Académique Documents
Professionnel Documents
Culture Documents
166245, 09 April No medical examination shall be required for amounts of insurance up to P50,000.00.
2008 However, a declaration of good health shall be required for all Lot Purchasers as part of the
2. Philamcare Health Systems, Inc. vs. Court of Appeals, 379 SCRA 356, G.R. No. 125678, March 18, 2002 application. The Company reserves the right to require further evidence of insurability
3. Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corp., G.R. No. 185964, June 16, 2014 satisfactory to the Company in respect of the following:
4. Cha vs. Court of Appeals, 277 SCRA 690, G.R. No. 124520, August 18, 1997
5. Gaisano Cagayan, Inc. vs. Insurance Company of North America, 490 SCRA 286, G.R. No. 147839, June 8, 2006 1. Any amount of insurance in excess of P50,000.00.
6. Sun Life of Canada [Philippines], Inc. vs. Sibya, 793 SCRA 45, G.R. No. 211212 June 8, 2016 7.
Geagonia vs. Court of Appeals, 241 SCRA 152, G.R. No. 114427, February 6, 1995 8. The 2. Any lot purchaser who is more than 55 years of age. cCHETI
Insular Life Assurance Company, Ltd. v. Paz Y. Khu, et al.
LIFE INSURANCE BENEFIT.
G.R. No. 195176; April 18, 2016
9. Vda. de Maglana vs. Hon. Consolacion (August 6, 1992) 10. Tiu vs. The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the
Arriesgado (GR No. 138060, 01 September 2004) 11. Prudential Guarantee vs. unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported
Trans-Asia Shipping Lines, Inc. G.R. No. 151890, 20 June 2006 by the Assured to the Company or the sum of P100,000.00, whichever is smaller. Such
12. Roque vs. Intermediate Appellate Court, 139 SCRA 596, No. L-66935 benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the
13. American Home Assurance Company vs. Chua, 309 SCRA 250, G.R. No. 130421, June 28, 1999 Policy.
14. The Insular Life Assurance Company, Ltd. vs. Khu, 789 SCRA 544, G.R. No. 195176 April 18, 2016
15. Lourdes v. Philam Plans, G.R. No. 186983, February 22, 2012 EFFECTIVE DATE OF BENEFIT.The insurance of any eligible Lot Purchaser shall be
effective on the date he contracts a loan with the Assured. However, there shall be no
insurance if the application of the Lot Purchaser is not approved by the Company. 3
[G.R. No. 166245. April 8, 2008.]
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
1. ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs. THE PHILIPPINE
together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of
AMERICAN LIFE INSURANCE COMPANY, respondent.
all insured lot purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated
December 29, 1982, 4 containing a list of insurable balances of its lot buyers for October 1982. One of those
included in the list as "new business" was a certain John Chuang. His balance of payments was PhP100,000.
DECISION On August 2, 1984, Chuang died.
Eternal sent a letter dated August 20, 1984 5 to Philamlife, which served as an insurance claim for
Chuang's death. Attached to the claim were the following documents: (1) Chuang's Certificate of Death; (2)
Identification Certificate stating that Chuang is a naturalized Filipino Citizen; (3) Certificate of Claimant; (4)
VELASCO, JR., J p: Certificate of Attending Physician; and (5) Assured's Certificate. cAHIST
The Case In reply, Philamlife wrote Eternal a letter on November 12, 1984, 6 requiring Eternal to submit the
following documents relative to its insurance claim for Chuang's death: (1) Certificate of Claimant (with form
Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside attached); (2) Assured's Certificate (with form attached); (3) Application for Insurance accomplished and
the November 26, 2004 Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 57810 is the query: May signed by the insured, Chuang, while still living; and (4) Statement of Account showing the unpaid balance of
the inaction of the insurer on the insurance application be considered as approval of the application? Chuang before his death.
The Facts Eternal transmitted the required documents through a letter dated November 14, 1984, 7 which was
received by Philamlife on November 15, 1984.
On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife)
entered into an agreement denominated as Creditor Group Life Policy No. P-1920 2 with petitioner Eternal After more than a year, Philamlife had not furnished Eternal with any reply to the latter's insurance
Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP100,000 on April 25,
lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended 1986. 8
upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year,
renewable on a yearly basis. SacTCA In response to Eternal's demand, Philamlife denied Eternal's insurance claim in a letter dated May
20, 1986, 9 a portion of which reads:
The relevant provisions of the policy are:
The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal
ELIGIBILITY. Gardens Memorial Park in October 1982 for the total maximum insurable amount of
P100,000.00 each. No application for Group Insurance was submitted in our office prior to
Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age, is his death on August 2, 1984. CacTIE
indebted to the Assured for the unpaid balance of his loan with the Assured, and is accepted
for Life Insurance coverage by the Company on its effective date is eligible for insurance In accordance with our Creditor's Group Life Policy No. P-1920, under Evidence of
under the Policy. Insurability provision, "a declaration of good health shall be required for all Lot Purchasers
as party of the application." We cite further the provision on Effective Date of Coverage
EVIDENCE OF INSURABILITY. under the policy which states that "there shall be no insurance if the application is not
In the present case, the number of copies of the insurance application that Chuang executed is not at As a final note, to characterize the insurer and the insured as contracting parties on equal footing is
issue, neither is whether the insurance application presented by Eternal has been falsified. Thus, the inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in
inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternal's the industry purposefully used to its advantage. More often than not, insurance contracts are contracts of
witnesses. CIAcSa adhesion containing technical terms and conditions of the industry, confusing if at all understandable to
laypersons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are imbued
However, the question arises as to whether Philamlife assumed the risk of loss without approving with public interest that must be considered whenever the rights and obligations of the insurer and the insured
the application. are to be delineated. Hence, in order to protect the interest of insurance applicants, insurance companies must
be obligated to act with haste upon insurance applications, to either deny or approve the same, or otherwise be
This question must be answered in the affirmative.
bound to honor the application as a valid, binding, and effective insurance contract. 21
As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group
WHEREFORE, we GRANT the petition. The November 26, 2004 CA Decision in CA-G.R. CV
Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:
No. 57810 is REVERSED and SET ASIDE. The May 29, 1996 Decision of the Makati City RTC, Branch 138
EFFECTIVE DATE OF BENEFIT. is MODIFIED. Philamlife is hereby ORDERED: THIAaD
The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a (1) To pay Eternal the amount of PhP100,000 representing the proceeds of the Life Insurance
loan with the Assured. However, there shall be no insurance if the application of the Lot Policy of Chuang;
Purchaser is not approved by the Company. IcDESA
Ernani Trinos, deceased husband of respondent Julita Trinos, was issued a Health Care Agreement for a health 5. ID.; ID.; ID.; ID.; MUST BE ESTABLISHED BY SATISFACTORY AND CONVINCING EVIDENCE BY
coverage with petitioner. During the period of his coverage, he suffered a heart attack and was confined in the INSURER. — The fraudulent intent on the part of the insured must be established to warrant rescission of the
hospital. Respondent tried to claim the benefits under the health care agreement, but petitioner denied her claim. insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is an
Thus, respondent paid the hospitalization expenses herself. affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the
provider or insurer.
Respondent then filed with the RTC an action for damages against petitioner and its president, Dr. Benito Reverente.
The court ruled in favor of Julita and awarded damages. On appeal, the Court of Appeals affirmed the decision of 6. ID.; ID.; ID.; HEALTH CARE AGREEMENT; HEALTH CARE PROVIDER, WHEN LIABLE; CASE AT BAR.
the trial court but deleted all awards for damages and absolved petitioner Reverente. Hence, petitioner brought the — In any case, with or without the authority to investigate, petitioner is liable for claims made under the contract.
instant petition for review, raising the primary argument that a health care agreement is not an insurance Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed
contract. IAaCST upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or
injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.
In affirming the decision of the Court of Appeals, the Supreme Court ruled that an insurance contract exists when
the following elements concur: (1) the insured has an insurable interest; (2) the insured is subject to a risk of loss by 7. ID.; ID.; ID.; RESCISSION OF; CONDITIONS; NOT FULFILLED IN CASE AT BAR. — Under Section 27 of
the happening of the designated peril; (3) the insurer assumes the risk; (4) such assumption of risk is part of a the Insurance Code, "a concealment entitles the injured party to rescind a contract of insurance." The right to rescind
general scheme to distribute actual losses among a large group of persons bearing a similar risk; and (5) in should be exercised previous to the commencement of an action on the contract. In this case, no rescission was
consideration of the insurer's promise, the insured pays a premium. made. Besides, the cancellation of health care agreements as in insurance policies require the concurrence of the
following conditions: 1. Prior notice of cancellation to insured; 2. Notice must be based on the occurrence after
The health care agreement was in the nature of a non-life insurance, which is primarily a contract of indemnity. effective date of the policy of one or more of the grounds mentioned; 3. Must be in writing, mailed or delivered to
the insured at the address shown in the policy; 4. Must state the grounds relied upon provided in Section 64 of
SYLLABUS the Insurance Code and upon request of insured, to furnish facts on which cancellation is based. None of the above
pre-conditions was fulfilled in this case.
1. COMMERCIAL LAW; INSURANCE LAW; CONTRACT OF INSURANCE; DEFINED. — Section 2 (1) of 8. ID.; ID.; ID.; TERMS AND PHRASEOLOGY CONTAINED THEREIN MUST BE STRICTLY INTERPRETED
the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to AGAINST THE INSURER AND LIBERALLY IN FAVOR OF THE INSURED; CASE AT BAR. — When the
indemnify another against loss, damage or liability arising from an unknown or contingent event. terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude
Petitioner argues that the agreement grants "living benefits," such as medical check-ups and hospitalization which a
YNARES-SANTIAGO, J p: member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year
thereafter. Petitioner also points out that only medical and hospitalization benefits are given under the agreement
without any indemnification, unlike in an insurance contract where the insured is indemnified for his loss. Moreover,
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with petitioner
since Health Care Agreements are only for a period of one year, as compared to insurance contracts which last
Philamcare Health Systems, Inc. In the standard application form, he answered no to the following question:
longer, 7 petitioner argues that the incontestability clause does not apply, as the same requires an effectivity period
Have you or any of your family members ever consulted or been treated for high blood of at least two years. Petitioner further argues that it is not an insurance company, which is governed by the
pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give Insurance Commission, but a Health Maintenance Organization under the authority of the Department of Health.
details). 1
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a
The application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
issued Health Care Agreement No. P010194. Under the agreement, respondent's husband was entitled to avail of An insurance contract exists where the following elements concur:
hospitalization benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of "out-patient
1. The insured has an insurable interest;
benefits" such as annual physical examinations, preventive health care and other out-patient services.
2. The insured is subject to a risk of loss by the happening of the designated
Upon the termination of the agreement, the same was extended for another year from March 1, 1989 to March 1,
peril;
1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was increased to a maximum sum of
P75,000.00 per disability. 2 3. The insurer assumes the risk;
During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center 4. Such assumption of risk is part of a general scheme to distribute actual losses
(MMC) for one month beginning March 9, 1990. While her husband was in the hospital, respondent tried to claim among a large group of persons bearing a similar risk; and
the benefits under the health care agreement. However, petitioner denied her claim saying that the Health Care
Agreement was void. According to petitioner, there was a concealment regarding Ernani's medical history. Doctors 5. In consideration of the insurer's promise, the insured pays a premium. 8
at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application form. Thus, respondent paid the hospitalization expenses herself, Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which may
amounting to about P76,000.00. damnify a person having an insurable interest against him, may be insured against. Every person has an insurable
interest in the life and health of himself. Section 10 provides:
WHEREFORE, in view of the foregoing, the Court renders judgment in favor of the (4) of any person upon whose life any estate or interest vested in him depends.
plaintiff Julita Trinos, ordering:
In the case at bar, the insurable interest of respondent's husband in obtaining the health care agreement was his own
1. Defendants to pay and reimburse the medical and hospital coverage of the late Ernani health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of
Trinos in the amount of P76,000.00 plus interest, until the amount is fully paid to plaintiff indemnity. 9 Once the member incurs hospital, medical or any other expense arising from sickness, injury or other
who paid the same; stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the
contract. cDTHIE
We hereby declare and agree that all statement and answers contained herein and in any Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract of
addendum annexed to this application are full, complete and true and bind all parties-in- insurance." The right to rescind should be exercised previous to the commencement of an action on the
interest under the Agreement herein applied for, that there shall be no contract of health contract. 17 In this case, no rescission was made. Besides, the cancellation of health care agreements as in insurance
care coverage unless and until an Agreement is issued on this application and the full policies require the concurrence of the following conditions:
Membership Fee according to the mode of payment applied for is actually paid during the
lifetime and good health of proposed Members; that no information acquired by any
Representative of PhilamCare shall be binding upon PhilamCare unless set out in writing
in the application; that any physician is, by these presents, expressly authorized to disclose 1. Prior notice of cancellation to insured;
or give testimony at anytime relative to any information acquired by him in his
2. Notice must be based on the occurrence after effective date of the policy of
professional capacity upon any question affecting the eligibility for health care coverage of
one or more of the grounds mentioned;
the Proposed Members and that the acceptance of any Agreement issued on this application
shall be a ratification of any correction in or addition to this application as stated in the 3. Must be in writing, mailed or delivered to the insured at the address shown in
space for Home Office Endorsement. 11 (Emphasis ours) the policy;
In addition to the above condition, petitioner additionally required the applicant for authorization to inquire about 4. Must state the grounds relied upon provided in Section 64 of the Insurance
the applicant's medical history, thus: Code and upon request of insured, to furnish facts on which cancellation is
based. 18
I hereby authorize any person, organization, or entity that has any record or knowledge of
my health and/or that of ________ to give to the PhilamCare Health Systems, Inc. any and None of the above pre-conditions was fulfilled in this case. When the terms of insurance contract contain limitations
all information relative to any hospitalization, consultation, treatment or any other on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his
medical advice or examination. This authorization is in connection with the application for obligation. 19 Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the
health care coverage only. A photographic copy of this authorization shall be as valid as party which prepared the contract — the insurer. 20 By reason of the exclusive control of the insurance company
the original. 12 (Emphasis ours) over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer
and liberally in favor of the insured, especially to avoid forfeiture. 21 This is equally applicable to Health Care
Petitioner cannot rely on the stipulation regarding "Invalidation of Agreement" which reads:
Agreements. The phraseology used in medical or hospital service contracts, such as the one at bar, must be liberally
Failure to disclose or misrepresentation of any material information by the member in the construed in favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the construction
application or medical examination, whether intentional or unintentional, shall conferring coverage is to be adopted, and exclusionary clauses of doubtful import should be strictly construed
automatically invalidate the Agreement from the very beginning and liability of Philamcare against the provider. 22
shall be limited to return of all Membership Fees paid. An undisclosed or misrepresented
Anent the incontestability of the membership of respondent's husband, we quote with approval the following
information is deemed material if its revelation would have resulted in the declination of
findings of the trial court:
the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit
or benefits applied for. 13 (U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems
Inc. had twelve months from the date of issuance of the Agreement within which to contest
The answer assailed by petitioner was in response to the question relating to the medical history of the applicant.
