Republic of the Philippines any motor vehicle on the public highways without
SUPREME COURT having procured a license for the current year, nor
Manila
EN BANC
G.R. No. L-17312 November 29, 1965
ARTURO R. TANCO, JR., plaintiff-appellee,
vs.
THE PHILIPPINE GUARANTY COMPANY, defendant-
appellant.
Manuel Y. Macias and Julio R. Vicencio for plaintiff-
appellee.
Rufino Y. Luna and Josue H. Gustilo for defendant-
appellant.
MAKALINTAL, J.:
Plaintiff's automobile, while being driven at the
southern approach of the Jones bridge by his brother
Manuel Tanco on September 1, 1959, figured in a
collision with a pick-up delivery van, as a result of
which both vehicles were damaged. Plaintiff paid for
repairs the total sum of P2,536.99 and then filed his
claim with defendant company under a car insurance
policy issued by the latter. The claim was rejected,
whereupon suit was commenced in the Municipal Court
of Manila, whence it was elevated on appeal to the
Court of First Instance of Manila, which gave judgment
for plaintiff in the amount stated, plus interest at 8%
and P500.00 as attorney's fees. Appeal was taken by
defendant directly to this Court, there being no dispute
as to the facts.
The policy sued upon covers, up to a certain limit, loss
or damage to the insured vehicle as well as damage to
property of third persons as a consequence of or
incident to the operation of said vehicle. There is an
exception clause, however, which provides that "the
company shall not be liable in respect of any accident,
loss, damage or liability caused, sustained or
incurred ... whilst (the insured vehicle) is ... being
driven by or is for the purpose of being driven by him
in the charge of any person other than an Authorized
Driver." The policy defined the term "Authorized Driver"
to be the insured himself and "(b) any person driving
on the Insured's order or with his permission, provided
that the person driving is permitted in accordance with
the licensing or other laws or regulations to drive the
Motor Vehicle or has been permitted and is not
disqualified by order of a court of law or by reason of
any enactment or regulation in that behalf from driving
such Motor Vehicle."
At the time of the collision plaintiff's brother who was
at the wheel, did not have a valid license, the one he
had obtained for the year 1958 not having been
renewed on or before the last working day of February
1959, as required by section 31 of the Motor Vehicle
Law, Act No. 3992. That section states that any license
not so renewed "shall become delinquent and invalid,"
and section 21 states that "except as otherwise
specifically provided in this Act no person shall operate
while such license is delinquent, invalid, suspended or
revoked."
In rendering judgment for plaintiff the trial court
adverted to the absence of evidence that Manuel Tanco
had been "disqualified by order of a court of law or by
reason of any enactment or regulation in that behalf
from driving such motor vehicle," and ruled that if
there is any ambiguity in the definition of the term
"authorized driver" in the policy the ambiguity should
be construed in favor of plaintiff, since the policy had
been prepared in its entirety by defendant. The trial
court's advertence is true as a matter of fact; and its
ruling is correct as a matter of law. But neither one nor
the other is relevant in this case. Appellant does not
rely on the portion of the proviso in the policy quoted
by the court but on that which states that "the person
driving is permitted in accordance with the licensing or
other laws." And as to this there is no ambiguity
whatsoever, because the Motor Vehicle Law expressly
prohibits any person from operating a motor vehicle on
the highways without a license for the current year or
while such license is delinquent or invalid. That Manuel
Tanco renewed his license on September 8,1959, one
week after the accident did not cure the delinquency or
revalidate the license which had already expired.
We are not aware that the question presented here has
been decided by this Court in any previous case.
Indeed all the authorities cited by the parties consist of
decisions Courts United States. We note, however, that
those relied upon by appellee are not in point by
reason of material differences in the facts or issues
presented. In Messersmith vs. American Fidelity Co.,
187 App. Div. 35, 175 N.Y. Supp. 169; and Fireman's
Fund Insurance Co. vs. Haley, 129 Miss. 525, 90 So.
635, the question was whether the insured could
recover on an automobile policy for damage sustained
in a collision which occurred while the vehicle was
being driven in violation of law in the first case by an
infant at the instance of the insured, and in the second
by the insured himself beyond the statutory speed
limit. In neither case was there a provision in the policy
expressly excluding liability by reason of the particular
violation involved. We have no reason to disagree with
the pronouncement of the court in the second case,
after citing the first, that "if such a defense (that the
vehicle was being driven in violation of law) were
permissible automobile insurance would be practically
valueless."
In MacMahon vs. Pearlman, 13 N.E. 154-156, a
Massachusetts case, the defense of the insurer was
also the violation of law by the insured, namely, that
she was driving without a license; but as stated in the
decision, "the casualty company does not urge that the
unlawful conduct is forbidden in express terms, (but)
that because of public policy it ought not to be
compelled to pay damages." The court,
citing Messersmith v. American Fidelity Co., supra,
similarly allowed recovery, saying that to restrict such
insurance to cases where there has been no violation
of criminal law or ordinance would reduce indemnity to
a shadow.
In the case before Us now appellant's defense does not
rest on the general proposition that if a law is violated
at the time of the accident which causes the damage
or injury there can be no recovery, but rather on a
specific provision in the policy that appellant shall not
be liable if the accident occurs while the vehicle is
being driven by any person other than an authorized
driver and that an authorized driver, if not the insured
himself, is one who is acting on his order or with his
permission, provided he is permitted to drive under the
licensing laws.

The cases cited by appellant are apropos. In Crahan v.

Automobile Underwriters, Inc., et al., 176 A. (Pa.) 817, a
clause in the policy excluding loss while the motor
vehicle "is being operated by any person prohibited by
law from driving an automobile" was held to be free
from doubt or ambiguity, reasonable in its terms and in
furtherance of the policy of the law prohibiting
unlicensed drivers to operate motor vehicles.
In Zabonick v. Ralston, et al., 261 N.W. (Mich.) 316, the
insured was driving with an expired license, in violation
of law (Act No. 91 of the Public Acts of 1931), when the
accident occurred. Under a provision in the policy that
the insurer "shall not be liable while the automobile is
operated ... by any person prohibited by law from
driving," the insurance company was absolved, the
Supreme Court of Michigan saying: "To require a person
to secure an operator's license and meet certain
requirements before driving an automobile is a
regulation for the protection of life and property, the
wisdom of which can scarcely be questioned. The
Legislature has also provided that every three years
such licenses expire and may be renewed under
certain conditions. If one fails to comply with the
regulation, the statute says, he or she shall not drive a
motor vehicle upon the highway. Under the terms of
the contract, while under such statutory prohibition,
plaintiff could not recover under his policy. To permit
such recovery, notwithstanding the lack of a driver's
license, would tend to undermine the protection
afforded the public by virtue of Act No. 91."

The exclusion clause in the contract invoked by

appellant is clear. It does not refer to violations of law
in general, which indeed would tend to render
automobile insurance practically a sham, but to a
specific situation where a person other than the
insured himself, even upon his order or with his
permission, drives the motor vehicle without a license
or with one that has already expired. No principle of
law or of public policy militates against the validity of
such a provision.

The judgment appealed from is reversed, with costs.

 Kingsway car against loss or damage through accident
for an amount not exceeding P8,000.00 (Policy No.
M1156). On 25 June 1961, and during the effectivity of
the policy, the insured vehicle, while being driven by
the owner's driver, became involved in a vehicular
collision along Rizal Avenue Extension, Potrero,
Malabon, Rizal. The car was damaged, and the repair
was estimated to cost P5,300.00.

As the insurance company refused either to pay for the

repair or to cause the restoration of the car to its
original condition, Robes instituted Civil Case No. Q-
6063 in the Court of First Instance of Rizal for recovery
not only of the amount necessary for the repair of the
insured car but also of actual and moral damages,
attorneys' fees and costs. Resisting plaintiff's claim, the
insurance company disclaimed liability for payment,
alleging that there had been violation of the insurance
contract because the one driving the car at the time of
the incident was not an "authorized driver."

After due hearing, judgment was rendered for the

plaintiff, and defendant insurer was ordered to pay
unto the former the cost of repair of the car in the sum
of P5,031.28; the sum of P150.00, for the hauling and
impounding of the car at the repair shop; P2,000.00 as
actual damages; and P1,000.00 as attorneys' fees, plus
costs.

The insurance company went to the Court of Appeals,

Republic of the Philippines raising inter alia the questions of the qualification of
SUPREME COURT plaintiff's driver to operate the insured vehicle and the
Manila correctness of the trial court's award to plaintiff of the
amount of P5,013.28 as cost of repairs, and of actual
EN BANC damages and attorneys' fees. In its decision of 31
January 1966, the Court of Appeals affirmed the ruling
of the lower court except the award of actual damages
in the sum of P2,000.00, which was eliminated on the
ground that it was too speculative. Not content, the
G.R. No. L-25920 January 30, 1970 insurance company filed the present petition for review
of the aforesaid decision of the Court of Appeals on two
CCC INSURANCE CORPORATION, petitioner, grounds: (1) that the proceedings observed in the trial
vs. court were irregular and invalid; and (2) that the
COURT OF APPEALS (Fourth Division) and damage to the insured car was not covered by the
CARLOS F. ROBES, respondents. insurance policy because at the time of the accident it
was being driven by one who was not an authorized
driver.
Kalaw and Felipe for petitioner.
The second issue constitutes the main contention of
Adalia B. Francisco for respondents. herein appellant, and will be considered first. It is
vigorously urged by the insurer that the one driving the
insured vehicle at the time of the accident was not an
authorized driver thereof within the purview of the
REYES, J.B.L., J.: following provision of the insurance policy:

Petition for review of the decision of the Court of AUTHORIZED DRIVER:

Appeals, affirming that of the Court of First Instance of
Rizal (Quezon City) allowing insurance indemnification Any of the following: (a) The insured;
of plaintiff for his damaged car and the payment of
attorney's fees. (b) Any person driving on the Insured's
order or with his permission, provided
The following facts are not in dispute: that the person driving is permitted in
accordance with licensing laws or
On 1 March 1961, Carlos F. Robes took an insurance, regulations to drive the motor
with the CCC Insurance Corporation, on his Dodge vehicle covered by this Policy, or has
been so permitted and is not
 disqualified by order of a court of law
or by reason of any enactment or
regulation from driving such Motor
Vehicle. (Emphasis ours)
It has been found as a fact by the Court of Appeals that
Domingo Reyes, the, driver who was at the wheel of
the insured car at the time of the accident, does not
know how to read and write; that he was able to secure
a driver's license, without passing any examination
therefor, by paying P25.00 to a certain woman; and
that the Cavite agency of the Motor Vehicles Office has
certified not having issued Reyes' purported driver's
license No. 271703 DP.
In holding that the damage sustained by the car comes
within the coverage of the insurance policy, the Court
of Appeals argued that since Reyes' purported driver's
license (Exhibit "A") bears all the earmarks of a duly
issued license, then it is a public document, and
petitioner insurance company then has the burden of
disproving its genuineness, which the latter has failed
to do. In this respect the Court of Appeals ruled:
... . The fact that the Cavite Agency of
the Motor Vehicles Office states that
Driver's License No. 271703 DP was not
issued by that office, does not remove
the possibility that said office may have
been mistaken or that said license was
issued by another agency. Indeed
Exhibit 13 shows that a certain Gloria
Presa made the notation thereon "no
license issued" and which notation was
the basis of the 1st Indorsement,
Exhibit 12, signed by the MVO Cavite
City Agency's officer-in-charge. Neither
Gloria Presa nor the officer-in-charge
Marciano A. Monzon was placed on the
witness stand to be examined in order
to determine whether said license is
indeed void. As it is, as heretofore
pointed out, the fact remains that
Domingo Reyes is in possession of a
driver's license issued by the Motor
Vehicles Office which on its face
appears to have been regularly issued.
In effect, the Court of Appeals found that the driver's
license No. 271703 DP was genuine, that is, one really
issued by the Motor Vehicles Office or its authorized
deputy; and this finding of fact is now conclusive and
may not be questioned in this appeal.
Nevertheless, the appellant insurer insists that, under
the established facts of this case, Reyes, being
admittedly one who cannot read and write, who has
never passed any examination for drivers, and has not
applied for a license from the duly constituted
government agency entrusted with the duty of
licensing drivers, cannot be considered an authorized
driver.
The fatal flaw in appellant's argument is that it
studiously ignores the provisions of law existing at the
time of the mishap. Under Section 24 of the Revised
Motor Vehicles Law, Act 3992 of the Philippine
Legislature, as amended by Republic Acts Nos. 587,
1204 and 2863,1
An examination or demonstration to
show any applicant's ability to operate
motor vehicles may also be required in
the discretion of the Chief, Motor
Vehicles Office or his deputies.
(Emphasis supplied)
and reinforcing such discretion, Section 26 of the Act
prescribes further:
SEC. 26. Issuance of chauffeur's
license; professional badge: If, after
examination, or without the same, the
Chief, Motor Vehicles Office or his
deputies, believe the applicant to
possess the necessary qualifications
and knowledge, they shall issue to such
applicant a license to operate as
chauffeur ... (Emphasis supplied)
It is thus clear that the issuance of a driving license
without previous examination does not necessarily
imply that the license issued is invalid. As the law
stood in 1961, when the claim arose, the examinations
could be dispensed with in the discretion of the Motor
Vehicles Office official officials. Whether discretion was
abused in issuing the license without examination is
not a proper subject of inquiry in these proceedings,
though, as a matter of legislative policy, the discretion
should be eliminated. There is no proof that the owner
of the automobile knew that the circumstance
surrounding such issuance showed that it was irregular.
The issuance of the license is proof that the Motor
Vehicles Office official considered Reyes, the driver of
the insured- appellee, qualified to operate motor
vehicles, and the insured was entitled to rely upon such
license. In this connection, it should be observed that
the chauffeur, Reyes, had been driving since
1957,2 and without mishap, for all the record shows.
Considering that, as pointed out by the Court of
Appeals, the weight of authority is in favor of a liberal
interpretation of the insurance policy for the benefit of
the party insured, and strictly against the insurer, We
find no reason to diverge from the conclusion reached
by the Court of Appeals that no breach was committed
of the above-quoted provision of the policy.
The next issue assigned is anchored on the fact that
the decision of the trial court was based on evidence
presented to and received by the clerk of court who
acted as commissioner, although allegedly, there was
no written court order constituting him as such
commissioner, no written request for his commission
was made by the parties; he did not take an oath prior
to entering into the discharge of his commission; no
written report of his findings was ever submitted to the
court; and no notice thereof was sent to the parties,
contrary to the specific provisions of Rule 33 of the
Rules of Court.
Actually there is nothing basically wrong with the
practice of delegating to a commissioner, usually the
clerk of court, who is a duly sworn court officer, the
reception of both parties and for him to submit a report
thereon to the court. In fact, this procedure is expressly
sanctioned by Revised Rule 33 of the Rules of
Court.3 Petitioner's objection in this case, however, is
directed not against its referral to the clerk of court but
against the alleged non-observance of the prescribed
steps in connection with such delegation.
We find no cause sufficient to invalidate the
proceedings had in the trial court. We note that this
issue was brought up by the appellant insurance
company or the first time only in its motion for
reconsideration filed in the Court of Appeals. It was not
raised in the trial court, where the defect could still be
remedied. This circumstance precludes ventilation of
the issue of validity of the hearing at this stage; for, if
such irregularity is to vitiate the proceeding, the
question should have been seasonably raised, i.e.,
either before the parties proceeded with the hearing or
before the court handed down its ruling. 4 It is a
procedural point that can be waived by consent of the
parties, express or implied.5
For the same reason, appellant cannot insist now on
the annulment of the proceeding on the basis of
alleged lack of written consent of the parties to the
commission, or of an order appointing the clerk as
commissioner, or of notice of the submission of his
report to the court. Furthermore, appellant has
presented no proof that the clerk of court committed
any mistake or abuse in the performance of the task
entrusted to him, or that the trial court was not able to
properly appreciate the evidence in the case because it
was received by another person. If indeed there were
errors at all, they would be non-prejudicial and could
not justify the holding of a new trial, as urged by herein
petitioner. 6
WHEREFORE, the decision of the Court of Appeals is
affirmed, with costs against appellant CCC Insurance
Corporation.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-54171 October 28, 1980
JEWEL VILLACORTA, assisted by her husband,
GUERRERO VILLACORTA, petitioner,
vs.
THE INSURANCE COMMISSION and EMPIRE
INSURANCE COMPANY, respondents.
TEEHANKEE, Acting C.J.:
The Court sets aside respondent Insurance
Commission's dismissal of petitioner's complaint and
holds that where the insured's car is wrongfully taken
without the insured's consent from the car service and
repair shop to whom it had been entrusted for check-
up and repairs (assuming that such taking was for a joy
ride, in the course of which it was totally smashed in an
accident), respondent insurer is liable and must pay
insured for the total loss of the insured vehicle under
the theft clause of the policy.
The undisputed facts of the case as found in the
appealed decision of April 14, 1980 of respondent
insurance commission are as follows:
Complainant [petitioner] was the owner
of a Colt Lancer, Model 1976, insured
with respondent company under
Private Car Policy No. MBI/PC-0704 for
P35,000.00 Own Damage;
P30,000.00 Theft; and P30,000.00
Third Party Liability, effective May 16,
1977 to May 16, 1978. On May 9, 1978,
the vehicle was brought to the Sunday
Machine Works, Inc., for general check-
up and repairs. On May 11, 1978, while
it was in the custody of the Sunday
Machine Works, the car was allegedly
taken by six (6) persons and driven out
to Montalban, Rizal. While travelling
along Mabini St., Sitio Palyasan, Barrio
Burgos, going North at Montalban,
Rizal, the car figured in an accident,
hitting and bumping a gravel and sand
truck parked at the right side of the
road going south. As a consequence,
the gravel and sand truck veered to the
right side of the pavement going south
and the car veered to the right side of
the pavement going north. The driver,
Benito Mabasa, and one of the
passengers died and the other four
sustained physical injuries. The car, as
well, suffered extensive damage.
Complainant, thereafter, filed a claim
for total loss with the respondent
company but claim was denied. Hence,
 complainant, was compelled to
institute the present action.
The comprehensive motor car insurance policy for
P35,000.00 issued by respondent Empire Insurance
Company admittedly undertook to indemnify the
petitioner-insured against loss or damage to the car (a)
by accidental collision or overturning, or collision or
overturning consequent upon mechanical breakdown
or consequent upon wear and tear; (b) by fire, external
explosion, self-ignition or lightning or burglary,
housebreaking or theft; and (c) by malicious act.
Respondent insurance commission, however, dismissed
petitioner's complaint for recovery of the total loss of
the vehicle against private respondent, sustaining
respondent insurer's contention that the accident did
not fall within the provisions of the policy either for the
Own Damage or Theft coverage, invoking the policy
provision on "Authorized Driver" clause. 1
Respondent commission upheld private respondent's
contention on the "Authorized Driver" clause in this
wise: "It must be observed that under the above-
quoted provisions, the policy limits the use of the
insured vehicle to two (2) persons only, namely: the
insured himself or any person on his (insured's)
permission. Under the second category, it is to be
noted that the words "any person' is qualified by the
phrase
... on the insured's order or with his
permission.' It is therefore clear that if
the person driving is other than the
insured, he must have been duly
authorized by the insured, to drive the
vehicle to make the insurance
company liable for the driver's
negligence. Complainant admitted that
she did not know the person who drove
her vehicle at the time of the accident,
much less consented to the use of the
same (par. 5 of the complaint). Her
husband likewise admitted that he
neither knew this driver Benito Mabasa
(Exhibit '4'). With these declarations of
complainant and her husband, we hold
that the person who drove the vehicle,
in the person of Benito Mabasa, is not
an authorized driver of the
complainant. Apparently, this is a
violation of the 'Authorized Driver'
clause of the policy.
Respondent commission likewise upheld private
respondent's assertion that the car was not stolen and
therefore not covered by the Theft clause, ruling that
"The element of 'taking' in Article 308 of the Revised
Penal Code means that the act of depriving another of
the possession and dominion of a movable thing is
coupled ... with the intention. at the time of the
'taking', of withholding it with the character of
permanency (People vs. Galang, 7 Appt. Ct. Rep. 13). In
other words, there must have been shown a felonious
intent upon the part of the taker of the car, and the
intent must be an intent permanently to deprive the
insured of his car," and that "Such was not the case in
this instance. The fact that the car was taken by one of
the residents of the Sunday Machine Works, and the
withholding of the same, for a joy ride should not be
construed to mean 'taking' under Art. 308 of the
Revised Penal Code. If at all there was a 'taking', the
same was merely temporary in nature. A temporary
taking is held not a taking insured against (48 A LR 2d.,
page 15)."
The Court finds respondent commission's dismissal of
the complaint to be contrary to the evidence and the
law.
First, respondent commission's ruling that the person
who drove the vehicle in the person of Benito Mabasa,
who, according to its finding, was one of the residents
of the Sunday Machine Works, Inc. to whom the car had
been entrusted for general check-up and repairs was
not an "authorized driver" of petitioner-complainant is
too restrictive and contrary to the established principle
that insurance contracts, being contracts of adhesion
where the only participation of the other party is the
signing of his signature or his "adhesion" thereto,
"obviously call for greater strictness and vigilance on
the part of courts of justice with a view of protecting
the weaker party from abuse and imposition, and
prevent their becoming traps for the unwary. 2
The main purpose of the "authorized driver" clause, as
may be seen from its text, supra, is that a person other
than the insured owner, who drives the car on the
insured's order, such as his regular driver, or with his
permission, such as a friend or member of the family or
the employees of a car service or repair shop must be
duly licensed drivers and have no disqualification to
drive a motor vehicle.
A car owner who entrusts his car to an established car
service and repair shop necessarily entrusts his car key
to the shop owner and employees who are presumed
to have the insured's permission to drive the car for
legitimate purposes of checking or road-testing the car.
The mere happenstance that the employee(s) of the
shop owner diverts the use of the car to his own illicit
or unauthorized purpose in violation of the trust
reposed in the shop by the insured car owner does not
mean that the "authorized driver" clause has been
violated such as to bar recovery, provided that such
employee is duly qualified to drive under a valid
driver's license.
The situation is no different from the regular or family
driver, who instead of carrying out the owner's order to
fetch the children from school takes out his girl friend
instead for a joy ride and instead wrecks the car. There
is no question of his being an "authorized driver" which
allows recovery of the loss although his trip was for a
personal or illicit purpose without the owner's
authorization.
Secondly, and independently of the foregoing (since
when a car is unlawfully taken, it is the theft clause,
not the "authorized driver" clause, that applies), where
a car is admittedly as in this case unlawfully and
wrongfully taken by some people, be they employees
of the car shop or not to whom it had been entrusted,
and taken on a long trip to Montalban without the
owner's consent or knowledge, such taking constitutes
or partakes of the nature of theft as defined in Article
308 of the Revised Penal Code, viz. "Who are liable for
theft. Theft is committed by any person who, with
intent to gain but without violence against or
intimidation of persons nor force upon things, shall
take personal property of another without the latter's
consent," for purposes of recovering the loss under the
policy in question.

The Court rejects respondent commission's premise

that there must be an intent on the part of the taker of
the car "permanently to deprive the insured of his car"
and that since the taking here was for a "joy ride" and
"merely temporary in nature," a "temporary taking is
held not a taking insured against."

The evidence does not warrant respondent

commission's findings that it was a mere "joy ride".
From the very investigator's report cited in its
comment, 3 the police found from the waist of the car
driver Benito Mabasa Bartolome who smashed the car
and was found dead right after the incident "one cal.
45 Colt. and one apple type grenade," hardly the
materials one would bring along on a "joy ride". Then,
again, it is equally evident that the taking proved to be
quite permanent rather than temporary, for the car
was totally smashed in the fatal accident and was
never returned in serviceable and useful condition to
petitioner-owner.

Assuming, despite the totally inadequate evidence,

that the taking was "temporary" and for a "joy ride",
the Court sustains as the better view that which holds
that when a person, either with the object of going to a
certain place, or learning how to drive, or enjoying a
free ride, takes possession of a vehicle belonging to
another, without the consent of its owner, he is guilty FIRST DIVISION
of theft because by taking possession of the personal
property belonging to another and using it, his intent to [G.R. No. L-28772. September 21, 1983.]
gain is evident since he derives therefrom utility,
satisfaction, enjoyment and pleasure. Justice Ramon C. ASSOCIATION OF BAPTISTS FOR WORLD
Aquino cites in his work Groizard who holds that the EVANGELISM, INC., Plaintif, v. FIELDMENS
use of a thing constitutes gain and Cuello Calon who INSURANCE CO., INC., Defendant-Appellant.
calls it "hurt de uso. " 4

The insurer must therefore indemnify the petitioner- RESOLUTION

owner for the total loss of the insured car in the sum of
P35,000.00 under the theft clause of the policy, subject
to the filing of such claim for reimbursement or
payment as it may have as subrogee against the
Sunday Machine Works, Inc.
ACCORDINGLY, the appealed decision is set aside and
judgment is hereby rendered sentencing private
respondent to pay petitioner the sum of P35,000.00
with legal interest from the filing of the complaint until
full payment is made and to pay the costs of suit.
SO ORDERED.
MELENCIO-HERRERA, J.:
This case for "Indemnity for Damages and Attorneys
Fees" was elevated to this Tribunal by the then Court of
Appeals on a question of law.
The Stipulation of Facts submitted by the parties before
the Court of First Instance of Davao, Branch I, in Case
No. 3789, reads as follows:jgc:chanrobles.com.ph
"COMES the parties in the above entitled case, through
their respective counsels and to this Honorable Court
respectfully submit the following stipulations of
facts:chanrob1es virtual 1aw library

