Del Rosario v. Equitable Insurance & Casualty Co.
8 SCRA 343 (1963) The appealed decision stated at the outset that the motion for judgment on the pleadings filed by the
G.R. No. L-16215 June 29, 1963
Lessons Applicable: Ambiguous Provisions Interpreted Against Insurer (Insurance)
FACTS:
 April 13, 1957: Simeon del Rosario, father of the insured who died from drowning filed a claim for
payment with Equitable Ins. and Casualty Co., Inc. but it refused to pay more than P1,000 php so
a case was filed with the RTC for the P2,000 balance stating that under the policy they are entitled
to P1,000 to P3,000 as indemnity
 RTC: entitled to recover P3,000 - policy does not positively state any definite amount, there is an
ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of the insured
and strictly against the insurer so as to allow greater indemnity
ISSUE: W/N Simeon is entitled to recover P3,000
HELD: YES.
 terms in an insurance policy, which are ambiguous, equivocal or uncertain are to be construed
strictly against, the insurer, and liberally in favor of the insured so as to effect the dominant
purpose of indemnity or payment to the insured, especially where a forfeiture is involved
 reason for this rule is that the "insured usually has no voice in the selection or arrangement of the
words employed and that the language of the contract is selected with great care and deliberation
by expert and legal advisers employed by, and acting exclusively in the interest of, the insurance
company
G.R. No. L-23491 July 31, 1968
TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET AL., plaintiffs-appellees,
vs.
THE CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.
Vergara and Dayot for plaintiffs-appellees.
Achacoso, Nera and Ocampo for defendant-appellant.
FERNANDO, J.:
The principal legal question in this appeal from a lower court decision, ordering defendant-appellant The
Capital Insurance & Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi Co., Inc. as well as
plaintiffs-appellees, widow and children of the deceased Alfredo Monje, who, in his lifetime, was
employed as a taxi driver of such plaintiff-appellee, "the sum of P5,000.00 with interest thereon at the
legal rate from the filing of the complaint until fully paid," with P500.00 as attorney's fees and the costs
of the suit, is whether or not a provision in the insurance contract that defendant-appellant will indemnify
any authorized driver provided that [he] is not entitled to any indemnity under any other policy, it being
shown that the deceased was paid his workman's compensation from another insurance policy, should
defeat such a right to recover under the insurance contract subject of this suit. The lower court
answered in the negative. Its holding cannot be successfully impugned.
1
plaintiffs was granted, the defendant having no objection and the issue presented being capable of
resolution without the need of presenting any evidence. Then the decision continues: "Alfredo Monje,
according to the complaint, was employed as taxi driver by the plaintiff Taurus Taxi Co., Inc. On
December 6, 1962, the taxi he was driving collided with a Transport Taxicab at the intersection of Old
Sta. Mesa and V. Mapa Streets, Manila, resulting in his death. At the time of the accident, there was
subsisting and in force Commercial Vehicle Comprehensive Policy No. 101, 737 ... issued by the
defendant to the Taurus Taxi Co., Inc. The amount for which each passenger, including the driver, is
insured is P5,000.00. After the issuance of policy No. 101, 737, the defendant issued the Taurus Taxi
Co., Inc. Indorsement No. 1 which forms part of the policy ... " 1 Reference was then made to plaintiff-
appellee Felicitas Monje being the widow of the taxi driver, the other plaintiffs-appellees with the
exception of the Taurus Taxi Co., Inc., being the children of the couple. After which it was noted that
plaintiff Taurus Taxi Co., Inc. made representations "for the payment of the insurance benefit
corresponding to her and her children since it was issued in its name, benefit corresponding to her and
her children, ... but despite demands ... the defendant refused and still refuses to pay them." 2
On the above facts, the liability apparently clear, the defenses interposed by defendant insurance
company being in the opinion of the lower court without merit, the aforesaid judgment was rendered.
This being a direct appeal, to us on questions of law, the facts as found by the lower court cannot be
controverted.
Defendant-appellant Capital Insurance & Surety Co. Inc. alleged as the first error of the lower court its
failure to hold "that in view of the fact that the deceased Alfredo Monje was entitled to indemnity under
another insurance policy issued by Ed. A. Keller Co., Ltd., the heirs of the said deceased are not
entitled to indemnity under the insurance policy issued by appellant for the reason that the latter policy
contains a stipulation that "the company will indemnify any authorized driver provided that such
authorized driver is not entitled to indemnity under any other policy." " 3 In the discussion of the above
error, defendant-appellant stated the following: "The facts show that at the time of his death, the
deceased Alfredo Monje, as authorized driver and employee of plaintiff Taurus Taxi Co., Inc., was
entitled to indemnity under another insurance policy, then subsisting, which was Policy No. 50PH-1605
issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi Co., Inc. As a matter of fact, the indemnity to
which the deceased Alfredo Monje was entitled under the said Policy No. 50PH-1605 was paid by Ed.
A. Keller Co., Ltd. to the heirs of Alfredo Monje on December 28, 1962, as evidenced by the records of
W.C.C. Case No. A88637 entitled "Felicitas V. Monje, et al. vs. Taurus Taxi Co., Inc.", Regional Office
No. 4, Department of Labor, Manila ... " 4
The above defense, based on a fact which was not disputed, was raised and rightfully rejected by the
lower court. From its own version, defendant-appellant would seek to escape liability on the plea that
the workman's compensation to which the deceased driver was rightfully entitled was settled by the
employer through a policy issued by another insurance firm. What was paid therefore was not indemnity
but compensation.
Since what is prohibited by the insurance policy in question is that any "authorized driver of plaintiff
Taurus Taxi Co., Inc." should not be "entitled to any indemnity under any policy", it would appear
indisputable that the obligation of defendant-appellant under the policy had not in any wise been
extinguished. It is too well-settled to need the citation of authorities that what the law requires enters
into and forms part of every contract. The Workmen's Compensation Act, explicitly requires that an
employee suffering any injury or death arising out of or in the course of employment be compensated.
The fulfillment of such statutory obligation cannot be the basis for evading the clear, explicit and
mandatory terms of a policy.
In the same way as was held in Benguet Consolidated, Inc. v. Social Security System 5 that sickness
benefits under the Social Security Act may be recovered simultaneously with disability benefits under
the Workmen's Compensation Act, the previous payment made of the compensation under such
legislation is no obstacle by virtue of a clause like that invoked by defendant-appellant to the payment of
indemnity under the insurance policy.
Assuming however that there is a doubt concerning the liability of defendant-appellant insurance firm,
nonetheless, it should be resolved against its pretense and in favor of the insured. It was the holding
in Eagle Star Insurance, Ltd. v. Chia Yu 6 that courts are to regard "with extreme jealousy" limitations of
liability found in insurance policies and to construe them in such a way as to preclude the insurer from
non-compliance with his obligation. In other words, to quote a noted authority on the subject, "a contract
of insurance couched in language chosen by the insurer is, if open to the construction contended for by
the insured, to be construed most strongly, or strictly, against the insurer and liberally in favor of the
contention of the insured, which means in accordance with the rule contra proferentem."7 Enough has
been said therefore to dispose of the first assigned error.
The point is made in the second alleged error that the lower court ought to have held "that by joining the
heirs of Alfredo Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc. committed a breach of policy
condition and thus forfeited whatever benefits, if any, to which it might be entitled under appellant's
policy." 8 The basis for such an allegation is one of the conditions set forth in the policy. Thus: " "5. No
admission, offer, promise or payment shall be made by or on behalf of the insured without the written
consent of the Company which shall be entitled if it so desires to take over and conduct in his name the
defense or settlement of any claim or to prosecute in his name for its own benefit any claim for
indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings and
in the settlement of any claim and the Insured shall give all such information and assistance as the
Company may require ... " 9
Such a plea is even less persuasive. It is understandable then why the lower court refused to be
swayed by it. The plaintiff Taurus Taxi Co., inc. had to join the suit on behalf of the real beneficiaries,
the heirs of the deceased driver, who are the other plaintiffs as it was a party to the policy.
Moreover, as noted in the decision appealed from: "The institution of the action cannot possibly be
construed as an admission, offer, promise, or payment by the company, for it merely seeks to enforce,
by court action, the only legal remedy available to it, its rights under the contract of insurance to which it
is a party. To consider, furthermore, the commencement of an action by the insured, alone or with
others, as a breach of the policy, resulting in forfeiture of the benefits thereunder, to place in the hands
of the insurer the power to nullify at will the whole contract of insurance by the simple expedient of
refusing to make payment and compelling the insured to bring a suit to enforce the policy." 10
To so construe the policy to yield a contrary result is to put a premium on technicality. If such a defense
is not frowned upon and rejected, the time will come when the confidence on the part of the public in the
good faith of insurance firms would be minimized, if not altogether lost. Such a deplorable consequence
ought to be avoided and a construction of any stipulation that would be fraught with such a risk
repudiated. What the lower court did then cannot be characterized as error.
G.R. No. L-25920 January 30, 1970
2
CCC INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS (Fourth Division) and CARLOS F. ROBES, respondents.
Petition for review of the decision of the Court of Appeals, affirming that of the Court of First Instance of
Rizal (Quezon City) allowing insurance indemnification of plaintiff for his damaged car and the payment
of attorney's fees.
The following facts are not in dispute:
On 1 March 1961, Carlos F. Robes took an insurance, with the CCC Insurance Corporation, on his
Dodge Kingsway car against loss or damage through accident for an amount not exceeding P8,000.00
(Policy No. M1156). On 25 June 1961, and during the effectivity of the policy, the insured vehicle, while
being driven by the owner's driver, became involved in a vehicular collision along Rizal Avenue
Extension, Potrero, Malabon, Rizal. The car was damaged, and the repair was estimated to cost
P5,300.00.
As the insurance company refused either to pay for the repair or to cause the restoration of the car to its
original condition, Robes instituted Civil Case No. Q-6063 in the Court of First Instance of Rizal for
recovery not only of the amount necessary for the repair of the insured car but also of actual and moral
damages, attorneys' fees and costs. Resisting plaintiff's claim, the insurance company disclaimed
liability for payment, alleging that there had been violation of the insurance contract because the one
driving the car at the time of the incident was not an "authorized driver."
After due hearing, judgment was rendered for the plaintiff, and defendant insurer was ordered to pay
unto the former the cost of repair of the car in the sum of P5,031.28; the sum of P150.00, for the hauling
and impounding of the car at the repair shop; P2,000.00 as actual damages; and P1,000.00 as
attorneys' fees, plus costs.
The insurance company went to the Court of Appeals, raising inter alia the questions of the qualification
of plaintiff's driver to operate the insured vehicle and the correctness of the trial court's award to plaintiff
of the amount of P5,013.28 as cost of repairs, and of actual damages and attorneys' fees. In its decision
of 31 January 1966, the Court of Appeals affirmed the ruling of the lower court except the award of
actual damages in the sum of P2,000.00, which was eliminated on the ground that it was too
speculative. Not content, the insurance company filed the present petition for review of the aforesaid
decision of the Court of Appeals on two grounds: (1) that the proceedings observed in the trial court
were irregular and invalid; and (2) that the damage to the insured car was not covered by the insurance
policy because at the time of the accident it was being driven by one who was not an authorized driver.
The second issue constitutes the main contention of herein appellant, and will be considered first. It is
vigorously urged by the insurer that the one driving the insured vehicle at the time of the accident was
not an authorized driver thereof within the purview of the following provision of the insurance policy:
AUTHORIZED DRIVER:
Any of the following: (a) The insured;
 (b) Any person driving on the Insured's order or with his permission, provided that the
person driving ispermitted in accordance with licensing laws or regulations to drive
the motor vehicle covered by this Policy, or has been so permitted and is not
disqualified by order of a court of law or by reason of any enactment or regulation
from driving such Motor Vehicle. (Emphasis ours)
It has been found as a fact by the Court of Appeals that Domingo Reyes, the, driver who was at the
wheel of the insured car at the time of the accident, does not know how to read and write; that he was
able to secure a driver's license, without passing any examination therefor, by paying P25.00 to a
certain woman; and that the Cavite agency of the Motor Vehicles Office has certified not having issued
Reyes' purported driver's license No. 271703 DP.
In holding that the damage sustained by the car comes within the coverage of the insurance policy, the
Court of Appeals argued that since Reyes' purported driver's license (Exhibit "A") bears all the earmarks
of a duly issued license, then it is a public document, and petitioner insurance company then has the
burden of disproving its genuineness, which the latter has failed to do. In this respect the Court of
Appeals ruled:
... . The fact that the Cavite Agency of the Motor Vehicles Office states that Driver's
License No. 271703 DP was not issued by that office, does not remove the possibility
that said office may have been mistaken or that said license was issued by another
agency. Indeed Exhibit 13 shows that a certain Gloria Presa made the notation
thereon "no license issued" and which notation was the basis of the 1st Indorsement,
Exhibit 12, signed by the MVO Cavite City Agency's officer-in-charge. Neither Gloria
Presa nor the officer-in-charge Marciano A. Monzon was placed on the witness stand
to be examined in order to determine whether said license is indeed void. As it is, as
heretofore pointed out, the fact remains that Domingo Reyes is in possession of a
driver's license issued by the Motor Vehicles Office which on its face appears to have
been regularly issued.
In effect, the Court of Appeals found that the driver's license No. 271703 DP was genuine, that is, one
really issued by the Motor Vehicles Office or its authorized deputy; and this finding of fact is now
conclusive and may not be questioned in this appeal.
Nevertheless, the appellant insurer insists that, under the established facts of this case, Reyes, being
admittedly one who cannot read and write, who has never passed any examination for drivers, and has
not applied for a license from the duly constituted government agency entrusted with the duty of
licensing drivers, cannot be considered an authorized driver.
The fatal flaw in appellant's argument is that it studiously ignores the provisions of law existing at the
time of the mishap. Under Section 24 of the Revised Motor Vehicles Law, Act 3992 of the Philippine
Legislature, as amended by Republic Acts Nos. 587, 1204 and 2863, 1
An examination or demonstration to show any applicant's ability to operate motor
vehicles may also be required in the discretion of the Chief, Motor Vehicles Office or
his deputies. (Emphasis supplied)
and reinforcing such discretion, Section 26 of the Act prescribes further:
3
SEC. 26. Issuance of chauffeur's license; professional badge: If, after examination, or
without the same, the Chief, Motor Vehicles Office or his deputies, believe the
applicant to possess the necessary qualifications and knowledge, they shall issue to
such applicant a license to operate as chauffeur ... (Emphasis supplied)
It is thus clear that the issuance of a driving license without previous examination does not necessarily
imply that the license issued is invalid. As the law stood in 1961, when the claim arose, the
examinations could be dispensed with in the discretion of the Motor Vehicles Office official officials.
Whether discretion was abused in issuing the license without examination is not a proper subject of
inquiry in these proceedings, though, as a matter of legislative policy, the discretion should be
eliminated. There is no proof that the owner of the automobile knew that the circumstance surrounding
such issuance showed that it was irregular.
The issuance of the license is proof that the Motor Vehicles Office official considered Reyes, the driver
of the insured- appellee, qualified to operate motor vehicles, and the insured was entitled to rely upon
such license. In this connection, it should be observed that the chauffeur, Reyes, had been driving since
1957,2 and without mishap, for all the record shows. Considering that, as pointed out by the Court of
Appeals, the weight of authority is in favor of a liberal interpretation of the insurance policy for the
benefit of the party insured, and strictly against the insurer, We find no reason to diverge from the
conclusion reached by the Court of Appeals that no breach was committed of the above-quoted
provision of the policy.
The next issue assigned is anchored on the fact that the decision of the trial court was based on
evidence presented to and received by the clerk of court who acted as commissioner, although
allegedly, there was no written court order constituting him as such commissioner, no written request for
his commission was made by the parties; he did not take an oath prior to entering into the discharge of
his commission; no written report of his findings was ever submitted to the court; and no notice thereof
was sent to the parties, contrary to the specific provisions of Rule 33 of the Rules of Court.
Actually there is nothing basically wrong with the practice of delegating to a commissioner, usually the
clerk of court, who is a duly sworn court officer, the reception of both parties and for him to submit a
report thereon to the court. In fact, this procedure is expressly sanctioned by Revised Rule 33 of the
Rules of Court.3 Petitioner's objection in this case, however, is directed not against its referral to the