the membership of the patient if he had previous ailment of asthma, and six months from
This largely depends on opinion rather than fact, especially coming from respondent's husband who was not a
the issuance of the agreement if the patient was sick of diabetes or hypertension. The
medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent
periods having expired, the defense of concealment or misrepresentation no longer lie. 23
to deceive will not avoid a policy even though they are untrue. 14 Thus,
Finally, petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time
(A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment
of their marriage, the deceased was previously married to another woman who was still alive. The health care
of the insured will not avoid the policy if there is no actual fraud in inducing the
agreement is in the nature of a contract of indemnity. Hence, payment should be made to the party who incurred the
acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the
expenses. It is not controverted that respondent paid all the hospital and medical expenses. She is therefore entitled
rule although the statement is material to the risk, if the statement is obviously of the
to reimbursement. The records adequately prove the expenses incurred by respondent for the deceased's
foregoing character, since in such case the insurer is not justified in relying upon such
hospitalization, medication and the professional fees of the attending physicians. 24
statement, but is obligated to make further inquiry. There is a clear distinction between
such a case and one in which the insured is fraudulently and intentionally states to be true, WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed decision of the Court of Appeals
as a matter of expectation or belief, that which he then knows, to be actually untrue, or the dated December 14, 1995 is AFFIRMED.
impossibility of which is shown by the facts within his knowledge, since in such case the
intent to deceive the insurer is obvious and amounts to actual fraud. 15 (Emphasis ours) SO ORDERED.
The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance ||| (Philamcare Health Systems, Inc. v. Court of Appeals, G.R. No. 125678, [March 18, 2002], 429 PHIL 82-95)
contract. 16Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative
Upon receipt of the shipment, 5 GASI subjected the same to inspection and found that the delivered WHEREFORE, in light of the foregoing, judgment is hereby rendered
goods incurred shortages of 8,600 kilograms and spillage of 3,315 kg for a total of 11,915 kg of loss/damage DISMISSING the instant case for failure of [FIRST LEPANTO] to sufficiently establish
valued at PhP166,772.41. its cause of action against [ATI, COSCO, SMITH BELL, and PROVEN]. DTIACH
GASI sought recompense from COSCO, thru its Philippine agent Smith Bell Shipping Lines, Inc. The counterclaims of [ATI and PROVEN] are likewise dismissed for lack of
(SMITH BELL), 6 ATI 7 and PROVEN 8 but was denied. Hence, it pursued indemnification from the legal basis.
shipment's insurer. 9
No pronouncement as to cost.
After the requisite investigation and adjustment, FIRST LEPANTO paid GASI the amount of
P165,772.40 as insurance indemnity. 10 SO ORDERED. 24
Thereafter, GASI executed a Release of Claim 11 discharging FIRST LEPANTO from any and all Ruling of the Regional Trial Court
liabilities pertaining to the lost/damaged shipment and subrogating it to all the rights of recovery and claims On appeal, the Regional Trial Court (RTC) reversed the MeTC's findings. In its Decision 25 dated
the former may have against any person or corporation in relation to the lost/damaged shipment. IHaECA January 26, 2007, the RTC of Manila, Branch 21, in Civil Case No. 06-116237, rejected the contentions of ATI
As such subrogee, FIRST LEPANTO demanded from COSCO, its shipping agency in the upon its observation that the same is belied by its very own documentary evidence. The RTC remarked that, if,
Philippines, SMITH BELL, PROVEN and ATI, reimbursement of the amount it paid to GASI. When FIRST as alleged by ATI, one jumbo bag was already in bad order condition upon its receipt of the shipment from
LEPANTO's demands were not heeded, it filed on May 29, 1997 a Complaint 12 for sum of money before the COSCO on July 18, 1996, then how come that the Request for Bad Order Survey and the Turn Over Survey of
Metropolitan Trial Court (MeTC) of Manila, Branch 3. FIRST LEPANTO sought that it be reimbursed the Bad Order Cargo were prepared only weeks thereafter or on August 9, 1996 and August 6, 1996, respectively.
amount of PhP166,772.41, twenty-five percent (25%) thereof as attorney's fees, and costs of suit. ATI was adjudged unable to prove that it exercised due diligence while in custody of the shipment and hence,
negligent and should be held liable for the damages caused to GASI which, in turn, is subrogated by FIRST
ATI denied liability for the lost/damaged shipment and claimed that it exercised due diligence and LEPANTO.
care in handling the same. 13 ATI averred that upon arrival of the shipment, SMITH BELL requested for its
inspection 14 and it was discovered that one jumbo bag thereof sustained loss/damage while in the custody of The RTC rejected ATI's contention that its liability is limited only to PhP5,000.00 per package
COSCO as evidenced by Turn Over Survey of Bad Order Cargo No. 47890 dated August 6, 1996 15 jointly because its Management Contract with the Philippine Ports Authority (PPA) purportedly containing the same
executed by the respective representatives of ATI and COSCO. During the withdrawal of the shipment by was not presented as evidence. More importantly, FIRST LEPANTO or GASI cannot be deemed bound
PROVEN from ATI's warehouse, the entire shipment was re-examined and it was found to be exactly in the thereby because they were not parties thereto. Lastly, the RTC did not give merit to ATI's defense that any
same condition as when it was turned over to ATI such that one jumbo bag was damaged. To bolster this claim, claim against it has already prescribed because GASI failed to file any claim within the 15-day period stated in
ATI submitted Request for Bad Order Survey No. 40622 dated August 9, 1996 16 jointly executed by the the gate pass issued by ATI to GASI's broker, PROVEN. Accordingly, the RTC disposed thus:
respective representatives of ATI and PROVEN. ATI also submitted various Cargo Gate Passes 17 showing WHEREFORE, in light of the foregoing, the judgment on appeal is
that PROVEN was able to completely withdraw all the shipment from ATI's warehouse in good order hereby REVERSED.
condition except for that one damaged jumbo bag.
In its Decision 27 dated October 10, 2008, the CA dismissed the appeal and held that the Release of The relationship between the consignee and the arrastre operator is akin to that existing between the
Claim and the Certificate of Insurance presented by FIRST LEPANTO sufficiently established its relationship consignee and/or the owner of the shipped goods and the common carrier, or that between a depositor and a
with the consignee and that upon proof of payment of the latter's claim for damages, FIRST LEPANTO was warehouseman. Hence, in the performance of its obligations, an arrastre operator should observe the same
subrogated to its rights against those liable for the lost/damaged shipment. degree of diligence as that required of a common carrier and a warehouseman. Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them
The CA also affirmed the ruling of the RTC that the subject shipment was damaged while in the over to the party entitled to their possession. 34
custody of ATI. Thus, the CA disposed as follows:
In a claim for loss filed by the consignee (or the insurer), the burden of proof to show compliance
WHEREFORE, premises considered, the assailed Decision is with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. Since the
hereby AFFIRMED and the instant petition is DENIEDfor lack of merit. safekeeping of the goods is its responsibility, it must prove that the losses were not due to its negligence or to
that of its employees. To avoid liability, the arrastre operator must prove that it exercised diligence and due
SO ORDERED. 28 care in handling the shipment. 35
ATI moved for reconsideration but the motion was denied in the CA Resolution 29 dated January ATI failed to discharge its burden of proof. Instead, it insisted on shifting the blame to COSCO on
12, 2009. Hence, this petition arguing that: the basis of the Request for Bad Order Survey dated August 9, 1996 purportedly showing that when ATI
(a)The presentation of the insurance policy is indispensable in proving the right received the shipment, one jumbo bag thereof was already in damaged condition.
of FIRST LEPANTO to be subrogated to the right of the consignee pursuant to The RTC and CA were both correct in concluding that ATI's contention was improbable and
the ruling in Wallem Philippines Shipping, Inc. v. Prudential Guarantee and illogical. As judiciously discerned by the courts a quo, the date of the document was too distant from the date
Assurance, Inc.; 30 when the shipment was actually received by ATI from COSCO on July 18, 1996.
(b)ATI cannot be barred from invoking the defense of prescription as provided In fact, what the document established is that when the loss/damage was discovered, the shipment
for in the gate passes in consonance with the ruling in International Container has been in ATI's custody for at least two weeks. This circumstance, coupled with the undisputed declaration of
Terminal Services, Inc. v. Prudential Guarantee and Assurance Co., Inc. 31 PROVEN's witnesses that while the shipment was in ATI's custody, it was left in an open area exposed to the
elements, thieves and vandals, 36 all generate the conclusion that ATI failed to exercise due care and diligence
Ruling of the Court while the subject shipment was under its custody, control and possession as arrastre operator.
The Court denies the petition.
To prove the exercise of diligence in handling the subject cargoes, an arrastre operator must do
ATI failed to prove that it exercised more than merely show the possibility that some other party could be responsible for the loss or the
due care and diligence while the damage. 37 It must prove that it used all reasonable means to handle and store the shipment with due care and
shipment was under its custody, diligence including safeguarding it from weather elements, thieves or vandals.
control and possession as arrastre
Non-presentation of the insurance
operator.
contract is not fatal to FIRST
It must be emphasized that factual questions pertaining to ATI's liability for the loss/damage LEPANTO's cause of action for
sustained by GASI has already been settled in the uniform factual findings of the RTC and the CA that: ATI reimbursement as subrogee.
failed to prove by preponderance of evidence that it exercised due diligence in handling the shipment.
It is conspicuous from the records that ATI put in issue the submission of the insurance contract for
Such findings are binding and conclusive upon this Court since a review thereof is proscribed by the first time before the CA. Despite opportunity to study FIRST LEPANTO's complaint before the MeTC,
the nature of the present petition. Only questions of law are allowed in petitions for review on certiorari under ATI failed to allege in its answer the necessity of the insurance contract. Neither was the same considered
Rule 45 of the Rules of Court. It is not the Court's duty to review, examine, and evaluate or weigh all over during pre-trial as one of the decisive matters in the case. Further, ATI never challenged the relevancy or
again the probative value of the evidence presented, especially where the findings of the RTC are affirmed by materiality of the Certificate of Insurance presented by FIRST LEPANTO as evidence during trial as proof of
the CA, as in this case. 32 its right to be subrogated in the consignee's stead.
||| (Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corp., G.R. No. 185964, [June 16, 2014], 736 PHIL DECISION
373-397)
4.SPOUSES NILO CHA and STELLA UY CHA, and UNITED INSURANCE CO.,
INC., petitioners, vs. COURT OF APPEALS and CKS DEVELOPMENT PADILLA, J p:
CORPORATION, respondents. [G.R. No. 124520. August 18, 1997.]
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside a decision of respondent
Court of Appeals.
SYNOPSIS
The undisputed facts of the case are as follows:
1. Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with private respondent
CKS Development Corporation (hereinafter CKS), as lessor, on 5 October 1988. LexLib
6. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United. "Section 25. Every stipulation in a policy of Insurance for the payment of loss whether the
person insured has or has not any interest in the property insured, or that the policy shall be
7. On 2 June 1992, the Regional Trial Court, Branch 6, Manila, rendered a decision * ordering therein defendant received as proof of such interest, and every policy executed by way of gaming or
United to pay CKS the amount of P335,063.11 and defendant Cha spouses to pay P50,000.00 as exemplary wagering, is void."
damages, P20,000.00 as attorney's fees and costs of suit.
In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the
8. On appeal, respondent Court of Appeals in CA GR CV No. 39328 rendered a decision ** dated 11 January 1996, leased premises under the provisions of Section 17 of the Insurance Code which provide:
affirming the trial court decision, deleting however the awards for exemplary damages and attorney's fees. A motion
for reconsideration by United was denied on 29 March 1996. "Section 17. The measure of an insurable interest in property is the extent to which the
insured might be damnified by loss of injury thereof."
In the present petition, the following errors are assigned by petitioners to the Court of Appeals:
Therefore, respondent CKS cannot, under the Insurance Code — a special law — be validly a beneficiary of the fire
I insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said
merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the
THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THAT provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds
THE STIPULATION IN THE CONTRACT OF LEASE TRANSFERRING THE of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners).
PROCEEDS OF THE INSURANCE TO RESPONDENT IS NULL AND VOID FOR The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who
BEING CONTRARY TO LAW, MORALS AND PUBLIC POLICY. has no insurable interest in the property insured.
II
THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THE The liability of the Cha spouses to CKS for violating their lease contract in that the Cha spouses obtained a fire
CONTRACT OF LEASE ENTERED INTO AS A CONTRACT OF ADHESION AND insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct issue which we
THEREFORE THE QUESTIONABLE PROVISION THEREIN TRANSFERRING THE do not resolve in this case. cdasia
PROCEEDS OF THE INSURANCE TO RESPONDENT MUST BE RULED OUT IN
FAVOR OF PETITIONER. WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 39328 is SET ASIDE and a new decision
is hereby entered, awarding the proceeds of the fire insurance policy to petitioners Nilo Cha and Stella Uy-Cha.
III
||| (Spouses Cha v. Court of Appeals, G.R. No. 124520, [August 18, 1997], 343 PHIL 488-494)
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF
AN INSURANCE POLICY TO APPELLEE WHICH IS NOT PRIVY TO THE SAID 5. GAISANO CAGAYAN, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
POLICY IN CONTRAVENTION OF THE INSURANCE LAW. AMERICA, respondent. G.R. No. 147839. June 8, 2006.]
