EQUITABLE INSURANCE
CORPORATION, Petitioner, v. TRANSMODAL Respondent Transmodal denied knowledge of an
INTERNATIONAL, INC., Respondent.
G.R. No. 223592, August 07, 2017
This is to resolve the Petition for Review
on Certiorari under Rule 45 of the Rules of Court, dated
May 11, 2016, of petitioner Equitable Insurance
Corporation that seeks to reverse and set aside the
Decision1 dated September 15, 2015 and
Resolution2 dated March 17, 2016 of the Court of
Appeals (CA) reversing the Decision3 dated June 18,
2013 of the Regional Trial Court (RTC), Branch 26,
Manila in a civil case for actual damages.
The facts follow.
Sytengco Enterprises Corporation (Sytengco) hired
respondent Transmodal International, Inc. (Transmodal)
to clear from the customs authorities and withdraw,
transport, and deliver to its warehouse, cargoes
consisting of 200 cartons of gum Arabic with a total
weight of 5,000 kilograms valued at US21,750.00.
The said cargoes arrived in Manila on August 14, 2004
and were brought to Ocean Links Container Terminal
Center, Inc. pending their release by the Bureau of
Customs (BOC) and on September 2, 2004, respondent
Transmodal withdrew the same cargoes and delivered
them to Sytengco's warehouse. It was noted in the
delivery receipt that all the containers were wet.
In a preliminary survey conducted by Elite Adjusters and
Surveyors, Inc. (Elite Surveyors), it was found that 187
cartons had water marks and the contents of the 13 wet
cartons were partly hardened. On October 13, 2004, a
re-inspection was conducted and it was found that the
contents of the randomly opened 20 cartons were about
40% to 60% hardened, while 8 cartons had marks of
previous wetting. In its final report dated October 27,
2004, Elite Surveyor fixed the computed loss payable at
P728,712.00 after adjustment of 50% loss allowance.
Thus, on November 2, 2004, Sytengco demanded from
respondent Transmodal the payment of P1,457,424.00
as compensation for total loss of shipment. On that
same date, petitioner Equitable Insurance, as insurer of
the cargoes per Marine Open Policy No. MN-MRN-HO-
000549 paid Sytengco's claim for P728,712.00. On
October 4, 2004, Sytengco then signed a subrogation
receipt and loss receipt in favor of petitioner Equitable
Insurance. As such, petitioner Equitable Insurance
demanded from respondent Transmodal reimbursement
of the payment given to Sytengco.
Thereafter, petitioner Equitable Insurance filed a
complaint for damages invoking its right as subrogee
after paying Sytengco's insurance claim and averred that
respondent Transmodal's fault and gross negligence
were the causes of the damages sustained by
Sytengco's shipment. Petitioner Equitable Insurance
prayed for the payment of P728,712.00 actual damages
with 6% interest from the date of the filing of the
complaint until full payment, plus attorney's fees and
cost of suit.
insurance policy and claimed that petitioner Equitable
Insurance has no cause of action against it because the
damages to the cargoes were not due to its fault or
gross negligence. According to the same respondent,
the cargoes arrived at Sytengco's warehouse around
11:30 in the morning of September 1, 2004, however,
Sytengco did not immediately receive the said cargoes
and as a result, the cargoes got wet due to the rain that
occurred on the night of September 1, 2004.
Respondent Transmodal also questioned the timeliness
of Sytengco's formal claim for payment which was
allegedly made more than 14 days from the time the
cargoes were placed at its disposal in contravention of
the stipulations in the delivery receipts.
The RTC, in its Decision dated June 18, 2013, found in
favor of petitioner Equitable Insurance, thus, the
following dispositive portion of said decision:
WHEREFORE, based on the foregoing, judgment is
hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay the following:
(1) Actual damages in the amount of Php728,712.00
plus 6% interest from judicial demand until full payment;
(2) Attorney's fees in the amount equivalent to 10% of
the amount claimed;
(3) Costs of suit. SO ORDERED.4
According to the RTC, petitioner Equitable Insurance
was able to prove by substantial evidence its right to
institute an action as subrogee of Sytengco. It also ruled
that petitioner Equitable Insurance's non-presentation of
the insurance policy and non-compliance with Section 7,
Rule 8 of the Rules of Court on actionable document
were raised for the first time in respondent Transmodal's
memorandum and also noted that petitioner Equitable
Insurance had, in fact, submitted a copy of the insurance
contract.
Respondent Transmodal appealed the RTC's decision to
the CA. The CA, on September 15, 2015, promulgated
its decision reversing the RTC's decision. It disposed of
the appeal as follows:
WHEREFORE, the appeal is hereby GRANTED. The
June 18,2013 Decision of the Regional Trial Court,
Branch 26, Manila in Civil Case No. 06-114861 is
REVERSED and SET ASIDE. Accordingly, Equitable
Insurance Corp.'s complaint is DISMISSED for failure to
prove cause of action.
SO ORDERED.5
The CA ruled that there was no proof of insurance of the
cargoes at the time of the loss and that the subrogation
was improper. According to the CA, the insurance
contract was neither attached in the complaint nor
offered in evidence for the perusal and appreciation of
the RTC, and what was presented was just the marine
risk note.
Hence, the present petition after the CA denied
petitioner Equitable Insurance's motion for
reconsideration. manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion; (4) when the
Petitioner Equitable Insurance enumerates the following judgment is based on a misapprehension of facts; (5)
assignment of errors: when the findings of facts are conflicting; (6) when in
making its findings the CA went beyond the issues of the
1. THE HONORABLE COURT OF APPEALS ERRED IN case, or its findings are contrary to the admissions of
NOT DECLARING THAT THE CASE OF MALAYAN both the appellant and the appellee; (7) when the
INSURANCE CO., INC. V. REGIS BROKERAGE CORP. findings are contrary to the trial court; (8) when the
(G.R. NO. 172156, NOVEMBER 23, 2007) IS NOT findings are conclusions without citation of specific
APPLICABLE IN THE INSTANT CASE; evidence on which they are based; (9) when the facts
set forth in the petition as well as in the petitioner's main
2. THE HONORABLE COURT OF APPEALS ERRED IN and reply briefs are not disputed by the respondent; (10)
NOT DECLARING THAT THE FACTS SURROUNDING when the findings of fact are premised on the supposed
THE CASE OF MALAYAN INSURANCE CO., INC. V. absence of evidence and contradicted by the evidence
REGIS BROKERAGE CORP. (G.R. NO. 172156, on record; and (11) when the CA manifestly overlooked
NOVEMBER 23, 2007) IS DIFFERENT FROM THE certain relevant facts not disputed by the parties, which,
FACTS ATTENDING THE INSTANT CASE; if properly considered, would justify a different
conclusion.8 Considering that the findings of facts of the
3. THE HONORABLE COURT OF APPEALS ERRED IN RTC and the CA are glaringly in contrast, this Court
NOT APPLYING THE CASE OF TISON V. COURT OF deems it proper to review the present case.
APPEALS, 276 SCRA 582;
In ruling that petitioner's subrogation right is improper,
4. THE HONORABLE COURT OF APPEALS ERRED IN the CA stated that it found no proof of insurance of the
NOT APPLYING THE CASE OF COMPAÑA MARITIMA cargoes at the time of their loss. It also found that what
V. INSURANCE COMPANY OF NORTH AMERICA, 12 was presented in court was the marine risk note and not
SCRA 213; the insurance contract or policy, thus:

5. THE HONORABLE COURT OF APPEALS ERRED IN A perusal of the complaint and the other documentary
NOT APPLYING THE CASE OF DELSAN TRANSPORT evidence submitted by Equitable Insurance such as the
LINES, INC. V. COURT OF APPEALS, 273 SCRA 262; preliminary and final report clearly shows that the claims
for damages and subrogation were based on Policy No.
6. THE HONORABLE COURT OF APPEALS ERRED IN MN-MRN-HO-0005479. However, said insurance
NOT APPLYING THE STATUTORY PRESUMPTION contract was neither attached in the complaint nor
OF FAULT AND NEGLIGENCE.6 offered in evidence for the perusal and
It is the contention of petitioner Equitable Insurance that appreciation of the court a quo. Instead, Equitable
the CA erred in not applying certain jurisprudence on this Insurance presented the marine risk note. For clarity, We
case which it deemed applicable. It also argues that the quote the pertinent portions of the marine risk note,
present case is not a suit between the insured Sytengco
and the insurer but one between the consignee Line & Subline
Sytengco and the respondent common carrier since MARINE CARGO
petitioner Equitable Insurance merely stepped into the RISK NOTE
shoes of the said insured who has a direct cause of Policy No.:
action against respondent Transmodal on account of the MN-MRN-HO-0005479
damage sustained by the subject cargo, thus, the carrier Issue date Sep. 08, 2004
cannot set up as defense any defect in the insurance Invoice No. 59298 V
policy because it cannot avoid its liability to the
consignee under the contract of carriage which binds it Assured: SYTENGCO ENTERPRISES CORPORATION
to pay any loss or damage that may be caused to the Address: 10RESTHAVEN ST.
cargo involved therein. SAN FRANCISCO DEL MONTE
SUBDIVISION,
In its Comment7 dated July 25, 2016, respondent QUEZON CITY, METRO MANILA
Transmodal avers that the CA did not err in not applying
certain jurisprudence in the latter's decision. Respondent We have this day noted the undermentioned risk in your
Transmodal further refutes all the assigned errors that favor and hereby guarantee that this document has all
petitioner Equitable Insurance enumerated in its petition. the force and effect of the terms and conditions of
EQUITABLE INSURANCE CORPORATION Marine
A closer look at the arguments raised in the petition Policy No. MN-MOP-HO-0000099.
would show that petitioner is indeed asking this Court to
review the factual findings of the CA which is not within L/C AMOUNT: USD 21,750.00 MARK-UP: 20%
the scope of a petition for review under Rule 45 of the SUM INSURED: PHP 1,457,424.00 EXCHANGE
Rules of Court. However, this Court has recognized RATE: 55.8400
exceptions to the rule that the findings of fact of the CA
are conclusive and binding in the following instances: (1) CARGO: 200 CTNS. GUM ARABIC POWDER KB-120
when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is Supplier: JUMBO TRADING CO., LTD.
Vessel: ASIAN ZEPHYR VOYAGE No.: 062N
BL#:MNL04086310
ETD: 09-AUG-04 ETA: 13-AUG-04
From: THAILAND To: Manila, Philippines9
As such, according to the CA, the case of Eastern
Shipping Lines, Inc. v. Prudential Guarantee and
Assurance, Inc.10 is applicable, wherein this Court held
that a marine risk note is not an insurance policy. The
CA also found applicable this Court's ruling in Malayan
Insurance Co., Inc. v. Regis Brokerage Corp.,11 stating
that a marine policy is constitutive of the insurer-insured
relationship, thus, such document should have been
attached to the complaint as mandated by Section
7,12 Rule 8 of the Rules of Court.
Petitioner, however, insists that the CA erred in applying
the case of Malayan because the plaintiff therein did not
present the marine insurance policy whereas in the
present case, petitioner has presented not only the
marine risk note but also Marine Open Policy No. MN-
MOP-HO-000009913 which were all admitted in
evidence.
Indeed, a perusal of the records would show that
petitioner is correct in its claim that the marine insurance
policy was offered as evidence. In fact, in the questioned
decision of the CA, the latter, mentioned such policy,
thus:
Contrary to the ruling of the RTC, the marine policy was
not at all presented. As borne by the records, only the
marine risk note and EQUITABLE INSURANCE
CORPORATION Marine Policy No. MN-MOP-HO-
0000099 were offered in evidence. These pieces of
evidence are immaterial to Equitable Insurance's cause
of action. We have earlier pointed out that a marine risk
note is insufficient to prove the insurer's claim. Although
the marine risk note provided that it "has all the force
and effect of the terms and conditions of EQUITABLE
INSURANCE CORPORATION Marine Policy No. MN-
MOP-HO-0000099," there is nothing in the records
showing that the said policy is related to Policy No. MN-
MRN-HO-005479 which was the basis of Equitable
Insurance's complaint. It did not escape our attention
that the second page of the marine risk note explicitly
stated that it was "attached to and forming part of the
Policy No. MN-MRN-005479." Thus, without the
presentation of Policy No. MN-MRN-005479, We cannot
simply assume that the terms and conditions, including
the period of coverage, of such policy are similar to
Marine Policy No. MN-MOP-HO-0000099.14
As such, respondent had the opportunity to examine the
said documents or to object to its presentation as pieces
of evidence. The records also show that respondent was
able to cross-examine petitioner's witness regarding the
said documents. Thus, it was well established that
petitioner has the right to step into the shoes of the
insured who has a direct cause of action against herein
respondent on account of the damages sustained by the
cargoes. "Subrogation is the substitution of one person
in the place of another with reference to a lawful claim or
right, so that he who is substituted succeeds to the rights
of the other in relation to a debt or claim, including its
remedies or securities."15 The right of subrogation
springs from Article 2207 of the Civil Code which states:
Art. 2207. If the plaintiffs property has been insured, and
he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be
subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract.
If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person
causing the loss or injury.
The records further show that petitioner was able to
accomplish its obligation under the insurance policy as it
has paid the assured of its insurance claim in the
amount of P728,712,00 as evidenced by, among others,
the Subrogation Receipt,16 Loss Receipt,17 Check
Voucher,18 and Equitable PCI Bank Check No.
0000013925.19 The payment by the insurer to the
insured operates as an equitable assignment to the
insurer of all the remedies which the insured may have
against the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of
contract or upon payment by the insurance company of
the insurance claim. It accrues simply upon payment by
the insurance company of the insurance claim.20
This Court's ruling in Asian Terminals, Inc. v. First
Lepanto-Taisho Insurance Corporation21 is highly
instructive, thus:
As a general rule, the marine insurance policy needs to
be presented in evidence before the insurer may recover
the insured value of the lost/damaged cargo in the
exercise of its subrogatory right. In Malayan Insurance
Co., Inc. v. Regis Brokerage Corp., the Court stated that
the presentation of the contract constitutive of the
insurance relationship between the consignee and
insurer is critical because it is the legal basis of the
latter's right to subrogation.
In Home Insurance Corporation v. CA, the Court also
held that the insurance contract was necessary to prove
that it covered the hauling portion of the shipment and
was not limited to the transport of the cargo while at sea.
The shipment in that case passed through six stages
with different parties involved in each stage until it
reached the consignee. The insurance contract, which
was not presented in evidence, was necessary to
determine the scope of the insurer's liability, if any, since
no evidence was adduced indicating at what stage in the
handling process the damage to the cargo was
sustained.
An analogous disposition was arrived at in
the Wallem case cited by ATI wherein the Court held
that the insurance contract must be presented in
evidence in order to determine the extent of its
coverage. It was further ruled therein that the liability of
the carrier from whom reimbursement was demanded
was not established with certainty because the alleged
shortage incurred by the cargoes was not definitively
determined.
Nevertheless, the rule is not inflexible. In certain
instances, the Court has admitted exceptions by
declaring that a marine insurance policy is dispensable
evidence in reimbursement claims instituted by the
insurer.
In Delsan Transport Lines, Inc. v. CA, the Court ruled
that the right of subrogation accrues simply upon
payment by the insurance company of the insurance
claim. Hence, presentation in evidence of the marine
insurance policy is not indispensable before the insurer
may recover from the common carrier the insured value
of the lost cargo in the exercise of its subrogatory right.
The subrogation receipt, by itself, was held sufficient to
establish not only the relationship between the insurer
and consignee, but also the amount paid to settle the
insurance claim. The presentation of the insurance
contract was deemed not fatal to the insurer's cause of
action because the loss of the cargo undoubtedly
occurred while on board the petitioner's vessel.
The same rationale was the basis of the judgment
in International Container Terminal Services, Inc. v. FGU
Insurance Corporation, wherein the arrastre operator
was found liable for the lost shipment despite the failure
of the insurance company to offer in evidence the
insurance contract or policy. As in Delsan, it was certain
that the loss of the cargo occurred while in the
petitioner's custody.22
In view thereof, the RTC did not err in its ruling,
thus:.rary
Defendant in its memorandum, raised the issue that
plaintiff failed to attach in its complaint a copy of the
Marine Open Insurance Policy, thus, it failed to establish
its cause of action as subrogee of the consignee quoting
the case of Malayan Insurance Co., Inc. v. Regis
Brokerage Corp.
The above-mentioned case is not applicable in the
instant case. In Malayan Insurance Co. v. Regis
Brokerage, Malayan did not submit the copy of the
insurance contract or policy. In the instant case, plaintiff
submitted the copy of the insurance contract. In fact, the
non-presentation of the insurance contract is not fatal to
its cause of action.
In the more recent case of Asian Terminals, Inc. v.
Malayan Insurance Co., Inc., it was held:
Similarly, in this case, the presentation of the insurance
contract or policy was not necessary. Although petitioner
objected to the admission of the Subrogation Receipt in
its Comment to respondent's formal offer of evidence on
the ground that respondent failed to present the
insurance contract or policy, a perusal of petitioner's
Answer and Pre-trial Brief shows that petitioner never
questioned respondent's right to subrogation, nor did it
dispute the coverage of the insurance contract or policy.
Since there was no issue regarding the validity of the
insurance contract or policy, or any provision thereof,
respondent had no reason to present the insurance
contract or policy as evidence during the trial.
Perusal of the records likewise show that the defendant
failed to raise the issue of non-compliance with Section
7, Rule 8 of the 1997 Rules of Procedure and the non-
presentation of insurance policy during the pre-trial. In
the same case, it was held:.rary
Petitioner claims that respondent's non-presentation of
the insurance contract or policy between the respondent
and the consignee is fatal to its cause of action.
We do not agree.
First of all, this was never raised as an issue before the
RTC. In fact, it is not among the issues agreed upon by
the parties to be resolved during the pre-trial. As we
have said, the determination of issues during the pre-trial
conference bars the consideration of other questions,
whether during trial or on appeal. Thus, [t]he parties
must disclose during pre-trial all issues they intend to
raise during the trial, except those involving privileged or
impeaching matters. x x x The basis of the rule is simple.
Petitioners are bound by the delimitation of the issues
during the pre-trial because they themselves agreed to
the same.
Plaintiff was able to prove by substantial evidence their
right to institute this action as subrogee of the insured.
The defendant did not present any evidence or witness
to bolster their defense and to contradict plaintiffs
allegation.23
To reiterate, in this case, petitioner was able to present
as evidence the marine open policy that vested upon it,
its rights as a subrogee. Subrogation is designed to
promote and to accomplish justice and is the mode
which equity adopts to compel the ultimate payment of a
debt by one who injustice, equity and good conscience
ought to pay.24
WHEREFORE, the Petition for Review
on Certiorari under Rule 45 of the Rules of Court, dated
May 11, 2016, of petitioner Equitable Insurance
Corporation is GRANTED. Consequently, the Decision
dated September 15, 2015 and Resolution dated March
17, 2016 of the Court of Appeals in CA-G.R. CV No.
101296 are REVERSED and SET ASIDE, and the
Decision dated June 18, 2013 of the Regional Trial
Court, Branch 26, Manila
is AFFIRMED and REINSTATED.
SO ORDERED.
Carpio, (Chairperson), Mendoza, Leonen, and Martires,
JJ., concur.

