Comm2 Insurance (1)

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COMM2 (INSURANCE)

G.R. No. 185964 June 16, 2014

ASIAN TERMINALS, INC., Petitioner,

vs.

IRST LE!ANTO"TAIS#O INSURANCE COR!ORATION, Respondent.

D E C I S I O N

RE$ES, J.:

This is a Petition for Review on Certiorari1 under Rule 4 of the Rules of

Court see!in" to annul and set aside the De#ision$ dated O#to%er 1&,

$&&' of the Court of (ppeals )C(* in C(+.R. SP No. --&$1 whi#h

adud"ed petitioner (sian Ter/inals, In#. )(TI* lia%le to pa0 the /one0

#lai/s of respondent irst 2epanto+Taisho Insuran#e Corporation )IRST

2EP(NTO*.

The 3ndisputed a#ts

On ul0 5, 1--5,6 6,&&& %a"s of sodiu/ tripol0phosphate #ontained in

1&& plain u/%o %a"s #o/plete and in "ood #ondition were loaded and

re#eived on %oard 789 :Da en": owned %0 China O#ean Shippin" Co.

)COSCO* in favor of #onsi"nee, rand (sian Sales, In#. )(SI*. ;ased

on a Certi<#ate of Insuran#e4 dated (u"ust $4, 1--, it appears that

the ship/ent was insured a"ainst all ris!s %0 (SI with IRST 2EP(NTO

forP=,--,&.& under 7arine Open Poli#0 No. &1$6.

The ship/ent arrived in 7anila on ul0 1', 1--5 and was dis#har"ed

into the possession and #ustod0 of (TI, a do/esti# #orporation

en"a"ed in arrastre %usiness. The ship/ent re/ained for >uite so/e

ti/e at (TI?s stora"e area until it was withdrawn %0 %ro!er, Proven

Custo/s ;ro!era"e Corporation )PRO9EN*, on (u"ust ' and -, 1--5 for

deliver0 to the #onsi"nee. 3pon re#eipt of the ship/ent, (SI

su%e#ted the sa/e to inspe#tion and found that the delivered "oods

in#urred shorta"es of ',5&& !ilo"ra/s and spilla"e of 6,61 !" for a

total of11,-1 !" of loss8da/a"e valued at P155,==$.41.

(SI sou"ht re#o/pense fro/ COSCO, thru its Philippine a"ent S/ith

;ell Shippin" 2ines, In#. )S7IT@ ;E22*,5(TI= and PRO9EN' %ut was

denied. @en#e, it pursued inde/ni<#ation fro/ the ship/ent?s insurer. -

(fter the re>uisite investi"ation and adust/ent, IRST 2EP(NTO paid

(SI the a/ount of P15,==$.4& as insuran#e inde/nit0.1&

Thereafter, (SI eAe#uted a Release of Clai/11 dis#har"in" IRST

2EP(NTO fro/ an0 and all lia%ilities pertainin" to the lost8da/a"ed

ship/ent and su%ro"atin" it to all the ri"hts of re#over0 and #lai/s the

for/er /a0 have a"ainst an0 person or #orporation in relation to the

lost8da/a"ed ship/ent.

(s su#h su%ro"ee, IRST 2EP(NTO de/anded fro/ COSCO, its shippin"

a"en#0 in the Philippines, S7IT@ ;E22, PRO9EN and (TI,

rei/%urse/ent of the a/ount it paid to (SI. Bhen IRST 2EP(NTO?s

de/ands were not heeded, it <led on 7a0 $-, 1--= a Co/plaint1$ for

su/ of /one0 %efore the 7etropolitan Trial Court )7eTC* of 7anila,

;ran#h 6. IRST 2EP(NTO sou"ht that it %e rei/%ursed the a/ount of

155,==$.41, twent0+<ve per#ent )$* thereof as attorne0?s fees, and

#osts of suit.

(TI denied lia%ilit0 for the lost8da/a"ed ship/ent and #lai/ed that it

eAer#ised due dili"en#e and #are in handlin" the sa/e.16 (TI averred

that upon arrival of the ship/ent, S7IT@ ;E22 re>uested for its

inspe#tion14 and it was dis#overed that one u/%o %a" thereof

sustained loss8da/a"e while in the #ustod0 of COSCO as eviden#ed %0

Turn Over Surve0 of ;ad Order Car"o No. 4='-& dated (u"ust 5,

1--51 ointl0 eAe#uted %0 the respe#tive representatives of (TI and

COSCO. Durin" the withdrawal of the ship/ent %0 PRO9EN fro/ (TI?swarehouse, the entire ship/ent was re+eAa/ined and it was found to

%e eAa#tl0 in the sa/e #ondition as when it was turned over to (TI

su#h that one u/%o %a" was da/a"ed. To %olster this #lai/, (TI

su%/itted Re>uest for ;ad Order Surve0 No. 4&5$$ dated (u"ust -,

1--515 ointl0 eAe#uted %0 the respe#tive representatives of (TI and

PRO9EN. (TI also su%/itted various Car"o ate Passes 1= showin" that

PRO9EN was a%le to #o/pletel0 withdraw all the ship/ent fro/ (TI?s

warehouse in "ood order #ondition eA#ept for that one da/a"ed u/%o

%a".

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In the alternative, (TI asserted that even if it is found l ia%le for the

lost8da/a"ed portion of the ship/ent, its #ontra#t for #ar"o handlin"

servi#es li/its its lia%ilit0 to not /ore than P,&&&.&& per pa#!a"e. (TI

interposed a #ounter#lai/ of P$&,&&&.&& a"ainst IRST 2EP(NTO as

and for attorne0?s fees. It also <led a #ross+#lai/ a"ainst its #o+

defendants COSCO and S7IT@ ;E22 in the event that it is /ade lia%le

to IRST 2EP(NTO.1'

PRO9EN denied an0 lia%ilit0 for the lost8da/a"ed ship/ent and

averred that the #o/plaint alle"ed no spe#i<# a#ts or o/issions that

/a!es it lia%le for da/a"es. PRO9EN #lai/ed that the da/a"es in the

ship/ent were sustained %efore the0 were withdrawn fro/ (TI?s

#ustod0 under whi#h the ship/ent was left in an open area eAposed to

the ele/ents, thieves and vandals. PRO9EN #ontended that it

eAer#ised due dili"en#e and pruden#e in handlin" the ship/ent.

PRO9EN also <led a #ounter#lai/ for attorne0?s fees and da/a"es.1-

Despite re#eipt of su//ons on De#e/%er 4, 1--5,$& COSCO and S7IT@

;E22 failed to <le an answer to the #o/plaint. IRST 2EP(NTO thus/oved that the0 %e de#lared in default$1 %ut the /otion was denied %0

the 7eTC on the "round that under Rule -, Se#tion 6 of the Rules of

Civil Pro#edure, :when a pleadin" assertin" a #lai/ states a #o//on

#ause of a#tion a"ainst several defendin" parties, so/e of who/

answer and the other fail to do so, the Court shall tr0 the #ase a"ainst

all upon the answers thus <led, and render ud"/ent upon the

eviden#e presented.:$$

Rulin" of the 7eTC

In a ud"/ent$6 dated 7a0 6&, $&&5, the 7eTC a%solved (TI andPRO9EN fro/ an0 lia%ilit0 and instead found COSCO to %e the part0 at

fault and hen#e lia%le for the loss8da/a"e sustained %0 the su%e#t

ship/ent. @owever, the 7eTC ruled it has no urisdi#tion over COSCO

%e#ause it is a forei"n #orporation. (lso, it #annot enfor#e ud"/ent

upon S7IT@ ;E22 %e#ause no eviden#e was presented esta%lishin" that

it is indeed the Philippine a"ent of COSCO. There is also no eviden#e

attri%utin" an0 fault to S7IT@ ;E22. Conse>uentl0, the #o/plaint was

dis/issed in this wise

B@EREORE, in li"ht of the fore"oin", ud"/ent is here%0 rendered

DIS7ISSIN the instant #ase for failure of IRST 2EP(NTOF to

suG#ientl0 esta%lish its #ause o fa#tion a"ainst (TI, COSCO, S7IT@

;E22, and PRO9ENF.

The #ounter#lai/s of (TI and PRO9ENF are li!ewise dis/issed for la#!

of le"al %asis.

No pronoun#e/ent as to #ost.

SO ORDERED.$4

Rulin" of the Re"ional Trial Court

On appeal, the Re"ional Trial Court )RTC* reversed the 7eTC?s <ndin"s.

In its De#ision$ dated anuar0 $5, $&&=, the RTC of 7anila, ;ran#h $1,

in Civil Case No. &5+115$6=, ree#ted the #ontentions of (TI upon its

o%servation that the sa/e is %elied %0 its ver0 own do#u/entar0eviden#e. The RTC re/ar!ed that, if, as alle"ed %0 (TI, one u/%o %a"

was alread0 in %ad order #ondition upon its re#eipt of the ship/ent

fro/ COSCO on ul0 1', 1--5, then how #o/e that the Re>uest for ;ad

Order Surve0 and the Turn Over Surve0 of ;ad Order Car"o were

prepared onl0 wee!s thereafter or on (u"ust -, 1--5 and (u"ust 5,

1--5, respe#tivel0. (TI was adud"ed una%le to prove that it eAer#ised

due dili"en#e while in #ustod0 of the ship/ent and hen#e, ne"li"ent

and should %e held lia%le for the da/a"es #aused to (SI whi#h, in

turn, is su%ro"ated %0 IRST 2EP(NTO.

The RTC ree#ted (TI?s #ontention that its lia%ilit0 is li/ited onl0

to P,&&&.&& per pa#!a"e %e#ause its 7ana"e/ent Contra#t with the

Philippine Ports (uthorit0 )PP(* purportedl0 #ontainin" the sa/e was

not presented as eviden#e. 7ore i/portantl0, IRST 2EP(NTO or (SI

#annot %e dee/ed %ound there%0 %e#ause the0 were not parties

thereto. 2astl0, the RTC did not "ive /erit to (TI?s defense that an0

#lai/ a"ainst it has alread0 pres#ri%ed %e#ause (SI failed to <le an0

#lai/ within the 1+da0 period stated in the "ate pass issued %0 (TI to

(SI?s %ro!er, PRO9EN. (##ordin"l0, the RTC disposed thus

$




















B@EREORE, in li"ht of the fore"oin", the ud"/ent on appeal is

here%0 RE9ERSED.

(TIF is here%0 ordered to rei/%urse IRST 2EP(NTOF the a/ount of

PF15,==$.4& with le"al interest until full0 paid, to pa0 IRST

2EP(NTOF 1& of the a/ount due the latter as and for attorne0?s fees

plus the #osts of suit.

The #o/plaint a"ainst COSCO8S7IT@ ;E22 and PRO9ENF are

DIS7ISSED for la#! of eviden#e a"ainst the/. The #ounter#lai/ and

#ross+F#lai/ of (TIF are li!ewise DIS7ISSED for la#! of /erit.

SO ORDERED.$5

Rulin" of the C(

(TI sou"ht re#ourse with the C( #hallen"in" the RTC?s <ndin" that

IRST 2EP(NTO was validl0 su%ro"ated to the ri"hts of (SI withrespe#t to the lost8da/a"ed ship/ent. (TI ar"ued that there was no

valid su%ro"ation %e#ause IRST2EP(NTO failed to present a valid,

eAistin" and enfor#ea%le 7arine Open Poli#0 or insuran#e #ontra#t. (TI

reasoned that the Certi<#ate of Insuran#e or 7arine Cover Note

su%/itted %0 IRST 2EP(NTO as eviden#e is not the sa/e as an a#tual

insuran#e #ontra#t.

In its De#ision$= dated O#to%er 1&, $&&', the C( dis/issed the appeal

and held that the Release of Clai/ and the Certi<#ate of Insuran#e

presented %0 IRST 2EP(NTO suG#ientl0 esta%lished its relationship

with the #onsi"nee and that upon proof of pa0/ent of the latter?s #lai/

for da/a"es, IRST 2EP(NTO was su%ro"ated to its ri"hts a"ainst

those lia%le for the lost8da/a"ed ship/ent.

The C( also aGr/ed the rulin" of the RTC that the su%e#t ship/ent

was da/a"ed while in the #ustod0 of (TI. Thus, the C( disposed as

follows

B@EREORE, pre/ises #onsidered, the assailed De#ision is here%0

(IR7ED and the instant petition is DENIED for la#! of /erit.

SO ORDERED.$'

(TI /oved for re#onsideration %ut the /otion was denied in the C(

Resolution$- dated anuar0 1$, $&&-. @en#e, this petition ar"uin" that

)a* The presentation of the insuran#e poli#0 is indispensa%le in provin"

the ri"ht of IRST 2EP(NTO to %e su%ro"ated to the ri"ht of the#onsi"nee pursuant to the rulin" in Balle/ Philippines Shippin", In#. v.

Prudential uarantee and (ssuran#e In#.H6&

)%* (TI #annot %e %arred fro/ invo!in" the defense of pres#ription as

provided for in the "ate passes in #onsonan#e with the rulin" in

International Container Ter/inal Servi#es, In#. v. Prudential uarantee

and (ssuran#e Co, In#.61

Rulin" of the Court

The Court denies the petition.