IV
The core issue to be resolved in this case is whether or not the aforequoted paragraph 18 of the lease contract AUSTRIA-MARTINEZ, J p:
entered into between CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is 2. the amount of P535,613.00 representing the amount paid by the plaintiff-appellant to the
the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately insured Levi Strauss Phil., Inc., plus legal interest from the time of demand until fully paid.
obtained from respondent fire insurance policies with book debt endorsements. The insurance policies provide for
coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to With costs against the defendant-appellee.
various customers and dealers of the Insured anywhere in the Philippines." 2 The policies defined book debts as the
"unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered SO ORDERED. 10
under this Policy." 3 The policies also provide for the following conditions:
The CA held that the sales invoices are proofs of sale, being detailed statements of the nature, quantity and cost of
1. Warranted that the Company shall not be liable for any unpaid account in the thing sold; that loss of the goods in the fire must be borne by petitioner since the proviso contained in the sales
respect of the merchandise sold and delivered by the Insured which are invoices is an exception under Article 1504 (1) of the Civil Code, to the general rule that if the thing is lost by a
outstanding at the date of loss for a period in excess of six (6) months from the fortuitous event, the risk is borne by the owner of the thing at the time the loss under the principle of res perit
date of the covering invoice or actual delivery of the merchandise whichever domino; that petitioner's obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its
shall first occur. unpaid account and as such the obligation to pay is not extinguished, even if the fire is considered a fortuitous event;
that by subrogation, the insurer has the right to go against petitioner; that, being a fire insurance with book debt
2. Warranted that the Insured shall submit to the Company within twelve (12) endorsements, what was insured was the vendor's interest as a creditor. 11
days after the close of every calendar month all amount shown in their books of
accounts as unpaid and thus become receivable item from their customers and Petitioner filed a motion for reconsideration 12 but it was denied by the CA in its Resolution dated April 11,
dealers. . . . 4 2001. 13
xxx xxx xxx Hence, the present petition for review on certiorari anchored on the following Assignment of Errors:
Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE
Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or INSTANT CASE WAS ONE OVER CREDIT.
destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI.
THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE
On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER
with respondent their claims under their respective fire insurance policies with book debt endorsements; that as of UPON DELIVERY THEREOF.
February 25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with
IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC
by virtue thereof, respondent was subrogated to their rights against petitioner; that respondent made several demands SUBROGATION UNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF
for payment upon petitioner but these went unheeded. 5 RESPONDENT. 14
In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not be held liable because the Anent the first error, petitioner contends that the insurance in the present case cannot be deemed to be over credit
property covered by the insurance policies were destroyed due to fortuities event or force majeure; that respondent's since an insurance "on credit" belies not only the nature of fire insurance but the express terms of the policies; that it
right of subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss was due was not credit that was insured since respondent paid on the occasion of the loss of the insured goods to fire and not
to fire which it could not prevent or foresee; that IMC and LSPI never communicated to it that they insured their because of the non-payment by petitioner of any obligation; that, even if the insurance is deemed as one over credit,
properties; that it never consented to paying the claim of the insured. 6 there was no loss as the accounts were not yet due since no prior demands were made by IMC and LSPI against
petitioner for payment of the debt and such demands came from respondent only after it had already paid IMC and
At the pre-trial conference the parties failed to arrive at an amicable settlement. 7 Thus, trial on the merits LSPI under the fire insurance policies. 15
ensued. TADaCH
As to the second error, petitioner avers that despite delivery of the goods, petitioner-buyer IMC and LSPI assumed
On August 31, 1998, the RTC rendered its decision dismissing respondent's complaint. 8 It held that the fire was the risk of loss when they secured fire insurance policies over the goods.
purely accidental; that the cause of the fire was not attributable to the negligence of the petitioner; that it has not
been established that petitioner is the debtor of IMC and LSPI; that since the sales invoices state that "it is further Concerning the third ground, petitioner submits that there is no subrogation in favor of respondent as no valid
agreed that merely for purpose of securing the payment of purchase price, the above-described merchandise remains insurance could be maintained thereon by IMC and LSPI since all risk had transferred to petitioner upon delivery of
the property of the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the delivered the goods; that petitioner was not privy to the insurance contract or the payment between respondent and its insured
goods and must bear the loss. nor was its consent or approval ever secured; that this lack of privity forecloses any real interest on the part of
respondent in the obligation to pay, limiting its interest to keeping the insured goods safe from fire.
Dissatisfied, petitioner appealed to the CA. 9 On October 11, 2000, the CA rendered its decision setting aside the
decision of the RTC. The dispositive portion of the decision reads: For its part, respondent counters that while ownership over the ready-made clothing materials was transferred upon
delivery to petitioner, IMC and LSPI have insurable interest over said goods as creditors who stand to suffer direct
As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from the CA is xxx xxx xxx
limited to reviewing questions of law which involves no examination of the probative value of the evidence
presented by the litigants or any of them. 18 The Supreme Court is not a trier of facts; it is not its function to analyze Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the
or weigh evidence all over again. 19 Accordingly, findings of fact of the appellate court are generally conclusive on buyer. 27Accordingly, petitioner bears the risk of loss of the goods delivered.
the Supreme Court. 20
IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of
Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be resolved by this the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for
Court, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the consideration of who bears the risk of loss, in property insurance, one's interest is not determined by concept of title,
inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when but whether insured has substantial economic interest in the property. 28
the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or personal,
making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both
or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify
the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are
the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a)
conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition
an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an
as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact
existing interest in that out of which the expectancy arises.
are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the
CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
would justify a different conclusion. 21 Exceptions (4), (5), (7), and (11) apply to the present petition. cATDIH possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the
existence of such an interest, it is sufficient that the insured is so situated with reference to the property that he
would be liable to loss should it be injured or destroyed by the peril against which it is insured. 29 Anyone has an
At issue is the proper interpretation of the questioned insurance policy. Petitioner claims that the CA erred in insurable interest in property who derives a benefit from its existence or would suffer loss from its
construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI since such destruction. 30 Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any
insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner. interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien. 31 In
this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account
The Court disagrees with petitioner's stand. 45 days after the time of the loss covered by the policies.
It is well-settled that when the words of a contract are plain and readily understood, there is no room for The next question is: Is petitioner liable for the unpaid accounts?
construction. 22 In this case, the questioned insurance policies provide coverage for "book debts in connection with
ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 1174 32 of the Civil Code
anywhere in the Philippines." 23 ; and defined book debts as the "unpaid account still appearing in the Book of is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code.
Account of the Insured 45 days after the time of the loss covered under this Policy." 24 Nowhere is it provided in the
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's
questioned insurance policies that the subject of the insurance is the goods sold and delivered to the customers and
accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner's obligation is for
dealers of the insured.
the payment of money. As correctly stated by the CA, where the obligation consists in the payment of money, the
Indeed, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his
alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the liability. 33 The rationale for this is that the rule that an obligor should be held exempt from liability when the loss
contract. 25 Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and
unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered. there is no stipulation holding him liable even in case of fortuitous event. It does not apply when the obligation is
pecuniary in nature. 34
Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating
in the sales invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of
the above described merchandise remains the property of the vendor until the purchase price thereof is fully anything of the same kind does not extinguish the obligation." If the obligation is generic in the sense that the object
paid." 26 thereof is designated merely by its class or genus without any particular designation or physical segregation from all
others of the same class, the loss or destruction of anything of the same kind even without the debtor's fault and
The Court is not persuaded. before he has incurred in delay will not have the effect of extinguishing the obligation. 35 This rule is based on the
principle that the genus of a thing can never perish. Genus nunquan perit. 36 An obligation to pay money is generic;
The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: therefore, it is not excused by fortuitous loss of any specific property of the debtor. 37
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is transferred
With respect to IMC, the respondent has adequately established its claim. Exhibits "C" to "C-22" 38 show that Statement of Facts of the Case
petitioner has an outstanding account with IMC in the amount of P2,119,205.00. Exhibit "E" 39 is the check voucher
On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life insurance with Sun Life.
evidencing payment to IMC. Exhibit "F" 40 is the subrogation receipt executed by IMC in favor of respondent upon
In his Application for Insurance, he indicated that he had sought advice for kidney problems. 5 Atty. Jesus Jr.
receipt of the insurance proceeds. All these documents have been properly identified, presented and marked as
indicated the following in his application:
exhibits in court. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent
as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation "Last 1987, had undergone lithotripsy due to kidney stone under Dr. Jesus Benjamin
accrues simply upon payment by the insurance company of the insurance claim. 41 Respondent's action against Mendoza at National Kidney Institute, discharged after 3 days, no recurrence as
petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: claimed." 6
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and issued Insurance Policy
the insurance company for the injury or loss arising out of the wrong or breach of contract No. 031097335. The policy indicated the respondents as beneficiaries and entitles them to a death benefit of
complained of, the insurance company shall be subrogated to the rights of the insured P1,000,000.00 should Atty. Jesus Jr. dies on or before February 5, 2021, or a sum of money if Atty. Jesus Jr. is
against the wrongdoer or the person who has violated the contract. . . . still living on the endowment date. 7
Petitioner failed to refute respondent's evidence. On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo. As
such, Ma. Daisy filed a Claimant's Statement with Sun Life to seek the death benefits indicated in his
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No evidentiary weight can insurance policy. 8
be given to Exhibit "F Levi Strauss", 42 a letter dated April 23, 1991 from petitioner's General Manager, Stephen S.
Gaisano, Jr., since it is not an admission of petitioner's unpaid account with LSPI. It only confirms the loss of Levi's In a letter dated August 27, 2001, however, Sun Life denied the claim on the ground that the details
products in the amount of P535,613.00 in the fire that razed petitioner's building on February 25, 1991. on Atty. Jesus Jr.'s medical history were not disclosed in his application. Simultaneously, Sun Life tendered a
check representing the refund of the premiums paid by Atty. Jesus Jr. 9
Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in
The respondents reiterated their claim against Sun Life thru a letter dated September 17, 2001. Sun
evidence. Thus, there is no evidence that respondent has been subrogated to any right which LSPI may have against
Life, however, refused to heed the respondents' requests and instead filed a Complaint for Rescission before
petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of
the RTC and prayed for judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy. 10
P535,613.00.
In its Complaint, Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance application
WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October 11, 2000 and Resolution his previous medical treatment at the National Kidney Transplant Institute in May and August of 1994.
dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are AFFIRMED with the MODIFICATION According to Sun Life, the undisclosed fact suggested that the insured was in "renal failure" and at a high risk
that the order to pay the amount of P535,613.00 to respondent is DELETED for lack of factual basis. medical condition. Consequently, had it known such fact, it would not have issued the insurance policy in
favor of Atty. Jesus Jr. 11
No pronouncement as to costs.
For their defense, the respondents claimed that Atty. Jesus Jr. did not commit misrepresentation in
SO ORDERED. his application for insurance. They averred that Atty. Jesus Jr. was in good faith when he signed the insurance
application and even authorized Sun Life to inquire further into his medical history for verification purposes.
||| (Gaisano Cagayan, Inc. v. Insurance Company of North America, G.R. No. 147839, [June 8, 2006], 523 PHIL
According to them, the complaint is just a ploy to avoid the payment of insurance claims. 12
677-694)
Ruling of the RTC
On March 16, 2009, the RTC issued its Decision 13 dismissing the complaint for lack of merit. The
RTC held that Sun Life violated Sections 241, paragraph 1 (b), (d), and (e) 14 and 242 15 of the Insurance
Code when it refused to pay the rightful claim of the respondents. Moreover, the RTC ordered Sun Life to pay
6.SUN LIFE OF CANADA (PHILIPPINES), INC., petitioner, vs. MA. DAISY S. SIBYA, JESUS the amounts of P1,000,000.00 as death benefits, P100,000.00 as moral damages, P100,000.00 as exemplary
MANUEL S. SIBYA III, JAIME LUIS S. SIBYA, and The Estate of the deceased ATTY. JESUS damages, and P100,000.00 as attorney's fees and costs of suit.
SIBYA, JR., respondents. G.R. No. 211212. June 8, 2016.]
The RTC held that Atty. Jesus Jr. did not commit material concealment and misrepresentation when
he applied for life insurance with Sun Life. It observed that given the disclosures and the waiver and
authorization to investigate executed by Atty. Jesus Jr. to Sun Life, the latter had all the means of ascertaining
REYES, J p: the facts allegedly concealed by the applicant. 16
Before this Court is a petition for review on certiorari 1 under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision 2 dated November 18, 2013 and Resolution 3 dated February Aggrieved, Sun Life elevated the case to the CA.
13, 2014 of the Court of Appeals (CA) in CA-G.R. CV. No. 93269. In both instances, the CA affirmed the
Decision 4 dated March 16, 2009 of the Regional Trial Court (RTC) of Makati City, Branch 136, in Civil Case Ruling of the CA
No. 01-1506, ordering petitioner Sun Life of Canada (Philippines), Inc. (Sun Life) to pay Ma. Daisy S. Sibya On appeal, the CA issued its Decision 17 dated November 18, 2013 affirming the RTC decision in
(Ma. Daisy), Jesus Manuel S. Sibya III, and Jaime Luis S. Sibya (respondents) the amounts of P1,000,000.00 ordering Sun Life to pay death benefits and damages in favor of the respondents. The CA, however, modified
as death benefits, P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as
A mortgagor may, however, take out insurance for the benefit of the It is a cardinal rule on insurance that a policy or insurance contract
mortgagee, which is the usual practice. The mortgagee may be made the is to be interpreted liberally in favor of the insured and strictly against the
beneficial payee in several ways. He may become the assignee of the policy with company, the reason being, undoubtedly, to afford the greatest protection which
the consent of the insurer; or the mere pledgee without such consent; or the the insured was endeavoring to secure when he applied for insurance. It is also a
original policy may contain a mortgage clause; or a rider making the policy cardinal principle of law that forfeitures are not favored and that any
payable to the mortgagee "as his interest may appear" may be attached; or a construction which would result in the forfeiture of the policy benefits for the
"standard mortgage clause," containing a collateral independent contract person claiming thereunder, will be avoided, if it is possible to construe the
between the mortgagee and insurer, may be attached; or the policy, though by policy in a manner which would permit recovery, as, for example, by finding a
its terms payable absolutely to the mortgagor, may have been procured by a waiver for such forfeiture. 29 Stated differently, provisions, conditions or
mortgagor under a contract duty to insure for the mortgagee's benefit, in which exceptions in policies which tend to work a forfeiture of insurance policies
case the mortgagee acquires an equitable lien upon the proceeds. 21 should be construed most strictly against those for whose benefits they are
inserted, and most favorably toward those against whom they are intended to
In the policy obtained by the mortgagor with loss payable clause in operate. 30 The reason for this is that, except for riders which may later be
favor of the mortgagee as his interest may appear, the mortgagee is only a inserted, the insured sees the contract already in its final form and has had no
beneficiary under the contract, and recognized as such by the insurer but not voice in the selection or arrangement of the words employed therein. On the
made a party to the contract itself. Hence, any act of the mortgagor which other hand, the language of the contract was carefully chosen and deliberated
defeats his right will also defeat the right of the mortgagee.22 This kind of upon by experts and legal advisers who had acted exclusively in the interest of
policy covers only such interest as the mortgagee has at the issuing of the the insurers and the technical language employed therein is rarely understood
policy. 23 by ordinary laymen. 31
In the instant case, Eulogio's death rendered impossible full compliance with 1. The EXTRA PREMIUM is imposed; and
the conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death, 2. The ACCIDENTAL DEATH BENEFIT (ADB) and WAIVER
managed to file his Application for Reinstatement and deposit the amount for payment OF PREMIUM DISABILITY (WPD) rider originally attached to
of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 and forming parts of this policy is deleted.
could only be considered reinstated after the Application for Reinstatement had been
processed and approved by Insular Life during Eulogio's lifetime and good health. 31 In consequence thereof, the PREMIUM RATES on this policy are adjusted to
[P]28,000.00 annually, [P]14,843.00 semi-annually and [P]7,557.00 quarterly,
Thus, it is settled that the reinstatement of an insurance policy should be reckoned from the date Philippine Currency.
when the same was approved by the insurer.
