Table of contents

(1) ARMANDO GEAGONIA, petitioner,

vs.
COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION, respondents.

Page 2

(2 ) HEIRS OF ILDEFONSO COSCOLLUELA, SR., INC., petitioner,

vs.
RICO GENERAL INSURANCE CORPORATION, COURT OF APPEALS (11th Division), and HON.
ENRIQUE T. JOCSON, Judge, Regional Trial Court of Negros Occidental Branch, respondents.

Page 8

(3) PACIFIC TIMBER EXPORT CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and WORKMEN'S INSURANCE COMPANY,
INC., respondents.

Page 13

(4) GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner,

vs.
HONORABLE COURT OF APPEALS, respondents.

Page 18

(5) RIZAL COMMERCIAL BANKING CORPORATION, UY CHUN BING AND ELI D.

LAO, petitioners,
vs.
COURT OF APPEALS and GOYU & SONS, INC., respondents.

Page 22

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
PHILIPPINE AMERICAN GENERAL INSURANCE CO., respondent.

Page 37

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(1)

ARMANDO GEAGONIA, petitioner,

vs.
COURT OF APPEALS and COUNTRY BANKERS INSURANCE
CORPORATION, respondents.

DAVIDE, JR., J.:

Four our review under Rule 45 of the Rules of Court is the decision 1 of the Court of Appeals in CA-
G.R. SP No. 31916, entitled "Country Bankers Insurance Corporation versus Armando Geagonia,"
reversing the decision of the Insurance Commission in I.C. Case No. 3340 which awarded the claim of
petitioner Armando Geagonia against private respondent Country Bankers Insurance Corporation.

The petitioner is the owner of Norman's Mart located in the public market of San Francisco, Agusan
del Sur. On 22 December 1989, he obtained from the private respondent fire insurance policy No. F-
14622 2 for P100,000.00. The period of the policy was from 22 December 1989 to 22 December 1990 and
covered the following: "Stock-in-trade consisting principally of dry goods such as RTW's for men and
women wear and other usual to assured's business."

The petitioner declared in the policy under the subheading entitled CO-INSURANCE that Mercantile
Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, the petitioner had in his
inventory stocks amounting to P392,130.50, itemized as follows:

Zenco Sales, Inc. P55,698.00

F. Legaspi Gen. Merchandise 86,432.50

Cebu Tesing Textiles 250,000.00 (on credit)

P392,130.50

The policy contained the following condition:

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 3. The insured shall give notice to the Company of any insurance or insurances
already affected, or which may subsequently be effected, covering any of the
property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless such notice be given and the particulars
of such insurance or insurances be stated therein or endorsed in this policy pursuant
to Section 50 of the Insurance Code, by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this policy shall be deemed
forfeited, provided however, that this condition shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not more than
P200,000.00.

On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San
Francisco, Agusan del Sur. The petitioner's insured stock-in-trade were completely destroyed
prompting him to file with the private respondent a claim under the policy. On 28 December 1990,
the private respondent denied the claim because it found that at the time of the loss the petitioner's
stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144,
for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc.
(hereinafter PFIC). 3 These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando
Geagonia, Prop.)" with a mortgage clause reading:

MORTGAGE: Loss, if any shall be payable to Messrs. Cebu Tesing Textiles, Cebu
City as their interest may appear subject to the terms of this policy. CO-INSURANCE
DECLARED: P100,000. Phils. First CEB/F 24758. 4

The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of
the policy.

The petitioner then filed a complaint 5 against the private respondent with the Insurance Commission
(Case No. 3340) for the recovery of P100,000.00 under fire insurance policy No. F-14622 and for
attorney's fees and costs of litigation. He attached as Annex "AM" 6 thereof his letter of 18 January 1991
which asked for the reconsideration of the denial. He admitted in the said letter that at the time he
obtained the private respondent's fire insurance policy he knew that the two policies issued by the PFIC
were already in existence; however, he had no knowledge of the provision in the private respondent's
policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by the
private respondent's agent; and had it been mentioned, he would not have withheld such information. He
further asserted that the total of the amounts claimed under the three policies was below the actual value
of his stocks at the time of loss, which was P1,000,000.00.

In its answer, 7 the private respondent specifically denied the allegations in the complaint and set up as its
principal defense the violation of Condition 3 of the policy.

In its decision of 21 June 1993, 8 the Insurance Commission found that the petitioner did not violate
Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the
PFIC; that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or securing
his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These
findings were based on the petitioner's testimony that he came to know of the PFIC policies only when he
filed his claim with the private respondent and that Cebu Tesing Textile obtained them and paid for their
premiums without informing him thereof. The Insurance Commission then decreed:

WHEREFORE, judgment is hereby rendered ordering the respondent company to

pay complainant the sum of P100,000.00 with legal interest from the time the
complaint was filed until fully satisfied plus the amount of P10,000.00 as attorney's
fees. With costs. The compulsory counterclaim of respondent is hereby dismissed.

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Its motion for the reconsideration of the decision 9 having been denied by the Insurance Commission in
its resolution of 20 August 1993, 10 the private respondent appealed to the Court of Appeals by way of a
petition for review. The petition was docketed as CA-G.R. SP No. 31916.

In its decision of 29 December 1993, 11 the Court of Appeals reversed the decision of the Insurance
Commission because it found that the petitioner knew of the existence of the two other policies issued by
the PFIC. It said:

It is apparent from the face of Fire Policy GA 28146/Fire Policy No. 28144 that the
insurance was taken in the name of private respondent [petitioner herein]. The policy
states that "DISCOUNT MART (MR. ARMANDO GEAGONIA, PROP)" was the
assured and that "TESING TEXTILES" [was] only the mortgagee of the goods.

In addition, the premiums on both policies were paid for by private respondent, not by
the Tesing Textiles which is alleged to have taken out the other insurance without the
knowledge of private respondent. This is shown by Premium Invoices nos. 46632
and 46630. (Annexes M and N). In both invoices, Tesing Textiles is indicated to be
only the mortgagee of the goods insured but the party to which they were issued
were the "DISCOUNT MART (MR. ARMANDO GEAGONIA)."

In is clear that it was the private respondent [petitioner herein] who took out the
policies on the same property subject of the insurance with petitioner. Hence, in
failing to disclose the existence of these insurances private respondent violated
Condition No. 3 of Fire Policy No. 1462. . . .

Indeed private respondent's allegation of lack of knowledge of the provisions

insurances is belied by his letter to petitioner [of 18 January 1991. The body of the
letter reads as follows;]

xxx xxx xxx

Please be informed that I have no knowledge of the provision

requiring me to inform your office about my
prior insurance under FGA-28146 and F-CEB-24758. Your
representative did not mention about said requirement at the time he
was convincing me to insure with you. If he only die or even inquired
if I had other existing policies covering my establishment, I would
have told him so. You will note that at the time he talked to me until I
decided to insure with your company the two policies aforementioned
were already in effect. Therefore I would have no reason to withhold
such information and I would have desisted to part with my hard
earned peso to pay the insurance premiums [if] I know I could not
recover anything.

Sir, I am only an ordinary businessman interested in protecting my

investments. The actual value of my stocks damaged by the fire was
estimated by the Police Department to be P1,000,000.00 (Please see
xerox copy of Police Report Annex "A"). My Income Statement as of
December 31, 1989 or five months before the fire, shows my
merchandise inventory was already some P595,455.75. . . . These
will support my claim that the amount claimed under the three
policies are much below the value of my stocks lost.

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 xxx xxx xxx

The letter contradicts private respondent's pretension that he did not know that there
were other insurances taken on the stock-in-trade and seriously puts in question his
credibility.

His motion to reconsider the adverse decision having been denied, the petitioner filed the instant
petition. He contends therein that the Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction:

A . . . WHEN IT REVERSED THE FINDINGS OF FACTS OF THE INSURANCE

COMMISSION, A QUASI-JUDICIAL BODY CHARGED WITH THE DUTY OF
DETERMINING INSURANCE CLAIM AND WHOSE DECISION IS ACCORDED
RESPECT AND EVEN FINALITY BY THE COURTS;

B . . . WHEN IT CONSIDERED AS EVIDENCE MATTERS WHICH WERE NOT

PRESENTED AS EVIDENCE DURING THE HEARING OR TRIAL; AND

C . . . WHEN IT DISMISSED THE CLAIM OF THE PETITIONER HEREIN

AGAINST THE PRIVATE RESPONDENT.

The chief issues that crop up from the first and third grounds are (a) whether the petitioner had prior
knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance
policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the
policy, and (b) if he had, whether he is precluded from recovering therefrom.

The second ground, which is based on the Court of Appeals' reliance on the petitioner's letter of
reconsideration of 18 January 1991, is without merit. The petitioner claims that the said letter was
not offered in evidence and thus should not have been considered in deciding the case. However, as
correctly pointed out by the Court of Appeals, a copy of this letter was attached to the petitioner's
complaint in I.C. Case No. 3440 as Annex "M" thereof and made integral part of the complaint. 12 It
has attained the status of a judicial admission and since its due execution and authenticity was not denied
by the other party, the petitioner is bound by it even if it were not introduced as an independent
evidence. 13

As to the first issue, the Insurance Commission found that the petitioner had no knowledge of the
previous two policies. The Court of Appeals disagreed and found otherwise in view of the explicit
admission by the petitioner in his letter to the private respondent of 18 January 1991, which was
quoted in the challenged decision of the Court of Appeals. These divergent findings of fact constitute
an exception to the general rule that in petitions for review under Rule 45, only questions of law are
involved and findings of fact by the Court of Appeals are conclusive and binding upon this Court. 14

We agree with the Court of Appeals that the petitioner knew of the prior policies issued by the PFIC.
His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His
testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot
prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not
know about the prior policies since these policies were not new or original. Policy No. GA-28144 was
a renewal of Policy No. F-24758, while Policy No. GA-28146 had been renewed twice, the previous
policy being F-24792.

Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not proscribed by
law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code 15 which provides

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that "[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the
breach of an immaterial provision does not avoid the policy." Such a condition is a provision which
invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It
is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a
warranty that no other insurance exists. Its violation would thus avoid the
policy. 16 However, in order to constitute a violation, the other insurance must be upon same subject
matter, the same interest therein, and the same risk. 17

As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable
interest therein and both interests may be one policy, or each may take out a separate policy
covering his interest, either at the same or at separate times. 18 The mortgagor's insurable interest
covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full
value of the property. 19 The mortgagee's insurable interest is to the extent of the debt, since the property
is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien
thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the
debt, not exceeding the value of the mortgaged property. 20 Thus, separate insurances covering different
insurable interests may be obtained by the mortgagor and the mortgagee.

A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual
practice. The mortgagee may be made the beneficial payee in several ways. He may become the
assignee of the policy with the consent of the insurer; or the mere pledgee without such consent; or
the original policy may contain a mortgage clause; or a rider making the policy payable to the
mortgagee "as his interest may appear" may be attached; or a "standard mortgage clause,"
containing a collateral independent contract between the mortgagee and insurer, may be attached;
or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by a
mortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee
acquires an equitable lien upon the proceeds. 21

In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his
interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such
by the insurer but not made a party to the contract himself. Hence, any act of the mortgagor which
defeats his right will also defeat the right of the mortgagee. 22 This kind of policy covers only such
interest as the mortgagee has at the issuing of the policy. 23

On the other hand, a mortgagee may also procure a policy as a contracting party in accordance with
the terms of an agreement by which the mortgagor is to pay the premiums upon such insurance. 24 It
has been noted, however, that although the mortgagee is himself the insured, as where he applies for a
policy, fully informs the authorized agent of his interest, pays the premiums, and obtains on the assurance
that it insures him, the policy is in fact in the form used to insure a mortgagor with loss payable clause. 25

The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a
mortgage clause which reads:

Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their
interest may appear subject to the terms of this policy.

