PHILIPPINE HOME ASSURANCE v.

CA 1996
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, the following shipment for carriage to
Manila and Cebu, freight pre-paid and in good order and condition, viz: (a) two (2) boxes internal combustion engine parts,
consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (10) metric tons (334 bags) ammonium chloride,
consigned to Orca's Company under Bill of Lading No. KCE-12; (c) two hundred (200) bags Glue 300, consigned to Pan Oriental
Match Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding Velayo under Bills of Lading Nos. KMA-73
and KMA-74.
While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the
accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the acetylene
cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries
to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to
abandon the ship.
Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was declared abandoned.
Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the
vessel for the port of Naha, Japan.
. After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery to their original
ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges, as
follows: (a) for the goods covered by Bill of Lading No. 042283, ESLI charged the consignee the sum of P1,927.65, representing
salvage charges assessed against the goods; (b) for the goods covered by Bill of Lading No. KCE-12, ESLI charged the consignee
the sum of P2,980.64 for additional freight and P826.14 for salvage charges against the goods; (c) for the goods covered by Bill of
Lading No. KCE-8, ESLI charged the consignee the sum of P3,292.26 for additional freight and P4,130.68 for salvage charges
against the goods; and (d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74, ESLI charged the consignee the sum of
P8,337.06 for salvage charges against the goods.
The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the
consignees.
PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39,
against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by
the fault, negligence, illegal act and/or breach of contract of ESLI.
In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the
shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable pursuant
to the Bill of Lading;[1] and that salvage charges are properly collectible under Act No. 2616, known as the Salvage Law.
The trial court dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating thus:
The question to be resolved is whether or not the fire on the vessel which was caused by the explosion of an acetylene
cylinder loaded on the same was the fault or negligence of the defendant.
Evidence has been presented that the SS "Eastern Explorer" was a seaworthy vessel (Deposition of Jumpei Maeda, October
23, 1980, p. 3) and before the ship loaded the Acetylene Cylinder No. NCW 875, the same has been tested, checked and
examined and was certified to have complied with the required safety measures and standards (Deposition of Senjei Hayashi,
October 23, 1980, pp. 2-3). When the fire was detected by the crew, fire fighting operations was immediately conducted but due
to the explosion of the acetylene cylinder, the crew were unable to contain the fire and had to abandon the ship to save their
lives and were saved from drowning by passing vessels in the vicinity. The burning of the vessel rendering it a constructive total
loss and incapable of pursuing its voyage to the Philippines was, therefore, not the fault or negligence of defendant but a natural
disaster or calamity which nobody would like to happen. The salvage operations conducted by Fukuda Salvage Company (Exhibits
"4-A" and "6-A") was perfectly a legal operation and charges made on the goods recovered were legitimate charges.
On appeal to the Court of Appeals, respondent court affirmed the trial court's findings and conclusions, [3] hence, the present
petition for review before this Court on the following errors:
I. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S FINDINGS THAT THE BURNING OF THE
SS "EASTERN EXPLORER," RENDERING IT A CONSTRUCTIVE TOTAL LOSS, IS A NATURAL DISASTER OR CALAMITY WHICH NOBODY
WOULD LIKE TO HAPPEN, DESPITE EXISTING JURISPRUDENCE TO THE CONTRARY.
It is quite evident that the foregoing assignment of errors challenges the findings of fact and the appreciation of evidence
made by the trial court and later affirmed by respondent court. While it is a well-settled rule that only questions of law may be
raised in a petition for review under Rule 45 of the Rules of Court, it is equally well-settled that the same admits of the following

exceptions, namely: (a) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (b) when the
inference made is manifestly mistaken, absurd or impossible; (c) where there is a grave abuse of discretion; (d) when the
judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee; (g) when the findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (i) when the facts set forth in the petition as well as in
the petitioners' main and reply briefs are nor disputed by the respondents; and (j) when the finding of fact of the Court of Appeals
is premised on the supposed absence of evidence and is contradicted by the evidence on record. [5] Thus, if there is a showing, as
in the instant case, that the findings complained of are totally devoid of support in the records, or that they are so glaringly
erroneous as to constitute grave abuse of discretion, the same may be properly reviewed and evaluated by this Court.
It is worthy to note at the outset that the goods subject of the present controversy were neither lost nor damaged in transit
by the fire that razed the carrier. In fact, the said goods were all delivered to the consignees, even if the transshipment took
longer than necessary. What is at issue therefore is not whether or not the carrier is liable for the loss, damage, or deterioration of
the goods transported by them but who, among the carrier, consignee or insurer of the goods, is liable for the additional charges
or expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different
carrier.
In absolving respondent carrier of any liability, respondent Court of Appeals sustained the trial court's finding
that the fire that gutted the ship was a natural disaster or calamity. Petitioner takes exception to this conclusion
and we agree.
In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises
from some act of man or by human means. It cannot be an act of God unless caused by lightning or a natural
disaster or casualty not attributable to human agency.[6]
In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason thereof,
the same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder, obviously fully
loaded, was stored in the accommodation area near the engine room and not in a storage area considerably far, and in a safe
distance, from the engine room.
First, the acetylene cylinder which was fully loaded should not have been stored in the accommodation area near the engine
room where the heat generated therefrom could cause the acetylene cylinder to explode by reason of spontaneous
combustion.Respondent ESLI should have easily foreseen that the acetylene cylinder, containing highly inflammable material,
was in a real danger of exploding because it was stored in close proximity to the engine room.
Second, respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area supposed to
be reserved for passengers, it unnecessarily exposed its passengers to grave danger and injury. Curious passengers, ignorant of
the danger the tank might have on humans and property, could have handled the same or could have lighted and smoke
cigarettes while repairing in the accommodation area.
Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently certified as having complied
with the safety measures and standards by qualified experts [7] before it was loaded in the vessel only shows to a great extent that
negligence was present in the handling of the acetylene cylinder after it was loaded and while it was on board the ship. Indeed,
had the respondent and its agents not been negligent in storing the acetylene cylinder near the engine room, then that same
would not have leaked and exploded during the voyage.
Verily, there is no merit in the finding of the trial court to which respondent court erroneously agreed that the fire was not
fault or negligence of respondent but a natural disaster or calamity. The records are simply wanting in this regard.
Anent petitioner's objection to the admissibility of Exhibits "4" and "5", the Statement of Facts and the Marine Note of
Protest issued by Captain Tiburcio A. Licaylicay, we find the same impressed with merit because said documents are hearsay
evidence.Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said documents, was not presented in court to testify to
the truth of the facts he stated therein; instead, respondent ESLI presented Junpei Maeda, its Branch Manager in Tokyo and
Yokohama, Japan, who evidently had no personal knowledge of the facts stated in the documents at issue.
Prescinding from the foregoing premises, it indubitably follows that the cargo consignees cannot be made liable to
respondent carrier for additional freight and salvage charges. Consequently, respondent carrier must refund to herein petitioner
the amount it paid under protest for additional freight and salvage charges in behalf of the consignee.
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE.
G.R. No. 71360 July 16, 1986
DEVELOPMENT INSURANCE CORPORATION, , vs. INTERMEDIATE APPELLATE COURT, and PHILIPPINE UNION REALTY
DEVELOPMENT CORPORATION,.

CRUZ, J.:
A fire occurred in the building of the private respondent and it sued for recovery of damages from the petitioner on the basis of
an insurance contract between them. The petitioner allegedly failed to answer on time and was declared in default by the trial
court. A judgment of default was subsequently rendered on the strength of the evidence submitted ex parte by the private
respondent, which was allowed full recovery of its claimed damages. On learning of this decision, the petitioner moved to lift the
order of default, invoking excusable neglect, and to vacate the judgment by default. Its motion was denied. It then went to the
respondent court, which affirmed the decision of the trial court in toto. The petitioner is now before us, hoping presumably that it
will fare better here than before the trial court and the Intermediate Appellate Court. We shall see.
On the question of default, the record argues mightily against it. It is indisputable that summons was served on it, through its
senior vice-president, on June 19,1980. On July 14, 1980, ten days after the expiration of the original 15-day period to answer
(excluding July 4), its counsel filed an ex parte motion for an extension of five days within which to file its answer. On July 18,
1980, the last day of the requested extension-which at the time had not yet been granted-the same counsel filed a second
motion for another 5-day extension, fourteen days after the expiry of the original period to file its answer. The trial court
nevertheless gave it five days from July 14, 1980, or until July 19, 1980, within which to file its answer. But it did not. It did so only
on July 26, 1980, after the expiry of the original and extended periods, or twenty-one days after the July 5, deadline. As a
consequence, the trial court, on motion of the private respondent filed on July 28, 1980, declared the petitioner in default. This
was done almost one month later, on August 25, 1980. Even so, the petitioner made no move at all for two months thereafter. It
was only on October 27, 1980, more than one month after the judgment of default was rendered by the trial court on September
26, 1980, that it filed a motion to lift the order of default and vacate the judgment by default. 1
The pattern of inexcusable neglect, if not deliberate delay, is all too clear. The petitioner has slumbered on its right and awakened
too late. While it is true that in Trajano v. Cruz, 2 which it cites, this Court declared "that judgments by default are generally looked
upon with disfavor," the default judgment in that case was set aside precisely because there was excusable neglect, Summons in
that case was served through "an employee in petitioners' office and not the person in-charge," whereas in the present case
summons was served on the vice-president of the petitioner who however refused to accept it. Furthermore, as Justice Guerrero
noted, there was no evidence showing that the petitioners in Trajano intended to unduly delay the case.
Besides, the petitioners in Trajano had a valid defense against the complaint filed against them, and this justified a relaxation of
the procedural rules to allow full hearing on the substantive issues raised. In the instant case, by contrast, the petitioner must
just the same fail on the merits even if the default orders were to be lifted. As the respondent Court observed, "Nothing would be
gained by having the order of default set aside considering the appellant has no valid defense in its favor." 3
The petitioner's claim that the insurance covered only the building and not the elevators is absurd, to say the least. This Court
has little patience with puerile arguments that affront common sense, let alone basic legal principles with which even law
students are familiar. The circumstance that the building insured is seven stories high and so had to be provided with elevators-a
legal requirement known to the petitioner as an insurance company-makes its contention all the more ridiculous.
No less preposterous is the petitioner's claim that the elevators were insured after the occurrence of the fire, a case of shutting
the barn door after the horse had escaped, so to speak. 4 This pretense merits scant attention. Equally undeserving of serious
consideration is its submission that the elevators were not damaged by the fire, against the report of The arson investigators of
the INP 5 and, indeed, its own expressed admission in its answer 6 where it affirmed that the fire "damaged or destroyed a portion
of the 7th floor of the insured building and more particularly a Hitachi elevator control panel." 7
There is no reason to disturb the factual findings of the lower court, as affirmed by the Intermediate Appellate Court, that the
heat and moisture caused by the fire damaged although they did not actually burn the elevators. Neither is this Court justified in
reversing their determination, also factual, of the value of the loss sustained by the private respondent in the amount of
P508,867.00.
The only remaining question to be settled is the amount of the indemnity due to the private respondent under its insurance
contract with the petitioner. This will require an examination of this contract, Policy No. RY/F-082, as renewed, by virtue of which
the petitioner insured the private respondent's building against fire for P2,500,000.00. 8
The petitioner argues that since at the time of the fire the building insured was worth P5,800,000.00, the private respondent
should be considered its own insurer for the difference between that amount and the face value of the policy and should
share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an indemnity of only P67,629.31, the rest of
the loss to be shouldered by it alone. In support of this contention, the petitioner cites Condition 17 of the policy, which provides:
If the property hereby insured shall, at the breaking out of any fire, be collectively of greater value than the
sum insured thereon then the insured shall be considered as being his own insurer for the difference, and shall
bear a ratable proportion of the loss accordingly. Every item, if more than one, of the policy shall be separately
subject to this condition.
However, there is no evidence on record that the building was worth P5,800,000.00 at the time of the loss; only the petitioner
says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was
insured at P2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual value of the