(TI failed to prove that it eAer#ised

due #are and dili"en#e while the

ship/ent was under its #ustod0,

#ontrol and possession as arrastre

operator.

It /ust %e e/phasied that fa#tual >uestions pertainin" to (TI?s

lia%ilit0 for the loss8da/a"e sustained %0 (SI has alread0 %een

settled in the unifor/ fa#tual <ndin"s of the RTC and the C( that (TI

failed to prove %0 preponderan#e of eviden#e that it eAer#ised due

dili"en#e in handlin" the ship/ent.

Su#h <ndin"s are %indin" and #on#lusive upon this Court sin#e a

review thereof is pros#ri%ed %0 the nature of the present petition. Onl0

>uestions of law are allowed in petitions for review on #ertiorari under

Rule 4 of the Rules of Court. It is not the Court?s dut0 to review,

eAa/ine, and evaluate or wei"h all over a"ain the pro%ative value of

the eviden#e presented, espe#iall0 where the <ndin"s of the RTC are

aGr/ed %0 the C(, as in this #ase.6$

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There are onl0 spe#i<# instan#es when the Court deviates fro/ the rule

and #ondu#ts a review of the #ourts a >uo?s fa#tual <ndin"s, su#h as

when )1* the inferen#e /ade is /anifestl0 /ista!en, a%surd or

i/possi%leH )$* there is "rave a%use of dis#retionH)6* the <ndin"s are

"rounded entirel0 on spe#ulations, sur/ises or #one#turesH )4* the

ud"/ent of the C( is %ased on /isapprehension of fa#tsH )* the C(, in

/a!in" its <ndin"s, went %e0ond the issues of the #ase and the sa/e

is #ontrar0 to the ad/issions of %oth appellant and appelleeH )5* the

<ndin"s of fa#t are #on#lusions without #itation of spe#i<# eviden#e on

whi#h the0 are %asedH )=* the C( /anifestl0 overloo!ed #ertain

relevant fa#ts not disputed %0 the parties and whi#h, if properl0

#onsidered, would ustif0 a diJerent #on#lusionH and )'* the <ndin"s of

fa#t of the C( are pre/ised on the a%sen#e of eviden#e and are

#ontradi#ted %0 the eviden#e on re#ord.66

None of these instan#es, however, are present in this #ase. 7oreover, it

is un/ista!a%le that (TI has alread0 #on#eded to the fa#tual <ndin"s of

RTC and C( adud"in" it lia%le for the ship/ent?s loss8da/a"e

#onsiderin" the a%sen#e of ar"u/ents pertainin" to su#h issue in thepetition at %ar.

These notwithstandin", the Court s#rutinied the re#ords of the #ase

and found that indeed, (TI is lia%le as the arrastre operator for the

lost8da/a"ed portion of the ship/ent.

The relationship %etween the #onsi"nee and the arrastre operator is

a!in to that eAistin" %etween the #onsi"nee and8or the owner of the

shipped "oods and the #o//on #arrier, or that %etween a depositor

and a warehouse/an. @en#e, in the perfor/an#e of its o%li"ations, an

arrastre operator should o%serve the sa/e de"ree of dili"en#e as thatre>uired of a #o//on #arrier and a warehouse/an. ;ein" the

#ustodian of the "oods dis#har"ed fro/ a vessel, an arrastre operator?s

dut0 is to ta!e "ood #are of the "oods and to turn the/ over to the

part0 entitled to their possession.64

In a #lai/ for loss <led %0 the #onsi"nee )or the insurer*, the %urden of

proof to show #o/plian#e with the o%li"ation to deliver the "oods to

the appropriate part0 devolves upon the arrastre operator. Sin#e the

safe!eepin" of the "oods is its responsi%ilit0, it /ust prove that the

losses were not due to its ne"li"en#e or to that of its e/plo0ees. To

avoid lia%ilit0, the arrastre operator /ust prove that it eAer#ised

dili"en#e and due #are in handlin" the ship/ent.6

(TI failed to dis#har"e its %urden of proof. Instead, it insisted on

shiftin" the %la/e to COSCO on the %asis of the Re>uest for ;ad Order

Surve0 dated (u"ust -, 1--5 purportedl0 showin" that when (TI

re#eived the ship/ent, one u/%o %a" thereof was alread0 in da/a"ed

#ondition.

The RTC and C( were %oth #orre#t in #on#ludin" that (TI?s #ontention

was i/pro%a%le and illo"i#al. (s udi#iousl0 dis#erned %0 the #ourts a

>uo, the date of the do#u/ent was too distant fro/ the date when the

ship/ent was a#tuall0 re#eived %0 (TI fro/ COSCO on ul0 1', 1--5. In

fa#t, what the do#u/ent esta%lished is that when the loss8da/a"e was

dis#overed, the ship/ent has %een in (TI?s #ustod0 for at least two

wee!s. This #ir#u/stan#e, #oupled with the undisputed de#laration of

PRO9EN?s witnesses that while the ship/ent was in (TI?s #ustod0, it

was left in an open area eAposed to the ele/ents, thieves andvandals,65 all "enerate the #on#lusion that (TI failed to eAer#ise due

#are and dili"en#e while the su%e#t ship/ent was under its #ustod0,

#ontrol and possession as arrastre operator.

To prove the eAer#ise of dili"en#e in handlin" the su%e#t #ar"oes, an

arrastre operator /ust do /ore than /erel0 show the possi%ilit0 that

so/e other part0 #ould %e responsi%le for the loss or the da/a"e.6= It

/ust prove that it used all reasona%le /eans to handle and store the

ship/ent with due #are and dili"en#e in#ludin" safe"uardin" it fro/

weather ele/ents, thieves or vandals.

Non+presentation of the insuran#e

#ontra#t is not fatal to IRST

2EP(NTO?s #ause of a#tion for

rei/%urse/ent as su%ro"ee.

It is #onspi#uous fro/ the re#ords that (TI put in issue the su%/ission

of the insuran#e #ontra#t for the <rst ti/e %efore the C(. Despite

opportunit0 to stud0 IRST 2EP(NTO?s #o/plaint %efore the 7eTC, (TI

failed to alle"e in its answer the ne#essit0 of the insuran#e #ontra#t.

4














Neither was the sa/e #onsidered durin" pre+trial as one of the de#isive

/atters in the #ase. urther, (TI never #hallen"ed the relevan#0 or

/aterialit0 of the Certi<#ate of Insuran#e presented %0 IRST 2EP(NTO

as eviden#e durin" trial as proof of its ri"ht to %e su%ro"ated in the

#onsi"nee?s stead. Sin#e it was not a"reed durin" the pre+trial

pro#eedin"s that IRST 2EP(NTO will have to prove its su%ro"ation

ri"hts %0 presentin" a #op0 of the insuran#e #ontra#t, (TI is %arred

fro/ pleadin" the a%sen#e of su#h #ontra#t in its appeal. It is

i/perative for the parties to dis#lose durin" pre+trial all issues the0

intend to raise durin" the trial %e#ause, the0 are %ound %0 the

deli/itation of su#h issues. The deter/ination of issues durin" the pre+

trial #onferen#e %ars the #onsideration of other >uestions, whether

durin" trial or on appeal.6'

( faithful adheren#e to the rule %0 liti"ants is ensured %0 the e>uall0

settled prin#iple that a part0 #annot #han"e his theor0 on appeal as

su#h a#t violates the %asi# rudi/ents of fair pla0 and due pro#ess. (s

stressed in ose v. (lfuerto6-

(F part0 #annot #han"e his theor0 ofthe #ase or his #ause of a#tion on

appeal. Points of law, theories, issues and ar"u/ents not %rou"ht to

the attention of the lower #ourt will not %e #onsidered %0 the reviewin"

#ourt. The defenses not pleaded in the answer #annot, on appeal,

#han"e funda/entall0 the nature of the issue in the #ase. To do so

would %e unfair to the adverse part0, who had no opportunit0 to

present eviden#e in #onne#tion with the new theor0H this would oJend

the %asi# rules of due pro#ess and fair pla0.4& )Citation o/itted*

Bhile the Court /a0 adopt a li%eral stan#e and relaA the rule, no

reasona%le eAplanation, however, was introdu#ed to ustif0 (TI?s failureto ti/el0 >uestion the %asis of IRST 2EP(NTO?s ri"hts as a su%ro"ee.

The fa#t that the C( too! #o"nian#e of and resolved the said issue did

not #ure or ratif0 (TI?s fauA pas. :(F ud"/ent that "oes %e0ond the

issues and purports to adudi#ate so/ethin" on whi#h the #ourt did not

hear the parties, is not onl0 irre"ular %ut also eAtraudi#ial and

invalid.:41 Thus, for resolvin" an issue not fra/ed durin" the pre+trial

and on whi#h the parties were not heard durin" the trial, that portion of

the C(?s ud"/ent dis#ussin" the ne#essit0 of presentin" an insuran#e

#ontra#t was erroneous.

(t an0 rate, the non+presentation of the insuran#e #ontra#t is not fatal

to IRST 2EP(NTO?s ri"ht to #olle#t rei/%urse/ent as the su%ro"ee of

(SI.

:Su%ro"ation is the su%stitution of one person in the pla#e of another

with referen#e to a lawful #lai/ or ri"ht, so that he who is su%stituted

su##eeds to the ri"hts of the other in relation to a de%t or #lai/,

in#ludin" its re/edies or se#urities.:4$ The ri"ht of su%ro"ation sprin"s

fro/ (rti#le $$&= of the Civil Code whi#h states

(rt. $$&=. If the plaintiJ?s propert0 has %een insured, and he has

re#eived inde/nit0 fro/ the insuran#e #o/pan0 for the inur0 or loss

arisin" out of the wron" or %rea#h of #ontra#t #o/plained of, the

insuran#e #o/pan0 shall %e su%ro"ated to the ri"hts of the insured

a"ainst the wron"+doer or the person who has violated the #ontra#t. If

the a/ount paid %0 the insuran#e #o/pan0 does not full0 #over the

inur0 or loss, the a""rieved part0 shall %e entitled to re#over the

de<#ien#0 fro/ the person #ausin" the loss or inur0.

(s a "eneral rule, the /arine insuran#e poli#0 needs to %e presented in

eviden#e %efore the insurer /a0 re#over the insured value of the

lost8da/a"ed #ar"o in the eAer#ise of its su%ro"ator0 ri"ht. In 7ala0an

Insuran#e Co., In#. v.Re"is ;ro!era"e Corp.,46 the Court stated that the

presentation of the #ontra#t #onstitutive of the insuran#e relationship

%etween the #onsi"nee and insurer is #riti#al %e#ause it is the le"al

%asis of the latter?s ri"ht to su%ro"ation.44

In @o/e Insuran#e Corporation v. C(,4 the Court also held that the

insuran#e #ontra#t was ne#essar0 to prove that it #overed the haulin"

portion of the ship/ent and was not li/ited to the transport of the

#ar"o while at sea. The ship/ent in that #ase passed throu"h siA

sta"es with diJerent parties involved in ea#h sta"e until it rea#hed the

#onsi"nee. The insuran#e #ontra#t, whi#h was not presented in

eviden#e, was ne#essar0 to deter/ine the s#ope of the insurer?s

lia%ilit0, if an0, sin#e no eviden#e was addu#ed indi#atin" at what





















sta"e in the handlin" pro#ess the da/a"e to the #ar"o was

sustained.45

(n analo"ous disposition was arrived at in the Balle/4= #ase #ited %0

(TI wherein the Court held that the insuran#e #ontra#t /ust %e

presented in eviden#e in order to deter/ine the eAtent of its #overa"e.

It was further ruled therein that the lia%ilit0 of the #arrier fro/ who/

rei/%urse/ent was de/anded was not esta%lished with #ertaint0

%e#ause the alle"ed shorta"e in#urred %0 the #ar"oes was not

de<nitivel0 deter/ined.4'

Nevertheless, the rule is not inKeAi%le. In #ertain instan#es, the Court

has ad/itted eA#eptions %0 de#larin" that a /arine insuran#e poli#0 is

dispensa%le eviden#e in rei/%urse/ent #lai/s instituted %0 the

insurer.

In Delsan Transport 2ines, In#. v. C(,4- the Court ruled that the ri"ht of

su%ro"ation a##rues si/pl0 upon pa0/ent %0 the insuran#e #o/pan0

of the insuran#e #lai/. @en#e, presentation in eviden#e of the /arine

insuran#e poli#0 is not indispensa%le %efore the insurer /a0 re#over

fro/ the #o//on #arrier the insured value of the lost #ar"o in the

eAer#ise of its su%ro"ator0 ri"ht. The su%ro"ation re#eipt, %0 itself, was

held suG#ient to esta%lish not onl0 the relationship %etween the

insurer and #onsi"nee, %ut also the a/ount paid to settle the insuran#e

#lai/. The presentation of the insuran#e #ontra#t was dee/ed not fatal

to the insurer?s #ause of a#tion %e#ause the loss of the #ar"o

undou%tedl0 o##urred while on %oard the petitioner?s vessel.&

The sa/e rationale was the %asis of the ud"/ent in International

Container Ter/inal Servi#es, In#. v. 3 Insuran#eCorporation,1 wherein the arrastre operator was found lia%le for the

lost ship/ent despite the failure of the insuran#e #o/pan0 to oJer in

eviden#e the insuran#e #ontra#t or poli#0. (s in Delsan, it was #ertain

that the loss of the #ar"o o##urred while in the petitioner?s #ustod0. $

;ased on the attendant fa#ts of the instant #ase, the appli#ation of the

eA#eption is warranted.1âwphi1 (s dis#ussed a%ove, it is alread0

settled that the loss8da/a"e to the (SI?s ship/ent o##urred while

the0 were in (TI?s #ustod0, possession and #ontrol as arrastre operator.