Cagayan de Oro City, 07 January 2000.
In this case, the parties differ as to when the reinstatement was actually approved. Insular Life
claims that it approved the reinstatement only on December 27, 1999. On the other hand, respondents contend RCV/
that it was on June 22, 1999 that the reinstatement took effect.
(Signed) Authorized Signature
The resolution of this issue hinges on the following documents: 1) Letter of Acceptance; and 2) the
Endorsement. Based on the foregoing, we find that the CA did not commit any error in holding that the subject
insurance policy be considered as reinstated on June 22, 1999. This finding must be upheld not only because it
The Letter of Acceptance 32 wherein Felipe affixed his signature was actually drafted and prepared accords with the evidence, but also because this is favorable to the insured who was not responsible for
by Insular Life. This pro-forma document reads as follows: causing the ambiguity or obscurity in the insurance contract. 34
LETTER OF ACCEPTANCE The CA expounded on this point thus —
Place: Cag. De [O]ro City The Court discerns a genuine ambiguity or obscurity in the language of the
two documents.
The Insular Life Assurance Co., Ltd.
P.O. Box 128, MANILA In the Letter of Acceptance, Khu declared that he was accepting "the
imposition of an extra/additional . . . premium of P5.00 a year per thousand of
Policy No. A000015683 insurance; effective June 22, 1999". It is true that the phrase as used in this particular
Gentlemen: paragraph does not refer explicitly to the effectivity of the reinstatement. But the Court
notes that the reinstatement was conditioned upon the payment of additional premium
Thru your Reinstatement Section, I/WE learned that this policy may be reinstated not only prospectively, that is, to cover the remainder of the annual period of coverage,
provided I/we agree to the following condition/s indicated with a check mark: but also retroactively, that is for the period starting June 22, 1999. Hence, by paying the
amount of P3,054.50 on December 27, 1999 in addition to the P25,020.00 he had earlier
[xx] Accept the imposition of an extra/additional extra premium of paid on September 7, 1999, Khu had paid for the insurance coverage starting June 22,
[P]5.00 a year per thousand of insurance; effective June 22, 1999 1999. At the very least, this circumstance has engendered a true lacuna.
[ ] Accept the rating on the WPD at _____ at standard rates; the
In the Endorsement, the obscurity is patent. In the first sentence of the
ABD at ____ the standard rates; the SAR at P ____ annually per
Endorsement, it is not entirely clear whether the phrase "effective June 22, 1999" refers
thousand of Insurance;
to the subject of the sentence, namely "the reinstatement of this policy," or to the
[xx] Accept the cancellation of the Premium waiver & Accidental subsequent phrase "changes are made on the policy."
death benefit.
The court below is correct. Given the obscurity of the language, the
[] construction favorable to the insured will be adopted by the courts.
I am/we are agreeable to the above condition/s. Please proceed with the reinstatement of Accordingly, the subject policy is deemed reinstated as of June 22, 1999.
the policy. Thus, the period of contestability has lapsed. 35
Very truly yours,
||| (The Insular Life Assurance Co., Ltd. vs. Khu, G.R. No. 195176, [April 18, 2016]) " . . . . 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
9.FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR, that bumped the deceased was driven by Pepito Into, operated and owned by defendant
LEONILA M. MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and ELVIRA, Destrajo. From the investigation conducted by the traffic investigator, the PUJ jeep was
all surnamed MAGLANA, herein represented by their mother, FIGURACION VDA. overtaking another passenger jeep that was going towards the city poblacion. While
DE MAGLANA, petitioners, vs. HONORABLE FRANCISCO Z. CONSOLACION, Presiding overtaking, the PUJ jeep of defendant Destrajo running abreast with the overtaken jeep,
Judge of Davao City, Branch II, and AFISCO INSURANCE CORPORATION, respondents. G.R. bumped the motorcycle driven by the deceased who was going towards the direction of
No. 60506. August 6, 1992.] 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
10.WILLIAM TIU, doing business under the name and style of “D’ Rough Riders,” and VIRGILIO TE 8. That defendant William Tiu, being the owner and operator of the said Rough Riders
LASPIÑAS,petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and PHILIPPINE passenger bus which figured in the said accident, wherein plaintiff and his wife were riding
PHOENIX SURETY AND INSURANCE, INC., respondents. .[G.R. No. 138060. September 1, 2004.] at the time of the accident, is therefore directly liable for the breach of contract of carriage
for his failure to transport plaintiff and his wife safely to their place of destination which
DECISION was Cebu City, and which failure in his obligation to transport safely his passengers was
due to and in consequence of his failure to exercise the diligence of a good father of the
family in the selection and supervision of his employees, particularly defendant-driver
Virgilio Te Laspiñas. 9
CALLEJO, SR., J p: The respondent prayed that judgment be rendered in his favor and that the petitioners be condemned to pay the
following damages:
This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision 1 of the Court of
Appeals in CA-G.R. CV No. 54354 affirming with modification the Decision 2 of the Regional Trial Court, 7th 1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death and
Judicial Region, Cebu City, Branch 20, in Civil Case No. CEB-5963 for breach of contract of carriage, damages and untimely demise of plaintiff’s wife, Felisa Pepito Arriesgado;
attorney’s fees, and the Resolution dated February 26, 1999 denying the motion for reconsideration thereof.
2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing actual
The following facts are undisputed: expenses incurred by the plaintiff in connection with the death/burial of plaintiff’s wife;
At about 10:00 p.m. of March 15, 1987, the cargo truck marked “Condor Hollow Blocks and General Merchandise” 3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing
bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio medical/hospitalization expenses incurred by plaintiff for the injuries sustained by
Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires exploded. The him; EDaHAT
driver, Sergio Pedrano, then parked along the right side of the national highway and removed the damaged tire to
4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral damages;
have it vulcanized at a nearby shop, about 700 meters away. 3 Pedrano left his helper, Jose Mitante, Jr. to keep watch
over the stalled vehicle, and instructed the latter to place a spare tire six fathoms away 4 behind the stalled truck to 5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of
serve as a warning for oncoming vehicles. The truck’s tail lights were also left on. It was about 12:00 a.m., March exemplary damages;
16, 1987.
6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorney’s fees;
At about 4:45 a.m., D’ Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te Laspiñas was
cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also 7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation
bound for Cebu City, and had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses expenses.
Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of the bus, about three (3) or
four (4) places from the front seat. cAEaSC PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN
LAW AND EQUITY. 10
As the bus was approaching the bridge, Laspiñas saw the stalled truck, which was then about 25 meters away. 5 He
applied the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the bus rammed into The petitioners, for their part, filed a Third-Party Complaint 11 on August 21, 1987 against the following:
the truck’s left rear. The impact damaged the right side of the bus and left several passengers injured. Pedro respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tiu’s insurer; respondent Benjamin
Arriesgado lost consciousness and suffered a fracture in his right colles. 6 His wife, Felisa, was brought to the Condor, the registered owner of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They
Danao City Hospital. She was later transferred to the Southern Island Medical Center where she died shortly alleged that petitioner Laspiñas was negotiating the uphill climb along the national highway of Sitio Aggies,
thereafter. 7 Poblacion, Compostela, in a moderate and normal speed. It was further alleged that the truck was parked in a slanted
manner, its rear portion almost in the middle of the highway, and that no early warning device was displayed.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and attorney’s Petitioner Laspiñas promptly applied the brakes and swerved to the left to avoid hitting the truck head-on, but
fees before the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D’ Rough Riders bus operator despite his efforts to avoid damage to property and physical injuries on the passengers, the right side portion of the
William Tiu and his driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the passenger bus in bus hit the cargo truck’s left rear. The petitioners further alleged, thus:
question was cruising at a fast and high speed along the national road, and that petitioner Laspiñas did not take
precautionary measures to avoid the accident. 8 Thus:
6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic) SO ORDERED. 15
“Condor Hollow Blocks & General Merchandise,” with Plate No. GBP-675 which was
recklessly and imprudently parked along the national highway of Compostela, Cebu during According to the trial court, there was no dispute that petitioner William Tiu was engaged in business as a common
the vehicular accident in question, and third-party defendant Benjamin Condor, as the carrier, in view of his admission that D’ Rough Rider passenger bus which figured in the accident was owned by
registered owner of the cargo truck who failed to exercise due diligence in the selection him; that he had been engaged in the transportation business for 25 years with a sole proprietorship; and that he
and supervision of third-party defendant Sergio Pedrano, are jointly and severally liable to owned 34 buses. The trial court ruled that if petitioner Laspiñas had not been driving at a fast pace, he could have
the third-party plaintiffs for whatever liability that may be adjudged against said third-party easily swerved to the left to avoid hitting the truck, thus, averting the unfortunate incident. It then concluded that
plaintiffs or are directly liable of (sic) the alleged death of plaintiff’s wife; petitioner Laspiñas was negligent.
7. That in addition to all that are stated above and in the answer which are intended to show The trial court also ruled that the absence of an early warning device near the place where the truck was parked was
reckless imprudence on the part of the third-party defendants, the third-party plaintiffs not sufficient to impute negligence on the part of respondent Pedrano, since the tail lights of the truck were fully on,
hereby declare that during the vehicular accident in question, third-party defendant was and the vicinity was well lighted by street lamps. 16 It also found that the testimony of petitioner Tiu, that he based
clearly violating Section 34, par. (g) of the Land Transportation and Traffic Code . . . the selection of his driver Laspiñas on efficiency and in-service training, and that the latter had been so far an
efficient and good driver for the past six years of his employment, was insufficient to prove that he observed the
xxx xxx xxx diligence of a good father of a family in the selection and supervision of his employees.
10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William After the petitioner’s motion for reconsideration of the said decision was denied, the petitioners elevated the case to
Tiu, is covered by a common carrier liability insurance with Certificate of Cover No. the Court of Appeals on the following issues:
054940 issued by Philippine Phoenix Surety and Insurance, Inc., Cebu City Branch, in
favor of third-party plaintiff William Tiu which covers the period from July 22, 1986 to I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS
July 22, 1987 and that the said insurance coverage was valid, binding and subsisting during RECKLESS AND IMPRUDENT WHEN HE PARKED THE CARGO TRUCK
the time of the aforementioned incident (Annex “A” as part hereof); IN AN OBLIQUE MANNER;
11. That after the aforesaid alleged incident, third-party plaintiff notified third-party II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND
defendant Philippine Phoenix Surety and Insurance, Inc., of the alleged incident hereto SEVERALLY LIABLE DIRECTLY TO PLAINTIFF-APPELLEE OR TO
mentioned, but to no avail; DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT MAY
BE ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS;
12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely
adjudged, they stand to pay damages sought by the plaintiff and therefore could also look III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIÑAS WAS
up to the Philippine Phoenix Surety and Insurance, Inc., for contribution, indemnification GUILTY OF GROSS NEGLIGENCE;
and/or reimbursement of any liability or obligation that they might [be] adjudged per
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD
insurance coverage duly entered into by and between third-party plaintiff William Tiu and
EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY
third-party defendant Philippine Phoenix Surety and Insurance, Inc.; . . . 12
IN THE SELECTION AND SUPERVISION OF HIS DRIVERS;
The respondent PPSII, for its part, admitted that it had an existing contract with petitioner Tiu, but averred that it had
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-
already attended to and settled the claims of those who were injured during the incident. 13 It could not accede to
APPELLANT WILLIAM TIU IS LIABLE TO PLAINTIFF-APPELLEE,
the claim of respondent Arriesgado, as such claim was way beyond the scheduled indemnity as contained in the
WHETHER THERE IS LEGAL AND FACTUAL BASIS IN AWARDING
contract of insurance. 14
EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES,
After the parties presented their respective evidence, the trial court ruled in favor of respondent Arriesgado. The ATTORNEY’S FEES AND LITIGATION EXPENSES TO PLAINTIFF-
dispositive portion of the decision reads: aSITDC APPELLEE;
According to the petitioners, the appellate court erred in failing to appreciate the absence of an early warning device
and/or built-in reflectors at the front and back of the cargo truck, in clear violation of Section 34, par. (g) of the Land
Transportation and Traffic Code. They aver that such violation is only a proof of respondent Pedrano’s negligence, On this ground alone, the petition is destined to fail.
as provided under Article 2185 of the New Civil Code. They also question the appellate court’s failure to take into
However, considering that novel questions of law are likewise involved, the Court resolves to examine and rule on
account that the truck was parked in an oblique manner, its rear portion almost at the center of the road. As such, the
the merits of the case.