clerk of court but against the alleged non-observance of the prescribed steps in connection with such
delegation.
We find no cause sufficient to invalidate the proceedings had in the trial court. We note that this issue
was brought up by the appellant insurance company or the first time only in its motion for
reconsideration filed in the Court of Appeals. It was not raised in the trial court, where the defect could
still be remedied. This circumstance precludes ventilation of the issue of validity of the hearing at this
stage; for, if such irregularity is to vitiate the proceeding, the question should have been seasonably
raised, i.e., either before the parties proceeded with the hearing or before the court handed down its
ruling.4 It is a procedural point that can be waived by consent of the parties, express or implied. 5
For the same reason, appellant cannot insist now on the annulment of the proceeding on the basis of
alleged lack of written consent of the parties to the commission, or of an order appointing the clerk as
commissioner, or of notice of the submission of his report to the court. Furthermore, appellant has
presented no proof that the clerk of court committed any mistake or abuse in the performance of the
task entrusted to him, or that the trial court was not able to properly appreciate the evidence in the case
because it was received by another person. If indeed there were errors at all, they would be non-
prejudicial and could not justify the holding of a new trial, as urged by herein petitioner. 6
[G.R. No. L-28772. September 21, 1983.]
ASSOCIATION OF BAPTISTS FOR WORLD EVANGELISM, INC., Plaintiff, v. FIELDMEN’S
INSURANCE CO., INC., Defendant-Appellant.
SYLLABUS
1. MERCANTILE LAW; INSURANCE; COMPREHENSIVE POLICY; UNLAWFUL AND WRONGFUL
TAKING OF VEHICLE FOR A JOY RIDE CONSTITUTES THEFT WITHIN THE MEANING OF
INSURANCE POLICY; RECOVERY FOR DAMAGE NOT BARRED BY THE ILLEGAL USE OF THE
VEHICLE. — The Comprehensive Policy issued by the insurance company includes loss of or damage
to the motor vehicle by "burglary . . . or theft." It is settled that the act of Catiben in taking the vehicle for
a joy ride to Toril, Davao City, constitutes theft within the meaning of the insurance policy and that
recovery for damage to the car is not barred by the illegal use of the car by one of the station boys.
2. ID.; ID.; ID.; ID.; ID.; LIABILITY OF INSURER UNDER THE THEFT CLAUSE OF AN INSURANCE
POLICY; PRIOR CONVICTION NOT REQUIRED IN AN ACTION FOR RECOVERY ON AN
AUTOMOBILE INSURANCE; CASE AT BAR. — There need be no prior conviction for the crime of theft
to make an insurer liable under the theft clause of the policy. Upon the facts stipulated by the parties it
is admitted that Catiben had taken the vehicle for a joy ride and while the same was in his possession
he bumped it against an electric post resulting in damages. That act is theft within a policy of insurance.
In a civil action for recovery on an automobile insurance, the question whether a person using a certain
automobile at the time of the accident stole it or not is to be determined by a fair preponderance of
evidence and not by the rule of criminal law requiring proof of guilt beyond reasonable doubt (Villacorta
v. Insurance Commission, 100 SCRA 467 [1980]). Besides, there is no provision in the policy requiring
prior criminal conviction for theft.
RESOLUTION
MELENCIO-HERRERA, J.:
This case for "Indemnity for Damages and Attorney’s Fees" was elevated to this Tribunal by the then
Court of Appeals on a question of law.
The Stipulation of Facts submitted by the parties before the Court of First Instance of Davao, Branch I,
in Case No. 3789, reads as follows:jgc:chanrobles.com.ph
"COMES the parties in the above entitled case, through their respective counsels and to this Honorable
Court respectfully submit the following stipulations of facts:chanrob1es virtual 1aw library
‘1. That plaintiff is a religious corporation duly organized and registered under the laws of the
Philippines, while defendant is also a domestic corporation duly organized and existing under the laws
of the Philippines;
4
‘2. That plaintiff, having an insurable interest in a Chevrolet Carry-all, 1955 Model, with Motor No.
032433272555 and Plate No. E-73317 covered by Registration Certificate No. 288141 Rizal, issued by
the Davao Motor Vehicles Office Agency No. 20 and owned by Reverend Clinton Bonnel, insured said
vehicle with the defendant under Fieldmen’s Insurance Co., Inc. Private Car Comprehensive Policy No.
22 Jl 1107, attached hereto as Annex ‘A’ to ‘A-2’ against loss or damage up to the amount of P5,000.00;
‘3. That in the latter part of 1961, through plaintiff’s representative, Dr. Antonio Lim, the aforementioned
Chevrolet Carry-all was placed at the Jones Monument Mobilgas Service Station at Davao City, under
the care of said station’s operator, Rene Te so that said carry-all could be displayed as being for sale,
with the understanding that the latter or any of his station boys would receive a 2% commission should
they sell said vehicle.
‘4. That on the night of January 18, 1962, Romeo Catiben one of the boys at the aforementioned Jones
Monument Service Station and a nephew of the wife of Rene Te who is residing with them, took the
aforementioned chevrolet carry-all for a joy ride to Toril, Davao City, without the prior permission,
authority or consent of either the plaintiff or its representative Dr. Antonio Lim, or of Rene Te, and on its
way back to Davao City, said vehicle, due to some mechanical defect accidentally bumped an electric
post causing actual damages valued at P5,518.61.
‘5. That the issue before the Honorable Court is whether or not for the damage to the abovementioned
Chevrolet Carry-all to be compensable under the aforementioned Fieldmen’s Private Car
Comprehensive Policy No. 22 JL 11107, there must be a prior criminal conviction of Romeo Catiben for
theft.
WHEREFORE, it is respectfully prayed that this Honorable Court render judgment on the facts and
issues above stipulated after the parties shall have submitted their respective memoranda."cralaw
virtua1aw library
The Trial Court rendered judgment based on the facts stipulated and ordered defendant insurance
company to pay plaintiff association the amount of P5,000.00 as indemnity for the damage sustained by
the vehicle, P2,000.00 for attorney’s fees, and costs. Dissatisfied, the insurance company interposed an
appeal to the Appellate Court, docketed as CA-G.R. No. 33543-R, which as above stated, elevated it to
this instance.chanrobles.com:cralaw:red
We affirm. The Comprehensive Policy issued by the insurance company includes loss of or damage to
the motor vehicle by "burglary . . . or theft." It is settled that the act of Catiben in taking the vehicle for a
joy ride to Toril, Davao City, constitutes theft within the meaning of the insurance policy and that
recovery for damage to the car is not barred by the illegal use of the car by one of the station boys.
". . . where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be they
employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban
without the owner’s consent or knowledge, such taking constitutes or partakes of the nature of theft as
defined in Article 308 of the Revised Penal Code, viz.’(W)ho are liable for theft. — Theft is committed by
any person who, with intent to gain but without violence against or intimidation of persons nor force
upon things, shall take personal property of another without the latter’s consent,’ for purposes of
recovering the loss under the policy in question."cralaw virtua1aw library
". . . the Court sustains as the better view that which holds that when a person, either with the object of
going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle
belonging to another, without the consent of its owner, he is guilty of theft because by taking possession
of the personal property belonging to another and using it, his intent to gain is evident since he derives
therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C. Aquino cites in his work
Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it ‘hurto de uso.’
1 ... . Premiums are due and payable at the Office of the System in Manila or at any of
There need be no prior conviction for the crime of theft to make an insurer liable under the theft clause
of the policy. Upon the facts stipulated by the parties it is admitted that Catiben had taken the vehicle for
a joy ride and while the same was in his possession he bumped it against an electric post resulting in
damages. That act is theft within a policy of insurance. In a civil action for recovery on an automobile
insurance, the question whether a person using a certain automobile at the time of the accident stole it
or not is to be determined by a fair preponderance of evidence and not by the rule of criminal law
requiring proof of guilt beyond reasonable doubt. 2 Besides, there is no provision in the policy requiring
prior criminal conviction for theft.chanroblesvirtualawlibrary
ACCORDINGLY, finding no error in the judgment appealed from, the same is hereby affirmed.
G.R. No. L-28866 March 17, 1972
FE DE JOYA LANDICHO, in her own behalf and as judicial guardian of her minor children,
RAFAEL J. LANDICHO and MA. LOURDES EUGENIA LANDICHO,plaintiffs-appellees,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM,defendant-appellant. .
Vedasto J. Hernandez for plaintiffs-appellees.Government Corporate Counsel Leopoldo M. Abellera
and Trial Attorney Arsenio J. Magpale defendant-appellant.
CONCEPCION, C.J.:p
Appeal of the Government Service Insurance System — hereinafter referred to as GSIS, for the sake of
brevity — from a decision of the Court of First Instance of Manila directing said defendant to pay to the
plaintiffs-appellees, Fe de Joya Landicho and her minor children, Rafael J. and Maria Lourdes Eugenia,
both surnamed Landicho, the sum of P15,800, with interest thereon, at the legal rate, from September
26, 1967, until fully paid, in addition to the sum of P1,000, as and for attorney's fees, and the costs.
The facts are not in dispute. On June 1, 1964, the GSIS issued in favor of Flaviano Landicho, a civil
engineer of the Bureau of Public Works, stationed at Mamburao, Mindoro Occidental, optional additional
life insurance policy No. OG-136107 in the sum of P7,900. The policy states on its face:
This insurance is granted subject to the terms and conditions hereinafter set forth and
in consideration of the "Information" therefor and of the payment on the day this
Policy takes effect of the monthly premiums stated above, due from and payable by
the Insured, and the like payments on the last day of every month during the lifetime
of the Insured until maturity of this Policy or until prior death of the Insured.
On page 2 of said policy, condition No. 1 provides, in part: .
5
1. PAYMENT OF PREMIUMS: — .
its branches. When any premium or installment thereof remains unpaid after its due
date, such due date is the date of default in payment of premiums. The mere
possession of this Policy does not imply that it is in force unless the premiums due
thereon are paid on time or the policy has sufficient cash value to keep it in force.
Condition No. 18, on page 8 of the policy, is of the following tenor: .
18. ENTIRE CONTRACT IN THIS POLICY: — .
This Policy together with the "Information" sheet signed by the Insured, a copy of
which is attached hereto, is issued under the provisions of Commonwealth Act No.
186, as amended, and constitutes the entire contract.
All statements made by the Insured shall, in the absence of fraud, be deemed
representations and no warranties, and no statement shall void the Policy or be used
as a defense to claim hereunder unless it be contained in written information and a
copy of such information be endorsed upon or attached to the Policy when issued.
Before the issuance of said policy, the insured had filed an application, by filing and signing a printed
form of the GSIS on the basis of which the policy was issued. Paragraph 7 of said application States:
7. I hereby declare that all the above statements and answers as well as those I may
make to the System's Medical Examiner in continuation of this application, to be true
and co direct to the best of my knowledge and belief, and I hereby agree as follows: .
a. That this declaration, with the answers to be given by me to the Medical Officer,
shall be made the basis the policy and form part of the same; .
b. That acceptance of my policy issued on this application will constitute a ratification
by me of any correction or addition to this application made by the System; .
c. That this application serves as a letter of authority to the Collecting Officer of our
Office thru the GSIS to deduct from my salary the monthly premium in the amount of
P33.36, beginning the month of May, 1964, and every month thereafter until notice of
its discontinuance shall have beenreceived from the System; .
d. That the failure to deduct from my salary the month premiums shall not make the
policy lapse, however, the premium account shall be considered as indebtedness
which, I bind myself to pay the System; .
e. That my policy shall be made effective on the first day of the month next following
the month the first premium is paid; provided, that it is not more ninety (90) days
before or after the date of the medical examination,was conducted if required." .
While still under the employment of the Bureau of Public Works, Mr. Landicho met his death, on June
29, 1966, in an airplane crash in Mindoro. Thereupon, Mrs. Landicho, in her own behalf and that of her
co-plaintiffs and minor children, Rafael J. and Maria Lourdes Eugenia, filed with the GSIS a claim for
P15,800, as the double indemnity due under policy No. OG-136107, because of the untimely death of
the insured owing to said accident. The GSIS denied the claim, upon the ground that the policy had
never been in force because, pursuant to subdivision (e) of the above-quoted paragraph 7 of the
application, the policy "shall be ... effective on the first day of the month next following the month the
first premium is paid," and no premium had ever been paid on said policy. Upon refusal of the GSIS to
reconsider its stand, this action was filed, September 22, 1967, in the Court of First Instance of Manila,
in which the GSIS reiterated its aforementioned defense. Thereafter submitted by both parties for
judgment on the pleadings, upon the ground thatthe case involve purely questions of law, said court
rendered, in due course, its abovementioned decision, from which the GSIS has taken the present
appeal.
The main issue therein is whether or not the insurance policy in question has ever been in force, not a
single premium having been paid thereon. In support of the affirmative, plaintiffs invoke the stipulation in
the policy to the effect that the information contained in the application filed by the insured shall form
part of the contract between him and the GSIS, and, especially, subdivisions (c) and (d) of paragraph 7
of said application stating that the same shall serve "as a letter of authority to the Collecting Officer of
our Office" — the Bureau of Public Works — "thru the GSIS to deduct from my salary the monthly
premium in the amount of P33.36 beginning the month of May, 1964, and every month thereafter," and
that "failure to deduct from my salary the monthly premiums shall not make the policy lapse, however,
the premium account shall be considered as indebtedness which, I" — the insured — "bind myself to
pay the System."1 The GSIS maintains, however, the negative, relying upon subdivision (e) of the same
paragraph No. 7, which provides that the "policy shall be made effective on the first day of the month
next following the month the first premium is paid." Under this theory, subdivisions (c) and (d) of said
paragraph 7 would not apply unless and until the first premium shall have been actually paid, pursuant
to subdivision (e) of the same paragraph.
Although it may not be entirely farfetched, this view is not likely to be in accord with the understanding
of many, if not most, government employees who obtain an optional additional life insurance policy. As
a consequence, the actual receipt by them of their full pay — without any deduction for premiums on
their optional additional life insurance policies — may not impart to them the warning — which,
otherwise, it would necessarily convey — that said policy is not, as yet, in force, for they are liable to
believe "that failure to deduct" — from the salary of the insured — "the monthly premiums shall not" —
in the language of subdivision (d) — "make the policy lapse" and that "the premiums account shall be
considered as indebtedness," to be paid or deducted later, because, after all, the so called "payment" of
premiums is nothing but a "paper" or "accounting" process, whereby funds are merely
transferred, notphysically, but constructively, from one office of the government to another. In other
words, the language, of subdivisions (c), (d) and (e) is such as to create an ambiguity that should be
resolved against the party responsible therefor — defendant GSIS, as the party who prepared and
furnished the application form — and in favor of the party misled thereby, the insured employee.
Indeed, our Civil Code provides:
The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.2
This is particularly true as regards insurance policies, in respect of which it is settled that the " "terms in
an insurance policy, which are ambiguous, equivocal, or uncertain ... are to be construed strictly and
most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant
purpose of indemnity or payment to the insured, especially where a forfeiture is involved" (29 Am. Jur.,
181), and the reason for this rule is the "insured usually has no voice in the selection or arrangement of
the words employed and that the language of the contract is selected with great care and deliberation
by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance
company." (44 C.J.S., p. 1174.)3 .
The equitable and ethical considerations justifying the foregoing view are bolstered up by two (2)
factors, namely:
(a) The aforementioned subdivision (c) states "that this application serves as a letter of authority to the
Collecting Officer of our Office" — the Bureau of Public Works — "thru the GSIS to deduct from my
salary the monthly premium in the amount of P33.36." No such deduction was made — and,
consequently, not even the first premium "paid" — because the collecting officer of the Bureau of Public
Works was not advised by the GSIS to make it (the deduction) pursuant to said authority. Surely, this
omission of the GSIS should not inure to its benefit. .
(b) The GSIS had impliedly induced the insured to believe that Policy No. OG-136107 was in force, he
having been paid by the GSIS the dividends corresponding to said policy. Had the insured had the
slightest inkling that the latter was not, as yet, effective for non-payment of the first premium, he would
have, in all probability, caused the same to be forthwith satisfied.
American Home Assurance v. Tantuco
on 2:38 PM in Case Digests, Commercial Law
2
G.R. No. 138941, 8 Oct. 2001
o INSURANCE LAW: Liberality is the rule of construction in insurance contracts.
FACTS:
Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned two mills (the first oil
mill and a new one), both located at its factory compound at Iyam, Lucena City. The two oil mills are
separately covered by fire insurance policies issued by American Home Assurance Co.
On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. American Home rejected
the claim for the insurance proceeds on the ground that no policy was issued by it covering the burned
oil mill. It stated that the new oil mill was under Building No. 15 while the insurance coverage extended
only to the oil mill under Building No. 5.
ISSUE:
o Whether or not the new oil mill is covered by the fire insurance policy
HELD:
6