9eril0, the Certi<#ate of Insuran#e6 and the Release of

Clai/4 presented as eviden#e suG#ientl0 esta%lished IRST 2EP(NTO?s

ri"ht to #olle#t rei/%urse/ent as the su%ro"ee of the #onsi"nee, (SI.

Bith (TI?s lia%ilit0 havin" %een positivel0 esta%lished, to stri#tl0 re>uire

the presentation of the insuran#e #ontra#t will run #ounter to the

prin#iple of e>uit0 upon whi#h the do#trine of su%ro"ation is pre/ised.

Su%ro"ation is desi"ned to pro/ote and to a##o/plish usti#e and is

the /ode whi#h e>uit0 adopts to #o/pel the ulti/ate pa0/ent of a

de%t %0 one who in usti#e, e>uit0 and "ood #ons#ien#e ou"ht to pa0.

The pa0/ent %0 the insurer to the insured operates as an e>uita%le

assi"n/ent to the insurer of all the re/edies whi#h the insured /a0

have a"ainst the third part0 whose ne"li"en#e or wron"ful a#t #aused

the loss. The ri"ht of su%ro"ation is not dependent upon, nor does it

"row out of an0 privit0 of #ontra#t or upon pa0/ent %0 the insuran#e

#o/pan0 of the insuran#e #lai/. It a##rues si/pl0 upon pa0/ent %0

the insuran#e #o/pan0 of the insuran#e #lai/.5

(TI #annot invo!e pres#ription

(TI ar"ued that the #onsi"nee, thru its insurer, IRST 2EP(NTO is

%arred fro/ see!in" pa0/ent for the lost8da/a"ed ship/ent %e#ause

the #lai/ letter of (SI to (TI was served onl0 on Septe/%er $=, 1--5

or /ore than one /onth fro/ the date the ship/ent was delivered to

the #onsi"nee?s warehouse on (u"ust -, 1--5. The #lai/ of (SI was

thus <led %e0ond the 1+da0 period stated in (TI?s 7ana"e/ent

Contra#t with PP( whi#h in turn was reprodu#ed in the "ate passes

issued to the #onsi"nee?s %ro!er, PRO9EN, as follows

Issuan#e of this ate Pass Constitutes deliver0 to and re#eipt %0

#onsi"nee of the "oods as des#ri%ed a%ove in "ood order and #ondition

unless an a##o/pan0in" A A A #erti<#ates dul0 issued and noted on the

fa#e of this ate Pass appeals. si#F

This ate pass is su%e#t to all ter/s and #onditions de<ned in the

7ana"e/ent Contra#t %etween the Philippine PortsF (uthorit0 and

(sian Ter/inals, In#. and a/end/ent thereto and alterations thereof

parti#ularl0 %ut not li/ited to the (Frti#le 9I thereof, li/itin" the

5




























#ontra#tor?s lia%ilit0 to PF,&&&.&& per pa#!a"e unless the i/portation

is otherwise spe#i<ed or /anifested or #o//uni#ated in writin"

to"ether with the invoi#e value and supported %0 a #erti<ed pa#!in"

list to the #ontra#tor %0 the interested part0 or parties %efore the

dis#har"e of the "oods and #orrespondin" arrastre #har"es have %een

paid providin" eA#eption or restri#tions fro/ lia%ilit0 releasin" the

#ontra#tor fro/ lia%ilit0 a/on" others unless a for/al #lai/ with the

re>uired anneAes shall have %een <led with the #ontra#tor within

<fteen )1* da0s fro/ date of issuan#e %0 the #ontra#tors or #erti<#ate

of loss, da/a"es, inur0, or Certi<#ate of non+deliver0.=

The #ontention is %ereft of /erit. (s #lari<ed in Insuran#e Co/pan0 of

North (/eri#a v. (sian Ter/inals, In#.,'su%stantial #o/plian#e with the

1+da0 ti/e li/itation is allowed provided that the #onsi"nee has

/ade a provisional #lai/ thru a re>uest for %ad order surve0 or

eAa/ination report, vi

(lthou"h the for/al #lai/ was <led %e0ond the 1+da0 period fro/ the

issuan#e of the eAa/ination report on the re>uest for %ad ordersurve0, the purpose of the ti/e li/itations for the <lin" of #lai/s had

alread0 %een full0 satis<ed %0 the re>uest of the #onsi"nee?s %ro!er for

a %ad order surve0 and %0 the eAa/ination report of the arrastre

operator on the result thereof, as the arrastre operator had %e#o/e

aware of and had veri<ed the fa#ts "ivin" rise to its lia%ilit0. @en#e, the

arrastre operator suJered no preudi#e %0 the la#! of stri#t #o/plian#e

with the 1+da0 li/itation to <le the for/al #o/plaint.- )Citations

o/itted*

In the present #ase, (TI was noti<ed of the loss8da/a"e to the su%e#t

ship/ent as earl0 as (u"ust -, 1--5 thru a Re>uest for ;ad OrderSurve05& ointl0 prepared %0 the #onsi"nee?s %ro!er, PRO9EN, and the

representatives of (TI. or havin" su%/itted a provisional #lai/, (SI

is thus dee/ed to have su%stantiall0 #o/plied with the noti#e

re>uire/ent to the arrastre operator notwithstandin" that a for/al

#lai/ was sent to the latter onl0 on Septe/%er $=, 1--5. (TI was not

deprived the %est opportunit0 to pro%e i//ediatel0 the vera#it0 of

su#h #lai/s. 9eril0 then, (SI, thru its su%ro"ee IRST 2EP(NTO, is not

%arred %0 <lin" the herein a#tion in #ourt.

(TI #annot rel0 on the rulin" in Prudentiat51 %e#ause the #onsi"nee

therein /ade no provisional #lai/ thru re>uest for %ad order surve0

and instead <led a #lai/ for the <rst ti/e after four /onths fro/

re#eipt of the ship/ent.

(ttorne0Ls fees and interests

(ll told, (TI is lia%le to pa0 IRST 2EP(NTO the a/ount of the Pl 5,

==$.4& representin" the insuran#e inde/nit0 paid %0 the latter to

(SI. Pursuant to Na#ar v. aller0 ra/es,5$ the said a/ount shall earn

a le"al interest at the rate of siA per#ent )5* per annu/ fro/ the date

of <nalit0 of this ud"/ent until its full satisfa#tion.

(s #orre#tl0 i/posed %0 the RTC and the C(, ten per#ent )1&* of the

ud"/ent award is reasona%le as and for attorne0Ls fees #onsiderin"

the len"th of ti/e that has passed in prose#utin" the #lai/.56

B@EREORE, pre/ises #onsidered, the petition is here%0 DENIED. The

De#ision dated O#to%er 1&, $&&' of the Court of (ppeals in C(+.R. SP

No. --&$1 is here%0 (IR7ED insofar as it adud"ed lia%le and

ordered (sian Ter/inals, In#., to pa0 irst 2epanto+Taisho Insuran#e

Corp., the a/ount of P15,==$.4&, ten per#ent )1&* thereof as and

for attorne0Ls fees, plus #osts of suit. The said a/ount shall earn le"al

interest at the rate of siA per#ent ) 5* per annu/ fro/ the date of

<nalit0 of this ud"/ent until its full satisfa#tion.

SO ORDERED.

G.R. No. 152%%4 Se&'ee* 24, 2014

#.#. #OLLERO CONSTRUCTION, INC., Petitioner,

vs.

=


















GO+ERNMENT SER+ICE INSURANCE S$STEM n- !OOL OMAC#INER$ INSURERS, Respondents.

D E C I S I O N

!ERLAS"ERNAE, J.:

(ssailed in this petition for review on #ertiorari1 are the De#ision$ dated

7ar#h 16, $&&1 and the Resolution6 dated e%ruar0 $1, $&&$ of the

Court of (ppeals )C(* in C(+.R. C9 No. 561=, whi#h set aside and

reversed the ud"/ent4 dated e%ruar0 6, 1--- of the Re"ional Trial

Court of Mueon Cit0, ;ran#h $$& )RTC* in Civil Case No. -1+1&144, and

dis/issed petitioner @.@. @ollero Constru#tion, In#.L s )petitioner*

Co/plaint for Su/ of 7one0 and Da/a"es under the insuran#e

poli#ies issued %0 pu%li# respondent, the overn/ent Servi#e

Insuran#e S0ste/ )SIS*, on the "round of pres#ription.

The a#ts

On (pril $5, 1-'', the SIS and petitioner entered into a Proe#t

("ree/ent )("ree/ent* where%0 the latter undertoo! the

develop/ent of a SIS housin" proe#t !nown as 7odesta 9illa"e

Se#tion ; )Proe#t*. Petitioner o%li"ated itself to insurethe Proe#t,

in#ludin" all the i/prove/ents, upon the eAe#ution of the ("ree/ent

under a Contra#tors? (ll Ris!s )C(R* Insuran#e with the SIS eneral

Insuran#e Depart/ent for an a/ount e>ual to its #ost or sound value,

whi#h shall not %e su%e#t to an0 auto/ati# annual redu#tion.5

Pursuant to its underta!in", petitioner se#ured C(R Poli#0 No.

''8&'= in the a/ount of P1,&&&,&&&.&& for land develop/ent, whi#hwas later in#reased to P1&,&&&,&&&.&&,' eJe#tive fro/ 7a0 $, 1-'' to

7a0 $, 1-'-.-Petitioner li!ewise se#ured C(R Poli#0 No. ''8&'51& in the

a/ount of P1,&&&,&&&.&& for the #onstru#tion of twent0 )$&* housin"

units, whi#h a/ount was later in#reased to P1=,=&,&&&.&&11 to #over

the #onstru#tion of another 6 new units, eJe#tive fro/ 7a0 $, 1-''

toune 1, 1-'-.1$ In turn, the SIS reinsured C(R Poli#0 No. ''8&' with

respondent Pool of 7a#hiner0 Insurers )Pool*.16

3nder %oth poli#ies, it was provided that )a* there /ust %e prior noti#e

of #lai/ for loss, da/a"e or lia%ilit0 within fourteen )14* da0s fro/ the

o##urren#e of the loss or da/a"eH14 )%* all %ene<ts thereunder shall %e

forfeited if no a#tion is instituted within twelve)1$* /onths after the

ree#tion of the #lai/ for loss, da/a"e or lia%ilit0H1 and )#* if the su/

insured is found to %e less than the a/ount re>uired to %e insured, the

a/ount re#overa%le shall %e redu#ed tosu#h proportion %efore ta!in"

into a##ount the dedu#ti%les stated in the s#hedule )avera"e #lause

provision*.15

Durin" the #onstru#tion, three )6* t0phoons hit the #ountr0, na/el0,

T0phoon ;irin" fro/ une 1 to une 4, 1-'', T0phoon @uanin" on ul0

$-, 1-'', and T0phoon Salin" on O#to%er 11, 1-'-, whi#h #aused

#onsidera%le da/a"e to the Proe#t.1= (##ordin"l0, petitioner <led

several #lai/s for inde/nit0 with the SIS on une 6&, 1-'',1' (u"ust

$, 1-'',1- and O#to%er 1', 1-'-,$& respe#tivel0.

In a letter$1 dated (pril $5, 1--&, the SIS ree#ted petitioner?s

inde/nit0 #lai/s for the da/a"es wrou"ht %0 T0phoons ;irin" and@uanin", <ndin" that no a/ount is re#overa%le pursuant to the

avera"e #lause provision under the poli#ies.$$ In a letter$6 dated une

$1, 1--&, the SIS si/ilarl0 ree#ted petitioner?s inde/nit0 #lai/ for

da/a"es wrou"ht %0 T0phoon Salin" on a :no loss: %asis, itappearin"

fro/ its re#ords that the poli#ies were not renewed %efore the onset of

the said t0phoon.$4

In a letter$ dated (pril 1', 1--1, petitioner i/pu"ned the ree#tion of

its #lai/s for da/a"es8loss on a##ountof T0phoon Salin", and

reiterated its de/and for the settle/ent of its #lai/s.

On Septe/%er $=, 1--1, petitioner <led a Co/plaint$5 for Su/ of

7one0 and Da/a"es %efore the RTC, do#!eted as Civil Case No. -1+

1&144,$= whi#h was opposed %0 the SIS throu"h a 7otion to

Dis/iss$' dated O#to%er $, 1--1 on the "round that the #auses of

a#tion stated therein are %arred %0 the twelve+/onth li/itation

provided under the poli#ies, i.e., the #o/plaint was <led /ore than

one)1* 0ear fro/ the ree#tion of the inde/nit0 #lai/s. The RTC, in an

Order$- dated 7a0 16, 1--6, denied the said /otionH hen#e, the SIS

<led its answer6& with #ounter#lai/s for liti"ation eApenses, attorne0?s

'

http://www.lawphil.net/judjuris/juri2014/sep2014/gr_152334_2014.html#fnt1







































































fees, and eAe/plar0 da/a"es. Su%se>uentl0, the SIS <led a Third

Part0 Co/plaint61 for inde/ni<#ation a"ainst Pool, the reinsurer.