proximate cause of the incident was the gross recklessness and imprudence of respondent Pedrano, creating the
presumption of negligence on the part of respondent Condor in supervising his employees, which presumption was Petitioner Laspiñas
not rebutted. The petitioners then contend that respondents Condor and Pedrano should be held jointly and severally Was negligent in driving
liable to respondent Arriesgado for the payment of the latter’s claim. The Ill-fated bus
The petitioners, likewise, aver that expert evidence should have been presented to prove that petitioner Laspiñas was In his testimony before the trial court, petitioner Laspiñas claimed that he was traversing the two-lane road at
driving at a very fast speed, and that the CA could not reach such conclusion by merely considering the damages on Compostela, Cebu at a speed of only forty (40) to fifty (50) kilometers per hour before the incident occurred. 23 He
the cargo truck. It was also pointed out that petitioner Tiu presented evidence that he had exercised the diligence of a also admitted that he saw the truck which was parked in an “oblique position” at about 25 meters before
good father of a family in the selection and supervision of his drivers. impact, 24 and tried to avoid hitting it by swerving to the left. However, even in the absence of expert evidence, the
damage sustained by the truck 25 itself supports the finding of both the trial court and the appellate court, that the D’
The petitioners further allege that there is no legal and factual basis to require petitioner Tiu to pay exemplary Rough Rider bus driven by petitioner Laspiñas was traveling at a fast pace. Since he saw the stalled truck at a
damages as no evidence was presented to show that the latter acted in a fraudulent, reckless and oppressive manner, distance of 25 meters, petitioner Laspiñas had more than enough time to swerve to his left to avoid hitting it; that is,
or that he had an active participation in the negligent act of petitioner Laspiñas. if the speed of the bus was only 40 to 50 kilometers per hour as he claimed. As found by the Court of Appeals, it is
easier to believe that petitioner Laspiñas was driving at a very fast speed, since at 4:45 a.m., the hour of the accident,
Finally, the petitioners contend that respondent PPSII admitted in its answer that while it had attended to and settled
there were no oncoming vehicles at the opposite direction. Petitioner Laspiñas could have swerved to the left lane
the claims of the other injured passengers, respondent Arriesgado’s claim remained unsettled as it was beyond the
with proper clearance, and, thus, could have avoided the truck. 26 Instinct, at the very least, would have prompted
scheduled indemnity under the insurance contract. The petitioners argue that said respondent PPSII should have
him to apply the breaks to avert the impending disaster which he must have foreseen when he caught sight of the
settled the said claim in accordance with the scheduled indemnity instead of just denying the same. HIAESC
stalled truck. As we had occasion to reiterate: IacHAE
On the other hand, respondent Arriesgado argues that two of the issues raised by the petitioners involved questions
A man must use common sense, and exercise due reflection in all his acts; it is his duty to
of fact, not reviewable by the Supreme Court: the finding of negligence on the part of the petitioners and their
be cautious, careful and prudent, if not from instinct, then through fear of recurring
liability to him; and the award of exemplary damages, attorney’s fees and litigation expenses in his favor. Invoking
punishment. He is responsible for such results as anyone might foresee and for acts which
the principle of equity and justice, respondent Arriesgado pointed out that if there was an error to be reviewed in the
no one would have performed except through culpable abandon. Otherwise, his own
CA decision, it should be geared towards the restoration of the moral and exemplary damages to P50,000 each, or a
person, rights and property, and those of his fellow beings, would ever be exposed to all
total of P100,000 which was reduced by the Court of Appeals to P25,000 each, or a total of only P50,000.
manner of danger and injury. 27
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time of the mishap, . . . In our view, Dionisio’s negligence, although later in point of time than the truck
he was violating any traffic regulation. 31 driver’s negligence, and therefore closer to the accident, was not an efficient intervening or
independent cause. What the petitioners describe as an “intervening cause” was no more
Petitioner Tiu failed to than a foreseeable consequence of the risk created by the negligent manner in which the
Overcome the presumption truck driver had parked the dump truck. In other words, the petitioner truck driver owed a
Of negligence against him as duty to private respondent Dionisio and others similarly situated not to impose upon them
One engaged in the business the very risk the truck driver had created. Dionisio’s negligence was not that of an
Of common carriage independent and overpowering nature as to cut, as it were, the chain of causation in fact
between the improper parking of the dump truck and the accident, nor to sever the juris
The rules which common carriers should observe as to the safety of their passengers are set forth in the Civil
vinculum of liability. . .
Code, Articles 1733, 32 1755 33 and 1756. 34 In this case, respondent Arriesgado and his deceased wife contracted
with petitioner Tiu, as owner and operator of D’ Rough Riders bus service, for transportation from Maya,
Daanbantayan, Cebu, to Cebu City for the price of P18.00. 35 It is undisputed that the respondent and his wife were
not safely transported to the destination agreed upon. In actions for breach of contract, only the existence of such xxx xxx xxx
contract, and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his
destination are the matters that need to be proved. 36 This is because under the said contract of carriage, the We hold that private respondent Dionisio’s negligence was “only contributory,” that the
petitioners assumed the express obligation to transport the respondent and his wife to their destination safely and to “immediate and proximate cause” of the injury remained the truck driver’s “lack of due
observe extraordinary diligence with due regard for all circumstances. 37 Any injury suffered by the passengers in care.”. . . 46
the course thereof is immediately attributable to the negligence of the carrier. 38 Upon the happening of the
The petitioners were correct in invoking respondent Pedrano’s failure to observe Article IV, Section 34(g) of P12,000.00 P50,000 P540.00 52
the Rep. Act No. 4136, which provides: In its Answer 53 to the Third-Party Complaint, the respondent PPSII admitted the existence of the contract of
(g) Lights when parked or disabled. — Appropriate parking lights or flares visible one insurance, in view of its failure to specifically deny the same as required under then Section 8(a), Rule 8 of the
hundred meters away shall be displayed at a corner of the vehicle whenever such vehicle is Rules of Court, 54 which reads:
parked on highways or in places that are not well-lighted or is placed in such manner as to Sec. 8. How to contest genuineness of such documents. — When an action or defense is
endanger passing traffic. TCHcAE founded upon a written instrument copied in or attached to the corresponding pleading as
The manner in which the truck was parked clearly endangered oncoming traffic on both sides, considering that the provided in the preceding section, the genuineness and due execution of the instrument
tire blowout which stalled the truck in the first place occurred in the wee hours of the morning. The Court can only shall be deemed admitted unless the adverse party, under oath, specifically denies them,
now surmise that the unfortunate incident could have been averted had respondent Condor, the owner of the truck, and sets forth what he claims to be the facts; but the requirement of an oath does not apply
equipped the said vehicle with lights, flares, or, at the very least, an early warning device. 49 Hence, we cannot when the adverse party does not appear to be a party to the instrument or when compliance
subscribe to respondents Condor and Pedrano’s claim that they should be absolved from liability because, as found with an order for inspection of the original instrument is refused.
by the trial and appellate courts, the proximate cause of the collision was the fast speed at which petitioner Laspiñas In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it was liable thereon. It
drove the bus. To accept this proposition would be to come too close to wiping out the fundamental principle of law claimed, however, that it had attended to and settled the claims of those injured during the incident, and set up the
that a man must respond for the foreseeable consequences of his own negligent act or omission. Indeed, our law following as special affirmative defenses:
on quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate them among its members.
To accept this proposition would be to weaken the very bonds of society. 50 Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and
incorporates by way of reference the preceding paragraphs and further states THAT —
The Liability of
Respondent PPSII 8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali Palces
as Insurer who sustained injuries during the incident in question. In fact, it settled financially their
The trial court in this case did not rule on the liability of respondent PPSII, while the appellate court ruled that, as no claims per vouchers duly signed by them and they duly executed Affidavit[s] of Desistance
evidence was presented against it, the insurance company is not liable. to that effect, xerox copies of which are hereto attached as Annexes 1, 2, 3, 4, 5, and 6
respectively; HDAaIc
A perusal of the records will show that when the petitioners filed the Third-Party Complaint against respondent
PPSII, they failed to attach a copy of the terms of the insurance contract itself. Only Certificate of Cover No. 9. With respect to the claim of plaintiff, herein answering third party defendant through its
054940 51 issued in favor of “Mr. William Tiu, Lahug, Cebu City” signed by Cosme H. Boniel was appended to the authorized insurance adjuster attended to said claim. In fact, there were negotiations to that
third-party complaint. The date of issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22, effect. Only that it cannot accede to the demand of said claimant considering that the claim
1987, as well as the following items, were also indicated therein: was way beyond the scheduled indemnity as per contract entered into with third party
plaintiff William Tiu and third party defendant (Philippine Phoenix Surety and Insurance,
SCHEDULED VEHICLE Inc.). Third party Plaintiff William Tiu knew all along the limitation as earlier stated, he
being an old hand in the transportation business; 55 . . .
Considering the admissions made by respondent PPSII, the existence of the insurance contract and the salient terms
MODEL MAKE TYPE OF COLOR BLT FILE NO. thereof cannot be dispatched. It must be noted that after filing its answer, respondent PPSII no longer objected to the
presentation of evidence by respondent Arriesgado and the insured petitioner Tiu. Even in its
BODY Memorandum 56 before the Court, respondent PPSII admitted the existence of the contract, but averred as follows:
Isuzu Forward Bus blue mixed Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification
and/or reimbursement. This has no basis under the contract. Under the contract, PPSII will
pay all sums necessary to discharge liability of the insured subject to the limits of liability
but not to exceed the limits of liability as so stated in the contract. Also, it is stated in the
||| (Tiu v. Arriesgado, G.R. No. 138060, [September 1, 2004], 481 PHIL 1-30)
Damages to be
11.[G.R. No. 151890. June 20, 2006.]PRUDENTIAL GUARANTEE and ASSURANCE INC., petitioner, vs.
Awarded
TRANS-ASIA SHIPPING LINES, INC., respondent
The trial court correctly awarded moral damages in the amount of P50,000 in favor of respondent Arriesgado. The
award of exemplary damages by way of example or correction of the public good, 64 is likewise in order. As the .[G.R. No. 151991. June 20, 2006.]TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. PRUDENTIAL
Court ratiocinated in Kapalaran Bus Line v. Coronado: 65 GUARANTEE and ASSURANCE INC., respondent.
. . . While the immediate beneficiaries of the standard of extraordinary diligence are, of CHICO-NAZARIO, J p:
course, the passengers and owners of cargo carried by a common carrier, they are not the
only persons that the law seeks to benefit. For if common carriers carefully observed the This is a consolidation of two separate Petitions for Review on Certiorari filed by petitioner Prudential Guarantee
statutory standard of extraordinary diligence in respect of their own passengers, they and Assurance, Inc. (PRUDENTIAL) in G.R. No. 151890 and Trans-Asia Shipping Lines, Inc. (TRANS-ASIA) in
cannot help but simultaneously benefit pedestrians and the passengers of other vehicles G.R. No. 151991, assailing the Decision 1dated 6 November 2001 of the Court of Appeals in CA G.R. CV No.
who are equally entitled to the safe and convenient use of our roads and highways. The law 68278, which reversed the Judgment 2 dated 6 June 2000 of the Regional Trial Court (RTC), Branch 13, Cebu City
seeks to stop and prevent the slaughter and maiming of people (whether passengers or not) in Civil Case No. CEB-20709. The 29 January 2002 Resolution 3 of the Court of Appeals, denying PRUDENTIAL's
on our highways and buses, the very size and power of which seem to inflame the minds of Motion for Reconsideration and TRANS-ASIA's Partial Motion for Reconsideration of the 6 November 2001
their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of Decision, is likewise sought to be annulled and set aside.
"After a careful review and evaluation of your claim arising from the above- The Ruling of the Court of Appeals
captioned incident, it has been ascertained that you are in breach of policy On appeal by TRANS-ASIA, the Court of Appeals, in its assailed Decision of 6 November 2001, reversed the 6 June
conditions, among them "WARRANTED VESSEL CLASSED AND CLASS 2000 Judgment of the RTC.
MAINTAINED". Accordingly, we regret to advise that your claim is not
compensable and hereby DENIED." On the issue of TRANS-ASIA's alleged breach of warranty of the policy condition CLASSED AND CLASS
MAINTAINED, the Court of Appeals ruled that PRUDENTIAL, as the party asserting the non-compensability of
This was followed by defendant's letter dated 21 July 1997 requesting the return the loss had the burden of proof to show that TRANS-ASIA breached the warranty, which burden it failed to
or payment of the P3,000,000.00 within a period of ten (10) days from receipt discharge. PRUDENTIAL cannot rely on the lack of certification to the effect that TRANS-ASIA was CLASSED
of the letter (Exhibit "6"). 4 AND CLASS MAINTAINED as its sole basis for reaching the conclusion that the warranty was breached. The
Court of Appeals opined that the lack of a certification does not necessarily mean that the warranty was breached by
Following this development, on 13 August 1997, TRANS-ASIA filed a Complaint 5 for Sum of Money against
TRANS-ASIA. Instead, the Court of Appeals considered PRUDENTIAL's admission that at the time the insurance
PRUDENTIAL with the RTC of Cebu City, docketed as Civil Case No. CEB-20709, wherein TRANS-ASIA sought
contract was entered into between the parties, the vessel was properly classed by Bureau Veritas, a classification
the amount of P8,395,072.26 from PRUDENTIAL, alleging that the same represents the balance of the indemnity
society recognized by the industry. The Court of Appeals similarly gave weight to the fact that it was the
due upon the insurance policy in the total amount of P11,395,072.26. TRANS-ASIA similarly sought interest at 42%
responsibility of Richards Hogg International (Phils.) Inc., the average adjuster hired by PRUDENTIAL, to secure a
per annum citing Section 243 6 of Presidential Decree No. 1460, otherwise known as the "Insurance Code," as
copy of such certification to support its conclusion that mere absence of a certification does not warrant denial of
amended.
TRANS-ASIA's claim under the insurance policy.
In its Answer, 7 PRUDENTIAL denied the material allegations of the Complaint and interposed the defense that
In the same token, the Court of Appeals found the subject warranty allegedly breached by TRANS-ASIA to be a
TRANS-ASIA breached insurance policy conditions, in particular: "WARRANTED VESSEL CLASSED AND
rider which, while contained in the policy, was inserted by PRUDENTIAL without the intervention of TRANS-
CLASS MAINTAINED." PRUDENTIAL further alleged that it acted as facts and law require and incurred no
ASIA. As such, it partakes of a nature of a contract d'adhesion which should be construed against PRUDENTIAL,
liability to TRANS-ASIA; that TRANS-ASIA has no cause of action; and, that its claim has been effectively waived
the party which drafted the contract. Likewise, according to the Court of Appeals, PRUDENTIAL's renewal of the
and/or abandoned, or it is estopped from pursuing the same. By way of a counterclaim, PRUDENTIAL sought a
insurance policy from noon of 1 July 1994 to noon of 1 July 1995, and then again, until noon of 1 July 1996 must be
refund of P3,000,000.00, which it allegedly advanced to TRANS-ASIA by way of a loan without interest and
deemed a waiver by PRUDENTIAL of any breach of warranty committed by TRANS-ASIA.
without prejudice to the final evaluation of the claim, including the amounts of P500,000.00, for survey fees and
P200,000.00, representing attorney's fees.