property insured on the day the fire occurred. This valuation becomes even more believable if it is remembered that at the time
the building was burned it was still under construction and not yet completed.
The Court notes that Policy RY/F-082 is an open policy and is subject to the express condition that:
Open Policy
This is an open policy as defined in Section 57 of the Insurance Act. In the event of loss, whether total or partial,
it is understood that the amount of the loss shall be subject to appraisal and the liability of the company, if
established, shall be limited to the actual loss, subject to the applicable terms, conditions, warranties and
clauses of this Policy, and in no case shall exceed the amount of the policy.
As defined in the aforestated provision, which is now Section 60 of the Insurance Code, "an open policy is one in which the value
of the thing insured is not agreed upon but is left to be ascertained in case of loss. " This means that the actual loss, as
determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not
exceed the face value of the policy.
The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in the absence
of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed
upon by the parties in their contract, we hold that the private respondent is entitled to the payment of indemnity under the said
contract in the total amount of P508,867.00.
The refusal of its vice-president to receive the private respondent's complaint, as reported in the sheriff's return, was the first
indication of the petitioner's intention to prolong this case and postpone the discharge of its obligation to the private respondent
under this agreement. That intention was revealed further in its subsequent acts-or inaction-which indeed enabled it to avoid
payment for more than five years from the filing of the claim against it in 1980. The petitioner has temporized long enough to
avoid its legitimate responsibility; the delay must and does end now.
WHEREFORE, the appealed decision is affirmed in full, with costs against the petitioner.
G.R. No. 200784

August 7, 2013

MALAYAN INSURANCE COMPANY, INC., , vs. PAP CO., LTD. (PHIL. BRANCH), .
The undisputed factual antecedents were succinctly summarized by the CA as follows:
On May 13, 1996, Malayan Insurance Company (Malayan) issued Fire Insurance Policy No. F-00227-000073 to PAP Co., Ltd. (PAP
Co.) for the latters machineries and equipment located at Sanyo Precision Phils. Bldg., Phase III, Lot 4, Block 15, PEZA, Rosario,
Cavite (Sanyo Building). The insurance, which was for Fifteen Million Pesos (?15,000,000.00) and effective for a period of one (1)
year, was procured by PAP Co. for Rizal Commercial Banking Corporation (RCBC), the mortgagee of the insured machineries and
equipment.
After the passage of almost a year but prior to the expiration of the insurance coverage, PAP Co. renewed the policy on an "as is"
basis. Pursuant thereto, a renewal policy, Fire Insurance Policy No. F-00227-000079, was issued by Malayan to PAP Co. for the
period May 13, 1997 to May 13, 1998.
On October 12, 1997 and during the subsistence of the renewal policy, the insured machineries and equipment were totally lost
by fire. Hence, PAP Co. filed a fire insurance claim with Malayan in the amount insured.
In a letter, dated December 15, 1997, Malayan denied the claim upon the ground that, at the time of the loss, the insured
machineries and equipment were transferred by PAP Co. to a location different from that indicated in the policy. Specifically, that
the insured machineries were transferred in September 1996 from the Sanyo Building to the Pace Pacific Bldg., Lot 14, Block 14,
Phase III, PEZA, Rosario, Cavite (Pace Pacific). Contesting the denial, PAP Co. argued that Malayan cannot avoid liability as it was
informed of the transfer by RCBC, the party duty-bound to relay such information. However, Malayan reiterated its denial of PAP
Co.s claim. Distraught, PAP Co. filed the complaint below against Malayan. 4
Ruling of the RTC
On September 17, 2009, the RTC handed down its decision, ordering Malayan to pay PAP Company Ltd (PAP) an indemnity for the
loss under the fire insurance policy as well as for attorneys fees. The dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff. Defendant is hereby ordered:
a) To pay plaintiff the sum of FIFTEEN MILLION PESOS (P15,000,000.00) as and for indemnity for the loss under the fire insurance
policy, plus interest thereon at the rate of 12% per annum from the time of loss on October 12, 1997 until fully paid;

b) To pay plaintiff the sum of FIVE HUNDRED THOUSAND PESOS (PhP500,000.00) as and by way of attorneys fees; [and,]
c) To pay the costs of suit.
The RTC explained that Malayan is liable to indemnify PAP for the loss under the subject fire insurance policy because, although
there was a change in the condition of the thing insured as a result of the transfer of the subject machineries to another location,
said insurance company failed to show proof that such transfer resulted in the increase of the risk insured against. In the absence
of proof that the alteration of the thing insured increased the risk, the contract of fire insurance is not affected per Article 169 of
the Insurance Code.
Ruling of the CA
On October 27, 2011, the CA rendered the assailed decision which affirmed the RTC decision but deleted the attorneys fees. The
decretal portion of the CA decision reads:
WHEREFORE, the assailed dispositions are MODIFIED. As modified, Malayan Insurance Company must indemnify PAP Co. Ltd the
amount of Fifteen Million Pesos (PhP15,000,000.00) for the loss under the fire insurance policy, plus interest thereon at the rate of
12% per annum from the time of loss on October 12, 1997 until fully paid. However, the Five Hundred Thousand Pesos
(PhP500,000.00) awarded to PAP Co., Ltd. as attorneys fees is DELETED. With costs.
SO ORDERED.6
The CA wrote that Malayan failed to show proof that there was a prohibition on the transfer of the insured properties during the
efficacy of the insurance policy. Malayan also failed to show that its contractual consent was needed before carrying out a
transfer of the insured properties. Despite its bare claim that the original and the renewed insurance policies contained provisions
on transfer limitations of the insured properties, Malayan never cited the specific provisions.
The CA further stated that even if there was such a provision on transfer restrictions of the insured properties, still Malayan could
not escape liability because the transfer was made during the subsistence of the original policy, not the renewal policy. PAP
transferred the insured properties from the Sanyo Factory to the Pace Pacific Building (Pace Factory) sometime in September
1996. Therefore, Malayan was aware or should have been aware of such transfer when it issued the renewal policy on May 14,
1997.
Malayan further argues that PAP failed to discharge the burden of proving that the transfer of the insured properties under the
insurance policy was with its knowledge and consent. Granting that PAP informed RCBC of the transfer or change of location of
the insured properties, the same is irrelevant and does not bind Malayan considering that RCBC is a corporation vested with
separate and distinct juridical personality. Malayan did not consent to be the principal of RCBC. RCBC did not also act as
Malayans representative.
With regard to the alleged increase of risk, Malayan insists that there is evidence of an increase in risk as a result of the unilateral
transfer of the insured properties. According to Malayan, the Sanyo Factory was occupied as a factory of automotive/computer
parts by the assured and factory of zinc & aluminum die cast and plastic gear for copy machine by Sanyo Precision Phils., Inc.
with a rate of 0.449% under 6.1.2 A, while Pace Factory was occupied as factory that repacked silicone sealant to plastic cylinders
with a rate of 0.657% under 6.1.2 A.
PAPs position
On the other hand, PAP counters that there is no evidence of any misrepresentation, concealment or deception on its part and
that its claim is not fraudulent. It insists that it can still sue to protect its rights and interest on the policy notwithstanding the fact
that the proceeds of the same was payable to RCBC, and that it can collect interest at the rate of 12% per annum on the
proceeds of the policy because its claim for indemnity was unduly delayed without legal justification.
The Courts Ruling
The Court agrees with the position of Malayan that it cannot be held liable for the loss of the insured properties under the fire
insurance policy.
As can be gleaned from the pleadings, it is not disputed that on May 13, 1996, PAP obtained a ?15,000,000.00 fire insurance
policy from Malayan covering its machineries and equipment effective for one (1) year or until May 13, 1997; that the policy
expressly stated that the insured properties were located at "Sanyo Precision Phils. Building, Phase III, Lots 4 & 6, Block 15, EPZA,
Rosario, Cavite"; that before its expiration, the policy was renewed 11 on an "as is" basis for another year or until May 13, 1998;
that the subject properties were later transferred to the Pace Factory also in PEZA; and that on October 12, 1997, during the
effectivity of the renewal policy, a fire broke out at the Pace Factory which totally burned the insured properties.
The policy forbade the removal of the insured properties unless sanctioned by Malayan

Condition No. 9(c) of the renewal policy provides:

9. Under any of the following circumstances the insurance ceases to attach as regards the property affected unless the insured,
before the occurrence of any loss or damage, obtains the sanction of the company signified by endorsement upon the policy, by
or on behalf of the Company:
(c) If property insured be removed to any building or place other than in that which is herein stated to be insured. 12
Evidently, by the clear and express condition in the renewal policy, the removal of the insured property to any building or place
required the consent of Malayan. Any transfer effected by the insured, without the insurers consent, would free the latter from
any liability.
The respondent failed to notify, and to obtain the consent of, Malayan regarding the removal
The records are bereft of any convincing and concrete evidence that Malayan was notified of the transfer of the insured
properties from the Sanyo factory to the Pace factory. The Court has combed the records and found nothing that would show that
Malayan was duly notified of the transfer of the insured properties.
What PAP did to prove that Malayan was notified was to show that it relayed the fact of transfer to RCBC, the entity which made
the referral and the named beneficiary in the policy. Malayan and RCBC might have been sister companies, but such fact did not
make one an agent of the other. The fact that RCBC referred PAP to Malayan did not clothe it with authority to represent and bind
the said insurance company. After the referral, PAP dealt directly with Malayan.
The respondent overlooked the fact that during the November 9, 2006 hearing, 13 its counsel stipulated in open court that it was
Malayans authorized insurance agent, Rodolfo Talusan, who procured the original policy from Malayan, not RCBC. This was the
reason why Talusans testimony was dispensed with.
Moreover, in the previous hearing held on November 17, 2005, 14 PAPs hostile witness, Alexander Barrera, Administrative
Assistant of Malayan, testified that he was the one who procured Malayans renewal policy, not RCBC, and that RCBC merely
referred fire insurance clients to Malayan. He stressed, however, that no written referral agreement exists between RCBC and
Malayan. He also denied that PAP notified Malayan about the transfer before the renewal policy was issued. He added that PAP,
through Maricar Jardiniano (Jardiniano), informed him that the fire insurance would be renewed on an "as is basis." 15
Granting that any notice to RCBC was binding on Malayan, PAPs claim that it notified RCBC and Malayan was not indubitably
established. At best, PAP could only come up with the hearsay testimony of its principal witness, Branch Manager Katsumi Yoneda
(Mr. Yoneda)
This enfeebles PAPs position that the subject properties were already transferred to the Pace factory before the policy was
renewed. The transfer from the Sanyo Factory to the PACE Factory increased the risk.
The Court agrees with Malayan that the transfer to the Pace Factory exposed the properties to a hazardous environment and
negatively affected the fire rating stated in the renewal policy. The increase in tariff rate from 0.449% to 0.657% put the subject
properties at a greater risk of loss. Such increase in risk would necessarily entail an increase in the premium payment on the fire
policy.
Malayan is entitled to rescind the insurance contract
It can also be said that with the transfer of the location of the subject properties, without notice and without Malayans consent,
after the renewal of the policy, PAP clearly committed concealment, misrepresentation and a breach of a material warranty.
Section 26 of the Insurance Code provides:
Section 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.
Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract of insurance."
Moreover, under Section 168 of the Insurance Code, the insurer is entitled to rescind the insurance contract in case of an
alteration in the use or condition of the thing insured. Section 168 of the Insurance Code provides, as follows:
Section 68. An alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the
consent of the insurer, by means within the control of the insured, and increasing the risks, entitles an insurer to rescind a
contract of fire insurance.
Accordingly, an insurer can exercise its right to rescind an insurance contract when the following conditions are present, to wit:

1) the policy limits the use or condition of the thing insured; 2) there is an alteration in said use or condition; 3) the
alteration is without the consent of the insurer; 4) the alteration is made by means within the insureds control; and 5)
the alteration increases the risk of loss.20
In the case at bench, all these circumstances are present. It was clearly established that the renewal policy stipulated that the
insured properties were located at the Sanyo factory; that PAP removed the properties without the consent of Malayan; and that
the alteration of the location increased the risk of loss.
WHEREFORE, the October 27, 2011 Decision of the Court of Appeals is hereby REVERSED and SET ASIDE.
New Life v CA G.R. No. 94071 March 31, 1992
Facts:
Julian Sy, owner of New Life, insured his building in 3 different insurance agencies for 350,000, 1,000,000, and 200,000. When his
building and the goods inside burned down, he claimed for insurance indemnities, but these were rejected by the three
companies for violation of policy conditions.
Sy filed for 3 different suits in the trial court, where he won all suits against the insurance companies. The court of appeals
reversed the decision of the trial court.
Issue: Did the petitioner violate conditions 3 and 27 of the three insurance policies, thereby foreiting collection of indemnities?
Held: Yes.
Ratio:
Condition 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 such notice be given and the particulars of such insurance or insurances
be stated therein or endorsed on 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 loss or damage not more than
P200,000.00.
Sy never disclosed co-insurance in the contracts he entered into with the three corporations. The insured is specifically required
to disclose the insurance that he had contracted with other companies. Sy also contended that the insurance agents knew of the
co-insurance. However, the theory of imputed knowledge, that the knowledge of the agent is presumed to be known by the
principal, is not enough.
When the words of the document are readily understandable by an ordinary reader, there is no need for construction anymore.
The conformity of the insured to the terms of the policy is implied with his failure to disagree with the terms of the contract.
Since Sy, was a businessman, it was incumbent upon him to read the contracts.
Pioneer Insurance and Surety Corporation vs. Yap- The obvious purpose of the aforesaid requirement in the policy is to prevent
over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation
in which a fire would be profitable to the insured.
Also, policy condition 15 was used. It stated: 15.. . . if any false declaration be made or used in support thereof, . . . all benefits
under this Policy shall be forfeited . . .
As for condition number 27, the stipulation read:
27. Action or suit clause. If a claim be made and rejected and an action or suit be not commenced either in the Insurance
Commission or any court of competent jurisdiction of notice of such rejection, or in case of arbitration taking place as provided
herein, within twelve (12) months after due notice of the award made by the arbitrator or arbitrators or umpire, then the claim
shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.
This is regarding Sys claim for one of the companies. Recovery was filed in court by petitioners only on January 31, 1984, or after
more than one (1) year had elapsed from petitioners' receipt of the insurers' letter of denial on November 29, 1982. This made it
void.

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.
G.R. No. 184300

July 11, 2012

MALAYAN INSURANCE CO., INC., Petitioner, vs. PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE FORWARDER
SERVICES, INC
Before the Court is a petitiOn for review on certiorari filed by petitioner Malayan Insurance Co., lnc. (Malayan) assailing the
Decision1 dated February 29, 2008 and Resolution 2 dated August 28, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 71204
which affirmed with modification the decision of the Regional Trial Court (RTC), Branch 38 of Manila.
Antecedent Facts
Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services, Inc. (Reputable) had been annually
executing a contract of carriage, whereby the latter undertook to transport and deliver the formers products to its customers,
dealers or salesmen.3
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from respondent Philippines First Insurance
Co., Inc. (Philippines First) to secure its interest over its own products. Philippines First thereby insured Wyeths nutritional,
pharmaceutical and other products usual or incidental to the insureds business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct physical loss or damage from any external cause, if by land, and
provides a limit of P6,000,000.00 per any one land vehicle.
On December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned out, however, that the contract
was not signed by Wyeths representative/s. 4 Nevertheless, it was admittedly signed by Reputables representatives, the terms
thereof faithfully observed by the parties and, as previously stated, the same contract of carriage had been annually executed by
the parties every year since 1989.5
Under the contract, Reputable undertook to answer for "all risks with respect to the goods and shall be liable to the COMPANY
(Wyeth), for the loss, destruction, or damage of the goods/products due to any and all causes whatsoever, including theft,

robbery, flood, storm, earthquakes, lightning, and other force majeure while the goods/products are in transit and until actual
delivery to the customers, salesmen, and dealers of the COMPANY". 6
The contract also required Reputable to secure an insurance policy on Wyeths goods. 7 Thus, on February 11, 1994, Reputable
signed a Special Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount of P1,000,000.00.
On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable received from Wyeth 1,000 boxes of
Promil infant formula worth P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation in Libis, Quezon City.
Unfortunately, on the same date, the truck carrying Wyeths products was hijacked by about 10 armed men. They threatened to
kill the truck driver and two of his helpers should they refuse to turn over the truck and its contents to the said highway robbers.
The hijacked truck was recovered two weeks later without its cargo.
On March 8, 1995, Philippines First, after due investigation and adjustment, and pursuant to the Marine Policy, paid Wyeth
P2,133,257.00 as indemnity. Philippines First then demanded reimbursement from Reputable, having been subrogated to the
rights of Wyeth by virtue of the payment. The latter, however, ignored the demand.
Consequently, Philippines First instituted an action for sum of money against Reputable on August 12, 1996. 8 In its complaint,
Philippines First stated that Reputable is a "private corporation engaged in the business of a common carrier." In its
answer,9 Reputable claimed that it is a private carrier. It also claimed that it cannot be made liable under the contract of carriage
with Wyeth since the contract was not signed by Wyeths representative and that the cause of the loss was force majeure, i.e.,
the hijacking incident.
Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to collect the amount covered in the SR Policy.
According to Reputable, "it was validly insured with Malayan for P1,000,000.00 with respect to the lost products under the latters
Insurance Policy No. SR-0001-02577 effective February 1, 1994 to February 1, 1995" and that the SR Policy covered the risk of
robbery or hijacking.10
Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy, the insurance does not cover any
loss or damage to property which at the time of the happening of such loss or damage is insured by any marine policy and that
the SR Policy expressly excluded third-party liability.
After trial, the RTC rendered its Decision 11 finding Reputable liable to Philippines First for the amount of indemnity it paid to
Wyeth, among others. In turn, Malayan was found by the RTC to be liable to Reputable to the extent of the policy coverage. The
dispositive portion of the RTC decision provides:
WHEREFORE, on the main Complaint, judgment is hereby rendered finding [Reputable] liable for the loss of the Wyeth products
and orders it to pay Philippines First the following:
the amount of P2,133,257.00 representing the amount paid by Philippines First to Wyeth for the loss of the products in
question;
the amount of P15,650.00 representing the adjustment fees paid by Philippines First to hired
adjusters/surveyors;
Dissatisfied, both Reputable and Malayan filed their respective appeals from the RTC decision.
Reputable asserted that the RTC erred in holding that its contract of carriage with Wyeth was binding despite Wyeths failure to
sign the same. Reputable further contended that the provisions of the contract are unreasonable, unjust, and contrary to law and
public policy.
For its part, Malayan invoked Section 5 of its SR Policy, which provides:
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does not cover any loss or damage to property which at the time
of the happening of such loss or damage is insured by or would but for the existence of this policy, be insured by any Fire or
Marine policy or policies except in respect of any excess beyond the amount which would have been payable under the Fire or
Marine policy or policies had this insurance not been effected.
Malayan argued that inasmuch as there was already a marine policy issued by Philippines First securing the same subject matter
against loss and that since the monetary coverage/value of the Marine Policy is more than enough to indemnify the hijacked
cargo, Philippines First alone must bear the loss.
Malayan sought the dismissal of the third-party complaint against it. In the alternative, it prayed that it be held liable for no more
than P468,766.70, its alleged pro-rata share of the loss based on the amount covered by the policy, subject to the provision of
Section 12 of the SR Policy, which states:

12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage happening to any property hereby insured, there be any
other subsisting insurance or insurances, whether effected by the insured or by any other person or persons, covering the same
property, the company shall not be liable to pay or contribute more than its ratable proportion of such loss or damage.
On February 29, 2008, the CA rendered the assailed decision sustaining the ruling of the RTC,
Issues
The liability of Malayan under the SR Policy hinges on the following issues for resolution:
1) Whether Reputable is a private carrier;
2) Whether Reputable is strictly bound by the stipulations in its contract of carriage with Wyeth, such that it should be
liable for any risk of loss or damage, for any cause whatsoever, including that due to theft or robbery and other force
majeure;
3) Whether the RTC and CA erred in rendering "nugatory" Sections 5 and Section 12 of the SR Policy; and
4) Whether Reputable should be held solidarily liable with Malayan for the amount of P998,000.00 due to Philippines
First.
The Courts Ruling
On the first issue Reputable is a private carrier.
The Court agrees with the RTC and CA that Reputable is a private carrier. Well-entrenched in jurisprudence is the rule that factual
findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and
considered conclusive between the parties, save for certain exceptional and meritorious circumstances, none of which are
present in this case.18
Malayan relies on the alleged judicial admission of Philippines First in its complaint that Reputable is a common carrier. 19 Invoking
Section 4, Rule 129 of the Rules on Evidence that "an admission verbal or written, made by a party in the course of the
proceeding in the same case, does not require proof," it is Malayans position that the RTC and CA should have ruled that
Reputable is a common carrier. Consequently, pursuant to Article 1745(6) of the Civil Code, the liability of Reputable for the loss
of Wyeths goods should be dispensed with, or at least diminished.
More importantly, the finding of the RTC and CA that Reputable is a special or private carrier is warranted by the evidence on
record, primarily, the unrebutted testimony of Reputables Vice President and General Manager, Mr. William Ang Lian Suan, who
expressly stated in open court that Reputable serves only one customer, Wyeth. 27
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public.
On the other hand, a private carrier is one wherein the carriage is generally undertaken by special agreement and it does not
hold itself out to carry goods for the general public. 28 A common carrier becomes a private carrier when it undertakes to carry a
special cargo or chartered to a special person only. 29 For all intents and purposes, therefore, Reputable operated as a
private/special carrier with regard to its contract of carriage with Wyeth.
On the second issue Reputable is bound by the terms of the contract of carriage.
The extent of a private carriers obligation is dictated by the stipulations of a contract it entered into, provided its stipulations,
clauses, terms and conditions are not contrary to law, morals, good customs, public order, or public policy. "The Civil Code
provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. Public policy
governing common carriers has no force where the public at large is not involved." 30
Thus, being a private carrier, the extent of Reputables liability is fully governed by the stipulations of the contract of carriage,
one of which is that it shall be liable to Wyeth for the loss of the goods/products due to any and all causes whatsoever, including
theft, robbery and other force majeure while the goods/products are in transit and until actual delivery to Wyeths customers,
salesmen and dealers.31
On the third issue other insurance vis--vis over insurance.
Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to Section 12 as a "modified other insurance
clause".32 In rendering inapplicable said provisions in the SR Policy, the CA ruled in this wise:

Since Sec. 5 calls for Malayans complete absolution in case the other insurance would be sufficient to cover the entire amount of
the loss, it is in direct conflict with Sec. 12 which provides only for a pro-rated contribution between the two insurers. Being the
later provision, and pursuant to the rules on interpretation of contracts, Sec. 12 should therefore prevail.
Section 5 is actually the other insurance clause (also called "additional insurance" and "double insurance"), one akin to Condition
No. 3 in issue in Geagonia v. CA, 35 which validity was upheld by the Court as a warranty that no other insurance exists. The Court
ruled that Condition No. 336 is a condition which is not proscribed by law as its incorporation in the policy is allowed by Section 75
of the Insurance Code. It was also the Courts finding that unlike the other insurance clauses, Condition No. 3 does not absolutely
declare void any violation thereof but expressly provides that the 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."
In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for the nullity of the SR Policy but simply limits the
liability of Malayan only up to the excess of the amount that was not covered by the other insurance policy. In interpreting the
"other insurance clause" in Geagonia, the Court ruled that the prohibition applies only in case of double insurance. The Court
ruled that in order to constitute a violation of the clause, the other insurance must be upon same subject matter, the same
interest therein, and the same risk. Thus, even though the multiple insurance policies involved were all issued in the name of the
same assured, over the same subject matter and covering the same risk, it was ruled that there was no violation of the "other
insurance clause" since there was no double insurance.
Section 12 of the SR Policy, on the other hand, is the over insurance clause. More particularly, it covers the situation where there
is over insurance due to double insurance. In such case, Section 15 provides that Malayan shall "not be liable to pay or contribute
more than its ratable proportion of such loss or damage." This is in accord with the principle of contribution provided under
Section 94(e) of the Insurance Code,37 which states that "where the insured is over insured by double insurance, each insurer is
bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is
liable under his contract."
By the express provision of Section 93 of the Insurance Code, double insurance exists where the same person is insured by
several insurers separately in respect to the same subject and interest. The requisites in order for double insurance to arise are
as follows:38
1. The person insured is the same; 2. Two or more insurers insuring separately; 3. There is identity of subject matter; 4. There is
identity of interest insured; and 5. There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the SR Policy were both issued over the same subject matter, i.e.
goods belonging to Wyeth, and both covered the same peril insured against, it is, however, beyond cavil that the said policies
were issued to two different persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines First under its
Marine Policy, while Reputable is the recognized insured of Malayan under the SR Policy. The fact that Reputable procured
Malayans SR Policy over the goods of Wyeth pursuant merely to the stipulated requirement under its contract of carriage with
the latter does not make Reputable a mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance contracts is also different and distinct from that of
Reputables. The policy issued by Philippines First was in consideration of the legal and/or equitable interest of Wyeth over its own
goods. On the other hand, what was issued by Malayan to Reputable was over the latters insurable interest over the safety of the
goods, which may become the basis of the latters liability in case of loss or damage to the property and falls within the
contemplation of Section 15 of the Insurance Code.39
Therefore, even though the two concerned insurance policies were issued over the same goods and cover the same risk, there
arises no double insurance since they were issued to two different persons/entities having distinct insurable interests.
Necessarily, over insurance by double insurance cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither
Section 5 nor Section 12 of the SR Policy can be applied.
Suffice it to say that Malayan's and Reputable's respective liabilities arose from different obligations- Malayan's is based on the
SR Policy while Reputable's is based on the contract of carriage.
All told, the Court finds no reversible error in the judgment sought to be reviewed.
WHEREFORE, premises considered, the petition is DENIED. The Decision dated February 29, 2008 and Resolution dated August
28, 2008 of the Court of Appeals in CA-G.R. CV No. 71204 are hereby AFFIRMED.
Cost against petitioner Malayan Insurance Co., Inc.
Fortune v CA G.R. No. 115278 May 23, 1995
J. Davide Jr.
Facts:

Producers Banks money was stolen while it was being transported from Pasay to Makati. The people guarding the money were
charged with the theft. The bank filed a claim for the amount of Php 725,000, and such was refused by the insurance corporation
due to the stipulation:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee
or authorized representative of the Insured whether acting alone or in conjunction with others. . . .
In the trial court, the bank claimed that the suspects were not any of the above mentioned. They won the case. The appellate
court affirmed on the basis that the bank had no power to hire or dismiss the guard and could only ask for replacements from the
security agency.
Issue: Did the guards fall under the general exceptions clause of the insurance policy and thus absolved the insurance company
from liability?
Held: Yes to both. Petition granted.
Ratio:
The insurance agency contended that the guards automatically became the authorized representatives of the bank when they
cited International Timber Corp. vs. NLRC where a contractor is a "labor-only" contractor in the sense that there is an employeremployee relationship between the owner of the project and the employees of the "labor-only" contractor.
They cited Art. 106. Of the Labor Code which said:
Contractor or subcontractor. There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such persons are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by him.
The bank asserted that the guards were not its employees since it had nothing to do with their selection and engagement, the
payment of their wages, their dismissal, and the control of their conduct.
They cited a case where an employee-employer relationship was governed by (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct.
The case was governed by Article 174 of the Insurance Code where it stated that casualty insurance awarded an amount to loss
cause by accident or mishap.
The term "employee," should be read as a person who qualifies as such as generally and universally understood, or
jurisprudentially established in the light of the four standards in the determination of the employer-employee relationship, or as
statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under
a "labor-only" contract as employees of the party employing them and not of the party who supplied them to the employer.
But even if the contracts were not labor-only, the bank entrusted the suspects with the duty to safely transfer the money to its
head office, thus, they were representatives. According to the court, a representative is defined as one who represents or
stands in the place of another; one who represents others or another in a special capacity, as an agent, and is interchangeable
with agent.
G.R. No. L-49699 August 8, 1988
PERLA COMPANIA de SEGUROS, INC., petitioner, vs. HON. CONSTANTE A. ANCHETA, Presiding Judge
The instant petition for certiorari and prohibition with preliminary injunction concerns the ability of insurers under the "no fault
indemnity" provision of the Insurance Code. *
On December 27, 1977, in a collision between the IH Scout in which private respondents were riding and a Superlines bus along
the national highway in Sta. Elena, Camarines Norte, private respondents sustained physics injuries in varying degrees of gravity.
Thus, they filed with the Court of First Instance of Camarines Norte on February 23,1978 a complaint for damages against
Superlines, the bus driver and petitioner, the insurer of the bus [Rollo, pp. 27-39.] The bus was insured with petitioner for the
amount of P50,000.00 as and for passenger liability and P50,000.00 as and for third party liability. The vehicle in which private
respondents were riding was insured with Malayan Insurance Co.
Even before summons could be served, respondent judge issued an order dated March 1, 1978 [Rollo, pp. 40-41], the pertinent
portion of which stated:
The second incident is the prayer for an order of this court for the Insurance Company, Perla Compania de
Seguros, Inc., to pay immediately the P5,000.00 under the "no fault clause" as provided for under Section 378
of the Insurance Code, and finding that the requisite documents to be attached in the record, the said Insurance
Company is therefore directed to pay the plaintiffs (private respondents herein) within five (5) days from receipt
of this order.
Petitioner denied in its Answer its alleged liability under the "no fault indemnity" provision [Rollo, p. 44] and likewise moved for
the reconsideration of the order. Petitioner held the position that under Sec. 378 of the Insurance Code, the insurer liable to pay
the P5,000.00 is the insurer of the vehicle in which private respondents were riding, not petitioner, as the provision states that
"[i]n the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding,
mounting or dismounting from." Respondent judge, however, denied reconsideration. A second motion for reconsideration was
filed by petitioner. However, in an order dated January 3, 1979, respondent judge denied the second motion for reconsideration
and ordered the issuance of a writ of execution [Rollo, p. 69.] Hence, the instant petition praying principally for the annulment
and setting aside of respondent judge's orders dated March 1, 1978 and January 3, 1979.