The RTC Rulin"

In a ud"/ent6$ dated e%ruar0 6, 1---, the RTC "ranted petitioner?s

inde/nit0 #lai/s. It held that )a* the avera"e #lauseprovision in thepoli#ies whi#h did not #ontain the assentor si"nature of the petitioner

#annot li/it the SIS? lia%ilit0, for %ein" ineG#a#ious and #ontrar0 to

pu%li# poli#0H66 )%* petitioner has esta%lished that the da/a"es it

sustained were due to the peril insured a"ainstH64 and )#* C(R Poli#0

No. ''8&'5 was dee/ed renewed when the SIS withheld the a/ount

of 6,'.&& #orrespondin" to the pre/iu/ pa0a%le,6 fro/ the

retentions it released to petitioner.65 The RTC there%0 de#lared the SIS

lia%le for petitioner?s inde/nit0 #lai/s for the da/a"es %rou"ht a%out

%0 the said t0phoons, less the stipulated dedu#tions under the

poli#ies,plus 5 le"al interest fro/ the dates of eAtraudi#ial de/and,

as well as for attorne0?s fees and #osts of suit. It further dis/issed for

la#! of /erit SIS?s #ounter#lai/ and third part0 #o/plaint.6=

Dissatis<ed, the SIS elevated the /atter to the C(. The C( Rulin" In a

De#ision6' dated 7ar#h 16, $&&1, the C(set aside and reversed the RTC

ud"/ent, there%0 dis/issin" the #o/plaint. It ruled that the #o/plaint

<led on Septe/%er $=, 1--1 was %arred %0 pres#ription, havin" %een

#o//en#ed %e0ond the twelve+/onth li/itation provided under the

poli#ies, re#!oned fro/ the <nal ree#tion of the inde/nit0 #lai/s on

(pril $5, 1--& and une $1, 1--&. The Issue ;efore the Court

The essential issue for the Court?s resolution is whether or not the C(

#o//itted reversi%le error in dis/issin" the #o/plaint onthe "round of pres#ription.

The Court?s Rulin"

The petition la#!s /erit.

Contra#ts of insuran#e, li!e other #ontra#ts, are to %e #onstrued

a##ordin" to the sense and /eanin" of the ter/s whi#h the parties

the/selves have used. If su#h ter/s are #lear and una/%i"uous, the0

/ust %e ta!en and understood in their plain, ordinar0, and popular

sense.6-

Se#tion 1&4& of the eneral Conditions of the su%e#t C(R Poli#ies

#o//onl0 read

1&. If a #lai/ is in an0 respe#t fraudulent, or if an0 false de#laration is/ade or used in support thereof, or if an0 fraudulent /eans or devi#es

are used %0 the Insured or an0one a#tin" on his %ehalf to o%tain an0

%ene<t under this Poli#0, or if a #lai/ is /ade and ree#ted and no

a#tion or suit is #o//en#ed within twelve /onths after su#h

ree#tionor, in #ase of ar%itration ta!in" pla#e as provided herein,

within twelve /onths after the (r%itrator or (r%itrators or 3/pire have

/ade their award, all %ene<t under this Poli#0 shall %e forfeited.

)E/phases supplied*

In this relation, #ase law illu/ines that the pres#riptive period for the

insured?s a#tion for inde/nit0 should %ere#!oned fro/ the :<nal

ree#tion: of the #lai/.41

@ere, petitioner insists that the SIS?s letters dated (pril $5, 1--& and

une $1, 1--& did not a/ount to a :<nal ree#tion: o<ts #lai/s, ar"uin"

that the0 were /ere tentative resolutions pendin" further a#tion on

petitioner?s part or su%/ission of proof in refutation of the reasons for

ree#tion.4$ @en#e, its #auses of a#tion for inde/nit0 did not a##rue on

those dates.

The Court does not a"ree.

( perusal of the letter46 dated (pril $5, 1--& shows that the SISdenied petitioner?s inde/nit0 #lai/s wrou"ht %0 T0phoons ;irin" and

@uanin", it appearin" that no a/ount was re#overa%le under the

poli#ies. Bhile the SIS "ave petitioner the opportunit0 to dispute its

<ndin"s, neither of the parties pursued an0 further a#tion on the

/atterH this lo"i#all0 shows that the0 dee/ed the said letter as a

ree#tion of the #lai/s. 2est it #ause an0 #onfusion, the state/ent in

that letter pertainin" to an0 >ueries petitioner /a0 have on the denial

should %e #onstrued, at %est, as a for/ of noti#e to the for/er that it

had the opportunit0 to see! re#onsideration of the SIS?s ree#tion.

-



































Surel0, petitioner #annot #onstrue the said letter to %e a /ere

:tentative resolution.: In fa#t, despite its disavowals, petitioner

ad/itted in its pleadin"s44 that the SIS indeed denied its #lai/

throu"h the afore/entioned letter, %uttarried in #o//en#in" the

ne#essar0 a#tion in #ourt.

The sa/e #on#lusion o%tains for the letter4 dated une $1, 1--&

den0in" petitioner?s inde/nit0 #lai/ #aused %0 T0phoon Salin" on a

:no loss: %asis due to the non+renewal of the poli#ies therefor %efore

the onset of the said t0phoon. The fa#t that petitioner <led a letter45 of

re#onsideration therefro/ dated (pril 1', 1--1, #onsiderin" too the

ina#tion of the SIS on the sa/e si/ilarl0 shows that the une $1, 1--&

letter was also a <nal ree#tion of petitioner?s inde/nit0 #lai/.

(s #orre#tl0 o%served %0 the C(, :<nal ree#tion: si/pl0 /eans denial

%0 the insurer of the #lai/s of the insured and not the ree#tion or

denial %0 the insurer of the insured?s /otion or re>uest for

re#onsideration.4= The ree#tion referred to should %e #onstrued as the

ree#tion in the <rst instan#e,4' as in the two instan#es a%ove+dis#ussed.

Co/para%le to the fore"oin" is the Court?s a#tion in the #ase of Sun

Insuran#e OG#e, 2td. v. C(4- wherein it de%un!ed :tFhe #ontention of

the respondents thereinF that the one+0ear pres#riptive period does

not start to run until the petition for re#onsideration had %een resolved

%0 the insurer,: holdin" that su#h view :runs #ounter to the de#lared

purpose for re>uirin" that an a#tion or suit %e <led in the Insuran#e

Co//ission or in a #ourt of #o/petent urisdi#tion fro/ the denial of

the #lai/.:& In this re"ard, the Court rationalied that

:upholdin"FrespondentsL #ontention would #ontradi#t and defeat thever0 prin#iple whi#h this Court had laid down. 7oreover, it #an easil0

%e used %0 insured persons as a s#he/e or devi#e to waste ti/e until

an0 eviden#e whi#h /a0 %e #onsidered a"ainst the/ is

destro0ed.:1 EApoundin" on the /atter, the Court had this to sa0

The #ru#ial issue in this #ase is Bhen does the #ause of a#tion a##rue

In support of private respondent?s view, two rulin"s of this Court have

%een #ited, na/el0, the #ase of Ea"le Star Insuran#e Co.vs.Chia u

)supra note 41F*, where the Court held

The ri"ht of the insured to the pa0/ent of his loss a##rues fro/ the

happenin" of the loss. @owever, the #ause of a#tion in an insuran#e

#ontra#t does not a##rue until the insured?s #lai/ is <nall0 ree#ted %0

the insurer. This is %e#ause %efore su#h <nal ree#tion there is no real

ne#essit0 for %rin"in" suit.

and the #ase of (CC( vs. (lpha Insuran#e Suret0 Co., In#. )$4 SCR(

11 1-5'F, holdin" that

Sin#e :#ause of a#tion: re>uires as essential ele/ents not onl0 a le"al

ri"ht of the plaintiJ and a #orrelated o%li"ation of the defendant in

violation of the said le"al ri"ht, the #ause of a#tion does not a##rue

until the part0 o%li"ated )suret0* refuses, eApressl0 or i/pliedl0, to

#o/pl0 with its dut0 )in this #ase to pa0 the a/ount of the %ond*.:

Indisputa%l0, the a%ove+#ited pronoun#e/ents of this Court /a0 %e

ta!en to /ean that the insuredL s #ause of a#tion or his ri"ht to <le a

#lai/ either in the Insuran#e Co//ission or in a #ourt of #o/petent

urisdi#tion as in this #aseF #o//en#es fro/ the ti/e of the denial of

his #lai/ %0 the Insurer, either eApressl0 or i/pliedl0. 1âwphi1

;ut as pointed out %0 the petitioner insuran#e #o/pan0, the ree#tion

referred to should %e #onstrued as the ree#tion, in the <rst instan#e,

for if what is %ein" referred to is a reiterated ree#tion #onve0ed in a

resolution of a 0etition for re#onsideration, su#h should have %een

eApressl0 stipulated.$

In li"ht of the fore"oin", it is thus #lear that petitionerLs #auses of

a#tion for inde/nit0 respe#tivel0 a##rued fro/ its re#eipt of the letters

dated (pril $5, 1--& and une $1, 1--&, or the date the SIS ree#ted

its #lai/s in the <rst instan#e. Conse>uentl0, "iven that it allowed

/ore than twelve )1$* /onths to lapse %efore <lin" the ne#essar0

#o/plaint %efore the R TC on Septe/%er $=, 1--1, its #auses of a#tion

had alread0 pres#ri%ed.

1&























B@EREORE, the petition is DENIED. The De#ision dated 7ar#h 16,

$&&1 and the Resolution dated e%ruar0 $1, $&&$ of the Court of

(ppeals )C(* in C(+.R. C9 No. 561= are here%0 (IR7ED.

SO ORDERED.

G.R. No. 18%2/2 O'oe* 15, 2014

SUN LIE O CANAA (!#ILI!!INES), INC., Petitioner,

vs.

SANRA TAN IT n- T3e E''e o '3e eee- NORERTOTAN IT, respondents.

D E C I S I O N

EL CASTILLO, J.:

The Court of (ppealsL )C(* i/position of 1$o8o interest onthe P16,&'&.-6 pre/iu/ refund is the onl0 /atter in >uestion in this

#ase.

This Petition for Review on Certiorari1 assails the O#to%er 1=, $&&=

De#ision$ of C( in C(+R. C9 No. '5-$6, whi#h, a/on" others, i/posed

a 1$ per annu/ rate of interest re#!oned fro/ the ti/e of death of

the insured until full0 paid, on the pre/iu/ to %e rei/%ursed %0

petitioner Sun 2ife of Canada )Philippines*, In#. )petitioner* to

respondents Sandra Tan Qit )respondent Tan Qit* and the Estate of the

De#eased Nor%erto Tan Qit )respondent estate*. 2i!ewise assailed in

this Petition is the C(Ls une 1$, $&&' Resolution6 den0in" petitionerLs

7otion for Re#onsideration of the said De#ision.

a#tual (nte#edents

Respondent Tan Qit is the widow and desi"nated %ene<#iar0 of

Nor%erto Tan Qit )Nor%erto*, whose appli#ation for a life insuran#e

poli#0,4 with fa#e value of P6&&,&&&.&&, was "ranted %0 petitioner on

O#to%er $', 1---. On e%ruar0 1-, $&&1, or within the two+0ear

#ontesta%ilit0 period, Nor%erto died of disse/inated "astri#

#ar#ino/a.5 Conse>uentl0, respondent Tan Qit <led a #lai/ under the

su%e#t poli#0.

In a 2etter= dated Septe/%er 6, $&&1, petitioner denied respondent Tan

Qit?s #lai/ on a##ount of Nor%erto?s failure to full0 and faithfull0

dis#lose in his insuran#e appli#ation #ertain /aterial and relevant

infor/ation a%out his health and s/o!in" histor0. Spe#i<#all0, Nor%erto

answered :No: to the >uestion in>uirin" whether he had s/o!ed

#i"arettes or #i"ars within the last 1$ /onths prior to <llin" out said

appli#ation.' @owever, the /edi#al report of Dr. (nna Chua )Dr. Chua*,

one of the several ph0si#ians that Nor%erto #onsulted for his illness,

reveals that he was a s/o!er and had onl0 stopped s/o!in" in (u"ust

1---. (##ordin" to petitioner, its underwriters would not have

approved Nor%erto?s appli#ation for life insuran#e had the0 %een "iven

the #orre#t infor/ation. ;elievin" that the poli#0 is null and void,

petitioner opined that its lia%ilit0 is li/ited to the refund of all the

pre/iu/s paid. (##ordin"l0, it en#losed in the said letter a #he#!

for P16,&'&.-6 representin" the pre/iu/ refund.

In a letter- dated Septe/%er 16, $&&1, respondent Tan Qit refused to

a##ept the #he#! and insisted on the pa0/ent of the insuran#e

pro#eeds.

On O#to%er 4, $&&$, petitioner <led a Co/plaint1& for Res#ission of

Insuran#e Contra#t %efore the Re"ional Trial Court )RTC* of 7a!ati Cit0.