1. That plaintiff is a religious corporation duly
organized and registered under the laws of the
Philippines, while defendant is also a domestic
corporation duly organized and existing under the laws
of the Philippines;
2. That plaintiff, having an insurable interest in a
Chevrolet Carry-all, 1955 Model, with Motor No.
032433272555 and Plate No. E-73317 covered by
Registration Certificate No. 288141 Rizal, issued by the
Davao Motor Vehicles Office Agency No. 20 and owned
by Reverend Clinton Bonnel, insured said vehicle with
the defendant under Fieldmens Insurance Co., Inc.
Private Car Comprehensive Policy No. 22 Jl 1107,
attached hereto as Annex A to A-2 against loss or
damage up to the amount of P5,000.00;
3. That in the latter part of 1961, through plaintiffs
representative, Dr. Antonio Lim, the aforementioned
Chevrolet Carry-all was placed at the Jones Monument
Mobilgas Service Station at Davao City, under the care
of said stations operator, Rene Te so that said carry-all
could be displayed as being for sale, with the
understanding that the latter or any of his station boys
would receive a 2% commission should they sell said
vehicle.
4. That on the night of January 18, 1962, Romeo
Catiben one of the boys at the aforementioned Jones
Monument Service Station and a nephew of the wife of
Rene Te who is residing with them, took the
aforementioned chevrolet carry-all for a joy ride to Toril,
Davao City, without the prior permission, authority or
consent of either the plaintiff or its representative Dr.
Antonio Lim, or of Rene Te, and on its way back to
Davao City, said vehicle, due to some mechanical
defect accidentally bumped an electric post causing
actual damages valued at P5,518.61.
5. That the issue before the Honorable Court is
whether or not for the damage to the abovementioned
Chevrolet Carry-all to be compensable under the
aforementioned Fieldmens Private Car Comprehensive
Policy No. 22 JL 11107, there must be a prior criminal
conviction of Romeo Catiben for theft.
WHEREFORE, it is respectfully prayed that this
Honorable Court render judgment on the facts and
issues above stipulated after the parties shall have
submitted their respective memoranda."cralaw
virtua1aw library
The Trial Court rendered judgment based on the facts
stipulated and ordered defendant insurance company
to pay plaintiff association the amount of P5,000.00 as
indemnity for the damage sustained by the vehicle,
P2,000.00 for attorneys fees, and costs. Dissatisfied,
the insurance company interposed an appeal to the
Appellate Court, docketed as CA-G.R. No. 33543-R,
which as above stated, elevated it to this
instance.chanrobles.com:cralaw:red
We affirm. The Comprehensive Policy issued by the
insurance company includes loss of or damage to the
motor vehicle by "burglary . . . or theft." It is settled
that the act of Catiben in taking the vehicle for a joy
ride to Toril, Davao City, constitutes theft within the
meaning of the insurance policy and that recovery for
damage to the car is not barred by the illegal use of
the car by one of the station boys.
". . . where a car is admittedly as in this case unlawfully
and wrongfully taken by some people, be they
employees of the car shop or not to whom it had been
entrusted, and taken on a long trip to Montalban
without the owners consent or knowledge, such taking
constitutes or partakes of the nature of theft as defined
in Article 308 of the Revised Penal Code, viz.(W)ho are
liable for theft. Theft is committed by any person
who, with intent to gain but without violence against or
intimidation of persons nor force upon things, shall
take personal property of another without the latters
consent, for purposes of recovering the loss under the
policy in question."cralaw virtua1aw library
". . . the Court sustains as the better view that which
holds that when a person, either with the object of
going to a certain place, or learning how to drive, or
enjoying a free ride, takes possession of a vehicle
belonging to another, without the consent of its owner,
he is guilty of theft because by taking possession of the
personal property belonging to another and using it, his
intent to gain is evident since he derives therefrom
utility, satisfaction, enjoyment and pleasure. Justice
Ramon C. Aquino cites in his work Groizard who holds
that the use of a thing constitutes gain and Cuello
Calon who calls it hurto de uso. 1
There need be no prior conviction for the crime of theft
to make an insurer liable under the theft clause of the
policy. Upon the facts stipulated by the parties it is
admitted that Catiben had taken the vehicle for a joy
ride and while the same was in his possession he
bumped it against an electric post resulting in
damages. That act is theft within a policy of insurance.
In a civil action for recovery on an automobile
insurance, the question whether a person using a
certain automobile at the time of the accident stole it
or not is to be determined by a fair preponderance of
evidence and not by the rule of criminal law requiring
proof of guilt beyond reasonable doubt. 2 Besides,
there is no provision in the policy requiring prior
criminal conviction for theft.chanroblesvirtualawlibrary
ACCORDINGLY, finding no error in the judgment
appealed from, the same is hereby affirmed.
Costs against defendant Fieldmens Insurance Co., Inc.
SO ORDERED.
FIRST DIVISION
[G.R. No. L-34768. February 24, 1984.]
JAMES STOKES, as Attorney-in-Fact of Daniel
Stephen Adolfson and DANIEL STEPHEN
ADOLFSON, Plaintifs-Appellees, v. MALAYAN
INSURANCE CO., INC., Defendant-Appellant.
Rodrigo M. Nera for Plaintifs-Appellees.
Pio B. Salomon, Jr., for Defendant-Appellant.
DECISION
PLANA, J.:
This is an appeal by Malayan Insurance Company, Inc.
(MALAYAN) from a decision of Court of First Instance of
Manila ordering it to pay the insured under a car
insurance policy issued by MALAYAN to Daniel Stephen
Adolfson against own damage as well as third party
liability.chanrobles virtualawlibrary
The facts are not in dispute, Adolfson had a subsisting
MALAYAN car insurance policy with the above coverage
on November 23, 1969 when his car collided with a car
owned by Cesar Poblete, resulting in damage to both
vehicles. At the time of the accident, Adolfsons car
was being driven by James Stokes, who was authorized
to do so by Adolfson. Stokes, an Irish citizen who had
been in the Philippines as a tourist for more than ninety
days, had a valid and subsisting Irish drivers license
but without a Philippine drivers license.
After the collision, Adolfson filed a claim with MALAYAN
but the latter refused to pay, contending that Stokes
was not an authorized driver under the "Authorized
Driver" clause of the insurance policy in relation to
Section 21 of the Land Transportation and Traffic Code.
Under the insurance policy, "authorized driver" refers
to
"(a) The insured
"(b) Any person driving on the insureds order or with
his permission.
"PROVIDED that the person driving is permitted in
accordance with the licensing or other laws or
regulations to drive the motor vehicle and is not
disqualified from driving such motor vehicle by order of
a court of law or by reason of any enactment or
regulation in that behalf."cralaw virtua1aw library
The cited Section 21 of the Land Transportation and
Traffic Code provides:jgc:chanrobles.com.ph
"Operation of motor vehicles by tourists. Bona fide
tourists and similar transients who are duly licensed to
operate motor vehicles in their respective countries
may be allowed to operate motor vehicles during but
not after ninety days of their sojourn in the Philippines.
"After ninety days, any tourist or transient desiring to
operate motor vehicles shall pay fees and obtain and
carry a license as hereinafter provided." (Emphasis
supplied.)
Unable to convince MALAYAN to pay, Stokes and
Adolfson brought suit before the Court of First Instance
of Manila and succeeded in getting a favorable
judgment, although Stokes had ceased to be
authorized to drive a motor vehicle in the Philippines at
the time of the accident, he having stayed therein as a
tourist for over 90 days without having obtained a
Philippine drivers license. The Court held that Stokes
lack of a Philippine drivers license was not fatal to the
enforcement of the insurance policy; and the MALAYAN
was estopped from denying liability under the
insurance policy because it accepted premium
payment made by the insured one day after the
accident. It said:jgc:chanrobles.com.ph
"Defendant cannot evade liability under the policy by
virtue of the above provision of the Land Transportation
and Traffic Code. This is an insurance case. The basis of
insurance contracts is good faith and trust between the
insurer and the insured. The matter of the failure on
the part of Stokes to have a Philippine drivers license
is not such a defect that can be considered as fatal to
the contract of insurance, because the fact is that
Stokes still had a valid and unexpired Irish license. As a
matter of fact, the traffic officer who investigated the
incident gave Stokes a traffic violation receipt and not
a ticket for driving without license.
"Then the Court believes that defendant is in estoppel
in this case because it allowed the plaintiff to pay the
insurance premium even after the accident occurred.
Admitting for the sake of argument that there was a
violation of the terms of the policy before the incident,
the admission or acceptance by the insurance
company of the premium should be considered as a
waiver on its part to contest the claim of the
plaintiffs."cralaw virtua1aw librar
In this appeal, the two issues resolved by the court a
quo are raised anew. We find the appeal meritorious.
1. A contract of insurance is a contract of indemnity
upon the terms and conditions specified therein. When
the insurer is called upon to pay in case of loss or
damage, he has the right to insist upon compliance
with the terms of the contract. If the insured cannot
bring himself within the terms and conditions of the
contract, he is not entitled as a rule to recover for the
loss or damage suffered. For the terms of the contract
constitute the measure of the insurers liability, and
compliance therewith is a condition precedent to the
right of recovery. (Young v. Midland Textile Insurance
Co., 30 Phil. 617.)
Under the "authorized driver" clause, an authorized
driver must not only be permitted to drive by the
insured. It is also essential that he is permitted under
the law and regulations to drive the motor vehicle and
is not disqualified from so doing under any enactment
or regulation.chanrobles virtual lawlibrary
At the time of the accident, Stokes had been in the
Philippines for more than 90 days. Hence, under the
law, he could not drive a motor vehicle without a
Philippine drivers license. He was therefore not an
"authorized driver" under the terms of the insurance
policy in question, and MALAYAN was right in denying
the claim of the insured.cralawnad
2. Acceptance of premium within the stipulated period
for payment thereof, including the agreed period of
grace, merely assures continued effectivity of the
insurance policy in accordance with its terms. Such
acceptance does not estop the insurer from interposing
any valid defense under the terms of the insurance
policy.
The principle of estoppel is an equitable principle
rooted upon natural justice which prevents a person
from going back on his own acts and representations to
the prejudice of another whom he has led to rely upon
them. The principle does not apply to the instant case.
In accepting the premium payment of the insured,
MALAYAN was not guilty of any inequitable act or
representation. There is nothing inconsistent between
acceptance of premium due under an insurance policy
and the enforcement of its
terms.chanroblesvirtualawlibrary
WHEREFORE, the appealed judgment is reversed. The
complaint is dismissed. Costs against the appellees.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-26827 June 29, 1984
AGAPITO GUTIERREZ, plaintiff-appellee,
vs.
CAPITAL INSURANCE & SURETY CO.,
INC., defendant-appellant.
Celso P. delas Alas for plaintiff-appellee.
Achacoso, Ocampo & Simbulan Law Office for
defendant-appellant.
AQUINO, J.:
The issue in this case is whether an insurance covers a
jeepney whose driver's traffic violation report or
temporary operator's permit had already expired.
Capital Insurance & Surety Co., Inc. insured on
December 7, 1961 for one year the jeepney of Agapito
Gutierrez against passenger and third-party liability.
The passenger liability would not exceed P5,000 for
any one person (Exh. 1 or C-2).
The policy provides in item 13 that the authorized
driver must be the holder of a valid and subsisting
professional driver's license. "A driver with an expired
Traffic Violation Receipt or expired Temporary
Operator's Permit is not considered an authorized
driver" (pp. 26-27, 107, Record on Appeal, Par. 13,
Policy, Exh. C).
Item 13 is part of the "declarations" which formed part
of the policy and had a promissory nature and effect
and constituted "the basis of the policy" (Exh. C, p. 7,
Record on Appeal).
On May 29, 1962, the insured jeepney figured in an
accident at Buendia Avenue, Makati, Rizal. As a result,
a passenger named Agatonico Ballega fell off the
vehicle and died (Pars. 3 and 4, Exh. A).
Teofilo Ventura, the jeepney driver, was duly licensed
for the years 1962 and 1963 (Exh. D). However, at the
time of the accident he did not have the license.
Instead, he had a carbon copy of a traffic violation
report (summons) issued by a policeman on February
22, 1962, with the notation that he had committed the
violation: "Inattentive to driving (Inv. in accident) at
9:30 a.m., 2-22-62" (Exh. E-1).
The same TVR, which served as a receipt for his
license, required him to report to Branch 8 of the traffic
court at the corner of Arroceros and Concepcion
Streets, Manila at nine o'clock in the morning of March
2, 1962. The TVR would "serve as a temporary
operator's permit for 15 days from receipt hereof" (p.
100, Record on Appeal). It is indisputable that at the
time of the accident (May 29, 1962), Ventura was
holding an "expired Temporary Operator's Permit."
Gutierrez paid P4,000 to the passenger's widow,
Rosalina Abanes Vda. de Ballega, by reason of her
husband's death (5 tsn January 20, 1966; Exh. B and B-
1).
As Capital Insurance refused to make any
reimbursement, he filed on October 14, 1963 in the city
court of Manila an action for specific performance and
damages.
The city court in a decision dated April 20, 1965 held
that Ventura was an authorized driver because his TVR
was coterminous with his license. However, it
dismissed the complaint because Gutierrez allegedly
failed to prove that he paid any amount to the heirs of
Ballega. Gutierrez appealed.
The Court of First Instance in a decision dated April 18,
1966 held that Gutierrez's Exhibits B and B-1 prove
that he paid the widow of Ballega P4,099.95 and that
his driver, Ventura, was an authorized driver because
his TVR was "coextensive with the" two-year term of
his confiscated license. It ordered the insurance
company to pay the Id amount. The insurance
company appealed to this Court.
We hold that paragraph 13 of the policy, already cited,
is decisive and controlling in this case. It plainly
provides, and we repeat, that "a driver with an expired
Traffic Violation Receipt or expired Temporary
Operator's permit is not considered an authorized
driver within the meaning" of the policy. Obviously,
Ventura was not an authorized driver. His temporary
operator's permit had expired. The expiration bars
recovery under the policy.
In liability insurance, "the parties are bound by the
terms of the policy and the right of insured to recover
is governed thereby" (44 C.J.S. 934).
It may be that for purposes of the Motor Vehicle Law
the TVR is coterminous with the confiscated license.
That is why the Acting Administrator of the Motor
Vehicles Office and the Manila deputy chief of police
ventured the opinion that a TVR does not suspend the
erring driver's license, that it serves as a temporary
license and that it may be renewed but should in no
case extend beyond the expiration date of the original
license (Exh. F and J, 67, 90-9 1, Record on Appeal).
But the instant case deals with an insurance policy
which definitively fixed the meaning of "authorized
driver". That stipulation cannot be disregarded or
rendered meaningless. It is binding on the insured.

It means that to be entitled to recovery the insured

should see to it that his driver is authorized as
envisaged in paragraph 13 of the policy which is the
law between the parties (Ty vs. First National Surety &
Insurance Co., Inc., 111 Phil. 1122).lwphl@it The
rights of the parties flow from the insurance contract
(Ang vs. Fulton Fire Ins. Co., 112 Phil. 844).

The following ruling has persuasive authority:

Insurance; Automobile; When insurer

exempt from liability; Case at bar.
The automobile insurance policy sued
upon in the instant case exempts the
insurer company from liability for any
accident loss, damage or liability
caused, sustained or incurred while the
vehicle is being driven by any person
other than an authorized driver.

The policy defines the term 'authorized

driver' to be the insured himself or any
person driving on the insured's order or
with his permission provided he is
permitted to drive under the licensing
laws.

In the case at bar, plaintiff's brother,

who was at the wheel at the time of the
collision, did not have a valid license
because the one he had obtained had
already expired and had not been
renewed as required by Section 31 of
the Motor Vehicle Law.

That he had renewed his license one

week after the accident did not cure
the delinquency or revalidate the
license which had already expired
(Syllabus, Tanco, Jr. vs. Phil. Guaranty
Co., 122 Phil. 709).

WHEREFORE. The judgment of the trial is reverse and

set aside. The complaint is dismissed. No costs.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-59919 November 26, 1986
MALAYAN INSURANCE CO., INC., petitioner-
appellant,
vs.
THE HONORABLE COURT OF APPEALS and
AURELIO LACSON, respondents-appellees.
Edgardo Elumba, Yulo, Sedonio, Alejandro and
Associates for petitioner-appellant.
Filomeno B. Tan, Jr., Soberrano, Leong, Amihan, Tan,
Escuerte, Parel and Associates for private respondent-
appellee.
PARAS, J.:
This is an appeal by certiorari, for the review of the
Decision of the respondent Court of Appeals (C.A.) in
CA-G.R. No. 63398-R, entitled "Aurelio Lacson,
(appellee) vs. Malayan Insurance Co., Inc., (appellant),
which affirmed the decision of the Court of First
Instance (CFI) of Negros Occidental holding petitioner
liable to pay private respondent Aurelio Lacson the
amount of P20,000.00, less deductible franchise, which
is the maximum coverage of the insurance policy, with
legal interest thereon from the date of filing of the
complaint, the amount of P5,000.00 as attorney's fees
and expenses in litigation, and to pay the costs.
Plaintiff Aurelio Lacson (private respondent herein) is
the owner of a Toyota NP Land Cruiser, Model 1972,
bearing Plate No. NY-362 and with engine Number F-
374325. Said vehicle was insured with defendant
company (petitioner herein) under "private car
comprehensive" policy No. BIFC/PV-0767 for a one year
period, from Dec. 3, 1974 to Dec. 3, 1975. On Dec. 1,
1975 plaintiff caused the delivery of subject vehicle to
the shop of Carlos Jamelo for repair. On Dec. 2, 1975
while the vehicle was in Carlos Jamelo's shop, a certain
Rogelio Mahinay, together with his other co-employees
in the shop, namely Johnny Mahinay, Rogelio
Macapagong and Rogelio Francisco took and drove the
Toyota Land Cruiser, as a result of which it met with an
accident at Bo. Taculing Bacolod City, causing damage
thereto, in an estimated amount of P21,849.62. Shop-
owner Carlos Jamelo reported the incident to the police
and later on instituted a criminal case for Qualified
Theft against his employees who had taken plaintiff's
vehicle. Plaintiff sought indemnification under his
insurance policy from defendant company but the
latter refused to pay on the ground that the claim is not
covered by the policy inasmuch as the driver of the
insured vehicle at the time of the accident was not a
duly licensed driver. This act of defendant company
prompted Plaintiff to file a civil case for damages
docketed as Civil Case No. 12447 of the CFI of Negros
Occidental. Defendant in its answer raised among
other things as affirmative and special defenses that
plaintiff has no cause of action, claim is not covered by
the insurance policy, and non-joinder of indispensable
party. After trial the Court a quo rendered a favorable
judgment for the plaintiff. On appeal the Court of
Appeals affirmed said decision and denied a motion for
reconsideration of the same. Hence, the instant
petition by defendant company relying on the following
grounds:
1. the respondent Court of Appeals
erred in holding that conviction of theft
is not necessary for claim to be
compensable under the "theft"
coverage of the insurance policy, which
ruling establishes a bad and dangerous
precedent to the detriment and
prejudice of insurance industry.
2. the respondent Court of Appeals
erred in holding petitioner liable for
actual damage of the vehicle without
sufficient and come tent evidentiary
basis.
3. the respondent Court of Appeals
erred in holding petitioner liable to
private respondent Aurelio Lacson in
disregard of the real party in interest
BIFC in violation of the principle
embodied in the Rules of Court, that
every action must be prosecuted in the
name of the real party in interest.
 4. the respondent Court of Appeals
erred in holding petitioner liable for
interest from firing of the complaint
and not from the date of decision or its
finality, also in disregard of established
doctrines laid down by the Honorable
Supreme Court.
Petitioner's contentions hold no water. The first
assignment of error was satisfactorily disposed of by
the trial court as well as by the appellate court as
shown by the ruling that "the taking of the vehicle by
another person without permission or authority from
the owner or person-in-charge thereof is sufficient to
place it within the ambit of the word theft as
contemplated in the policy, and is therefore,
compensable." The fact that one of the accused
persons in the criminal case (filed against those who
took the jeep from the repair shop) pleaded guilty to
the charge of having unlawfully taken the insured
vehicle did away with the necessity of a final
disposition of the criminal case in order for plaintiff to
recover under his insurance policy. At any rate,
accused Rogelio Mahinay was convicted of Theft after
he pleaded guilty to the charge.
As to petitioner's third assignment of error, after
considering the facts and circumstances of the case as
found by the trial court and the respondent appellate
court, We cannot see any reason to depart from the
ruling set down by the respondent Court of Appeals. In
this connection, the CA said:
the memorandum on the policy states LOSS on
DAMAGE, IF ANY, under this policy shall be payable to
the Bacolod IFC 1 as their interest may appear, subject
otherwise to the terms and conditions, clauses and
warranties of this policy. Since as testified to by
plaintiff-appellee,2 Bacolod IFCs interest in the insured
vehicle was in the amount of P2,000.00 only compared
to plaintiff's P26,000.00 it is well to presume that
Bacolod IFC did not deem it wise to be impleaded as
party-plaintiff in this case. Had Bacolod IFC been
interested in the insurance proceeds, it could thru its
duly authorized office, have taken the initiative to join
plaintiff in the suit, but it did not. As a matter of fact, as
testified to by the plaintiff, Atty. Morravilla of the BIFC
knew fully well that he (plaintiff) was pursuing a claim
for insurance from defendant-appellant. This inaction
on the part of BIFC will only show that it was not really
interested to intervene.

There is no question that the vehicle of private Petitioner's fourth assignment of error is untenable.
respondent was damaged because the unlawful taker, Respondent has sufficiently established his demand for
accused Rogelio Mahinay, drove it and met with a the award of damages plus interest as sanctioned
vehicular accident. The damages therefore were under Arts. 1169, 1170 and 2209 of the Civil Code.
sustained in the course of the unlawful taking. The Thus, a debtor who is in delay (default) is liable for
testimonies of plaintiff and his witness in this respect damages (Art. 1170) generally from extrajudicial or
remain unrebutted. The fact remains that plaintiff's judicial demand (Art. 1169) in the form of interest. (See
claim is substantiated by competent evidence. The Art. 2209, Civil Code).
appellate court ruled:
WHEREFORE, premises considered, the present petition
Appellant contends that the trial court is hereby DENIED for lack of merit and the judgment
erred in awarding the amount of appealed from AFFIRMED in toto.
P20,000.00 actual damage without
sufficient evidentiary basis and SO ORDERED.
imposing interest from date of filing of
the complaint. We do not see anything
erroneous with this finding of the trial
court. As estimated by a reputed motor
company, Fidelity Motor Company, the
damage which the insured vehicle
sustained amounts to P21,849,62.
Actual repair is not necessary for the
purpose, as the insured has the option,
either to advance expenses for the
repair of or to wait for the proceeds of
the insurance.

Likewise in the very insurance policy (Exh. "A")

covering the damaged vehicle, petitioner's liability is
fixed at P20,000 less deductible franchise of P800.00.
As borne out by the evidence, private respondent
before instituting the present action against petitioner
wrote a letter of demand (Exh. "H") to petitioner for the
payment of his claim in the amount of P21,849.62 as
estimated by Fidelity Motor Company. This
notwithstanding, petitioner failed and refused to pay
respondent's claim prompting the latter to file the
present action in court.
 G.R. No. L-36480 May 31, 1988

ANDREW PALERMO, plaintiff-appellee,

vs.
PYRAMID INSURANCE CO., INC., defendant-
appellant.

GRIO-AQUINO, J:

The Court of Appeals certified this case to Us for proper

disposition as the only question involved is the
interpretation of the provision of the insurance contract
regarding the "authorized driver" of the insured motor
vehicle.

On March 7, 1969, the insured, appellee Andrew

Palermo, filed a complaint in the Court of First Instance
of Negros Occidental against Pyramid Insurance Co.,
Inc., for payment of his claim under a Private Car
Comprehensive Policy MV-1251 issued by the
defendant (Exh. A).

In its answer, the appellant Pyramid Insurance Co., Inc.,

alleged that it disallowed the claim because at the time
of the accident, the insured was driving his car with an
expired driver's license.

After the trial, the court a quo rendered judgment on

October 29, 1969 ordering the defendant "to pay the
plaintiff the sum of P20,000.00, value of the insurance
of the motor vehicle in question and to pay the costs."

On November 26, 1969, the plaintiff filed a "Motion for

Immediate Execution Pending Appeal." It was opposed
by the defendant, but was granted by the trial court on
December 15, 1969.

The trial court found the following facts to be

undisputed:

On October 12,1968, after having

purchased a brand new Nissan Cedric
de Luxe Sedan car bearing Motor No.
087797 from the Ng Sam Bok Motors
Co. in Bacolod City, plaintiff insured the
same with the defendant insurance
company against any loss or damage
for P 20,000.00 and against third party
liability for P 10,000.00. Plaintiff paid
the defendant P 361.34 premium for
one year, March 12, 1968 to March 12,
1969, for which defendant issued
Private Car Comprehensive Policy No.
MV-1251, marked Exhibit "A."

The automobile was, however,

mortgaged by the plaintiff with the
Republic of the Philippines vendor, Ng Sam Bok Motors Co., to
SUPREME COURT secure the payment of the balance of
Manila the purchase price, which explains why
the registration certificate in the name
FIRST DIVISION
 of the plaintiff remains in the hands of
the mortgagee, Ng Sam Bok Motors Co.
On April 17, 1968, while driving the
automobile in question, the plaintiff
met a violent accident. The La Carlota
City fire engine crashed head on, and
as a consequence, the plaintiff
sustained physical injuries, his father,
Cesar Palermo, who was with am in the
car at the time was likewise seriously
injured and died shortly thereafter, and
the car in question was totally wrecked.
The defendant was immediately
notified of the occurrence, and upon its
orders, the damaged car was towed
from the scene of the accident to the
compound of Ng Sam Bok Motors in
Bacolod City where it remains
deposited up to the present time.
The insurance policy, Exhibit "A,"
grants an option unto the defendant, in
case of accident either to indemnify the
plaintiff for loss or damage to the car in
cash or to replace the damaged car.
The defendant, however, refused to
take either of the above-mentioned
alternatives for the reason as alleged,
that the insured himself had violated
the terms of the policy when he drove
the car in question with an expired
driver's license. (Decision, Oct. 29,
1969, p. 68, Record on Appeal.)
Appellant alleges that the trial court erred in
interpreting the following provision of the Private Car
Comprehensive Policy MV-1251:
AUTHORIZED DRIVER:
Any of the following:
(a) The Insured.
(b) Any person driving on the Insured's
order or with his permission. Provided
that the person driving is permitted in
accordance with the licensing or other
laws or regulations to drive the Motor
Vehicle and is not disqualified from
driving such motor vehicle by order of
a Court of law or by reason of any
enactment or regulation in that behalf.
(Exh. "A.")
There is no merit in the appellant's allegation that the
plaintiff was not authorized to drive the insured motor
vehicle because his driver's license had expired. The
driver of the insured motor vehicle at the time of the
accident was, the insured himself, hence an
"authorized driver" under the policy.
While the Motor Vehicle Law prohibits a person from
operating a motor vehicle on the highway without a
license or with an expired license, an infraction of the
Motor Vehicle Law on the part of the insured, is not a
bar to recovery under the insurance contract. It
however renders him subject to the penal sanctions of
the Motor Vehicle Law.
The requirement that the driver be "permitted in
accordance with the licensing or other laws or
regulations to drive the Motor Vehicle and is not
disqualified from driving such motor vehicle by order of
a Court of Law or by reason of any enactment or
regulation in that behalf," applies only when the driver"
is driving on the insured's order or with his permission."
It does not apply when the person driving is the insured
himself.
This view may be inferred from the decision of this
Court in Villacorta vs. Insurance Commission, 100 SCRA
467, where it was held that:
The main purpose of the "authorized
driver" clause, as may be seen from its
text, is that a person other than the
insured owner, who drives the car on
the insured's order, such as his regular
driver, or with his permission, such as a
friend or member of the family or the
employees of a car service or repair
shop, must be duly licensed drivers and
have no disqualification to drive a
motor vehicle.
In an American case, where the insured herself was
personally operating her automobile but without a
license to operate it, her license having expired prior to
the issuance of the policy, the Supreme Court of
Massachusetts was more explicit:
... Operating an automobile on a public
highway without a license, which act is
a statutory crime is not precluded by
public policy from enforcing a policy
indemnifying her against liability for
bodily injuries The inflicted by use of
the automobile." (Drew C. Drewfield
McMahon vs. Hannah Pearlman, et al.,
242 Mass. 367, 136 N.E. 154, 23 A.L.R.
1467.)
WHEREFORE, the appealed decision is affirmed with
costs against the defendant-appellant.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 96452 May 7, 1992

PERLA COMPANIA DE SEGUROS, INC. petitioner,

vs.
THE COURT OF APPEALS, HERMINIO LIM and
EVELYN LIM, respondents.

G.R. No. 96493 May 7, 1992

FCP CREDIT CORPORATION, petitioner,

vs.

THE COURT OF APPEALS, Special Third Division,

HERMINIO LIM and EVELYN LIM, respondents.

Yolanda Quisumbing-Javellana and Nelson A. Loyola for

petitioner.

Wilson L. Tee for respondents Herminio and Evelyn

Lim.