This is clearly a simple loss payable clause, not a standard mortgage clause.

It must, however, be underscored that unlike the "other insurance" clauses involved in General
Insurance and Surety Corp. vs. Ng Hua 26 or in Pioneer Insurance & Surety Corp. vs. Yap, 27 which read:

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 The insured shall give notice to the company of any insurance or insurances already
effected, or which may subsequently be effected covering any of the property hereby
insured, and unless such notice be given and the particulars of such insurance or
insurances be stated in or endorsed on this Policy by or on behalf of the Company
before the occurrence of any loss or damage, all benefits under this Policy shall be
forfeited.

or in the 1930 case of Santa Ana vs. Commercial Union Assurance

Co. 28 which provided "that any outstanding insurance upon the whole or a portion of the objects
thereby assured must be declared by the insured in writing and he must cause the company to
add or insert it in the policy, without which such policy shall be null and void, and the insured will
not be entitled to indemnity in case of loss," Condition 3 in the private respondent's policy No. F-
14622 does not absolutely declare void any violation thereof. It expressly provides that the
condition "shall not apply when the total insurance or insurances in force at the time of the loss or
damage is not more than P200,000.00."

It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in

favor of the insured and strictly against the company, the reason being, undoubtedly, to afford the
greatest protection which the insured was endeavoring to secure when he applied for insurance. It is
also a cardinal principle of law that forfeitures are not favored and that any construction which would
result in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is
possible to construe the policy in a manner which would permit recovery, as, for example, by finding
a waiver for such forfeiture. 29 Stated differently, provisions, conditions or exceptions in policies which
tend to work a forfeiture of insurance policies should be construed most strictly against those for whose
benefits they are inserted, and most favorably toward those against whom they are intended to
operate. 30 The reason for this is that, except for riders which may later be inserted, the insured sees the
contract already in its final form and has had no voice in the selection or arrangement of the words
employed therein. On the other hand, the language of the contract was carefully chosen and deliberated
upon by experts and legal advisers who had acted exclusively in the interest of the insurers and the
technical language employed therein is rarely understood by ordinary laymen. 31

With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally
free from ambiguity and must, perforce, be meticulously analyzed. Such analysis leads us to
conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy
shall only be to the extent exceeding P200,000.00 of the total policies obtained.

The first conclusion is supported by the portion of the condition referring to other insurance "covering
any of the property or properties consisting of stocks in trade, goods in process and/or inventories
only hereby insured," and the portion regarding the insured's declaration on the subheading CO-
INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A
double insurance exists where the same person is insured by several insurers separately in respect
of the same subject and interest. As earlier stated, the insurable interests of a mortgagor and a
mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC
do not cover the same interest as that covered by the policy of the private respondent, no double
insurance exists. The non-disclosure then of the former policies was not fatal to the petitioner's right
to recover on the private respondent's policy.

Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total
insurance in force at the time of loss does not exceed P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in
mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other
insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of
fraud. When a property owner obtains insurance policies from two or more insurers in a total amount

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that exceeds the property's value, the insured may have an inducement to destroy the property for
the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a
situation in which a fire would be profitable to the insured. 32

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-
G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Commission in Case No. 3340
is REINSTATED.

Costs against private respondent Country Bankers Insurance Corporation.

SO ORDERED.

(2)

HEIRS OF ILDEFONSO COSCOLLUELA, SR., INC., petitioner,

vs.
RICO GENERAL INSURANCE CORPORATION, COURT OF APPEALS
(11th Division), and HON. ENRIQUE T. JOCSON, Judge, Regional Trial
Court of Negros Occidental Branch, respondents.

Ildefonso S. Villanueva and Rolando N. Medalla for petitioner.

Limbaga, Bana-ag, Bana-ag & Associates for private respondent.

GUTIERREZ, JR., J.:

The main issues raised in this petition for review on certiorari are whether the Court of Appeals erred
in: (1) affirming the dismissal by the trial court of the complaint for damages on the ground of lack of
cause of action, and in (2) denying due course to a petition for certiorari on the ground that the
remedy of the petitioner to assail said order is appeal.

Petitioner, Heirs of Ildefonso Coscoluella, Inc. is a domestic corporation and the registered owner of
an Isuzu KBD Pick-up truck bearing Motor No. 663296 and Plate No. LTV-FAW-189. The vehicle was
insured with the private respondent Rico General Insurance Corporation for a consideration of
P100,000.00 excluding third party liability under Commercial Vehicle Policy No. CV-122415 per
Renewal Certificate No. 02189. The premiums and other expenses for insurance paid covered the
period from October 1, 1986 to October 1, 1987.

On August 28, 1987 and within the period covered by the insurance, the insured vehicle was
severely damaged and rendered unserviceable when fired upon by a group of unidentified armed
persons at Hacienda Puyas, Barangay Blumentritt, Murcia, Negros Occidental. In the same incident,
four persons died.

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Petitioner filed its claim of P80,000.00 for the repair of the vehicle but private respondent, in a letter
dated October 8, 1987, refused to grant it. As a consequence, the petitioner was prompted to file a
complaint with the Regional Trial Court, 6th Judicial Region, Branch 47 at Bacolod City, docketed as
Civil Case No. 4707, to recover the claim of P80,000.00 plus interest and attorney's fees.

The private respondent filed a motion to dismiss alleging that the complaint lacks a cause of action
because the firing by armed men is a risk excepted under the following provisions in the insurance
policy:

The Company shall not be liable under any Section of the Policy in respect of:

1. x x x x x

2. x x x x x

3. Except in respect of claims arising under Sections I and II of the policy, any
accident, loss, damage or liability directly or indirectly, proximately or remotely
occasioned by, contributed to by or traceable to, or arising out of, or in connection
with flood, typhoon, hurricane, volcanic eruption, earthquake or other convulsion of
nature, invasion, the act of foreign enemies, hostilities or warlike operations (whether
war be declared or not), civil commotion, mutiny, rebellion, insurrection, military or
usurped power, or by any direct or indirect consequences of any of the said
occurrences and in the event of any claim hereunder, the insured shall prove that the
accident, loss or damage or liability arose independently of, and was in no way
connected with, or occasioned by, or contributed to, any of the said occurrences, or
any consequence thereof, and in default of such proof, the Company shall not be
liable to make any payment in respect of such claim. (Emphasis supplied; see Rollo,
p. 33,71)

The private respondent alleged that the firing was "an indirect consequence of rebellion, insurrection
or civil commotion." The petitioner opposed the motion, saying that the quoted provision does not
apply in the absence of an official governmental proclamation of any of the above-enumerated
conditions.

The trial court ordered the dismissal of the complaint for lack of cause of action stating that the
damage arose from a civil commotion or was a direct result thereof. (Rollo, p. 37)

A motion for reconsideration filed by the petitioner was denied by the trial court which further noted
that "Courts can take effective cognizance of the general civil disturbance in the country akin to civil
war without any executive proclamation of the existence of such unsettling condition." (Rollo, p. 38)

A second motion for reconsideration was filed but was later withdrawn.

Petitioner filed a notice of appeal which was given due course. However, the trial court, stated in its
order that "the records of the case will not be transmitted to the Court of Appeals, the appropriate
remedy being (a) petition for review by way of certiorari." In that same order, the trial court took

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cognizance of the withdrawal of the second motion for reconsideration but noted the police blotter
appended to said motion which showed that "other than M-16 Armalite Rifles (the number of which
were not specified for unknown reasons), nothing else was taken by the attackers." (Rollo, p. 40)

Thereafter, the petitioner filed a petition for certiorari with the Court of Appeals. The appellate court
denied the petition, affirmed the trial court's dismissal order, and also ruled that an appeal in the
ordinary course of law, not a special civil action of certiorari, is the proper remedy for the petitioner in
assailing the dismissal order.

Hence, this petition to review the respondent appellate court's decision.

Petitioner asserts that its complaint states a cause of action since ultimate facts were alleged as
follows:

3. That, on August 28, 1987, the ISUZU KBD PICK-UP referred to in the preceding
paragraph was damaged as a result of an incident at Hda. Puyas, Barangay
Blumentritt, Murcia, Negros Occidental, when it was fired upon by a group of
unidentified armed persons causing even the death of four (4) persons and rendering
the said vehicle almost totally damaged and unserviceable;

4. That when the said incident occurred on August 28, 1987, the said ISUZU KBD
PICK-UP was insured by the defendant for P100,000.00 excluding third-party liability
under Commercial Vehicle Policy No. CV/122415 per Renewal Certificate No. 02189
a copy of which is herewith attached as Annex "B"; and with the premiums and other
expenses thereon duly paid for under Official Receipt No. 691, dated September 8,
1986, covering the period from October 1, 1986 to October 1, 1987, a copy of the
same being attached hereto as Annex "C";

5. That, the damage on said motor vehicle being a "fait accompli" and that it was
insured by the defendant at the time it was damaged, it is the obligation of the
defendant to restore the said vehicle to its former physical and running condition
when it was insured however defendant refused and still refuses and fails, despite
demands in writing made by plaintiff and its counsel to that effect, copies of said
letters attached hereto as Annexes "D" & "E";

6. That, for purposes of restoring the ISUZU KBD PICK-UP insured by the
defendant to its former physical and running condition when it was insured, as
mentioned above, would cost P80,000.00, which will include repair, repainting,
replacement of spare parts, labor, etc., the said amount having arrived at upon
inspection and appraisal of the said motor vehicle by knowledgeable and technical
people;

7. That, as a consequence of defendant's refusal to settle or pay the just claim of

plaintiff, plaintiff has been compelled to hire the legal services of counsel for the
protection of its rights and interest at the agreed fee of P15,000.00, for and as

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 attorney's fees, which sum plaintiff is claiming from the defendant. (At pp. 29-30,
Rollo)

Petitioner further maintains that the order of dismissal was erroneous in that: it overlooked the
principle that a motion to dismiss a complaint on the ground of failure to state a cause of action
hypothetically admits the allegations in the complaint; no trial was held for the reception of proof that
the firing incident was a direct or indirect result of a civil commotion, mutiny, insurrection or rebellion;
private respondent had the burden of proof to show that the cause was really an excepted risk; and
in any case, the nature of the incident as a "civil disturbance" must first be officially proclaimed by
the executive branch of the government. Private respondent, on the other hand, argues that the
accident was really a result of a civil commotion, one of the fatalities being a military officer. (Rollo, p.
59)

After a review of the records, the Court finds that the allegations set forth in the complaint sufficiently
establish a cause of action. The following are the requisites for the existence of a cause of action: (1)
a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2)
an obligation on the part of the named defendant to respect, or not to violate such right; and (3) an
act or omission on the part of the said defendant constituting a violation of the plaintiff's right or a
breach of the obligation of the defendant to the plaintiff. (Cole v. Vda. de Gregoria, 116 SCRA 670
[1982]; Baliwag Transit, Inc. v. Ople, G. R. No. 57642, March 16, 1989)

The facts as alleged clearly define the existence of a right of the petitioner to a just claim against the
insurer for the payment of the indemnity for a loss due to an event against which the petitioner's
vehicle was insured. The insurance contract mentioned therein manifests a right to pursue a claim
and a duty on the part of the insurer or private respondent to compensate the insured in case of a
risk insured against. The refusal of the insurer to satisfy the claim and the consequent loss to the
petitioner in incurring the cost of acquiring legal assistance on the matter constitutes a violation or an
injury brought to the petitioner.