In construing the words used descriptive of a building insured, the greatest liberality is shown by the
courts in giving effect to the insurance. In view of the custom of insurance agents to examine buildings
before writing policies upon them, and since a mistake as to the identity and character of the building is
extremely unlikely, the courts are inclined to consider the policy of insurance covers any building which
the parties manifestly intended to insure, however inaccurate the description may be.
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what
the parties manifestly intended to insure was the new oil mill.
If the parties really intended to protect the first oil mill, then there is no need to specify it as new. Indeed,
it would be absurd to assume that the respondent would protect its first oil mill for different amounts and
leave uncovered its second one.
Fortune Insurance and Surety Company Insurance Company, Inc. vs. Court of Appeals,
G.R. No. 115278, May 23, 1995
Lessons Applicable: Stipulations Cannot Be Segregated (Insurance)
FACTS:
 Producers Bank of the Philippines insured with Fortune Insurance and Surety Co. P725,000 which
was lost during a robbery of Producer's armored vehicle while it was in transit from Pasay City City
to its Makati head office.
 The armored car was driven by Benjamin Magalong Y de Vera, escorted by Security Guard
Saturnino Atiga Y Rosete.
 After an investigation conducted by the Pasay police authorities, the driver Magalong and guard
Atiga were charged, together with Edelmer Bantigue Y Eulalio, Reynaldo Aquino and John Doe,
with violation of P.D. 532 (Anti-Highway Robbery Law)
 Upon claiming, Fortune refused stating that it is not liable since under the general exceptions of
the policy:
 any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer,
employee, partner, director, trustee or authorized representative of the Insured whether acting
alone or in conjunction with others.
 RTC: favored Producers Bank since Driver and Security Guard were merely assigned
 CA: Affirmed RTC
ISSUE: W/N the driver and security guard are employees under the general exception
HELD: YES. Petition is granted.
 It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt
from protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons
granted or having unrestricted access to Producers' money or payroll. When it used then the term
"employee," it must have had in mind any person who qualifies as such as generally and
universally understood, or jurisprudentially established in the light of the four standards in the
determination of the employer-employee relationship, 21 or as statutorily declared even in a
limited sense as in the case of Article 106 of the Labor Code which considers the employees
under a "labor-only" contract as employees of the party employing them and not of the party who
supplied them to the employer
7
 Producers entrusted the three with the specific duty to safely transfer the money to its head office,
with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle
which would carry the money; and Atiga to provide the needed security for the money, the vehicle,
and his two other companions.
 A "representative" is defined as one who represents or stands in the place of another; one who
represents others or another in a special capacity, as an agent, and is interchangeable with
"agent."
SUN INSURANCE OFFICE, LTD. vs. CA and NERISSA LIM G.R. No. 92383 July 17, 1992
FACTS:
The petitoner issued personal accident insurance policy to Felix Lim Jr with face value of P200,000.
Lim died two months later. It was on October 6, 1982, Lim, on a happy mood, was playing with his
handgun from which he had previously removed the magazine. He pointed the gun to his secretary who
pushes it aside saying that it might be loaded. Lim assured her its not and pointed to his temple. The
next moment there was an explosion and Lim slumped to the floor. He was dead before he fell. As
beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was rejected. The
petitioner agreed that there was no suicide. It argued, however that there was no accident either.
The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained. The
trial court rendered a decision in favor of private respondent.
ISSUE:
Whether the insurer is liable to the insured under the insurance contract
HELD:
YES. An accident is an event that takes place without one's foresight or expectation — an event that
proceeds from an unknown cause, or is an unusual effect of a known case, and therefore not expected.
An accident is an event which happens without any human agency or, if happening through human
agency, an event which, under the circumstances, is unusual to and not expected by the person to
whom it happens. It has also been defined as an injury which happens by reason of some violence or
casualty to the injured without his design, consent, or voluntary co-operation. In light of these
definitions, the Court is convinced that the incident that resulted in Lim's death was indeed an accident.
Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent
his widow from recovering from the insurance policy he obtained precisely against accident. There is
nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the
insured is shown to have contributed to his own accident. Indeed, most accidents are caused by
negligence. It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in
favor of the assured.
Guingon V. Del Monte, 20 SCRA 1043 (1967)