JAIME T. GAISANO, Petitioner, v. DEVELOPMENT
INSURANCE AND SURETY
CORPORATION, Respondent.
G.R. No. 190702, February 27, 2017
This is a petition for review on certiorari1 seeking to
nullify the Court of Appeals' (CA) September 11, 2009
Decision2 and November 24, 2009 Resolution3 in CA-
G.R. CV No. 81225. The CA reversed the September
24, 2003 Decision4 of the Regional Trial Court (RTC) in
Civil Case No. 97-85464. The RTC granted Jaime T.
Gaisano's (petitioner) claim on the proceeds of the
comprehensive commercial vehicle policy issued by
Development Insurance and Surety Corporation
(respondent), viz.:ChanRoblesVirtualawlibrary
IN VIEW OF THE FOREGOING, the decision appealed
from is reversed, and the defendant-appellant ordered to
pay the plaintiff-appellee the sum of P55,620.60 with
interest at 6 percent per annum from the date of the
denial of the claim on October 9, 1996 until payment.
SO ORDERED.5.rary
I the non-payment of the premium rendered the policy
The facts are undisputed. Petitioner was the registered
owner of a 1992 Mitsubishi Montero with plate number
GTJ-777 (vehicle), while respondent is a domestic
corporation engaged in the insurance business.6 On
September 27, 1996, respondent issued a In its Decision24 dated September 24, 2003, the RTC
comprehensive commercial vehicle policy7 to petitioner
in the amount of P1,500,000.00 over the vehicle for a
period of one year commencing on September 27, 1996
up to September 27, 1997.8 Respondent also issued two
other commercial vehicle policies to petitioner covering
two other motor vehicles for the same period.9
To collect the premiums and other charges on the
policies, respondent's agent, Trans-Pacific Underwriters
Agency (Trans-Pacific), issued a statement of account to
petitioner's company, Noah's Ark Merchandising (Noah's
Ark).10 Noah's Ark immediately processed the payments
and issued a Far East Bank check dated September 27,
1996 payable to Trans-Pacific on the same day.11 The
check bearing the amount of P140,893.50 represents
payment for the three insurance policies, with
P55,620.60 for the premium and other charges over the
vehicle.12 However, nobody from Trans-Pacific picked up
the check that day (September 27) because its president
and general manager, Rolando Herradura, was
celebrating his birthday. Trans-Pacific informed Noah's
Ark that its messenger would get the check the next day,
September 28.13
In the evening of September 27, 1996, while under the
official custody of Noah's Ark marketing manager
Achilles Pacquing (Pacquing) as a service company
vehicle, the vehicle was stolen in the vicinity of SM
Megamall at Ortigas, Mandaluyong City. Pacquing
reported the loss to the Philippine National Police Traffic
Management Command at Camp Crame in Quezon
City.14 Despite search and retrieval efforts, the vehicle
was not recovered.15
Oblivious of the incident, Trans-Pacific picked up the
check the next day, September 28. It issued an official
receipt numbered 124713 dated September 28, 1996,
acknowledging the receipt of P55,620.60 for the
premium and other charges over the vehicle. 16 The
check issued to Trans-Pacific for P140,893.50 was
deposited with Metrobank for encashment on October 1,
1996.17
On October 1, 1996, Pacquing informed petitioner of the
vehicle's loss. Thereafter, petitioner reported the loss
and filed a claim with respondent for the insurance
proceeds of P1,500,000.00.18 After investigation,
respondent denied petitioner's claim on the ground that
there was no insurance contract.19 Petitioner, through
counsel, sent a final demand on July 7,
1997.20 Respondent, however, refused to pay the
insurance proceeds or return the premium paid on the
vehicle.
On October 9, 1997, petitioner filed a complaint for
collection of sum of money and damages21 with the RTC
where it sought to collect the insurance proceeds from
respondent. In its Answer,22 respondent asserted that
ineffective. The premium was received by the
respondent only on October 2, 1996, and there was no
known loss covered by the policy to which the payment
could be applied.23
ruled in favor of petitioner. It considered the premium
paid as of September 27, even if the check was received
only on September 28 because (1) respondent's agent,
Trans-Pacific, acknowledged payment of the premium
on that date, September 27, and (2) the check that
petitioner issued was honored by respondent in
acknowledgment of the authority of the agent to receive
it.25 Instead of returning the premium, respondent sent a
checklist of requirements to petitioner and assigned an
underwriter to investigate the claim.26 The RTC ruled
that it would be unjust and inequitable not to allow a
recovery on the policy while allowing respondent to
retain the premium paid.27 Thus, petitioner was awarded
an indemnity of P1,500,000.00 and attorney's fees of
P50,000.00.28
After respondent's motion for reconsideration was
denied,29 it filed a Notice of Appeal. 30 Records were
forwarded to the CA.31
The CA granted respondent's appeal.32 The CA upheld
respondent's position that an insurance contract
becomes valid and binding only after the premium is
paid pursuant to Section 77 of the Insurance Code
(Presidential Decree No. 612, as amended by Republic
Act No. 10607).33 It found that the premium was not yet
paid at the time of the loss on September 27, but only a
day after or on September 28, 1996, when the check
was picked up by Trans-Pacific.34 It also found that none
of the exceptions to Section 77 obtains in this
case.35 Nevertheless, the CA ordered respondent to
return the premium it received in the amount of
P55,620.60, with interest at the rate of 6% per
annum from the date of the denial of the claim on
October 9, 1996 until payment.36
Hence petitioner filed this petition. He argues that there
was a valid and binding insurance contract between him
and respondent.37 He submits that it comes within the
exceptions to the rule in Section 77 of the Insurance
Code that no contract of insurance becomes binding
unless and until the premium thereof has been paid. The
prohibitive tenor of Section 77 does not apply because
the parties stipulated for the payment of
premiums.38 The parties intended the contract of
insurance to be immediately effective upon issuance,
despite non-payment of the premium, because
respondent trusted petitioner.39 He adds that respondent
waived its right to a pre-payment in full of the terms of
the policy, and is in estoppel.40
Petitioner also argues that assuming he is not entitled to
recover insurance proceeds, but only to the return of the
premiums paid, then he should be able to recover the full
amount of P140,893.50, and not merely
P55,620.60.41 The insurance policy covered three
vehicles yet respondent's intention was merely to
disregard the contract for only the lost
vehicle.42 According to petitioner, the principle of
mutuality of contracts is violated, at his expense, if
respondent is allowed to be excused from performance
on the insurance contract only for one vehicle, but not as
to the two others, just because no loss is suffered as to
the two. To allow this "would be to place exclusively in
the hands of one of the contracting parties the right to
decide whether the contract should stand or not x x x."43
For failure of respondent to tile its comment to the
petition, we declared respondent to have waived its right
to file a comment in our June 15, 2011 Resolution. 44
The lone issue here is whether there is a binding
insurance contract between petitioner and respondent.
II
We deny the petition.
Insurance is a contract whereby one undertakes for a
consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent
event.45 Just like any other contract, it requires a cause
or consideration. The consideration is the premium,
which must be paid at the time and in the way and
manner specified in the policy.46 If not so paid, the policy
will lapse and be forfeited by its own terms.47
The law, however, limits the parties' autonomy as to
when payment of premium may be made for the contract
to take effect. The general rule in insurance laws is that
unless the premium is paid, the insurance policy is not
valid and binding.48 Section 77 of the Insurance Code,
applicable at the time of the issuance of the policy,
provides:
Sec. 77. An insurer is entitled to payment of the premium
as soon as the thing insured is exposed to the peril
insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until
the premium thereof has been paid, except in the case
of a life or an industrial life policy whenever the grace
period provision applies.
In Tibay v. Court of Appeals,49 we emphasized the
importance of this rule. We explained that in an
insurance contract, both the insured and insurer
undertake risks. On one hand, there is the insured, a
member of a group exposed to a particular peril, who
contributes premiums under the risk of receiving nothing
in return in case the contingency does not happen; on
the other, there is the insurer, who undertakes to pay the
entire sum agreed upon in case the contingency
happens. This risk-distributing mechanism operates
under a system where, by prompt payment of the
premiums, the insurer is able to meet its legal obligation
to maintain a legal reserve fund needed to meet its
contingent obligations to the public. The premium,
therefore, is the elixir vitae or source of life of the
insurance business:
In the desire to safeguard the interest of the assured, it
must not be ignored that the contract of insurance is
primarily a risk-distributing device, a mechanism by
which all members of a group exposed to a particular
risk contribute premiums to an insurer. From these
contributory funds are paid whatever losses occur due to
exposure to the peril insured against. Each party
therefore takes a risk: the insurer, that of being
compelled upon the happening of the contingency to pay
the entire sum agreed upon, and the insured, that of
parting with the amount required as premium. without
receiving anything therefor in case the contingency does
not happen. To ensure payment tor these losses, the law