The Court issued a temporary restraining order on January 24,1979 [Rollo pp. 73-74.]
The sole issue raised in this petition is whether or not petitioner is the insurer liable to indemnify private respondents under Sec.
378 of the Insurance Code.
The key to the resolution of the issue is of courts e Sec. 378, which provides:
Sec. 378. Any claim for death or injury to any passenger or third party pursuant to the provision of this chapter shall be paid
without the necessity of proving fault or negligence of any kind. Provided, That for purposes of this section
(i) The indemnity in respect of any one person shall not exceed five thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim:
(a) Police report of accident, and
(b) Death certificate and evidence sufficient to establish the proper payee, or
(c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed;
(iii) Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer
of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case, claim shall lie against the insurer
of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle
responsible for the accident shall be maintained. [Emphasis supplied.]
From a reading of the provision, which is couched in straight-forward and unambiguous language, the following rules on claims
under the "no fault indemnity" provision, where proof of fault or negligence is not necessary for payment of any claim for death
Or injury to a passenger or a third party, are established:
1. A claim may be made against one motor vehicle only.
2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle. in which he is riding, mounting or
dismounting from.
3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie against the insurer of the directly
offending vehicle.
4. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident
shall be maintained.
The law is very clear the claim shall lie against the insurer of the vehicle in which the "occupant" ** is riding, and no other. The
claimant is not free to choose from which insurer he will claim the "no fault indemnity," as the law, by using the word "shall,
makes it mandatory that the claim be made against the insurer of the vehicle in which the occupant is riding, mounting or
dismounting from.
That said vehicle might not be the one that caused the accident is of no moment since the law itself provides that the party
paying the claim under Sec. 378 may recover against the owner of the vehicle responsible for the accident. This is precisely the
essence of "no fault indemnity" insurance which was introduced to and made part of our laws in order to provide victims of
vehicular accidents or their heirs immediate compensation, although in a limited amount, pending final determination of who is
responsible for the accident and liable for the victims'injuries or death. In turn, the "no fault indemnity" provision is part and
parcel of the Insurance Code provisions on compulsory motor vehicle ability insurance [Sec. 373-389] and should be read
together with the requirement for compulsory passenger and/or third party liability insurance [Sec. 377] which was mandated in
order to ensure ready compensation for victims of vehicular accidents.
Irrespective of whether or not fault or negligence lies with the driver of the Superlines bus, as private respondents were not
occupants of the bus, they cannot claim the "no fault indemnity" provided in Sec. 378 from petitioner. The claim should be made
against the insurer of the vehicle they were riding. This is very clear from the law. Undoubtedly, in ordering petitioner to pay
private respondents the 'no fault indemnity,' respondent judge gravely abused his discretion in a manner that amounts to lack of
jurisdiction. The issuance of the corrective writ of certiorari is therefore warranted.
WHEREFORE, the petition is GRANTED and respondent judge's order dated March 1, 1978, requiring petitioner to pay private
respondents the amount of P5,000.00 as "no fault indemnity' under Sec. 378 of the Insurance Code, and that of January 3, 1979,
denying the second motion for reconsideration and issuing a writ of execution, are ANNULLED and SET ASIDE. The temporary
restraining order issued by the Court on January 24, 1979 is made permanent.

G.R. No. 78848 November 14, 1988

SHERMAN
SHAFER, petitioner,
vs.
HON. JUDGE, REGIONAL TRIAL COURT OF OLONGAPO CITY, BRANCH 75, and MAKATI INSURANCE COMPANY,
INC., respondents.
This is a petition for review on certiorari of the Order * of the Regional Trial Court, Olongapo City, Branch 75, dated 24 April 1986
dismissing petitioner's third party complaint filed in Criminal Case No. 381-85, a prosecution for reckless imprudence resulting in
damage to property and serious physical injuries. 1
On 2 January 1985, petitioner Sherman Shafer obtained a private car policy, GA No. 0889, 2 over his Ford Laser car with Plate No.
CFN-361 from Makati Insurance Company, Inc., for third party liability (TPL).<re||an1w> During the effectivity of the policy,
an information 3 for reckless imprudence resulting in damage to property and serious physical injuries was filed against petitioner.
The information reads as follows:
That on or about the seventeeth (17th) day of May 1985, in the City of Olongapo, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, being then the driver and in actual physical
control of a Ford Laser car bearing Plate No. CFN-361, did then and there wilfully, unlawfully and criminally
drive, operate and manage the said Ford Laser car in a careless, reckless and imprudent manner without
exercising reasonable caution, diligence and due care to avoid accident to persons and damage to property and
in disregard of existing traffic rules and regulations, causing by such carelessness, recklessness and
imprudence the said Ford Laser car to hit and bump a Volkswagen car bearing Plate No. NJE-338 owned and
driven by Felino llano y Legaspi, thereby causing damage in the total amount of P12,345.00 Pesos, Philippine
Currency, and as a result thereof one Jovencio Poblete, Sr. who was on board of the said Volkswagen car
sustained physical injuries, to wit:
which injuries causing [sic] deformity on the face.

The owner of the damaged Volkswagen car filed a separate civil action against petitioner for damages, while Jovencio Poblete, Sr.,
who was a passenger in the Volkswagen car when allegedly hit and bumped by the car driven by petitioner, did not reserve his
right to file a separate civil action for damages. Instead, in the course of the trial in the criminal case, Poblete, Sr. testified on his
claim for damages for the serious physical injuries which he claimed to have sustained as a result of the accident.
Upon motion, petitioner was granted leave by the former presiding judge of the trail court to file a third party complaint against
the herein private respondent, Makati Insurance Company, Inc. Said insurance company, however, moved to vacate the order
granting leave to petitioner to file a third party complaint against it and/or to dismiss the same. 5
On 24 April 1987, the court a quo issued an order dismissing the third party complaint on the ground that it was premature,
based on the premise that unless the accused (herein petitioner) is found guilty and sentenced to pay the offended party (Poblete
Sr.) indemnity or damages, the third party complaint is without cause of action. The court further stated that the better procedure
is for the accused (petitioner) to wait for the outcome of the criminal aspect of the case to determine whether or not the accused,
also the third party plaintiff, has a cause of action against the third party defendant for the enforcement of its third party liability
(TPL) under the insurance contract.6 Petitioner moved for reconsideration of said order, but the motion was denied; 7 hence, this
petition.
It is the contention of herein petitioner that the dismissal of the third party complaint amounts to a denial or curtailment of his
right to defend himself in the civil aspect of the case. Petitioner further raises the legal question of whether the accused in a
criminal action for reckless imprudence, where the civil action is jointly prosecuted, can legally implead the insurance company
as third party defendant under its private car insurance policy, as one of his modes of defense in the civil aspect of said
proceedings.
On the other hand, the insurance company submits that a third party complaint is, under the rules, available only if the defendant
has a right to demand contribution, indemnity, subrogation or any other relief in respect of plaintiff's claim, to minimize the
number of lawsuits and avoid the necessity of bringing two (2) or more suits involving the same subject matter. The insurance
company further contends that the contract of motor vehicle insurance, the damages and attorney's fees claimed by
accused/third party plaintiff are matters entirely different from his criminal liability in the reckless imprudence case, and that
petitioner has no cause of action against the insurer until petitioner's liability shall have been determined by final judgment, as
stipulated in the contract of insurance. 8
Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily intended to provide compensation for the
death or bodily injuries suffered by innocent third parties or passengers as a result of a negligent operation and use of motor
vehicles. 9 The victims and/or their dependents are assured of immediate financial assistance, regardless of the financial capacity
of motor vehicle owners.

The liability of the insurance company under the Compulsory Motor Vehicle Liability Insurance is for loss or damage. Where an
insurance policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or
event upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the
insured. 10
The injured for whom the contract of insurance is intended can sue directly the insurer. The general purpose of statutes enabling
an injured person to proceed directly against the insurer is to protect injured persons against the insolvency of the insured who
causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to
be liberally construed so that their intended purpose may be accomplished. It has even been held that such a provision creates a
contractual relation which inures to the benefit of any and every person who may be negligently injured by the named insured as
if such injured person were specifically named in the policy. 11
In the event that the injured fails or refuses to include the insurer as party defendant in his claim for indemnity against the
insured, the latter is not prevented by law to avail of the procedural rules intended to avoid multiplicity of suits. Not even a "no
action" clause under the policy-which requires that a final judgment be first obtained against the insured and that only thereafter
can the person insured recover on the policy can prevail over the Rules of Court provisions aimed at avoiding multiplicity of
suits. 12
In the instant case, the court a quo erred in dismissing petitioner's third party complaint on the ground that petitioner had no
cause of action yet against the insurance company (third party defendant). There is no need on the part of the insured to wait for
the decision of the trial court finding him guilty of reckless imprudence. The occurrence of the injury to the third party
immediately gave rise to the liability of the insurer under its policy.
A third party complaint is a device allowed by the rules of procedure by which the defendant can bring into the original suit a
party against whom he will have a claim for indemnity or remuneration as a result of a liability established against him in the
original suit. 13 Third party complaints are allowed to minimize the number of lawsuits and avoid the necessity of bringing two (2)
or more actions involving the same subject matter. They are predicated on the need for expediency and the avoidance of
unnecessary lawsuits. If it appears probable that a second action will result if the plaintiff prevails, and that this result can be
avoided by allowing the third party complaint to remain, then the motion to dismiss the third party complaint should be denied. 14
Respondent insurance company's contention that the third party complaint involves extraneous matter which will only clutter,
complicate and delay the criminal case is without merit. An offense causes two (2) classes of injuries the first is the social injury
produced by the criminal act which is sought to be repaired thru the imposition of the corresponding penalty, and the second is
the personal injury caused to the victim of the crime, which injury is sought to be compensated thru indemnity, which is civil in
nature. 15
In the instant case, the civil aspect of the offense charged, i.e., serious physical injuries allegedly suffered by Jovencio Poblete,
Sr., was impliedly instituted with the criminal case. Petitioner may thus raise all defenses available to him insofar as the criminal
and civil aspects of the case are concerned. The claim of petitioner for payment of indemnity to the injured third party, under the
insurance policy, for the alleged bodily injuries caused to said third party, arose from the offense charged in the criminal case,
from which the injured (Jovencio Poblete, Sr.) has sought to recover civil damages. Hence, such claim of petitioner against the
insurance company cannot be regarded as not related to the criminal action.
WHEREFORE, the instant petition is GRANTED. The questioned order dated 24 April 1987 is SET ASIDE and a new one entered
admitting petitioner's third party complaint against the private respondent Makati Insurance Company, Inc.
G.R. No. 60506 August 6, 1992
FIGURACION VDA. DE MAGLAN, vs. HONORABLE FRANCISCO Z. CONSOLACION
Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa, here in Davao City. On December 20,
1978, early morning, Lope Maglana was on his way to his work station, driving a motorcycle owned by the Bureau of Customs. At
Km. 7, Lanang, he met an accident that resulted in his death. He died on the spot. The PUJ jeep that bumped the deceased was
driven by Pepito Into, operated and owned by defendant Destrajo. From the investigation conducted by the traffic investigator,
the PUJ jeep was overtaking another passenger jeep that was going towards the city poblacion. While overtaking, the PUJ jeep of
defendant Destrajo running abreast with the overtaken jeep, bumped the motorcycle driven by the deceased who was going
towards the direction of Lasa, Davao City. The point of impact was on the lane of the motorcycle and the deceased was thrown
from the road and met his untimely death. 1
Consequently, the heirs of Lope Maglana, Sr., here petitioners, filed an action for damages and attorney's fees against operator
Patricio Destrajo and the Afisco Insurance Corporation (AFISCO for brevity) before the then Court of First Instance of Davao,
Branch II. An information for homicide thru reckless imprudence was also filed against Pepito Into.
During the pendency of the civil case, Into was sentenced to suffer an indeterminate penalty of one (1) year, eight (8) months
and one (1) day of prision correccional, as minimum, to four (4) years, nine (9) months and eleven (11) days of prision
correccional, as maximum, with all the accessory penalties provided by law, and to indemnify the heirs of Lope Maglana, Sr. in