NOCON, J.:

These are two petitions for review on certiorari, one

filed by Perla Compania de Seguros, Inc. in G.R. No.
96452, and the other by FCP Credit Corporation in G.R.
No. 96493, both seeking to annul and set aside the
decision dated July 30, 1990 1 of the Court of Appeals
in CA-G.R. No. 13037, which reversed the decision of
the Regional Trial Court of Manila, Branch VIII in Civil
Case No. 83-19098 for replevin and damages. The
dispositive portion of the decision of the Court of
Appeals reads, as follows:
 WHEREFORE, the decision appealed
from is reversed; and appellee Perla
Compania de Seguros, Inc. is ordered
to indemnify appellants Herminio and
Evelyn Lim for the loss of their insured
vehicle; while said appellants are
ordered to pay appellee FCP Credit
Corporation all the unpaid installments
that were due and payable before the
date said vehicle was carnapped; and
appellee Perla Compania de Seguros,
Inc. is also ordered to pay appellants
moral damages of P12,000.00 for the
latter's mental sufferings, exemplary
damages of P20,000.00 for appellee
Perla Compania de Seguros, Inc.'s
unreasonable refusal on sham grounds
to honor the just insurance claim of
appellants by way of example and
correction for public good, and
attorney's fees of P10,000.00 as a just
and equitable reimbursement for the
expenses incurred therefor by
appellants, and the costs of suit both in
the lower court and in this appeal. 2
The facts as found by the trial court are as follows:
On December 24, 1981, private respondents spouses
Herminio and Evelyn Lim executed a promissory note in
favor Supercars, Inc. in the sum of P77,940.00, payable
in monthly installments according to the schedule of
payment indicated in said note, 3 and secured by a
chattel mortgage over a brand new red Ford Laser
1300 5DR Hatchback 1981 model with motor and serial
No. SUPJYK-03780, which is registered under the name
of private respondent Herminio Lim 4and insured with
the petitioner Perla Compania de Seguros, Inc. (Perla
for brevity) for comprehensive coverage under Policy
No. PC/41PP-QCB-43383. 5
On the same date, Supercars, Inc., with notice to
private respondents spouses, assigned to petitioner
FCP Credit Corporation (FCP for brevity) its rights, title
and interest on said promissory note and chattel
mortgage as shown by the Deed of Assignment. 6
At around 2:30 P.M. of November 9, 1982, said vehicle
was carnapped while parked at the back of Broadway
Centrum along N. Domingo Street, Quezon City. Private
respondent Evelyn Lim, who was driving said car before
it was carnapped, immediately called up the Anti-
Carnapping Unit of the Philippine Constabulary to
report said incident and thereafter, went to the nearest
police substation at Araneta, Cubao to make a police
report regarding said incident, as shown by the
certification issued by the Quezon City police. 7
On November 10, 1982, private respondent Evelyn Lim
reported said incident to the Land Transportation
Commission in Quezon City, as shown by the letter of
her counsel to said office, 8 in compliance with the
insurance requirement. She also filed a complaint with
the Headquarters, Constabulary Highway Patrol
Group. 9
On November 11, 1982, private respondent filed a
claim for loss with the petitioner Perla but said claim
was denied on November 18, 1982 10 on the ground
that Evelyn Lim, who was using the vehicle before it
was carnapped, was in possession of an expired
driver's license at the time of the loss of said vehicle
which is in violation of the authorized driver clause of
the insurance policy, which states, to wit:
AUTHORIZED DRIVER:
Any of the following: (a) The Insured (b)
Any person driving on the Insured's
order, or with his
permission. Provided that the person
driving is permitted, in accordance with
the licensing or other laws or
regulations, to drive the Scheduled
Vehicle, or has been permitted and is
not disqualified by order of a Court of
Law or by reason of any enactment or
regulation in that behalf. 11
On November 17, 1982, private respondents requests
from petitioner FCP for a suspension of payment on the
monthly amortization agreed upon due to the loss of
the vehicle and, since the carnapped vehicle insured
with petitioner Perla, said insurance company should
be made to pay the remaining balance of the
promissory note and the chattel mortgage contract.
Perla, however, denied private respondents' claim.
Consequently, petitioner FCP demanded that private
respondents pay the whole balance of the promissory
note or to return the vehicle 12 but the latter refused.
On July 25, 1983, petitioner FCP filed a complaint
against private respondents, who in turn filed an
amended third party complaint against petitioner Perla
on December 8, 1983. After trial on the merits, the trial
court rendered a decision, the dispositive portion which
reads:
WHEREFORE, in view of the foregoing,
judgment is hereby rendered as
follows:
1. Ordering defendants Herminio Lim
and Evelyn Lim to pay, jointly and
severally, plaintiff the sum of
P55,055.93 plus interest thereon at the
rate of 24% per annum from July 2,
1983 until fully paid;
2. Ordering defendants to pay plaintiff
P50,000.00 as and for attorney's fees;
and the costs of suit.
Upon the other hand, likewise, ordering
the DISMISSAL of the Third-Party
Complaint filed against Third-Party
Defendant. 13
Not satisfied with said decision, private respondents
appealed the same to the Court of Appeals, which
reversed said decision.
After petitioners' separate motions for reconsideration
were denied by the Court of Appeals in its resolution of
December 10, 1990, petitioners filed these separate
petitions for review on certiorari.
Petitioner Perla alleged that there was grave abuse of
discretion on the part of the appellate court in holding
that private respondents did not violate the insurance
contract because the authorized driver clause is not
applicable to the "Theft" clause of said Contract.
For its part, petitioner FCP raised the issue of whether
or not the loss of the collateral exempted the debtor
from his admitted obligations under the promissory
note particularly the payment of interest, litigation
expenses and attorney's fees.
We find no merit in Perla's petition.
The comprehensive motor car insurance policy issued
by petitioner Perla undertook to indemnify the private
respondents against loss or damage to the car (a) by
accidental collision or overturning, or collision or
overturning consequent upon mechanical breakdown
or consequent upon wear and tear; (b) by fire, external
explosion, self-ignition or lightning or burglary,
housebreaking or theft; and (c) by malicious act. 14
Where a car is admittedly, as in this case, unlawfully
and wrongfully taken without the owner's consent or
knowledge, such taking constitutes theft, and,
therefore, it is the "THEFT"' clause, and not the
"AUTHORIZED DRIVER" clause that should apply. As
correctly stated by the respondent court in its decision:
. . . Theft is an entirely different legal
concept from that of accident. Theft is
committed by a person with the intent
to gain or, to put it in another way, with
the concurrence of the doer's will. On
the other hand, accident, although it
may proceed or result from negligence,
is the happening of an event without
the concurrence of the will of the
person by whose agency it was caused.
(Bouvier's Law Dictionary, Vol. I, 1914
ed., p. 101).
Clearly, the risk against accident is
distinct from the risk against theft. The
"authorized driver clause" in a typical
insurance policy is in contemplation or
anticipation of accident in the legal
sense in which it should be understood,
and not in contemplation or
anticipation of an event such as theft.
The distinction often seized upon by
insurance companies in resisting claims
from their assureds between death
occurring as a result of accident and
death occurring as a result of intent
may, by analogy, apply to the case at
bar. Thus, if the insured vehicle had
figured in an accident at the time she
drove it with an expired license, then,
appellee Perla Compania could properly
resist appellants' claim for
indemnification for the loss or
destruction of the vehicle resulting
from the accident. But in the present
case. The loss of the insured vehicle
did not result from an accident where
intent was involved; the loss in the
present case was caused by theft, the
commission of which was attended by
intent. 15
It is worthy to note that there is no causal connection
between the possession of a valid driver's license and
the loss of a vehicle. To rule otherwise would render car
insurance practically a sham since an insurance
company can easily escape liability by citing
restrictions which are not applicable or germane to the
claim, thereby reducing indemnity to a shadow.
We however find the petition of FCP meritorious.
This Court agrees with petitioner FCP that private
respondents are not relieved of their obligation to pay
the former the installments due on the promissory note
on account of the loss of the automobile. The chattel
mortgage constituted over the automobile is merely an
accessory contract to the promissory note. Being the
principal contract, the promissory note is unaffected by
whatever befalls the subject matter of the accessory
contract. Therefore, the unpaid balance on the
promissory note should be paid, and not just the
installments due and payable before the automobile
was carnapped, as erronously held by the Court of
Appeals.
However, this does not mean that private respondents
are bound to pay the interest, litigation expenses and
attorney's fees stipulated in the promissory note.
Because of the peculiar relationship between the three
contracts in this case, i.e., the promissory note, the
chattel mortgage contract and the insurance policy,
this Court is compelled to construe all three contracts
as intimately interrelated to each other, despite the
fact that at first glance there is no relationship
whatsoever between the parties thereto.
Under the promissory note, private respondents are
obliged to pay Supercars, Inc. the amount stated
therein in accordance with the schedule provided for.
To secure said promissory note, private respondents
constituted a chattel mortgage in favor of Supercars,
Inc. over the automobile the former purchased from
the latter. The chattel mortgage, in turn, required
private respondents to insure the automobile and to
make the proceeds thereof payable to Supercars, Inc.
The promissory note and chattel mortgage were
assigned by Supercars, Inc. to petitioner FCP, with the
knowledge of private respondents. Private respondents
were able to secure an insurance policy from petitioner
Perla, and the same was made specifically payable to
petitioner FCP. 16
The insurance policy was therefore meant to be an
additional security to the principal contract, that is, to
insure that the promissory note will still be paid in case
the automobile is lost through accident or theft. The
Chattel Mortgage Contract provided that:
THE SAID MORTGAGOR COVENANTS
AND AGREES THAT HE/IT WILL CAUSE
THE PROPERTY/IES HEREIN-ABOVE
MORTGAGED TO BE INSURED AGAINST
LOSS OR DAMAGE BY ACCIDENT, THEFT
AND FIRE FOR A PERIOD OF ONE YEAR
FROM DATE HEREOF AND EVERY YEAR
THEREAFTER UNTIL THE MORTGAGE
OBLIGATION IS FULLY PAID WITH AN
INSURANCE COMPANY OR COMPANIES
ACCEPTABLE TO THE MORTGAGEE IN
AN AMOUNT NOT LESS THAN THE
OUTSTANDING BALANCE OF THE
MORTGAGE OBLIGATION; THAT HE/IT
WILL MAKE ALL LOSS, IF ANY, UNDER
SUCH POLICY OR POLICIES, PAYABLE
TO THE MORTGAGE OR ITS ASSIGNS AS
ITS INTERESTS MAY APPEAR AND
FORTHWITH DELIVER SUCH POLICY OR
POLICIES TO THE MORTGAGEE, . . . . 17
As to the award of moral damages, exemplary
damages and attorney's fees, private respondents are
legally entitled to the same since petitioner Perla had
acted in bad faith by unreasonably refusing to honor
the insurance claim of the private respondents.
Besides, awards for moral and exemplary damages, as
well as attorney's fees are left to the sound discretion
of the Court. Such discretion, if well exercised, will not
be disturbed on appeal. 19
WHEREFORE, the assailed decision of the Court of
Appeals is hereby MODIFIED to require private
respondents to pay petitioner FCP the amount of
P55,055.93, with legal interest from July 2, 1983 until
fully paid. The decision appealed from is hereby
affirmed as to all other respects. No pronouncement as
to costs.
SO ORDERED.

It is clear from the abovementioned provision that upon

the loss of the insured vehicle, the insurance company
Perla undertakes to pay directly to the mortgagor or to
their assignee, FCP, the outstanding balance of the
mortgage at the time of said loss under the mortgage
contract. If the claim on the insurance policy had been
approved by petitioner Perla, it would have paid the
proceeds thereof directly to petitioner FCP, and this
would have had the effect of extinguishing private
respondents' obligation to petitioner FCP. Therefore,
private respondents were justified in asking petitioner
FCP to demand the unpaid installments from petitioner
Perla.

Because petitioner Perla had unreasonably denied their

valid claim, private respondents should not be made to
pay the interest, liquidated damages and attorney's
fees as stipulated in the promissory note. As mentioned
above, the contract of indemnity was procured to
insure the return of the money loaned from petitioner
FCP, and the unjustified refusal of petitioner Perla to
recognize the valid claim of the private respondents
should not in any way prejudice the latter.

Private respondents can not be said to have unduly

enriched themselves at the expense of petitioner FCP
since they will be required to pay the latter the unpaid
balance of its obligation under the promissory note.

In view of the foregoing discussion, We hold that the

Court of Appeals did not err in requiring petitioner Perla
to indemnify private respondents for the loss of their
insured vehicle. However, the latter should be ordered
to pay petitioner FCP the amount of P55,055.93,
representing the unpaid installments from December
30, 1982 up to July 1, 1983, as shown in the statement
of account prepared by petitioner FCP, 18 plus legal
interest from July 2, 1983 until fully paid.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 81026 April 3, 1990
PAN MALAYAN INSURANCE
CORPORATION, petitioner,
vs.
COURT OF APPEALS, ERLINDA FABIE AND HER
UNKNOWN DRIVER, respondents.
Regulus E. Cabote & Associates for petitioner.
Benito P. Fabie for private respondents.
CORTES, J.:
Petitioner Pan Malayan Insurance Company
(PANMALAY) seeks the reversal of a decision of the
Court of Appeals which upheld an order of the trial
court dismissing for no cause of action PANMALAY's
complaint for damages against private respondents
Erlinda Fabie and her driver.
The principal issue presented for resolution before this
Court is whether or not the insurer PANMALAY may
institute an action to recover the amount it had paid its
assured in settlement of an insurance claim against
private respondents as the parties allegedly
responsible for the damage caused to the insured
vehicle.
On December 10, 1985, PANMALAY filed a complaint for
damages with the RTC of Makati against private
respondents Erlinda Fabie and her driver. PANMALAY
averred the following: that it insured a Mitsubishi Colt
Lancer car with plate No. DDZ-431 and registered in
the name of Canlubang Automotive Resources
Corporation [CANLUBANG]; that on May 26, 1985, due
to the "carelessness, recklessness, and imprudence" of
the unknown driver of a pick-up with plate no. PCR-220,
the insured car was hit and suffered damages in the
amount of P42,052.00; that PANMALAY defrayed the
cost of repair of the insured car and, therefore, was
subrogated to the rights of CANLUBANG against the
driver of the pick-up and his employer, Erlinda Fabie;
and that, despite repeated demands, defendants, failed
and refused to pay the claim of PANMALAY.
Private respondents, thereafter, filed a Motion for Bill of
Particulars and a supplemental motion thereto. In
compliance therewith, PANMALAY clarified, among
others, that the damage caused to the insured car was
settled under the "own damage", coverage of the
insurance policy, and that the driver of the insured car
was, at the time of the accident, an authorized driver
duly licensed to drive the vehicle. PANMALAY also
submitted a copy of the insurance policy and the
Release of Claim and Subrogation Receipt executed by
CANLUBANG in favor of PANMALAY.
On February 12, 1986, private respondents filed a
Motion to Dismiss alleging that PANMALAY had no
cause of action against them. They argued that
payment under the "own damage" clause of the
insurance policy precluded subrogation under Article
2207 of the Civil Code, since indemnification
thereunder was made on the assumption that there
was no wrongdoer or no third party at fault.
After hearings conducted on the motion, opposition
thereto, reply and rejoinder, the RTC issued an order
dated June 16, 1986 dismissing PANMALAY's complaint
for no cause of action. On August 19, 1986, the RTC
denied PANMALAY's motion for reconsideration.
On appeal taken by PANMALAY, these orders were
upheld by the Court of Appeals on November 27, 1987.
Consequently, PANMALAY filed the present petition for
review.
After private respondents filed its comment to the
petition, and petitioner filed its reply, the Court
considered the issues joined and the case submitted
for decision.
Deliberating on the various arguments adduced in the
pleadings, the Court finds merit in the petition.
PANMALAY alleged in its complaint that, pursuant to a
motor vehicle insurance policy, it had indemnified
CANLUBANG for the damage to the insured car
resulting from a traffic accident allegedly caused by the
negligence of the driver of private respondent, Erlinda
Fabie. PANMALAY contended, therefore, that its cause
of action against private respondents was anchored
upon Article 2207 of the Civil Code, which reads:
If the plaintiffs property has been insured, and
he has received indemnity from the insurance
company for the injury or loss arising out of the
wrong or breach of contract complained of, the
insurance company shall be subrogated to the
rights of the insured against the wrongdoer or
the person who has violated the contract. . . .
PANMALAY is correct.
Article 2207 of the Civil Code is founded on the well-
settled principle of subrogation. If the insured property
is destroyed or damaged through the fault or
negligence of a party other than the assured, then the
insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured
operates as an equitable assignment to the former of
all remedies which the latter may have against the
third party whose negligence or wrongful act caused
the loss. The right of subrogation is not dependent
upon, nor does it grow out of, any privity of contract or
upon written assignment of claim. It accrues simply
upon payment of the insurance claim by the insurer
[Compania Maritima v. Insurance Company of North
America, G.R. No. L-18965, October 30, 1964, 12 SCRA
213; Fireman's Fund Insurance Company v. Jamilla &
Company, Inc., G.R. No. L-27427, April 7, 1976, 70
SCRA 323].
There are a few recognized exceptions to this rule. For
instance, if the assured by his own act releases the
wrongdoer or third party liable for the loss or damage,
from liability, the insurer's right of subrogation is
defeated [Phoenix Ins. Co. of Brooklyn v. Erie &
Western Transport, Co., 117 US 312, 29 L. Ed. 873
(1886); Insurance Company of North America v. Elgin,
Joliet & Eastern Railway Co., 229 F 2d 705 (1956)].
Similarly, where the insurer pays the assured the value
of the lost goods without notifying the carrier who has
in good faith settled the assured's claim for loss, the
settlement is binding on both the assured and the
insurer, and the latter cannot bring an action against
the carrier on his right of subrogation [McCarthy v.
Barber Steamship Lines, Inc., 45 Phil. 488 (1923)]. And
where the insurer pays the assured for a loss which is
not a risk covered by the policy, thereby effecting
"voluntary payment", the former has no right of
subrogation against the third party liable for the loss
[Sveriges Angfartygs Assurans Forening v. Qua Chee
Gan, G. R. No. L-22146, September 5, 1967, 21 SCRA
12].
None of the exceptions are availing in the present case.
The lower court and Court of Appeals, however, were of
the opinion that PANMALAY was not legally subrogated
under Article 2207 of the Civil Code to the rights of
CANLUBANG, and therefore did not have any cause of
action against private respondents. On the one hand,
the trial court held that payment by PANMALAY of
CANLUBANG's claim under the "own damage" clause of
the insurance policy was an admission by the insurer
that the damage was caused by the assured and/or its
representatives. On the other hand, the Court of
Appeals in applying the ejusdem generis rule held that
Section III-1 of the policy, which was the basis for
settlement of CANLUBANG's claim, did not cover
damage arising from collision or overturning due to the
negligence of third parties as one of the insurable risks.
Both tribunals concluded that PANMALAY could not now
invoke Article 2207 and claim reimbursement from
private respondents as alleged wrongdoers or parties
responsible for the damage.
The above conclusion is without merit.
It must be emphasized that the lower court's ruling
that the "own damage" coverage under the policy
implies damage to the insured car caused by the
assured itself, instead of third parties, proceeds from
an incorrect comprehension of the phrase "own
damage" as used by the insurer. When PANMALAY
utilized the phrase "own damage" a phrase which,
incidentally, is not found in the insurance policy to
define the basis for its settlement of CANLUBANG's
claim under the policy, it simply meant that it had
assumed to reimburse the costs for repairing
the damage to the insured vehicle [See PANMALAY's
Compliance with Supplementary Motion for Bill of
Particulars, p. 1; Record, p. 31]. It is in this sense that
the so-called "own damage" coverage under Section III
of the insurance policy is differentiated from Sections I
and IV-1 which refer to "Third Party Liability" coverage
(liabilities arising from the death of, or bodily injuries
suffered by, third parties) and from Section IV-2 which
refer to "Property Damage" coverage (liabilities arising
from damage caused by the insured vehicle to the
properties of third parties).
Neither is there merit in the Court of Appeals' ruling
that the coverage of insured risks under Section III-1 of
the policy does not include to the insured vehicle
arising from collision or overturning due to the
negligent acts of the third party. Not only does it stem
from an erroneous interpretation of the provisions of
the section, but it also violates a fundamental rule on
the interpretation of property insurance contracts.
It is a basic rule in the interpretation of contracts that
the terms of a contract are to be construed according
to the sense and meaning of the terms which
the parties thereto have used. In the case of property
insurance policies, the evident intention of the
contracting parties, i.e., the insurer and the assured,
determine the import of the various terms and
provisions embodied in the policy. It is only when the
terms of the policy are ambiguous, equivocal or
uncertain, such that the parties themselves disagree
about the meaning of particular provisions, that the
courts will intervene. In such an event, the policy will
be construed by the courts liberally in favor of the
assured and strictly against the insurer [Union
Manufacturing Co., Inc. v. Philippine Guaranty Co., Inc.,
G.R., No. L-27932, October 30, 1972, 47 SCRA 271;
National Power Corporation v. Court of Appeals, G.R.
No. L-43706, November 14, 1986, 145 SCRA 533;
Pacific Banking Corporation v. Court of Appeals, G.R.
No. L-41014, November 28, 1988, 168 SCRA
1. Also Articles 1370-1378 of the Civil Code].
Section III-1 of the insurance policy which refers to the
conditions under which the insurer PANMALAY is liable
to indemnify the assured CANLUBANG against damage
to or loss of the insured vehicle, reads as follows:
SECTION III LOSS OR DAMAGE
1. The Company will, subject to the Limits of
Liability, indemnify the Insured against loss of
or damage to the Scheduled Vehicle and its
accessories and spare parts whilst thereon:
(a) by accidental collision or
overturning, or collision or overturning
consequent upon mechanical
breakdown or consequent upon wear
and tear;
(b) by fire, external explosion, self
ignition or lightning or burglary,
housebreaking or theft;
(c) by malicious act;
 (d) whilst in transit (including the
processes of loading and unloading)
incidental to such transit by road, rail,
inland, waterway, lift or elevator.
xxx xxx xxx
[Annex "A-1" of PANMALAY's Compliance with
Supplementary Motion for Bill of Particulars;
Record, p. 34; Emphasis supplied].
PANMALAY contends that the coverage of insured risks
under the above section, specifically Section III-1(a), is
comprehensive enough to include damage to the
insured vehicle arising from collision or overturning due
to the fault or negligence of a third party. CANLUBANG
is apparently of the same understanding. Based on a
police report wherein the driver of the insured car
reported that after the vehicle was sideswiped by a
pick-up, the driver thereof fled the scene [Record, p.
20], CANLUBANG filed its claim with PANMALAY for
indemnification of the damage caused to its car. It then
accepted payment from PANMALAY, and executed a
Release of Claim and Subrogation Receipt in favor of
latter.
Considering that the very parties to the policy were not
shown to be in disagreement regarding the meaning
and coverage of Section III-1, specifically sub-
paragraph (a) thereof, it was improper for the appellate
court to indulge in contract construction, to apply
the ejusdem generis rule, and to ascribe meaning
contrary to the clear intention and understanding of
these parties.
It cannot be said that the meaning given by PANMALAY
and CANLUBANG to the phrase "by accidental collision
or overturning" found in the first paint of sub-
paragraph (a) is untenable. Although the terms
"accident" or "accidental" as used in insurance
contracts have not acquired a technical meaning, the
Court has on several occasions defined these terms to
mean that which takes place "without one's foresight or
expectation, an event that proceeds from an unknown
cause, or is an unusual effect of a known cause and,
therefore, not expected" [De la Cruz v. The Capital
Insurance & Surety Co., Inc., G.R. No. L-21574, June 30,
1966, 17 SCRA 559; Filipino Merchants Insurance Co.,
Inc. v. Court of Appeals, G.R. No. 85141, November 28,
1989]. Certainly, it cannot be inferred from
jurisprudence that these terms, without qualification,
exclude events resulting in damage or loss due to the
fault, recklessness or negligence of third parties. The
concept "accident" is not necessarily synonymous with
the concept of "no fault". It may be utilized simply to
distinguish intentional or malicious acts from negligent
or careless acts of man.
Moreover, a perusal of the provisions of the insurance
policy reveals that damage to, or loss of, the insured
vehicle due to negligent or careless acts of third parties
is not listed under the general and specific exceptions
to the coverage of insured risks which are enumerated
in detail in the insurance policy itself [See Annex "A-1"
of PANMALAY's Compliance with Supplementary Motion
for Bill of Particulars, supra.]
The Court, furthermore. finds it noteworthy that the
meaning advanced by PANMALAY regarding the
coverage of Section III-1(a) of the policy is undeniably
more beneficial to CANLUBANG than that insisted upon
by respondents herein. By arguing that this section
covers losses or damages due not only to malicious,
but also to negligent acts of third parties, PANMALAY in
effect advocates for a more comprehensive coverage
of insured risks. And this, in the final analysis, is more
in keeping with the rationale behind the various rules
on the interpretation of insurance contracts favoring
the assured or beneficiary so as to effect the dominant
purpose of indemnity or payment [See Calanoc v. Court
of Appeals, 98 Phil. 79 (1955); Del Rosario v. The
Equitable Insurance and Casualty Co., Inc., G.R. No. L-
16215, June 29, 1963, 8 SCRA 343; Serrano v. Court of
Appeals, G.R. No. L-35529, July 16, 1984, 130 SCRA
327].
Parenthetically, even assuming for the sake of
argument that Section III-1(a) of the insurance policy
does not cover damage to the insured vehicle caused
by negligent acts of third parties, and that PANMALAY's
settlement of CANLUBANG's claim for damages
allegedly arising from a collision due to private
respondents' negligence would amount to unwarranted
or "voluntary payment", dismissal of PANMALAY's
complaint against private respondents for no cause of
action would still be a grave error of law.
For even if under the above circumstances PANMALAY
could not be deemed subrogated to the rights of its
assured under Article 2207 of the Civil Code,
PANMALAY would still have a cause of action against
private respondents. In the pertinent case of Sveriges
Angfartygs Assurans Forening v. Qua Chee Gan, supra.,
the Court ruled that the insurer who may have no
rights of subrogation due to "voluntary" payment may
nevertheless recover from the third party responsible
for the damage to the insured property under Article
1236 of the Civil Code.
In conclusion, it must be reiterated that in this present
case, the insurer PANMALAY as subrogee merely prays
that it be allowed to institute an action to recover from
third parties who allegedly caused damage to the
insured vehicle, the amount which it had paid its
assured under the insurance policy. Having thus shown
from the above discussion that PANMALAY has a cause
of action against third parties whose negligence may
have caused damage to CANLUBANG's car, the Court
holds that there is no legal obstacle to the filing by
PANMALAY of a complaint for damages against private
respondents as the third parties allegedly responsible
for the damage. Respondent Court of Appeals therefore
committed reversible error in sustaining the lower
court's order which dismissed PANMALAY's complaint
against private respondents for no cause of action.
Hence, it is now for the trial court to determine if in fact
the damage caused to the insured vehicle was due to
the "carelessness, recklessness and imprudence" of the
driver of private respondent Erlinda Fabie.
WHEREFORE, in view of the foregoing, the present
petition is GRANTED. Petitioner's complaint for
damages against private respondents is hereby
REINSTATED. Let the case be remanded to the lower SUN INSURANCE OFFICE, LTD., petitioner,
court for trial on the merits. vs.
THE HON. COURT OF APPEALS and NERISSA
SO ORDERED. LIM, respondents.

CRUZ, J.:

The petitioner issued Personal Accident Policy No.

05687 to Felix Lim, Jr. with a face value of P200,000.00.
Two months later, he was dead with a bullet wound in
his head. As beneficiary, his wife Nerissa Lim sought
payment on the policy but her claim was rejected. The
petitioner agreed that there was no suicide. It argued,
however that there was no accident either.

Pilar Nalagon, Lim's secretary, was the only eyewitness

to his death. It happened on October 6, 1982, at about
10 o'clock in the evening, after his mother's birthday
party. According to Nalagon, Lim was in a happy mood
(but not drunk) and was playing with his handgun, from
which he had previously removed the magazine. As she
watched television, he stood in front of her and pointed
the gun at her. She pushed it aside and said it might he
loaded. He assured her it was not and then pointed it
to his temple. The next moment there was an explosion
and Lim slumped to the floor. He was dead before he
fell. 1

The widow sued the petitioner in the Regional Trial

Court of Zamboanga City and was sustained. 2 The
petitioner was sentenced to pay her P200,000.00,
representing the face value of the policy, with interest
at the legal rate; P10,000.00 as moral damages;
P5,000.00 as exemplary damages; P5,000.00 as actual
and compensatory damages; and P5,000.00 as
attorney's fees, plus the costs of the suit. This decision
was affirmed on appeal, and the motion for
reconsideration was denied. 3 The petitioner then came
to this Court to fault the Court of Appeals for approving
the payment of the claim and the award of damages.

The term "accident" has been defined as follows:

The words "accident" and "accidental" have never

acquired any technical signification in law, and when
used in an insurance contract are to be construed and
considered according to the ordinary understanding
and common usage and speech of people generally. In-
substance, the courts are practically agreed that the
words "accident" and "accidental" mean that which
happens by chance or fortuitously, without intention or
design, and which is unexpected, unusual, and
unforeseen. The definition that has usually been
Republic of the Philippines adopted by the courts is that an accident is an event
SUPREME COURT that takes place without one's foresight or expectation
Manila an event that proceeds from an unknown cause, or
is an unusual effect of a known case, and therefore not
FIRST DIVISION expected. 4

An accident is an event which happens without any

human agency or, if happening through human agency,
G.R. No. 92383 July 17, 1992 an event which, under the circumstances, is unusual to
and not expected by the person to whom it happens. It
has also been defined as an injury which happens by
reason of some violence or casualty to the injured
without his design, consent, or voluntary co-
operation. 5
In light of these definitions, the Court is convinced that
the incident that resulted in Lim's death was indeed an
accident. The petitioner, invoking the case of De la
Cruz v. Capital Insurance, 6 says that "there is no
accident when a deliberate act is performed unless
some additional, unexpected, independent and
unforeseen happening occurs which produces or brings
about their injury or death." There was such a
happening. This was the firing of the gun, which was
the additional unexpected and independent and
unforeseen occurrence that led to the insured person's
death.
The petitioner also cites one of the four exceptions
provided for in the insurance contract and contends
that the private petitioner's claim is barred by such
provision. It is there stated:
Exceptions
The company shall not be liable in respect of
1. Bodily injury
xxx xxx xxx
b. consequent upon
i) The insured person attempting to
commit suicide or willfully exposing
himself to needless peril except in an
attempt to save human life.
To repeat, the parties agree that Lim did not commit
suicide. Nevertheless, the petitioner contends that the
insured willfully exposed himself to needless peril and
thus removed himself from the coverage of the
insurance policy.
It should be noted at the outset that suicide and willful
exposure to needless peril are in pari materia because
they both signify a disregard for one's life. The only
difference is in degree, as suicide imports a positive act
of ending such life whereas the second act indicates a
reckless risking of it that is almost suicidal in intent. To
illustrate, a person who walks a tightrope one thousand
meters above the ground and without any safety
device may not actually be intending to commit
suicide, but his act is nonetheless suicidal. He would
thus be considered as "willfully exposing himself to
needless peril" within the meaning of the exception in
question.
The petitioner maintains that by the mere act of
pointing the gun to hip temple, Lim had willfully
exposed himself to needless peril and so came under
the exception. The theory is that a gun is per
se dangerous and should therefore be handled
cautiously in every case.
That posture is arguable. But what is not is that, as the
secretary testified, Lim had removed the magazine
from the gun and believed it was no longer dangerous.
He expressly assured her that the gun was not loaded.
It is submitted that Lim did not willfully expose himself
to needless peril when he pointed the gun to his
temple because the fact is that he thought it was not
unsafe to do so. The act was precisely intended to
assure Nalagon that the gun was indeed harmless.
The contrary view is expressed by the petitioner thus:
Accident insurance policies were never
intended to reward the insured for his
tendency to show off or for his
miscalculations. They were intended to
provide for contingencies. Hence, when
I miscalculate and jump from the
Quezon Bridge into the Pasig River in
the belief that I can overcome the
current, I have wilfully exposed myself
to peril and must accept the
consequences of my act. If I drown I
cannot go to the insurance company to
ask them to compensate me for my
failure to swim as well as I thought I
could. The insured in the case at bar
deliberately put the gun to his head
and pulled the trigger. He wilfully
exposed himself to peril.
The Court certainly agrees that a drowned man cannot
go to the insurance company to ask for compensation.
That might frighten the insurance people to death. We
also agree that under the circumstances narrated, his
beneficiary would not be able to collect on the
insurance policy for it is clear that when he braved the
currents below, he deliberately exposed himself to
a known peril.
The private respondent maintains that Lim did not.
That is where she says the analogy fails. The
petitioner's hypothetical swimmer knew when he dived
off the Quezon Bridge that the currents below were
dangerous. By contrast, Lim did not know that the gun
he put to his head was loaded.
Lim was unquestionably negligent and that negligence
cost him his own life. But it should not prevent his
widow from recovering from the insurance policy he
obtained precisely against accident. There is nothing in
the policy that relieves the insurer of the responsibility
to pay the indemnity agreed upon if the insured is
shown to have contributed to his own accident. Indeed,
most accidents are caused by negligence. There are
only four exceptions expressly made in the contract to
relieve the insurer from liability, and none of these
exceptions is applicable in the case at bar. **
It bears noting that insurance contracts are as a rule
supposed to be interpreted liberally in favor of the
assured. There is no reason to deviate from this rule,
especially in view of the circumstances of this case as
above analyzed.
On the second assigned error, however, the Court must
rule in favor of the petitioner. The basic issue raised in
this case is, as the petitioner correctly observed, one of
first impression. It is evident that the petitioner was
acting in good faith then it resisted the private
respondent's claim on the ground that the death of the
insured was covered by the exception. The issue was
indeed debatable and was clearly not raised only for
the purpose of evading a legitimate obligation. We hold
therefore that the award of moral and exemplary
damages and of attorney's fees is unjust and so must
be disapproved.