G.R. No. L-22042 August 17, 1967 Tiu v Ca G.R. No. 127410. January 20, 1999
Lessons Applicable: Stipulation Pour Autrui (Insurance) J. Panganiban

FACTS:
 Julio Aguilar owner and operator of several jeepneys insured them with Capital Insurance & Surety Facts:
Co., Inc.
On March 13, 1992, Congress, with the approval of the President, passed into law RA 7227. This was
 February 20, 1961: Along the intersection of Juan Luna and Moro streets, City of Manila, the
for the conversion of former military bases into industrial and commercial uses. Subic was one of these
jeepneys operated by Aguilar driven by Iluminado del Monte and Gervacio Guingon bumped and
areas. It was made into a special economic zone.
Guingon died some days after
 Iluminado del Monte was charged with homicide thru reckless imprudence and was penalized
4 months imprisonment
 The heirs of Gervacio Guingon filed an action for damages praying that P82,771.80 be paid to In the zone, there were no exchange controls. Such were liberalized. There was also tax incentives and
them jointly and severally by the driver del Monte, owner and operator Aguilar, and the Capital duty free importation policies under this law.
Insurance & Surety Co., Inc.
 CFI: Iluminado del Monte and Julio Aguilar jointly and severally to pay plaintiffs the sum of
P8,572.95 as damages for the death of their father, plus P1,000.00 for attorney's fees plus costs
 Capital Insurance and Surety Co., Inc. is hereby sentenced to pay P5,000 plus P500 as attorney's On June 10, 1993, then President Fidel V. Ramos issued Executive Order No. 97 (EO 97), clarifying
fees and costs to be applied in partial satisfaction of the judgment rendered against Iluminado del the application of the tax and duty incentives. It said that
Monte and Julio Aguilar in this case
On Import Taxes and Duties. — Tax and duty-free importations shall apply only to raw materials, capital
ISSUE: goods and equipment brought in by business enterprises into the SSEZ
1. W/N there a stipulation pour autriu to enable that will enable the heirs to sue against Capital
Insurance and Surety Co., Inc.? - YES
2. W/N the heirs can sue the insurer and insured jointly? - YES
On All Other Taxes. — In lieu of all local and national taxes (except import taxes and duties),
all business enterprises in the SSEZ shall be required to pay the tax specified in Section 12(c) of R.A.
HELD: Affirmed in toto. No. 7227.

1. YES
 policy: the insurer agreed to indemnify the insured "against all sums . . . which the Insured shall Nine days after, on June 19, 1993, the President issued Executive Order No. 97-A (EO 97-A),
become legally liable to pay in respect of: a. death of or bodily injury to any person . . . ." - specifying the area within which the tax-and-duty-free privilege was operative.
indemnity against liability
 TEST: Where the contract provides for indemnity against liability to third persons, then third
persons to whom the insured is liable, CAN sue the insurer. Where the contract is for indemnity
against actual loss or payment, then third persons CANNOT proceed against the insurer, the Section 1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall
contract being solely to reimburse the insured for liability actually discharged by him thru payment be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals
to third persons, said third persons' recourse being thus limited to the insured alone. (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital
2. YES goods, equipment, and consumer items tax and duty-free.
 policy: expressly disallows suing the insurer as a co-defendant of the insured in a suit to determine
the latter's liability
 no action close: suit and final judgment be first obtained against the insured; that only "thereafter"
can the person injured recover on the policy Petitioners challenged the constitutionality of EO 97-A for allegedly being violative of their right to equal
 Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of Rule 3 on "Permissive joinder of protection of the laws. This was due to the limitation of tax incentives to Subic and not to the entire area
parties" cannot be superseded, at least with respect to third persons not a party to the contract, as of Olongapo. The case was referred to the Court of Appeals.
herein, by a "no action" clause in the contract of insurance.
8