the amount of twelve thousand pesos (P12,000.00) with subsidiary imprisonment in case of insolvency, plus five thousand pesos
(P5,000.00) in the concept of moral and exemplary damages with costs. No appeal was interposed by accused who later applied
for probation. 2
On December 14, 1981, the lower court rendered a decision finding that Destrajo had not exercised sufficient diligence as the
operator of the jeepney. The dispositive portion of the decision reads:
WHEREFORE, the Court finds judgment in favor of the plaintiffs against defendant Destrajo, ordering him to pay
plaintiffs the sum of P28,000.00 for loss of income; to pay plaintiffs the sum of P12,000.00 which amount shall
be deducted in the event judgment in Criminal Case No. 3527-D against the driver, accused Into, shall have
been enforced; to pay plaintiffs the sum of P5,901.70 representing funeral and burial expenses of the deceased;
to pay plaintiffs the sum of P5,000.00 as moral damages which shall be deducted in the event judgment (sic) in
Criminal Case No. 3527-D against the driver, accused Into; to pay plaintiffs the sum of P3,000.00 as attorney's
fees and to pay the costs of suit.
The defendant insurance company is ordered to reimburse defendant Destrajo whatever amounts the latter
shall have paid only up to the extent of its insurance coverage.
SO ORDERED.

Petitioners filed a motion for the reconsideration of the second paragraph of the dispositive portion of the decision contending
that AFISCO should not merely be held secondarily liable because the Insurance Code provides that the insurer's liability is "direct
and primary and/or jointly and severally with the operator of the vehicle, although only up to the extent of the insurance
coverage." 4 Hence, they argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been
awarded in their favor.
In its comment on the motion for reconsideration, AFISCO argued that since the Insurance Code does not expressly provide for a
solidary obligation, the presumption is that the obligation is joint.
In its Order of February 9, 1982, the lower court denied the motion for reconsideration ruling that since the insurance contract "is
in the nature of suretyship, then the liability of the insurer is secondary only up to the extent of the insurance coverage." 5
Petitioners filed a second motion for reconsideration reiterating that the liability of the insurer is direct, primary and solidary with
the jeepney operator because the petitioners became direct beneficiaries under the provision of the policy which, in effect, is a
stipulation pour autrui. 6 This motion was likewise denied for lack of merit.
Hence, petitioners filed the instant petition for certiorari which, although it does not seek the reversal of the lower court's
decision in its entirety, prays for the setting aside or modification of the second paragraph of the dispositive portion of said
decision. Petitioners reassert their position that the insurance company is directly and solidarily liable with the negligent operator
up to the extent of its insurance coverage.
We grant the petition.
The particular provision of the insurance policy on which petitioners base their claim is as follows:
Sec. 1 LIABILITY TO THE PUBLIC
1. The Company will, subject to the Limits of Liability, pay all sums necessary to discharge liability of the insured in respect of
(a) death of or bodily injury to any THIRD PARTY
3. In the event of the death of any person entitled to indemnity under this Policy, the Company will, in respect of the liability
incurred to such person indemnify his personal representatives in terms of, and subject to the terms and conditions hereof. 7
The above-quoted provision leads to no other conclusion but that AFISCO can be held directly liable by petitioners. As this Court
ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here an insurance policy insures directly against liability, the insurer's
liability accrues immediately upon the occurrence of the injury or even upon which the liability depends, and does not depend on
the recovery of judgment by the injured party against the insured." 8 The underlying reason behind the third party liability (TPL)
of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of the insured who
causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy 9 Since petitioners
had received from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's liability is now limited to P15,000.00.
However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo. In Malayan Insurance Co., Inc. v. Court of
Appeals, 10 this Court had the opportunity to resolve the issue as to the nature of the liability of the insurer and the insured vis-avis the third party injured in an accident. We categorically ruled thus:

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, 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 (the injured third party), 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. (emphasis supplied)
The Court then proceeded to distinguish the extent of the liability and manner of enforcing the same in ordinary contracts from
that of insurance contracts. While in solidary obligations, the creditor may enforce the entire obligation against one of the
solidary debtors, in an insurance contract, the insurer undertakes for a consideration to indemnify the insured against loss,
damage or liability arising from an unknown or contingent event. 11 Thus, petitioner therein, which, under the insurance contract
is liable only up to P20,000.00, can not be made solidarily liable with the insured for the entire obligation of P29,013.00 otherwise
there would result "an evident breach of the concept of solidary obligation."
Similarly, petitioners herein cannot validly claim that AFISCO, whose liability under the insurance policy is also P20,000.00, can
be held solidarily liable with Destrajo for the total amount of P53,901.70 in accordance with the decision of the lower court. Since
under both the law and the insurance policy, AFISCO's liability is only up to P20,000.00, the second paragraph of the dispositive
portion of the decision in question may have unwittingly sown confusion among the petitioners and their counsel. What should
have been clearly stressed as to leave no room for doubt was the liability of AFISCO under the explicit terms of the insurance
contract.
In fine, we conclude that the liability of AFISCO based on the insurance contract is direct, but not solidary with that of Destrajo
which is based on Article 2180 of the Civil Code. 12 As such, petitioners have the option either to claim the P15,000 from AFISCO
and the balance from Destrajo or enforce the entire judgment from Destrajo subject to reimbursement from AFISCO to the extent
of the insurance coverage.
While the petition seeks a definitive ruling only on the nature of AFISCO's liability, we noticed that the lower court erred in the
computation of the probable loss of income. Using the formula: 2/3 of (80-56) x P12,000.00, it awarded P28,800.00. 13 Upon
recomputation, the correct amount is P192,000.00. Being a "plain error," we opt to correct the same. 14 Furthermore, in
accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 15
WHEREFORE, premises considered, the present petition is hereby GRANTED. The award of P28,800.00 representing loss of income
is INCREASED to P192,000.00 and the death indemnity of P12,000.00 to P50,000.00.
G.R. No. L-24377

October 26, 1968

FAR EASTERN SURETY & INSURANCE COMPANY, INC, vs. SOCORRO DANCEL VDA. DE MISA,
Appeal by petition for review from a judgment of the Court of Appeals, in its Case CA-G.R. No. 30846-R, sentencing the Far
Eastern Surety & Insurance Company to indemnify La Mallorca on its insurance contract for P9,661.50.
The record discloses that on 3 September 1957 the two respondents, Socorro Dancel Vda. de Misa and Araceli Pinto, hired a
taxicab operated by respondent La Mallorca in Quezon City. While proceeding south toward the Archbishop's Palace in Shaw
Boulevard, the taxicab collided with a gravel and sand truck, driven by one Faustino Nabor, that was proceeding in the opposite
direction. As a result the two passengers of the La Mallorca taxicab were injured, and filed suit for damages against the taxicab
company in the Court of First Instance. The operator denied liability, but instituted a third party complaint against herein
appellant, Far Eastern Surety and Insurance Company, to recoup from the latter, based on its Common Carrier's Accident
Insurance No. CCA 106, any damages that might be recovered by the plaintiffs taxicab passengers. The insurer, likewise, denied
responsibility.
After trial, the Court of First Instance of Quezon City awarded to plaintiffs Vda. de Misa and Pinto (now respondents) actual, moral,
and exemplary damages and attorney's fees, payable by the taxicab operator, La Mallorca; and sentenced the insurance
company to pay to La Mallorca P10,000.00 on its third party liability insurance.
On appeal, the Court of Appeals, while holding that the collision was due to the fault of the driver of the sand truck nevertheless
held the taxicab operator liable in damages to the passengers of its motor vehicle on the strength of its representation that the
passengers were insured against accidents, as shown by the sticker affixed to the taxicab; and, overruling the defense of the
insurance company that it was not answerable except for whatever amounts the insured might be legally liable for in the event of
accident caused by, or arising out of, the use of the motor vehicle, the appellate court adjudged the said insurer answerable to La
Mallorca in view of its third party liability insurance contract. As a result, it rendered judgment on appeal in the following terms:

IN VIEW WHEREOF, judgment affirmed with modifications; so that; 1st, on the complaint, appellant La Mallorca is
sentenced to pay unto appellee, Socorro Dancel Vda. de Misa the sum of P3,910.00 plus P1,000.00 attorney's fees; and
unto appellee, Araceli Pinto, the sum of P3,751.50 plus P1,000.00 attorney's fees; and pursuant to Art. 2210, of the New
Civil Code, this Court orders that the P3,910.00 awarded unto Socorro Dancel and the P3,751.50 awarded unto Araceli
Pinto shall earn interest from the date of the promulgation of this decision; and 2ndly, on the third party complaint,
condemning Far Eastern Surety and Insurance Co. Inc., to pay unto La Mallorca the sum of P4,910.00 corresponding to
Socorro Dancel and P4,751.50 corresponding to Araceli Pinto; costs against appellants La Mallorca and Far Eastern
Surety and Insurance Company.
SO ORDERED.
Unable to secure reconsideration, the insurance company appealed to this Court, but La Mallorca did not. The decision of the
Court of Appeals not having been appealed by the taxicab company, the same is now final as far as that entity is concerned, and
may not be modified by this Court. The insurance company's first and second assignments of error, regarding the correctness of
the appealed judgment in holding La Mallorca responsible to the taxicab passengers, must be, therefore, overruled. The only
issue before this Court at this stage of the litigation is whether or not the appellant insurer is liable to the insured on its policy of
insurance.
In affirming the responsibility of the insurer, the Court of Appeals reasoned out in this wise:
In the first place, as we have said earlier, the Far Eastern Surety is not liable under the insurance contract because the assured La
Mallorca is not "legally liable" to the plaintiffs-appellees. But in the very remote event that the La Mallorca is held "legally liable"
and for which reason that the Far Eastern Surety may be called upon to answer under the insurance contract, it is the stand of
this representation that it cannot be answerable to the full extent of its maximum liability of P5,000.00 per passenger."
For one thing, the Far Eastern Surety's liability under the insurance contract does not extend to moral, compensatory and
exemplary damages, and attorney's fees. Its insurance liability is limited to actual physical injuries. This is so because under the
Common Carrier's Accident Insurance Contract and its Third Party Liability Insurance Rider (Annex "C" of the Third-Party
Complaint, please see page 59 of the Record on Appeal), the liability of the Far Eastern Surety is defined as follows:
"l. The Company will subject to the Limits of Liability indemnify the Insured in the event of accident caused by
or arising out of the use of the Motor Vehicle or in connection with the loading or unloading of the Motor Vehicle
against all sums including claimant's costs and expense which the Insured shall become legally liable to pay in
respect of:
(a) death of or bodily injury to any person
(b) damage to property
"The above-quoted stipulation exempts the Far Eastern Surety from paying damages other than actual bodily
injuries sustained by third parties." (Brief for the Third Party Defendant-Appellant Far Eastern Surety &
Insurance Company, Inc., pages 12-13)
but this is wrong, because since La Mallorca has been found to be "legally liable", it must follow that Far Eastern Surety
must now answer unto it as its insurer; only that the total liability per passenger should not exceed P5,000.00; nor is it
correct for Far Eastern to say that it should answer only for "actual bodily injuries" and to no other; for what the
stipulation above copied says and what it therefore must mean is that said Company:
"will ... indemnify the Insured in the event of accident caused by or arising out of the use of the Motor Vehicle ...
against all sums ... which the Insured shall become legally liable in respect of ... bodily injury;"
otherwise stated, the "bodily injury" is only required to be the cause of the liability of Far Eastern, but its liability should
extend to "all sums which the Insured shall become legally liable only that this should not exceed P5,000.00; the result
of all these will be to sustain the decision appealed from, within the corresponding deductions outlined above.
We agree with the appellant that the decision of the Court of Appeals on this point is not legally tenable, for the reason that the
policy of insurance limited the recovery of the insured to "all sums including claimant's" (passengers in this case) "cost and
expenses which the Insured shall become legally liable" in the "event of accident caused by or arising out of the use of the Motor
Vehicle;" and the appealed decision itself shows that the indemnity awarded to the passengers of the La Mallorca taxicab was not
because of the accident but was exclusively predicated on the representation made by the taxicab company to its
passengers that the latter were insured against accidents. This is plain from the consideranda made in the appealed decision
(pages 10-11):
... indeed, the notice in the sticker evidently being intended in order to court the riding public into patronizing La
Mallorca, and being placed there right in the taxi, the only meaning that can be given to it and certainly it must have
a meaning for it could not have been there placed if intended to be useless was that La Mallorca bound itself, in its