In order that a person may be made

liable to the payment of moral
damages, the law requires that his act
be wrongful. The adverse result of an
action does not per se make the act
wrongful and subject the act or to the
payment of moral damages. The law
could not have meant to impose a
penalty on the right to litigate; such
right is so precious that moral damages
may not be charged on those who may
exercise it erroneously. For these the
law taxes costs. 7

The fact that the results of the trial

were adverse to Barreto did not alone
make his act in bringing the action
wrongful because in most cases one Republic of the Philippines
party will lose; we would be imposing SUPREME COURT
an unjust condition or limitation on the Manila
right to litigate. We hold that the award
of moral damages in the case at bar is SECOND DIVISION
not justified by the facts had
circumstances as well as the law.

If a party wins, he cannot, as a rule, G.R. No. 100970 September 2, 1992

recover attorney's fees and litigation
expenses, since it is not the fact of
winning alone that entitles him to FINMAN GENERAL ASSURANCE
recover such damages of the CORPORATION, petitioner,
exceptional circumstances enumerated vs.
in Art. 2208. Otherwise, every time a THE HONORABLE COURT OF APPEALS and JULIA
defendant wins, automatically the SURPOSA, respondents.
plaintiff must pay attorney's fees
thereby putting a premium on the right Aquino and Associates for petitioner.
to litigate which should not be so. For
those expenses, the law deems the Public Attorney's Office for private respondent.
award of costs as sufficient. 8

WHEREFORE, the challenged decision of the Court of

Appeals is AFFIRMED in so far as it holds the petitioner
liable to the private respondent in the sum of
P200,000.00 representing the face value of the
insurance contract, with interest at the legal rate from
the date of the filing of the complaint until the full
amount is paid, but MODIFIED with the deletion of all
awards for damages, including attorney's fees, except
the costs of the suit.
SO ORDERED.
NOCON, J.:
This is a petition for certiorari with a prayer for the
issuance of a restraining order and preliminary
mandatory injunction to annul and set aside the
decision of the Court of Appeals dated July 11,
1991, 1 affirming the decision dated March 20, 1990 of
the Insurance Commission 2 in ordering petitioner
Finman General Assurance Corporation to pay private
respondent Julia Surposa the proceeds of the personal
accident Insurance policy with interest.
It appears on record that on October 22, 1986,
deceased, Carlie Surposa was insured with petitioner
Finman General Assurance Corporation under Finman
General Teachers Protection Plan Master Policy No.
2005 and Individual Policy No. 08924 with his parents,
spouses Julia and Carlos Surposa, and brothers
Christopher, Charles, Chester and Clifton, all surnamed,
Surposa, as beneficiaries. 3
While said insurance policy was in full force and effect,
the insured, Carlie Surposa, died on October 18, 1988
as a result of a stab wound inflicted by one of the three
(3) unidentified men without provocation and warning
on the part of the former as he and his cousin, Winston
Surposa, were waiting for a ride on their way home
along Rizal-Locsin Streets, Bacolod City after attending
the celebration of the "Maskarra Annual Festival."
Thereafter, private respondent and the other
beneficiaries of said insurance policy filed a written
notice of claim with the petitioner insurance company
which denied said claim contending that murder and
assault are not within the scope of the coverage of the
insurance policy.
On February 24, 1989, private respondent filed a
complaint with the Insurance Commission which
subsequently rendered a decision, the pertinent portion
of which reads:
In the light of the foregoing. we find
respondent liable to pay complainant
the sum of P15,000.00 representing the
proceeds of the policy with interest. As
no evidence was submitted to prove
the claim for mortuary aid in the sum
of P1,000.00, the same cannot be
entertained.
WHEREFORE, judgment is hereby
rendered ordering respondent to pay
complainant the sum of P15,000.00
with legal interest from the date of the
filing of the complaint until fully
satisfied. With costs. 4
On July 11, 1991, the appellate court affirmed said
decision.
Hence, petitioner filed this petition alleging grove
abuse of discretion on the part of the appellate court in
applying the principle of "expresso unius exclusio
alterius" in a personal accident insurance policy since
death resulting from murder and/or assault are
impliedly excluded in said insurance policy considering
that the cause of death of the insured was not
accidental but rather a deliberate and intentional act of
the assailant in killing the former as indicated by the
location of the lone stab wound on the insured.
Therefore, said death was committed with deliberate
intent which, by the very nature of a personal accident
insurance policy, cannot be indemnified.
We do not agree.
The terms "accident" and "accidental"
as used in insurance contracts have not
acquired any technical meaning, and
are construed by the courts in their
ordinary and common acceptation.
Thus, the terms have been taken to
mean that which happen by chance or
fortuitously, without intention and
design, and which is unexpected,
unusual, and unforeseen. An accident
is an event that takes place without
one's foresight or expectation an
event that proceeds from an unknown
cause, or is an unusual effect of a
known cause and, therefore, not
expected.
. . . The generally accepted rule is that,
death or injury does not result from
accident or accidental means within
the terms of an accident-policy if it is
the natural result of the insured's
voluntary act, unaccompanied by
anything unforeseen except the death
or injury. There is no accident when a
deliberate act is performed unless
some additional, unexpected,
independent, and unforeseen
happening occurs which produces or
brings about the result of injury or
death. In other words, where the death
or injury is not the natural or probable
result of the insured's voluntary act, or
if something unforeseen occurs in the
doing of the act which produces the
injury, the resulting death is within the
protection of the policies insuring
against death or injury from accident. 5
As correctly pointed out by the respondent appellate
court in its decision:
In the case at bar, it cannot be
pretended that Carlie Surposa died in
the course of an assault or murder as a
result of his voluntary act considering
the very nature of these crimes. In the
first place, the insured and his
companion were on their way home
from attending a festival. They were
confronted by unidentified persons. The
record is barren of any circumstance
showing how the stab wound was
inflicted. Nor can it be pretended that
the malefactor aimed at the insured
precisely because the killer wanted to
take his life. In any event, while the act
may not exempt the unknown
perpetrator from criminal liability, the
fact remains that the happening was a
pure accident on the part of the victim.
The insured died from an event that
took place without his foresight or
expectation, an event that proceeded
from an unusual effect of a known
cause and, therefore, not expected.
Neither can it be said that where was a
 capricious desire on the part of the
accused to expose his life to danger
considering that he was just going
home after attending a festival. 6

Furthermore, the personal accident insurance policy

involved herein specifically enumerated only ten (10)
circumstances wherein no liability attaches to
petitioner insurance company for any injury, disability
or loss suffered by the insured as a result of any of the
stimulated causes. The principle of " expresso unius
exclusio alterius" the mention of one thing implies
the exclusion of another thing is therefore applicable
in the instant case since murder and assault, not
having been expressly included in the enumeration of
the circumstances that would negate liability in said
insurance policy cannot be considered by implication to
discharge the petitioner insurance company from
liability for, any injury, disability or loss suffered by the
insured. Thus, the failure of the petitioner insurance
company to include death resulting from murder or
assault among the prohibited risks leads inevitably to
the conclusion that it did not intend to limit or exempt
itself from liability for such death.

Article 1377 of the Civil Code of the Philippines

provides that:

The interpretation of obscure words or

stipulations in a contract shall not favor
the party who caused the obscurity.

Moreover,

it is well settled that contracts of

insurance are to be construed liberally
in favor of the insured and strictly
against the insurer. Thus ambiguity in
the words of an insurance contract
should be interpreted in favor of its
beneficiary. 7

WHEREFORE, finding no irreversible error in the

decision of the respondent Court of Appeals, the
petition for certiorari with restraining order and
preliminary injunction is hereby DENIED for lack of
merit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 60506 August 6, 1992
FIGURACION VDA. DE MAGLANA, EDITHA M.
CRUZ, ERLINDA M. MASESAR, LEONILA M.
MALLARI, GILDA ANTONIO and the minors LEAH,
LOPE, JR., and ELVIRA, all surnamed MAGLANA,
herein represented by their mother, FIGURACION
VDA. DE MAGLANA, petitioners,
vs.
HONORABLE FRANCISCO Z. CONSOLACION,
Presiding Judge of Davao City, Branch II, and
AFISCO INSURANCE CORPORATION, respondents.
Jose B. Guyo for petitioners.
Angel E. Fernandez for private respondent.
ROMERO, J.:
The nature of the liability of an insurer sued together
with the insured/operator-owner of a common carrier
which figured in an accident causing the death of a
third person is sought to be defined in this petition
for certiorari.
The facts as found by the trial court are as follows:
. . . 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. 3
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
(b) . . . .
2. . . . .
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-a-vis 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.
SO ORDERED.
SECOND DIVISION
[G.R. No. 137775. March 31, 2005]
FGU INSURANCE CORPORATION, petitioner, vs.
THE COURT OF APPEALS, SAN MIGUEL
CORPORATION, and ESTATE OF ANG GUI,
represented by LUCIO, JULIAN, and JAIME,
all surnamed ANG, and CO
TO, respondents.
[G.R. No. 140704. March 31, 2005]
ESTATE OF ANG GUI, Represented by LUCIO,
JULIAN and JAIME, all surnamed ANG, and
CO TO, petitioners, vs. THE HONORABLE
COURT OF APPEALS, SAN MIGUEL CORP.,
and FGU INSURANCE CORP., respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us are two separate Petitions for review
assailing the Decision[1] of the Court of Appeals in CA-
G.R. CV No. 49624 entitled, San Miguel Corporation,
Plaintiff-Appellee versus Estate of Ang Gui, represented
by Lucio, Julian and Jaime, all surnamed Ang, and Co
To, Defendants-Appellants, ThirdParty Plaintiffs versus
FGU Insurance Corporation, Third-Party Defendant-
Appellant, which affirmed in toto the decision[2] of the
Regional Trial Court of Cebu City, Branch 22. The
dispositive portion of the Court of Appeals decision
reads:
WHEREFORE, for all the foregoing, judgment is hereby
rendered as follows:
1) Ordering
defendants to pay plaintiff the sum of
P1,346,197.00 and an interest of 6% per
annum to be reckoned from the filing of this
case on October 2, 1990;
2) Ordering
defendants to pay plaintiff the sum of
P25,000.00 for attorneys fees and an
additional sum of P10,000.00 as litigation
expenses;
3) With cost against defendants.
For the Third-Party Complaint:
1) Ordering third-party defendant FGU Insurance
Company to pay and reimburse defendants the amount
of P632,700.00.[3]
The Facts
Evidence shows that Anco Enterprises Company
(ANCO), a partnership between Ang Gui and Co To, was
engaged in the shipping business. It owned the M/T
ANCO tugboat and the D/B Lucio barge which were
operated as common carriers. Since the D/B Lucio had
no engine of its own, it could not maneuver by itself
and had to be towed by a tugboat for it to move from
one place to another.
On 23 September 1979, San Miguel Corporation
(SMC) shipped from Mandaue City, Cebu, on board the
D/B Lucio, for towage by M/T ANCO, the following
cargoes:
Bill of Lading No. Shipment Destination
1 25,000 cases Pale Pilsen Estancia,
Iloilo
350 cases Cerveza
Negra Estancia, Iloilo
2 15,000 cases Pale Pilsen San Jose,
Antique
200 cases Cerveza
Negra San Jose,
Antique
 The consignee for the cargoes covered by Bill of
Lading No. 1 was SMCs Beer Marketing Division (BMD)-
Estancia Beer Sales Office, Estancia, Iloilo, while the
consignee for the cargoes covered by Bill of Lading No.
2 was SMCs BMD-San Jose Beer Sales Office, San Jose,
Antique.
The D/B Lucio was towed by the M/T ANCO all the
way from Mandaue City to San Jose, Antique. The
vessels arrived at San Jose, Antique, at about one
oclock in the afternoon of 30 September 1979. The
tugboat M/T ANCO left the barge immediately after
reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose,
Antique, in the afternoon of 30 September 1979, the
clouds over the area were dark and the waves were
already big. The arrastre workers unloading the
cargoes of SMC on board the D/B Lucio began to
complain about their difficulty in unloading the
cargoes. SMCs District Sales Supervisor, Fernando
Macabuag, requested ANCOs representative to transfer
the barge to a safer place because the vessel might
not be able to withstand the big waves.
ANCOs representative did not heed the request
because he was confident that the barge could
withstand the waves. This, notwithstanding the fact
that at that time, only the M/T ANCO was left at the
wharf of San Jose, Antique, as all other vessels already
left the wharf to seek shelter. With the waves growing
bigger and bigger, only Ten Thousand Seven Hundred
Ninety (10,790) cases of beer were discharged into the
custody of the arrastre operator.
At about ten to eleven oclock in the evening of 01
October 1979, the crew of D/B Lucio abandoned the
vessel because the barges rope attached to the wharf
was cut off by the big waves. At around midnight, the
barge run aground and was broken and the cargoes of
beer in the barge were swept away.
As a result, ANCO failed to deliver to SMCs
consignee Twenty-Nine Thousand Two Hundred Ten
(29,210) cases of Pale Pilsen and Five Hundred Fifty
(550) cases of Cerveza Negra. The value per case of
Pale Pilsen was Forty-Five Pesos and Twenty Centavos
(P45.20). The value of a case of Cerveza Negra was
Forty-Seven Pesos and Ten Centavos (P47.10), hence,
SMCs claim against ANCO amounted to One Million
Three Hundred Forty-Six Thousand One Hundred
Ninety-Seven Pesos (P1,346,197.00).
As a consequence of the incident, SMC filed a
complaint for Breach of Contract of Carriage and
Damages against ANCO for the amount of One Million
Three Hundred Forty-Six Thousand One Hundred
Ninety-Seven Pesos (P1,346,197.00) plus interest,
litigation expenses and Twenty-Five Percent (25%) of
the total claim as attorneys fees.
Upon Ang Guis death, ANCO, as a partnership, was
dissolved hence, on 26 January 1993, SMC filed a
second amended complaint which was admitted by the
Court impleading the surviving partner, Co To and the
Estate of Ang Gui represented by Lucio, Julian and
Jaime, all surnamed Ang. The substituted defendants
adopted the original answer with counterclaim of ANCO
since the substantial allegations of the original
complaint and the amended complaint are practically
the same.
ANCO admitted that the cases of beer Pale Pilsen
and Cerveza Negra mentioned in the complaint were
indeed loaded on the vessel belonging to ANCO. It
claimed however that it had an agreement with SMC
that ANCO would not be liable for any losses or
damages resulting to the cargoes by reason of
fortuitous event. Since the cases of beer Pale Pilsen
and Cerveza Negra were lost by reason of a storm, a
fortuitous event which battered and sunk the vessel in
which they were loaded, they should not be held liable.
ANCO further asserted that there was an agreement
between them and SMC to insure the cargoes in order
to recover indemnity in case of loss. Pursuant to that
agreement, the cargoes to the extent of Twenty
Thousand (20,000) cases was insured with FGU
Insurance Corporation (FGU) for the total amount of
Eight Hundred Fifty-Eight Thousand Five Hundred Pesos
(P858,500.00) per Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a
Third-Party Complaint against FGU, alleging that before
the vessel of ANCO left for San Jose, Antique with the
cargoes owned by SMC, the cargoes, to the extent of
Twenty Thousand (20,000) cases, were insured with
FGU for a total amount of Eight Hundred Fifty-Eight
Thousand Five Hundred Pesos (P858,500.00) under
Marine Insurance Policy No. 29591. ANCO further
alleged that on or about 02 October 1979, by reason of
very strong winds and heavy waves brought about by a
passing typhoon, the vessel run aground near the
vicinity of San Jose, Antique, as a result of which, the
vessel was totally wrecked and its cargoes owned by
SMC were lost and/or destroyed. According to ANCO,
the loss of said cargoes occurred as a result of risks
insured against in the insurance policy and during the
existence and lifetime of said insurance policy. ANCO
went on to assert that in the remote possibility that the
court will order ANCO to pay SMCs claim, the third-
party defendant corporation should be held liable to
indemnify or reimburse ANCO whatever amounts, or
damages, it may be required to pay to SMC.
In its answer to the Third-Party complaint, third-
party defendant FGU admitted the existence of the
Insurance Policy under Marine Cover Note No. 29591
but maintained that the alleged loss of the cargoes
covered by the said insurance policy cannot be
attributed directly or indirectly to any of the risks
insured against in the said insurance policy. According
to FGU, it is only liable under the policy to Third-party
Plaintiff ANCO and/or Plaintiff SMC in case of any of the
following:
a) total loss of the entire shipment;
b) loss of any case as a result of the
sinking of the vessel; or
c) loss as a result of the vessel being on
fire.
 Furthermore, FGU alleged that the Third-Party
Plaintiff ANCO and Plaintiff SMC failed to exercise
ordinary diligence or the diligence of a good father of
the family in the care and supervision of the cargoes
insured to prevent its loss and/or destruction.
Third-Party defendant FGU prayed for the
dismissal of the Third-Party Complaint and asked for
actual, moral, and exemplary damages and attorneys
fees.[1]
The trial court found that while the cargoes were
indeed lost due to fortuitous event, there was failure on
ANCOs part, through their representatives, to observe
the degree of diligence required that would exonerate
them from liability. The trial court thus held the Estate
of Ang Gui and Co To liable to SMC for the amount of
the lost shipment. With respect to the Third-Party
complaint, the court a quo found FGU liable to bear
Fifty-Three Percent (53%) of the amount of the lost
cargoes. According to the trial court:
. . . Evidence is to the effect that the D/B Lucio, on
which the cargo insured, run-aground and was broken
and the beer cargoes on the said barge were swept
away. It is the sense of this Court that the risk insured
against was the cause of the loss.
...
Since the total cargo was 40,550 cases which had a
total amount of P1,833,905.00 and the amount of the
policy was only for P858,500.00, defendants as
assured, therefore, were considered co-insurers of
third-party defendant FGU Insurance Corporation to the
extent of 975,405.00 value of the cargo. Consequently,
inasmuch as there was partial loss of only
P1,346,197.00, the assured shall bear 53% of the
loss[4] [Emphasis ours]
The appellate court affirmed in toto the decision of
the lower court and denied the motion for
reconsideration and the supplemental motion for
reconsideration.
Hence, the petitions.
The Issues
In G.R. No. 137775, the grounds for review raised
by petitioner FGU can be summarized into two: 1)
Whether or not respondent Court of Appeals committed
grave abuse of discretion in holding FGU liable under
the insurance contract considering the circumstances
surrounding the loss of the cargoes; and 2) Whether or
not the Court of Appeals committed an error of law in
holding that the doctrine of res judicata applies in the
instant case.
In G.R. No. 140704, petitioner Estate of Ang Gui
and Co To assail the decision of the appellate court
based on the following assignments of error: 1) The
Court of Appeals committed grave abuse of discretion
in affirming the findings of the lower court that the
negligence of the crewmembers of the D/B Lucio was
the proximate cause of the loss of the cargoes; and 2)
The respondent court acted with grave abuse of
discretion when it ruled that the appeal was without
merit despite the fact that said court had accepted the
decision in Civil Case No. R-19341, as affirmed by the
Court of Appeals and the Supreme Court, as res
judicata.
Ruling of the Court
First, we shall endeavor to dispose of the common
issue raised by both petitioners in their respective
petitions for review, that is, whether or not the doctrine
of res judicata applies in the instant case.
It is ANCOs contention that the decision in Civil
Case No. R-19341,[5] which was decided in its favor,
constitutes res judicata with respect to the issues
raised in the case at bar.
The contention is without merit. There can be
no res judicata as between Civil Case No. R-19341 and
the case at bar. In order for res judicata to be made
applicable in a case, the following essential requisites
must be present: 1) the former judgment must be final;
2) the former judgment must have been rendered by a
court having jurisdiction over the subject matter and
the parties; 3) the former judgment must be a
judgment or order on the merits; and 4) there must be
between the first and second action identity of parties,
identity of subject matter, and identity of causes of
action.[6]
There is no question that the first three elements
of res judicata as enumerated above are indeed
satisfied by the decision in Civil Case No. R-19341.
However, the doctrine is still inapplicable due to the
absence of the last essential requisite of identity of
parties, subject matter and causes of action.
The parties in Civil Case No. R-19341 were ANCO
as plaintiff and FGU as defendant while in the instant
case, SMC is the plaintiff and the Estate of Ang Gui
represented by Lucio, Julian and Jaime, all surnamed
Ang and Co To as defendants, with the latter merely
impleading FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was
the insurance contract entered into by ANCO, the
owner of the vessel, with FGU covering the vessel D/B
Lucio, while in the instant case, the subject matter of
litigation is the loss of the cargoes of SMC, as shipper,
loaded in the D/B Lucio and the resulting failure of
ANCO to deliver to SMCs consignees the lost cargo.
Otherwise stated, the controversy in the first case
involved the rights and liabilities of the shipowner vis--
vis that of the insurer, while the present case involves
the rights and liabilities of the shipper vis--vis that of
the shipowner. Specifically, Civil Case No. R-19341 was
an action for Specific Performance and Damages based
on FGU Marine Hull Insurance Policy No. VMF-MH-13519
covering the vessel D/B Lucio, while the instant case is
an action for Breach of Contract of Carriage and
Damages filed by SMC against ANCO based on Bill of
Lading No. 1 and No. 2, with defendant ANCO seeking
reimbursement from FGU under Insurance Policy No.
MA-58486, should the former be held liable to pay SMC.
Moreover, the subject matter of the third-party
complaint against FGU in this case is different from that
in Civil Case No. R-19341. In the latter, ANCO was suing
FGU for the insurance contract over the vessel while in
the former, the third-party complaint arose from the
insurance contract covering the cargoes on board the
D/B Lucio.
The doctrine of res judicata precludes the re-
litigation of a particular fact or issue already passed
upon by a court of competent jurisdiction in a former
judgment, in another action between the same parties
based on a different claim or cause of action. The
judgment in the prior action operates as estoppel only
as to those matters in issue or points controverted,
upon the determination of which the finding or
judgment was rendered.[7] If a particular point or
question is in issue in the second action, and the
judgment will depend on the determination of that
particular point or question, a former judgment
between the same parties or their privies will be final
and conclusive in the second if that same point or
question was in issue and adjudicated in the first suit. [8]
Since the case at bar arose from the same incident
as that involved in Civil Case No. R-19341, only findings
with respect to matters passed upon by the court in the
former judgment are conclusive in the disposition of
the instant case. A careful perusal of the decision in
Civil Case No. R-19341 will reveal that the pivotal
issues resolved by the lower court, as affirmed by both
the Court of Appeals and the Supreme Court, can be
summarized into three legal conclusions: 1) that the
D/B Lucio before and during the voyage was
seaworthy; 2) that there was proper notice of loss
made by ANCO within the reglementary period; and 3)
that the vessel D/B Lucio was a constructive total loss.
Said decision, however, did not pass upon the
issues raised in the instant case. Absent therein was
any discussion regarding the liability of ANCO for the
loss of the cargoes. Neither did the lower court pass
upon the issue of the alleged negligence of the
crewmembers of the D/B Lucio being the cause of the
loss of the cargoes owned by SMC.
Therefore, based on the foregoing discussion, we
are reversing the findings of the Court of Appeals that
there is res judicata.
Anent ANCOs first assignment of error, i.e., the
appellate court committed error in concluding that the
negligence of ANCOs representatives was the
proximate cause of the loss, said issue is a question of
fact assailing the lower courts appreciation of evidence
on the negligence or lack thereof of the crewmembers
of the D/B Lucio. As a rule, findings of fact of lower
courts, particularly when affirmed by the appellate
court, are deemed final and conclusive. The Supreme
Court cannot review such findings on appeal, especially
when they are borne out by the records or are based
on substantial evidence.[9] As held in the case
of Donato v. Court of Appeals,[10] in this jurisdiction, it is
a fundamental and settled rule that findings of fact by
the trial court are entitled to great weight on appeal
and should not be disturbed unless for strong and
cogent reasons because the trial court is in a better
position to examine real evidence, as well as to
observe the demeanor of the witnesses while testifying
in the case.[11]
It is not the function of this Court to analyze or
weigh evidence all over again, unless there is a
showing that the findings of the lower court are totally
devoid of support or are glaringly erroneous as to
constitute palpable error or grave abuse of discretion.
[12]
A careful study of the records shows no cogent
reason to fault the findings of the lower court, as
sustained by the appellate court, that ANCOs
representatives failed to exercise the extraordinary
degree of diligence required by the law to exculpate
them from liability for the loss of the cargoes.
First, ANCO admitted that they failed to deliver to
the designated consignee the Twenty Nine Thousand
Two Hundred Ten (29,210) cases of Pale Pilsen and Five
Hundred Fifty (550) cases of Cerveza Negra.
Second, it is borne out in the testimony of the
witnesses on record that the barge D/B Lucio had no
engine of its own and could not maneuver by itself. Yet,
the patron of ANCOs tugboat M/T ANCO left it to fend
for itself notwithstanding the fact that as the two
vessels arrived at the port of San Jose, Antique, signs of
the impending storm were already manifest. As stated
by the lower court, witness Mr. Anastacio Manilag
testified that the captain or patron of the tugboat M/T
ANCO left the barge D/B Lucio immediately after it
reached San Jose, Antique, despite the fact that there
were already big waves and the area was already dark.
This is corroborated by defendants own witness, Mr.
Fernando Macabueg.[13]
The trial court continued:
At that precise moment, since it is the duty of the
defendant to exercise and observe extraordinary
diligence in the vigilance over the cargo of the plaintiff,
the patron or captain of M/T ANCO, representing the
defendant could have placed D/B Lucio in a very safe
location before they left knowing or sensing at that
time the coming of a typhoon. The presence of big
waves and dark clouds could have warned the patron
or captain of M/T ANCO to insure the safety of D/B
Lucio including its cargo. D/B Lucio being a barge,
without its engine, as the patron or captain of M/T
ANCO knew, could not possibly maneuver by itself. Had
the patron or captain of M/T ANCO, the representative
of the defendants observed extraordinary diligence in
placing the D/B Lucio in a safe place, the loss to the
cargo of the plaintiff could not have occurred. In short,
therefore, defendants through their representatives,
failed to observe the degree of diligence required of
them under the provision of Art. 1733 of the Civil Code
of the Philippines.[14]
 Petitioners Estate of Ang Gui and Co To, in
their Memorandum, asserted that the contention of
respondents SMC and FGU that the crewmembers of
D/B Lucio should have left port at the onset of the
typhoon is like advising the fish to jump from the frying
pan into the fire and an advice that borders on
madness.[15]
The argument does not persuade. The records
show that the D/B Lucio was the only vessel left at San
Jose, Antique, during the time in question. The other
vessels were transferred and temporarily moved to
Malandong, 5 kilometers from wharf where the barge
remained.[16] Clearly, the transferred vessels were
definitely safer in Malandong than at the port of San
Jose, Antique, at that particular time, a fact which
petitioners failed to dispute
ANCOs arguments boil down to the claim that the
loss of the cargoes was caused by the typhoon Sisang,
a fortuitous event (caso fortuito), and there was no
fault or negligence on their part. In fact, ANCO claims
that their crewmembers exercised due diligence to
prevent or minimize the loss of the cargoes but their
efforts proved no match to the forces unleashed by the
typhoon which, in petitioners own words was, by any
yardstick, a natural calamity, a fortuitous event, an act
of God, the consequences of which petitioners could
not be held liable for.[17]
The Civil Code provides:
Art. 1733. Common carriers, from the nature of their
business and for reasons of public policy are bound to
observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers
transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in vigilance over the
goods is further expressed in Articles 1734, 1735, and
1745 Nos. 5, 6, and 7 . . .
Art. 1734. Common carriers are responsible for the
loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or
other natural disaster or calamity;
...
Art. 1739. In order that the common carrier may
be exempted from responsibility, the natural
disaster must have been the proximate and only
cause of the loss. However, the common carrier must
exercise due diligence to prevent or minimize loss
before, during and after the occurrence of flood, storm,
or other natural disaster in order that the common
carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods . . .
(Emphasis supplied)
Caso fortuito or force majeure (which in law are
identical insofar as they exempt an obligor from
liability)[18] by definition, are extraordinary events not
foreseeable or avoidable, events that could not be
foreseen, or which though foreseen, were inevitable. It
is therefore not enough that the event should not have
been foreseen or anticipated, as is commonly believed
but it must be one impossible to foresee or to avoid. [19]
In this case, the calamity which caused the loss of
the cargoes was not unforeseen nor was it
unavoidable. In fact, the other vessels in the port of
San Jose, Antique, managed to transfer to another
place, a circumstance which prompted SMCs District
Sales Supervisor to request that the D/B Lucio be
likewise transferred, but to no avail. The D/B Lucio had
no engine and could not maneuver by itself. Even if
ANCOs representatives wanted to transfer it, they no
longer had any means to do so as the tugboat M/T
ANCO had already departed, leaving the barge to its
own devices. The captain of the tugboat should have
had the foresight not to leave the barge alone
considering the pending storm.
While the loss of the cargoes was admittedly
caused by the typhoon Sisang, a natural disaster,
ANCO could not escape liability to respondent SMC.
The records clearly show the failure of petitioners
representatives to exercise the extraordinary degree of
diligence mandated by law. To be exempted from
responsibility, the natural disaster should have been
the proximate and only cause of the loss. [20] There must
have been no contributory negligence on the part of
the common carrier. As held in the case of Limpangco
Sons v. Yangco Steamship Co.:[21]
. . . To be exempt from liability because of an act of
God, the tug must be free from any previous
negligence or misconduct by which that loss or
damage may have been occasioned. For, although the
immediate or proximate cause of the loss in any given
instance may have been what is termed an act of God,
yet, if the tug unnecessarily exposed the two to such
accident by any culpable act or omission of its own, it
is not excused.[22]
Therefore, as correctly pointed out by the
appellate court, there was blatant negligence on the
part of M/T ANCOs crewmembers, first in leaving the
engine-less barge D/B Lucio at the mercy of the storm
without the assistance of the tugboat, and again in
failing to heed the request of SMCs representatives to
have the barge transferred to a safer place, as was
done by the other vessels in the port; thus, making
said blatant negligence the proximate cause of the loss
of the cargoes.
We now come to the issue of whether or not FGU
can be held liable under the insurance policy to
reimburse ANCO for the loss of the cargoes despite the
findings of the respondent court that such loss was
occasioned by the blatant negligence of the latters
employees.
One of the purposes for taking out insurance is to
protect the insured against the consequences of his
own negligence and that of his agents. Thus, it is a
basic rule in insurance that the carelessness and
negligence of the insured or his agents constitute no
defense on the part of the insurer. [23] This rule however
presupposes that the loss has occurred due to causes
which could not have been prevented by the insured,
despite the exercise of due diligence.
The question now is whether there is a certain
degree of negligence on the part of the insured or his
agents that will deprive him the right to recover under
the insurance contract. We say there is. However, to
what extent such negligence must go in order to
exonerate the insurer from liability must be evaluated
in light of the circumstances surrounding each case.
When evidence show that the insureds negligence or
recklessness is so gross as to be sufficient to constitute
a willful act, the insurer must be exonerated.
In the case of Standard Marine Ins. Co. v. Nome
Beach L. & T. Co.,[24] the United States Supreme Court
held that:
The ordinary negligence of the insured and his agents
has long been held as a part of the risk which the
insurer takes upon himself, and the existence of which,
where it is the proximate cause of the loss, does not
absolve the insurer from liability. But willful exposure,
gross negligence, negligence amounting to
misconduct, etc., have often been held to release the
insurer from such liability.[25] [Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3
Cliff. 244, Fed. Cas. No. 17,731, the owners of an
insured vessel attempted to put her across the bar at
Hatteras Inlet. She struck on the bar and was wrecked.
The master knew that the depth of water on the bar
was such as to make the attempted passage
dangerous. Judge Clifford held that, under the
circumstances, the loss was not within the protection of
the policy, saying:
Authorities to prove that persons insured cannot
recover for a loss occasioned by their own wrongful
acts are hardly necessary, as the proposition involves
an elementary principle of universal application. Losses
may be recovered by the insured, though remotely
occasioned by the negligence or misconduct of the
master or crew, if proximately caused by the perils
insured against, because such mistakes and negligence
are incident to navigation and constitute a part of the
perils which those who engage in such adventures are
obliged to incur; but it was never supposed that the
insured could recover indemnity for a loss occasioned
by his own wrongful act or by that of any agent for
whose conduct he was responsible.[26] [Emphasis ours]
From the above-mentioned decision, the United
States Supreme Court has made a distinction between
ordinary negligence and gross negligence or
negligence amounting to misconduct and its effect on
the insureds right to recover under the insurance
contract. According to the Court, while mistake and
negligence of the master or crew are incident to
navigation and constitute a part of the perils that the
insurer is obliged to incur, such negligence or
recklessness must not be of such gross character as to
amount to misconduct or wrongful acts; otherwise,
such negligence shall release the insurer from liability
under the insurance contract.
In the case at bar, both the trial court and the
appellate court had concluded from the evidence that
the crewmembers of both the D/B Lucio and the M/T
ANCO were blatantly negligent. To wit:
There was blatant negligence on the part of the
employees of defendants-appellants when the patron
(operator) of the tug boat immediately left the barge at
the San Jose, Antique wharf despite the looming bad
weather. Negligence was likewise exhibited by the
defendants-appellants representative who did not heed
Macabuags request that the barge be moved to a more
secure place. The prudent thing to do, as was done by
the other sea vessels at San Jose, Antique during the
time in question, was to transfer the vessel to a safer
wharf. The negligence of the defendants-appellants is
proved by the fact that on 01 October 1979, the only
simple vessel left at the wharf in San Jose was the D/B
Lucio.[27] [Emphasis ours]
As stated earlier, this Court does not find any
reason to deviate from the conclusion drawn by the
lower court, as sustained by the Court of Appeals, that
ANCOs representatives had failed to exercise
extraordinary diligence required of common carriers in
the shipment of SMCs cargoes. Such blatant negligence
being the proximate cause of the loss of the cargoes
amounting to One Million Three Hundred Forty-Six
Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00)
This Court, taking into account the circumstances
present in the instant case, concludes that the blatant
negligence of ANCOs employees is of such gross
character that it amounts to a wrongful act which must
exonerate FGU from liability under the insurance
contract.
WHEREFORE, premises considered, the Decision
of the Court of Appeals dated 24 February 1999 is
hereby AFFIRMED with MODIFICATION dismissing the
third-party complaint.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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.
R.M. Blanco for petitioner.
Camacho and Associates for respondents.
PADILLA, J.:
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:
1. 2 cm. laceration of left side of
tongue.
2. 6 cm. laceration with partial
transection of muscle (almost full
thickness) left side of face.
3. Full thickness laceration of lower lip
and adjacent skin.
which injuries causing [sic] deformity on the face. 4
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. 6Petitioner
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 SECOND DIVISION
not related to the criminal action.
[G.R. No. 101439. June 21, 1999]
WHEREFORE, the instant petition is GRANTED. The
questioned order dated 24 April 1987 is SET ASIDE and GOVERNMENT SERVICE INSURANCE SYSTEM
a new one entered admitting petitioner's third party (GSIS), petitioner, vs. COURT OF APPEALS
complaint against the private respondent Makati (former Tenth Division), VICTORIA JAIME
Insurance Company, Inc. VDA. DE KHO, for herself and minor ROY
ROLAND, GLORIA KHO VDA. DE CALABIA
SO ORDERED. for herself and minors MARY GRACE,
WILLIE, JR., VOLTAIRE, GLENN, and MAY,
all surnamed CALABIA, DANIEL KHO,
JOSEFINA KHO, EMERITA KHO APEGO,
ANTONIO KHO and TERESITA
KHO, respondents.