Rulin" of the Re"ional Trial Court

In its Nove/%er 6&, $&& De#ision,11 the RTC noted that petitioner?s

ph0si#ian, Dr. Charit0 Salvador )Dr. Salvador*, #ondu#ted /edi#aleAa/ination on Nor%erto. 7oreover, petitioner?s a"ent, Ir/a o0 E.

avelosa )avelosa*, answered :NO: to the >uestion :(re 0ou aware of

an0thin" a%out the life to %e insured?s lifest0le, haardous sports,

ha%its, /edi#al histor0, or an0 ris! fa#tor that would have an adverse

eJe#t on insura%ilit0: in her ("ent?s Report. avelosa also alread0

!new Nor%erto two 0ears prior to the approval of the latter?s

appli#ation for insuran#e. The RTC #on#luded that petitioner, throu"h

the a%ove+/entioned #ir#u/stan#es, had alread0 #leared Nor%erto of

an0 /isrepresentation that he /a0 have #o//itted. The RTC also

11

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opined that the aGdavit of Dr. Chua, presented as part of petitioner?s

eviden#e and whi#h #on<r/ed the fa#t that the insured was a s/o!er

and onl0 stopped s/o!in" a 0ear a"o 1---F, is hearsa0 sin#e Dr. Chua

did not testif0 in #ourt. urther, sin#e Nor%erto had a su%sistin"

insuran#e poli#0 with petitioner durin" his appli#ation for insuran#e

su%e#t of this #ase, it was in#u/%ent upon petitioner to as#ertain the

health #ondition of Nor%erto #onsiderin" the additional %urden that it

was assu/in". 2astl0, petitioner did not #o/pl0 with the re>uire/entsfor res#ission of insuran#e #ontra#t as held in Phila/#are @ealth

S0ste/s, In#. v. Court of (ppeals.1$ Thus, the dispositive portion of the

RTC De#ision

B@EREORE, in view of the fore"oin" #onsiderations, this #ourt here%0

<nds in favor of the respondents andF a"ainst the petitionerF, hen#e it

here%0 orders the petitionerF to pa0 the respondentF, Sandra Tan Qit,

the su/ of Philippine Pesos T@REE @3NDRED T@O3S(ND

)P6&&,&&&.&&*, representin" the fa#e value of the insuran#e poli#0 with

interest at siA per#ent )5* per annu/ fro/ O#to%er 4, $&&$ until full0

paid.

Cost de o<#io.

SO ORDERED.16

Petitioner /oved for re#onsideration,14 %ut was denied in an Order1

dated e%ruar0 1, $&&5.

@en#e, petitioner appealed to the C(.

Rulin" of the Court of (ppeals

On appeal, the C( reversed and set aside the RTC?s rulin" in its

De#ision15 dated O#to%er 1=, $&&=.

ro/ the re#ords, the C( found that prior to his death, Nor%erto had

#onsulted two ph0si#ians, Dr. Chua on (u"ust 1-, $&&&, and Dr. ohn

2edes/a )Dr. 2edes/a* on De#e/%er $', $&&&, to who/ he #on<ded

that he had stopped s/o!in" onl0 in 1---. (t the ti/e therefore that

he applied for insuran#e poli#0 on O#to%er $', 1---, there is no truth

to his #lai/ that he did not s/o!e #i"arettes within 1$ /onths prior to

the said appli#ation. The C( thus held that Nor%erto is "uilt0 of

#on#eal/ent whi#h /isled petitioner in for/in" its esti/ates of the

ris!s of the insuran#e poli#0. This "ave petitioner the ri"ht to res#ind

the insuran#e #ontra#t whi#h it properl0 eAer#ised in this #ase.

In addition, the C( held that the #ontent of Nor%erto?s /edi#al re#ords

are dee/ed ad/itted %0 respondents sin#e the0 failed to den0 the

sa/e despite havin" re#eived fro/ petitioner a Re>uest for (d/ission

pursuant to Rule $5 of the Rules of Court.1= (nd sin#e an ad/ission is

in the nature of eviden#e the le"al eJe#ts of whi#h for/ part of the

re#ords, the C( dis#redited the RTC?s rulin" that the su%e#t /edi#al

re#ords and the aGdavits eAe#uted %0 Nor%erto?s ph0si#ians attestin"

to the truth of the sa/e were hearsa0.

The dispositive portion of the C( De#ision reads

B@EREORE, the fore"oin" #onsidered, the instant appeal is here%0

R(NTED and the appealed De#ision RE9ERSED and SET (SIDE, and inlieu thereof, a ud"/ent is here%0 rendered R(NTIN the #o/plaint a

>uo.

(##ordin"l0, petitionerF is ordered to rei/%urse respondentsF the su/

of P16,&'&.-6 representin" the pre/iu/F paid %0 the insured with

interest at the rate of 1$ per annu/ fro/ the ti/e of the death of the

insured until full0 paid.

SO ORDERED.1'

The parties <led their separate /otions for re#onsideration.1- Bhilerespondents >uestioned the fa#tual and le"al %ases of the C( De#ision,

petitioner, on the other hand, assailed the i/position of interest on the

pre/iu/ ordered refunded to respondents.

@owever, the appellate #ourt denied the /otions in its une 1$, $&&'

Resolution,$& vi

1$


















B@EREORE, the fore"oin" #onsidered, the separate /otions for

re#onsideration <led %0 the petitionerF and the respondentsF are

here%0 DENIED.

SO ORDERED.$1

Onl0 petitioner appealed to this Court throu"h the present Petition for

Review on Certiorari.

Issue

The sole issue in this #ase is whether petitioner is lia%le to pa0 interest

on the pre/iu/ to %e refunded to respondents.

The Parties? (r"u/ents

Petitioner ar"ues that no interest should have %een i/posed on the

pre/iu/ to %e refunded %e#ause the C( De#ision does not provide an0le"al or fa#tual %asis thereforH that petitioner dire#tl0 and ti/el0

tendered to respondents an a/ount representin" the pre/iu/ refund

%ut the0 ree#ted it sin#e the0 opted to pursue their #lai/ for the

pro#eeds of the insuran#e poli#0H that respondents should %ear the

#onse>uen#e of their unsound de#ision of ree#tin" the refund tendered

to the/H and, that petitioner is not "uilt0 of dela0 or of invalid or unust

res#ission as to /a!e it lia%le for interest. @en#e, followin" the rulin" in

Tio Qhe Chio v. Court of (ppeals,$$ no interest #an %e assessed a"ainst

petitioner.

Respondents, on the other hand, #ontend that the rei/%urse/ent of

pre/iu/ is #learl0 a /one0 o%li"ation or one that arises fro/

for%earan#e of /one0, hen#e, the i/position of 1$ interest per

annu/ is ust, proper and supported %0 urispruden#e. Bhile the0

ad/it that the0 refused the tender of pa0/ent of the pre/iu/ refund,

the0 aver that the0 onl0 did so %e#ause the0 did not want to a%andon

their #lai/ for the pro#eeds of the insuran#e poli#0. In an0 #ase, what

petitioner should have done under the #ir#u/stan#es was to #onsi"n

the a/ount of pa0/ent in #ourt durin" the penden#0 of the #ase.

Our Rulin"

Tio Qhe Chio is not appli#a%le in this #ase.

Petitioner avers that Tio Qhe Chio, al%eit pertainin" to /arine

insuran#e, is instru#tive on the issue of pa0/ent of

interest.1âwphi1 There, the Court pointed to Se#tions $46 and $44 of

the Insuran#e Code whi#h eApli#itl0 provide for pa0/ent of interest

when there is unusti<ed refusal or withholdin" of pa0/ent of the #lai/

%0 the insurer, $6 and to (rti#le $$&-$4 of the New Civil Code whi#h

li!ewise provides for pa0/ent of interest when the de%tor is in dela0.

The Court <nds, however, that Tio Qhe Chio is not appli#a%le here as it

deals with pa0/ent of interest on the insuran#e pro#eeds in whi#h the

#lai/ therefor was either unreasona%l0 denied or withheld or the

insurer in#urred dela0 in the pa0/ent thereof. In this #ase, what is

involved is an order for petitioner to refund to respondents the

insuran#e pre/iu/ paid %0 Nor%erto as a #onse>uen#e of the

res#ission of the insuran#e #ontra#t on a##ount of the latter?s

#on#eal/ent of /aterial infor/ation in his insuran#e appli#ation.

7oreover, petitioner did not unreasona%l0 den0 or withhold theinsuran#e pro#eeds as it was satisfa#toril0 esta%lished that Nor%erto

was "uilt0 of #on#eal/ent.

Nature of interest i/posed %0 the C(

There are two !inds of interest /onetar0 and #o/pensator0.

:7onetar0 interest refers to the #o/pensation set %0 the parties for

the use or for%earan#e of /one0.:$ No su#h interest shall %e due

unless it has %een eApressl0 stipulated in writin".$5 :On the other hand,

#o/pensator0 interest refers to the penalt0 or inde/nit0 for da/a"esi/posed %0 law or %0 the #ourts.:$= The interest /entioned in (rti#les

$$&- and $$1$$'of the Civil Code applies to #o/pensator0 interest.$-

Clearl0 and #ontrar0 to respondents? assertion, the interest i/posed %0

the C( is not /onetar0 interest %e#ause aside fro/ the fa#t that there

is no use or for%earan#e of /one0 involved in this #ase, the su%e#t

interest was not one whi#h was a"reed upon %0 the parties in writin".

This %ein" the #ase and ud"in" fro/ the tenor of the C(, to wit

16























(##ordin"l0, petitionerF is ordered to rei/%urse respondentsF the su/

of P16,&'&.-6 representin" the pre/iu/F paid %0 the insured with

interest at the rate of 1$ per annu/ fro/ ti/e of death of the

insured until full0 paid.6&

there #an %e no other #on#lusion than that the interest i/posed %0 the

appellate #ourt is in the nature of #o/pensator0 interest.

The C( in#orre#tl0 i/posed #o/pensator0 interest on the pre/iu/

refund re#!oned fro/ the ti/e of death of the insured until full0 paid

(s a for/ of da/a"es, #o/pensator0 interest is due onl0 if the o%li"or

is proven to have failed to #o/pl0 with his o%li"ation.61

In this #ase, it is undisputed that si/ultaneous to its "ivin" of noti#e to

respondents that it was res#indin" the poli#0 due to #on#eal/ent,

petitioner tendered the refund of pre/iu/ %0 atta#hin" to the said

noti#e a #he#! representin" the a/ount of refund. @owever,

respondents refused to a##ept the sa/e sin#e the0 were see!in" for

the release of the pro#eeds of the poli#0. ;e#ause of this dis#ord,

petitioner <led for udi#ial res#ission of the #ontra#t. Petitioner, after

re#eivin" an adverse ud"/ent fro/ the RTC, appealed to the C(. (nd

as /a0 %e re#alled, the appellate #ourt found Nor%erto "uilt0 of

#on#eal/ent and thus upheld the res#ission of the insuran#e #ontra#t

and #onse>uentl0 de#reed the o%li"ation of petitioner to return to

respondents the pre/iu/ paid %0 Nor%erto. 7oreover, we <nd that

petitioner did not in#ur dela0 or unusti<a%l0 den0 the #lai/.

;ased on the fore"oin", we <nd that petitioner properl0 #o/plied with

its o%li"ation under the law and #ontra#t. @en#e, it should not %e /adelia%le to pa0 #o/pensator0 interest.

Considerin" the prevailin" #ir#u/stan#es of the #ase, we here%0 dire#t

petitioner to rei/%urse the pre/iu/ paid within 1 da0s fro/ date of

<nalit0 of this De#ision. If petitioner fails to pa0 within the said period,

then the a/ount shall %e dee/ed e>uivalent to a for%earan#e of

#redit.6$ In su#h a #ase, the rate of interest shall %e 5 per annu/.66

B@EREORE, the assailed O#to%er 1=, $&&= De#ision of the Court of

(ppeals in C(+.R. C9 No. '5-$6 is 7ODIIED in that petitioner Sun

2ife of Canada )Philippines*, In#. is ordered to rei/%urse to

respondents Sandra Tan Qit and the Estate of the De#eased Nor%erto

Tan Qit the su/ of 16,&'&.-6 representin" the pre/iu/ paid %0 the

insured within <fteen )1* da0s fro/ date of <nalit0 of this De#ision. If

the a/ount is not rei/%ursed within said period, the sa/e shall earn

interest of 5 per annu/ until full0 paid.

SO ORDERED.

AL!#A INSURANCE AN SURET$ CO. . ARSENIA SONIACASTOR

G.R. No. 1981/4, Se&'ee* 2, 201% (!ERALTA, J.)

(CTS

(rsenia Sonia Castor )Castor* o%tained a 7otor Car Poli#0 for her

To0ota Revo D2 DS2 with (lpha Insuran#e and Suret0 Co )(lpha*. The

#ontra#t of insuran#e o%li"ates the petitioner to pa0 the respondent

the a/ount of P56&,&&& in #ase of loss or da/a"e to said vehi#le

durin" the period #overed.

On (pril 15, $&&=, respondent instru#ted her driver, ose oel Salaar

2anua to %rin" the vehi#le to near%0 auto+shop for a tune up.

@owever, 2anua no lon"er returned the /otor vehi#le and despite

dili"ent eJorts to lo#ate the sa/e, said eJorts proved futile.