contract of carriage, with that additional stipulation therein indicated, that the passengers were "Insured", and if there
be any ambiguity in its meaning, such ambiguity must be construed most strongly against the party causing the
ambiguity, 1377 New Civil Code; and having that as a basis, this Court must find that La Mallorca had indeed, insured its
pasengers and since such a stipulation was not at all illegal, it must bind La Mallorca, and would be enough to render it
liable for injuries to the passengers thereof, even though it had not been at fault, i.e., that the damage had come from &
fortuitous event coming from the fault of a third party for which it was not responsible, since the Law also dictates that:
"ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which, though foreseen, are inevitable." (Art. 1174, New Civil Code)
and the result must be that La Mallorca would have to answer just the same and the 3rd and 4th assignments of error
must have to be overruled; and this will take the discussion to the amount of damages awarded, subject of the 5th error.
While the decision correctly held that la Mallorca was in estoppel, and could not be heard to deny that its passengers were
insured, it does not necessarily follow that the estoppel, likewise, applied to the appellant insurer. The Court of Appeals concurred
in the finding of the trial court that only the negligence of the driver of the sand and gravel truck was the causative factor of the
mishap, and made no pronouncement that the driver of the taxicab in any way contributed thereto; so that, had it not been for its
representation that its passengers were insured, the taxicab company would not have been liable at all. As it does not appear
that the insurance company authorized or consented to, or even knew of, the representation made by the taxicab company to its
passengers, it follows that the source of the award of damages against the taxicab company was beyond, or outside of, the
contemplation of the parties to the contract of Accident Insurance No. CCA 106, and that the insurer may not be held liable for
such damages.
WHEREFORE, the decision of the Court of Appeals is modified, by eliminating therefrom the award against the appellant, Far
Eastern Insurance Co., Inc., in favor of the taxicab operator, La Mallorca, including the sharing of the costs of litigation, which
shall be exclusively borne by the latter entity. Without costs in this instance.
G.R. No. L-29749 April 15, 1988
PLACIDA PEZA et al., petitioners, vs. HON. FEDERICO C. ALIKPALA, etc., et al., respondents.
Presented in the proceeding at bar is the sorry situation of the loss by a party of the right to argue the merits of a cause on
appeal due to an obsessive pre-occupation with a question of admissibility of evidence, like a man who, it is said, "fails to see the
forest for the trees."
The case had its origin in an unfortunate vehicular accident. Two (2) children ran across the path of a vehicle as it was running
along the national highway at barrio Makiling Calamba, Laguna. They were killed.
The vehicle, a Chevrolet "Carry-All", belonged to a partnership known as Diman & Company, and was then being driven by its
driver, Perfecto Amar. It was insured with the Empire Insurance Co., Inc. under a so-called 'comprehensive coverage" policy, loss
by theft excluded. The policy was in force at the time of the accident.
Placida Peza, the managing partner of Diman & Co. filed a claim with the insurance company, hereafter simply, Empire, for
payment of compensation to the family of the two (2) children who died as a result of the accident. Empire refused to pay on the
ground that the driver had no authority to operate the vehicle, a fact which expressly excepted it from liability under the policy.
What Peza did was to negotiate directly with the deceased children father for an out-of-court settlement. The father agreed to
accept P 6,200.00 in fun settlement of the liability of the vehicles owner and driver, and Peza paid him this sum.
Peza thereafter sued Empire to recover this sum of P6,200.00 as actual damages, as well as P20,000.00 as moral damages,
P10,000.00 as exemplary damages, and P10,000.00 as attorney's fees. She amended her complaint shortly thereafter to include
Diman & Co. as alternative party plaintiff. 1
Empire's basic defense to the suit was anchored on the explicit requirement in the policy limiting the operation of the insured
vehicle to the "authorized driver" therein defined, namely, (a) the insured, or (b) any person driving on the insured order or with
his permission, provided that... that the person driving is permited in accordance with the licensing or other laws or regulations to drive the Motor vehicle or
has been so permitted and is not disqualified by order of the Court of Law of by reason of any enactment or regulation in that
behalf from driving such Motor Vehicle.It appearing, according to Empire, that at the time of the mishap, the driver Perfecto Amar only had a temporary operator's
permit (TVR) already expired his drivers license having earlier been confiscated by an agent of the Land Transportation
Commission for an alleged violation of Land Transportation and Traffic Rules, he was not permitted by law and was in truth
disqualified to operate any motor vehicle; and this operated to relieve it (Empire) from liability under its policy.

The fact of Amar's having only an expired TVR at the time of the accident was duly established during the trial. It does not seem
to have been seriously disputed by the plaintiffs. What plaintiff's counsel attempted to do, to neutralize that fact, was to offer
rebuttal testimony (1) to explain the circumstances attending the issuance of the TVR by the LTC officer to Amar in proof of the
proposition that there was no reason for confiscation of Amar's license and the issuance to him of a TVR, and the LTC agent was
wrong in doing so, and also, to (2) prove that, "contrary to the implication' of one of Empire's exhibits, Amar's license had not
expired, but had been renewed. The respondent Judge however sustained the objection of Empire's councel to the evidence on
the ground that it was irrelevant to the issue. 2 The Judge also denied plaintiffs' request for time to present additional rebuttal
evidence in proof of the same propositions. 3
The plaintiffs having moved for reconsideration, and the Court having refused, said plaintiffs have come to this Court seeking
communication on certiorari of the above describe orders, assailing them as being tainted by grave abuse of discretion.
It would seem fairly obvious that whether the LTC agent was correct or not in his opinion that driver Amar had violated some
traffic regulation warranting confiscation of his license and issuance of a TVR in lieu thereof, this would not alter the undisputed
fact that Amar's licence had indeed been confiscated and a TVR issued to him, and the TVR had already expired at the time that
the vehicle being operated by him killed two children by accident. Neither would proof of the renewal of Amar's license change
the fact that it had really been earlier confiscated by the LTC agent. The plaintiffs' proferred proof therefore had no logical
connection with the facts thereby sought to be refuted, the proof had no rational tendency to establish the improbability of the
facts demonstrated by Empire's evidence. The proofs were thus correctly by the respondent Judge as being irrelevant.
Even positing error in the Judge's analysis of the evidence attempted to be introduced and his rejection thereof, it is clear that it
was at most an error of judgment, not such an error as may be branded a grave abuse of discretion, i.e., such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction, against which the writ of certiorari will lie. 4 In any event,
the established principle is "that ruling of the trial court on procedural questions and on admissibility of evidence during the
course of the trial are interlocutory in nature and may not be the subject of separate appeal or review on certiorari, but are to be
assigned as errors and reviewed in the appeal properly taken from the decision rendered by the trial court on the merits of the
case. 5
In the meantime, respondent Judge Alikpala rendered judgment on the merits, since the case was then already ripe for
adjudication. The judgment ordered dismissal of the case for failure on the part of the plaintiff to prove their cause of action
against Empire. Notice of the judgment was served on the parties in due course. The plaintiffs did not appeal. instead, they filed a
motion praying that Judge Alikpala be declared guilty of contempt of court for having decided the case on the merits despite the
pendency in this Court of the the certiorari action instituted by the plaintiffs.
It is elementary that the mere pendency of a special civil action for certiorari, commenced in relation to a case pending before a
lower Court, does not interrupt the course of the latter when there is no writ of injunction restraining it. This was particularly true
in the case of the respondent Judge in the light of the requirement of the Judiciary Act that a case be decided within ninety (90)
days from date of submission. 6 As His Honor has pointed out, he but did his duty under the law, and hence, by no stretch of the
imagination may his act be regarded as contempt of court, much less an 'affront to the Tribunal.' He is right, and must therefore
be absolved of any responsibility for contempt.
In their eagerness to prove the respondent Judge wrong in sustaining objections to their proffered proofs, and to have him
punished for contempt for rendering judgment on the merits adversely to them despite his being a respondent in their certiorari
suit before this Court, the plaintiff failed to perfect an appeal from that judgment on the merits. Judge Alikpala's judgment has
thus become and executory, and this is an additional factor precluding relief to the petitioners.
WHEREFORE, the petition is DISMISSED
Western Guaranty v CA G.R. No. 91666 July 20, 1990
Facts:
Priscilla Rodriguez was struck by a bus owned by De Dios. She was hospitalized and her face was permanently disfigured.
Western Guaranty, the insurance company of the bus line, was obliged to pay due to the bodily injury caused by the bus.
Rodriguez was able to earn a money judgment from the court to the tune of 3000 for actual damages, 1500 for loss of earning
capacity, and 20000 for moral damages and attorneys fees. De Dios filed a complaint against Western to indemnify the amount.
Western lost the case in the appellate court, hence this petition.
Issue: Is Western liable for paying loss of earnings, moral damages and attorney's fees even if these items are not among those
included in the Schedule of Indemnities set forth in the insurance policy.
Held: Yes. Petition dismissed.
Ratio:
The policy states:
Section 1. Liability to the Public Company will, subject to the Limits of Liability, pay all sums necessary to discharge liability of
the insured in respect of
(a)
death of or bodily injury to or damage to property of any passenger as defined herein.
There was also a schedule of indemnities that specified a certain amount for a certain type of injury as well as hospital service
payments.
In this case, the limits on the amount payable for certain kinds of expenses were not considered by the court as excluding
liability for any other type of expense or damage or loss even though actually sustained or incurred by the third party victim.