DECISION

QUISUMBING, J.:

In this petition for review on certiorari under Rule

45 of the Rules of Court, petitioner Government Service
Insurance System (GSIS) assails the January 15, 1991
Decision[1] of the Court of Appeals in CA-G.R. No.
19849, which affirmed in toto the judgment of the
Regional Trial Court of Butuan City, Branch II, dated
April 30, 1985, stating in part:

WHEREFORE, judgment is hereby rendered, as follows:

xxx

In Civil Case No. 2256:

a) Dismissing the complaint against defendant Victor

Uy;

b) Ordering defendants Mabuhay Insurance and

Guaranty Company, Inc., Guillermo Corbeta, NFA and
GSIS to pay jointly and severally the following sums of
money:

i. to pay plaintiff Gloria Kho Vda. de Calabia, the sum of

P8,935.06 for doctors fees, medicines, hospitalizations
and medical expenses; P2,319.00 for transportation
expenses; and P53.30 for telegrams; P10,000.00 for
the injuries she sustained; P12,000.00 loss of income
for six months.
ii. to plaintiff Victoria Kho, the sum of P832.00 for
hospitalization and medicines; P10,000.00 for the
injuries she sustained;
iii. to the heirs of Wellie [Willie] Calabia, Roland Kho
and Maxima Uhmad [Ugmad] Vda. de Kho, the sum of
P7,500.00 as funeral expenses less P5,000.00
advanced by defendant Victor Uy.
iv. to the heirs of Wellie [Willie] Calabia, Sr., heirs of
Roland Kho and heirs of Maxima Ugmad Vda. de Kho;
P30,000.00 each as compensatory damages.
c) To pay plaintiff the sum of P10,000.00 as attorneys
fees and expenses of litigation;
d) Dismissing defendants counterclaim, and cross-
claim; and
e) To pay the costs.
That this decision is without prejudice as to the right of
Mabuhay Insurance & Guaranty Co., Inc., and NFA to
recover from Guillermo Corbeta and GSIS the amounts
they may have paid by virtue hereof.[2]
For purposes of this review, we deem as also
assailed the disposition by the trial court in its Order
issued on July 12, 1985, modifying its original decision,
by awarding moral damages to the heirs of the
deceased victims, as follows:
Considering that the dispositive portion of the decision
in this case, an award of P10,000.00 each made to
plaintiffs Gloria Kho Vda. de Calabia x x x, for injuries
they sustained, this award, through [sic] not clearly
stated in the decision, is the moral damages the
instant motion seeks to obtain. However, the prayer for
moral damages for the death of the three (3) persons
above-mentioned is proper. (citation omitted)
In view of the foregoing, the prayer of plaintiffs Gloria
Kho Vda. de Calabia and Victoria Kho for an award of
moral damages in their favor is hereby
denied. However, as for the death of Wellie [Willie]
Calabia, Sr., Rolando Kho and Maxima Ugmad Vda. de
Kho, an award of moral damages is hereby made, and
ordering and directing defendants Mabuhay Insurance
and Guaranty Company Inc., Guillermo Corbeta,
National Food Authority and Government Service
Insurance System to pay jointly and severally the
following sums to wit:
P10,000.00 to the heirs of Wellie [Willie] Calabia, Sr.
P10,000.00 to the heirs of Rolando Kho and
P10,000.00 to the heirs of Maxima Ugmad Vda. de Kho
xxx
IT IS SO ORDERED.[3]
The relevant facts as found by the trial court are
as follows:
National Food Authority (NFA, formerly National
Grains Authority) was the owner of a Chevrolet truck
which was insured against liabilities for death of and
injuries to third persons with the GSIS.
On May 9, 1979, at about 7:00 in the evening at
Tabon-Tabon, Butuan City, the said truck driven by
Guillermo Corbeta collided with a public utility vehicle,
a Toyota Tamaraw. The Toyota Tamaraw was owned and
operated by Victor Uy, under the name and style of
Victory Line. The Tamaraw was a total wreck.
All the collision victims were passengers of the
Toyota Tamaraw. Five (5) passengers died[4] while ten
(10) others sustained bodily injuries. Among those
injured were private respondents, Victoria Jaime Vda.
de Kho and Gloria Kho Vda. de Calabia. Among the
dead were Maxima Ugmad Vda. de Kho, Roland Kho
and Willie Calabia, Sr.
Three (3) cases were filed with the Court of First
Instance of Agusan del Norte and Butuan City. The first,
Civil Case No. 2196 for quasi-delict, damages and
attorneys fees, was commenced by Uy on June 5, 1979
against NFA and Corbeta. On August 27, 1979,
the second, Civil Case No. 2225 for damages, was filed
by an injured passenger, Librado Taer, against Uy, the
operator of the public utility vehicle, and insurer,
Mabuhay Insurance and Guaranty Co. (MIGC). In turn,
Uy filed a cross-claim against MIGC and a third-party
complaint against Corbeta and NFA. The third, Civil
Case No. 2256, was instituted by herein private
respondents on November 26, 1979 against the
following: NFA and Corbeta for damages due to quasi-
delict; GSIS as insurer of the truck; Uy for breach of
contract of carriage; and MIGC as insurer of the Toyota
Tamaraw. These cases were consolidated and partially
tried by Judge Fortunato A. Vailoces, of the then Court
of First Instance of Agusan del Norte and Butuan City.
These cases were later on transferred to Branch II
of the Regional Trial Court of Butuan City. Trial ensued
and on April 30, 1985, the court rendered its
decision[5] holding that Corbetas negligence was the
proximate cause of the collision. The findings of the
trial court stated that the truck which crossed over to
the other lane was speeding because after the
collision, its left front wheel was detached and the
truck traveled for about fifty (50) meters and fell into a
ravine.[6] Likewise, the court concluded that if both
vehicles had traveled in their respective lanes, the
incident would not have occurred.[7] However, the
Chevy cargo truck had crossed over to the other lane
which, under traffic rules, was the lane of the Toyota
Tamaraw.[8]
In Civil Case No. 2196, the trial court awarded Uy
the total amount of one hundred nine thousand one
hundred (P109,100.00) pesos for damages. In Civil
Case No. 2225, said court dismissed the case against
Uy and ordered MIGC, Corbeta and NFA to pay plaintiff
Taer, jointly and severally, the total amount of forty
thousand five hundred fifty-nine pesos and ninety four
centavos (P40,559.94) for actual, compensatory, and
moral damages plus attorneys fees. Damages were
likewise awarded to the herein private respondents in
Civil Case No. 2256, as earlier mentioned.
Corbeta and NFA appealed the decision of the trial
court in Civil Case Nos. 2196, 2225, and 2256 to the
Court of Appeals. GSIS also elevated the decision in
Civil Case No. 2256 to the same appellate court. The
appeals were docketed as C.A.-G.R. Nos. 19847, 19848,
and 19849.
The Court of Appeals agreed with the conclusions
of the trial court and ruled as follows:
WHEREFORE, in view of the foregoing considerations,
and finding no reversible error, the decisions of the
Court a quo in Civil Cases Nos. 2196, 2225 and 2256
are hereby AFFIRMED in toto, with costs against the
appellants.
SO ORDERED.[9]
On February 5 and 6, 1991, GSIS and NFA filed
their motions for reconsideration respectively, which
were denied by the respondent court in its
Resolution[10] dated August 13, 1991.
On October 4, 1991, only GSIS filed this petition
for review on certiorari based on the following assigned
errors:
1. The respondent court erred in holding GSIS
solidarily liable with NFA.
2. The respondent court erred in holding GSIS
liable beyond the terms and conditions of
the contract of insurance and the
limitations under Insurance Memorandum
Circular (IMC) No. 5-78.
3. The respondent court erred in holding GSIS
liable without proof that a notice of claim
had been filed within six (6) months from
the date of the accident.
We find pertinent the following issues:
1) Whether the respondent court erred in
holding GSIS solidarily liable with the
negligent insured/owner-operator of the
Chevrolet truck for damages awarded to
private respondents which are beyond the
limitations of the insurance policy and the
Insurance Memorandum Circular No. 5-78.
2) Whether the respondent court failed to
consider that the private respondents
have no cause of action against the
petitioner, allegedly for failure of the
victims to file an insurance claim within six
(6) months from the date of the accident.
Petitioner denies solidary liability with the NFA or
the negligent operator of the cargo truck because it
claims that they are liable under different obligations. It
asserts that the NFAs liability is based on quasi-delict,
while petitioners liability is based on the contract of
insurance. Citing articles 1207[11] and 1208[12] of the
Civil Code of the Philippines, petitioner states that
when there are two or more debtors or two or more
creditors, the obligation as a general rule is joint. It
claims that the only exceptions are: (1) when there is a
stipulation for solidary obligation; (2) when the nature
of the obligation requires solidary liability; and (3)
when the law declares the obligation to be
solidary. However, since neither the provision of the
contract nor the insurance law provides for solidary
liability, petitioner asserts that the presumption is that
its obligation arising from a contract of insurance is
joint.
Petitioners position insofar as joint liability is
concerned is not tenable. It is now established that the
injured or the heirs of a deceased victim of a vehicular
accident may sue directly the insurer of the
vehicle. Note that common carriers are required to
secure Compulsory Motor Vehicle Liability Insurance
[CMVLI] coverage as provided under Sec. 374[13] of the
Insurance Code, precisely for the benefit of victims of
vehicular accidents and to extend them immediate
relief.[14] As this Court held in Shafer vs. Judge, RTC of
Olongapo City, Br. 75:[15]
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. The
victims and/or their defendants [dependents] are
assured of immediate financial assistance, regardless
of the financial capacity of motor vehicle owners.
xxx
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. (S 449 7 Am. Jur., 2d, pp. 118-119)
[16]
However, although the victim may proceed
directly against the insurer for indemnity, the third
party liability is only up to the extent of the insurance
policy and those required by law. While it is true that
where the insurance contract provides for indemnity
against liability to third persons, and such third persons
can directly[17] sue the insurer, the direct liability of the
insurer under indemnity contracts against third party
liability does not mean that the insurer can be held
liable in solidum with the insured and/or the other
parties found at fault.[18] For the liability of the insurer is
based on contract; that of the insured carrier or vehicle
owner is based on tort.[19] The liability of GSIS based on
the insurance contract is direct, but not solidary with
that of the NFA. The latters liability is based separately
on Article 2180[20] of the Civil Code.[21]
Obviously, the insurer could be held liable only up
to the extent of what was provided for by the contract
of insurance, in accordance with CMVLI law. At the time
of the incident, the schedule of indemnities for death
and/or bodily injuries, professional fees, hospital and
other charges payable under a CMVLI coverage was
provided under the Insurance Memorandum Circular
(IMC) No. 5-78 which was approved on November 10,
1978. As therein provided, the maximum indemnity for
death was twelve thousand (P12,000.00) pesos per
victim.[22] The schedules for medical expenses were
also provided by said IMC, specifically in paragraphs
(C) to (G).
Consequently, heirs of the victims who died in the
May 9, 1979 vehicular incident, could proceed (1)
against GSIS for the indemnity of P12,000 for each
dead victim, and against NFA and Guillermo Corbeta for
any other damages or expenses claimed; or (2) against
NFA and Corbeta to pay them all their claims in full.
It follows also that injured victims, Gloria Kho Vda.
de Calabia and Victoria Kho, could claim their medical
expenses for eight thousand nine hundred thirty-five
pesos and six centavos (P8,935.06) and eight hundred
thirty-two (P832.00) pesos, from any of the
following: GSIS, NFA, or Corbeta. As to the other
damages, only NFA or Corbeta may be held liable
therefor.
Computation of hospital charges and fees for the
services rendered to the injured victims was
conclusively established by the trial court. The
petitioner failed to object to the evidence thereon,
when presented by the private respondents during the
trial. Thus, these factual bases for the award of
damages may no longer be attacked. For generally,
findings of the judge who tried the case and heard the
witnesses could not be disturbed on appeal, unless
there are substantial facts and particular circumstances
which have been overlooked but which, if properly
considered, might affect the result of the case. [23] Thus,
considering the evidence on record including the
schedule of indemnities provided under IMC No. 5-78,
we find no cogent reason to disturb the computation of
medical charges and expenses that justify the award of
damages by the trial court.
As to the second issue, the petitioner contends
that it cannot be held liable without proof nor
allegation that the private respondents filed before its
office a notice of claim within six (6) months from the
date of the accident. This requirement, according to
the petitioner, gives the insurer the opportunity to
investigate the veracity of the claim, and non-
compliance therewith constitutes waiver. Since the
claim was not reported to the insurer, the petitioner
avers that the presumption is that the victim opted to
pursue his claim against the motor vehicle owner or
against the tortfeasor.
However, in this case the records reveal that on
September 7, 1979, the private respondents sent a
notice of loss to the petitioner informing the latter of
the accident. Included as Exhibit J[24] in the records, this
notice constitutes evidence of the loss they suffered by
reason of the vehicular collision. They stressed further
that the petitioner did not deny receipt of notice of
claim during the trial, and it would be too late now to
state otherwise.
Although merely factual, we need to emphasize
that the alleged delay in reporting the loss by the
insured and/or by the beneficiaries must be promptly
raised by the insurer[25] in objecting to the
claims. When the insured presented proof of loss
before the trial court, the insurer failed to object to said
presentation. The petitioner should have promptly
interposed the defense of delay, or belated
compliance, concerning the notice of claim. Moreover,
the petitioner merely waited for the victims or
beneficiaries to file their complaint. As matters stand
now, the defense of laches or prescription is deemed
waived because of petitioners failure to raise it not only
before but also during the hearing.[26]
To recapitulate, petitioner seeks a definitive ruling
only on the extent of its liability, as insurer of NFA, to
those injured or killed in the May 9, 1979 vehicular
collision.
As found by the trial court, the driver (Guillermo
Corbeta), the operator (NFA), and MIGC, are solidarily
liable for damages as computed below:
SCHEDULE A
I. For the Injured Victims
1) Gloria Kho Vda. de Calabia
a) Medical expenses P 8,935.06
b) Transportation and Telegraph Expenses 2,372.30
c) Other Compensatory/Moral Damages 10,000.00
d) Loss of Income 12,000.00
Total P 33,307.36
2) Victoria Kho
a) Medical expenses P 832.00
b) Other Compensatory/Moral Damages 10,000.00
Total P10,832.00
 II. For the Heirs of the Deceased Victims: 1. Petitioner Government Service Insurance
System is ordered to pay (a) twelve
Compensatory/ thousand pesos (P12,000.00) as death
indemnity to each group of heirs of the
deceased, Willie Calabia Sr., Roland Kho
Funeral Death Moral and Maxima Ugmad Vda. de Kho; (b) eight
hundred thirty-two (P832.00) pesos for
Expenses Indemnity Da medical expenses of Victoria Jaime Vda. de
mages Total Kho; and (c) eight thousand, nine hundred
thirty-five pesos and six centavos
1) Heirs of Willie Calabia, Sr. P 2,500.00 P30,000.00 P10, (P8,935.06) for medical expenses of Gloria
000.00 42,500.00 Kho Vda. de Calabia.

2) Heirs of Roland 2. Guillermo Corbeta, National Foods

Kho 2,500.00 30,000.00 10,000.00 42,500.00
3) Heirs of Maxima Ugmad Vda.
de
Kho 2,500.00 30,000.00 10,000.00 42,5
00.00
Authority, and Mabuhay Insurance &
Guaranty Co., Inc., jointly and severally,
are ordered to pay private respondents
claims[28] as adjudged by the Regional Trial
Court of Butuan City, minus the amounts
that GSIS must pay to the injured victims
and the heirs of the deceased victims as
abovestated.