Resultantl0, respondent pro/ptl0 reported the in#ident to the poli#e

and #on#o/itantl0 noti<ed petitioner of the said loss and de/anded

pa0/ent of the insuran#e pro#eeds.

14













(lpha, however, denied the de/and of Castor #lai/in" that the0 are

not lia%le sin#e the #ulprit who stole the vehi#le is e/plo0ed with

Castor. 3nder the EA#eptions to Se#tion III of the Poli#0, the Co/pan0

shall not %e lia%le for )4* an0 /ali#ious da/a"e #aused %0 the insured,

an0 /e/%er of his fa/il0 or %0 U( PERSON IN T@E INS3RED?S

SER9ICEV.

Castor <led a Co/plaint for Su/ of 7one0 with Da/a"es a"ainst (lpha

%efore the Re"ional Trial Court of Mueon Cit0. The trial #ourt rendered

its de#ision in favor of Castor whi#h de#ision is aGr/ed in toto %0 the

Court of (ppeals. @en#e, this Petition for Review on Certiorari.

ISS3E

Bhether or not the loss of respondent?s vehi#le is eA#luded under the

insuran#e poli#0

@E2D

NO. The words UlossV and Uda/a"eV /ean diJerent thin"s in #o//on

ordinar0 usa"e. The word UlossV refers to the a#t or fa#t of losin", or

failure to !eep possession, while the word Uda/a"eV /eans

deterioration or inur0 to propert0. Therefore, petitioner #annot eA#lude

the loss of Castor?s vehi#le under the insuran#e poli#0 under para"raph

4 of UEA#eptions to Se#tion IIIV, sin#e the sa/e refers onl0 to

U/ali#ious da/a"eV, or /ore spe#i<#all0, Uinur0V to the /otor vehi#le

#aused %0 a person under the insured?s servi#e. Para"raph 4 #learl0

does not #onte/plate Uloss of propert0V.

( #ontra#t of insuran#e is a #ontra#t of adhesion. So, when the ter/s of

the insuran#e #ontra#t #ontain li/itations on lia%ilit0, #ourts should

#onstrue the/ in su#h a wa0 as to pre#lude the insurer fro/ non+

#o/plian#e with his o%li"ation. Thus, in Eternal ardens 7e/orial Par!

Corporation vs. Philippine (/eri#an 2ife Insuran#e Co/pan0, this Court

ruled that it /ust %e re/e/%ered that an insuran#e #ontra#t is a

#ontra#t of adhesion whi#h /ust %e #onstrued li%erall0 in favor of the

insured and stri#tl0 a"ainst the insurer in order to safe"uard the

latter?s interest.

G.R. No. L"4/59% eee* 29, 194%

T#E INSULAR LIE ASSURANCE CO., LT., petitioner,

vs.

SERAIN . ELICIANO ET AL., respondents.

Manuel Roxas and Araneta, Zaragoza, Araneta and Bautista for

petitioner.

Den o!en and "a#lo $orenzo for respondents.

Ra%irez and &rtigas as a%i'i 'uriae.

O7AETA, J.:

In a four+to+three de#ision pro/ul"ated on Septe/%er 16, 1-41, 1 this

Court aGr/ed the ud"/ent of the Court of (ppeals in favor of the

respondents and a"ainst the petitioner for the su/ of P$,&&&,

representin" the value of two insuran#e poli#ies issued %0 the

petitioner on the life of Evaristo eli#iano. ( /otion to re#onsider and

set aside said de#ision has %een <led %0 the petitioner, and %oth

1



parties have su%/itted eAhaustive and lu/inous written ar"u/ents in

support of their respe#tive #ontentions.

The fa#ts of the #ase are set forth in the /aorit0 and dissentin"

opinions heretofore handed down %0 this Court, the salient points of

whi#h /a0 %e %rieK0 restated as follows

Evaristo eli#iano, who died on Septe/%er $-, 1-6, was suJerin" with

advan#ed pul/onar0 tu%er#ulosis when he si"ned his appli#ations for

insuran#e with the petitioner on O#to%er 1$, 1-64. On that sa/e date

Do#tor Trepp, who had ta!en +ra0 pi#tures of his lun"s, infor/ed the

respondent Dr. Sera<n D. eli#iano, %rother of Evaristo, that the latter

:was alread0 in a ver0 serious ad pra#ti#all0 hopeless #ondition.:

Nevertheless the >uestion #ontained in the appli#ation W :@ave 0ou

ever suJered fro/ an0 ail/ent or disease of the lun"s, pleuris0,

pneu/onia or asth/a: W appears to have %een answered , :No: (nd

a%ove the si"nature of the appli#ant, followin" the answers to the

various >uestions propounded to hi/, is the followin" printed

state/ent1awphil.net

I de#lare on %ehalf of /0self and of an0 person who shall have

or #lai/ an0 interest in an0 poli#0 issued hereunder, that ea#h

of the a%ove answers is full, #o/plete and true, and that to the

%est of /0 !nowled"e and %elief I a/ a proper su%e#t for life

insuran#e. )EAhi%it Q.*

The false answer a%ove referred to, as well as the others, was written

%0 the Co/pan0Ls soli#itin" a"ent Ro/ulo 7. David, in #ollusion with

the /edi#al eAa/iner Dr. re"orio 9alde, for the purpose of se#urin"

the Co/pan0Ls approval of the appli#ation so that the poli#0 to %eissued thereon /i"ht %e #redited to said a"ent in #onne#tion with the

inter+provin#ial #ontest whi#h the Co/pan0 was then holdin" a/on" its

soli#itin" a"ents to %oost the sales of its poli#ies. ("ent David %ri%ed

7edi#al EAa/iner 9alde with /one0 whi#h the for/er %orrowed fro/

the appli#antLs /other %0 wa0 of advan#ed pa0/ent on the pre/iu/,

a##ordin" to the <ndin" of the Court of (ppeals. Said #ourt also found

that %efore the insured si"ned the appli#ation he, as well as the

/e/%ers of his fa/il0, told the a"ent and the /edi#al eAa/iner that

he had %een si#! and #ou"hin" for so/e ti/e and that he had "one

three ti/es to the Santol Sanatoriu/ and had +ra0 pi#tures of his

lun"s ta!enH %ut that in spite of su#h infor/ation the a"ent and the

/edi#al eAa/iner told the/ that the appli#ant was a <t su%e#t for

insuran#e.

Ea#h of the poli#ies sued upon #ontains the followin" stipulations

This poli#0 and the appli#ation herefor #onstitute the entire

#ontra#t %etween the parties hereto. . . . Onl0 the President, or

the 7ana"er, a#tin" ointl0 with the Se#retar0 or (ssistant

Se#retar0 )and then onl0 in writin" si"ned %0 the/* have

power in %ehalf of the Co/pan0 to issue per/its, or to /odif0

this or an0 #ontra#t, or to eAtend the sa/e ti/e for /a!in"

an0 pre/iu/ pa0/ent, and the (o%pan) shall not #e #ound

#) an) pro%ise or representation heretofore or hereafter gi!en

#) an) person other than the a#o!e*na%ed o+'ials, and #)

the% onl) in writing and signed 'onointl) as stated.

The appli#ation #ontains, a/on" others, the followin" state/ents

1'. W I the appli#antF here%0 de#lare that all the a%ove

state/ents and answers as well as all those that I /a0 /a!e to

the Co/pan0Ls 7edi#al EAa/iner in #ontinuation of this

appli#ation, to %e #o/plete, true and #orre#t to the %est of /0

!nowled"e and %elief, and I here%0 a"ree as follows

1. That his de#laration, with the answers to %e "iven %0 /e to

the 7edi#al EAa/iner, shall #e the #asis of the poli') and for%

part of sa%e.

A A A A A A A A A

6. That the said poli#0 shall not ta!e eJe#t until the <rst

pre/iu/ has %een paid and the poli') has #een deli!ered to

and a''epted #) %e, while - a% in good health.

4. hat the agent ta/ing this appli'ation has no authorit) to

%a/e, %odif) or dis'harge 'ontra'ts, or to wai!e an) of the

(o%pan)0s rights or reuire%ents.

15



. 70 a##eptan#e of an0 poli#0 issued on this appli#ation will

#onstitute a rati<#ation %0 /e of an0 #orre#tions in or additions

to this appli#ation /ade %0 the Co/pan0 in the spa#e provided

:or @o/e OG#e Corre#tions or (dditions Onl0.: I a"ree that

photo"raphi# #op0 of this appli#ations as #orre#ted or added to

shall #onstitute suG#ient noti#e to /e of the #han"es /ade.

)E/phasis added.*

The petitioner insists that upon the fa#ts of the #ase the poli#ies in

>uestion are null and void a% initio and that all that the respondents

are entitled to is the refund of the pre/iu/s paid thereon. (fter a

#areful re+eAa/ination of the fa#ts and the law, we are persuaded that

petitionerLs #ontention is #orre#t. To the reasons addu#ed in the

dissentin" opinion heretofore pu%lished, we onl0 desire to add the

followin" #onsiderations

Bhen Evaristo eli#iano, the appli#ant for insuran#e, si"ned the

appli#ation in %lan! and authoried the soli#itin" a"ent and8or /edi#al

eAa/iner of the Co/pan0 to write the answers for hi/, he /ade the/his own a"ents for that purpose, and he was responsi%le for their a#ts

in that #onne#tion. If the0 falsi<ed the answers for hi/, he #ould not

evade the responsi%ilit0 for he falsi<#ation. @e was not supposed to

si"n the appli#ation in %lan!. @e !new that the answers to the

>uestions therein #ontained would %e :the %asis of the poli#0,: and for

that ever0 reason he was re>uired with his si"nature to vou#h for truth

thereof.

7oreover, fro/ the fa#ts of the #ase we #annot es#ape the #on#lusion

that the insured a#ted in #onnivan#e with the soli#itin" a"ent and the

/edi#al eAa/iner of the Co/pan0 in a##eptin" the poli#ies in >uestion.(%ove the si"nature of the appli#ant is the printed state/ent or

representation : . . . I a/ a proper su%e#t for life insuran#e.: In

another sheet of the sa/e appli#ation and a%ove another si"nature of

the appli#ant was also printed this state/ent :That the said poli#0

shall not ta!e eJe#t until he <rst pre/iu/ has %een paid and the poli#0

as %een delivered to and a''epted #) %e, while - a% in good health.:

Bhen the appli#ant si"ned the appli#ation he was :havin" diG#ult0 in

%reathin", . . . with a ver0 hi"h fever.: @e had "one three ti/es to the

Santol Sanatoriu/ and had +ra0 pi#tures ta!en of his lun"s. @e

therefore !new that he was not :a proper su%e#t for life insuran#e.:

Bhen he a##epted the poli#0, he !new that he was not in "ood health.

Nevertheless, he not onl0 a##epted the <rst poli#0 of P$&,&&& %ut then

and there applied for and later a##epted another poli#0 of P,&&&.

Be #annot %rin" ourselves to %elieve that the insured did not ta!e the

trou%le to read the answers #ontained in the photostati# #op0 of the

appli#ation atta#hed to and /ade a part of the poli#0 %efore he

a##epted it and paid the pre/iu/ thereon. @e /ust have noti#e that

the answers to the >uestions therein as!ed #on#ernin" his #lini#al

histor0 were false, and 0et he a##epted the <rst poli#0 and applied for

another. In an0 event, he o%li"ated hi/self to read the poli#0 when he

su%s#ri%ed to this state/ent :70 a##eptan#e of an0 poli#0 issued on

this appli#ation will #onstitute a rati<#ation %0 /e of an0 #orre#tions in

or additions to this appli#ation /ade %0 the Co/pan0 . . .: ;0

a##eptin" the poli#0 he %e#a/e #har"ed with !nowled"e of its

#ontents, whether he a#tuall0 read it or not. @e #ould not ostri#h+li!e

hide his head fro/ it in order to avoid his part of the %ar"ain and at the

sa/e ti/e #lai/ the %ene<t thereof. @e !new, or was #har"ea%le with!nowled"e, fro/ the ver0 ter/s of the two poli#ies sued upon )one of

whi#h is printed in En"lish and the other in Spanish* that the soli#itin"

a"ent and the /edi#al eAa/iner had no power to %ind the Co/pan0 %0

an0 ver%al pro/ise or oral representation. The insured, therefore, had

no ri"ht to rel0 W and we #annot %elieve he relied in "ood faith W upon

the oral representation. The insured, therefore, had no ri"ht to rel0 W

and we #annot %elieve he relied in "ood faith W upon the oral

representation of said a"ent and /edi#al eAa/iner that he )the

appli#ant* was a <t su%e#t for insuran#e notwithstandin" that he had

%een and was still suJerin" with advan#ed pul/onar0 tu%er#ulosis.

ro/ all the fa#ts and #ir#u/stan#es of this #ase, we are #onstrained to

#on#lude that the insured was a #oparti#ipant, and #oresponsi%le with

("ent David and 7edi#al EAa/iner 9alde, in the fraudulent

pro#ure/ent of the poli#ies in >uestion and that %0 reason thereof said

poli#ies are void a# initio.