There is, therefore, a sufficient cause of action upon which the trial court can render a valid
judgment. (Taedo v. Bernad, et al; G. R. No. 66520, August 30, 1988).

The Court is very much cognizant of the principle that a motion to dismiss on the ground of failure to
state a cause of action stated in the complaint hypothetically admits the truth of the facts therein.
The Court notes the following limitations on the hypothetical admission:

The hypothetical admission is however limited to the relevant and material facts well
pleaded in the complaint and inferences fairly deducible therefrom. The admission
does not extend to conclusions or interpretations of law: nor does it cover allegations
of fact the falsity of which is subject to judicial notice. (U. Baez Electric Light Co. v.
Abra Electric Cooperative, Inc., 119 SCRA 90 [1982])

Applying the above principle, we hold that the private respondent's motion to dismiss hypothetically
admits the facts alleged in the complaint. We do not find anything in the complaint which does not
deserve admission by the motion since there are no "conclusions or interpretations of law" nor
"allegations of fact the falsity of which is subject to judicial notice." It is clear that the complaint does

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no more and no less than state simply that the van was damaged due to the firing by unidentified
armed men. Since the complaint does not explicitly state nor intimate civil strife which private
respondent insists to be the cause of the damage, the motion to dismiss cannot go beyond the
admission of the facts stated and inferences reasonably deducible from them. Any other assertion by
the private respondent is subject to proof. Meanwhile, the sufficiency of the petitioner's cause of
action has been shown since, admitting the facts alleged, a valid judgment can be rendered.

The private respondent's invocation of the exceptions clause in the insurance policy as the basis for
its non-liability and the consequent dismissal of the complaint is without merit. We also reiterate the
established rule that when the terms of an insurance contract contain limitations on liability, the court
"should construe them in such a way as to preclude the insurer from non-compliance with his
obligations." (Taurus Taxi Co. Inc. v. Capital Insurance and Surety Company, Inc., 24 SCRA 454
[l968]) A policy of insurance with a narration of exceptions tending to work a forfeiture of the policy
shall be interpreted liberally in favor of the insured and strictly against the insurance company or the
party for whose benefit they are inserted. (Eagle Star Insurance, Ltd. v. Chia Yu, 96 Phil. 696 [1955];
Trinidad v. Orient Protective Asso., 67 Phil. 181 [1939]; Serrano v. Court of Appeals, 130 SCRA 327
[1984]; and National Power Corp. v. Court of Appeals, 145 SCRA 533 [1986]).

The facts alleged in the complaint do not give a complete scenario of the real nature of the firing
incident. Hence, it was incumbent upon the trial judge to have made a deeper scrutiny into the
circumstances of the case by receiving evidence instead of summarily disposing of the case.
Contrary to what the respondent appellate court says, this case does not present a pure question of
law but demands a factual determination of whether the incident was a result of events falling under
the exceptions to the liability of private respondent contained in the policy of insurance.

We agree with the petitioner's claim that the burden of proof to show that the insured is not liable
because of an excepted risk is on the private respondent. The Rules of Court in its Section 1, Rule
131 provides that "each party must prove his affirmative allegations." (Summit Guaranty and
Insurance Co., Inc. vs. Court of Appeals, 110 SCRA 241 [1981]; Tai Tong Chuache & Co. v.
Insurance Commissioner, 158 SCRA 366 [1988]; Paris-Manila Perfume Co. v. Phoenix Assurance
Co., 49 Phil. 753 [1926]). Where the insurer denies liability for a loss alleged to be due to a risk not
insured against, but fails to establish the truth of such fact by concrete proofs, the Court rules that
the insurer is liable under the terms and conditions of the policy by which it has bound itself. In this
case, the dismissal order without hearing and reception of evidence to prove that the firing incident
was indeed a result of a civil commotion, rebellion or insurrection constitutes reversible error on the
part of the trial court.

The Court stresses that it would be a grave and dangerous procedure for the courts to permit
insurance companies to escape liability through a motion to dismiss without the benefit of hearing
and evidence every time someone is killed, or as in this case,. property is damaged in an ambush.
The question on the nature of the firing incident for the purpose of determining whether or not the
insurer is liable must first be threshed out and resolved in a full-blown trial.

The evidence to be received does not even have to relate to the existence of an official government
proclamation of the nature of the incident because the latter is not an explicit requirement in the
exception clause resolved in a mere motion to dismiss and is, for purposes of this petition for review

Page | 12
on certiorari, immaterial. This particular issue on when to take cognizance of a rebellion for purposes
of the law on contracts and obligations should have been developed during the trial on the merits or
may have to await remedial legislation in Insurance Law or a decision in a more appropriate case.

The petitioner also questions the reasoning of the Court of Appeals in denying due course to the
petition for certiorari. The appellate court said that even assuming for the sake of argument that the
dismissal order by the trial court was not procedurally correct for lack of hearing, there was only an
"error of judgment or procedure" correctible only by appeal then available in the ordinary course of
law and not by a special civil action of certiorari which cannot be a substitute for appeal.

The records show that the remedy of appeal was actually intended to be pursued by petitioner.
However, the appeal was rendered unfeasible when the trial judge refused to transmit the records to
the appellate court. (see Rollo, p. 40) The judge, in effect, ruled out the remedy of appeal which was
supposed to be availed of as a matter of right. In filing a petition for certiorari, the petitioner was
acting upon the instructions of the judge. Under a situation where there was no more plain, speedy
and adequate remedy in the ordinary course of law, the only available recourse was to file a special
civil action of certiorari to determine whether or not the dismissal order was issued with grave abuse
of discretion.

It is apparent, moreover, that the respondent appellate court failed to appreciation the petitioner's
predicament. The trial judge, aside from dismissing the complaint which we now rule to have a
sufficient cause of action, likewise prevented an ordinary appeal to prosper in contravention of what
is provided for by the rules of procedure.

The April 6, 1988 order of the trial judge stating that the appropriate remedy was a petition for review
by way of certiorari is deplorable. The lower court cannot even distinguish between an original
petition for certiorari and a petition for review by way of certiorari. A petition for review before the
Court of Appeals could have been availed of if what is challenged is an adverse decision of the
Regional Trial Court in its appellate capacity affirming, modifying or reversing a decision of a
municipal trial court or lower tribunal. (Section 22, Batas Pambansa Blg. 129 and Section 22 (6) of
the Interim Rules). In this case, the petitioner assailed the dismissal order of the Regional Trial Court
of a complaint originally filed with it. This adverse order which had the effect of a judgment on the
merits, may be appealed to the Court of Appeals by filing a notice of appeal within fifteen (15) days
from receipt of notice of the order both on questions of law and of fact. (Section 39, Batas Pambansa
Blg. 129 and Section 19 (a) of the Interim Rules). This was exactly what petitioner did after its motion
for reconsideration was denied. Unfortunately, the trial judge failed to see the propriety of this
recourse. And the Court of Appeals compounded the problem when it denied the petitioner any
remedy arising from the Judge's wrong instructions.

The filing of the petition for certiorari was proper. Petitioner has satisfactorily shown before the
respondent appellate court that the trial judge "acted whimsically in total disregard of evidence
material to and even decisive of the controversy". (Pure Foods Corp. v. National Labor Relations
Commission, G. R. No. 78591, March 21, 1989).

Page | 13
The extraordinary writ of certiorari is always available where there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law. (Tropical Homes, Inc. v. National
Housing Authority, 152 SCRA 540 [1987]; Pure Foods Corp. v. NLRC, supra)

Since the petitioner was denied the remedy of appeal, the Court deems that a certiorari petition was
in order.

WHEREFORE, considering the foregoing, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals affirming the dismissal order by the Regional Trial Court is hereby
REVERSED and SET ASIDE. Let the case be remanded to the lower court for trial on the merits.

SO ORDERED.

(3)

Page | 14
PACIFIC TIMBER EXPORT CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and WORKMEN'S
INSURANCE COMPANY, INC., respondents.

DE CASTRO, ** J.:

This petition seeks the review of the decision of the Court of Appeals reversing the decision of the
Court of First Instance of Manila in favor of petitioner and against private respondent which ordered
the latter to pay the sum of Pll,042.04 with interest at the rate of 12% interest from receipt of notice
of loss on April 15, 1963 up to the complete payment, the sum of P3,000.00 as attorney's fees and
the costs 1 thereby dismissing petitioner s complaint with costs. 2

The findings of the of fact of the Court of Appeals, which are generally binding upon this Court,
Except as shall be indicated in the discussion of the opinion of this Court the substantial correctness
of still particular finding having been disputed, thereby raising a question of law reviewable by this
Court 3 are as follows:

March 19, l963, the plaintiff secured temporary insurance from the defendant for its
exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be
shipped from the Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan. The
defendant issued on said date Cover Note No. 1010, insuring the said cargo of the
plaintiff "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE
COMPANY, INC. printed Marine Policy form as filed with and approved by the Office
of the Insurance Commissioner (Exhibit A).

The regular marine cargo policies were issued by the defendant in favor of the
plaintiff on April 2, 1963. The two marine policies bore the numbers 53 HO 1032 and
53 HO 1033 (Exhibits B and C, respectively). Policy No. 53 H0 1033 (Exhibit B) was
for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0 1033 was
for 853 pieces of logs equivalent to 695,548 board feet (Exhibit C). The total cargo
insured under the two marine policies accordingly consisted of 1,395 logs, or the
equivalent of 1,195.498 bd. ft.

After the issuance of Cover Note No. 1010 (Exhibit A), but before the issuance of the
two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to
be exported were lost during loading operations in the Diapitan Bay. The logs were to
be loaded on the 'SS Woodlock' which docked about 500 meters from the shoreline
of the Diapitan Bay. The logs were taken from the log pond of the plaintiff and from
which they were towed in rafts to the vessel. At about 10:00 o'clock a. m. on March
29, 1963, while the logs were alongside the vessel, bad weather developed resulting
in 75 pieces of logs which were rafted together co break loose from each other. 45
pieces of logs were salvaged, but 30 pieces were verified to have been lost or
washed away as a result of the accident.

Page | 15
In a letter dated April 4, 1963, the plaintiff informed the defendant about the loss of 'appropriately 32
pieces of log's during loading of the 'SS Woodlock'. The said letter (Exhibit F) reads as follows:

April 4, 1963

Workmen's Insurance Company, Inc. Manila, Philippines

Gentlemen:

This has reference to Insurance Cover Note No. 1010 for shipment of 1,250,000 bd.
ft. Philippine Lauan and Apitong Logs. We would like to inform you that we have
received advance preliminary report from our Office in Diapitan, Quezon that we
have lost approximately 32 pieces of logs during loading of the SS Woodlock.