Sub-Total P 7,500.00 P90,000.00 P30,000.00 P127,500.00 This decision is immediately executory. No

pronouncement as to costs.
Less: Advances by Victor Uy (5,000.00) NIL _ (5,000.00)
SO ORDERED.
Balance P2,500.00 P90,000.00 P30,000.00 122,500.00

III. Total Amount of Attorneys Fees P10,000.00

Note that, the petitioner (GSIS) was impleaded as

insurer of NFA. But under the CMVLI law, the petitioner
could only be held liable under its contract of
insurance. And pursuant to the CMVLI law, its liability is
primary, and not dependent on the recovery of
judgment from the insured. Hence, GSIS is directly
liable to the private respondents, in the following
amounts:

SCHEDULE B

I. Injured Victims Medical expenses

1) Victoria Jaime Vda. de Kho P 832.00

2) Gloria Kho Vda. de Calabia P 8,935.06

II. Heirs of Deceased Victims Death Indemnity

1) Heirs of Willie Calabia, Sr. P 12,000.00

2) Heirs of Roland Kho 12,000.00

3) Heirs of Maxima Ugmad Vda. de Kho 12,000.00

The balance of the private respondents claims as

shown on Schedule A above, must be paid by Corbeta
or NFA, or MIGC, the parties found solidarily liable. [27]

WHEREFORE, the instant petition is hereby

GRANTED, but the decision of the trial court as affirmed
by the Court of Appeals is hereby MODIFIED, as follows:

SECOND DIVISION
[G.R. No. 138060. September 1, 2004]
WILLIAM TIU, doing business under the name
and style of D Rough Riders, and VIRGILIO
TE LAS PIAS petitioners, vs. PEDRO A.
ARRIESGADO, BENJAMIN CONDOR, SERGIO
PEDRANO and PHILIPPINE PHOENIX
SURETY AND INSURANCE,
INC., respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under
Rule 45 of the Rules of Court from the Decision [1]of the
Court of Appeals in CA-G.R. CV No. 54354 affirming
with modification the Decision[2] of the Regional Trial
Court, 7th Judicial Region, Cebu City, Branch 20, in Civil
Case No. CEB-5963 for breach of contract of carriage,
damages and attorneys fees, and the Resolution dated
February 26, 1999 denying the motion for
reconsideration thereof.
The following facts are undisputed:
At about 10:00 p.m. of March 15, 1987, the cargo
truck marked Condor Hollow Blocks and General
Merchandise bearing plate number GBP-675 was
loaded with firewood in Bogo, Cebu and left
for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a
bridge, one of its rear tires exploded. The driver, Sergio
Pedrano, then parked along the right side of the
national highway and removed the damaged tire to
have it vulcanized at a nearby shop, about 700 meters
away.[3] Pedrano left his helper, Jose Mitante, Jr. to keep
watch over the stalled vehicle, and instructed the latter
to place a spare tire six fathoms away[4] behind the
stalled truck to serve as a warning for oncoming
vehicles. The trucks tail lights were also left on. It was
about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus
with plate number PBP-724 driven by Virgilio Te Laspias
was cruising along the national highway of Sitio Aggies,
Poblacion, Compostela, Cebu. The passenger bus was
also bound for Cebu City, and had come from Maya,
Daanbantayan, Cebu. Among its passengers were the
Spouses Pedro A. Arriesgado and Felisa Pepito
Arriesgado, who were seated at the right side of the
bus, about three (3) or four (4) places from the front
seat.
As the bus was approaching the bridge, Laspias
saw the stalled truck, which was then about 25 meters
away.[5] He applied the breaks and tried to swerve to
the left to avoid hitting the truck. But it was too late;
the bus rammed into the trucks left rear. The impact
damaged the right side of the bus and left several
passengers injured. Pedro Arriesgado lost
consciousness and suffered a fracture in his right
colles.[6] His wife, Felisa, was brought to
the Danao City Hospital. She was later transferred to
the Southern Island Medical Center where she died
shortly thereafter.[7]
Respondent Pedro A. Arriesgado then filed a
complaint for breach of contract of carriage, damages
and attorneys fees before the Regional Trial Court of
Cebu City, Branch 20, against the petitioners, D Rough
Riders bus operator William Tiu and his driver, Virgilio
Te Laspias on May 27, 1987. The respondent alleged
that the passenger bus in question was cruising at a
fast and high speed along the national road, and that
petitioner Laspias did not take precautionary measures
to avoid the accident.[8] Thus:
6. That the accident resulted to the death of the
plaintiffs wife, Felisa Pepito Arriesgado, as evidenced
by a Certificate of Death, a xerox copy of which is
hereto attached as integral part hereof and marked as
ANNEX A, and physical injuries to several of its
passengers, including plaintiff himself who suffered a
COLLES FRACTURE RIGHT, per Medical Certificate, a
xerox copy of which is hereto attached as integral part
hereof and marked as ANNEX B hereof.
7. That due to the reckless and imprudent driving by
defendant Virgilio Te Laspias of the said Rough Riders
passenger bus, plaintiff and his wife, Felisa Pepito
Arriesgado, failed to safely reach their destination
which was Cebu City, the proximate cause of which
was defendant-drivers failure to observe utmost
diligence required of a very cautious person under all
circumstances.
8. That defendant William Tiu, being the owner and
operator of the said Rough Riders passenger bus which
figured in the said accident, wherein plaintiff and his
wife were riding at the time of the accident, is
therefore directly liable for the breach of contract of
carriage for his failure to transport plaintiff and his wife
safely to their place of destination which was Cebu
City, and which failure in his obligation to transport
safely his passengers was due to and in consequence
of his failure to exercise the diligence of a good father
of the family in the selection and supervision of his
employees, particularly defendant-driver Virgilio Te
Laspias.[9]
The respondent prayed that judgment be rendered
in his favor and that the petitioners be condemned to
pay the following damages:
1). To pay to plaintiff, jointly and severally, the amount
of P30,000.00 for the death and untimely demise of
plaintiffs wife, Felisa Pepito Arriesgado;
2). To pay to plaintiff, jointly and severally, the amount
of P38,441.50, representing actual expenses incurred
by the plaintiff in connection with the death/burial of
plaintiffs wife;
3). To pay to plaintiff, jointly and severally, the amount
of P1,113.80, representing medical/hospitalization
expenses incurred by plaintiff for the injuries sustained
by him;
4). To pay to plaintiff, jointly and severally, the amount
of P50,000.00 for moral damages;
5). To pay to plaintiff, jointly and severally, the amount
of P50,000.00 by way of exemplary damages;
6). To pay to plaintiff, jointly and severally, the amount
of P20,000.00 for attorneys fees;
7). To pay to plaintiff, jointly and severally, the amount
of P5,000.00 for litigation expenses.
PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS
AND REMEDIES IN LAW AND EQUITY. [10]
The petitioners, for their part, filed a Third-Party
Complaint[11] on August 21, 1987 against the following:
respondent Philippine Phoenix Surety and Insurance,
Inc. (PPSII), petitioner Tius insurer; respondent
Benjamin Condor, the registered owner of the cargo
truck; and respondent Sergio Pedrano, the driver of the
truck. They alleged that petitioner Laspias was
negotiating the uphill climb along the national highway
of Sitio Aggies, Poblacion, Compostela, in a moderate
and normal speed. It was further alleged that the truck
was parked in a slanted manner, its rear portion almost
in the middle of the highway, and that no early warning
device was displayed. Petitioner Laspias promptly
applied the brakes and swerved to the left to avoid
hitting the truck head-on, but despite his efforts to
avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the
cargo trucks left rear. The petitioners further alleged,
thus:
5. That the cargo truck mentioned in the aforequoted
paragraph is owned and registered in the name of the
third-party defendant Benjamin Condor and was left
unattended by its driver Sergio Pedrano, one of the
third-party defendants, at the time of the incident;
6. That third-party defendant Sergio Pedrano, as driver
of the cargo truck with marked (sic) Condor Hollow
Blocks & General Merchandise, with Plate No. GBP-675
which was recklessly and imprudently parked along the
national highway of Compostela, Cebu during the
vehicular accident in question, and third-party
defendant Benjamin Condor, as the registered owner of
the cargo truck who failed to exercise due diligence in
the selection and supervision of third-party defendant
Sergio Pedrano, are jointly and severally liable to the
third-party plaintiffs for whatever liability that may be
adjudged against said third-party plaintiffs or are
directly liable of (sic) the alleged death of plaintiffs
wife;
7. That in addition to all that are stated above and in
the answer which are intended to show reckless
imprudence on the part of the third-party defendants,
the third-party plaintiffs hereby declare that during the
vehicular accident in question, third-party defendant
was clearly violating Section 34, par. (g) of the Land
Transportation and Traffic Code
10. That the aforesaid passenger bus, owned and
operated by third-party plaintiff William Tiu, is covered
by a common carrier liability insurance with Certificate
of Cover No. 054940 issued by Philippine Phoenix
Surety and Insurance, Inc., Cebu City Branch, in favor
of third-party plaintiff William Tiu which covers the
period from July 22, 1986 to July 22, 1987 and that the
said insurance coverage was valid, binding and
subsisting during the time of the aforementioned
incident (Annex A as part hereof);
11. That after the aforesaid alleged incident, third-
party plaintiff notified third-party defendant Philippine
Phoenix Surety and Insurance, Inc., of the alleged
incident hereto mentioned, but to no avail;
12. That granting, et arguendo et arguendi, if herein
third-party plaintiffs will be adversely adjudged, they
stand to pay damages sought by the plaintiff and
therefore could also look up to the Philippine Phoenix
Surety and Insurance, Inc., for contribution,
indemnification and/or reimbursement of any liability
or obligation that they might [be] adjudged per
insurance coverage duly entered into by and between
third-party plaintiff William Tiu and third-party
defendant Philippine Phoenix Surety and Insurance,
Inc.;[12]
The respondent PPSII, for its part, admitted that it
had an existing contract with petitioner Tiu, but
averred that it had already attended to and settled the
claims of those who were injured during the incident.
[13]
It could not accede to the claim of respondent
Arriesgado, as such claim was way beyond the
scheduled indemnity as contained in the contract of
insurance. [14]
After the parties presented their respective
evidence, the trial court ruled in favor of respondent
Arriesgado. The dispositive portion of the decision
reads:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered in favor of plaintiff as against
defendant William Tiu ordering the latter to pay the
plaintiff the following amounts:
1 - The sum of FIFTY THOUSAND PESOS (P50,000.00)
as moral damages;
2 - The sum of FIFTY THOUSAND PESOS (P50,000.00)
as exemplary damages;
3 - The sum of THIRTY-EIGHT THOUSAND FOUR
HUNDRED FORTY-ONE PESOS (P38,441.00) as actual
damages;
4 - The sum of TWENTY THOUSAND PESOS
(P20,000.00) as attorneys fees;
5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as
costs of suit;
SO ORDERED.[15]
According to the trial court, there was no dispute
that petitioner William Tiu was engaged in business as
a common carrier, in view of his admission that D
Rough Rider passenger bus which figured in the
accident was owned by him; that he had been engaged
in the transportation business for 25 years with a sole
proprietorship; and that he owned 34 buses. The trial
court ruled that if petitioner Laspias had not been
driving at a fast pace, he could have easily swerved to
the left to avoid hitting the truck, thus, averting the
unfortunate incident. It then concluded that petitioner
Laspias was negligent.
The trial court also ruled that the absence of an
early warning device near the place where the truck
was parked was not sufficient to impute negligence on
the part of respondent Pedrano, since the tail lights of
the truck were fully on, and the vicinity was well
lighted by street lamps.[16] It also found that the
testimony of petitioner Tiu, that he based the selection
of his driver Laspias on efficiency and in-service
training, and that the latter had been so far an efficient
and good driver for the past six years of his
employment, was insufficient to prove that he
observed the diligence of a good father of a family in
the selection and supervision of his employees.
After the petitioners motion for reconsideration of
the said decision was denied, the petitioners elevated
the case to the Court of Appeals on the following
issues:
I WHETHER THIRD PARTY DEFENDANT SERGIO
PEDRANO WAS RECKLESS AND
IMPRUDENT WHEN HE PARKED THE
CARGO TRUCK IN AN OBLIQUE MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS
ARE JOINTLY AND SEVERALLY LIABLE
DIRECTLY TO PLAINTIFF-APPELLEE OR TO
DEFENDANTS-APPELLANTS FOR
WHATEVER LIABILITY THAT MAY BE
ADJUDGED TO THE SAID DEFENDANTS-
APPELLANTS;
III WHETHER DEFENDANT-APPELLANT
VIRGILIO TE LASPIAS WAS GUILTY OF
GROSS NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT
WILLIAM TIU HAD EXERCISED THE DUE
DILIGENCE OF A GOOD FATHER OF A
FAMILY IN THE SELECTION AND
SUPERVISION OF HIS DRIVERS;
V GRANTING FOR THE SAKE OF ARGUMENT
THAT DEFENDANT-APPELLANT WILLIAM TIU
IS LIABLE TO PLAINTIFF-APPELLEE,
WHETHER THERE IS LEGAL AND FACTUAL
BASIS IN AWARDING EXCESSIVE MORAL
DAMAGES, EX[E]MPLARY DAMAGES,
ATTORNEYS FEES AND LITIGATION
EXPENSES TO PLAINTIFF-APPELLEE;
VI WHETHER THIRD PARTY DEFENDANT
PHILIPPINE PHOENIX SURETY AND
INSURANCE, INC. IS LIABLE TO
DEFENDANT- APPELLANT WILLIAM TIU.[17]
The appellate court rendered judgment affirming
the trial courts decision with the modification that the
awards for moral and exemplary damages were
reduced to P25,000. The dispositive portion reads:
WHEREFORE, the appealed Decision dated November
6, 1995 is hereby MODIFIED such that the awards for
moral and exemplary damages are each reduced
to P25,000.00 or a total of P50,000.00 for both. The
judgment is AFFIRMED in all other respects.
SO ORDERED.[18]
According to the appellate court, the action of
respondent Arriesgado was based not on quasi-delict
but on breach of contract of carriage. As a common
carrier, it was incumbent upon petitioner Tiu to prove
that extraordinary diligence was observed in ensuring
the safety of passengers during transportation. Since
the latter failed to do so, he should be held liable for
respondent Arriesgados claim. The CA also ruled that
no evidence was presented against the respondent
PPSII, and as such, it could not be held liable for
respondent Arriesgados claim, nor for contribution,
indemnification and/or reimbursement in case the
petitioners were adjudged liable.
The petitioners now come to this Court and
ascribe the following errors committed by the appellate
court:
I. THE HONORABLE COURT OF APPEALS
ERRED IN NOT DECLARING RESPONDENTS
BENJAMIN CONDOR AND SERGIO PEDRANO
GUILTY OF NEGLIGENCE AND HENCE,
LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONERS FOR
WHATEVER LIABILITY THAT MAY BE
ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS
ERRED IN FINDING PETITIONERS GUILTY OF
NEGLIGENCE AND HENCE, LIABLE TO
RESPONDENT PEDRO A. ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS
ERRED IN FINDING PETITIONER WILLIAM
TIU LIABLE FOR EXEMPLARY DAMAGES,
ATTORNEYS FEES AND LITIGATION
EXPENSES.
IV.THE HONORABLE COURT OF APPEALS
ERRED IN NOT FINDING RESPONDENT
PHILIPPINE PHOENIX SURETY AND
INSURANCE, INC. LIABLE TO RESPONDENT
PEDRO A. ARRIESGADO OR TO PETITIONER
WILLIAM TIU.[19]
According to the petitioners, the appellate court
erred in failing to appreciate the absence of an early
warning device and/or built-in reflectors at the front
and back of the cargo truck, in clear violation of
Section 34, par. (g) of the Land Transportation and
Traffic Code. They aver that such violation is only a
proof of respondent Pedranos negligence, as provided
under Article 2185 of the New Civil Code. They also
question the appellate courts failure to take into
account that the truck was parked in an oblique
manner, its rear portion almost at the center of the
road. As such, the proximate cause of the incident was
the gross recklessness and imprudence of respondent
Pedrano, creating the presumption of negligence on the
part of respondent Condor in supervising his
employees, which presumption was not rebutted. The
petitioners then contend that respondents Condor and
Pedrano should be held jointly and severally liable to
respondent Arriesgado for the payment of the latters
claim.
The petitioners, likewise, aver that expert
evidence should have been presented to prove that
petitioner Laspias was driving at a very fast speed, and
that the CA could not reach such conclusion by merely
considering the damages on the cargo truck. It was
also pointed out that petitioner Tiu presented evidence
that he had exercised the diligence of a good father of
a family in the selection and supervision of his drivers.
The petitioners further allege that there is no legal
and factual basis to require petitioner Tiu to pay
exemplary damages as no evidence was presented to
show that the latter acted in a fraudulent, reckless and
oppressive manner, or that he had an active
participation in the negligent act of petitioner Laspias.
Finally, the petitioners contend that respondent
PPSII admitted in its answer that while it had attended
to and settled the claims of the other injured
passengers, respondent Arriesgados claim remained
unsettled as it was beyond the scheduled indemnity
under the insurance contract. The petitioners argue
that said respondent PPSII should have settled the said
claim in accordance with the scheduled indemnity
instead of just denying the same.
On the other hand, respondent Arriesgado argues
that two of the issues raised by the petitioners involved
questions of fact, not reviewable by the Supreme
Court: the finding of negligence on the part of the
petitioners and their liability to him; and the award of
exemplary damages, attorneys fees and litigation
expenses in his favor. Invoking the principle of equity
and justice, respondent Arriesgado pointed out that if
there was an error to be reviewed in the CA decision, it
should be geared towards the restoration of the moral
and exemplary damages to P50,000 each, or a total
of P100,000 which was reduced by the Court of
Appeals to P25,000 each, or a total of only P50,000.
Respondent Arriesgado also alleged that
respondents Condor and Pedrano, and respondent
Phoenix Surety, are parties with whom he had no
contract of carriage, and had no cause of action
against. It was pointed out that only the petitioners
needed to be sued, as driver and operator of the ill-
fated bus, on account of their failure to bring the
Arriesgado Spouses to their place of destination as
agreed upon in the contract of carriage, using the
utmost diligence of very cautious persons with due
regard for all circumstances.
Respondents Condor and Pedrano point out that,
as correctly ruled by the Court of Appeals, the
proximate cause of the unfortunate incident was the
fast speed at which petitioner Laspias was driving the
bus owned by petitioner Tiu. According to the
respondents, the allegation that the truck was not
equipped with an early warning device could not in any
way have prevented the incident from happening. It
was also pointed out that respondent Condor had
always exercised the due diligence required in the
selection and supervision of his employees, and that he
was not a party to the contract of carriage between the
petitioners and respondent Arriesgado.
Respondent PPSII, for its part, alleges that
contrary to the allegation of petitioner Tiu, it settled all
the claims of those injured in accordance with the
insurance contract. It further avers that it did not deny
respondent Arriesgados claim, and emphasizes that its
liability should be within the scheduled limits of
indemnity under the said contract. The respondent
concludes that while it is true that insurance contracts
are contracts of indemnity, the measure of the insurers
liability is determined by the insureds compliance with
the terms thereof.
The Courts Ruling
At the outset, it must be stressed that this Court is
not a trier of facts.[20] Factual findings of the Court of
Appeals are final and may not be reviewed on appeal
by this Court, except when the lower court and the CA
arrived at diverse factual findings. [21] The petitioners in
this case assail the finding of both the trial and the
appellate courts that petitioner Laspias was driving at a
very fast speed before the bus owned by petitioner Tiu
collided with respondent Condors stalled truck. This is
clearly one of fact, not reviewable by the Court in a
petition for review under Rule 45.[22]
On this ground alone, the petition is destined to
fail.
However, considering that novel questions of law
are likewise involved, the Court resolves to examine
and rule on the merits of the case.
Petitioner Laspias
Was negligent in driving
The Ill-fated bus
In his testimony before the trial court, petitioner
Laspias claimed that he was traversing the two-lane
road at Compostela, Cebu at a speed of only forty (40)
to fifty (50) kilometers per hour before the incident
occurred.[23] He also admitted that he saw the truck
which was parked in an oblique position at about 25
meters before impact,[24] and tried to avoid hitting it by
swerving to the left. However, even in the absence of
expert evidence, the damage sustained by the
truck[25] itself supports the finding of both the trial court
and the appellate court, that the D Rough Rider bus
driven by petitioner Laspias was traveling at a fast
pace. Since he saw the stalled truck at a distance of 25
meters, petitioner Laspias had more than enough time
to swerve to his left to avoid hitting it; that is, if the
speed of the bus was only 40 to 50 kilometers per hour
as he claimed. As found by the Court of Appeals, it is
easier to believe that petitioner Laspias was driving at
a very fast speed, since at 4:45 a.m., the hour of the
accident, there were no oncoming vehicles at the
opposite direction. Petitioner Laspias could have
swerved to the left lane with proper clearance, and,
thus, could have avoided the truck. [26] Instinct, at the
very least, would have prompted him to apply the
breaks to avert the impending disaster which he must
have foreseen when he caught sight of the stalled
truck. As we had occasion to reiterate:
A man must use common sense, and exercise due
reflection in all his acts; it is his duty to be cautious,
careful and prudent, if not from instinct, then through
fear of recurring punishment. He is responsible for such
results as anyone might foresee and for acts which no
one would have performed except through culpable
abandon. Otherwise, his own person, rights and
property, and those of his fellow beings, would ever be
exposed to all manner of danger and injury.[27]
We agree with the following findings of the trial
court, which were affirmed by the CA on appeal:
A close study and evaluation of the testimonies and the
documentary proofs submitted by the parties which
have direct bearing on the issue of negligence, this
Court as shown by preponderance of evidence that
defendant Virgilio Te Laspias failed to observe
extraordinary diligence as a driver of the common
carrier in this case. It is quite hard to accept his version
of the incident that he did not see at a reasonable
distance ahead the cargo truck that was parked when
the Rough Rider [Bus] just came out of the bridge
which is on an (sic) [more] elevated position than the
place where the cargo truck was parked. With its
headlights fully on, defendant driver of the Rough Rider
was in a vantage position to see the cargo truck ahead
which was parked and he could just easily have
avoided hitting and bumping the same by maneuvering
to the left without hitting the said cargo truck. Besides,
it is (sic) shown that there was still much room or space
for the Rough Rider to pass at the left lane of the said
national highway even if the cargo truck had occupied
the entire right lane thereof. It is not true that if the
Rough Rider would proceed to pass through the left
lane it would fall into a canal considering that there
was much space for it to pass without hitting and
bumping the cargo truck at the left lane of said
national highway. The records, further, showed that
there was no incoming vehicle at the opposite lane of
the national highway which would have prevented the
Rough Rider from not swerving to its left in order to
avoid hitting and bumping the parked cargo truck. But
the evidence showed that the Rough Rider instead of
swerving to the still spacious left lane of the national
highway plowed directly into the parked cargo truck
hitting the latter at its rear portion; and thus, the (sic)
causing damages not only to herein plaintiff but to the
cargo truck as well.[28]
Indeed, petitioner Laspias negligence in driving
the bus is apparent in the records. By his own
admission, he had just passed a bridge and was
traversing the highway of Compostela, Cebu at a speed
of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a
bridge is only 30 kilometers per hour. [29] And, as
correctly pointed out by the trial court, petitioner
Laspias also violated Section 35 of the Land
Transportation and Traffic Code, Republic Act No. 4136,
as amended:
Sec. 35. Restriction as to speed. (a) Any person driving
a motor vehicle on a highway shall drive the same at a
careful and prudent speed, not greater nor less than is
reasonable and proper, having due regard for the
traffic, the width of the highway, and or any other
condition then and there existing; and no person shall
drive any motor vehicle upon a highway at such speed
as to endanger the life, limb and property of any
person, nor at a speed greater than will permit him to
bring the vehicle to a stop within the assured clear
distance ahead.[30]
 Under Article 2185 of the Civil Code, a person
driving a vehicle is presumed negligent if at the time of
the mishap, he was violating any traffic regulation.[31]
Petitioner Tiu failed to
Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage
The rules which common carriers should observe
as to the safety of their passengers are set forth in the
Civil Code, Articles 1733,[32] 1755[33] and 1756.[34] In this
case, respondent Arriesgado and his deceased wife
contracted with petitioner Tiu, as owner and operator
of D Rough Riders bus service, for transportation from
Maya, Daanbantayan, Cebu, to Cebu City for the price
of P18.00.[35] It is undisputed that the respondent and
his wife were not safely transported to the destination
agreed upon. In actions for breach of contract, only the
existence of such contract, and the fact that the
obligor, in this case the common carrier, failed to
transport his passenger safely to his destination are
the matters that need to be proved. [36] This is because
under the said contract of carriage, the petitioners
assumed the express obligation to transport the
respondent and his wife to their destination safely and
to observe extraordinary diligence with due regard for
all circumstances.[37] Any injury suffered by the
passengers in the course thereof is immediately
attributable to the negligence of the carrier. [38] Upon
the happening of the accident, the presumption of
negligence at once arises, and it becomes the duty of a
common carrier to prove that he observed
extraordinary diligence in the care of his passengers.
[39]
It must be stressed that in requiring the highest
possible degree of diligence from common carriers and
in creating a presumption of negligence against them,
the law compels them to curb the recklessness of their
drivers.[40]
While evidence may be submitted to overcome
such presumption of negligence, it must be shown that
the carrier observed the required extraordinary
diligence, which means that the carrier must show the
utmost diligence of very cautious persons as far as
human care and foresight can provide, or that the
accident was caused by fortuitous event.[41] As correctly
found by the trial court, petitioner Tiu failed to
conclusively rebut such presumption. The negligence of
petitioner Laspias as driver of the passenger bus is,
thus, binding against petitioner Tiu, as the owner of the
passenger bus engaged as a common carrier.[42]
The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioners contention, the
principle of last clear chance is inapplicable in the
instant case, as it only applies in a suit between the
owners and drivers of two colliding vehicles. It does not
arise where a passenger demands responsibility from
the carrier to enforce its contractual obligations, for it
would be inequitable to exempt the negligent driver
and its owner on the ground that the other driver was
likewise guilty of negligence. [43] The common law notion
of last clear chance permitted courts to grant recovery
to a plaintiff who has also been negligent provided that
the defendant had the last clear chance to avoid the
casualty and failed to do so. Accordingly, it is difficult
to see what role, if any, the common law of last clear
chance doctrine has to play in a jurisdiction where the
common law concept of contributory negligence as an
absolute bar to recovery by the plaintiff, has itself been
rejected, as it has been in Article 2179 of the Civil
Code.[44]
Thus, petitioner Tiu cannot escape liability for the
death of respondent Arriesgados wife due to the
negligence of petitioner Laspias, his employee, on this
score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate
Appellate Court,[45] where therein respondent Dionisio
sustained injuries when his vehicle rammed against a
dump truck parked askew, the Court ruled that the
improper parking of a dump truck without any warning
lights or reflector devices created an unreasonable risk
for anyone driving within the vicinity, and for having
created such risk, the truck driver must be held
responsible. In ruling against the petitioner therein, the
Court elucidated, thus:
In our view, Dionisios negligence, although later in
point of time than the truck drivers negligence, and
therefore closer to the accident, was not an efficient
intervening or independent cause. What the petitioners
describe as an intervening cause was no more than a
foreseeable consequence of the risk created by the
negligent manner in which the truck driver had parked
the dump truck. In other words, the petitioner truck
driver owed a duty to private respondent Dionisio and
others similarly situated not to impose upon them the
very risk the truck driver had created. Dionisios
negligence was not that of an independent and
overpowering nature as to cut, as it were, the chain of
causation in fact between the improper parking of the
dump truck and the accident, nor to sever the juris
vinculum of liability.
We hold that private respondent Dionisios negligence
was only contributory, that the immediate and
proximate cause of the injury remained the truck
drivers lack of due care.[46]
In this case, both the trial and the appellate courts
failed to consider that respondent Pedrano was also
negligent in leaving the truck parked askew without
any warning lights or reflector devices to alert
oncoming vehicles, and that such failure created the
presumption of negligence on the part of his employer,
respondent Condor, in supervising his employees
properly and adequately. As we ruled in Poblete v.
Fabros:[47]
It is such a firmly established principle, as to have
virtually formed part of the law itself, that the
negligence of the employee gives rise to the
presumption of negligence on the part of the employer.
This is the presumed negligence in the selection and
supervision of employee. The theory of presumed
negligence, in contrast with the American doctrine
of respondeat superior, where the negligence of the
employee is conclusively presumed to be the
negligence of the employer, is clearly deducible from
the last paragraph of Article 2180 of the Civil Code
which provides that the responsibility therein
mentioned shall cease if the employers prove that they
observed all the diligence of a good father of a family
to prevent damages. [48]
The petitioners were correct in invoking
respondent Pedranos failure to observe Article IV,
Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. Appropriate
parking lights or flares visible one hundred meters
away shall be displayed at a corner of the vehicle
whenever such vehicle is parked on highways or in
places that are not well-lighted or is placed in such
manner as to endanger passing traffic.
The manner in which the truck was parked clearly
endangered oncoming traffic on both sides, considering
that the tire blowout which stalled the truck in the first
place occurred in the wee hours of the morning. The
Court can only now surmise that the unfortunate
incident could have been averted had respondent
Condor, the owner of the truck, equipped the said
vehicle with lights, flares, or, at the very least, an early
warning device.[49] Hence, we cannot subscribe to
respondents Condor and Pedranos claim that they
should be absolved from liability because, as found by
the trial and appellate courts, the proximate cause of
the collision was the fast speed at which petitioner
Laspias drove the bus. To accept this proposition would
be to come too close to wiping out the fundamental
principle of law that a man must respond for the
foreseeable consequences of his own negligent act or
omission. Indeed, our law on quasi-delicts seeks to
reduce the risks and burdens of living in society and to
allocate them among its members. To accept this
proposition would be to weaken the very bonds of
society.[50]
The Liability of
Respondent PPSII
as Insurer
The trial court in this case did not rule on the
liability of respondent PPSII, while the appellate court
ruled that, as no evidence was presented against it, the
insurance company is not liable.
A perusal of the records will show that when the
petitioners filed the Third-Party Complaint against
respondent PPSII, they failed to attach a copy of the
terms of the insurance contract itself. Only Certificate
of Cover No. 054940[51] issued in favor of Mr. William
Tiu, Lahug, Cebu City signed by Cosme H. Boniel was
appended to the third-party complaint. The date of
issuance, July 22, 1986, the period of insurance, from
July 22, 1986 to July 22, 1987, as well as the following
items, were also indicated therein:
SCHEDULED VEHICLE
MODEL MAKE TYPE O
Isuzu Forward Bus
PLATE NO. PBP- SERIAL/CHASSIS NO. SER450- MOTOR
724 1584124
SECTION 1/11 *LIMITS
A. THIRD PARTY LIABILITY
B. PASSENGER LIABILITY Per Per
In its Answer53 to the Third-Party Complaint, the
respondent PPSII admitted the existence of the
contract of insurance, in view of its failure to
specifically deny the same as required under then
Section 8(a), Rule 8 of the Rules of Court, 54 which
reads:
Sec. 8. How to contest genuineness of such
documents. When an action or defense is founded
upon a written instrument copied in or attached to the
corresponding pleading as provided in the preceding
section, the genuineness and due execution of the
instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them,
and sets forth what he claims to be the facts; but the
requirement of an oath does not apply when the
adverse party does not appear to be a party to the
instrument or when compliance with an order for
inspection of the original instrument is refused.
In fact, respondent PPSII did not dispute the
existence of such contract, and admitted that it was
liable thereon. It claimed, however, that it had
attended to and settled the claims of those injured
during the incident, and set up the following as special
affirmative defenses:
Third party defendant Philippine Phoenix Surety and
Insurance, Inc. hereby reiterates and incorporates by
way of reference the preceding paragraphs and further
states THAT:-
8. It has attended to the claims of Vincent Canales,
Asuncion Batiancila and Neptali Palces who sustained
injuries during the incident in question. In fact, it
settled financially their claims per vouchers duly signed
by them and they duly executed Affidavit[s] of
Desistance to that effect, xerox copies of which are
hereto attached as Annexes 1, 2, 3, 4, 5, and 6
respectively;
9. With respect to the claim of plaintiff, herein
answering third party defendant through its authorized
insurance adjuster attended to said claim. In fact, there
were negotiations to that effect. Only that it cannot
accede to the demand of said claimant considering
that the claim was way beyond the scheduled
indemnity as per contract entered into with third party
plaintiff William Tiu and third party defendant
(Philippine Phoenix Surety and Insurance, Inc.). Third
party Plaintiff William Tiu knew all along the limitation
as earlier stated, he being an old hand in the
transportation business; 55
Considering the admissions made by respondent
PPSII, the existence of the insurance contract and the
salient terms thereof cannot be dispatched. It must be
noted that after filing its answer, respondent PPSII no
longer objected to the presentation of evidence by
respondent Arriesgado and the insured petitioner Tiu.
Even in its Memorandum56 before the Court,
respondent PPSII admitted the existence of the
contract, but averred as follows:
Petitioner Tiu is insisting that PPSII is liable to him for
contribution, indemnification and/or reimbursement.
This has no basis under the contract. Under the
contract, PPSII will pay all sums necessary to discharge
liability of the insured subject to the limits of liability
but not to exceed the limits of liability as so stated in
the contract. Also, it is stated in the contract that in the
event of accident involving indemnity to more than one
person, the limits of liability shall not exceed the
aggregate amount so specified by law to all persons to
be indemnified.57
As can be gleaned from the Certificate of Cover,
such insurance contract was issued pursuant to the
Compulsory Motor Vehicle Liability Insurance Law. It
was expressly provided therein that the limit of the
insurers liability for each person was P12,000, while the
limit per accident was pegged at P50,000. An insurer in
an indemnity contract for third party liability is directly
liable to the injured party up to the extent specified in
the agreement but it cannot be held solidarily liable
beyond that amount.58 The respondent PPSII could not
then just deny petitioner Tius claim; it should have
paid P12,000 for the death of Felisa Arriesgado, 59 and
respondent Arriesgados hospitalization expenses
of P1,113.80, which the trial court found to have been
duly supported by receipts. The total amount of the
claims, even when added to that of the other injured
passengers which the respondent PPSII claimed to have
settled,60 would not exceed the P50,000 limit under the
insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle
Liability Insurance is such that it is primarily intended
to provide compensation for the death or bodily injuries
suffered by innocent third parties or passengers as a
result of the negligent operation and use of motor
vehicles. The victims and/or their dependents are
assured of immediate financial assistance, regardless
of the financial capacity of motor vehicle owners. 61 As
the Court, speaking through Associate Justice Leonardo
A. Quisumbing, explained in Government Service
Insurance System v. Court of Appeals:62
However, although the victim may proceed directly
against the insurer for indemnity, the third party
liability is only up to the extent of the insurance policy
and those required by law. While it is true that where
the insurance contract provides for indemnity against
liability to third persons, and such persons can directly
sue the insurer, the direct liability of the insurer under
indemnity contracts against third party liability does
not mean that the insurer can be held liable
in solidum with the insured and/or the other parties
found at fault. For the liability of the insurer is based on
contract; that of the insured carrier or vehicle owner is
based on tort.
Obviously, the insurer could be held liable only up to
the extent of what was provided for by the contract of
insurance, in accordance with the CMVLI law. At the
time of the incident, the schedule of indemnities for
death and bodily injuries, professional fees and other
charges payable under a CMVLI coverage was provided
for under the Insurance Memorandum Circular (IMC)
No. 5-78 which was approved on November 10, 1978.
As therein provided, the maximum indemnity for death
was twelve thousand (P12,000.00) pesos per victim.
The schedules for medical expenses were also provided
by said IMC, specifically in paragraphs (C) to (G). 63
Damages to be
Awarded
The trial court correctly awarded moral damages
in the amount of P50,000 in favor of respondent
Arriesgado. The award of exemplary damages by way
of example or correction of the public good, 64is likewise
in order. As the Court ratiocinated in Kapalaran Bus
Line v. Coronado:65
While the immediate beneficiaries of the standard of
extraordinary diligence are, of course, the passengers
and owners of cargo carried by a common carrier, they
are not the only persons that the law seeks to benefit.
For if common carriers carefully observed the statutory
standard of extraordinary diligence in respect of their
own passengers, they cannot help but simultaneously
benefit pedestrians and the passengers of other
vehicles who are equally entitled to the safe and
convenient use of our roads and highways. The law
seeks to stop and prevent the slaughter and maiming
of people (whether passengers or not) on our highways
and buses, the very size and power of which seem to
inflame the minds of their drivers. Article 2231 of the
Civil Code explicitly authorizes the imposition of
exemplary damages in cases of quasi-delicts if the
defendant acted with gross negligence.66
The respondent Pedro A. Arriesgado, as the
surviving spouse and heir of Felisa Arriesgado, is
entitled to indemnity in the amount of P50,000.00.67
The petitioners, as well as the respondents
Benjamin Condor and Sergio Pedrano are jointly and
severally liable for said amount, conformably with the
following pronouncement of the Court in Fabre, Jr. vs.
Court of Appeals:68
The same rule of liability was applied in situations
where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus
causing an accident. In Anuran v. Buo, Batangas
Laguna Tayabas Bus Co. v. Intermediate Appellate
Court, and Metro Manila Transit Corporation v. Court of
Appeals, the bus company, its driver, the operator of
the other vehicle and the driver of the vehicle were
jointly and severally held liable to the
injured passenger or the latters heirs. The basis of this
allocation of liability was explained in Viluan v. Court of
Appeals, thus:
Nor should it make difference that the liability of
petitioner [bus owner] springs from contract while that
of respondents [owner and driver of other vehicle]
arises from quasi-delict. As early as 1913, we already
ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in
case of injury to a passenger due to the negligence of
the driver of the bus on which he was riding and of the
driver of another vehicle, the drivers as well as the
owners of the two vehicles are jointly and severally
liable for damages. Some members of the Court,
though, are of the view that under the circumstances
they are liable on quasi-delict. 69
IN LIGHT OF ALL THE FOREGOING, the petition
is PARTIALLY GRANTED. The Decision of the Court of
Appeals is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and
Insurance, Inc. and petitioner William Tiu
are ORDERED to pay, jointly and severally, respondent
Pedro A. Arriesgado the total amount of P13,113.80;
(2) The petitioners and the respondents Benjamin
Condor and Sergio Pedrano are ORDERED to pay,
jointly and severally, respondent Pedro A.
Arriesgado P50,000.00 as indemnity; P26,441.50 as
actual damages; P50,000.00 as moral
damages; P50,000.00 as exemplary damages;
and P20,000.00 as attorneys fees.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-49699 August 8, 1988
PERLA COMPANIA de SEGUROS, INC., petitioner,
vs.
HON. CONSTANTE A. ANCHETA, Presiding Judge
of the Court of First instance of Camarines Norte,
Branch III, ERNESTO A. RAMOS and GOYENA
ZENAROSA-RAMOS, for themselves and as
Guardian Ad Litem for Minors JOBET, BANJO,
DAVID and GRACE all surnamed RAMOS,
FERNANDO M. ABCEDE, SR., for himself and
Guardian Ad Litem for minor FERNANDO G.
ABCEDE, JR., MIGUEL JEREZ MAGO as Guardian
Ad Litem for minors ARLEEN R. MAGO, and
ANACLETA J. ZENAROSA., respondents.
Jose B. Sanez for petitioner.
James B. Pajares for private respondents.
CORTES, J.:
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.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-48546 February 29, 1988