mandates all insurance companies to maintain a legal
reserve fund in favor of those claiming under their
policies. It should be understood that the integrity of this
fund cannot be secured and maintained if by judicial fiat
partial offerings of premiums were to be construed as a
legal nexus between the applicant and the insurer
despite an express agreement to the contrary. For what
could prevent the insurance applicant from deliberately
or willfully holding back full premium payment and wait
for the risk insured against to transpire and then
conveniently pass on the balance of the premium to be
deducted from the proceeds of the insurance? x x x
xxx
And so it must be. For it cannot be disputed that
premium is the elixir vitae of the insurance business
because by law the insurer must maintain a legal
reserve fund to meet its contingent obligations to the
public, hence, the imperative need for its prompt
payment and full satisfaction. It must be emphasized
here that all actuarial calculations and various
tabulations of probabilities of losses under the risks
insured against are based on the sound hypothesis of
prompt payment of premiums. Upon this bedrock
insurance firms are enabled to other the assurance of
security to the public at favorable rates. x x x 50 (Citations
omitted.)
Here, there is no dispute that the check was delivered to
and was accepted by respondent's agent, Trans-Pacific,
only on September 28, 1996. No payment of premium
had thus been made at the time of the loss of the vehicle
on September 27, 1996. While petitioner claims that
Trans-Pacific was informed that the check was ready for
pick-up on September 27, 1996, the notice of the
availability of the check, by itself, does not produce the
effect of payment of the premium. Trans-Pacific could
not be considered in delay in accepting the check
because when it informed petitioner that it will only be
able to pick-up the check the next day, petitioner did not
protest to this, but instead allowed Trans-Pacific to do
so. Thus, at the time of loss, there was no payment of
premium yet to make the insurance policy effective.
There are, of course, exceptions to the rule that no
insurance contract takes effect unless premium is paid.
In UCPB General Insurance Co., Inc. v. Masagana
Telamart, Inc.,51 we said:ChanRoblesVirtualawlibrary
It can be seen at once that Section 77 does not restate
the portion of Section 72 expressly permitting an
agreement to extend the period to pay the premium. But
are there exceptions to Section 77?
The answer is in the affirmative.
The first exception is provided by Section 77 itself, and
that is, in case of a life or industrial life policy whenever
the grace period provision applies.
The second is that covered by Section 78 of the
Insurance Code, which
provides:ChanRoblesVirtualawlibrary
SEC. 78. Any acknowledgment in a policy or contract of
insurance of the receipt of premium is conclusive
evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it
shall not be binding until premium is actually paid.
A third exception was laid down in Makati Tuscany
Condominium Corporation vs. Court of Appeals, wherein
we ruled that Section 77 may not apply if the parties
have agreed to the payment in installments of the
premium and partial payment has been made at the time
of loss. We said therein,
thus:ChanRoblesVirtualawlibrary
We hold that the subject policies are valid even if the
premiums were paid on installments. The records clearly
show that the petitioners and private respondent
intended subject insurance policies to be binding and
effective notwithstanding the staggered payment of the
premiums. The initial insurance contract entered into in
1982 was renewed in 1983, then in 1984. In those three
years, the insurer accepted all the installment payments.
Such acceptance of payments speaks loudly of the
insurer's intention to honor the policies it issued to
petitioner. Certainly, basic principles of equity and
fairness would not allow the insurer to continue
collecting and accepting the premiums, although paid on
installments, and later deny liability on the lame excuse
that the premiums were not prepaid in full.
Not only that. In Tuscany, we also quoted with approval
the following pronouncement of the Court of Appeals in
its Resolution denying the motion for reconsideration of
its decision:ChanRoblesVirtualawlibrary
While the import of Section 77 is that prepayment of
premiums is strictly required as a condition to the validity
of the contract, We are not prepared to rule that the
request to make installment payments duly approved by
the insurer would prevent the entire contract of
insurance from going into effect despite payment and
acceptance of the initial premium or first installment.
Section 78 of the Insurance Code in effect allows waiver
by the insurer of the condition of prepayment by making
an acknowledgment in the insurance policy of receipt of
premium as conclusive evidence of payment so far as to
make the policy binding despite the fact that premium is
actually unpaid. Section 77 merely precludes the parties
from stipulating that the policy is valid even if premiums
are not paid, but docs not expressly prohibit an
agreement granting credit extension, and such an
agreement is not contrary to morals, good customs,
public order or public policy (De Leon,' The Insurance
Code, p. 175). So is an understanding to allow insured to
pay premiums in installments not so prescribed. At the
very least, both parties should be deemed in estoppel to
question the arrangement they have voluntarily
accepted.
By the approval of the aforequoted findings and
conclusion of the Court of Appeals, Tuscany has
provided a fourth exception to Section 77, namely, that
the insurer may grant credit extension for the payment of
the premium. This simply means that if the insurer has
granted the insured a credit term for the payment of the
premium and loss occurs before the expiration of the
term, recovery on the policy should be allowed even
though the premium is paid after the loss but within the
credit term.
x x x
Finally in the instant case, it would be unjust and
inequitable if recovery on the policy would not be
permitted against Petitioner, which had consistently
granted a 60- to 90-day credit term for the payment of
premiums despite its full awareness of Section 77.
Estoppel bars it from taking refuge under said Section,
since Respondent relied in good faith on such practice.
Estoppel then is the fifth exception to Section
77.52 (Citations omitted.)
In UCPB General Insurance Co., Inc., we summarized
the exceptions as follows: (1) in case of life or industrial
life policy, whenever the grace period provision applies,
as expressly provided by Section 77 itself; (2) where the
insurer acknowledged in the policy or contract of
insurance itself the receipt of premium, even if premium
has not been actually paid, as expressly provided by
Section 78 itself; (3) where the parties agreed that
premium payment shall be in installments and partial
payment has been made at the time of loss, as held
in Makati Tuscany Condominium Corp. v. Court of
Appeals;53 (4) where the insurer granted the insured a
credit term for the payment of the premium, and loss
occurs before the expiration of the term, as held
in Makati Tuscany Condominium Corp.; and (5) where
the insurer is in estoppel as when it has consistently
granted a 60 to 90-day credit term for the payment of
premiums.
The insurance policy in question does not fall under the
first to third exceptions laid out in UCPB General
Insurance Co., Inc.: (1) the policy is not a life or industrial
life policy; (2) the policy does not contain an unjustly retains a benefit to the loss of another, or when
acknowledgment of the receipt of premium but merely a a person retains money or property of another against
statement of account on its face;54 and (3) no payment of the fundamental principles of justice, equity and good
an installment was made at the time of loss on conscience.58 Petitioner cannot claim the full amount of
September 27. P140,893.50, which includes the payment of premiums
for the two other vehicles. These two policies are not
Petitioner argues that his case falls under the fourth and affected by our ruling on the policy subject of this case
fifth exceptions because the parties intended the because they were issued as separate and independent
contract of insurance to be immediately effective upon contracts of insurance.59 We, however, find that the
issuance, despite non-payment of the premium. This award shall earn legal interest of 6% from the time of
waiver to a pre-payment in full of the premium places extrajudicial demand on July 7, 1997.60
respondent in estoppel.
WHEREFORE, the petition is DENIED. The assailed
We do not agree with petitioner. Decision of the CA dated September 11, 2009 and the
Resolution dated November 24, 2009
The fourth and fifth exceptions to Section 77 operate are AFFIRMED with the MODIFICATION that
under the facts obtaining in Makati Tuscany respondent should return the amount of P55,620.60 with
Condominium Corp. and UCPB General Insurance Co., the legal interest computed at the rate of 6% per
Inc. Both contemplate situations where the insurers have annum reckoned from July 7, 1997 until finality of this
consistently granted the insured a credit extension or judgment. Thereafter, the total amount shall earn interest
term for the payment of the premium. Here, however, at the rate of 6% per annum from the finality of this
petitioner failed to establish the fact of a grant by judgment until its full satisfaction.
respondent of a credit term in his favor, or that the grant
has been consistent. While there was mention of a credit SO ORDERED..rary
agreement between Trans-Pacific and respondent, such
arrangement was not proven and was internal between
agent and principal.55 Under the principle of relativity of
contracts, contracts bind the parties who entered into it.
It cannot favor or prejudice a third person, even if he is
aware of the contract and has acted with knowledge.56