The court noted that the limits of the liability was at 50,000 per person per accident. Construing this with section 1 means that all
kinds of damages allowable by law were also to be covered by the policy once it was shown that liability has arisen.
The schedule of indemnities was not a closed enumeration of the kinds of damages Western can award.
Western should have used far more specific language, not the pay all sums necessary to discharge liability clause.
Insurance contracts must be read by the courts with a jaundiced eye to prevent the insurer from escaping from its obligation.
Also, contracts of adhesion such as policies msut be construed against the party who made them, in this case western.
Case No
: G.R. No. L-51221
First Integrated Bonding v. Hernando,
Topic
: Casualty Insurance; Compulsory motor vehicle liability; Third party suit against insurer
Facts
: Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death andinjuries to third persons
with First Integrated Bonding and Insurance Company, Inc. for P30,000. The said jeepney driven by Blanco himself bumped a fiveyear old child, Deogracias Advincula, causing the latter's death. The boys parents filed a complaint for damages against
Blanco and First Insurance, which was granted by the lower court. First Insurance filed a petition for certiorari contending that the
victims parents have no cause of action against it becausethey are not parties to the insuranc e contract and that they may only
proceed against the driver based on the provisions of the New Civil Code.
Issue
: W/N an injured party for whom the contract of insurance is intended can sue directly the insurer
Held
: YES
Doctrine
: Where the insurance contract provides for indemnity against liability to a third party, such third party can directly sue the
insurer. The liability of the insurer to such third person is based on contract while the liability of the insured to the third party is
based on tort. It cannot evade its liability as insurer by hiding under the cloak of the insured. Its liability is primary and
not dependent on the recovery of judgment from the insure
SURETY CASES
Zaragosa vs. Fidelino
Facts Antonio Zaragosa, sold a car to Ma. Angelina Fidelino. Fidelino however, failed to pay the price in the manner stipulated in
their agreement.
The car was taken from Fidelinos possession by the sheriff on the strength of a writ of delivery, but was promptly returned to her
on orders of the court when a surety bond for the cars release was posted in her behalf by Mabini Insurance & Fidelity Co., Inc.
The judgment however was rendered in favor of the plaintiff, ordering Fidelino to pay the unpaid balances plus damages and
interests. Zaragosa within the reglementary period for taking an appeal moved for the amendment of the decision so as to
include the surety as a party solidarily liable with the defendant for the payment of the sums awarded in the judgment.
Insurance agency said that the lower court never acquired jurisdiction over it since no summons was ever served on it, its filing of
a counter-bond not being equivalent to voluntary submission to the courts jurisdiction.
Issue
WON the insurance company could be held liable
Held. Yes To hold a surety on a counter-bond liable, what is entailed is (1) the filing of an application therefor with the court
having jurisdiction of the action; (2) the presentation thereof before the judgment becomes executory (or before the trial or
before appeal is perfected); (3) the statement in said application of the facts showing the application to the attaching creditor
and his surety or sureties and (5) the holding of a proper hearing at which the attaching creditor and sureties may be heard on
the application.
Further Sec 17 of Rule 57 says:
When execution returned unsatisfied. Recovery had upon band.- if the execution be returned unsatisfied in whole or in part, the
surety or sureties on any counter-bond given pursuant to the provisions of this rule to secure the payment of the judgment shall
become charged on such counter-bond and bound to pay to the judgment creditor upon demand, the amount due or under the
judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action.
The record shows that the appellant surety company bound itself jointly and severally with the defendants Fidelino. This being
so, the appellant suretys liability attached upon the promulgation of the verdict against Fidelino. All that was necessary to
enforce the judgment against it was, as aforestated, an application therefore with the Court, with due notice to the surety, and
proper hearing, i.e., that it be formally notified that it was in truth being made responsible for its coprincipals adjudicated
prestation, and an opportunity, at a hearing called for the purpose, to show to the court why it should not be adjudged so
responsible.
Philippine Pryce Assurance vs. CA,
Petitioner, Interworld Assurance Corporation (the company now carries the corporate name Philippine Pryce Assurance
Corporation), was the butt of the complaint for collection of sum of money, filed on May 13, 1988 by respondent, Gegroco, Inc.
before the Makati Regional Trial Court, Branch 138. The complaint alleged that petitioner issued two surety bonds (No. 0029,

dated July 24, 1987 and No. 0037, dated October 7, 1987) in behalf of its principal Sagum General Merchandise for FIVE
HUNDRED THOUSAND (P500,000.00) PESOS and ONE MILLION (1,000,000.00) PESOS, respectively.
On June 16, 1988, summons, together with the copy of the complaint, was served on petitioner. Within the reglementary period,
two successive motions were filed by petitioner praying for a total of thirty (30) days extention within which to file a responsible
pleading.
In its Answer, dated July 29, 1988, but filed only on August 4, 1988, petitioner admitted having executed the said bonds, but
denied liability because allegedly 1) the checks which were to pay for the premiums bounced and were dishonored hence there is
no contract to speak of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment
of its principal's obligation, thus, excussion is necessary. After the issues had been joined, the case was set for pre-trial
conference on September 29, 1988. the petitioner received its notice on September 9, 1988, while the notice addressed to its
counsel was returned to the trial court with the notation "Return to Sender, Unclaimed." 2
On the scheduled date for pre-trial conference, only the counsel for petitioner appeared while both the representative of
respondent and its counsel were present. The counsel for petitioner manifested that he was unable to contract the Vice-President
for operations of petitioner, although his client intended to file a third party complaint against its principal. Hence, the pre-trial
was re-set to October 14, 1988. 3
On October 14, 1988, petitioner filed a "Motion with Leave to Admit Third-Party Complaint" with the Third-Party Complaint
attached. On this same day, in the presence of the representative for both petitioner and respondent and their counsel, the pretrial conference was re-set to December 1, 1988. Meanwhile on November 29, 1988, the court admitted the Third Party Complaint
and ordered service of summons on third party defendants. 4
On scheduled conference in December, petitioner and its counsel did not appear notwithstanding their notice in open court
ISSUE: W/N Interworld Assurance Corp. should be liable for the surety bond that it issued as payment for the premium
HELD: YES. RTC and CA: confirmed
Interworld did not and never attempted to pay the requisite docket fee and was not present during the scheduled pre-trial so it is
as if third-party complaint was never filed
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and
delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has
been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective
of whether or not the premium has been paid by the obligor to the surety
Interworld's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud committed against
Gegroco. No person can claim benefit from the wrong he himself committed. A representation made is rendered conclusive upon
the person making it and cannot be denied or disproved as against the person relying thereon.
Eastern Assurance & Surety Corporation vs. Intermediate Appellate Court
Facts
Department of Agrarian reform (DAR) put up a public bidding for the repair of seven units of (USAID) Willys
Mitsubishi/Eisenhower jeeps. Motor City, an automotive repair company won the bid.
The winning bid was accompanied by a proposal bond in the amount of 33,275php and issued by Eastern as surety on behalf of
Motor City, its principal.
Under the performance bond, Eastern shall be liable upon the happening of three events; the failure or refusal of Motor City as
principal (1) to guarantee the true and faithful performance of the contract in case of an award; (2) to accept the award; and (3)
to answer for any delay and/or default in the execution of the contract as provided in the proposal
Motor City was able to repair and deliver six out of seven jeeps, but the seventh was not returned despite repeated demands.
DAR filed an action for specific performance and damages against Motor City and Eastern Assurance.
Eastern argued that the bon was only a proposal bond and not a performance bond. Liability therefore ends when the contract
was executed, meaning signed and accepted by the parties.
Judgment is rendered in favor of DAR, holding Motor and Eastern solidarily liable.
Issue
WON petitioner Eastern may be held liable to respondent DAR for the contractual breach committed here by Motor City?
Held. Yes. A proposal or bid bond has for its purpose to assure the owner of the project of the good faith of the bidder and that the
bidder will enter into a contract with the project owner should his proposal be accepted. A performance bond is, upon the other
hand, designed to afford the project owner security that the bidder, now the contractor, will faithfully comply with the
requirements of the contract awarded to the contractor and make good damages sustained by the project owner in case of the
contractors failure to so perform. Easterns argument is, however, clearly too broad to be helpful; for liability under a surety
bond is determined not upon the basis of its abstract nature or its title or caption but rather in accordance with the particular
terms and conditions set out in such bond. It is thus necessary to look into the actual terms of the Proposal Bond in question.
INTRA-STRATA ASSURANCE CORPORATION and PHILIPPINE HOME ASSURANCE CORPORATION, , vs. REPUBLIC OF
THE PHILIPPINES
[G.R. No. 156571. July 09, 2008]
FACTS:
Grand textile is a local manufacturing corporation importing various articles such as dyestuffs, spare parts for warehouse
machinery and filaments. Subsequent to importation, the articles were transferred to Bureau of Customs (BoC) where it required
payment of tariffs and other charges. Inter-Strata and PhilHome issued warehousing bonds in favor of BoC which provided that
that the goods shall be withdrawn from the bonded warehouse on payment of the legal customs duties, internal revenue, and
other charges to which they shall then be subject. Without payment of the taxes, customs duties, and charges due and for
purposes of domestic consumption, Grand Textile withdrew the imported goods from storage. The Bureau of Customs demanded
payment of the amounts due from Grand Textile as importer, and from Intra-Strata and PhilHome as sureties. All three failed to
pay. The government responded by filing a collection suit against the parties with the RTC of Manila. The RTC ruled in favor of the
BoC which was later affirmed by the Court of Appeals.

ISSUES:
Civil Law
(1) Whether or not the withdrawal of the stored goods, wares and merchandise without notice to them as sureties released
them from any liability for the duties, taxes, and charges they committed to pay under the bonds they issued.
RULINGS:
Civil Law
(1) No. The surety does not, by reason of the surety agreement, earn the right to intervene in the principal creditor-debtor
relationship; its role becomes alive only upon the debtors default, at which time it can be directly held liable by the creditor for
payment as a solidary obligor. A surety contract is made principally for the benefit of the creditor-obligee and this is ensured by
the solidary nature of the sureties undertaking. Under these terms, the surety is not entitled as a rule to a separate notice of
default,nor to the benefit of excussion, and may be sued separately or together with the principal debtor.