The appellate court concluded that such being the case, petitioners could not claim that EO 97-A is
unconstitutional, while at the same time maintaining the validity of RA 7227.
The court a quo also explained that the intention of Congress was to confine the coverage of the SSEZ
to the "secured area" and not to include the "entire Olongapo City and other areas mentioned in Section
12 of the law.
Hence, this was a petition for review under Rule 45 of the Rules of Court.
Issue:
Whether the provisions of Executive Order No. 97-A confining the application of R.A. 7227 within the
secured area and excluding the residents of the zone outside of the secured area is discriminatory or
not owing to a violation of the equal protection clause.
Held. No. Petition dismissed.
Ratio:
Citing Section 12 of RA 7227, petitioners contend that the SSEZ encompasses (1) the City of Olongapo,
(2) the Municipality of Subic in Zambales, and (3) the area formerly occupied by the Subic Naval Base.
However, they claimed that the E.O. narrowed the application to the naval base only.
OSG- The E.O. Was a valid classification.
Court- The fundamental right of equal protection of the laws is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial distinctions that make real
differences, one class may be treated and regulated differently from another. The classification must
also be germane to the purpose of the law and must apply to all those belonging to the same class.
9
Inchong v Hernandez- Equal protection does not demand absolute equality among residents; it merely
requires that all persons shall be treated alike, under like circumstances and conditions both as to
privileges conferred and liabilities enforced.
Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the
law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same
class.
RA 7227 aims primarily to accelerate the conversion of military reservations into productive uses. This
was really limited to the military bases as the law's intent provides. Moreover, the law tasked the BCDA
to specifically develop the areas the bases occupied.
Among such enticements are: (1) a separate customs territory within the zone, (2) tax-and-duty-free
importations, (3) restructured income tax rates on business enterprises within the zone, (4) no foreign
exchange control, (5) liberalized regulations on banking and finance, and (6) the grant of resident status
to certain investors and of working visas to certain foreign executives and workers. The target of the law
was the big investor who can pour in capital.
Even more important, at this time the business activities outside the "secured area" are not likely to
have any impact in achieving the purpose of the law, which is to turn the former military base to
productive use for the benefit of the Philippine economy. Hence, there was no reasonable basis to
extend the tax incentives in RA 7227.
It is well-settled that the equal-protection guarantee does not require territorial uniformity of
laws. As long as there are actual and material differences between territories, there is no
violation of the constitutional clause.
Besides, the businessmen outside the zone can always channel their capital into it.
RA 7227, the objective is to establish a "self-sustaining, industrial, commercial, financial and investment
center”. There will really be differences between it and the outside zone of Olongapo.
The classification of the law also applies equally to the residents and businesses in the zone. They are
similarly treated to contribute to the end gaol of the law.
G.R. No. 60506 August 6, 1992
FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR, LEONILA M.
MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and ELVIRA, all surnamed
MAGLANA, herein represented by their mother, FIGURACION VDA. DE MAGLANA, petitioners,
vs.
HONORABLE FRANCISCO Z. CONSOLACION, Presiding Judge of Davao City, Branch II, and
AFISCO INSURANCE CORPORATION, respondents.
Jose B. Guyo for petitioners.
Angel E. Fernandez for private respondent.
ROMERO, J.:
The nature of the liability of an insurer sued together with the insured/operator-owner of a common
carrier which figured in an accident causing the death of a third person is sought to be defined in this
petition for certiorari.
The facts as found by the trial court are as follows:
. . . Lope Maglana was an employee of the Bureau of Customs whose work station
was at Lasa, here in Davao City. On December 20, 1978, early morning, Lope
Maglana was on his way to his work station, driving a motorcycle owned by the
Bureau of Customs. At Km. 7, Lanang, he met an accident that resulted in his death.
He died on the spot. The PUJ jeep that bumped the deceased was driven by Pepito
Into, operated and owned by defendant Destrajo. From the investigation conducted
by the traffic investigator, the PUJ jeep was overtaking another passenger jeep that
was going towards the city poblacion. While overtaking, the PUJ jeep of defendant
Destrajo running abreast with the overtaken jeep, bumped the motorcycle driven by
the deceased who was going towards the direction of Lasa, Davao City. The point of
impact was on the lane of the motorcycle and the deceased was thrown from the road
and met his untimely death. 1
Consequently, the heirs of Lope Maglana, Sr., here petitioners, filed an action for damages and
attorney's fees against operator Patricio Destrajo and the Afisco Insurance Corporation (AFISCO for
brevity) before the then Court of First Instance of Davao, Branch II. An information for homicide thru
reckless imprudence was also filed against Pepito Into.
During the pendency of the civil case, Into was sentenced to suffer an indeterminate penalty of one (1)
year, eight (8) months and one (1) day of prision correccional, as minimum, to four (4) years, nine (9)
months and eleven (11) days of prision correccional, as maximum, with all the accessory penalties
provided by law, and to indemnify the heirs of Lope Maglana, Sr. in the amount of twelve thousand
pesos (P12,000.00) with subsidiary imprisonment in case of insolvency, plus five thousand pesos
(P5,000.00) in the concept of moral and exemplary damages with costs. No appeal was interposed by
accused who later applied for probation. 2
10
On December 14, 1981, the lower court rendered a decision finding that Destrajo had not exercised
sufficient diligence as the operator of the jeepney. The dispositive portion of the decision reads:
WHEREFORE, the Court finds judgment in favor of the plaintiffs against defendant
Destrajo, ordering him to pay plaintiffs the sum of P28,000.00 for loss of income; to
pay plaintiffs the sum of P12,000.00 which amount shall be deducted in the event
judgment in Criminal Case No. 3527-D against the driver, accused Into, shall have
been enforced; to pay plaintiffs the sum of P5,901.70 representing funeral and burial
expenses of the deceased; to pay plaintiffs the sum of P5,000.00 as moral damages
which shall be deducted in the event judgment (sic) in Criminal Case No. 3527-D
against the driver, accused Into; to pay plaintiffs the sum of P3,000.00 as attorney's
fees and to pay the costs of suit.
The defendant insurance company is ordered to reimburse defendant Destrajo
whatever amounts the latter shall have paid only up to the extent of its insurance
coverage.
SO ORDERED. 3
Petitioners filed a motion for the reconsideration of the second paragraph of the dispositive portion of
the decision contending that AFISCO should not merely be held secondarily liable because the
Insurance Code provides that the insurer's liability is "direct and primary and/or jointly and severally with
the operator of the vehicle, although only up to the extent of the insurance coverage." 4 Hence, they
argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been
awarded in their favor.
In its comment on the motion for reconsideration, AFISCO argued that since the Insurance Code does
not expressly provide for a solidary obligation, the presumption is that the obligation is joint.
In its Order of February 9, 1982, the lower court denied the motion for reconsideration ruling that since
the insurance contract "is in the nature of suretyship, then the liability of the insurer is secondary only up
to the extent of the insurance coverage." 5
Petitioners filed a second motion for reconsideration reiterating that the liability of the insurer is direct,
primary and solidary with the jeepney operator because the petitioners became direct beneficiaries
under the provision of the policy which, in effect, is a stipulation pour autrui. 6 This motion was likewise
denied for lack of merit.
Hence, petitioners filed the instant petition for certiorari which, although it does not seek the reversal of
the lower court's decision in its entirety, prays for the setting aside or modification of the second
paragraph of the dispositive portion of said decision. Petitioners reassert their position that the
insurance company is directly and solidarily liable with the negligent operator up to the extent of its
insurance coverage.
We grant the petition.
The particular provision of the insurance policy on which petitioners base their claim is as follows:

Sec. 1 — LIABILITY TO THE PUBLIC
1. The Company will, subject to the Limits of Liability, pay all sums necessary to
discharge liability of the insured in respect of
(a) death of or bodily injury to any THIRD PARTY
(b) . . . .
2. . . . .
3. In the event of the death of any person entitled to indemnity under this Policy, the
Company will, in respect of the liability incurred to such person indemnify his personal
representatives in terms of, and subject to the terms and conditions hereof. 7
The above-quoted provision leads to no other conclusion but that AFISCO can be held directly liable by
petitioners. As this Court ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here an insurance
policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of
the injury or even upon which the liability depends, and does not depend on the recovery of judgment
by the injured party against the insured." 8 The underlying reason behind the third party liability (TPL) of
the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of
the insured who causes such injury, and to give such injured person a certain beneficial interest in the
proceeds of the policy . . ." 9 Since petitioners had received from AFISCO the sum of P5,000.00 under
the no-fault clause, AFISCO's liability is now limited to P15,000.00.
However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo. In Malayan Insurance
Co., Inc. v. Court of Appeals, 10 this Court had the opportunity to resolve the issue as to the nature of
the liability of the insurer and the insured vis-a-vis the third party injured in an accident. We categorically
ruled thus:
While it is true that where the insurance contract provides for indemnity against
liability to third persons, such third persons can directly sue the insurer, however, the
direct liability of the insurer under indemnity contracts against third party liability does
not mean that the insurer can be held solidarily liable with the insured and/or the other
parties found at fault. The liability of the insurer is based on contract; that of the
insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos
(the injured third party), but it cannot, as incorrectly held by the trial court, be made
"solidarily" liable with the two principal tortfeasors, namely respondents Sio Choy and
San Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said, two (2)
respondents by reason of the indemnity contract against third party liability — under
which an insurer can be directly sued by a third party — this will result in a violation of
the principles underlying solidary obligation and insurance contracts. (emphasis
supplied)
11
The Court then proceeded to distinguish the extent of the liability and manner of enforcing the same in
ordinary contracts from that of insurance contracts. While in solidary obligations, the creditor may
enforce the entire obligation against one of the solidary debtors, in an insurance contract, the insurer
undertakes for a consideration to indemnify the insured against loss, damage or liability arising from an
unknown or contingent event. 11 Thus, petitioner therein, which, under the insurance contract is liable
only up to P20,000.00, can not be made solidarily liable with the insured for the entire obligation of
P29,013.00 otherwise there would result "an evident breach of the concept of solidary obligation."
Similarly, petitioners herein cannot validly claim that AFISCO, whose liability under the insurance policy
is also P20,000.00, can be held solidarily liable with Destrajo for the total amount of P53,901.70 in
accordance with the decision of the lower court. Since under both the law and the insurance policy,
AFISCO's liability is only up to P20,000.00, the second paragraph of the dispositive portion of the
decision in question may have unwittingly sown confusion among the petitioners and their counsel.
What should have been clearly stressed as to leave no room for doubt was the liability of AFISCO under
the explicit terms of the insurance contract.
In fine, we conclude that the liability of AFISCO based on the insurance contract is direct, but not
solidary with that of Destrajo which is based on Article 2180 of the Civil Code. 12 As such, petitioners
have the option either to claim the P15,000 from AFISCO and the balance from Destrajo or enforce the
entire judgment from Destrajo subject to reimbursement from AFISCO to the extent of the insurance
coverage.
While the petition seeks a definitive ruling only on the nature of AFISCO's liability, we noticed that the
lower court erred in the computation of the probable loss of income. Using the formula: 2/3 of (80-56) x
P12,000.00, it awarded P28,800.00. 13 Upon recomputation, the correct amount is P192,000.00. Being
a "plain error," we opt to correct the same. 14 Furthermore, in accordance with prevailing jurisprudence,
the death indemnity is hereby increased to P50,000.00. 15
WHEREFORE, premises considered, the present petition is hereby GRANTED. The award of
P28,800.00 representing loss of income is INCREASED to P192,000.00 and the death indemnity of
P12,000.00 to P50,000.00.
SO ORDERED.
G.R. No. L-54171 October 28, 1980
JEWEL VILLACORTA, assisted by her husband, GUERRERO VILLACORTA, petitioner,
vs.
THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY, respondents.
TEEHANKEE, Acting C.J.:
The Court sets aside respondent Insurance Commission's dismissal of petitioner's complaint and holds
that where the insured's car is wrongfully taken without the insured's consent from the car service and
repair shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for
a joy ride, in the course of which it was totally smashed in an accident), respondent insurer is liable and
must pay insured for the total loss of the insured vehicle under the theft clause of the policy.
The undisputed facts of the case as found in the appealed decision of April 14, 1980 of respondent
insurance commission are as follows:
Complainant [petitioner] was the owner of a Colt Lancer, Model 1976, insured with
respondent company under Private Car Policy No. MBI/PC-0704 for P35,000.00 —
Own Damage; P30,000.00 — Theft; and P30,000.00 — Third Party Liability, effective
May 16, 1977 to May 16, 1978. On May 9, 1978, the vehicle was brought to the
Sunday Machine Works, Inc., for general check-up and repairs. On May 11, 1978,
while it was in the custody of the Sunday Machine Works, the car was allegedly taken
by six (6) persons and driven out to Montalban, Rizal. While travelling along Mabini
St., Sitio Palyasan, Barrio Burgos, going North at Montalban, Rizal, the car figured in
an accident, hitting and bumping a gravel and sand truck parked at the right side of
the road going south. As a consequence, the gravel and sand truck veered to the
right side of the pavement going south and the car veered to the right side of the
pavement going north. The driver, Benito Mabasa, and one of the passengers died
and the other four sustained physical injuries. The car, as well, suffered extensive
damage. Complainant, thereafter, filed a claim for total loss with the respondent
company but claim was denied. Hence, complainant, was compelled to institute the
present action.
The comprehensive motor car insurance policy for P35,000.00 issued by respondent Empire Insurance
Company admittedly undertook to indemnify the petitioner-insured against loss or damage to the car (a)
by accidental collision or overturning, or collision or overturning consequent upon mechanical
breakdown or consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or
burglary, housebreaking or theft; and (c) by malicious act.
Respondent insurance commission, however, dismissed petitioner's complaint for recovery of the total
loss of the vehicle against private respondent, sustaining respondent insurer's contention that the
accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage,
invoking the policy provision on "Authorized Driver" clause. 1
Respondent commission upheld private respondent's contention on the "Authorized Driver" clause in
this wise: "It must be observed that under the above-quoted provisions, the policy limits the use of the
insured vehicle to two (2) persons only, namely: the insured himself or any person on his (insured's)
permission. Under the second category, it is to be noted that the words "any person' is qualified by the
phrase
... on the insured's order or with his permission.' It is therefore clear that if the person
driving is other than the insured, he must have been duly authorized by the insured,
to drive the vehicle to make the insurance company liable for the driver's negligence.
Complainant admitted that she did not know the person who drove her vehicle at the
time of the accident, much less consented to the use of the same (par. 5 of the
complaint). Her husband likewise admitted that he neither knew this driver Benito
Mabasa (Exhibit '4'). With these declarations of complainant and her husband, we
hold that the person who drove the vehicle, in the person of Benito Mabasa, is not an
authorized driver of the complainant. Apparently, this is a violation of the 'Authorized
Driver' clause of the policy.
12
Respondent commission likewise upheld private respondent's assertion that the car was not stolen and
therefore not covered by the Theft clause, ruling that "The element of 'taking' in Article 308 of the
Revised Penal Code means that the act of depriving another of the possession and dominion of a
movable thing is coupled ... with the intention. at the time of the 'taking', of withholding it with the
character of permanency (People vs. Galang, 7 Appt. Ct. Rep. 13). In other words, there must have
been shown a felonious intent upon the part of the taker of the car, and the intent must be an intent
permanently to deprive the insured of his car," and that "Such was not the case in this instance. The
fact that the car was taken by one of the residents of the Sunday Machine Works, and the withholding of
the same, for a joy ride should not be construed to mean 'taking' under Art. 308 of the Revised Penal
Code. If at all there was a 'taking', the same was merely temporary in nature. A temporary taking is held
not a taking insured against (48 A LR 2d., page 15)."
The Court finds respondent commission's dismissal of the complaint to be contrary to the evidence and
the law.
First, respondent commission's ruling that the person who drove the vehicle in the person of Benito
Mabasa, who, according to its finding, was one of the residents of the Sunday Machine Works, Inc. to
whom the car had been entrusted for general check-up and repairs was not an "authorized driver" of
petitioner-complainant is too restrictive and contrary to the established principle that insurance
contracts, being contracts of adhesion where the only participation of the other party is the signing of his
signature or his "adhesion" thereto, "obviously call for greater strictness and vigilance on the part of
courts of justice with a view of protecting the weaker party from abuse and imposition, and prevent their
becoming traps for the unwary.2
The main purpose of the "authorized driver" clause, as may be seen from its text, supra, is that a person
other than the insured owner, who drives the car on the insured's order, such as his regular driver, or
with his permission, such as a friend or member of the family or the employees of a car service or repair
shop must be duly licensed drivers and have no disqualification to drive a motor vehicle.
A car owner who entrusts his car to an established car service and repair shop necessarily entrusts his
car key to the shop owner and employees who are presumed to have the insured's permission to drive
the car for legitimate purposes of checking or road-testing the car. The mere happenstance that the
employee(s) of the shop owner diverts the use of the car to his own illicit or unauthorized purpose in
violation of the trust reposed in the shop by the insured car owner does not mean that the "authorized
driver" clause has been violated such as to bar recovery, provided that such employee is duly qualified
to drive under a valid driver's license.
The situation is no different from the regular or family driver, who instead of carrying out the owner's
order to fetch the children from school takes out his girl friend instead for a joy ride and instead wrecks
the car. There is no question of his being an "authorized driver" which allows recovery of the loss
although his trip was for a personal or illicit purpose without the owner's authorization.
Secondly, and independently of the foregoing (since when a car is unlawfully taken, it is the theft clause,
not the "authorized driver" clause, that applies), where a car is admittedly as in this case unlawfully and
wrongfully taken by some people, be they employees of the car shop or not to whom it had been
entrusted, and taken on a long trip to Montalban without the owner's consent or knowledge, such taking
constitutes or partakes of the nature of theft as defined in Article 308 of the Revised Penal Code, viz.
"Who are liable for theft. — Theft is committed by any person who, with intent to gain but without
violence against or intimidation of persons nor force upon things, shall take personal property of another
without the latter's consent," for purposes of recovering the loss under the policy in question.
The Court rejects respondent commission's premise that there must be an intent on the part of the taker
of the car "permanently to deprive the insured of his car" and that since the taking here was for a "joy
ride" and "merely temporary in nature," a "temporary taking is held not a taking insured against."
The evidence does not warrant respondent commission's findings that it was a mere "joy ride". From the
very investigator's report cited in its comment, 3 the police found from the waist of the car driver Benito
Mabasa Bartolome who smashed the car and was found dead right after the incident "one cal. 45 Colt.
and one apple type grenade," hardly the materials one would bring along on a "joy ride". Then, again, it
is equally evident that the taking proved to be quite permanent rather than temporary, for the car was
totally smashed in the fatal accident and was never returned in serviceable and useful condition to
petitioner-owner.
Assuming, despite the totally inadequate evidence, that the taking was "temporary" and for a "joy ride",
the Court sustains as the better view that which holds that when a person, either with the object of going
to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle
belonging to another, without the consent of its owner, he is guilty of theft because by taking possession
of the personal property belonging to another and using it, his intent to gain is evident since he derives
therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C. Aquino cites in his work
Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it "hurt de uso.
"4
The insurer must therefore indemnify the petitioner-owner for the total loss of the insured car in the sum
of P35,000.00 under the theft clause of the policy, subject to the filing of such claim for reimbursement
or payment as it may have as subrogee against the Sunday Machine Works, Inc.
ACCORDINGLY, the appealed decision is set aside and judgment is hereby rendered sentencing
private respondent to pay petitioner the sum of P35,000.00 with legal interest from the filing of the
complaint until full payment is made and to pay the costs of suit.
SO ORDERED.
ANDREW PALERMO vs. PYRAMID INSURANCE CO., INC. [G.R. No. L-36480 May 31, 1988]
Facts: Petitioner, having purchased a brand new Nissan Cedric de Luxe Sedan, insured the same with
the defendant insurance company against any loss or damage for P 20,000.00 and against third party
liability for P 10,000.00. Plaintiff paid the defendant P 361.34 premium for one year The automobile
was, however, mortgaged by the plaintiff with the vendor, Ng Sam Bok Motors Co., to secure the
payment of the balance of the purchase price, which explains why the registration certificate in the
name of the plaintiff remains in the hands of the mortgagee, Ng Sam Bok Motors Co. while driving the
automobile in question, the plaintiff met a violent accident. The insured, Andrew Palermo, filed a
complaint in the Court of First Instance against Pyramid Insurance Co., Inc., for payment of his claim
under a Private Car Comprehensive Policy issued by the defendant. In its answer, Pyramid Insurance
Co., Inc., alleged that it disallowed the claim because at the time of the accident, the insured was
driving his car with an expired driver's license. the court a quo rendered judgment ordering the
defendant to pay the plaintiff value of the insurance of the motor vehicle in question and to pay the
costs."
Issue: Whether the insured is considered an unauthorized driver if he has an expired driver’s license,
thus the insurer is not liable under the policy.
13
Ruling: There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the
insured motor vehicle because his driver's license had expired. The driver of the insured motor vehicle
at the time of the accident was, the insured himself, hence an "authorized driver" under the policy. While
the Motor Vehicle Law prohibits a person from operating a motor vehicle on the highway without a
license or with an expired license, an infraction of the Motor Vehicle Law on the part of the insured, is
not a bar to recovery under the insurance contract. It however renders him subject to the penal
sanctions of the Motor Vehicle Law. The requirement that the driver be "permitted in accordance with
the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving
such motor vehicle by order of a Court of Law or by reason of any enactment or regulation in that
behalf," applies only when the driver" is driving on the insured's order or with his permission." It does
not apply when the person driving is the insured himself. The main purpose of the "authorized driver"
clause, as may be seen from its text, is that a person other than the insured owner, who drives the car
on the insured's order, such as his regular driver, or with his permission, such as a friend or member of
the family or the employees of a car service or repair shop, must be duly licensed drivers and have no
disqualification to drive a motor vehicle.
G.R. No. L-17312 November 29, 1965
ARTURO R. TANCO, JR., plaintiff-appellee,
vs.
THE PHILIPPINE GUARANTY COMPANY, defendant-appellant.
Manuel Y. Macias and Julio R. Vicencio for plaintiff-appellee.
Rufino Y. Luna and Josue H. Gustilo for defendant-appellant.
MAKALINTAL, J.:
Plaintiff's automobile, while being driven at the southern approach of the Jones bridge by his brother
Manuel Tanco on September 1, 1959, figured in a collision with a pick-up delivery van, as a result of
which both vehicles were damaged. Plaintiff paid for repairs the total sum of P2,536.99 and then filed
his claim with defendant company under a car insurance policy issued by the latter. The claim was
rejected, whereupon suit was commenced in the Municipal Court of Manila, whence it was elevated on
appeal to the Court of First Instance of Manila, which gave judgment for plaintiff in the amount stated,
plus interest at 8% and P500.00 as attorney's fees. Appeal was taken by defendant directly to this
Court, there being no dispute as to the facts.
The policy sued upon covers, up to a certain limit, loss or damage to the insured vehicle as well as