We will send you an accurate report all the details including values as soon as same
will be reported to us.

Thank you for your attention, we wish to remain.

Very respectfully yours,

PACIFIC TIMBER EXPORT CORPORATION

(Sgd.) EMMANUEL S. ATILANO Asst. General Manager.

Although dated April 4, 1963, the letter was received in the office of the defendant
only on April 15, 1963, as shown by the stamp impression appearing on the left
bottom corner of said letter. The plaintiff subsequently submitted a 'Claim Statement
demanding payment of the loss under Policies Nos. 53 HO 1032 and 53 HO 1033, in
the total amount of P19,286.79 (Exhibit G).

On July 17, 1963, the defendant requested the First Philippine Adjustment
Corporation to inspect the loss and assess the damage. The adjustment company
submitted its 'Report on August 23, 1963 (Exhibit H). In said report, the adjuster
found that 'the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032
and 1033 inasmuch as said policies covered the actual number of logs loaded on
board the 'SS Woodlock' However, the loss of 30 pieces of logs is within the
1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00.

On September 14, 1963, the adjustment company submitted a computation of the

defendant's probable liability on the loss sustained by the shipment, in the total
amount of Pl1,042.04 (Exhibit 4).

On January 13, 1964, the defendant wrote the plaintiff denying the latter's claim, on
the ground they defendant's investigation revealed that the entire shipment of logs
covered by the two marines policies No. 53 110 1032 and 713 HO 1033 were

Page | 16
 received in good order at their point of destination. It was further stated that the said
loss may be considered as covered under Cover Note No. 1010 because the said
Note had become 'null and void by virtue of the issuance of Marine Policy Nos. 53
HO 1032 and 1033'(Exhibit J-1). The denial of the claim by the defendant was
brought by the plaintiff to the attention of the Insurance Commissioner by means of a
letter dated March 21, 1964 (Exhibit K). In a reply letter dated March 30, 1964,
Insurance Commissioner Francisco Y. Mandanas observed that 'it is only fair and
equitable to indemnify the insured under Cover Note No. 1010', and advised early
settlement of the said marine loss and salvage claim (Exhibit L).

On June 26, 1964, the defendant informed the Insurance Commissioner that, on
advice of their attorneys, the claim of the plaintiff is being denied on the ground that
the cover note is null and void for lack of valuable consideration (Exhibit M). 4

Petitioner assigned as errors of the Court of Appeals, the following:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE COVER NOTE WAS
NULL AND VOID FOR LACK OF VALUABLE CONSIDERATION BECAUSE THE
COURT DISREGARDED THE PROVEN FACTS THAT PREMIUMS FOR THE
COMPREHENSIVE INSURANCE COVERAGE THAT INCLUDED THE COVER
NOTE WAS PAID BY PETITIONER AND THAT INCLUDED THE COVER NOTE
WAS PAID BY PETITIONER AND THAT NO SEPARATE PREMIUMS ARE
COLLECTED BY PRIVATE RESPONDENT ON ALL ITS COVER NOTES.

II

THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT

WAS RELEASED FROM LIABILITY UNDER THE COVER NOTE DUE TO
UNREASONABLE DELAY IN GIVING NOTICE OF LOSS BECAUSE THE COURT
DISREGARDED THE PROVEN FACT THAT PRIVATE RESPONDENT DID NOT
PROMPTLY AND SPECIFICALLY OBJECT TO THE CLAIM ON THE GROUND OF
DELAY IN GIVING NOTICE OF LOSS AND, CONSEQUENTLY, OBJECTIONS ON
THAT GROUND ARE WAIVED UNDER SECTION 84 OF THE INSURANCE ACT. 5

1. Petitioner contends that the Cover Note was issued with a consideration when, by express
stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the
payment of premiums is one of the terms of the policies. From this undisputed fact, We uphold
petitioner's submission that the Cover Note was not without consideration for which the respondent
court held the Cover Note as null and void, and denied recovery therefrom. The fact that no separate
premium was paid on the Cover Note before the loss insured against occurred, does not militate
against the validity of petitioner's contention, for no such premium could have been paid, since by
the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the
shipment that would serve as basis for the computation of the premiums. As a logical consequence,
no separate premiums are intended or required to be paid on a Cover Note. This is a fact admitted

Page | 17
by an official of respondent company, Juan Jose Camacho, in charge of issuing cover notes of the
respondent company (p. 33, tsn, September 24, 1965).

At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the
statement issued by private respondent after the issuance of the two regular marine insurance
policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must
be deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of
integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note
would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere
application for insurance which is a mere offer. 6

It may be true that the marine insurance policies issued were for logs no longer including those
which had been lost during loading operations. This had to be so because the risk insured against is
not for loss during operations anymore, but for loss during transit, the logs having already been
safely placed aboard. This would make no difference, however, insofar as the liability on the cover
note is concerned, for the number or volume of logs lost can be determined independently as in fact
it had been so ascertained at the instance of private respondent itself when it sent its own adjuster to
investigate and assess the loss, after the issuance of the marine insurance policies.

The adjuster went as far as submitting his report to respondent, as well as its computation of
respondent's liability on the insurance coverage. This coverage could not have been no other than
what was stipulated in the Cover Note, for no loss or damage had to be assessed on the coverage
arising from the marine insurance policies. For obvious reasons, it was not necessary to ask
petitioner to pay premium on the Cover Note, for the loss insured against having already occurred,
the more practical procedure is simply to deduct the premium from the amount due the petitioner on
the Cover Note. The non-payment of premium on the Cover Note is, therefore, no cause for the
petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was
not chargeable against its fault. Had all the logs been lost during the loading operations, but after the
issuance of the Cover Note, liability on the note would have already arisen even before payment of
premium. This is how the cover note as a "binder" should legally operate otherwise, it would serve
no practical purpose in the realm of commerce, and is supported by the doctrine that where a policy
is delivered without requiring payment of the premium, the presumption is that a credit was intended
and policy is valid. 7

2. The defense of delay as raised by private respondent in resisting the claim cannot be sustained.
The law requires this ground of delay to be promptly and specifically asserted when a claim on the
insurance agreement is made. The undisputed facts show that instead of invoking the ground of
delay in objecting to petitioner's claim of recovery on the cover note, it took steps clearly indicative
that this particular ground for objection to the claim was never in its mind. The nature of this specific
ground for resisting a claim places the insurer on duty to inquire when the loss took place, so that it
could determine whether delay would be a valid ground upon which to object to a claim against it.

As already stated earlier, private respondent's reaction upon receipt of the notice of loss, which was
on April 15, 1963, was to set in motion from July 1963 what would be necessary to determine the
cause and extent of the loss, with a view to the payment thereof on the insurance agreement. Thus it
sent its adjuster to investigate and assess the loss in July, 1963. The adjuster submitted his report

Page | 18
on August 23, 1963 and its computation of respondent's liability on September 14, 1963. From April
1963 to July, 1963, enough time was available for private respondent to determine if petitioner was
guilty of delay in communicating the loss to respondent company. In the proceedings that took place
later in the Office of the Insurance Commissioner, private respondent should then have raised this
ground of delay to avoid liability. It did not do so. It must be because it did not find any delay, as this
Court fails to find a real and substantial sign thereof. But even on the assumption that there was
delay, this Court is satisfied and convinced that as expressly provided by law, waiver can
successfully be raised against private respondent. Thus Section 84 of the Insurance Act provides:

Section 84.Delay in the presentation to an insurer of notice or proof of loss is

waived if caused by any act of his or if he omits to take objection promptly and
specifically upon that ground.

From what has been said, We find duly substantiated petitioner's assignments of error.

ACCORDINGLY, the appealed decision is set aside and the decision of the Court of First Instance is
reinstated in toto with the affirmance of this Court. No special pronouncement as to costs.

SO ORDERED.

(4)

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner,

vs.
HONORABLE COURT OF APPEALS, respondents.

G.R. No. L-31878 April 30, 1979

LAPULAPU D. MONDRAGON, petitioner,

vs.
HON. COURT OF APPEALS and NGO HING, respondents.

DE CASTRO, J.:

The two above-entitled cases were ordered consolidated by the Resolution of this Court dated April
29, 1970, (Rollo, No. L-31878, p. 58), because the petitioners in both cases seek similar relief,
through these petitions for certiorari by way of appeal, from the amended decision of respondent
Court of Appeals which affirmed in toto the decision of the Court of First Instance of Cebu, ordering
"the defendants (herein petitioners Great Pacific Ligfe Assurance Company and Mondragon) jointly
and severally to pay plaintiff (herein private respondent Ngo Hing) the amount of P50,000.00 with
interest at 6% from the date of the filing of the complaint, and the sum of P1,077.75, without interest.

Page | 19
It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great
Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year
endownment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go.
Said respondent supplied the essential data which petitioner Lapulapu D. Mondragon, Branch
Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting
(Exhibit I-M). Mondragon finally type-wrote the data on the application form which was signed by
private respondent Ngo Hing. The latter paid the annual premuim the sum of P1,077.75 going over
to the Company, but he reatined the amount of P1,317.00 as his commission for being a duly
authorized agebt of Pacific Life. Upon the payment of the insurance premuim, the binding deposit
receipt (Exhibit E) was issued to private respondent Ngo Hing. Likewise, petitioner Mondragon
handwrote at the bottom of the back page of the application form his strong recommendation for the
approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from
Pacific Life disapproving the insurance application (Exhibit 3-M). The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old,
but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the approval of the 20-year endowment insurance
plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for
such coverage (Exhibit 4-M).

It was when things were in such state that on May 28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. Thereupon, private respondent sought the payment of the
proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of the
same before the Court of First Instance of Cebu, which rendered the adverse decision as earlier
refered to against both petitioners.

The decisive issues in these cases are: (1) whether the binding deposit receipt (Exhibit E)
constituted a temporary contract of the life insurance in question; and (2) whether private respondent
Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void the
aforesaid Exhibit E.

1. At the back of Exhibit E are condition precedents required before a deposit is considered a
BINDING RECEIPT. These conditions state that:

A. If the Company or its agent, shan have received the premium deposit ... and the
insurance application, ON or PRIOR to the date of medical examination ... said
insurance shan be in force and in effect from the date of such medical examination,
for such period as is covered by the deposit ..., PROVIDED the company shall be
satisfied that on said date the applicant was insurable on standard rates under its
rule for the amount of insurance and the kind of policy requested in the application.

D. If the Company does not accept the application on standard rate for the amount of
insurance and/or the kind of policy requested in the application but issue, or offers to

Page | 20
 issue a policy for a different plan and/or amount ..., the insurance shall not be in
force and in effect until the applicant shall have accepted the policy as issued
or offered by the Company and shall have paid the full premium thereof. If the
applicant does not accept the policy, the deposit shall be refunded.

E. If the applicant shall not have been insurable under Condition A above, and the
Company declines to approve the application the insurance applied for shall not
have been in force at any time and the sum paid be returned to the applicant upon
the surrender of this receipt. (Emphasis Ours).