Finding for therein appellant TRANS-ASIA, the Court of Appeals ruled in this wise: VII.
WHEREFORE, the foregoing consideration, We find for Appellant. The instant appeal is THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACCEPTANCE BY
ALLOWED and the Judgment appealed from REVERSED. The P3,000,000.00 initially PRUDENTIAL OF THE FINDINGS OF RICHARDS HOGG IS INDICATIVE OF A
paid by appellee Prudential Guarantee Assurance Incorporated to appellant Trans-Asia and WAIVER ON THE PART OF PRUDENTIAL OF ANY VIOLATION BY TRANS-ASIA
covered by a "Loan and Trust Receipt" dated 29 May 1995 is HELD to be in partial OF THE WARRANTY.
settlement of the loss suffered by appellant and covered by Marine Policy No. MH93/1363
issued by appellee. Further, appellee is hereby ORDERED to pay appellant the additional VIII.
amount of P8,395,072.26 representing the balance of the loss suffered by the latter as
THE COURT OF APPEALS ERRRED (sic) IN REVERSING THE TRIAL COURT, IN
recommended by the average adjuster Richard Hogg International (Philippines) in its
FINDING THAT PRUDENTIAL "UNJUSTIFIABLY REFUSED" TO PAY THE CLAIM
Report, with double interest starting from the time Richard Hogg's Survey Report was
AND IN ORDERING PRUDENTIAL TO PAY TRANS-ASIA P8,395,072.26 PLUS
completed, or on 13 August 1996, until the same is fully paid.
DOUBLE INTEREST FROM 13 AUGUST 1996, UNTIL [THE] SAME IS FULLY
All other claims and counterclaims are hereby DISMISSED. PAID. 15
All costs against appellee. 14 Similarly, TRANS-ASIA, disagreeing in the ruling of the Court of Appeals filed a Petition for Review docketed as
G.R. No. 151991, raising the following grounds for the allowance of the petition, to wit:
Not satisfied with the judgment, PRUDENTIAL and TRANS-ASIA filed a Motion for Reconsideration and Partial
Motion for Reconsideration thereon, respectively, which motions were denied by the Court of Appeals in the I.
Resolution dated 29 January 2002.
THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING
The Issues ATTORNEY'S FEES TO PETITIONER TRANS-ASIA ON THE GROUND THAT SUCH
CAN ONLY BE AWARDED IN THE CASES ENUMERATED IN ARTICLE 2208 OF
Aggrieved, PRUDENTIAL filed before this Court a Petition for Review, docketed as G.R. No. 151890, relying on THE CIVIL CODE, AND THERE BEING NO BAD FAITH ON THE PART OF
the following grounds, viz: RESPONDENT PRUDENTIAL IN DENYING HEREIN PETITIONER TRANS-ASIA'S
INSURANCE CLAIM.
I.
II.
THE AWARD IS GROSSLY UNCONSCIONABLE.
THE "DOUBLE INTEREST" REFERRED TO IN THE DECISION DATED 06
II. NOVEMBER 2001 SHOULD BE CONSTRUED TO MEAN DOUBLE INTEREST
BASED ON THE LEGAL INTEREST OF 12%, OR INTEREST AT THE RATE OF 24%
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO
PER ANNUM. 16
VIOLATION BY TRANS-ASIA OF A MATERIAL WARRANTY, NAMELY,
WARRANTY CLAUSE NO. 5, OF THE INSURANCE POLICY. In our Resolution of 2 December 2002, we granted TRANS-ASIA's Motion for Consolidation 17 of G.R.
Nos. 151890 and 151991; 18hence, the instant consolidated petitions.
III.
In sum, for our main resolution are: (1) the liability, if any, of PRUDENTIAL to TRANS-ASIA arising from the
THE COURT OF APPEALS ERRED IN HOLDING THAT PRUDENTIAL, AS
subject insurance contract; (2) the liability, if any, of TRANS-ASIA to PRUDENTIAL arising from the transaction
INSURER HAD THE BURDEN OF PROVING THAT THE ASSURED, TRANS-ASIA,
between the parties as evidenced by a document denominated as "Loan and Trust Receipt," dated 29 May 1995; and
VIOLATED A MATERIAL WARRANTY.
(3) the amount of interest to be imposed on the liability, if any, of either or both parties.
IV.
Ruling of the Court
THE COURT OF APPEALS ERRED IN HOLDING THAT THE WARRANTY CLAUSE Prefatorily, it must be emphasized that in a petition for review, only questions of law, and not questions of fact, may
EMBODIED IN THE INSURANCE POLICY CONTRACT WAS A MERE RIDER. be raised. 19This rule may be disregarded only when the findings of fact of the Court of Appeals are contrary to the
findings and conclusions of the trial court, or are not supported by the evidence on record. 20 In the case at bar, we
V. find an incongruence between the findings of fact of the Court of Appeals and the court a quo, thus, in our
In resisting the claim of TRANS-ASIA, PRUDENTIAL posits that TRANS-ASIA violated an express and material ATTY. LIM
warranty in the subject insurance contract, i.e., Marine Insurance Policy No. MH93/1363, specifically Warranty
Clause No. 5 thereof, which stipulates that the insured vessel, "M/V ASIA KOREA" is required to be CLASSED Q Can you mention some classification societies that you know?
AND CLASS MAINTAINED. According to PRUDENTIAL, on 25 October 1993, or at the time of the occurrence
A Well we have the Bureau Veritas, American Bureau of Shipping, D&V Local Classification Society,
of the fire, "M/V ASIA KOREA" was in violation of the warranty as it was not CLASSED AND CLASS
The Philippine Registration of Ships Society, China Classification, NKK and Company Classification
MAINTAINED. PRUDENTIAL submits that Warranty Clause No. 5 was a condition precedent to the recovery of
Society, and many others, we have among others, there are over 20 worldwide. 22
TRANS-ASIA under the policy, the violation of which entitled PRUDENTIAL to rescind the contract under Sec.
74 21of the Insurance Code. At the outset, it must be emphasized that the party which alleges a fact as a matter of defense has the burden of
proving it. PRUDENTIAL, as the party which asserted the claim that TRANS-ASIA breached the warranty in the
The warranty condition CLASSED AND CLASS MAINTAINED was explained by PRUDENTIAL's Senior
policy, has the burden of evidence to establish the same. Hence, on the part of PRUDENTIAL lies the initiative to
Manager of the Marine and Aviation Division, Lucio Fernandez. The pertinent portions of his testimony on direct
show proof in support of its defense; otherwise, failing to establish the same, it remains self-serving. Clearly, if no
examination is reproduced hereunder, viz:
evidence on the alleged breach of TRANS-ASIA of the subject warranty is shown, a fortiori, TRANS-ASIA would
ATTY. LIM be successful in claiming on the policy. It follows that PRUDENTIAL bears the burden of evidence to establish the
fact of breach.
Q Please tell the court, Mr. Witness, the result of the evaluation of this claim, what final action was
taken? In our rule on evidence, TRANS-ASIA, as the plaintiff below, necessarily has the burden of proof to show proof of
loss, and the coverage thereof, in the subject insurance policy. However, in the course of trial in a civil case, once
A It was eventually determined that there was a breach of the policy condition, and basically there is a plaintiff makes out a prima facie case in his favor, the duty or the burden of evidence shifts to defendant to
breach of policy warranty condition and on that basis the claim was denied. controvert plaintiff's prima facie case, otherwise, a verdict must be returned in favor of plaintiff. 23 TRANS-ASIA
was able to establish proof of loss and the coverage of the loss, i.e., 25 October 1993: Fire on Board. Thereafter, the
Q To refer you (sic) the "policy warranty condition," I am showing to you a policy here marked as burden of evidence shifted to PRUDENTIAL to counter TRANS-ASIA's case, and to prove its special and
Exhibits "1", "1-A" series, please point to the warranty in the policy which you said was breached or affirmative defense that TRANS-ASIA was in violation of the particular condition on CLASSED AND CLASS
violated by the plaintiff which constituted your basis for denying the claim as you testified. MAINTAINED.
A Warranted Vessel Classed and Class Maintained. We sustain the findings of the Court of Appeals that PRUDENTIAL was not successful in discharging the burden of
evidence that TRANS-ASIA breached the subject policy condition on CLASSED AND CLASS MAINTAINED.
ATTY. LIM
Witness pointing, Your Honor, to that portion in Exhibit "1-A" which is the second page of the policy
below the printed words: "Clauses, Endorsements, Special Conditions and Warranties," below this are Foremost, PRUDENTIAL, through the Senior Manager of its Marine and Aviation Division, Lucio Fernandez, made
several typewritten clauses and the witness pointed out in particular the clause reading: "Warranted a categorical admission that at the time of the procurement of the insurance contract in July 1993, TRANS-ASIA's
Vessel Classed and Class Maintained." vessel, "M/V Asia Korea" was properly classed by Bureau Veritas, thus:
COURT Q Kindly examine the records particularly the policy, please tell us if you know
whether M/V Asia Korea was classed at the time (sic) policy was procured
Q Will you explain that particular phrase? perthe (sic) insurance was procured that Exhibit "1" on 1st July 1993 (sic).
A Yes, a warranty is a condition that has to be complied with by the insured. When we say a class WITNESS
warranty, it must be entered in the classification society.
A I recall that they were classed.
COURT
ATTY. LIM
Slowly.
Q With what classification society?
WITNESS
A I believe with Bureau Veritas. 24
(continued)
As found by the Court of Appeals and as supported by the records, Bureau Veritas is a classification society
A A classification society is an organization which sets certain standards for a vessel to maintain in recognized in the marine industry. As it is undisputed that TRANS-ASIA was properly classed at the time the
order to maintain their membership in the classification society. So, if they failed to meet that contract of insurance was entered into, thus, it becomes incumbent upon PRUDENTIAL to show evidence that the
Our foregoing discussion supports the conclusion that TRANS-ASIA is entitled to the unpaid claims covered by
"The receipt of money by the insured employers from a surety company for Marine Policy No. MH93/1363, or a total amount of P8,395,072.26.
losses on account of forgery of drafts by an employee where no provision or
repayment of the money was made except upon condition that it be recovered B. Likewise, PRUDENTIAL is directed to pay TRANS-ASIA, damages in the
from other parties and neither interest nor security for the asserted debts was form of attorney's fees equivalent to 10% of P8,395,072.26.
provided for, the money constituted the payment of a liability and not a mere
The Court of Appeals denied the grant of attorney's fees. It held that attorney's fees cannot be awarded absent a
loan, notwithstanding recitals in the written receipt that the money was intended
showing of bad faith on the part of PRUDENTIAL in rejecting TRANS-ASIA's claim, notwithstanding that the
as a mere loan."
rejection was erroneous. According to the Court of Appeals, attorney's fees can be awarded only in the cases
What is clear from the wordings of the so-called "Loan and Trust Receipt Agreement" is enumerated in Article 2208 of the Civil Code which finds no application in the instant case.
that appellant is obligated to hand over to appellee "whatever recovery (Trans Asia) may
We disagree. Sec. 244 of the Insurance Code grants damages consisting of attorney's fees and other expenses
make and deliver to (Prudential) all documents necessary to prove its interest in the said
incurred by the insured after a finding by the Insurance Commissioner or the Court, as the case may be, of an
property." For all intents and purposes therefore, the money receipted is payment under the
unreasonable denial or withholding of the payment of the claims due. Moreover, the law imposes an interest of twice
policy, with Prudential having the right of subrogation to whatever net recovery Trans-Asia
the ceiling prescribed by the Monetary Board on the amount of the claim due the insured from the date following the
may obtain from third parties resulting from the fire. In the law on insurance, subrogation
time prescribed in Section 242 35 or in Section 243, 36 as the case may be, until the claim is fully satisfied. Finally,
is an equitable assignment to the insurer of all remedies which the insured may have
Section 244 considers the failure to pay the claims within the time prescribed in Sections 242 or 243, when
against third person whose negligence or wrongful act caused the loss covered by the
applicable, as prima facie evidence of unreasonable delay in payment.
insurance policy, which is created as the legal effect of payment by the insurer as an
assignee in equity. The loss in the first instance is that of the insured but after To the mind of this Court, Section 244 does not require a showing of bad faith in order that attorney's fees be
reimbursement or compensation, it becomes the loss of the insurer. It has been referred to granted. As earlier stated, under Section 244, a prima facie evidence of unreasonable delay in payment of the claim
as the doctrine of substitution and rests on the principle that substantial justice should be is created by failure of the insurer to pay the claim within the time fixed in both Sections 242 and 243 of
attained regardless of form, that is, its basis is the doing of complete, essential, and perfect the Insurance Code. As established in Section 244, by reason of the delay and the consequent filing of the suit by the
justice between all the parties without regard to form. 31 insured, the insurers shall be adjudged to pay damages which shall consist of attorney's fees and other expenses
incurred by the insured. 37
We agree. Notwithstanding its designation, the tenor of the "Loan and Trust Receipt" evidences that the real nature
of the transaction between the parties was that the amount of P3,000,000.00 was not intended as a loan whereby Section 244 reads:
TRANS-ASIA is obligated to pay PRUDENTIAL, but rather, the same was a partial payment or an advance on the
policy of the claims due to TRANS-ASIA. In case of any litigation for the enforcement of any policy or contract of insurance, it shall
be the duty of the Commissioner or the Court, as the case may be, to make a finding as to
First, the amount of P3,000,000.00 constitutes an advance payment to TRANS-ASIA by PRUDENTIAL, whether the payment of the claim of the insured has been unreasonably denied or withheld;
subrogating the former to the extent of "any net recovery made by TRANS ASIA SHIPPING CORP., from any and in the affirmative case, the insurance company shall be adjudged to pay damages
person or persons, corporation or corporations, or other parties, on account of loss by any casualty for which they which shall consist of attorney's fees and other expenses incurred by the insured person by
may be liable, occasioned by the 25 October 1993: Fire on Board." 32 reason of such unreasonable denial or withholding of payment plus interest of twice the
ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from
Second, we find that per the "Loan and Trust Receipt," even as TRANS-ASIA agreed to "promptly prosecute suit
the date following the time prescribed in section two hundred forty-two or in section two
against such persons, corporation or corporations through whose negligence the aforesaid loss was caused or who
hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the
may otherwise be responsible therefore, with all due diligence" in its name, the prosecution of the claims against
failure to pay any such claim within the time prescribed in said sections shall be
such third persons are to be carried on "at the expense of and under the exclusive direction and control of
considered prima facie evidence of unreasonable delay in payment.