Bheretofore, the /otion for re#onsideration is sustained and the

ud"/ent of the Court of (ppeals is here%0 reversed. 2et another

ud"/ent %e entered in favor of the respondents and a"ainst the

1=



petitioner for the refund of the pre/iu/s a/ountin" to P1,6'-, with

le"al interest thereon fro/ the date of the #o/plaint, and without an0

<ndin" as to #osts.

G.R. No. L"1669 Auu' %1, 1950

!A7 LO!E7 E CONSTANTINO, plaintiJ+appellant,

vs.

ASIA LIE INSURANCE COM!AN$, defendant+appellee.

A+++++++++++++++++++++++++++++++++++++++++++++++++++++++++A

G.R. No. L"16/0 Auu' %1, 1950

AGUSTINA !ERALTA, plaintiJ+appellant,

vs.

ASIA LIE INSURANCE COM!AN$, defendant+appellee.

Mariano $ozada for appellant (onstantino.

(a'hero and Madarang for appellant "eralta.

Dewitt, "er/ins and "on'e 2nrile for appellee.

Ra%irez and &rtigas and "adilla, (arlos and 3ernando as a%i'i 'uriae.

ENG7ON, J.

These two #ases, appealed fro/ the Court of irst Instan#e of 7anila,

#all for de#ision of the >uestion whether the %ene<#iar0 in a life

insuran#e poli#0 /a0 re#over the a/ount thereof althou"h the insured

died after repeatedl0 failin" to pa0 the stipulated pre/iu/s, su#h

failure havin" %een #aused %0 the last war in the Pa#i<#.

The fa#ts are these

3irst 'ase. In #onsideration of the su/ of P1=5.&4 as annual pre/iu/

dul0 paid to it, the (sia 2ife Insuran#e Co/pan0 )a forei"n #orporation

in#orporated under the laws of Delaware, 3.S.(.*, issued on Septe/%er

$=, 1-41, its Poli#0 No. -6-1$ for P6,&&&, where%0 it insured the life of

(r#adio Constantino for a ter/ of twent0 0ears. The <rst pre/iu/

#overed the period up to Septe/%er $5, 1-4$. The plaintiJ Pa 2ope

de Constantino was re"ularl0 appointed %ene<#iar0. The poli#0

#ontained these stipulations, a/on" others

This PO2IC O INS3R(NCE is issued in #onsideration of the

written and printed appli#ation here for a #op0 of whi#h is

atta#hed hereto and is here%0 /ade a part hereof /ade a part

hereof, and of the pa0/ent in advan#e durin" the lifeti/e and

"ood health of the Insured of the annual pre/iu/ of One

@undred <ft0+ei"ht and 481&& pesos Philippine #urren#01 and of

the pa)%ent of a li/e a%ount upon ea'h twent)*se!enth da)

of 4epte%#er hereafter durin" the ter/ of Twent0 0ears or

until the prior death of the Insured. )E/phasis supplied.*

A A A A A A A A A

(ll pre/iu/ pa0/ents are due in advan#e and an0

unpun#tualit0 in /a!in" an0 su#h pa0/ent shall #ause this

poli#0 to lapse unless and eA#ept as !ept in for#e %0 the ra#ePeriod #ondition or under Option 4 %elow. )ra#e of 61 da0s.*

(fter that <rst pa0/ent, no further pre/iu/s were paid. The insured

died on Septe/%er $$, 1-44.

It is ad/itted that the defendant, %ein" an (/eri#an #orporation , had

to #lose its %ran#h oG#e in 7anila %0 reason of the apanese

o##upation, i.e. fro/ anuar0 $, 1-4$, until the 0ear 1-4.

4e'ond 'ase. On (u"ust 1, 1-6', the defendant (sia 2ife Insuran#e

Co/pan0 issued its Poli#0 No. ='14 )oint 2ife $&+ear Endow/entParti#ipatin" with (##ident Inde/nit0*, #overin" the lives of the

spouses To/as Rui and ("ustina Peralta, for the su/ of P6,&&&. The

annual pre/iu/ stipulated in the poli#0 was re"ularl0 paid fro/ (u"ust

1, 1-6', up to and in#ludin" Septe/%er 6&, 1-41. EJe#tive (u"ust 1,

1-41, the /ode of pa0/ent of pre/iu/s was #han"ed fro/ annual to

>uarterl0, so that >uarterl0 pre/iu/s were paid, the last havin" %een

delivered on Nove/%er 1', 1-41, said pa0/ent #overin" the period up

to anuar0 61, 1-4$. No further pa0/ents were handed to the insurer.

3pon the apanese o##upation, the insured and the insurer %e#a/e

1'



separated %0 the lines of war, and it was i/possi%le and ille"al for

the/ to deal with ea#h other. ;e#ause the insured had %orrowed on

the poli#0 an /ount of P$64.&& in anuar0, 1-41, the #ash surrender

value of the poli#0 was suG#ient to /aintain the poli#0 in for#e onl0 up

to Septe/%er =, 1-4$. To/as Rui died on e%ruar0 15, 1-4. The

plaintiJ ("ustina Peralta is his %ene<#iar0. @er de/and for pa0/ent

/et with defendantLs refusal, "rounded on non+pa0/ent of the

pre/iu/s.

The poli#0 provides in part

This PO2IC O INS3R(NCE is issued in #onsideration of the

written and printed appli#ation herefor, a #op0 of whi#h is

atta#hed hereto and is here%0 /ade apart hereof, and of the

pa0/ent in advan#e durin" the life ti/e and "ood health of the

Insured of the annual pre/iu/ of Two hundred and 4681&&

pesos Philippine #urren#0 and of the pa)%ent of a l i/e a%ount

upon ea'h rst da) of August hereafter during the ter/ of

Twent0 0ears or until the prior death of either of the Insured.)E/phasis supplied.*

A A A A A A A A A

(ll pre/iu/ pa0/ents are due in advan#e and an0

unpun#tualit0 in /a!in" an0 su#h pa0/ent shall #ause this

poli#0 to lapse unless and eA#ept as !ept in for#e %0 the ra#e

Period #ondition or under Option 4 %elow. )ra#e of da0s.* . . .

PlaintiJs /aintain that, as %ene<#iaries, the0 are entitled to re#eive

the pro#eeds of the poli#ies /inus all su/s due for pre/iu/s inarrears. The0 alle"e that non+pa0/ent of the pre/iu/s was #aused %0

the #losin" of defendantLs oG#es in 7anila durin" the apanese

o##upation and the i/possi%le #ir#u/stan#es #reated %0 war.

Defendant on the other hand asserts that the poli#ies had lapsed for

non+pa0/ent of pre/iu/s, in a##ordan#e with the #ontra#t of the

parties and the law appli#a%le to the situation.

The lower #ourt a%solved the defendant. @en#e this appeal.

The #ontroversial point has never %een de#ided in this urisdi#tion.

ortunatel0, this #ourt has had the %ene<t of eAtensive and eAhaustive

/e/oranda in#ludin" those of a%i'i 'uriae. The /atter has re#eived

#areful #onsideration, inas/u#h as it aJe#ts the interest of thousands

of poli#0+holders and the o%li"ations of /an0 insuran#e #o/panies

operatin" in this #ountr0.

Sin#e the 0ear 1-1=, the Philippine law on Insuran#e was found in (#t

No. $4$=, as a/ended, and the Civil Code.$ (#t No. $4$= was lar"el0

#opied fro/ the Civil Code of California.6 (nd this #ourt has heretofore

announ#ed its intention to supple/ent the statutor0 laws with "eneral

prin#iples prevailin" on the su%e#t in the 3nited State.4

In oun" !s. 7idland TeAtile Insuran#e Co. )6& Phil., 51=*, we said that

:#ontra#ts of insuran#e are #ontra#ts of inde/nit0 upon the ter/s and

#onditions spe#i<ed in the poli#0. The parties have a ri"ht to i/pose

su#h reasona%le #onditions at the ti/e of the /a!in" of the #ontra#t as

the0 /a0 dee/ wise and ne#essar0. The rate of pre/iu/ is /easured

%0 the #hara#ter of the ris! assu/ed. The insuran#e #o/pan0, for a#o/parativel0 s/all #onsideration, underta!es to "uarantee the

insured a"ainst loss or da/a"e, upon the ter/s and #onditions a"reed

upon, and upon no other, and when #alled upon to pa0, in #ase of loss,

the insurer, therefore, /a0 ustl0 insists upon a ful<ll/ent of these

ter/s. If the insured #annot %rin" hi/self within the #onditions of the

poli#0, he is not entitled for the loss. The ter/s of the poli#0 #onstitute

the /easure of the insurerLs lia%ilit0, and in order to re#over the

insured /ust show hi/self within those ter/sH and if it appears that

the #ontra#t has %een ter/inated %0 a violation, on the part of the

insured, of its #onditions, then there #an %e no ri"ht of re#over0. The

#o/plian#e of the insured with the ter/s of the #ontra#t is a #ondition

pre#edent to the ri"ht of re#over0.:

Re#all of the a%ove pronoun#e/ents is appropriate %e#ause the

poli#ies in >uestion stipulate that :all pre/iu/ pa0/ents are due in

advan#e and an0 unpun#tualit0 in /a!in" an0 su#h pa0/ent shall

#ause this poli#0 to lapse.: Bherefore, it would see/ that pursuant to

the eApress ter/s of the poli#0, non+pa0/ent of pre/iu/ produ#es its

avoidan#e.

1-



The #onditions of #ontra#ts of Insuran#e, when plainl0

eApressed in a poli#0, are %indin" upon the parties and should

%e enfor#ed %0 the #ourts, if the eviden#e %rin"s the #ase

#learl0 within their /eanin" and intent. It tends to %rin" the

law itself into disrepute when, %0 astute and su%tle

distin#tions, a plain #ase is atte/pted to %e ta!en without the

operation of a #lear, reasona%le and /aterial o%li"ation of the

#ontra#t. 7a#! !s. Ro#hester er/an Ins. Co., 1&5 N.., 5&,54. )oun" !s. 7idland TeAtile Ins. Co., 6& Phil., 51=, 5$$.*

In lara"a !s. Sun 2ife (ss. Co. )4- Phil., =6=*, this #ourt held that a life

poli#0 was avoided %e#ause the pre/iu/ had not %een paid within the

ti/e <Aed, sin#e %0 its eApress ter/s, non+pa0/ent of an0 pre/iu/

when due or within the thirt0+da0 period of "ra#e, ipso fa'to #aused

the poli#0 to lapse. This "oes to show that althou"h we ta!e the view

that insuran#e poli#ies should %e #onserved and should not li"htl0 %e

thrown out, still we do not hesitate to enfor#e the a"ree/ent of the

parties.

orfeitures of insuran#e poli#ies are not favored, %ut #ourts

#annot for that reason alone refuse to enfor#e an insuran#e

#ontra#t a##ordin" to its /eanin". )4 C..S., p. 1&.*

Nevertheless, it is #ontended for plaintiJ that inas/u#h as the non+

pa0/ent of pre/iu/ was the #onse>uen#e of war, it should %e

eA#used and should not #ause the forfeiture of the poli#0.

Professor 9an#e of ale, in his standard treatise on Insuran#e, sa0s that

in deter/inin" the eJe#t of non+pa0/ent of pre/iu/s o##asioned %0

war, the (/eri#an #ases /a0 %e divided into three "roups, a##ordin"as the0 support the so+#alled Conne#ti#ut Rule, the New or! Rule, or

the 3nited States Rule.

The <rst holds the view that :there are two ele/ents in the

#onsideration for whi#h the annual pre/iu/ is paid W irst, the /ere

prote#tion for the 0ear, and se#ond, the privile"e of renewin" the

#ontra#t for ea#h su##eedin" 0ear %0 pa0in" the pre/iu/ for that 0ear

at the ti/e a"reed upon. (##ordin" to this view of the #ontra#t, the

pa0/ent of pre/iu/s is a #ondition pre#edent, the non+perfor/an#e

would %e ille"al ne#essaril0 defeats the ri"ht to renew the #ontra#t.:

The se#ond rule, apparentl0 followed %0 the "reater nu/%er of

de#isions, hold that :war %etween states in whi#h the parties reside

/erel0 suspends the #ontra#ts of the life insuran#e, and that, upon

tender of all pre/iu/s due %0 the insured or his representatives after

the war has ter/inated, the #ontra#t revives and %e#o/es full0

operative.:

The 3nited States rule de#lares that the #ontra#t is not /erel0

suspended, %ut is a%ro"ated %0 reason of non+pa0/ents is pe#uliarl0 of

the essen#e of the #ontra#t. It additionall0 holds that it would %e unust

to allow the insurer to retain the reserve value of the poli#0, whi#h is

the eA#ess of the pre/iu/s paid over the a#tual ris! #arried durin" the

0ears when the poli#0 had %een in for#e. This rule was announ#ed in

the well+!nown Statha/5#ase whi#h, in the opinion of Professor

9an#e, is the 'orre't rule.=

The appellants and so/e a%i'i 'uriae #ontend that the New or! rule

should %e applied here. The appellee and other a%i'i 'uriae #ontend

that the 3nited States do#trine is the orthodoA view.