The aforequoted provisions printed on Exhibit E show that the binding deposit receipt is intended to
be merely a provisional or temporary insurance contract and only upon compliance of the following
conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates;
(2) that if the company does not accept the application and offers to issue a policy for a different
plan, the insurance contract shall not be binding until the applicant accepts the policy offered;
otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the
standard rates, and the company disapproves the application, the insurance applied for shall not be
in force at any time, and the premium paid shall be returned to the applicant.

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely
an acknowledgment, on behalf of the company, that the latter's branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the
insurance company; and that the latter will either approve or reject the same on the basis of whether
or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the
insurance application of respondent Ngo Hing, the binding deposit receipt in question had never
become in force at any time.

Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly, merely conditional and does
not insure outright. As held by this Court, where an agreement is made between the applicant and
the agent, no liability shall attach until the principal approves the risk and a receipt is given by the
agent. The acceptance is merely conditional and is subordinated to the act of the company in
approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt"
does not insure by itself (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264).

It bears repeating that through the intra-company communication of April 30, 1957 (Exhibit 3-M),
Pacific Life disapproved the insurance application in question on the ground that it is not offering the
twenty-year endowment insurance policy to children less than seven years of age. What it offered
instead is another plan known as the Juvenile Triple Action, which private respondent failed to
accept. In the absence of a meeting of the minds between petitioner Pacific Life and private
respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in
favor of the latter's one-year old daughter, and with the non-compliance of the abovequoted
conditions stated in the disputed binding deposit receipt, there could have been no insurance
contract duly perfected between thenl Accordingly, the deposit paid by private respondent shall have
to be refunded by Pacific Life.

Page | 21
As held in De Lim vs. Sun Life Assurance Company of Canada, supra, "a contract of insurance, like
other contracts, must be assented to by both parties either in person or by their agents ... The
contract, to be binding from the date of the application, must have been a completed contract, one
that leaves nothing to be dione, nothing to be completed, nothing to be passed upon, or determined,
before it shall take effect. There can be no contract of insurance unless the minds of the parties have
met in agreement."

We are not impressed with private respondent's contention that failure of petitioner Mondragon to
communicate to him the rejection of the insurance application would not have any adverse effect on
the allegedly perfected temporary contract (Respondent's Brief, pp. 13-14). In this first place, there
was no contract perfected between the parties who had no meeting of their minds. Private
respondet, being an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably
aware that said company does not offer the life insurance applied for. When he filed the insurance
application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will
approve the recommendation of Mondragon for the acceptance and approval of the application in
question along with his proposal that the insurance company starts to offer the 20-year endowment
insurance plan for children less than seven years. Nonetheless, the record discloses that Pacific Life
had rejected the proposal and recommendation. Secondly, having an insurable interest on the life of
his one-year old daughter, aside from being an insurance agent and an offense associate of
petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on
the processing of such application and could not pretend ignorance of the Company's rejection of the
20-year endowment life insurance application.

At this juncture, We find it fit to quote with approval, the very apt observation of then Appellate
Associate Justice Ruperto G. Martin who later came up to this Court, from his dissenting opinion to
the amended decision of the respondent court which completely reversed the original decision, the
following:

Of course, there is the insinuation that neither the memorandum of rejection (Exhibit
3-M) nor the reply thereto of appellant Mondragon reiterating the desire for
applicant's father to have the application considered as one for a 20-year endowment
plan was ever duly communicated to Ngo; Hing, father of the minor applicant. I am
not quite conninced that this was so. Ngo Hing, as father of the applicant herself, was
precisely the "underwriter who wrote this case" (Exhibit H-1). The unchallenged
statement of appellant Mondragon in his letter of May 6, 1957) (Exhibit 4-M),
specifically admits that said Ngo Hing was "our associate" and that it was the latter
who "insisted that the plan be placed on the 20-year endowment plan." Under these
circumstances, it is inconceivable that the progress in the processing of the
application was not brought home to his knowledge. He must have been duly
apprised of the rejection of the application for a 20-year endowment plan otherwise
Mondragon would not have asserted that it was Ngo Hing himself who insisted on the
application as originally filed, thereby implictly declining the offer to consider the
application under the Juvenile Triple Action Plan. Besides, the associate of
Mondragon that he was, Ngo Hing should only be presumed to know what kind of
policies are available in the company for minors below 7 years old. What he and
Mondragon were apparently trying to do in the premises was merely to prod the

Page | 22
 company into going into the business of issuing endowment policies for minors just
as other insurance companies allegedly do. Until such a definite policy is however,
adopted by the company, it can hardly be said that it could have been bound at all
under the binding slip for a plan of insurance that it could not have, by then issued at
all. (Amended Decision, Rollo, pp- 52-53).

2. Relative to the second issue of alleged concealment. this Court is of the firm belief that private
respondent had deliberately concealed the state of health and piysical condition of his daughter
Helen Go. Wher private regpondeit supplied the required essential data for the insurance application
form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a
congenital physical defect could never be ensconced nor disguished. Nonetheless, private
respondent, in apparent bad faith, withheld the fact materal to the risk to be assumed by the
insurance compary. As an insurance agent of Pacific Life, he ought to know, as he surely must have
known. his duty and responsibility to such a material fact. Had he diamond said significant fact in the
insurance application fom Pacific Life would have verified the same and would have had no choice
but to disapprove the application outright.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute
and perfect candor or openness and honesty; the absence of any concealment or demotion,
however slight [Black's Law Dictionary, 2nd Edition], not for the alone but equally so for the insurer
(Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70). Concealment is a neglect to
communicate that which a partY knows aDd Ought to communicate (Section 25, Act No. 2427).
Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of
insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil 930; Satumino vs.
Philippine American Life Insurance Company, 7 SCRA 316). Private respondent appears guilty
thereof.

We are thus constrained to hold that no insurance contract was perfected between the parties with
the noncompliance of the conditions provided in the binding receipt, and concealment, as legally
defined, having been comraitted by herein private respondent.

WHEREFORE, the decision appealed from is hereby set aside, and in lieu thereof, one is hereby
entered absolving petitioners Lapulapu D. Mondragon and Great Pacific Life Assurance Company
from their civil liabilities as found by respondent Court and ordering the aforesaid insurance
company to reimburse the amount of P1,077.75, without interest, to private respondent, Ngo Hing.
Costs against private respondent.

SO ORDERED.

(5)

Page | 23
RIZAL COMMERCIAL BANKING CORPORATION, UY CHUN BING AND
ELI D. LAO, petitioners,
vs.
COURT OF APPEALS and GOYU & SONS, INC., respondents.

G.R. No. 128834 April 20, 1998

RIZAL COMMERCIAL BANKING CORPORATION, petitioners,

vs.
COURT OF APPEALS, ALFREDO C. SEBASTIAN, GOYU & SONS, INC.,
GO SONG HIAP, SPOUSES GO TENG KOK and BETTY CHIU SUK
YING alias BETTY GO, respondents.

G.R. No. 128866 April 20, 1998

MALAYAN INSURANCE INC., petitioners,

vs.
GOYU & SONS, INC. respondent.

MELO, J.:

The issue relevant to the herein three consolidated petitions revolve around the fire loss claims of
respondent Goyu & Sons, Inc. (GOYU) with petitioner Malayan Insurance Company, Inc. (MICO) in
connection with the mortgage contracts entered into by and between Rizal Commercial Banking
Corporation (RCBC) and GOYU.

The Court of Appeals ordered MICO to pay GOYU its claims in the total amount of P74,040,518.58,
plus 37% interest per annum commending July 27, 1992. RCBC was ordered to pay actual and
compensatory damages in the amount of P5,000,000.00. MICO and RCBC were held solidarily liable
to pay GOYU P1,500,000.00 as exemplary damages and P1,500,000.00 for attorney's fees. GOYU's
obligation to RCBC was fixed at P68,785,069.04 as of April 1992, without any interest, surcharges,
and penalties. RCBC and MICO appealed separately but, in view of the common facts and issues
involved, their individual petitions were consolidated.

The undisputed facts may be summarized as follows:

GOYU applied for credit facilities and accommodations with RCBC at its Binondo Branch. After due
evaluation, RCBC Binondo Branch, through its key officers, petitioners Uy Chun Bing and Eli D. Lao,
recommended GOYU's application for approval by RCBC's executive committee. A credit facility in
the amount of P30 million was initially granted. Upon GOYU's application and Uy's and Lao's
recommendation, RCBC's executive committee increased GOYU's credit facility to P50 million, then
to P90 million, and finally to P117 million.

Page | 24
As security for its credit facilities with RCBC, GOYU executed two real estate mortgages and two
chattel mortgages in favor of RCBC, which were registered with the Registry of Deeds at Valenzuela,
Metro Manila. Under each of these four mortgage contracts, GOYU committed itself to insure the
mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse
and deliver the insurance polices to RCBC.

GOYU obtained in its name a total of ten insurance policies from MICO. In February 1992, Alchester
Insurance Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies,
issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU (Exhibits "1-
Malayan" to "9-Malayan").

On April 27, 1992, one of GOYU's factory buildings in Valenzuela was gutted by fire. Consequently,
GOYU submitted its claim for indemnity on account of the loss insured against. MICO denied the
claim on the ground that the insurance policies were either attached pursuant to writs of
attachments/garnishments issued by various courts or that the insurance proceeds were also
claimed by other creditors of GOYU alleging better rights to the proceeds than the insured. GOYU
filed a complaint for specific performance and damages which was docketed at the Regional Trial
Court of the National Capital Judicial Region (Manila, Branch 3) as Civil Case No. 93-65442, now
subject of the present G.R. No. 128833 and 128866.

RCBC, one of GOYU's creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons that MICO denied
GOYU's claims.

In an interlocutory order dated October 12, 1993 (Record, pp. 311-312), the Regional Trial Court of
Manila (Branch 3), confirmed that GOYU's other creditors, namely, Urban Bank, Alfredo Sebastian,
and Philippine Trust Company obtained their respective writs of attachments from various courts,
covering an aggregate amount of P14,938,080.23, and ordered that the proceeds of the ten
insurance policies be deposited with the said court minus the aforementioned P14,938,080.23.
Accordingly, on January 7, 1994, MICO deposited the amount of P50,505,594.60 with Branch 3 of
the Manila RTC.

In the meantime, another notice of garnishment was handed down by another Manila RTC sala
(Branch 28) for the amount of P8,696,838.75 (Exhibit "22-Malayan").

After trial, Branch 3 of the Manila RTC rendered judgment in favor of GOYU, disposing:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, Malayan Insurance Company, Inc. and Rizal Commercial Banking
Corporation, ordering the latter as follows:

1. For defendant Malayan Insurance Co., Inc.:

a. To pay the plaintiff its fire loss claims in the total

amount of P74,040,518.58 less the amount of
P50,000,000.00 which is deposited with this Court;

Page | 25
 b. To pay the plaintiff damages by was of interest for
the duration of the delay since July 27, 1992 (ninety
days after defendant insurer's receipt of the required
proof of loss and notice of loss) at the rate of twice the
ceiling prescribed by the Monetary Board, on the
following amounts:

1) P50,000,000.00 from July 27,

1992 up to the time said amount was
deposited with this Court on January
7, 1994;

2) P24,040,518.58 from July 27,

1992 up to the time when the writs of
attachments were received by
defendant Malayan;

2. For defendant Rizal Commercial Banking Corporation:

a. To pay the plaintiff actual and compensatory

damages in the amount of P2,000,000.00;

3. For both defendants Malayan and RCBC:

a. To pay the plaintiff, jointly and severally, the

following amounts:

1) P1,000,000.00 as exemplary
damages;

2) P1,000,000.00 as, and for,

attorney's fees;

3) Costs of suit.

and on the Counterclaim of defendant RCBC, ordering the plaintiff to

pay its loan obligations with defendant RCBC in the amount of
P68,785,069.04, as of April 27, 1992, with interest thereon at the rate
stipulated in the respective promissory notes (without surcharges and
penalties) per computation, pp. 14-A, 14-B & 14-C.