SUMMIT GUARANTY & INSURANCE COMPANY,

INC., petitioner,
vs.
THE HONORABLE GREGORIA C. ARNALDO, in her
capacity as Insurance Commissioner, and FGU
INSURANCE CORPORATION, respondents.

GANCAYCO, J.:

As a result of a vehicular accident that happened on

November 26,1976 whereby a Ford Pick-up with Plate
No. UC-5925 Phil. '76 owned by Marcos Olaso was
bumped by a cargo truck with Plate No. OY-783 then
owned by Alberto Floralde, FGU insurance poration FGU
by reason of Motor Vehicle Insurance Policy No. IC-VF-
07185 paid Olaso the sum of P 2,817.50 as its share in
the repair cost of the said Ford Pick-up. Having thus
been subrogated to the rights and causes of action of
said Olaso in the said amount FGU formally demanded
payment of said amount from Floralde and attempted
to verify Floralde's insurance carrier. Floralde failed to
reveal his insurance carrier. In the early part of 1978
FGU was able to ascertain the Identity of Floralde's
insurance carrier to be the Summit Guaranty and
Insurance Company, Inc. (Summit). On February
22,1978 FGU wrote to the insurance commissioner
requesting for a conference with Summit and
demanded from Summit through counsel on February
28,1978 the payment of the damages sustained by the
car of Olaso but to no avail. Hence on May 22,1978
FGU filed IC Case No. 825 in the Insurance
Commissioner's Office against Summit for recovery of
said amount.

A motion to dismiss the complaint was filed by Summit

on May 30,1978 on the ground of prescription under
Section 384 of PD No. 612. In an order of June 19,1978
the resolution of the motion was deferred until after the
hearing on the merits. A motion for reconsideration of
said order filed by Summit was denied in an order of
June 28,1978 and Summit was required to file its
answer to the complaint. Hence Summit filed the
herein petition for certiorari and prohibition with
restraining order in this Court alleging that respondent
commissioner acted without or in excess of jurisdiction
or with grave abuse of discretion in denyingthe
aforesaid motion for reconsideration when it has been
shown that the action has already prescribed so
petitioner sought an order to restrain the respondent
commissioner from further proceeding in the case
during the pendency of the petition.
Without giving due course to the petition, the
respondents were required to comment thereon within
ten (10) days from notice. The comments of
respondents were submitted in due time. The petitioner
was then required to submit a reply thereto which reply
was filed. On October 6, 1978 the court gave due
course to the petition and thereafter required the
parties to file their briefs. The briefs of all the parties
having all been submitted, the case is now due for
decision.
Outrightly, the court finds that the petition should be
dismissed for lack of merit. The questioned orders of
the respondent Commissioner of June 19,1978 and June
28,1978 deferring the consideration of the petitioner's
motion to dismiss the complaint until after the hearing
on the merits of the case are supported by the
provision of Section 3, Rule 16 of the Rules of Court
that such hearing and determination of the motion may
be deferred "until the trial if the ground alleged therein
does not appear to be indubitable." Obviously, the
respondent commissioner had doubts from the mere
allegations of the motion to dismiss. Considering such
doubt the deferment was proper and may be
considered as a provisional denial of the motion to
dismiss. 1
The purpose of this provision requiring that the order of
the court dismissing an action should be founded on
indubitable grounds is to avoid multiplicity of appeals.
In case of doubt, the court, instead of denying or
granting the motion, must defer its final hearing and
determination until the trial . 2
The remedy against the denial of a motion to dismiss is
by appeal in due course after the case is decided on
the merits, save where the trial court clearly acted
outside its jurisdiction or with grave abuse of discretion
as to amount to excess of jurisdiction . 3 Thus it is only
when it clearly appears that the trial judge or court is
proceeding in excess or outside of its jurisdiction, when
the remedy of prohibition would lie since it would be
useless to waste time to go ahead with the
proceedings. 4 The same remedy applies when the
court denies the motion based on lack of
jurisdiction. 5 However, such a situation does not exist
in the present case as to warrant this extraordinary
remedy.
Nevertheless, petitioner squarely brings into focus the
provisions of Section 384 of PD 612, the Insurance
Code, which provides as follows:
Sec. 384. Any person having any claim
upon the policy issued pursuant to this
chapter shall, without any unnecessary
delay, present to the insurance
company concerned a written notice of
claim setting forth the amount of his
loss, and/or the nature, extent and
duration of the injuries sustained as
certified by a duly licensed physician.
Notice of claim must be filed within six
months from date of the accident,
otherwise, the claim shall be deemed
waived. Action or suit for recovery of
damage due to loss or injury must be
brought, in proper cases, with the
Commissioner or the Courts within one
year from date of accident, otherwise,
the claimant's right of action shall
prescribe.
As averred in the motion to dismiss flied by petitioner
the accident happened on November 26, 1976 while
the complaint was filed on May 22,1978 beyond the
one-year period from the time of the accident provided
for by the aforecited provision of law.
Respondent FGU, however, contends that the said one-
year prescriptive period can not apply to it because it
was merely subrogated to the rights of Olaso; that the
prescriptive period of its cause of action is ten (10)
years being one arising from a written contract; 6 that
said provision of Section 384 of the Insurance Code
apply only to the claim directly filed by a person
against the insurance company for the loss he
sustained; and that the claim of respondent FGU is one
for reimbursement as subrogee of its assured Marcos
Olaso against petitioner for the third party liability
insurance coverage the latter issued in favor of
Floralde.
Respondent Commissioner in turn argues that the
cause of action of FGU was shown and arose only from
the date it paid Olaso for the damages suffered and not
from the date of the accident; and that the period set
forth in Section 384 of PD 612 begins to run only from
the time the party against whom the right is to be
asserted is Identified. In this case FGU was able to
Identify petitioner only in 1978 after all efforts were
undertaken to verify its Identity. FGU paid Marcos Olaso
on Dec. 9,1976.
Respondent Commissioner invites attention to the
phrase "in proper cases" in Section 384 of PD 612 and
argues that the prescriptive period was interrupted
upon the extrajudicial demand for payment made by
FGU on petitioner. 7It is further argued that respondent
FGU had a right to wait for the petitioner to respond to
the demand before it should file a suit as litigation is
not encouraged when it could be justifiably settled.
In the cases of Summit Guaranty & Insurance Co., Inc.
vs. The Hon. Jose C. de Guzman, etc., et al., G.R. No.
50997, Summit Guaranty & Insurance Co., Inc. vs. The
Hon. Gregoria C. Arnaldo, etc., G.R. No. L-48679,
and Summit Guaranty & Insurance Co., Inc. vs. The
Hon. Ramon B. Jabson etc., G.R. No. L-48758, which
were jointly decided by this Court on June 30,1987,
wherein the petitioner in the present case was also the
petitioner in said cases, the Court had occasion to
interpret the aforesaid provision of Section 384 of the
Insurance Code in this manner:
Petitioner company contends that the
two periods prescribed in the
aforementioned law that is, the six-
month period for filing the notice of
claim and the one-year period for
bringing an action or suit are
mandatory and must always concur.
Petitioner company argues that under
this law, even if the notice of claim was
timely filed with the insurance
company within the six-month period,
as what happened in the three cases
before Us, the action or suit that
follows, if filed beyond the one-year
period should necessarily be dismissed
on the ground of prescription.
We find no merit in the contention of
petitioner company. There is absolutely
nothing in the law which mandates that
the two periods must always concur.
On the contrary, it is very clear that the
one-year period is only required 'in
proper cases.' It appears that petitioner
company disregarded this very
significant phrase when it made its own
interpretation of the law. Had the
lawmakers intended it to be the way
petitioner company assumes it to be,
then the phrase in proper cases' would
not have been inserted. At this point, it
is but appropriate for Us to reiterate
our ruling in Aisporna vs. Court of
Appeals, 8 to wit:
Legislative intent must
be ascertained from a
consideration of the
statute as a whole. The
particular words,
clauses and phrases
should not be studied
as detached and
isolated expressions,
but the whole and
every part of the
statute must be
considered in fixing the
meaning of any of its
parts and in order to
produce a harmonious
whole. A statute must
be so construed as to
harmonize and give
effect to all its
provisions whenever
possible.
It is very obvious that petitioner
company is trying to use Section 384 of
the Insurance Code as a cloak to hide
itself from its liabilities. The facts of
these cases evidently reflect the
deliberate efforts of petitioner company
to prevent the filing of a formal action
against it. Bearing in mind that if it
succeeds in doing so until one year
lapses from the date of the accident it
could set up the defense of
prescription, petitioner company made
private respondents believe that their
claims would be settled in order that
the latter will not find it necessary to
immediately bring suit. In violation of
its duties to adopt and implement
reasonable standards for the prompt
investigation of claims and to
effectuate prompt, fair and equitable
settlement of claims, and with manifest
bad faith, petitioner company devised
means and ways of stalling the
settlement proceedings. In G.R.No. L-
50997, no steps were taken to process
the claim and no rejection of said claim
was ever made even if private
respondent had already complied with
all the requirements. In G.R. No. L-
48758 petitioner company even
provided legal assistance to one of the
private respondents in the criminal
case filed against him leading private
respondents to believe that it was
ready to pay. In the same case,
petitioner company admits that it took
no final action or adjudication of the
claim. Worse still, in G.R. No. L-48679,
assurances of payment were constantly
given and petitioner company even
said that a check was ready for release.
This Court has made the observation
that some insurance companies have
been inventing excuses to avoid their
just obligations and it is only the State
that can give the protection which the
insuring public needs from possible
abuses of the insurers.
In view of the foregoing, We hold that
these three cases do not fall within the
meaning of 'proper cases as
contemplated in Section 384 of the
Insurance Code. To hold otherwise
would enable petitioner company to
evade its responsibility through a
clever scheme it had contrived.
xxx xxx xxx
The one-year period should instead be
counted from the date of rejection by
the insurer as this is the time when the
cause of action accrues. Since in these
cases there has yet been no accrual of
cause of action, We hold that
precription has not yet set in.
We also observed in the aforesaid cases that because
of the problems created by the aforecited provision of
the Insurance Code the said section was amended by
the then Batas Pambansa to read as follows:
... Action or suit for recovery of damage
due to loss or injury must be brought in
proper cases, with the Commissioner or
the Courts within one year from the
denial of the claim, otherwise, the
claimant's right of action shall
prescribe. 9
In the present case, it is not denied that an
extrajudicial demand for payment was made by
respondent FGU on petitioner but petitioner failed to
respond to the same. Nevertheless the complaint was
filed even before a denial of the claim was made by
petitioner. For all legal purposes, the one-year
prescriptive period provided for in Section 384 of the
Insurance Code has not begun to run. The cause of
action arises only and starts to run upon the denial of
the claim by the insurance company.

The court takes note of the dilatory tactics employed

by petitioner in this as in the several cases aforecited
to avoid payment of its liabilities. We now put a finis to
this case and express extreme disapproval of such
actuations of petitioner.

WHEREFORE, the petition is DISMISSED for lack of

merit with costs against petitioner. Respondent
Commissioner is hereby directed to terminate the
proceedings in IC No. 825 with deliberate dispatch. No
motion for extension of time to file a motion for
reconsideration of this decision shall be entertained.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-51221 July 31, 1991