PRUDENTIAL GUARANTEE AND ASSURANCE INC." 33The clear import of the phrase "at the expense of and
under the exclusive direction and control" as used in the "Loan and Trust Receipt" grants solely to PRUDENTIAL Sections 243 and 244 of the Insurance Code apply when the court finds an unreasonable delay or refusal in the
the power to prosecute, even as the same is carried in the name of TRANS-ASIA, thereby making TRANS-ASIA payment of the insurance claims.
merely an agent of PRUDENTIAL, the principal, in the prosecution of the suit against parties who may have
occasioned the loss. In the case at bar, the facts as found by the Court of Appeals, and confirmed by the records show that there was an
unreasonable delay by PRUDENTIAL in the payment of the unpaid balance of P8,395,072.26 to TRANS-ASIA. On
Third, per the subject "Loan and Trust Receipt," the obligation of TRANS-ASIA to repay PRUDENTIAL is highly 26 October 1993, a day after the occurrence of the fire in "M/V Asia Korea", TRANS-ASIA filed its notice of claim.
speculative and contingent, i.e., only in the event and to the extent that any net recovery is made by TRANS-ASIA On 13 August 1996, the adjuster, Richards Hogg International (Phils.), Inc., completed its survey report
from any person on account of loss occasioned by the fire of 25 October 1993. The transaction, therefore, was made recommending the amount of P11,395,072.26 as the total indemnity due to TRANS-ASIA. 38 On 21 April 1997,
to benefit TRANS-ASIA, such that, if no recovery from third parties is made, PRUDENTIAL cannot be repaid the PRUDENTIAL, in a letter 39 addressed to TRANS-ASIA denied the latter's claim for the amount of P8,395,072.26
Succinctly, an award equivalent to ten percent (10%) of the unpaid proceeds of the policy as attorney's fees to E. The payment of double interest should be counted from 13 September 1996.
TRANS-ASIA is reasonable under the circumstances, or otherwise stated, ten percent (10%) of P8,395,072.26. In
the case of Cathay Insurance, Co., Inc. v. Court of Appeals, 41 where a finding of an unreasonable delay under The Court of Appeals, in imposing double interest for the duration of the delay of the payment of the unpaid balance
Section 244 of the Insurance Code was made by this Court, we grant an award of attorney's fees equivalent to ten due TRANS-ASIA, computed the same from 13 August 1996 until such time when the amount is fully paid.
percent (10%) of the total proceeds. We find no reason to deviate from this judicial precedent in the case at bar. Although not raised by the parties, we find the computation of the duration of the delay made by the appellate court
to be patently erroneous.
C. Further, the aggregate amount (P8,395,072.26 plus 10% thereof as
attorney's fees) shall be imposed double interest in accordance with Section 244 To be sure, Section 243 imposes interest on the proceeds of the policy for the duration of the delay at the rate of
of the Insurance Code. twice the ceiling prescribed by the Monetary Board. Significantly, Section 243 mandates the payment of any loss or
damage for which an insurer may be liable, under any policy other than life insurance policy, within thirty days after
Section 244 of the Insurance Code is categorical in imposing an interest twice the ceiling prescribed by the proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between
Monetary Board due the insured, from the date following the time prescribed in Section 242 or in Section 243, as the the insured and the insurer or by arbitration. It is clear that under Section 243, the insurer has until the 30th day after
case may be, until the claim is fully satisfied. In the case at bar, we find Section 243 to be applicable as what is proof of loss and ascertainment of the loss or damage to pay its liability under the insurance, and only after such
involved herein is a marine insurance, clearly, a policy other than life insurance. time can the insurer be held to be in delay, thereby necessitating the imposition of double interest.
In the case at bar, it was not disputed that the survey report on the ascertainment of the loss was completed by the
adjuster, Richard Hoggs International (Phils.), Inc. on 13 August 1996. PRUDENTIAL had thirty days from 13
Section 243 is hereunder reproduced: August 1996 within which to pay its liability to TRANS-ASIA under the insurance policy, or until 13 September
1996. Therefore, the double interest can begin to run from 13 September 1996 only.
SEC. 243. The amount of any loss or damage for which an insurer may be liable, under any
policy other than life insurance policy, shall be paid within thirty days after proof of loss is IV.
received by the insurer and ascertainment of the loss or damage is made either by
agreement between the insured and the insurer or by arbitration; but if such ascertainment A. An interest of 12% per annum is similarly imposed on the TOTAL amount of
is not had or made within sixty days after such receipt by the insurer of the proof of loss, liability adjudged in section III herein, computed from the time of finality of
then the loss or damage shall be paid within ninety days after such receipt. Refusal or judgment until the full satisfaction thereof in conformity with this Court's ruling
failure to pay the loss or damage within the time prescribed herein will entitle the assured in Eastern Shipping Lines, Inc. v. Court of Appeals.
to collect interest on the proceeds of the policy for the duration of the delay at the rate of
This Court in Eastern Shipping Lines, Inc. v. Court of Appeals, 47 inscribed the rule of thumb 48 in the application
twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is
of interest to be imposed on obligations, regardless of their source. Eastern emphasized beyond cavil that when the
based on the ground that the claim is fraudulent.
judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, regardless of
As specified, the assured is entitled to interest on the proceeds for the duration of the delay at the rate of twice the whether the obligation involves a loan or forbearance of money, shall be 12% per annum from such finality until its
ceiling prescribed by the Monetary Board except when the failure or refusal of the insurer to pay was founded on the satisfaction, this interim period being deemed to be by then an equivalent to a forbearance 49 of credit.
ground that the claim is fraudulent.
We find application of the rule in the case at bar proper, thus, a rate of 12% per annum from the finality of judgment
D. The term "double interest" as used in the Decision of the Court of Appeals until the full satisfaction thereof must be imposed on the total amount of liability adjudged to PRUDENTIAL. It is
must be interpreted to mean 24% per annum. clear that the interim period from the finality of judgment until the satisfaction of the same is deemed equivalent to a
forbearance of credit, hence, the imposition of the aforesaid interest.
PRUDENTIAL assails the award of interest, granted by the Court of Appeals, in favor of TRANS-ASIA in the
assailed Decision of 6 November 2001. It is PRUDENTIAL's stance that the award is extortionate and grossly Fallo
unsconscionable. In support thereto, PRUDENTIAL makes a reference to TRANS-ASIA's prayer in the Complaint WHEREFORE, the Petition in G.R. No. 151890 is DENIED. However, the Petition in G.R. No. 151991 is
filed with the court a quo wherein the latter sought, "interest double the prevailing rate of interest of 21% per annum GRANTED, thus, we award the grant of attorney's fees and make a clarification that the term "double interest" as
now obtaining in the banking business or plus 42% per annum pursuant to Article 243 of the Insurance used in the 6 November 2001 Decision of the Court of Appeals in CA-G.R. CV No. 68278 should be construed to
Code . . . ." 42 mean interest at the rate of 24% per annum, with a further clarification, that the same should be computed from 13
September 1996 until fully paid. The Decision and Resolution of the Court of Appeals, in CA-G.R. CV No. 68278,
The contention fails to persuade. It is settled that an award of double interest is lawful and justified under Sections
dated 6 November 2001 and 29 January 2002, respectively, are, thus, MODIFIED in the following manner, to wit:
243 and 244 of the Insurance Code. 43 In Finman General Assurance Corporation v. Court of Appeals, 44 this Court
held that the payment of 24% interest per annum is authorized by the Insurance Code. 45 There is no gainsaying that
3. The aggregate amount (P8,395,072.26 plus 10% thereof as attorney's fees) "(c) Ordering the counterclaim of defendant Insurance against plaintiffs, dismissed, for
shall be imposed double interest at the rate of 24% per annum to be computed lack of merit, but as to its cross-claim against its co-defendant Manila Bay Lighterage
from 13 September 1996 until fully paid; and Corporation, the latter is ordered to reimburse the former for whatever amount it may pay
the plaintiffs as such surety;
4. An interest of 12% per annum is similarly imposed on the TOTAL amount of
liability adjudged as abovestated in paragraphs (1), (2), and (3) herein, "(d) Ordering the counterclaim of defendant Lighterage against plaintiffs, dismissed for
computed from the time of finality of judgment until the full satisfaction lack of merit;
thereof.
"(e) Plaintiffs' claim of not less than P100,000.00 and P75,000.00 as exemplary damages
No costs. are ordered dismissed, for lack of merits; plaintiffs' claim for attorney's fees in the sum of
P10,000.00 is hereby granted, against both defendants, who are, moreover ordered to pay
SO ORDERED. the costs; and
||| (Prudential Guarantee and Assurance, Inc. v. Trans-asia Shipping Lines, Inc., G.R. No. 151890, 151991, [June "(f) The sum of P150,000.00 award to plaintiffs, shall bear interest of six per cent (6%)
20, 2006], 524 PHIL 716-751) from March 25, 1975, until amount is fully paid."
12.ISABELA ROQUE, doing business under the name and style of Isabela Roque Timber Respondent Pioneer appealed to the Intermediate Appellate Court. Manila Bay did not appeal. According to the
Enterprises and ONG CHIONG, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT petitioners, the transportation company is no longer doing business and is without funds.
and PIONEER INSURANCE AND SURETY CORPORATION,respondents. G.R. No. L-66935.
November 11, 1985.] During the initial stages of the hearing, Manila Bay informed the trial court that it had salvaged part of the logs. The
court ordered them to be sold to the highest bidder with the funds to be deposited in a bank in the name of Civil
Case No. 86599.
GUTIERREZ, J p: On January 30, 1984, the appellate court modified the trial court's decision and absolved Pioneer from liability after
finding that there was a breach of implied warranty of seaworthiness on the part of the petitioners and that the loss
This petition for certiorari asks for the review of the decision of the Intermediate Appellate Court which absolved of the insured cargo was caused by the "perils of the ship" and not by the "perils of the sea". It ruled that the loss is
the respondent insurance company from liability on the grounds that the vessel carrying the insured cargo was not covered by the marine insurance policy. llcd
unseaworthy and the loss of said cargo was caused not by the perils of the sea but by the perils of the ship.
After the appellate court denied their motion for reconsideration, the petitioners filed this petition with the following
On February 19, 1972, the Manila Bay Lighterage Corporation (Manila Bay) a common carrier, entered into a assignments of errors:
contract with the petitioners whereby the former would load and carry on board its barge Mable 10 about 422.18
I
cubic meters of logs from Malampaya Sound, Palawan to North Harbor, Manila. The petitioners insured the logs
against loss for P100,000.00 with respondent Pioneer Insurance and Surety Corporation (Pioneer). THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT IN CASES
OF MARINE CARGO INSURANCE, THERE IS A WARRANTY OF
On February 29, 1972, the petitioners loaded on the barge, 811 pieces of logs at Malampaya Sound, Palawan for SEAWORTHINESS BY THE CARGO OWNER.
carriage and delivery to North Harbor, Port of Manila, but the shipment never reached its destination because Mable
10 sank with the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to Manila. As alleged by the II
petitioners in their complaint and as found by both the trial and appellate courts, the barge where the logs were
loaded was not seaworthy such that it developed a leak. The appellate court further found that one of the hatches was THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE LOSS
left open causing water to enter the barge and because the barge was not provided with the necessary cover or OF THE CARGO IN THIS CASE WAS CAUSED BY 'PERILS OF THE SHIP' AND
tarpaulin, the ordinary splash of sea waves brought more water inside the barge. NOT BY 'PERILS OF THE SEA.'.
On March 8, 1972, the petitioners wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of III
the shipment plus P100,000.00 as unrealized profits but the latter ignored the demand. Another letter was sent to THE INTERMEDIATE APPELLATE COURT ERRED IN NOT ORDERING THE
respondent Pioneer claiming the full amount of P100,000.00 under the insurance policy but respondent refused to RETURN TO PETITIONER OF THE AMOUNT OF P8,000.00 WHICH WAS
pay on the ground that its liability depended upon the "Total loss by Total Loss of Vessel only". Hence, petitioners DEPOSITED IN THE TRIAL COURT AS SALVAGE VALUE OF THE LOGS THAT
commenced Civil Case No. 86599 against Manila Bay and respondent Pioneer. WERE RECOVERED.
After hearing, the trial court found in favor of the petitioners. The dispositive portion of the decision reads: In their first assignment of error, the petitioners contend that the implied warranty of seaworthiness provided for in
the Insurance Code refers only to the responsibility of the shipowner who must see to it that his ship is reasonably fit
"FOR ALL THE FOREGOING, the Court hereby rendered judgment as follows: to make in safety the contemplated voyage.
Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine insurance, it In fact, in the petitioners' complaint, it is alleged that "the barge Mable 10 of defendant carrier developed a leak
becomes the obligation of a cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy which allowed water to come in and that one of the hatches of said barge was negligently left open by the person in
condition. The shipper of cargo may have no control over the vessel but he has full control in the choice of the charge thereof causing more water to come in", and that "the loss of said plaintiffs' cargo was due to the fault,
common carrier that will transport his goods. Or the cargo owner may enter into a contract of insurance which negligence, and/or lack of skill of defendant carrier and/or defendant carrier's representatives on barge Mable
specifically provides that the insurer answers not only for the perils of the sea but also provides for coverage of 10." LexLib
perils of the ship. It is quite unmistakable that the loss of the cargo was due to the perils of the ship rather than the perils of the sea.
We are constrained to apply Section 113 of the Insurance Code to the facts of this case. As stated by the private The facts clearly negate the petitioners' claim under the insurance policy. In the case of Go Tiaoco y Hermanos v.
respondents: Union Ins. Society of Canton, supra, we had occasion to elaborate on the term "perils of the ship." We ruled:
"In marine cases, the risks insured against are 'perils of the sea' (Chute v. North River Ins. "It must be considered to be settled, furthermore, that a loss which, in the ordinary course
Co., Minn - 214 NW 472, 55 ALR 933). The purpose of such insurance is protection of events, results from the natural and inevitable action of the sea, from the ordinary wear
On the issue of damages, respondent maintains that the amounts awarded were reasonable. He cites numerous trips Section 78 of the Insurance Code explicitly provides:
he had to make from Cagayan de Oro City to Manila to follow up his rightful claim. He imputes bad faith on
petitioner who made enforcement of his claim difficult in the hope that he would eventually abandon it. He further An acknowledgment in a policy or contract of insurance of the receipt of premium is
emphasizes that the adjusters of the other insurance companies recommended payment of his claim, and they conclusive evidence of its payment, so far as to make the policy binding, notwithstanding
complied therewith. any stipulation therein that it shall not be binding until the premium is actually paid.