FURTHER, the Clerk of Court of the Regional Trial Court of Manila is hereby ordered
to release immediately to the plaintiff the amount of P50,000,000.00 deposited with
the Court by defendant Malayan, together with all the interest earned thereon.

(Record, pp. 478-479.)

Page | 26
From this judgment, all parties interposed their respective appeals. GOYU was unsatisfied with the
amount awarded in its favor. MICO and RCBC disputed the trial court's findings of liability on their
part. The Court of Appeals party granted GOYU's appeal, but sustained the findings of the trial court
with respect to MICO and RCBC's liabilities, thusly:

WHEREFORE, the decision of the lower court dated June 29, 1994 is hereby
modified as follows:

1. FOR DEFENDANT MALAYAN INSURANCE CO., INC:

a) To pay the plaintiff its fire loss claim in the total

amount of P74,040,518.58 less the amount of
P50,505,594.60 (per O.R. No. 3649285) plus
deposited in court and damages by way of interest
commencing July 27, 1992 until the time Goyu
receives the said amount at the rate of thirty-seven
(37%) percent per annum which is twice the ceiling
prescribed by the Monetary Board.

2. FOR DEFENDANT RIZAL COMMERCIAL BANKING

CORPORATION;

a) To pay the plaintiff actual and compensatory

damages in the amount of P5,000,000.00.

3. FOR DEFENDANTS MALAYAN INSURANCE CO., INC., RIZAL

COMMERCIAL BANKING CORPORATION, UY CHUN BING AND
ELI D. LAO:

a) To pay the plaintiff jointly and severally the

following amounts:

1. P1,500,000.00 as exemplary damages;

2. P1,500,000.00 as and for attorney's fees.

4. And on RCBC's Counterclaim, ordering the plaintiff Goyu & Sons,

Inc. to pay its loan obligation with RCBC in the amount of
P68,785,069.04 as of April 27, 1992 without any interest, surcharges
and penalties.

The Clerk of the Court of the Regional Trial Court of Manila is hereby ordered to
immediately release to Goyu & Sons, Inc. the amount of P50,505,594.60 (per O.R.
No. 3649285) deposited with it by Malayan Insurance Co., Inc., together with all the
interests thereon.

Page | 27
 (Rollo, p. 200.)

RCBC and MICO are now before us in G.R. No. 128833 and 128866, respectively, seeking review
and consequent reversal of the above dispositions of the Court of Appeals.

In G.R. No. 128834, RCBC likewise appeals from the decision in C.A. G.R. No. CV-48376, which
case, by virtue of the Court of Appeals' resolution dated August 7, 1996, was consolidated with C.A.
G.R. No. CV-46162 (subject of herein G.R. No. 128833). At issue in said petition is RCBC's right to
intervene in the action between Alfredo C. Sebastian (the creditor) and GOYU (the debtor), where
the subject insurance policies were attached in favor of Sebastian.

After a careful reviews of the material facts as found by the two courts below in relation to the
pertinent and applicable laws, we find merit in the submission of RCBC and MICO.

The several causes of action pursued below by GOYU gave rise to several related issues which are
now submitted in the petitions before us. This Court, however, discerns one primary and central
issue, and this is, whether or not RCBC, as mortgagee, has any right over the insurance policies
taken by GOYU, the mortgagor, in case of the occurrence of loss.

As earlier mentioned, accordant with the credit facilities extended by RCBC to GOYU, the latter
executed several mortgage contracts in favor of RCBC. It was expressly stipulated in these
mortgage contracts that GOYU shall insure the mortgaged property with any of the insurance
companies acceptable to RCBC. GOYU indeed insured the mortgaged property with MICO, an
insurance company acceptable to RCBC. Bases on their stipulations in the mortgage contracts,
GOYU was supposed to endorse these insurance policies in favor of, and deliver them, to RCBC.
Alchester Insurance Agency, Inc., MICO's underwriter from whom GOYU obtained the subject
insurance policies, prepared the nine endorsements (see Exh. "1-Malayan" to "9-Malayan"; also Exh.
"51-RCBC" to "59-RCBC"), copies of which were delivered to GOYU, RCBC, and MICO. However,
because these endorsements do not bear the signature of any officer of GOYU, the trial court, as
well as the Court of Appeals, concluded that the endorsements are defective.

We do not quite agree.

It is settled that a mortgagor and a mortgagee have separated and distinct insurable interests in the
same mortgaged property, such that each one of them may insure the same property for his own
sole benefit. There is no question that GOYU could insure the mortgaged property for its own
exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance
policies naming itself as the sole payee, the intentions of the parties as shown by their
contemporaneous acts, must be given due consideration in order to better serve the interest of
justice and equity.

It is to be noted that nine endorsement documents were prepared by Alchester in favor of RCBC.
The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific
insurance policy in favor of any particular beneficiary or payee other than the insured had not such
named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that
GOYU voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC,

Page | 28
and not just from any other insurance company. Alchester would not have found out that the subject
pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by
GOYU itself. Had it not been for GOYU, Alchester would not have known of GOYU's intention of
obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with
RCBC, and verily, Alchester would not have endorsed the policies to RCBC had it not been so
directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in
favor of mortgagor RCBC. The basis and purpose of the doctrine was explained in Philippine
National Bank vs. Court of Appeals (94 SCRA 357 [1979]), to wit:

The doctrine of estoppel is based upon the grounds of public, policy, fair dealing,
good faith and justice, and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were directed and
who reasonably relied thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to aid the law in the
administration of justice where without its aid injustice might result. It has been
applied by this Court wherever and whenever special circumstances of a case so
demand.

(p. 368.)

Evelyn Lozada of Alchester testified that upon instructions of Mr. Go, through a certain Mr. Yam, she
prepared in quadruplicate on February 11, 1992 the nine endorsement documents for GOYU's nine
insurance policies in favor of RCBC. The original copies of each of these nine endorsement
documents were sent to GOYU, and the others were sent to RCBC and MICO, while the fourth
copies were detained for Alchester's file (tsn, February 23, pp. 7-8). GOYU has not denied having
received from Alchester the originals of these documents.

RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant to
the stipulation in the mortgage contracts. We find such reliance to be justified under the
circumstances of the case. GOYU failed to seasonably repudiate the authority of the person or
persons who prepared such endorsements. Over and above this, GOYU continued, in the meantime,
to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss
insure against, it was too late for GOYU to disown the endorsements for any imagined or contrived
lack of authority of Alchester to prepare and issue said endorsements. If there had not been actually
an implied ratification of said endorsements by virtue of GOYU's inaction in this case, GOYU is at
the very least estopped from assailing their operative effects. To permit GOYU to capitalize on its
non-confirmation of these endorsements while it continued to enjoy the benefits of the credit facilities
of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage
contracts, is to countenance grave contravention of public policy, fair dealing, good faith, and justice.
Such an unjust situation, the Court cannot sanction. Under the peculiar circumstances obtaining in
this case, the Court is bound to recognize RCBC's right to the proceeds of the insurance polices if
not for the actual endorsement of the policies, at least on the basis of the equitable principle of
estoppel.

Page | 29
GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds
of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit
it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification
to take exception to the strict application of said provision, it having been sufficiently established that
it was the intention of the parties to designate RCBC as the party for whose benefit the insurance
policies were taken out. Consider thus the following:

1. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered
into between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from
RCBC. The mortgage contracts contained common provisions whereby GOYU, as mortgagor,
undertook to have the mortgaged property properly covered against any loss by an insurance
company acceptable to RCBC.

2. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no
less than a sister company of RCBC and definitely an acceptable insurance company to RCBC.

3. Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc.,
and copies thereof were sent to GOYU, MICO, and RCBC. GOYU did not assail, until of late, the
validity of said endorsements.

4. GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities
extended by RCBC which was conditioned upon the endorsement of the insurance policies to be
taken by GOYU to cover the mortgaged properties.

This Court can not over stress the fact that upon receiving its copies of the endorsement documents
prepared by Alchester, GOYU, despite the absence of its written conformity thereto, obviously
considered said endorsement to be sufficient compliance with its obligation under the mortgage
contracts since RCBC accordingly continued to extend the benefits of its credits facilities and GOYU
continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as
the beneficiary of the various insurance policies obtained by GOYU. The intention of the parties will
have to be given full force and effect particular case. The insurance proceeds may, therefore, be
exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person
or entity for whose benefit the polices were clearly intended.

Moreover, the law's evident intention to protect the interests of the mortgage upon the mortgaged
property is expressed in Article 2127 of the Civil Code which states:

Art. 2127. The mortgage extends to the natural accessions, to the improvements,
growing fruits, and the rents or income not yet received when the obligation becomes
due, and to the amount of the indemnity granted or owing to the proprietor from the
insurers of the property mortgaged, or in virtue of expropriation for public use, with
the declarations, amplifications and limitations established by law, whether the estate
remains in the possession of the mortgagor, or it passes into the hands of a third
person.

Page | 30
Significantly, the Court notes that out of the 10 insurance policies subject of this case, only 8 of them
appear to have been subject of the endorsements prepared and delivered by Alchester for and upon
instructions of GOYU as shown below:

INSURANCE POLICY PARTICULARS ENDORSEMENT

a. Policy Number F-114-07795 None

Issue Date March 18, 1992
Expiry Date April 5, 1993
Amount P9,646,224.92

b. Policy Number ACIA/F-174-07660 Exhibit "1-Malayan"

Issue Date January 18, 1992
Expiry Date February 9, 1993
Amount P4,307,217.54

c. Policy Number ACIA/F-114-07661 Exhibit "2-Malayan"

Issue Date January 18, 1992
Expiry Date February 15, 1993
Amount P6,603,586.43

d. Policy Number ACIA/F-114-07662 Exhibit "3-Malayan"

Issue Date January 18, 1992
Expiry Date (not legible)
Amount P6,603,586.43

e. Policy Number ACIA/F-114-07663 Exhibit "4-Malayan"

Issue Date January 18, 1992
Expiry Date February 9, 1993
Amount P9,457,972.76

f. Policy Number ACIA/F-114-07623 Exhibit "7-Malayan"

Issue Date January 13, 1992
Expiry Date January 13, 1993
Amount P24,750,000.00

g. Policy Number ACIA/F-174-07223 Exhibit "6-Malayan"

Issue Date May 29, 1991
Expiry Date June 27, 1992
Amount P6,000,000.00

h. Policy Number CI/F-128-03341 None

Issue Date May 3, 1991
Expiry Date May 3, 1992
Amount P10,000,000.00

Page | 31
 i. Policy Number F-114-07402 Exhibit "8-Malayan"
Issue Date September 16, 1991
Expiry Date October 19, 1992
Amount P32,252,125.20

j. Policy Number F-114-07525 Exhibit "9-Malayan"

Issue Date November 20, 1991
Expiry Date December 5, 1992
Amount P6,603,586.43

(pp. 456-457, Record; Folder of Exhibits for MICO.)