FIRST INTEGRATED BONDING & INSURANCE

COMPANY, INC., petitioner,
vs.
HON. HAROLD M. HERNANDO, VICTORINO
ADVINCULA, ROMANA ADVINCULA, SILVERIO
BLANCO & THE SHERIFF OF MANILA and his
DEPUTY SHERIFFS, respondents.
Octavio M. Zavas for petitioner.
MEDIALDEA, J.:p
This petition for certiorari under Rule 65 of the Revised
Rules of Court, seeks the annulment of the amended
decision of respondent trial court in Civil Case No. 1104
for allegedly having been rendered in excess of
jurisdiction. The same decision was sought to be
annulled in a petition for relief from judgment filed in
the same case but the petition was denied for having
been filed out of time.
The narration of facts below was taken from the
pleadings filed by the parties. As regards the
proceedings following the promulgation of the
amended decision, the dates were supplied in the
Comment and Answer filed by respondent judge and
which were not disputed by petitioner.
Silverio Blanco was the owner of a passenger jeepney
which he insured against liabilities for death and
injuries to third persons with First Integrated Bonding
and Insurance Company, Inc. (First Insurance) under
Motor Vehicle Policy No. V-0563751 with the face value
of P30,000.00 (p. 15, Rollo).
On November 25, 1976, the said jeepney driven by
Blanco himself bumped a five-year old child,
Deogracias Advincula, causing the latter's death.
A complaint (pp. 38-41, Rollo) for damages was
brought by the child's parents, the Advincula spouses,
against Silverio Blanco. First Insurance was also
impleaded in the complaint as the insurer. The
complaint was docketed as Civil Case No. 1104 of the
Court of First Instance of Abra (now Regional Trial
Court).
Summons were served on Silverio Blanco and First
Insurance. However, only Blanco filed an answer. Upon
motion of the Advincula spouses, First Insurance was
declared in default (p. 45, Rollo) on January 19, 1978.
Thereafter, a pre-trial conference was conducted where
the Advincula spouses presented the following
documentary evidence:
Exhibit "A" Marriage Certificate,
Exhibit B Birth Certificate, Exhibit B-
1 The Certificate of the Local Civil
Registrar, Exhibit C Certificate of
Death, Exhibit C-1 the official receipt
of the burial permit, Exhibit C-2 the
autopsy report, Exhibit D filing fee
under official receipt in the amount of
P80.00, Exhibit D-1 list of actual
expenses in connection with the death
and burial of the deceased Advincula,
Exhibit E Criminal Case No. 666 of
the Municipal Court of Tayum, Abra
entitled People of the Philippines
versus Silverio Blanco for Homicide
thru Reckless Imprudence, Exhibit E-1
sworn statement of Severino Balneg
Exhibit F Tax Declaration No. 906 in
the name of Maria Blanco delivered by
Silverio Blanco to the plaintiffs as
pledge of Silverio Blanco to settle the
civil aspect of this case. (pp. 14-
15, Rollo)
On the basis of the evidence presented by the
Advincula spouses, judgment was rendered by the trial
court on March 1, 1978, the dispositive portion of which
states:
WHEREFORE, for moral damages, this
court adjudicates to the plaintiffs
P5,000.00; for the life of Deogracias
Advincula P12,000.00, for funeral
expenses, P3,663.50 and for attomey's
fees, P3,000.00. The satisfaction of
these damages divulged (sic)
independently now upon the defendant
insurance company and to pay the
costs of the proceedings.
SO ORDERED. (p. 16, Rollo)
First Insurance received a copy of the decision on
March 14, 1978. Upon motion of the Advincula spouses,
the decision was amended on March 27, 1978 (p.
17, Rollo), which, in addition to the damages granted in
the original decision, awarded damages in the amount
of P6,336.50 to Silverio Blanco. The dispositive portion
of the amended decision is quoted, as follows:
WHEREFORE, for moral damages, this
Court hereby adjudicates to the
plaintiffs P5,000.00; for the life of
Deogracias Advincula P12,000.00; for
funeral expenses P3,663.50 and for
attorney's fees P3,000.00 or in the total
amount of P23,663.50 which must be
satisfied independently by the
defendant First Integrated Bonding and
Insurance Company, Inc. in favor of the
plaintiffs and the balance of P6,336.50
shall also be paid by said defendant
Insurance Company to the defendant
Silverio Blanco. The grand total under
the insurance policy, Exhibit H, is
P30,000.00.
The defendant Insurance Company to
pay the costs of the proceedings.
SO ORDERED. (p. 17, Rollo)
The amended decision was received by First Instance
on April 11, 1978. On May 11, 1978, entry of judgment
was made, a copy of which was furnished First
Insurance on June 27, 1978. Upon motion of the
Advincula spouses, an order granting execution was
issued by the court on June 14, 1978, which was
received by First Insurance on August 1, 1978 (pp. 31-
32, Rollo).
On September 5, 1978, First Insurance filed a petition
for relief from judgment in the same case. The petition
was set for hearing on September 28, 1978. No
appearance was entered by First Insurance on the said
date. On October 4, 1978, the trial court issued an
order, denying the petition for relief from judgment (pp.
33-34, Rollo), a copy of which was received by First
Insurance on October 10, 1978 (p. 35, Rollo). The order
reads:
The records of this case show that on
April 11, 1978, the defendant First
Integrated Bonding and Insurance
Company, Inc. received a copy of the
amended decision dated March 27,
1978 and found on page 30 of the
records of this case; on May 11, 1978,
the Deputy Clerk of Court entered the
corresponding entry of judgment and
the First Integrated Bonding and
Insurance Company, Inc. received a
copy thereof on June 27, 1978, On June
13, 1978, the plaintiffs moved for
execution of judgment and the same
was granted pursuant to an Order of
this Court dated June 14, 1978 and
found on page 35 of the records of this
case.
And now comes the petition for relief
from the Order of execution and
judgment with preliminary injunction
filed by First integrated Bonding and
Insurance Co., Inc. and which was
received by this Court on September 5,
1978; on September 28, 1978, the
plaintiffs filed their written opposition
to the petition for relief from judgment
and preliminary injunction. The
opposition is based on three grounds,
namely: 1. that the petition is filed out
of time; 2. that there was gross and
notorious negligence of the Insurance
Company; 3. that this case is within the
jurisdiction of this Court and therefore
the cause of action of the plaintiffs
deserves judicial consideration.
It was on April 11, 1978 that the First
Integrated Bonding and Insurance Co.,
Inc. received the amended decision
and the petition for relief from Order of
Execution and judgment with
preliminary injunction was filed on
September 5, 1978 or a period of 191
days already expired, that is, more
than 6 months already as required by
Section 3, Rule 38 of the Rules of Court.
Consequently, the first ground invoked
by the opposition must be sustained.
On the second ground, the records of
this case show that the First Integrated
Bonding and Insurance Co., Inc. was
duly summoned and served a copy of
the complaint on August 16, 1977 and
it was received by the President of the
Insurance Company as shown by the
certificate of Service of the Sheriff of
Manila and found in page 12 and page
13 of the records of this case; after the
reglementary period to file an answer
expired, the plaintiffs move to declare
the defendant insurance company in
default and likewise asked the Court
that they be allowed to present their
evidence on January 23, 1978 and
which was granted by this Court
pursuant to an order dated January 19,
1978 and found on page 16 of the
records of this case; after the reception
of the evidence for the plaintiffs this
Court rendered a decision on March 1,
1978 and which is found on pages 23
to 26 of the records of this case;
subsequently, on March 27, 1978, an
amended decision was issued by this
Court and it is found on page 30 of the
records of this case. Clearly, therefore,
the First Integrated Bonding and
Insurance Co., Inc. was grossly and
notoriously negligent in giving the
proper attention to this case. This kind
of gross and notorious negligence can
not be considered excusable. The last
ground is that this Court has
jurisdiction over the plaintiffs' cause of
action against the insurance company.
This ground is well-taken because
according to Section 416 of the
Philippine Insurance Code, Presidential
Decree No. 612, it provides that the
authority to adjudicate granted to the
Commissioner of insurance shall be
concurrent with that of the civil courts,
but the filing of a complaint with the
commissioner shall preclude the civil
courts from taking cognizance of a suit
involving the same subject matter.
Furthermore, the plaintiffs did not
intervene in the criminal aspect of this
case, instead, they filed a separate and
independent civil action on July 26,
1977 and which is now the present Civil
Case No. 1104. It may be added, that
the matter of exhaustion of
administrative remedy may be waived
which has been so in the present case
because the First Integrated Bonding
and Insurance Co., Inc. was declared in
default.
In view of all the foregoing
considerations, the petition for relief
from the order of execution and
judgment with preliminary injunction,
for lack of merit, is hereby denied.
SO ORDERED. (pp. 33-34, Rollo)
First Insurance filed a motion for reconsideration of the
order denying the petition for relief on May 14, 1979.
The motion was set for hearing and again no
appearance was entered by the movant First Insurance
(p. 35, Rollo), prompting the trial court to deny the
same.
On August 13, 1979, the herein petitioner First
Insurance filed this petition for certiorari on the
following grounds:
1. The trial court erred in deciding for
the respondent spouse(s) where there
exists no cause of action against the
herein petitioner.
2. The trial court erred when it
abbreviated the proceeding and
rendered judgment based only on the
documentary evidence presented
during the pre-trial conference.
3. The trial court erred in holding the
petitioner liable in excess of the limits
of liability as provided for in the policy
contract.
On August 20, 1979, this Court issued a temporary
restraining order enjoining the respondents from
enforcing the Writ of Execution dated August 1, 1978
(p. 19, Rollo)
It is the contention of the petitioner that the Advincula
spouses have no cause of action against it. As parents
of the victim, they may proceed against the driver,
Silverio Blanco on the basis of the provisions of the
New Civil Code. However, they have no cause of action
against First Insurance, because they are not parties to
the insurance contract.
It is settled that where the insurance contract provides
for indemnity against liability to a third party, such
third party can directly sue the insurer (Caguia v.
Fieldman's Insurance Co., Inc., G. R. No. 23276,
November 29, 1968, 26 SCRA 178). 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 (Malayan Insurance Co., Inc. v. CA, L-36413,
September 26, 1988, 165 SCRA 536). This rule was
explained in the case of Shafer v. Judge, RTC of
Olongapo City, Br. 75, G.R. No. 78848, November 14,
1988:
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.
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. (p. 391,
167 SCRA) (emphasis supplied)
First Insurance 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 insured.
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. The victims and/or their
dependents are assured of immediate
financial assistance, regardless of the
financial capacity of the motor vehicle
owners.
. . . 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 (Shafer v. Judge, RTC of
Olongapo, supra, p. 390).
It is true that Blanco denied that he was negligent
when the incident occurred. However, during the pre-
trial conference, when respondent judge admitted all
the exhibits of the plaintiffs to abbreviate the
proceedings, no objection was interposed by Blanco.
When a decision was rendered based only on the
exhibits of the plaintiffs, Blanco likewise did not object.
No motion for reconsideration was filed by either
Blanco or First Insurance. Hence, the decision became
final and may no longer be attacked.
It should be noted also that First Insurance was
declared in default because of its failure to file an
answer. As far as it was concerned, it failed to raise any
triable issue. It lost its standing in court and judgment
may be rendered against it on the basis only of the
evidence of the Advincula spouses.
Petitioner had been given its day in court. Despite its
having been declared in default and its failure to file a
motion to lift the order of default, it was still notified of
the subsequent proceedings in the trial court. But no
positive step was taken by it on time to vacate the
order of default, the decision nor the amended
decision. Instead, it chose to file a petition for relief
from judgment on September 1, 1978 almost five (5)
months from its receipt of a copy of the amended
decision on April 11, 1978. Clearly, the said petition for
relief from judgment was filed out of time. The rules
require that such petitions must be filed within sixty
(60) days after the petitioner learns of the judgment
and not more than six (6) months after such judgment
was entered (Rule 38, Section 3). The period fixed by
Rule 38 of the Rules of Court is non-extendible and
never interrupted. It is not subject to any condition or
contingency, because it is itself devised to meet a
condition or contingency. The remedy allowed by Rule
38 is an act of grace, as it were, designed to give the
aggrieved party another and last chance. Being in the
position of one who begs, such party's privilege is not
to impose conditions, haggle or dilly-dally, but to grab
what is offered him. (Palomares, et al. v. Jimenez, et al.,
90 Phil. 773, XVII, L.J., No. 3, p. 136, Rafanan v.
Rafanan, 35 O.G. 228; Santos v. Manila Electric Co.,
G.R. L-7735, December 29, 1955; Gana v. Abaya, G.R.
No. L-3106, December 29, 1955, cited in Vicente J.
Francisco, The Revised Rules of Court of the Philippines,
Annotated and Commented, Vol, 11, p. 580.
It appears that the award of damages in favor of
Blanco has no basis. The complaint in Civil case 1104
was for damages brought by the spouses against
Blanco and First Insurance. Blanco did not put up any
claim against the latter. However, since the said
decision had already become final and executory, it
can no longer be corrected or amended. In the same
vein, the claim of petitioner that its liability to third
parties under the insurance policy is limited to
P20,000.00 only can no longer be given consideration
at this late stage, when the decision of the trial court
awarding damages had already become final and
executory.
ACCORDINGLY, finding respondent judge to have acted
within his jurisdiction in denying the petition for relief
from judgment, the petition is DISMISSED. The
questioned decision of the trial court in Civil Case No.
1104 having become final and executory, is AFFIRMED.
The temporary restraining order issued on August 20,
1979 is hereby lifted. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 82036. May 22, 1997]
TRAVELLERS INSURANCE & SURETY
CORPORATION, petitioner, vs. HON.
COURT OF APPEALS and VICENTE
MENDOZA, respondents.
DECISION
HERMOSISIMA, JR., J.:
The petition herein seeks the review and reversal
of the decision[1] of respondent Court of
Appeals[2] affirming in toto the judgment[3] of the
Regional Trial Court[4] in an action for damages[5] filed
by private respondent Vicente Mendoza, Jr. as heir of
his mother who was killed in a vehicular accident.
Before the trial court, the complainant lumped the
erring taxicab driver, the owner of the taxicab, and the
alleged insurer of the vehicle which featured in the
vehicular accident into one complaint. The erring
taxicab was allegedly covered by a third-party liability
insurance policy issued by petitioner Travellers
Insurance & Surety Corporation.
The evidence presented before the trial court
established the following facts:
At about 5:30 oclock in the morning of July 20, 1980, a
78-year old woman by the name of Feliza Vineza de
Mendoza was on her way to hear mass at the Tayuman
Cathedral. While walking along Tayuman corner
Gregorio Perfecto Streets, she was bumped by a taxi
that was running fast. Several persons witnessed the
accident, among whom were Rolando Marvilla, Ernesto
Lopez and Eulogio Tabalno. After the bumping, the old
woman was seen sprawled on the pavement. Right
away, the good Samaritan that he was, Marvilla ran
towards the old woman and held her on his lap to
inquire from her what had happened, but obviously she
was already in shock and could not talk. At this moment,
a private jeep stopped. With the driver of that vehicle,
the two helped board the old woman on the jeep and
brought her to the Mary Johnston Hospital in Tondo.
x x x Ernesto Lopez, a driver of a passenger jeepney
plying along Tayuman Street from Pritil, Tondo, to Rizal
Avenue and vice-versa, also witnessed the incident. It
was on his return trip from Rizal Avenue when Lopez
saw the plaintiff and his brother who were crying near
the scene of the accident. Upon learning that the two
were the sons of the old woman, Lopez told them what
had happened. The Mendoza brothers were then able to
trace their mother at the Mary Johnston Hospital where
they were advised by the attending physician that they
should bring the patient to the National Orthopedic
Hospital because of her fractured bones. Instead, the
victim was brought to the U.S.T. Hospital where she
expired at 9:00 oclock that same morning. Death was
caused by traumatic shock as a result of the severe
injuries she sustained x x x x.
x x x The evidence shows that at the moment the victim
was bumped by the vehicle, the latter was running fast,
so much so that because of the strong impact the old
woman was thrown away and she fell on the
pavement. x x x In truth, in that related criminal case
against defendant Dumlao x x x the trial court found as
a fact that therein accused was driving the subject
taxicab in a careless, reckless and imprudent manner
and at a speed greater than what was reasonable and
proper without taking the necessary precaution to avoid
accident to persons x x x considering the condition of
the traffic at the place at the time aforementioned x x
x. Moreover, the driver fled from the scene of the
accident and without rendering assistance to the
victim. x x x
x x x Three (3) witnesses who were at the scene at the
time identified the taxi involved, though not necessarily
the driver thereof. Marvilla saw a lone taxi speeding
away just after the bumping which, when it passed by
him, said witness noticed to be a Lady Love Taxi with
Plate No. 438, painted maroon, with baggage bar
attached on the baggage compartment and with an
antenae[sic] attached at the right rear side. The same
descriptions were revealed by Ernesto Lopez, who
further described the taxi to have x x x reflectorized
decorations on the edges of the glass at the back. x x x
A third witness in the person of Eulogio Tabalno x x x
made similar descriptions although, because of the fast
speed of the taxi, he was only able to detect the last
digit of the plate number which is 8. x x x [T]he police
proceeded to the garage of Lady Love Taxi and then and
there they took possession of such a taxi and later
impounded it in the impounding area of the agency
concerned. x x x [T]he eyewitnesses x x x were
unanimous in pointing to that Lady Love Taxi with Plate
No. 438, obviously the vehicle involved herein.
x x x During the investigation, defendant Armando
Abellon, the registered owner of Lady Love Taxi bearing
No. 438-HA Pilipinas Taxi 1980, certified to the fact that
the vehicle was driven last July 20, 1980 by one Rodrigo
Dumlao x x x x x x It was on the basis of this affidavit of
the registered owner that caused the police to
apprehend Rodrigo Dumlao, and consequently to have
him prosecuted and eventually convicted of the offense
x x x. x x x [S]aid Dumlao absconded in that criminal
case, specially at the time of the promulgation of the
judgment therein so much so that he is now a fugitive
from justice.[6]
Private respondent filed a complaint for damages
against Armando Abellon as the owner of the Lady
Love Taxi and Rodrigo Dumlao as the driver of the Lady
Love taxicab that bumped private respondents
mother. Subsequently, private respondent amended his
complaint to include petitioner as the compulsory
insurer of the said taxicab under Certificate of Cover
No. 1447785-3.
After trial, the trial court rendered judgment in
favor of private respondent, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiff, or more particularly the Heirs of the late
Feliza Vineza de Mendoza, and against defendants
Rodrigo Dumlao, Armando Abellon and Travellers
Insurance and Surety Corporation, by ordering the
latter to pay, jointly and severally, the former the
following amounts:
(a) The sum of P2,924.70, as actual and compensatory
damages, with interest thereon at the rate of 12% per
annum from October 17, 1980, when the complaint was
filed, until the said amount is fully paid;
(b) P30,000.00 as death indemnity;
(c) P25,000.00 as moral damages;
(d) P10,000.00 as by way of corrective or exemplary
damages; and
(e) Another P10,000.00 by way of attorneys fees and
other litigation expenses.
Defendants are further ordered to pay, jointly and
severally, the costs of this suit.
SO ORDERED.[7]
Petitioner appealed from the aforecited decision to
the respondent Court of Appeals. The decision of the
trial court was affirmed by respondent appellate
court. Petitioners Motion for Reconsideration[8] of
September 22, 1987 was denied in a Resolution [9] dated
February 9, 1988.
Hence this petition.
Petitioner mainly contends that it did not issue an
insurance policy as compulsory insurer of the Lady
Love Taxi and that, assuming arguendo that it had
indeed covered said taxicab for third-party liability
insurance, private respondent failed to file a written
notice of claim with petitioner as required by Section
384 of P.D. No. 612, otherwise known as the Insurance
Code.
We find the petition to be meritorious.
I
When private respondent filed his amended
complaint to implead petitioner as party defendant and
therein alleged that petitioner was the third-party
liability insurer of the Lady Love taxicab that fatally hit
private respondents mother, private respondent did not
attach a copy of the insurance contract to the
amended complaint. Private respondent does not deny
this omission.
It is significant to point out at this juncture that
the right of a third person to sue the insurer depends
on whether the contract of insurance is intended to
benefit third persons also or only the insured.
[A] policy x x x whereby the insurer agreed to
indemnify the insured against all sums x x x which the
Insured shall become legally liable to pay in respect of:
a. death of or bodily injury to any person x x x is one
for indemnity against liability; from the fact then that
the insured is liable to the third person, such third
person is entitled to sue the insurer.
The right of the person injured to sue the insurer of the
party at fault (insured), depends on whether the
contract of insurance is intended to benefit third
persons also or on the insured. And the test applied
has been this:Where the contract provides for
indemnity against liability to third persons, then third
persons to whom the insured is liable can sue the
insurer. Where the contract is for indemnity against
actual loss or payment, then third persons cannot
proceed against the insurer, the contract being solely
to reimburse the insured for liability actually
discharged by him thru payment to third persons, said
third persons recourse being thus limited to the insured
alone.[10]
Since private respondent failed to attach a copy of
the insurance contract to his complaint, the trial court
could not have been able to apprise itself of the real
nature and pecuniary limits of petitioners liability. More
importantly, the trial court could not have possibly
ascertained the right of private respondent as third
person to sue petitioner as insurer of the Lady Love
taxicab because the trial court never saw nor read the
insurance contract and learned of its terms and
conditions.
Petitioner, understandably, did not volunteer to
present any insurance contract covering the Lady Love
taxicab that fatally hit private respondents mother,
considering that petitioner precisely presented the
defense of lack of insurance coverage before the trial
court. Neither did the trial court issue
a subpoena duces tecum to have the insurance
contract produced before it under pain of contempt.
We thus find hardly a basis in the records for the
trial court to have validly found petitioner liable jointly
and severally with the owner and the driver of the Lady
Love taxicab, for damages accruing to private
respondent.
Apparently, the trial court did not distinguish
between the private respondents cause of action
against the owner and the driver of the Lady Love
taxicab and his cause of action against petitioner.The
former is based on torts and quasi-delicts while the
latter is based on contract. Confusing these two
sources of obligations as they arise from the same act
of the taxicab fatally hitting private respondents
mother, and in the face of overwhelming evidence of
the reckless imprudence of the driver of the Lady Love
taxicab, the trial court brushed aside its ignorance of
the terms and conditions of the insurance contract and
forthwith found all three - the driver of the taxicab, the
owner of the taxicab, and the alleged insurer of the
taxicab - jointly and severally liable for actual, moral
and exemplary damages as well as attorneys fees and
litigation expenses. This is clearly a misapplication of
the law by the trial court, and respondent appellate
court grievously erred in not having reversed the trial
court on this ground.
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.[11]
Applying this principle underlying solidary obligation
and insurance contracts, we ruled in one case that:
In solidary obligation, the creditor may enforce the
entire obligation against one of the solidary
debtors. On the other hand, insurance is defined as a
contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability
arising from an unknown or contingent event.
In the case at bar, the trial court held petitioner
together with respondents Sio Choy and San Leon Rice
Mills Inc. solidarily liable to respondent Vallejos for a
total amount of P29,103.00, with the qualification that
petitioners liability is only up to P20,000.00. In the
context of a solidary obligation, petitioner may be
compelled by respondent Vallejos to pay the entire
obligation of P29,103.00, notwithstanding the
qualification made by the trial court. But, how can
petitioner be obliged to pay the entire obligation when
the amount stated in its insurance policy with
respondent Sio Choy for indemnity against third-party
liability is only P20,000.00?Moreover, the qualification
made in the decision of the trial court to the effect that
petitioner is sentenced to pay up to P20,000.00 only
when the obligation to pay P29,103.00 is made solidary
is an evident breach of the concept of a solidary
obligation.[12]
The above principles take on more significance in
the light of the counter-allegation of petitioner that,
assuming arguendo that it is the insurer of the Lady
Love taxicab in question, its liability is limited to
only P50,000.00, this being its standard amount of
coverage in vehicle insurance policies. It bears
repeating that no copy of the insurance contract was
ever proffered before the trial court by the private
respondent, notwithstanding knowledge of the fact that
the latters complaint against petitioner is one under a
written contract. Thus, the trial court proceeded to hold
petitioner liable for an award of damages exceeding its
limited liability of P50,000.00. This only shows beyond
doubt that the trial court was under the erroneous
presumption that petitioner could be found liable
absent proof of the contract and based merely on the
proof of reckless imprudence on the part of the driver
of the Lady Love taxicab that fatally hit private
respondents mother.
II
Petitioner did not tire in arguing before the trial
court and the respondent appellate court that,
assuming arguendo that it had issued the insurance
contract over the Lady Love taxicab, private
respondents cause of action against petitioner did not
successfully accrue because he failed to file with
petitioner a written notice of claim within six (6)
months from the date of the accident as required by
Section 384 of the Insurance Code.
At the time of the vehicular incident
which resulted in the death of private respondents
mother, during which time the Insurance Code had not
yet been amended by Batas Pambansa (B.P.) Blg. 874,
Section 384 provided as follows:
Any person having any claim upon the policy issued
pursuant to this chapter shall, without any unnecessary
delay, present to the insurance company concerned a
written notice of claim setting forth the amount of his
loss, and/or the nature, extent and duration of the
injuries sustained as certified by a duly licensed
physician. Notice of claim must be filed within six
months from date of the accident, otherwise, the claim
shall be deemed waived. Action or suit for recovery of
damage due to loss or injury must be brought in proper
cases, with the Commission or the Courts within one
year from date of accident, otherwise the claimants
right of action shall prescribe [emphasis and
underscoring supplied].
In the landmark case of Summit Guaranty and
Insurance Co., Inc. v. De Guzman, [13] we ruled that the
one year prescription period to bring suit in court
against the insurer should be counted from the time
that the insurer rejects the written claim filed therewith
by the insured, the beneficiary or the third person
interested under the insurance policy. We explained:
It is very obvious that petitioner company is trying to
use Section 384 of the Insurance Code as a cloak to
hide itself from its liabilities. The facts of these cases
evidently reflect the deliberate efforts of petitioner
company to prevent the filing of a formal action against
it. Bearing in mind that if it succeeds in doing so until
one year lapses from the date of the accident it could
set up the defense of prescription, petitioner company
made private respondents believe that their claims
would be settled in order that the latter will not find it
necessary to immediately bring suit. In violation of its
duties to adopt and implement reasonable standards
for the prompt investigation of claims and to effectuate
prompt, fair and equitable settlement of claims, and
with manifest bad faith, petitioner company devised
means and ways of stalling the settlement
proceedings. x x x [N]o steps were taken to process the
claim and no rejection of said claim was ever made
even if private respondent had already complied with
all the requirements. x x x
This Court has made the observation that some
insurance companies have been inventing excuses to
avoid their just obligations and it is only the State that
can give the protection which the insuring public needs
from possible abuses of the insurers.[14]
It is significant to note that the aforecited Section
384 was amended by B.P. Blg. 874 to categorically
provide that action or suit for recovery of damage due
to loss or injury must be brought in proper cases, with
the Commissioner or the Courts within one
year from denial of the claim, otherwise the
claimants right of action shall prescribe [emphasis
ours].[15]
We have certainly ruled with consistency that the
prescriptive period to bring suit in court under an
insurance policy, begins to run from the date of the
insurers rejection of the claim filed by the insured, the
beneficiary or any person claiming under an insurance
contract. This ruling is premised upon the compliance
by the persons suing under an insurance contract, with
the indispensable requirement of having filed the
written claim mandated by Section 384 of the
Insurance Code before and after its
amendment. Absent such written claim filed by the
person suing under an insurance contract, no cause of
action accrues under such insurance contract,
considering that it is the rejection of that claim that
triggers the running of the one-year prescriptive period
to bring suit in court, and there can be no opportunity
for the insurer to even reject a claim if none has been
filed in the first place, as in the instant case.
The one-year period should instead be counted from
the date of rejection by the insurer as this is the time
when the cause of action accrues. x x x
In Eagle Star Insurance Co., Ltd., et al. vs. Chia Yu, this
Court ruled:
The plaintiffs cause of action did not accrue until his
claim was finally rejected by the insurance
company. This is because, before such final rejection,
there was no real necessity for bringing suit.
The philosophy of the above pronouncement was
pointed out in the case of ACCFA vs. Alpha Insurance
and Surety Co., viz.:
Since a cause of action requires, as essential elements,
not only a legal right of the plaintiff and a correlative
obligation of the defendant but also an act or omission
of the defendant in violation of said legal right, the
cause of action does not accrue until the party
obligated refuses, expressly or impliedly, to comply
with its duty.[16]
When petitioner asseverates, thus, that no written
claim was filed by private respondent and rejected by
petitioner, and private respondent does not dispute
such asseveration through a denial in his pleadings, we
are constrained to rule that respondent appellate court
committed reversible error in finding petitioner liable
under an insurance contract the existence of which had
not at all been proven in court. Even if there were such
a contract, private respondents cause of action can not
prevail because he failed to file the written claim
mandated by Section 384 of the Insurance Code. He is
deemed, under this legal provision, to have waived his
rights as against petitioner-insurer.
WHEREFORE, the instant petition is HEREBY
GRANTED. The decision of the Court of Appeals in CA-
G.R. CV No. 09416 and the decision of the Regional
Trial Court in Civil Case No. 135486 are REVERSED and
SET ASIDE insofar as Travellers Insurance & Surety
Corporation was found jointly and severally liable to
pay actual, moral and exemplary damages, death
indemnity, attorneys fees and litigation expenses in
Civil Case No. 135486. The complaint against Travellers
Insurance & Surety Corporation in said case is hereby
ordered dismissed.
No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 103883 November 14, 1996
JACQUELINE JIMENEZ VDA. DE
GABRIEL, petitioner,
vs.
HON. COURT OF APPEALS and FORTUNE
INSURANCE & SURETY COMPANY,
INC., respondents.
VITUG, J.:
The petition for review on certiorari in this case seeks
the reversal of the decision 1 of the Court of Appeals
setting aside the judgment of the Regional Trial Court
of Manila, Branch 55, which has ordered private
respondent Fortune Insurance & Surety Company, Inc.,
to pay petitioner Jacqueline Jimenez vda. de Gabriel,
the surviving spouse and beneficiary in an accident
(group) insurance of her deceased husband, the
amount of P100,000.00, plus legal interest.
Marcelino Gabriel, the insured, was employed by
Emerald Construction & Development Corporation
("ECDC") at its construction project in Iraq. He was
covered by a personal accident insurance in the
amount of P100,000.00 under a group policy 2 procured
from private respondent by ECDC for its overseas
workers. The insured risk was for "(b)odily injury
caused by violent accidental external and visible
means which injury (would) solely and independently of
any other cause" 3result in death or disability.
On 22 May 1982, within the life of the policy, Gabriel
died in Iraq. A year later, or on 12 July 1983, ECDC
reported Gabriel's death to private respondent by
telephone. 4 Among the documents thereafter
submitted to private respondent were a copy of the
death certificate 5 issued by the Ministry of Health of
the Republic of Iraq which stated
REASON OF DEATH: UNDER
EXAMINATION NOW NOT YET
KNOWN 6
and an autopsy report 7 of the National Bureau
of Investigation ("NBI") to the effect that "(d)ue
to advanced state of postmortem
decomposition, cause of death (could) not be
determined." 8 Private respondent referred the
insurance claim to Mission Adjustment Service,
Inc.
Following a series of communications between
petitioner and private respondent, the latter, on 22
September 1983, ultimately denied the claim of ECDC
on the ground of prescription. 9 Petitioner went to the
Regional Trial Court of Manila. In her complaint against
ECDC and private respondent, she averred that her
husband died of electrocution while in the performance
of his work and prayed for the recovery of P100,000.00
for insurance indemnification and of various other
sums by way of actual, moral, and exemplary
damages, plus attorney's fees and costs of suit.
Private respondent filed its answer, which was not
verified, admitting the genuineness and due execution
of the insurance policy; it alleged, however, that since
both the death certificate issued by the Iraqi Ministry of
Health and the autopsy report of the NBI failed to
disclose the cause of Gabriel's death, it denied liability
under the policy. In addition, private respondent raised
the defense of "prescription," invoking Section 384 10 of
the Insurance Code. Later, private respondent filed an
amended answer, still unverified, reiterating its original
defenses but, this time, additionally putting up a
counterclaim and a crossclaim.
The trial court dismissed the case against ECDC for the
failure of petitioner to take steps to cause the service
of the fourth alias summons on ECDC. The dismissal
was without prejudice.
The case proceeded against private respondent alone.
On 28 May 1987, the trial court rendered its
decision 11 in favor (partly) of petitioner's claim. In
arriving at its conclusion, the trial court held that
private respondent was deemed to have waived the
defense, i.e., that the cause of Gabriel's death was not
covered by the policy, when the latter failed to impugn
by evidence petitioner's averment on the matter. With
regard to the defense of prescription, the court
considered the complaint to have been timely filed or
within one (1) year from private respondent's denial of
the claim.
Petitioner and private respondent both appealed to the
Court of Appeals. Petitioner contended that the lower
court should have awarded all the claims she had
asked for. Private respondent asserted, on its part, that
the lower court erred in ruling (a) that the insurer had
waived the defense that Gabriel's death was not
caused by the insured peril ("violent accidental
external and visible means") specified in the policy and
(b) that the cause of action had not prescribed.
The Court of Appeals, on 18 September 1991, reversed
the decision of the lower court. The appellate court
held that petitioner had failed to substantiate her
allegation that her husband's death was caused by a
risk insured against. The appellate court observed that
the only evidence presented by petitioner, in her
attempt to show the circumstances that led to the
death of the insured, were her own affidavit and a
letter allegedly written by a co-worker of the deceased
in Iraq which, unfortunately for her, were held to be
both
hearsay. 12
The motion for reconsideration was denied. 13
matters;" 14 however, the verification, like in most
cases required by the rules of procedure, is a formal,
not jurisdictional, requirement, and mainly intended to
secure an assurance that matters which are alleged are
done in good faith or are true and correct and not of
mere speculation. When circumstances warrant, the
court may simply order the correction of unverified
pleadings or act on it and waive strict compliance with
the rules in order that the ends of justice may thereby
be served. 15 In the case of answers to written requests
for admission particularly, the court can allow the party
making the admission, whether made expressly or
deemed to have been made impliedly, "to withdraw or
amend it upon such terms as may be just." 16

Petitioner's recourse to this Court must also fail. The appellate court acted neither erroneously nor with
grave abuse of discretion when it seconded the court a
quo and ruled:
On the issue of "prescription," private respondent
correctly invoked Section 384 of the Insurance
Code; viz: As to the allegation of the plaintiff-
appellant that the matters requested
by her to be admitted by the
Sec. 384. Any person having any claim defendant-appellant under the Request
upon the policy issued pursuant to this for Admission were already deemed
chapter shall, without any unnecessary admitted by the latter for its failure to
delay, present to the insurance answer it under oath, has already been
company concerned a written notice of properly laid to rest when the lower
claim setting forth the nature, extent court in its Order of May 28, 1987
and duration of the injuries sustained correctly ruled:
as certified by a duly licensed
physician. Notice of claim must be filed
within six months from date of the At the outset, it must
accident, otherwise, the claim shall be be stressed that the
deemed waived. Action or suit for defendant indeed filed
recovery of damage due to loss or a written answer to the
injury must be brought, in proper request for
cases, with the Commissioner or the admission, sans verifica
Courts within one year from denial of tion. The case of Motor
the claim, otherwise, the claimant's Service
right of action shall prescribe. Co., Inc. vs. Yellow
Taxicab Co., Inc., et al.
may not therefore be
The notice of death was given to private controlling, or actually
respondent, concededly, more than a year after opposite. In said case,
the death of petitioner's husband. Private there was an absolute
respondent, in invoking prescription, was not failure on the part of
referring to the one-year period from the denial the defendant to
of the claim within which to file an action answer the request for
against an insurer but obviously to the written admission, and thus
notice of claim that had to be submitted within the court was justified
six months from the time of the accident. in rendering a
summary judgment.
Petitioner argues that private respondent must be Here, however, as
deemed to have waived its right to controvert the clearly intimated
claim, that is, to show that the cause of death is an elsewhere above, the
excepted peril, by failing to have its answers (to the defendant answered in
Request for Admission sent by petitioner) duly verified. writing practically
It is true that a matter of which a written request for every question posed in
admission is made shall be deemed impliedly admitted the request for
"unless, within a period designated in the request, admission. The Court
which shall not be less than ten (10) days after service believes, under the
thereof, or within such further time as the court may peculiar circumstance,
allow on motion and notice, the party to whom the that the more
request is directed serves upon the party requesting controlling
the admission a sworn statement either denying jurisprudence on the
specifically the matters of which an admission is mater would be those
requested or setting forth in detail the reasons why he cited by the defendant
cannot truthfully either admit or deny those in its memorandum,
 particularly the case
of Quimpo vs. de la
Victoria, 46 SCRA 139.
Prescinding from the foregoing, there is
absolutely no basis in fact and in law
for the lower court to hold that the
appellant insurance company was
deemed to have waived the defense,
that the death of plaintiff-appellant's
husband was not caused by violent
accidental external and visible means'
as contemplated in the insurance
policy. The Death Certificate (Exh. 9)
and the Autopsy Report (Exh. 10), more
than controverted the allegation of the
plaintiff-appellant as to the cause of
death of her husband. 17
The insurance policy expressly provided that to be
compensable, the injury or death should be caused by
"violent accidental external and visible means." In
attempting to prove the cause of her husband's death,
all that petitioner could submit were a letter sent to her
by her husband's co-worker, stating that Gabriel died
when he tried to haul water out of a tank while its
submerged motor was still functioning, 18 and
petitioner's sinumpaang
salaysay 19 which merely confirmed the receipt and
stated contents of the letter. Said the appellate court in
this regard:
. . . . It must be noted that the only
evidence presented by her to prove the
circumstances surrounding her
husband's death were her purported
affidavit and the letter allegedly written
by the deceased co-worker in Iraq. The
said affidavit however suffers from
procedural infirmity as it was not even
testified to or identified by the affiant
(plaintiff-appellant) herself. This self-
serving affidavit therefore is a mere
hearsay under the rules, . . . .
xxx xxx xxx
In like manner, the letter allegedly
written by the deceased's co-worker
which was never identified to in court
by the supposed author, suffers from
the same defect as the affidavit of the
plaintiff-appellant. 20
Not one of the other documents submitted, to
wit, the POEA decision, dated 06 June
1984, 21 the death certificate issued by the
Ministry of Health of Iraq and the NBI autopsy
report, 22 could give any probative value to
petitioner's claim. The POEA decision did not
make any categorical holding on the specific
cause of Gabriel's death. Neither did the death
certificate issued by the health authorities in
Iraq nor the NBI autopsy report provide any
clue on the cause of death. All that appeared to
be clear was the fact of Gabriel's demise on 22
May 1982 in Iraq.
Evidence, in fine, is utterly wanting to establish that
the insured suffered from an accidental death, the risk
covered by the policy. In an accident insurance, the
insured's beneficiary has the burden of proof in
demonstrating that the cause of death is due to the
covered peril. Once that fact is established, the burden
then shifts to the insurer to show any excepted peril
that may have been stipulated by the parties. An
"accident insurance" is not thus to be likened to an
ordinary life insurance where the insured's death,
regardless of the cause thereof, would normally be
compensable. The latter is akin in property insurance
to an "all risk" coverage where the insured, on the
aspect of burden of proof, has merely to show the
condition of the property insured when the policy
attaches and the fact of loss or damage during the
period of the policy and where, thereafter, the burden
would be on the insurer to show any "excluded peril."
When, however, the insured risk is specified, like in the
case before us, it lies with the claimant of the
insurance proceeds to initially prove that the loss is
caused by the covered peril.
While petitioner did fail in substantiating her allegation
that the death of her husband was due to an accident,
considering, however, the uncertainty on the real
cause of death, private respondent might find its way
clear into still taking a second look on the matter and
perhaps help ease the load of petitioner's loss.
WHEREFORE, the decision appealed from is AFFIRMED.
No costs.
SO ORDERED.