We cannot sustain petitioner's claim that the parties

agreed that the insurance contract is immediately
effective upon issuance despite non payment of the
premiums. Even if there is a waiver of pre-payment of
premiums, that in itself does not become an exception to
Section 77, unless the insured clearly gave a credit term
or extension. This is the clear import of the fourth
exception in the UCPB General Insurance Co., Inc. To
rule otherwise would render nugatory the requirement in
Section 77 that "[n]otwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until
the premium thereof has been paid, x x x." Moreover,
the policy itself states:ChanRoblesVirtualawlibrary
WHEREAS THE INSURED, by his corresponding
proposal and declaration, and which shall be the basis of
this Contract and deemed incorporated herein, has
applied to the company for the insurance hereinafter
contained, subject to the payment of the Premium as
consideration for such insurance.57 (Emphasis supplied.)
The policy states that the insured's application for the
insurance is subject to the payment of the premium.
There is no waiver of pre-payment, in full or in
installment, of the premiums under the policy.
Consequently, respondent cannot be placed in estoppel.

Thus, we find that petitioner is not entitled to the

insurance proceeds because no insurance policy
became effective for lack of premium payment.

The consequence of this declaration is that petitioner is

entitled to a return of the premium paid for the vehicle in
the amount of P55,620.60 under the principle of unjust
enrichment. There is unjust enrichment when a person
 INDUSTRIAL PERSONNEL AND MANAGEMENT
SERVICES, INC., PETITIONER, V. COUNTRY
BANKERS INSURANCE CORPORATION,
RESPONDENT.
[ G.R. No. 194126, October 17, 2018 ]
CAGUIOA, J:
Before this Court is a Petition for Review
on Certiorari[1] (Petition) under Rule 45 of the Rules of
Court filed by petitioner Industrial Personnel and
Management Services, Inc. (IPAMS) assailing the
Decision[2] dated October 14, 2010 (assailed Decision) of
the Court of Appeals (CA) Eleventh Division in CA-G.R.
SP No. 114683, which reversed and set aside the
following rulings:
1. the Resolution[3] dated June 26, 2007 and
Order[4] dated December 4, 2007 issued by the
Insurance Commission (IC);
2. the Decision[5] dated September 17, 2008 and
Resolution[6] dated April 29, 2009 issued by the
Department of Finance (DOF); and
3. the Decision[7] dated January 8, 2010 and
Resolution[8] dated June 1, 2010 issued by the
Office of the President (OP).
These issuances upheld the ruling of the IC that
respondent Country Bankers Corporation (Country
Bankers) shall be subjected to disciplinary action
pursuant to Section 241 (now Section 247) and Section
247 (now Section 254) of the Insurance Code, as
amended,[9] if respondent Country Bankers does not
settle the subject claims presented by petitioner IPAMS.
The Facts and Antecedent Proceedings
As narrated by the CA in its assailed Decision, the
essential facts and antecedent proceedings of the
instant case are as follows:
In 2000, Industrial Personnel and Management Services,
Inc. (IPAMS) began recruiting registered nurses for work
deployment in the United States of America (U.S.). It
takes eighteen (18) to twenty four (24) months for the
entire immigration process to complete. As the process
requires huge amounts of money, such amounts are
advanced [to] the nurse applicants.
By reason of the advances made to the nurse
applicants, the latter were required to post surety bond.
The purpose of the bond is to guarantee the following
during its validity period: (a) that they will comply with the
entire immigration process, (b) that they will complete
the documents required, and (c) that they will pass all
the qualifying examinations for the issuance of
immigration visa. The Country Bankers Insurance
Corporation (Country Bankers for brevity) and IPAMS
agreed to provide bonds for the said nurses. [Under the
agreement of IPAMS and Country Bankers, the latter will
provide surety bonds and the premiums therefor were
paid by IPAMS on behalf of the nurse applicants.[10]]
[The surety bonds issued specifically state that the
liability of the surety company, i.e., respondent Country
Bankers, "shall be limited only to actual damages arising
from Breach of Contract by the applicant."[11]]
A Memorandum of Agreement (MOA) was executed by
the said parties on February 1, 2002 [which stipulated
the various requirements for collecting claims from
Country Bankers, namely:
B. REQUIREMENTS FOR CLAIM
Requirements are as follows:
SURETY BOND:
A. 1st demand letter requiring his/her to submit
complete documents.
B. 2nd Demand letter (follow up of above).
C. Affidavit stating reason of any violation to be
executed by responsible officer of Recruitment
Agency;
D. Statement of Account (detailed expenses).
E. Transmittal Claim Letter.[12] (Emphasis and
underscoring in the original)]
[On the basis of the MOA, IPAMS submitted its claims
under the surety bonds issued by Country Bankers. For
its part, Country Bankers, upon receipt of the documents
enumerated under the MOA, paid the claims to
IPAMS.[13]] According to IPAMS, starting 2004, some of
its claims were not anymore settled by Country Bankers.
[In 2004, Country Bankers was not able to pay six (6)
claims of IPAMS. The claims were not denied by
Country Bankers, which instead asked for time within
which to pay the claims, as it alleged to be cash
strapped at that time. Thereafter, the number of unpaid
claims increased. By February 16, 2007, the total
amount of unpaid claims was P11,309,411.56.
IPAMS took the matter up with the General Manager of
Country Bankers, Mr. Ignacio Ong (Ong). In response,
Country Bankers, through its letter[14] dated November
14, 2005 signed by Mr. Ong, acknowledged the
obligations of Country Bankers, apologized for the delay
in the payment of claims, and proposed to amortize the
settlement of claims by paying a semi-monthly amount of
P850,000.00. In addition, Country Bankers promised to
pay future claims within a ninety (90)-day period. That
commitment made by Country Bankers was not fulfilled
and IPAMS had to deal with Country Bankers' new
General Manager, Ms. Tess Valeriano (Valeriano). Ms.
Valeriano assured IPAMS that the obligations of Country
Bankers would be paid promptly.
However, the counsel of Country Bankers, Atty. Marisol
Caleja, started to oppose the payment of claims and
insisted on the production of official receipts of IPAMS
on the expenses it incurred for the application of nurses.
IPAMS opposed this, saying that the Country Bankers'
insistence on the production of official receipts was
contrary to, and not contemplated in, the MOA and was
an impossible condition considering that the U.S.
authorities did not issue official receipts. In lieu of official
receipts, IPAMS submitted statements of accounts, as
provided in the MOA.[15]]
Then, [in a letter[16] dated August 22, 2006,] Country
Bankers limited the authority of its agent [assigned to the
accounts of IPAMS,] Mr. Jaime C. Lacaba [(Lacaba),] to
transact business with IPAMS.
[Due to the unwillingness of Country Bankers to settle
the claims of IPAMS, the latter sought the intervention of
the IC, through a letter-complaint dated February 9,
2007.[17] ]
Country Bankers on the other hand alleged that until the
third quarter of 2006, it never received any complaint
from IPAMS. Due to remarkable high loss ratio of
IPAMS, the latter's accounts were evaluated and audited
by the Country Bankers. The IPAMS was informed of the
same problem. Instead of complying with the
requirements for claim processes, IPAMS insisted that
the supporting documents cannot be produced.
[The] [c]ontending parties went to a series of
conferences to settle the differences but to no avail. The
[IC] therefore ordered the parties to submit [their]
respective Position Papers.[18] On June 26, 2007, the
Claims Division of the [IC] [issued] a 5. Insurance Commission order dated December 4,
[R]esolution[19] declaring the following:
"IN VIEW OF THE FOREGOING, this Commission
believes and so holds that there is no ground for the
refusal of CBIC to pay the claims of IPAMS. Its failure to
settle the claim after having entered into an Agreement
with the complainant, IPAMS, demonstrates
respondent's bad faith in the fulfillment of their
obligation, to the prejudice of the complainant.
Accordingly, we find the insurance company liable to
settle the subject claim otherwise, this Commission shall
be constrained to take disciplinary action pursuant to
Sections 241 and 247 of the Insurance Code, as
amended." (Underscoring supplied)
The move by Country Bankers to reconsider the above
resolution was denied by the [IC] in an [O]rder [20] dated
December 4, 2007.
Country Bankers made an appeal before the [DOF]. The
[DOF] decided to affirm the assailed orders of the [IC].
The dispositive portion of the said [D]ecision[21] [dated
September 30, 2008] reads:
"WHEREFORE, foregoing premises considered, the
questioned Resolution of the Commission dated June
26, 2007, as reiterated in its Order dated December 7,
2007, is hereby AFFIRMED and that the same be
implemented in accordance with Sec. 241, in relation to
Sec. 247 of the Insurance Code and other pertinent rules
and regulations on the matter."
A motion to reconsider the x x x aforementioned decision
was filed but was denied [by the DOF in its
Resolution[22] dated] April 29, 2009.
On appeal to the [OP], the ruling of the [DOF] was
affirmed in a [D]ecision[23] docketed as O.P. Case No.
09-E-190 and dated January 8, 2010[:
WHEREFORE, herein appeal is DISMISSED for lack of
merit. The Decision of the Secretary of Finance dated
September 17, 2008 and its Resolution dated April 29,
2009 are hereby AFFIRMED.][24]
A subsequent motion to reconsider the same was denied
by the said office in its [R]esolution[25] dated June 1,
2010.
Hence, [the] instant [P]etition [for Review filed by
respondent Country Bankers before the CA under Rule
43 of the Rules of Court.][26]
The Ruling of the CA
In its assailed Decision, the CA granted the Rule 43
Petition filed by respondent Country Bankers, reversing
and setting aside the rulings of the IC, DOF, and OP, the
dispositive portion of which states:
WHEREFORE, premises considered, the petition
is GRANTED and the following issuances are
hereby REVERSED and SET ASIDE:
1. June 1, 2010 decision of the Office of the