Policy Number F-114-07795 [(a) above] has not been endorsed. This fact was admitted by MICO's
witness, Atty. Farolan (tsn, February 16, 1994, p. 25). Likewise, the record shows no endorsement
for Policy Number CI/F-128-03341 [(h) above]. Also, one of the endorsement documents, Exhibit "5-
Malayan", refers to a certain insurance policy number ACIA-F-07066, which is not among the
insurance policies involved in the complaint.

The proceeds of the 8 insurance policies endorsed to RCBC aggregate to P89,974,488.36. Being
excessively payable to RCBC by reason of the endorsement by Alchester to RCBC, which we
already ruled to have the force and effect of an endorsement by GOYU itself, these 8 policies can
not be attached by GOYU's other creditors up to the extent of the GOYU's outstanding obligation in
RCBC's favor. Section 53 of the Insurance Code ordains that the insurance proceeds of the
endorsed policies shall be applied exclusively to the proper interest of the person for whose benefit it
was made. In this case, to the extent of GOYU's obligation with RCBC, the interest of GOYU in the
subject policies had been transferred to RCBC effective as of the time of the endorsement. These
policies may no longer be attached by the other creditors of GOYU, like Alfredo Sebastian in the
present G.R. No. 128834, which may nonetheless forthwith be dismissed for being moot and
academic in view of the results reached herein. Only the two other policies amounting to
P19,646,224.92 may be validly attached, garnished, and levied upon by GOYU's other creditors. To
the extent of GOYU's outstanding obligation with RCBC, all the rest of the other insurance policies
above-listed which were endorsed to RCBC, are, therefore, to be released from attachment,
garnishment, and levy by the other creditors of GOYU.

This brings us to the next issue to be resolved, which is, the extent of GOYU's outstanding obligation
with RCBC which the proceeds of the 8 insurance policies will discharge and liquidate, or put
differently, the actual amount of GOYU's liability to RCBC.

The Court of Appeals simply echoed the declaration of the trial court finding that GOYU's total
obligation to RCBC was only P68,785,060.04 as of April 27, 1992, thus sanctioning the trial court's
exclusion of Promissory Note No. 421-92 (renewal of Promissory Note No. 908-91) and Promissory
Note No. 420-92 (renewal of Promissory Note No. 952-91) on the ground that their execution is
highly questionable for not only are these dated after the fire, but also because the signatures of
either GOYU or any its representative are conspicuously absent. Accordingly, the Court of Appeals
speculated thusly:

Page | 32
 . . . Hence, this Court is inclined to conclude that said promissory notes were pre-
signed by plaintiff in bank terms, as averred by plaintiff, in contemplation of the
speedy grant of future loans, for the same practice of procedure has always been
adopted in its previous dealings with the bank.

(Rollo, pp. 181-182.)

The fact that the promissory notes bear dates posterior to the fire does not necessarily mean that the
documents are spurious, for it is presumed that the ordinary course of business had been followed
(Metropolitan Bank and Trust Company vs. Quilts and All, Inc., 22 SCRA 486 [1993]). The obligor
and not the holder of the negotiable instrument has the burden of proof of showing that he no longer
owes the obligee any amount (Travel-On, Inc. vs. Court of Appeals, 210 SCRA 351 [1992]).

Even casting aside the presumption of regularity of private transactions, receipt of the loan
amounting to P121,966,058.67 (Exhibits 1-29, RCBC) was admitted by GOYU as indicated in the
testimony of Go Song Hiap when he answered the queries of the trial court.

ATTY. NATIVIDAD

Q: But insofar as the amount stated in Exhibits 1 to 29-RCBC, you

received all the amounts stated therein?

A: Yes, sir, I received the amount.

COURT

He is asking if he received all the amounts stated in Exhibits 1 to 29-

RCBC?

WITNESS:

Yes, Your Honor, I received all the amounts.

COURT

Indicated in the Promissory Notes?

WITNESS

A. The promissory Notes they did not give to me but the amount I
asked which is correct, Your Honor.

COURT

Q Your mean to say the amounts indicated in Exhibits 1 to 29-RCBC

is correct?

Page | 33
 A Yes, Your Honor.

(tsn, Jan. 14, 1994, p. 26.)

Furthermore, aside from its judicial admission of having received all the proceeds of the 29
promissory notes as hereinabove quotes, GOYU also offered and admitted to RCBC that is
obligation be fixed at P116,301,992.60 as shown in its letter date March 9, 1993, which pertinently
reads:

We wish to inform you, therefore that we are ready and willing to pay the current past
due account of this company in the amount of P116,301,992.60 as of 21 January
1993, specified in pars. 15, p. 10, and 18, p. 13 of your affidavits of Third Party
Claims in the Urban case at Makati, Metro Manila and in the Zamboanga case at
Zamboanga city, respectively, less the total of P8,851,519.71 paid from the Seaboard
and Equitable insurance companies and other legitimate deductions. We accept and
confirm this amount of P116,301,992.60 as stated as true and correct.

(Exhibit BB.)

The Court of Appeals erred in placing much significance on the fact that the excluded promissory
notes are dated after the fire. It failed to consider that said notes had for their origin transactions
consummated prior to the fire. Thus, careful attention must be paid to the fact that Promissory Notes
No. 420-92 and 421-92 are mere renewals of Promissory Notes No. 908-91 and 952-91, loans
already availed of by GOYU.

The two courts below erred in failing to see that the promissory notes which they ruled should be
excluded for bearing dates which are after that of the fire, are mere renewals of previous ones. The
proceeds of the loan represented by these promissory notes were admittedly received by GOYU.
There is ample factual and legal basis for giving GOYU's judicial admission of liability in the amount
of P116,301,992.60 full force and effect.

It should, however, be quickly added that whatever amount RCBC may have recovered from the
other insurers of the mortgage property will, nonetheless, have to be applied as payment against
GOYU's obligation. But, contrary to the lower courts' findings, payments effected by GOYU prior to
January 21, 1993 should no longer be deducted. Such payments had obviously been duly
considered by GOYU, in its aforequoted letter date March 9, 1993, wherein it admitted that its past
due account totaled P116,301,992.60 as of January 21, 1993.

The net obligation of GOYU, after deductions, is thus reduced to P107,246,887.90 as of January 21,
1993, to wit:

Total Obligation as admitted by GOYU

as of January 21, 1993: P116,301,992.60

Broken down as follows:

Page | 34
 Principal 1 Interest

Regular 80,535,946.32
FDU 27,548,025.17
____________
Total 108,083,971.49 8,218,021.11 2

LESS:

1) Proceeds from
Seaboard Eastern
Insurance Company 6,095,145.81

2) Proceeds from
Equitable Insurance
Company 2,756,373.00

3) Payment from
foreign department
negotiation: 203,584.89
___________

9,055,104.70 3
================
NET AMOUNT as of January 21, 1993 P107,246,887.90

The need for the payment of interest due the principal amount of the obligation, which is the cost of
money to RCBC, the primary end and the ultimate reason for RCBC's existence and being, was duly
recognized by the trial court when it ruled favorably on RCBC's counterclaim, ordering GOYU "to pay
its loan obligation with RCBC in the amount of P68,785,069.04, as of April 27, 1992, with interest
thereon at the rate stipulated in the respective promissory notes (without surcharges and penalties)
per computation, pp. 14-A, 14-B 14-C" (Record, p. 479). Inexplicably, the Court of Appeals, without
even laying down the factual or legal justification for its ruling, modified the trial court's ruling and
ordered GOYU "to pay the principal amount of P68,785,069.04 without any interest, surcharges and
penalties" (Rollo, p. 200).

It is to be noted in this regard that even the trial court hedgingly and with much uncertainty deleted
the payment of additional interest, penalties, and charges, in this manner:

Regarding defendant RCBC's commitment not to charge additional interest, penalties

and surcharges, the same does not require that it be embodied in a document or
some form of writing to be binding and enforceable. The principle is well known that
generally a verbal agreement or contract is no less binding and effective than a
written one. And the existence of such a verbal agreement has been amply
established by the evidence in this case. In any event, regardless of the existence of
such verbal agreement, it would still be unjust and inequitable for defendant RCBC

Page | 35
 to charge the plaintiff with surcharges and penalties considering the latter's pitiful
situation. (Emphasis supplied).

(Record, p. 476)

The essence or rationale for the payment of interest or cost of money is separate and distinct from
that of surcharges and penalties. What may justify a court in not allowing the creditor to charge
surcharges and penalties despite express stipulation therefor in a valid agreement, may not equally
justify non-payment of interest. The charging of interest for loans forms a very essential and
fundamental element of the banking business, which may truly be considered to be at the very core
of its existence or being. It is inconceivable for a bank to grant loans for which it will not charge any
interest at all. We fail to find justification for the Court of Appeal's outright deletion of the payment of
interest as agreed upon in the respective promissory notes. This constitutes gross error.

For the computation of the interest due to be paid to RCBC, the following rules of thumb laid down
by this Court in Eastern Shipping Lines, Inc. vs. Court of Appeals (234 SCRA 78 [1994]), shall apply,
to wit:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the actual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6%per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to
run only from the date of the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

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 3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.

(pp. 95-97).

There being written stipulations as to the rate of interest owing on each specific promissory note as
summarized and tabulated by the trial court in its decision (pp. 470 and 471, Record) such agreed
interest rates must be followed. This is very clear from paragraph II, sub-paragraph 1 quoted above.

On the issue of payment of surcharges and penalties, we partly agree that GOYU's pitiful situation
must be taken into account. We do not agree, however, that payment of any amount as surcharges
and penalties should altogether be deleted. Even assuming that RCBC, through its responsible
officers, herein petitioners Eli Lao and Uy Chun Bing, may have relayed its assurance for assistance
to GOYU immediately after the occurrence of the fire, we cannot accept the lower courts' finding that
RCBC had thereby ipso facto effectively waived collection of any additional interests, surcharges,
and penalties from GOYU. Assurances of assistance are one thing, but waiver of additional interests,
surcharges, and penalties is another.

Surcharges and penalties agreed to be paid by the debtor in case of default partake of the nature of
liquidated damages, covered by Section 4, Chapter 3, Title XVIII of the Civil Code. Article 2227
thereof provides:

Art. 2227. Liquidated damages, whether intended as a indemnity or penalty, shall be

equitably reduced if they are iniquitous and unconscionable.

In exercising this vested power to determine what is iniquitous and unconscionable, the Court must
consider the circumstances of each case. It should be stressed that the Court will not make any
sweeping ruling that surcharges and penalties imposed by banks for non-payment of the loans
extended by them are generally iniquitous and unconscionable. What may be iniquitous and
unconscionable in one case, may be totally just and equitable in another. This provision of law will
have to be applied to the established facts of any given case. Given the circumstance under which
GOYU found itself after the occurrence of the fire, the Court rules the surcharges rates ranging
anywhere from 9% to 27%, plus the penalty charges of 36%, to be definitely iniquitous and
unconscionable. The Court tempers these rates to 2% and 3%, respectively. Furthermore, in the light
of GOYU's offer to pay the amount of P116,301,992.60 to RCBC as March 1993 (See: Exhibit "BB"),
which RCBC refused, we find it more in keeping with justice and equity for RCBC not to charge
additional interest, surcharges, and penalties from that time onward.