damage to property of third persons as a consequence of or incident to the operation of said vehicle.
There is an exception clause, however, which provides that "the company shall not be liable in respect
of any accident, loss, damage or liability caused, sustained or incurred ... whilst (the insured vehicle) is
... being driven by or is for the purpose of being driven by him in the charge of any person other than an
Authorized Driver." The policy defined the term "Authorized Driver" to be the insured himself and "(b)
any person driving on the Insured's order or with his permission, provided that the person driving is
permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle or has
been permitted and is not disqualified by order of a court of law or by reason of any enactment or
regulation in that behalf from driving such Motor Vehicle."
At the time of the collision plaintiff's brother who was at the wheel, did not have a valid license, the one
he had obtained for the year 1958 not having been renewed on or before the last working day of
February 1959, as required by section 31 of the Motor Vehicle Law, Act No. 3992. That section states
that any license not so renewed "shall become delinquent and invalid," and section 21 states that
"except as otherwise specifically provided in this Act no person shall operate any motor vehicle on the
public highways without having procured a license for the current year, nor while such license is
delinquent, invalid, suspended or revoked."
In rendering judgment for plaintiff the trial court adverted to the absence of evidence that Manuel Tanco
had been "disqualified by order of a court of law or by reason of any enactment or regulation in that
behalf from driving such motor vehicle," and ruled that if there is any ambiguity in the definition of the
term "authorized driver" in the policy the ambiguity should be construed in favor of plaintiff, since the
policy had been prepared in its entirety by defendant. The trial court's advertence is true as a matter of
fact; and its ruling is correct as a matter of law. But neither one nor the other is relevant in this case.
Appellant does not rely on the portion of the proviso in the policy quoted by the court but on that which
states that "the person driving is permitted in accordance with the licensing or other laws." And as to
this there is no ambiguity whatsoever, because the Motor Vehicle Law expressly prohibits any person
from operating a motor vehicle on the highways without a license for the current year or while such
license is delinquent or invalid. That Manuel Tanco renewed his license on September 8,1959, one
week after the accident did not cure the delinquency or revalidate the license which had already
expired.
We are not aware that the question presented here has been decided by this Court in any previous
case. Indeed all the authorities cited by the parties consist of decisions Courts United States. We note,
however, that those relied upon by appellee are not in point by reason of material differences in the
facts or issues presented. In Messersmith vs. American Fidelity Co., 187 App. Div. 35, 175 N.Y. Supp.
169; and Fireman's Fund Insurance Co. vs. Haley, 129 Miss. 525, 90 So. 635, the question was
whether the insured could recover on an automobile policy for damage sustained in a collision which
occurred while the vehicle was being driven in violation of law — in the first case by an infant at the
instance of the insured, and in the second by the insured himself beyond the statutory speed limit. In
neither case was there a provision in the policy expressly excluding liability by reason of the particular
violation involved. We have no reason to disagree with the pronouncement of the court in the second
case, after citing the first, that "if such a defense (that the vehicle was being driven in violation of law)
were permissible automobile insurance would be practically valueless."
In MacMahon vs. Pearlman, 13 N.E. 154-156, a Massachusetts case, the defense of the insurer was
also the violation of law by the insured, namely, that she was driving without a license; but as stated in
the decision, "the casualty company does not urge that the unlawful conduct is forbidden in express
terms, (but) that because of public policy it ought not to be compelled to pay damages." The court,
citing Messersmith v. American Fidelity Co., supra, similarly allowed recovery, saying that to restrict
such insurance to cases where there has been no violation of criminal law or ordinance would reduce
indemnity to a shadow.
In the case before Us now appellant's defense does not rest on the general proposition that if a law is
violated at the time of the accident which causes the damage or injury there can be no recovery, but
rather on a specific provision in the policy that appellant shall not be liable if the accident occurs while
the vehicle is being driven by any person other than an authorized driver and that an authorized driver,
if not the insured himself, is one who is acting on his order or with his permission, provided he is
permitted to drive under the licensing laws.
14
The cases cited by appellant are apropos. In Crahan v. Automobile Underwriters, Inc., et al., 176 A.
(Pa.) 817, a clause in the policy excluding loss while the motor vehicle "is being operated by any person
prohibited by law from driving an automobile" was held to be free from doubt or ambiguity, reasonable in
its terms and in furtherance of the policy of the law prohibiting unlicensed drivers to operate motor
vehicles. In Zabonick v. Ralston, et al., 261 N.W. (Mich.) 316, the insured was driving with an expired
license, in violation of law (Act No. 91 of the Public Acts of 1931), when the accident occurred. Under a
provision in the policy that the insurer "shall not be liable while the automobile is operated ... by any
person prohibited by law from driving," the insurance company was absolved, the Supreme Court of
Michigan saying: "To require a person to secure an operator's license and meet certain requirements
before driving an automobile is a regulation for the protection of life and property, the wisdom of which
can scarcely be questioned. The Legislature has also provided that every three years such licenses
expire and may be renewed under certain conditions. If one fails to comply with the regulation, the
statute says, he or she shall not drive a motor vehicle upon the highway. Under the terms of the
contract, while under such statutory prohibition, plaintiff could not recover under his policy. To permit
such recovery, notwithstanding the lack of a driver's license, would tend to undermine the protection
afforded the public by virtue of Act No. 91."
The exclusion clause in the contract invoked by appellant is clear. It does not refer to violations of law in
general, which indeed would tend to render automobile insurance practically a sham, but to a specific
situation where a person other than the insured himself, even upon his order or with his permission,
drives the motor vehicle without a license or with one that has already expired. No principle of law or of
public policy militates against the validity of such a provision.
The judgment appealed from is reversed, with costs.
G.R. No. L-48546 February 29, 1988
SUMMIT GUARANTY & INSURANCE COMPANY, INC., petitioner,
vs.
THE HONORABLE GREGORIA C. ARNALDO, in her capacity as Insurance Commissioner, and
FGU INSURANCE CORPORATION, respondents.
GANCAYCO, J.:
As a result of a vehicular accident that happened on November 26,1976 whereby a Ford Pick-up with
Plate No. UC-5925 Phil. '76 owned by Marcos Olaso was bumped by a cargo truck with Plate No. OY-
783 then owned by Alberto Floralde, FGU insurance poration FGU by reason of Motor Vehicle
Insurance Policy No. IC-VF-07185 paid Olaso the sum of P 2,817.50 as its share in the repair cost of
the said Ford Pick-up. Having thus been subrogated to the rights and causes of action of said Olaso in
the said amount FGU formally demanded payment of said amount from Floralde and attempted to verify
Floralde's insurance carrier. Floralde failed to reveal his insurance carrier. In the early part of 1978 FGU
was able to ascertain the Identity of Floralde's insurance carrier to be the Summit Guaranty and
Insurance Company, Inc. (Summit). On February 22,1978 FGU wrote to the insurance commissioner
requesting for a conference with Summit and demanded from Summit through counsel on February
28,1978 the payment of the damages sustained by the car of Olaso but to no avail. Hence on May
22,1978 FGU filed IC Case No. 825 in the Insurance Commissioner's Office against Summit for
recovery of said amount.
A motion to dismiss the complaint was filed by Summit on May 30,1978 on the ground of prescription
under Section 384 of PD No. 612. In an order of June 19,1978 the resolution of the motion was deferred
until after the hearing on the merits. A motion for reconsideration of said order filed by Summit was
denied in an order of June 28,1978 and Summit was required to file its answer to the complaint. Hence
Summit filed the herein petition for certiorari and prohibition with restraining order in this Court alleging
that respondent commissioner acted without or in excess of jurisdiction or with grave abuse of discretion
in denyingthe aforesaid motion for reconsideration when it has been shown that the action has already
prescribed so petitioner sought an order to restrain the respondent commissioner from further
proceeding in the case during the pendency of the petition.
Without giving due course to the petition, the respondents were required to comment thereon within ten
(10) days from notice. The comments of respondents were submitted in due time. The petitioner was
then required to submit a reply thereto which reply was filed. On October 6, 1978 the court gave due
course to the petition and thereafter required the parties to file their briefs. The briefs of all the parties
having all been submitted, the case is now due for decision.
Outrightly, the court finds that the petition should be dismissed for lack of merit. The questioned orders
of the respondent Commissioner of June 19,1978 and June 28,1978 deferring the consideration of the
petitioner's motion to dismiss the complaint until after the hearing on the merits of the case are
supported by the provision of Section 3, Rule 16 of the Rules of Court that such hearing and
determination of the motion may be deferred "until the trial if the ground alleged therein does not appear
to be indubitable." Obviously, the respondent commissioner had doubts from the mere allegations of the
motion to dismiss. Considering such doubt the deferment was proper and may be considered as a
provisional denial of the motion to dismiss. 1
The purpose of this provision requiring that the order of the court dismissing an action should be
founded on indubitable grounds is to avoid multiplicity of appeals. In case of doubt, the court, instead of
denying or granting the motion, must defer its final hearing and determination until the trial . 2
The remedy against the denial of a motion to dismiss is by appeal in due course after the case is
decided on the merits, save where the trial court clearly acted outside its jurisdiction or with grave abuse
of discretion as to amount to excess of jurisdiction . 3 Thus it is only when it clearly appears that the trial
judge or court is proceeding in excess or outside of its jurisdiction, when the remedy of prohibition would
lie since it would be useless to waste time to go ahead with the proceedings. 4 The same remedy
applies when the court denies the motion based on lack of jurisdiction. 5 However, such a situation does
not exist in the present case as to warrant this extraordinary remedy.
Nevertheless, petitioner squarely brings into focus the provisions of Section 384 of PD 612, the
Insurance Code, which provides as follows:
Sec. 384. Any person having any claim upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the amount of his loss, and/or the
nature, extent and duration of the injuries sustained as certified by a duly licensed
physician. Notice of claim must be filed within six months from date of the accident,
otherwise, the claim shall be deemed waived. Action or suit for recovery of damage
due to loss or injury must be brought, in proper cases, with the Commissioner or the
Courts within one year from date of accident, otherwise, the claimant's right of action
shall prescribe.
15
As averred in the motion to dismiss flied by petitioner the accident happened on November 26, 1976
while the complaint was filed on May 22,1978 beyond the one-year period from the time of the accident
provided for by the aforecited provision of law.
Respondent FGU, however, contends that the said one-year prescriptive period can not apply to it
because it was merely subrogated to the rights of Olaso; that the prescriptive period of its cause of
action is ten (10) years being one arising from a written contract; 6 that said provision of Section 384 of
the Insurance Code apply only to the claim directly filed by a person against the insurance company for
the loss he sustained; and that the claim of respondent FGU is one for reimbursement as subrogee of
its assured Marcos Olaso against petitioner for the third party liability insurance coverage the latter
issued in favor of Floralde.
Respondent Commissioner in turn argues that the cause of action of FGU was shown and arose only
from the date it paid Olaso for the damages suffered and not from the date of the accident; and that the
period set forth in Section 384 of PD 612 begins to run only from the time the party against whom the
right is to be asserted is Identified. In this case FGU was able to Identify petitioner only in 1978 after all
efforts were undertaken to verify its Identity. FGU paid Marcos Olaso on Dec. 9,1976.
Respondent Commissioner invites attention to the phrase "in proper cases" in Section 384 of PD 612
and argues that the prescriptive period was interrupted upon the extrajudicial demand for payment
made by FGU on petitioner. 7It is further argued that respondent FGU had a right to wait for the
petitioner to respond to the demand before it should file a suit as litigation is not encouraged when it
could be justifiably settled.
In the cases of Summit Guaranty & Insurance Co., Inc. vs. The Hon. Jose C. de Guzman, etc., et al.,
G.R. No. 50997, Summit Guaranty & Insurance Co., Inc. vs. The Hon. Gregoria C. Arnaldo, etc., G.R.
No. L-48679, and Summit Guaranty & Insurance Co., Inc. vs. The Hon. Ramon B. Jabson etc., G.R. No.
L-48758, which were jointly decided by this Court on June 30,1987, wherein the petitioner in the present
case was also the petitioner in said cases, the Court had occasion to interpret the aforesaid provision of
Section 384 of the Insurance Code in this manner:
Petitioner company contends that the two periods prescribed in the aforementioned
law — that is, the six-month period for filing the notice of claim and the one-year
period for bringing an action or suit — are mandatory and must always concur.
Petitioner company argues that under this law, even if the notice of claim was timely
filed with the insurance company within the six-month period, as what happened in
the three cases before Us, the action or suit that follows, if filed beyond the one-year
period should necessarily be dismissed on the ground of prescription.
We find no merit in the contention of petitioner company. There is absolutely nothing
in the law which mandates that the two periods must always concur. On the contrary,
it is very clear that the one-year period is only required 'in proper cases.' It appears
that petitioner company disregarded this very significant phrase when it made its own
interpretation of the law. Had the lawmakers intended it to be the way petitioner
company assumes it to be, then the phrase in proper cases' would not have been
inserted. At this point, it is but appropriate for Us to reiterate our ruling in Aisporna vs.
Court of Appeals, 8 to wit:
 Legislative intent must be ascertained from a consideration of the
statute as a whole. The particular words, clauses and phrases
should not be studied as detached and isolated expressions, but
the whole and every part of the statute must be considered in fixing
the meaning of any of its parts and in order to produce a
harmonious whole. A statute must be so construed as to harmonize
and give effect to all its provisions whenever possible.
It is very obvious that petitioner company is trying to use Section 384 of the Insurance
Code as a cloak to hide itself from its liabilities. The facts of these cases evidently
reflect the deliberate efforts of petitioner company to prevent the filing of a formal
action against it. Bearing in mind that if it succeeds in doing so until one year lapses
from the date of the accident it could set up the defense of prescription, petitioner
company made private respondents believe that their claims would be settled in order
that the latter will not find it necessary to immediately bring suit. In violation of its
duties to adopt and implement reasonable standards for the prompt investigation of
claims and to effectuate prompt, fair and equitable settlement of claims, and with
manifest bad faith, petitioner company devised means and ways of stalling the
settlement proceedings. In G.R.No. L-50997, no steps were taken to process the
claim and no rejection of said claim was ever made even if private respondent had
already complied with all the requirements. In G.R. No. L-48758 — petitioner
company even provided legal assistance to one of the private respondents in the
criminal case filed against him leading private respondents to believe that it was
ready to pay. In the same case, petitioner company admits that it took no final action
or adjudication of the claim. Worse still, in G.R. No. L-48679, assurances of payment
were constantly given and petitioner company even said that a check was ready for
release.
... Action or suit for recovery of damage due to loss or injury must be brought in
proper cases, with the Commissioner or the Courts within one year from the denial of
the claim, otherwise, the claimant's right of action shall prescribe. 9
In the present case, it is not denied that an extrajudicial demand for payment was made by respondent
FGU on petitioner but petitioner failed to respond to the same. Nevertheless the complaint was filed
even before a denial of the claim was made by petitioner. For all legal purposes, the one-year
prescriptive period provided for in Section 384 of the Insurance Code has not begun to run. The cause
of action arises only and starts to run upon the denial of the claim by the insurance company.
The court takes note of the dilatory tactics employed by petitioner in this as in the several cases
aforecited to avoid payment of its liabilities. We now put a finis to this case and express extreme
disapproval of such actuations of petitioner.
WHEREFORE, the petition is DISMISSED for lack of merit with costs against petitioner. Respondent
Commissioner is hereby directed to terminate the proceedings in IC No. 825 with deliberate dispatch.
No motion for extension of time to file a motion for reconsideration of this decision shall be entertained.
SO ORDERED.
G.R. No. L-26827 June 29, 1984
AGAPITO GUTIERREZ, plaintiff-appellee,
vs.
CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.