President in O.P. Case No. 09-E-190;
2. January 8, 2010 decision of the Office of the
President in O.P. Case No. 09-E-190;
3. Department of Finance resolution dated April 29,
2009;
4. Department of Finance decision dated
September 17, 2008;
2007; and the
6. Insurance Commission resolution dated June
26, 2007.
SO ORDERED.[27] (Emphasis in the original)
The CA held that respondent Country Bankers was
justified in delaying the payment of the claims to
petitioner IPAMS because of the purported lack of
submission by petitioner IPAMS of official receipts and
other "competent proof[28] on the expenses incurred by
petitioner IPAMS in its recruitment of nurse applicants.
The CA held that Section 241 (now Section 247) of the
Insurance Code, which defines an unfair claim
settlement practice, and Section 247 (now Section 254),
which provides for the suspension or revocation of the
insurer's authority to conduct business, should not be
made to apply to respondent Country Bankers because
of the failure of petitioner IPAMS to provide competent
proof of its claims.
Instead of filing a motion for reconsideration, petitioner
IPAMS decided to directly file the instant
[29]
Petition dated November 2, 2010 on November 4,
2010 before the Court.
On April 4, 2011, respondent Country Bankers filed its
Comment (To Petition for Review on Certiorari dated
November 2, 2010).[30] On August 18, 2011, petitioner
IPAMS filed its Reply.[31]
Issue
Stripped to its core, the present Petition asks the Court
to resolve whether the CA erred in issuing its assailed
Decision which reversed and set aside the rulings of the
IC, DOF, and OP, which found that respondent Country
Bankers has no ground to refuse the payment of
petitioner IPAMS' claims and shall accordingly be
subjected to disciplinary action pursuant to Sections 241
(now Section 247) and 247 (now Section 254) of the
Insurance Code if the latter does not settle the subject
claims of petitioner IPAMS.
The Court's Ruling
The appeal is partly meritorious.
In reversing and setting aside the rulings of the IC, DOF,
and OP, the CA, in the main, found that as provisions of
applicable law are deemed written into contracts, Article
2199 of the Civil Code[32] should be applied regarding
the MOA between petitioner IPAMS and respondent
Country Bankers. The CA reasoned that since
"[c]ompetent proof x x x must be presented to justify
award for actual damages,"[33] respondent Country
Bankers was correct in not paying the subject claims of
petitioner IPAMS because the latter failed to present
official receipts and other "competent" evidence
establishing the actual costs and expenses incurred by
petitioner IPAMS.
Apparently, the CA concurred with the reason posited by
respondent Country Bankers for not paying the claims
presented by petitioner IPAMS, i.e., the failure of
petitioner IPAMS to present official receipts of expenses
it incurred. Consequently, the CA found that mere
Statements of Accounts with detailed expenses, without
accompanying official receipts or any other "competent"
evidence, cannot prove actual expenses. Hence,
respondent Country Bankers was supposedly justified in
not paying the claims of petitioner IPAMS.
Autonomy of Contracts
At the onset, it is important to note that according to the
autonomy characteristic of contracts, the contracting
parties may establish such stipulations, clauses,
terms and conditions as they may deem
convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy. [34]
The stipulation of the MOA at issue is the provision
enumerating requirements (Requirements for Claim
Clause) that must be presented by petitioner IPAMS in
order to make a valid claim against the surety bond. To
reiterate, the Requirements for Claim Clause provides:
B. REQUIREMENTS FOR CLAIM
Requirements are as follows:
SURETY BOND:
F. 1st demand letter requiring his/her to submit complete
documents.
G. 2nd Demand letter (follow up of above).
H. Affidavit stating reason of any violation to be executed
by responsible office of Recruitment Agency;
I. Statement of Account (detailed expenses).
J. Transmittal Claim Letter.[35] (Emphasis and
underscoring in the original)
Petitioner IPAMS and respondent Country Bankers in
essence made a stipulation to the effect that mere
demand letters, affidavits, and statements of accounts
are enough proof of actual damages — that more direct
and concrete proofs of expenditures by the petitioner
such as official receipts have been dispensed with in
order to prove actual losses.
As to why the parties agreed on the sufficiency of the
listed requirements under the MOA goes into the
motives of the parties, which is not hard to understand,
considering that the covered transactions, i.e., the
processing of applications of nurses in the U.S., are
generally not subject to the issuance of official receipts
by the U.S. government and its agencies.[36]
Considering the foregoing, the question is crystallized:
Can the parties stipulate on the requirements that must
be presented in order to claim against a surety bond?
And the answer is a definite YES, pursuant to the
autonomy characteristic of contracts, they can. In an
insurance contract, founded on the autonomy of
contracts, the parties are generally not prevented from
imposing the terms and conditions that determine the
contract's obligatory force.[37]
Thus, the view posited by the CA that the Requirements
for Claim Clause is contrary to law because it is
incongruent with Article 2199 of the Civil Code and,
therefore, an exception to the rule on autonomy of
contracts is erroneous. A more thorough examination of
Article 2199 does not support the CA's view.
Article 2199 of the Civil Code states:
Article 2199. Except as provided by law or by
stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by
him as he has duly proved. Such compensation is
referred to as actual or compensatory damages.
(Emphasis and underscoring supplied)
The law is clear and unequivocal when it states that one
is entitled to adequate compensation for pecuniary loss
only for such losses as he has duly
proved EXCEPT: (1) when the law provides
otherwise, or (2) by stipulation of the parties.
Otherwise stated, the amount of actual damages is
limited to losses that were actually incurred and proven,
except when the law provides otherwise, or when the
parties stipulate that actual damages are not limited to
the actual losses incurred or that actual damages are to
be proven by specific documents agreed upon.
The submission of official
receipts and other pieces of
evidence as a prerequisite
for the payment of claims
is excused by stipulation of
the parties; and in lieu
thereof, the presentation of
statement of accounts with
detailed expenses, demand
letters, and affidavits is, by
express stipulation,
sufficient evidence for the
payment of claims.
To reiterate, Article 2199 of the Civil Code explicitly
provides that the prerequisite of proof for the recovery of
actual damages is not absolute. This was illustrated
in People of the Philippines v. Jonjie Eso y Hungoy, et
al.,[38] wherein this Court held that the requirement of
providing actual proof found under Article 2199 for the
recovery of actual and compensatory damages (in that
case, funeral expenses) may. be dispensed with,
considering that there was a stipulation to that effect
made by the parties.
In the instant case, it is not disputed by any party that in
the MOA entered into by the petitioner IPAMS and
respondent Country Bankers, the parties expressly
agreed upon a list of requirements to be fulfilled by the
petitioner in order to claim from respondent Country
Bankers under the surety bond.
Hence, it is crystal clear that the petitioner IPAMS and
respondent Country Bankers, by express stipulation,
agreed that in order for the former to have a valid claim
under the surety bond, the only requirements that need
to be submitted are the two demand letters, an Affidavit
stating reason of any violation to be executed by
responsible officer of the Recruitment Agency, a
Statement of Account detailing the expenses incurred,
and the Transmittal Claim Letter. Evidently, the parties
did not include as preconditions for the payment of
claims the submission of official receipts or any
other more direct or concrete piece of evidence to
substantiate the expenditures of petitioner IPAMS. If
the parties truly had the intention of treating the
submission of official receipts as a requirement for the
payment of claims, they would have included such
requirement in the MOA. But they did not.
It is elementary that when the terms of an agreement
have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be
no evidence on such terms other than the contents of
the written agreement.[39] Further, when the terms of the
contract are clear and leave no doubt upon the intention
of the contracting parties, the stipulations of the parties
are controlling.[40]
In the case at hand, respondent Country Banker failed to
present any compelling evidence that convinces the
Court that the parties had the intention of adding
requirements other than the five requirements for
payment of claims enumerated in the Requirements for
Claim Clause. On the contrary, several circumstances
show that the submission of official receipts was really
NOT intended by the parties to be a precondition for the
payment of claims.
As found by the OP in its Decision dated January 8,
2010, respondent Country Bankers "knew as a matter of
IPAMS' regular course of business that these covered
transactions are generally not issued official receipts by
US government and its agencies and the US based
professional organizations and institutions involved to
complete the requirements for the issuance of an
immigrant visa."[41]
Further, as found by the IC in its Resolution dated June
26, 2007, which the CA did not controvert in its assailed
Decision, respondent Country Bankers had previously
admitted liability and promised to make payment on
similar claims under the surety agreement even without
the submission of official receipts.[42] In fact, respondent
Country Bankers had previously paid similar claims
made by petitioner IPAMS on the basis of the same set
of documents, even without the submission of official
receipts and other pieces of evidence.
As the contemporaneous and subsequent acts of the
contracting parties shall be principally considered in
determining the intention of the parties,[43] and that, by