Given the factual milieu hereover, we rule that it was error to hold MICO liable in damages for
denying or withholding the proceeds of the insurance claim to GOYU.

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Firstly, by virtue of the mortgage contracts as well as the endorsements of the insurance policies,
RCBC has the right to claim the insurance proceeds, in substitution of the property lost in the fire.
Having assigned its rights, GOYU lost its standing as the beneficiary of the said insurance policies.

Secondly, for an insurance company to be held liable for unreasonably delaying and withholding
payment of insurance proceeds, the delay must be wanton, oppressive, or malevolent (Zenith
Insurance Corporation vs. CA. 185 SCRA 403 [1990]). It is generally agreed, however, that an
insurer may in good faith and honesty entertain a difference of opinion as to its liability. Accordingly,
the statutory penalty for vexatious refusal of an insurer to pay a claim should not be inflicted unless
the evidence and circumstances show that such refusal was willful and without reasonable cause as
the facts appear to a reasonable and prudent man (Bufallo Ins. Co. vs. Bommarito [CCA 8th] 42 F
[2d] 53, 70 ALR 1211; Phoenix Ins. Co. vs. Clay, 101 Ga. 331, 28 SE 853, 65 Am St. Rep 307;
Kusnetsky vs. Security Ins. Co., 313 Mo. 143, 281 SW 47, 45 ALR 189). The case at bar does not
show that MICO wantonly and in bad faith delayed the release of the proceeds. The problem in the
determination of who is the actual beneficiary of the insurance policies, aggravated by the claim of
various creditors who wanted to partake of the insurance proceeds, not to mention the importance of
the endorsement to RCBC, to our mind, and as now borne out by the outcome herein, justified MICO
in withholding payment to GOYU.

In adjudging RCBC liable in damages to GOYU, the Court of Appeals said that RCBC cannot avail
itself of two simultaneous remedies in enforcing the claim of an unpaid creditor, one for specific
performance and the other for foreclosure. In doing so, said the appellate court, the second action is
deemed barred, RCBC having split a single cause of action (Rollo, pp. 195-199). The Court of
Appeals was too accommodating in giving due consideration to this argument of GOYU, for the
foreclosure suit is still pending appeal before the same Court of Appeals in CA G.R. CV No. 46247,
the case having been elevated by RCBC.

In finding that the foreclosure suit cannot prosper, the Fifteenth Division of the Court of Appeals pre-
empted the resolution of said foreclosure case which is not before it. This is plain reversible error if
not grave abuse of discretion.

As held in Pea vs. Court of Appeals (245 SCRA 691 [1995]):

It should have been enough, nonetheless, for the appellate court to merely set aside
the questioned ordered of the trial court for having been issued by the latter with
grave abuse of discretion. In likewise enjoining permanently herein petitioner "from
entering in and interfering with the use or occupation and enjoyment of petitioner's
(now private respondent) residential house and compound," the appellate court in
effect, precipitately resolved with finality the case for injunction that was yet to be
heard on the merits by the lower court. Elevated to the appellate court, it might be
stressed, were mere incidents of the principal case still pending with the trial court.
In Municipality of Bian, Laguna vs. Court of Appeals, 219 SCRA 69, we ruled that
the Court of Appeals would have "no jurisdiction in a certiorari proceeding involving
an incident in a case to rule on the merits of the main case itself which was not on
appeal before it.

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Anent the right of RCBC to intervene in Civil Case No. 1073, before the Zamboanga Regional Trial
Court, since it has been determined that RCBC has the right to the insurance proceeds, the subject
matter of intervention is rendered moot and academic. Respondent Sebastian must, however, yield
to the preferential right of RCBC over the MICO insurance policies. It is basic and fundamental that
the first mortgagee has superior rights over junior mortgagees or attaching creditors (Alpha
Insurance & Surety Co. vs. Reyes, 106 SCRA 274 [1981]; Sun Life Assurance Co. of Canada vs.
Gonzales Diaz, 52 Phil. 271 [1928]).

WHEREFORE, the petitions are hereby GRANTED and the decision and resolution of December 16,
1996 and April 3, 1997 in CA-G.R. CV No. 46162 are hereby REVERSED and SET ASIDE, and a
new one entered:

1. Dismissing the Complaint of private respondent GOYU in Civil Case No. 93-65442
before Branch 3 of the Manila Trial Court for lack of merit;

2. Ordering Malayan Insurance Company, Inc. to deliver to Rizal Commercial

Banking Corporation the proceeds of the insurance policies in the amount of
P51,862,390.94 (per report of adjuster Toplis & Harding (Far East), Inc., Exhibits "2"
and "2-1"), less the amount of P50,505,594.60 (per O.R. No. 3649285);

3. Ordering the Clerk of Court to release the amount of P50,505,594.60 including the
interests earned to Rizal Commercial Banking Corporation;

4. Ordering Goyu & Sons, Inc. to pay its loan obligation with Rizal Commercial
Banking Corporation in the principal amount of P107,246,887.90, with interest at the
respective rates stipulated in each promissory note from January 21, 1993 until
finality of this judgment, and surcharges at 2% and penalties at 3% from January 21,
1993 to March 9, 1993, minus payments made by Malayan Insurance Company, Inc.
and the proceeds of the amount deposited with the trial court and its earned interest.
The total amount due RCBC at the time of the finality of this judgment shall earn
interest at the legal rate of 12% in lieu of all other stipulated interests and charges
until fully paid.

The petition of Rizal Commercial Banking Corporation against the respondent Court in CA-GR CV
48376 is DISMISSED for being moot and academic in view of the results herein arrived at.
Respondent Sebastian's right as attaching creditor must yield to the preferential rights of Rizal
Commercial Banking Corporation over the Malayan insurance policies as first mortgagee.

SO ORDERED.

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(6)

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
PHILIPPINE AMERICAN GENERAL INSURANCE CO., respondent.
GANCAYCO, J.:

Marinduque Mining Industrial Corporation (Marinduque for short) shipped on board SS Arthur
Maersk from Boston, U.S.A. a shipment of one (1) skid carton parts for valves as evidenced by bill of
lading No. BOSF-45607 issued by the Maersk Lines dated April 25, 1980. 1

The shipment was ordered from Jamesbury, Singapore PTE, LTD., which issued the cargo's packing
list 2 and Invoice number 3 showing the contents of the carton. The consular invoice was issued by the

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Philippine Consulate in Singapore for the shipment showing the contents and its total price amounting to
$39,419.60 as well as the freight and other charges amounting to $2,791.73. 4 When the cargo arrived in
Manila, it was received and deposited in the office of Aboitiz Shipping Corporation (Aboitiz for short) at
Pier 4, North Harbor, Manila for transhipment to Nonoc Island for which it issued bill of lading No. 23. 5

On July 7,1980 Marinduque, as consignee of the cargo, made a report to the effect that said cargo
was pilfered on the night of July 3, 1980 while there was heavy rain at the Aboitiz terminal and that of
the total value of the cargo of $42,209.33, only $7,412.00 worth remains of the cargo with the
recommendation that the claim be made against Aboitiz. 6

The services of the Manila Adjusters and Surveyors Co. (Manila Adjusters for brevity) were engaged
by the Phil-American General Insurance Co., Inc. (Phil Am for short) which came out with the report
that the cargo in question was delivered at Pier 4, North Harbor on July 3, 1980 which cargo, when
inspected on July 5, 1980 showed that it was pilfered. The list of the remaining contents was in the
report. 7 A confirmatory report was submitted by the Manila Adjusters dated November 8,1980. 8

On August 11, 1980, Marinduque filed a claim against Aboitiz in the amount of P246,430.80
representing the value of the pilfered cargo. 9 On the same day Marinduque filed a claim for the same
amount against the Phil-Am on the latter's policy MRN-01754 PAG. 10

On August 25, 1981 Phil-Am paid Marinduque the sum of P246,430.80 as insurer of the cargo. 11

Phil-Am then filed a complaint in the Regional Trial Court (RTC) of Manila against Aboitiz for the
recovery of the same amount alleging that it has been subrogated to the rights of Marinduque.

In a decision rendered on January 11, 1984, the complaint was dismissed with costs against the
plaintiff. A motion for reconsideration of this decision was denied in an order dated March 19,1984.

Hence the Phil-Am appealed to the Court of Appeals wherein in due course a decision was rendered
on December 17, 1986 reversing the appealed order of dismissal of the complaint and ordering
defendant Aboitiz to pay plaintiff Phil-Am the sum of P246,430,80 plus P15,000.00 as attorney's
fees. 12 A motion for reconsideration thereof was denied in a resolution of the appellate court dated
February 27, 1987.

Hence the herein petition for review for certiorari filed by Aboitiz predicated on five assignments of
errors, the resolution of which revolves on the singular issue of whether petitioner was properly held
liable to the private respondent by the appellate court.

The petition is devoid of merit.

The main thrust of the petition is that the findings of the trial court that the insurance policy covering
the cargo was issued at the time when the cargo was already pilfered and that the coverage under
Marine Policy No. 100105 PAG never began and that Marine Policy No. 100184 did not attach to the
shipment because the shipment was never loaded on any vessel of the defendant should be entitled
to considerable weight.

The records of this case show that private respondent executed a continuous and open insurance
coverage covering goods of Marinduque imported into and exported from the Philippines which took
effect after September 1, 1975, as contained in Marine Open Policy No. 100184. 13 A similar insurance
coverage was also executed by petitioner in favor of Marinduque for all its goods shipped or moved within
the territorial limits of the Philippines also effective after September 1, 1975 and contained in Marine
Open Policy No. 100185. 14

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The questioned shipment is covered by this continuing open insurance coverage from the time it was
loaded aboard the SS Arthur Maersk in Boston, U.S.A. to the time it was delivered to the possession
of petitioner at its offices at Pier 4 in Manila until it was pilfered when the great majority of the cargo
was lost on July 3, 1980.

The trial court in dismissing the complaint apparently relied on Marine Risk Note No. 017545 which
was issued by private respondent only on July 28, 1980 15 after the shipment in question was already
pilfered . 16 Obviously the trial court mistook said Marine Risk Note as an insurance policy when it is not. It
is only an acknowledgment or declaration of the private respondent confirming the specific shipment
covered by its Marine Open Policy, the evaluation of the cargo and the chargeable premium. 17

The contention of the petitioner that it could not be liable for the pilferage of the cargo as it was
stolen even before it was loaded on its vessel is untenable. Petitioner received the cargo when it
arrived in Manila at its offices at Pier 4, North Harbor and it was while in its possession and before
loading it in its vessel that the cargo was pilfered. Its liability is clear.

Petitioner also decries the proceedings before the lower court as ex-parte without affording it due
process. The records however show that the petitioner was declared in default and thus the
evidence for Marinduque was received ex-parte in accordance with the rules. Petitioner had only
itself to blame under the circumstances.

WHEREFORE, the petition is DISMISSED with costs against petitioner.

SO ORDERED.

I Love you love!

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Hugs and Kisses!
-HotStuffed

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