In its reply, petitioner alleges that the petition questions the conclusions of law made by the trial court and the Court This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77. 9
of Appeals.
Is respondent guilty of the policy violations imputed against him? We are not convinced by petitioner's arguments.
Petitioner invokes respondent's admission that his check for the renewal of the policy was received only on 10 April The submission of the alleged fraudulent documents pertained to respondent's income tax returns for 1987 to 1989.
1990, taking into account that the policy period was 25 March 1990 to 25 March 1991. The official receipt was Respondent, however, presented a BIR certification that he had paid the proper taxes for the said years. The trial
Q In other words, to be emphatic about this, the only reason you recommended the denial of
the claim, you found three documents to be spurious. That is your only basis? LibLex DEL CASTILLO, J p:
Indubitably, it cannot be said that petitioner was deceived by respondent by the latter's non-disclosure of the other The date of last reinstatement mentioned in Section 48 of the Insurance Code pertains to the date
insurance contracts when petitioner actually had prior knowledge thereof. Petitioner's loss adjuster had known all that the insurer approved the application for reinstatement. However, in light of the ambiguity in the insurance
along of the other existing insurance contracts, yet, he did not use that as basis for his recommendation of denial. documents to this case, this Court adopts the interpretation favorable to the insured in determining the date
The loss adjuster, being an employee of petitioner, is deemed a representative of the latter whose awareness of the when the reinstatement was approved.
other insurance contracts binds petitioner. We, therefore, hold that there was no violation of the "other insurance" Assailed in this Petition for Review on Certiorari 1 are the June 24, 2010 Decision 2 of the Court
clause by respondent. of Appeals (CA), which dismissed the Petition in CA-G.R. CV No. 81730, and its December 13, 2010
Petitioner is liable to pay its share of the loss. The trial court and the Court of Appeals were correct in awarding Resolution, 3 which denied the petitioner Insular Life Assurance Company Ltd.'s (Insular Life) motion for
P200,000 for this. There is, however, merit in petitioner's grievance against the damages and attorney's fees partial reconsideration. 4
awarded. Factual Antecedents
There is no legal and factual basis for the award of P200,000 for loss of profit. It cannot be denied that the fire On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular Life
totally gutted respondent's business; thus, respondent no longer had any business to operate. His loss of profit cannot under the latter's Diamond Jubilee Insurance Plan. Felipe accomplished the required medical questionnaire
be shouldered by petitioner whose obligation is limited to the object of insurance, which was the stock-in-trade, and wherein he did not declare any illness or adverse medical condition. Insular Life thereafter issued him Policy
not the expected loss in income or profit. Number A000015683 with a face value of P1 million. This took effect on June 22, 1997. 5
Section 48 regulates both the actions of the insurers and prospective takers of The Insular Life Assurance Co., Ltd.
life insurance. It gives insurers enough time to inquire whether the policy was obtained P.O. Box 128, MANILA
by fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming Policy No. A000015683
individuals that their attempts at insurance fraud would be timely uncovered — thus
deterring them from venturing into such nefarious enterprise. At the same time, Gentlemen:
legitimate policy holders are absolutely protected from unwarranted denial of their
claims or delay in the collection of insurance proceeds occasioned by allegations of Thru your Reinstatement Section, I/WE learned that this policy may be reinstated
fraud, concealment, or misrepresentation by insurers, claims which may no longer be set provided I/we agree to the following condition/s indicated with a check mark:
up after the two-year period expires as ordained under the law. [xx] Accept the imposition of an extra/additional extra premium of
xxx xxx xxx [P]5.00 a year per thousand of insurance; effective June 22, 1999
[ ] Accept the rating on the WPD at _____ at standard rates; the
The Court therefore agrees fully with the appellate court's pronouncement
ABD at ____ the standard rates; the SAR at P ____ annually per
that —
thousand of Insurance;
xxx xxx xxx [xx] Accept the cancellation of the Premium waiver & Accidental
'The insurer is deemed to have the necessary facilities to discover such death benefit.
fraudulent concealment or misrepresentation within a period of two (2) years. It is not []
fair for the insurer to collect the premiums as long as the insured is still alive, only to
raise the issue of fraudulent concealment or misrepresentation when the insured dies in I am/we are agreeable to the above condition/s. Please proceed with the reinstatement of
order to defeat the right of the beneficiary to recover under the policy. the policy.
At least two (2) years from the issuance of the policy or its last reinstatement, Very truly yours,
the beneficiary is given the stability to recover under the policy when the insured dies.
Felipe N. Khu, Sr.
The provision also makes clear when the two-year period should commence in case the
policy should lapse and is reinstated, that is, from the date of the last reinstatement'. After Felipe accomplished this form, Insular Life, through its Regional Administrative Manager,
Jesse James R. Toyhorada, issued an Endorsement 33 dated January 7, 2000. For emphasis, the Endorsement is
In Lalican v. The Insular Life Assurance Company, Limited, 30 which coincidentally also involves
again quoted as follows: aDSIHc
the herein petitioner, it was there held that the reinstatement of the insured's policy is to be reckoned from the
date when the application was processed and approved by the insurer. There, we stressed that: ENDORSEMENT
In Eternal Gardens Memorial Park Corporation v. The Philippine American Life Insurance On October 23, 1997 Manuel Florendo filed an application for comprehensive pension plan with respondent Philam
Company, 36 we ruled in favor of the insured and in favor of the effectivity of the insurance contract in the Plans, Inc. (Philam Plans) after some convincing by respondent Perla Abcede. The plan had a pre-need price of
midst of ambiguity in the insurance contract provisions. We held that: P997,050.00, payable in 10 years, and had a maturity value of P2,890,000.00 after 20 years. 1 Manuel signed the
application and left to Perla the task of supplying the information needed in the application. 2 Respondent Ma.
It must be remembered that an insurance contract is a contract of adhesion Celeste Abcede, Perla's daughter, signed the application as sales counselor. 3
which must be construed liberally in favor of the insured and strictly against the insurer
in order to safeguard the latter's interest. Thus, in Malayan Insurance Corporation v. Aside from pension benefits, the comprehensive pension plan also provided life insurance coverage to
Court of Appeals, this Court held that: Florendo. 4 This was covered by a Group Master Policy that Philippine American Life Insurance Company (Philam
On March 30, 2006 the RTC rendered judgment, 16 ordering Philam Plans, Perla and Ma. Celeste, solidarily, to pay Others: (Please specify) : ___________________
Lourdes all the benefits from her husband's pension plan, namely: P997,050.00, the proceeds of his term insurance,
and P2,890,000.00 lump sum pension benefit upon maturity of his plan; P100,000.00 as moral damages, and to pay xxx xxx xxx. 20 (Emphasis supplied)
the costs of the suit. The RTC ruled that Manuel was not guilty of concealing the state of his health from his pension
plan application. Since Manuel signed the application without filling in the details regarding his continuing treatments for heart
condition and diabetes, the assumption is that he has never been treated for the said illnesses in the last five years
On December 18, 2007 the Court of Appeals (CA) reversed the RTC decision, 17 holding that insurance policies are preceding his application. This is implicit from the phrase "If your answer to any of the statements above
traditionally contracts uberrimae fidae or contracts of utmost good faith. As such, it required Manuel to disclose to (specifically, the statement: I have never been treated for heart condition or diabetes) reveal otherwise, please give
Philam Plans conditions affecting the risk of which he was aware or material facts that he knew or ought to know. 18 details in the space provided for." But this is untrue since he had been on "Coumadin," a treatment for venous
thrombosis, 21 and insulin, a drug used in the treatment of diabetes mellitus, at that time. 22
Issues Presented
Lourdes insists that Manuel had concealed nothing since Perla, the soliciting agent, knew that Manuel had a
The issues presented in this case are: pacemaker implanted on his chest in the 70s or about 20 years before he signed up for the pension plan. 23 But by
its tenor, the responsibility for preparing the application belonged to Manuel. Nothing in it implies that someone else
1. Whether or not the CA erred in finding Manuel guilty of concealing his illness when he kept blank and did not
may provide the information that Philam Plans needed. Manuel cannot sign the application and disown the
answer questions in his pension plan application regarding the ailments he suffered from;
responsibility for having it filled up. If he furnished Perla the needed information and delegated to her the filling up
2. Whether or not the CA erred in holding that Manuel was bound by the failure of respondents Perla and Ma. of the application, then she acted on his instruction, not on Philam Plans' instruction. cCESTA
Celeste to declare the condition of Manuel's health in the pension plan application; and
Lourdes next points out that it made no difference if Manuel failed to reveal the fact that he had a pacemaker
3. Whether or not the CA erred in finding that Philam Plans' approval of Manuel's pension plan application and implant in the early 70s since this did not fall within the five-year timeframe that the disclosure
acceptance of his premium payments precluded it from denying Lourdes' claim. contemplated. 24 But a pacemaker is an electronic device implanted into the body and connected to the wall of the
heart, designed to provide regular, mild, electric shock that stimulates the contraction of the heart muscles and
Rulings of the Court restores normalcy to the heartbeat. 25 That Manuel still had his pacemaker when he applied for a pension plan in
October 1997 is an admission that he remained under treatment for irregular heartbeat within five years preceding
One. Lourdes points out that, seeing the unfilled spaces in Manuel's pension plan application relating to his medical that application.
history, Philam Plans should have returned it to him for completion. Since Philam Plans chose to approve the
application just as it was, it cannot cry concealment on Manuel's part. Further, Lourdes adds that Philam Plans never Besides, as already stated, Manuel had been taking medicine for his heart condition and diabetes when he submitted
queried Manuel directly regarding the state of his health. Consequently, it could not blame him for not mentioning his pension plan application. These clearly fell within the five-year period. More, even if Perla's knowledge of
it. 19 Manuel's pacemaker may be applied to Philam Plans under the theory of imputed knowledge, 26 it is not claimed
that Perla was aware of his two other afflictions that needed medical treatments. Pursuant to Section 27 27 of
But Lourdes is shifting to Philam Plans the burden of putting on the pension plan application the true state of the Insurance Code, Manuel's concealment entitles Philam Plans to rescind its contract of insurance with him.
Manuel's health. She forgets that since Philam Plans waived medical examination for Manuel, it had to rely largely
on his stating the truth regarding his health in his application. For, after all, he knew more than anyone that he had Two. Lourdes contends that the mere fact that Manuel signed the application in blank and let Perla fill in the
been under treatment for heart condition and diabetes for more than five years preceding his submission of that required details did not make her his agent and bind him to her concealment of his true state of health. Since there is
application. But he kept those crucial facts from Philam Plans. no evidence of collusion between them, Perla's fault must be considered solely her own and cannot prejudice
Manuel. 28
Besides, when Manuel signed the pension plan application, he adopted as his own the written representations and
declarations embodied in it. It is clear from these representations that he concealed his chronic heart ailment and
diabetes from Philam Plans. The pertinent portion of his representations and declarations read as follows:
APPLICATION FOR PENSION PLAN Since Manuel died on the eleventh month following the issuance of his plan, 36 the one year incontestability period
(Comprehensive) has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes' entitlement to the benefits
of her husband's pension plan.
I hereby apply to purchase from PHILAM PLANS, INC. a Pension Plan Program
described herein in accordance with the General Provisions set forth in this application and WHEREFORE, the Court AFFIRMS in its entirety the decision of the Court of Appeals in CA-G.R. CV 87085
hereby certify that the date and other information stated herein are written by me or dated December 18, 2007.
under my direction. . . . . 29 (Emphasis supplied)
SO ORDERED.
Assuming that it was Perla who filled up the application form, Manuel is still bound by what it contains since he
certified that he authorized her action. Philam Plans had every right to act on the faith of that certification. ||| (Florendo v. Philam Plans, Inc., G.R. No. 186983, [February 22, 2012], 682 PHIL 582-592)
Lourdes could not seek comfort from her claim that Perla had assured Manuel that the state of his health would not
hinder the approval of his application and that what is written on his application made no difference to the insurance
company. But, indubitably, Manuel was made aware when he signed the pension plan application that, in granting
the same, Philam Plans and Philam Life were acting on the truth of the representations contained in that application.
Thus:
I agree that the insurance coverage of this application is based on the truth of the
foregoing representations and is subject to the provisions of the Group Life Insurance
Policy issued by THE PHILIPPINE AMERICAN LIFE INSURANCE CO. to PHILAM
PLANS, INC. 30 (Emphasis supplied)
It may be true that . . . insured persons may accept policies without reading them, and that
this is not negligence per se. But, this is not without any exception. It is and was incumbent
upon petitioner Sy to read the insurance contracts, and this can be reasonably expected of
him considering that he has been a businessman since 1965 and the contract concerns
indemnity in case of loss in his money-making trade of which important consideration he
could not have been unaware as it was precisely the reason for his procuring the same. 32
The same may be said of Manuel, a civil engineer and manager of a construction company. 33 He could be expected
to know that one must read every document, especially if it creates rights and obligations affecting him, before
signing the same. Manuel is not unschooled that the Court must come to his succor. It could reasonably be expected
that he would not trifle with something that would provide additional financial security to him and to his wife in his
twilight years.
Three. In a final attempt to defend her claim for benefits under Manuel's pension plan, Lourdes points out that any
defect or insufficiency in the information provided by his pension plan application should be deemed waived after
the same has been approved, the policy has been issued, and the premiums have been collected. 34
The Court cannot agree. The comprehensive pension plan that Philam Plans issued contains a one-year
incontestability period. It states:
VIII. INCONTESTABILITY
After this Agreement has remained in force for one ( 1) year, we can no longer contest for
health reasons any claim for insurance under this Agreement, except for the reason that
installment has not been paid (lapsed), or that you are not insurable at the time you bought
this pension program by reason of age. If this Agreement lapses but is reinstated
afterwards, the one (1) year contestability period shall start again on the date of approval of
your request for reinstatement. 35