virtue of estoppel, an admission or representation is
rendered conclusive upon the person making it and
cannot be denied or disproved as against the person
relying thereon,[44] the prior actuations of respondent
Country Bankers clearly establish that it did not intend
the submission of official receipts to be a prerequisite for
the payment of claims. Respondent Country Bankers is
therefore estopped from claiming that the submission of
official receipts and other "competent proof” is a further
requirement for the payment of claims.
Hence, the Court finds that, by stipulation of petitioner
IPAMS and respondent Country Bankers in their MOA,
the parties waived the requirement of actually proving
the expenses incurred by petitioner IPAMS through the
submission of official receipts and other documentary
evidence. Thus, respondent Country Bankers was not
justified in denying the payment of claims presented by
petitioner IPAMS based on the lack of official receipts.
Under the Insurance Code,
all defects in the proof of
loss, which the insured
might remedy, are waived
as grounds for objection
when the insurer omits to
specify to him without
unnecessary delay.
While placing utmost concentration on Article 2199 of
the Civil Code in ruling that competent proof is required
for the payment of the subject claims, the assailed
Decision of the CA failed to take into consideration the
applicable provisions of the Insurance Code.
The subject agreement of the parties indubitably
contemplates a surety agreement,[45] which is governed
mainly by the Insurance Code, considering that a
contract of suretyship shall be deemed an insurance
contract within the contemplation of the Insurance Code
if made by a surety which is doing an insurance
business.[46] In this case, the surety, i.e., respondent
Country Bankers, is admittedly an insurance company
engaged in the business of insurance. In fact, the CA
itself in its assailed Decision mentioned that a contract of
suretyship is defined and covered by the Insurance
Code.[47]
Moreover, the Insurance Code[48] specifically provides
applicable provisions on suretyship, stating that pertinent
provisions of the Civil Code shall only
apply suppletorily whenever necessary in interpreting the
provisions of a contract of suretyship.[49] Jurisprudence
also holds that a specific law should prevail over a law of
general character.[50]
Hence, in the resolution of the instant case, the CA erred
in not considering the applicable provisions under the
Insurance Code on the required proof of loss and when
such requirement is waivable.
Therefore, Section 92[51] of the Insurance Code must be
taken into consideration. The said provision states that
all defects in the proof of loss, which the insured might
remedy, are waived as grounds for objection when
the insurer omits to specify to him without unnecessary
delay. It is the duty of the insurer to indicate the defects
on the proofs of loss given, so that the deficiencies may
be supplied by the insured. When the insurer recognizes
his liability to pay the claim, there is waiver by the insurer
of any defect in the proof of loss.[52]
In the instant case, it must be emphasized that
respondent Country Bankers, through its General
Manager, Mr. Ong, issued a letter dated November 14,
2005 which readily acknowledged the obligations of
Country Bankers under the surety agreement,
apologized for the delay in the payment of claims, and
proposed to amortize the settlement of claims by paying
a semi-monthly amount of P850,000.00.[53] In addition,
Country Bankers promised to pay future claims within a
90-day period:
First of all, allow us to apologize for the delay in our
response to you considering that we still had to do some
reconciliation of our records with that of Mr. Lacaba.
After evaluating the total number of claims filed by
IPAMS, we have come up with the final figure of
P20,575,492.25.
In this regard, we wish to propose to amortize the
settlement of the said amount by paying you the semi-
monthly amount of P850,000.00 until the entire amount
of P20,575,492.25 is fully paid. With respect to future
claims (after the cut-off date, October 28, 2005), we shall
see to it that they are settled within the 90 days time
frame allowed us.[54]
It bears stressing that respondent Country Bankers, after
undergoing an evaluation of the total number of claims of
petitioner IPAMS, undertook the settlement of such
claims even WITHOUT the submission of official
receipts.
In fact, respondent Country Bankers raised up the issue
on the missing official receipts and other evidence to
prove the expenses incurred by petitioner IPAMS only
when the latter requested the intervention of the IC in
2007. If respondent Country Bankers truly believed that
the submission of official receipts was critical in
providing proof as to petitioner IPAMS' claims, then it
would have raised the issue on the lack of official
receipts at the earliest possible opportunity. This only
shows that the argument of respondent Country Bankers
on the lack of official receipts was a mere afterthought to
evade its obligation to pay the claims presented by
petitioner IPAMS.
While not denying the existence of the said letter,
respondent Country Bankers attempts to downplay it by
arguing that the claims covered by the letter and the
claims raised by petitioner IPAMS before the IC are
different and distinct from each other. Such argument
deserves scant consideration.
While the claims in the said letter may be different
from the specific claims presented before the IC,
both sets of claims were similarly made under the
same suretyship agreement between the
parties. Thus, the fact still remains that respondent
Country Bankers had previously acknowledged the
validity of a set of claims under a surety bond within the
purview of the Requirements for Claim Clause despite
the lack of official receipts and other pieces of evidence
aside from the required documents enumerated in the
MOA. To be sure, it must also be pointed out that the
representations of respondent Country Bankers in the
said letter likewise refer to future and similar claims of
petitioner IPAMS. Hence, respondent Country Bankers'
attempt to downplay the ramifications of its letter dated
November 14, 2005 is puerile.
Also, it must be emphasized that the IC, after holding a
series of conferences between the parties and after the
assessment of the respective position papers and
evidence from both parties, made the factual finding in
its Resolution dated June 26, 2007 that respondent
Country Bankers committed certain acts constituting a
waiver of its right to require the presentation of additional
documents to prove the expenses incurred by petitioner
IPAMS, such as the issuance of the letter dated
November 14, 2005 and the acceptance by respondent
Country Bankers of reimbursement from the nurse
applicants of petitioner IPAMS on the basis of the
Statements of Accounts presented, even without any
official receipt attached.[55] In fact, the records show
that respondent Country Bankers does not deny the
fact that it accepted the reimbursements from the
nurse applicants based on the Statements of
Accounts of petitioner IPAMS.[56]
Furthermore, the DOF likewise factually determined that
respondent Country Bankers, through its new General
Manager, Ms. Valeriano, had assured IPAMS that the
obligations of Country Bankers would be paid promptly,
again, even without the submission of official receipts
and other pieces of evidence.[57] The DOF similarly
found that the proposal by respondent Country Bankers
to amortize the settlement of petitioner IPAMS' claims by
paying the latter the semi-monthly amount of
P850,000.00 and respondent Country Bankers'
acceptance of reimbursements from the nurse applicants
based on the mere Statements of Accounts submitted by
petitioner IPAMS are tantamount to an acknowledgment
on the part of respondent Country Bankers of its liability
for claims under the surety bonds.
Moreover, the OP also factually found that respondent
Country Bankers "knew as a matter of IPAMS' regular
course of business that these covered transactions are
generally not issued official receipts by US government
and its agencies and the US based professional
organizations and institutions involved to complete the
requirements for the issuance of an immigrant visa."[58]
These factual findings of three separate administrative
agencies, which were not at all reversed or refuted by
the CA in its assailed Decision, should not be
perturbed by the Court without any compelling
countervailing reason. The Court has continuously
adopted the policy of respecting the findings of facts of
specialized administrative agencies.
In Villafor v. Court of Appeals,[59] the Court held that the
findings of fact of an administrative agency must be
respected as long as they are supported by substantial
evidence, even if such evidence might not be
overwhelming or even preponderant, because it is not
the task of an appellate court to weigh once more the
evidence submitted before the administrative body and October 14, 2010 issued by the Court of Appeals in CA-
to substitute its own judgment for that of the G.R. SP No. 114683 is REVERSED AND SET ASIDE.
administrative agency in respect of sufficiency of The Resolution dated June 26, 2007 and Order dated
evidence.[60] December 4, 2007 issued by the Insurance Commission,
the Decision dated September 17, 2008 and Resolution
Hence, considering that the IC, through the Insurance dated April 29, 2009 issued by the Department of
Commissioner, is particularly tasked by the Insurance Finance, and the Decision dated January 8, 2010 and
Code to issue such rulings, instructions, circulars, orders Resolution dated June 1, 2010 issued by the Office of
and decisions as may be deemed necessary to secure the President are REINSTATED and AFFIRMED.
the enforcement of the provisions of the law, to ensure SO ORDERED.
the efficient regulation of the insurance industry, and
considering that there are no compelling reasons
provided by respondent Country Bankers to overthrow
the IC's factual findings, the Court upholds the findings
of the IC, as concurred in by both the DOF and OP, that
respondent Country Bankers committed certain acts
constituting a waiver of its right to require the
presentation of additional documents to prove the
expenses incurred by petitioner IPAMS.