This Court has made the observation that some insurance companies have been Celso P. delas Alas for plaintiff-appellee.
inventing excuses to avoid their just obligations and it is only the State that can give
the protection which the insuring public needs from possible abuses of the insurers. Achacoso, Ocampo & Simbulan Law Office for defendant-appellant.

In view of the foregoing, We hold that these three cases do not fall within the meaning
of 'proper cases as contemplated in Section 384 of the Insurance Code. To hold
otherwise would enable petitioner company to evade its responsibility through a AQUINO, J.:
clever scheme it had contrived.

The issue in this case is whether an insurance covers a jeepney whose driver's traffic violation report or
xxx xxx xxx
temporary operator's permit had already expired.

The one-year period should instead be counted from the date of rejection by the
Capital Insurance & Surety Co., Inc. insured on December 7, 1961 for one year the jeepney of Agapito
insurer as this is the time when the cause of action accrues. Since in these cases
Gutierrez against passenger and third-party liability. The passenger liability would not exceed P5,000
there has yet been no accrual of cause of action, We hold that precription has not yet
for any one person (Exh. 1 or C-2).
set in.

The policy provides in item 13 that the authorized driver must be the holder of a valid and subsisting
We also observed in the aforesaid cases that because of the problems created by the aforecited
professional driver's license. "A driver with an expired Traffic Violation Receipt or expired Temporary
provision of the Insurance Code the said section was amended by the then Batas Pambansa to read as
Operator's Permit is not considered an authorized driver" (pp. 26-27, 107, Record on Appeal, Par. 13,
follows:
Policy, Exh. C).

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Item 13 is part of the "declarations" which formed part of the policy and had a promissory nature and But the instant case deals with an insurance policy which definitively fixed the meaning of "authorized
effect and constituted "the basis of the policy" (Exh. C, p. 7, Record on Appeal). driver". That stipulation cannot be disregarded or rendered meaningless. It is binding on the insured.

On May 29, 1962, the insured jeepney figured in an accident at Buendia Avenue, Makati, Rizal. As a
result, a passenger named Agatonico Ballega fell off the vehicle and died (Pars. 3 and 4, Exh. A).
Teofilo Ventura, the jeepney driver, was duly licensed for the years 1962 and 1963 (Exh. D). However,
at the time of the accident he did not have the license. Instead, he had a carbon copy of a traffic
violation report (summons) issued by a policeman on February 22, 1962, with the notation that he had
committed the violation: "Inattentive to driving — (Inv. in accident) at 9:30 a.m., 2-22-62" (Exh. E-1).
The same TVR, which served as a receipt for his license, required him to report to Branch 8 of the traffic
court at the corner of Arroceros and Concepcion Streets, Manila at nine o'clock in the morning of March
2, 1962. The TVR would "serve as a temporary operator's permit for 15 days from receipt hereof" (p.
100, Record on Appeal). It is indisputable that at the time of the accident (May 29, 1962), Ventura was
holding an "expired Temporary Operator's Permit."
Gutierrez paid P4,000 to the passenger's widow, Rosalina Abanes Vda. de Ballega, by reason of her
husband's death (5 tsn January 20, 1966; Exh. B and B-1).
It means that to be entitled to recovery the insured should see to it that his driver is authorized as
envisaged in paragraph 13 of the policy which is the law between the parties (Ty vs. First National
Surety & Insurance Co., Inc., 111 Phil. 1122).lwphl@itç The rights of the parties flow from the insurance
contract (Ang vs. Fulton Fire Ins. Co., 112 Phil. 844).
The following ruling has persuasive authority:
Insurance; Automobile; When insurer exempt from liability; Case at bar. — The
automobile insurance policy sued upon in the instant case exempts the insurer
company from liability for any accident loss, damage or liability caused, sustained or
incurred while the vehicle is being driven by any person other than an authorized
driver.
The policy defines the term 'authorized driver' to be the insured himself or any person
driving on the insured's order or with his permission provided he is permitted to drive
under the licensing laws.

As Capital Insurance refused to make any reimbursement, he filed on October 14, 1963 in the city court In the case at bar, plaintiff's brother, who was at the wheel at the time of the collision,
of Manila an action for specific performance and damages. did not have a valid license because the one he had obtained had already expired
and had not been renewed as required by Section 31 of the Motor Vehicle Law.
The city court in a decision dated April 20, 1965 held that Ventura was an authorized driver because his
TVR was coterminous with his license. However, it dismissed the complaint because Gutierrez allegedly That he had renewed his license one week after the accident did not cure the
failed to prove that he paid any amount to the heirs of Ballega. Gutierrez appealed. delinquency or revalidate the license which had already expired (Syllabus, Tanco, Jr.
vs. Phil. Guaranty Co., 122 Phil. 709).
The Court of First Instance in a decision dated April 18, 1966 held that Gutierrez's Exhibits B and B-1
prove that he paid the widow of Ballega P4,099.95 and that his driver, Ventura, was an authorized
driver because his TVR was "coextensive with the" two-year term of his confiscated license. It ordered
the insurance company to pay the Id amount. The insurance company appealed to this Court.

We hold that paragraph 13 of the policy, already cited, is decisive and controlling in this case. It plainly
provides, and we repeat, that "a driver with an expired Traffic Violation Receipt or expired Temporary
Operator's permit is not considered an authorized driver within the meaning" of the policy. Obviously,
Ventura was not an authorized driver. His temporary operator's permit had expired. The expiration bars
recovery under the policy.

In liability insurance, "the parties are bound by the terms of the policy and the right of insured to recover
is governed thereby" (44 C.J.S. 934).

It may be that for purposes of the Motor Vehicle Law the TVR is coterminous with the confiscated
license. That is why the Acting Administrator of the Motor Vehicles Office and the Manila deputy chief of
police ventured the opinion that a TVR does not suspend the erring driver's license, that it serves as a
temporary license and that it may be renewed but should in no case extend beyond the expiration date
of the original license (Exh. F and J, 67, 90-9 1, Record on Appeal).

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