Accordingly, under Section 92 of the Insurance Code,

the failure to attach official receipts and other documents
evidencing the expenses incurred by petitioner IPAMS,
even assuming that it can be considered a defect on the
required proof of loss, is therefore considered waived as
ground for objecting the claims of petitioner IPAMS.
For the foregoing reasons, the ruling of the CA, which
sets aside the rulings of the IC, DOF, and OP, which
found that respondent Country Bankers has no ground
to refuse the payment of petitioner IPAMS' claims and
shall accordingly be subjected to disciplinary action
pursuant to Sections 241 (now Section 247) and 247
(now Section 254) of the Insurance Code if the latter
does not settle the subject claims of petitioner IPAMS,
should be reversed.

Be that as it may, despite the reversal of the CA's

assailed Decision, petitioner IPAMS' prayers for (1) the
suspension/revocation of the license of respondent
Country Bankers due to its commission of an unfair
claim settlement practice for unreasonable delay in
paying petitioner IPAMS' claim for the total amount of
P21,230,643.19; (2) awarding of a total amount of
P21,230,643.19 and 20% thereof; and (3) awarding of
moral and exemplary damages, as well as attorney's
fees and judicial costs, are denied.

It must be stressed that the instant case resolved by the

Court is not a claims adjudication case. The subject
Resolution and Order of the IC that was concurred in by
the DOF and OP, which the Court now reinstates, were
issued in the IC's capacity as a regulator and not as an
adjudicator of claims, as admitted by the IC
itself.[61] Hence, while the Court herein reinstates the IC's
Resolution finding that disciplinary action is warranted in
the eventuality that respondent Country Bankers
continues to delay settling the claims of petitioner
IPAMS, the matter should be referred back to the IC so
that it could determine the remaining amount and extent
of the liability that should be settled by respondent
Country Bankers in order to avoid the IC's disciplinary
action.

WHEREFORE, in view of the foregoing, the appeal is

hereby PARTIALLY GRANTED. The Decision dated