Be have read and re+read the prin#ipal #ases upholdin" the diJerent

theories. ;esides the respe#t and hi"h re"ard we have alwa0s

entertained for de#isions of the Supre/e Court of the 3nited States,

we #annot resist the #onvi#tion that the reasons eApounded in its

de#ision of the Statha/ #ase are lo"i#all0 and udi#iall0 sound. 2i!e the

instant #ase, the poli#0 involved in the Statha/ de#ision spe#i<es that

non+pa0/ent on ti/e shall #ause the poli#0 to #ease and deter/ine.Reasonin" out that pun#tual pa0/ents were essential, the #ourt said

. . . it /ust %e #on#eded that pro/ptness of pa0/ent is

essential in the %usiness of life insuran#e. (ll the #al#ulations

of the insuran#e #o/pan0 are %ased on the h0pothesis of

pro/pt pa0/ents. The0 not onl0 #al#ulate on the re#eipt of the

pre/iu/s when due, %ut on #o/poundin" interest upon the/.

It is on this %asis that the0 are ena%led to oJer assuran#e at

the favora%le rates the0 do. orfeiture for non+pa0/ent is an

$&



ne#essar0 /eans of prote#tin" the/selves fro/

e/%arrass/ent. 3nless it were enfor#ea%le, the %usiness

would %e thrown into #onfusion. It is li!e the forfeiture of

shares in /inin" enterprises, and all other haardous

underta!in"s. There /ust %e power to #ut+oJ unpro<ta%le

/e/%ers, or the su##ess of the whole s#he/e is endan"ered.

The insured parties are asso#iates in a "reat s#he/e. This

asso#iated relation eAists whether the #o/pan0 %e a /utualone or not. Ea#h is interested in the en"a"e/ents of allH for out

of the #o+eAisten#e of /an0 ris!s arises the law of avera"e,

whi#h underlies the whole %usiness. (n essential feature of this

s#he/e is the /athe/ati#al #al#ulations referred to, on whi#h

the pre/iu/s and a/ounts assured are %ased. (nd these

#al#ulations, a"ain, are %ased on the assu/ption of avera"e

/ortalit0, and of pro/pt pa0/ents and #o/pound interest

thereon. Delin>uen#0 #annot %e tolerated nor redee/ed,

eA#ept at the option of the #o/pan0. This has alwa0s %een the

understandin" and the pra#ti#e in this depart/ent of %usiness.

So/e #o/panies, it is true, a##ord a "ra#e of thirt0 da0s, orother <Aed period, within whi#h the pre/iu/ in arrear /a0 %e

paid, on #ertain #onditions of #ontinued "ood health, et#. ;ut

this is a /atter of stipulation, or of dis#retion, on the part of

the parti#ular #o/pan0. Bhen no stipulation eAists, it is the

"eneral understandin" that ti/e is /aterial, and that the

forfeiture is a%solute if the pre/iu/ %e not paid. The

eAtraordinar0 and even desperate eJorts so/eti/es /ade,

when an insured person is in eAtre/es to /eet a pre/iu/

#o/in" due, de/onstrates the #o//on view of this /atter.

The #ase, therefore, is one in whi#h ti/e is /aterial and of the

essen#e and of the essen#e of the #ontra#t. Non+pa0/ent atthe da0 involves a%solute forfeiture if su#h %e the ter/s of the

#ontra#t, as is the #ase here. Courts #annot with safet0 var0

the stipulation of the parties %0 introdu#in" e>uities for the

relief of the insured a"ainst their own ne"li"en#e.

In another part of the de#ision, the 3nited States Supre/e Court

#onsiders and ree#ts what is, in eJe#t, the New or! theor0 in the

followin" words and phrases

The truth is, that the do#trine of the revival of #ontra#ts

suspended durin" the war is one %ased on #onsiderations of

e>uit0 and usti#e, and #annot %e invo!ed to revive a #ontra#t

whi#h it would %e unust or ine>uita%le to revive.

In the #ase of 2ife insuran#e, %esides the /aterialit0 of ti/e in

the perfor/an#e of the #ontra#t, another stron" reason eAists

wh0 the poli#0 should not %e revived. The parties do not stand

on e>ual "round in referen#e to su#h a revival. It would operate

/ost unustl0 a"ainst the #o/pan0. The %usiness of insuran#e

is founded on the law of avera"eH that of life insuran#e

e/inentl0 so. The avera"e rate of /ortalit0 is the %asis on

whi#h it rests. ;0 spreadin" their ris!s over a lar"e nu/%er of

#ases, the #o/panies #al#ulate on this avera"e with

reasona%le #ertaint0 and safet0. (n0thin" that interferes with it

deran"es the se#urit0 of the %usiness. If ever0 poli#0 lapsed %0

reason of the war should %e revived, and all the %a#!

pre/iu/s should %e paid, the #o/panies would have the

%ene<t of this avera"e a/ount of ris!. ;ut the "ood ris!s arenever heard fro/H onl0 the %ar are sou"ht to %e revived, where

the person insured is either dead or d0in". Those in health #an

"et the new poli#ies #heaper than to pa0 arreara"es on the old.

To enfor#e a revival of the %ad #ases, whilst the #o/pan0

ne#essaril0 lose the #ases whi#h are desira%le, would %e

/anifestl0 unust. (n insured person, as %efore stated, does

not stand isolated and alone. @is #ase is #onne#ted with and

#o+related to the #ases of all others insured %0 the sa/e

#o/pan0. The nature of the %usiness, as a whole, /ust %e

loo!ed at to understand the "eneral e>uities of the parties.

The a%ove #onsideration #ertainl0 lend the/selves to the approval of

fair+/inded /en. 7oreover, if, as alle"ed, the #onse>uen#es of war

should not preudi#e the insured, neither should the0 %ear down on the

insurer.

3r"in" adoption of the New or! theor0, #ounsel for plaintiJ point out

that the o%li"ation of the insured to pa0 pre/iu/s was eA#used durin"

the war owin" to i/possi%ilit0 of perfor/an#e, and that #onse>uentl0

no unfavora%le #onse>uen#es should follow fro/ su#h failure.

$1



The appellee answers, >uite plausi%l0, that the periodi# pa0/ent of

pre/iu/s, at least those after the <rst, is not an o#ligation of the

insured, so /u#h so that it is not a de%t enfor#ea%le %0 a#tion of the

insurer.

3nder an O!laho/a de#ision, the annual pre/iu/ due is not a

de%t. It is not an o%li"ation upon whi#h the insurer #an

/aintain an a#tion a"ainst insuredH nor is its settle/ent

"overned %0 the stri#t rule #ontrollin" pa0/ents of de%ts. So,

the #ourt in a Qentu#!0 #ase de#lares, in the opinion, that it is

not a de%t. . . . The fa#t that it is pa0a%le annuall0 or se/i+

annuall0, or at an0 other stipulated ti/e, does not of itself

#onstitute a pro/ise to pa0, either eApress or i/plied. In #ase

of non+pa0/ent the poli#0 is forfeited, eA#ept so far as the

forfeiture /a0 %e saved %0 a"ree/ent, %0 waiver, estoppel, or

%0 statute. The pa0/ent of the pre/iu/ is entirel0 optional,

while a de%t /a0 %e enfor#ed at law, and the fa#t that the

pre/iu/ is a"reed to %e paid is without for#e, in the a%sen#e

of an un>uali<ed and a%solute a"ree/ent to pa0 a spe#i<edsu/ at so/e #ertain ti/e. In the ordinar0 poli#0 there is no

pro/ise to pa0, %ut it is optional with the insured whether he

will #ontinue the poli#0 or forfeit it. )6 Cou#h, C0#. on

Insuran#e, Se#. 5$6, p. 1--5.*

It is well settled that a #ontra#t of insuran#e is sui generis.

Bhile the insured %0 an o%servan#e of the #onditions /a0 hold

the insurer to his #ontra#t, the latter has not the power or ri"ht

to #o/pel the insured to /aintain the #ontra#t relation with it

lon"er than he #hooses. 5hether the insured will 'ontinue it or

not is optional with hi%. here #eing no o#ligation to pa) for

the pre%iu%, the) did not 'onstitute a

de#t. )No%le!s. Southern States 7.D. Ins. Co., 1= Q0., 45H 15$

S.B., $'.* )E/phasis ours.*

It should %e noted that the parties #ontra#ted not onl0 for pea#eti/e

#onditions %ut also for ti/es of war, %e#ause the poli#ies #ontained

provisions appli#a%le eApressl0 to warti/e da0s. The lo"i#al inferen#e,

therefore, is that the parties #onte/plated uninterrupted operation of

the #ontra#t even if ar/ed #onKi#t should ensue.

or the plaintiJs, it is a"ain ar"ued that in view of the enor/ous

"rowth of insuran#e %usiness sin#e the Statha/ de#ision, it #ould now

%e relaAed and even disre"arded. It is stated :that the relaAation of

rules relatin" to insuran#e is in dire#t proportion to the "rowth of the

%usiness. If there were onl0 1&& /en, for eAa/ple, insured %0 a

Co/pan0 or a /utual (sso#iation, the death of one will distri%ute the

insuran#e pro#eeds a/on" the re/ainin" -- poli#0+holders. ;e#ause

the loss whi#h ea#h survivor will %ear will %e relativel0 "reat, deathfro/ #ertain a"reed or spe#i<ed #auses /a0 %e dee/ed not a

#o/pensa%le loss. ;ut if the poli#0+holders of the Co/pan0 or

(sso#iation should %e 1,&&&,&&& individuals, it is #lear that the death of

one of the/ will not seriousl0 preudi#e ea#h one of the ---,---

survivin" insured. The loss to %e %orne %0 ea#h individual will %e

relativel0 s/all.:

The answer to this is that as there are )in the eAa/ple* one /illion

poli#0+holders, the :losses: to %e #onsidered will not %e the death of

one %ut the death of ten thousand, sin#e the proportion of 1 to 1&&

should %e /aintained. (nd #ertainl0 su#h losses for 1&,&&& deaths willnot %e :relativel0 s/all.:

(fter perusin" the Insuran#e (#t, we are <r/l0 persuaded that the non+

pa0/ent of pre/iu/s is su#h a vital defense of insuran#e #o/panies

that sin#e the ver0 %e"innin", said (#t no. $4$= eApressl0 preserved it,

%0 providin" that after the poli#0 shall have %een in for#e for two 0ears,

it shall %e#o/e in#ontesta%le )i.e. the insurer shall have no defense*

eA#ept for fraud, non*pa)%ent of pre%iu%s, and /ilitar0 or naval

servi#e in ti/e of war )se#. 1'4 %F, Insuran#e (#t*. (nd when Con"ress

re#entl0 a/ended this se#tion )Rep. (#t No. 1=1*, the defense of fraud

was eli/inated, while the defense of nonpa)%ent of pre%iu%s was

preser!ed. Thus the funda/ental #hara#ter of the underta!in" to pa0

pre/iu/s and the hi"h i/portan#e of the defense of non+pa0/ent

thereof, was spe#i<#all0 re#o"nied.

In !eepin" with su#h le"islative poli#0, we feel no hesitation to adopt

the 3nited States Rule, whi#h is in eJe#t a variation of the Conne#ti#ut

rule for the sa!e of e>uit0. In this #onne#tion, it appears that the <rst

poli#0 had no reserve value, and that the e>uita%le values of the

$$



se#ond had %een pra#ti#all0 returned to the insured in the for/ of loan

and advan#e for pre/iu/.

or all the fore"oin", the lower #ourtLs de#ision a%solvin" the

defendant fro/ all lia%ilit0 on the poli#ies in >uestion, is here%0

aGr/ed, without #osts.

G.R. No. L"2294 M: 25, 1951

ILI!INAS COM!A;IA E SEGUROS, petitioner,

vs.

C#RISTERN, #UENEEL n- CO., INC., respondent.

Ra%irez and &rtigas for petitioner.

2wald 6uenefeld for respondent.

!ARAS, C.J.

On O#to%er 1, 1-41, the respondent #orporation, Christern @uenefeld,

Co., In#., after pa0/ent of #orrespondin" pre/iu/, o%tained fro/

the petitioner ,ilipinas Cia. de Se"uros, <re poli#0 No. $-666 in the

su/ of P1&&&,&&&, #overin" /er#handise #ontained in a %uildin"

lo#ated at No. =11 Ro/an Street, ;inondo 7anila. On e%ruar0 $=,

1-4$, or durin" the apanese /ilitar0 o##upation, the %uildin" and

insured /er#handise were %urned. In due ti/e the respondent

su%/itted to the petitioner its #lai/ under the poli#0. The salva"e

"oods were sold at pu%li# au#tion and, after dedu#tin" their value, the

total loss suJered %0 the respondent was <Aed at P-$,5&. The

petitioner refused to pa0 the #lai/ on the "round that the poli#0 in

favor of the respondent had #eased to %e in for#e on the date the

3nited States de#lared war a"ainst er/an0, the respondent

Corporation )thou"h or"anied under and %0 virtue of the laws of the

Philippines* %ein" #ontrolled %0 the er/an su%e#ts and the petitioner

%ein" a #o/pan0 under (/eri#an urisdi#tion when said poli#0 was

issued on O#to%er 1, 1-41. The petitioner, however, in pursuan#e of

the order of the Dire#tor of ;ureau of inan#in", Philippine EAe#utive

Co//ission, dated (pril -, 1-46, paid to the respondent the su/ of

P-$,5& on (pril 1-, 1-46.

The present a#tion was <led on (u"ust 5, 1-45, in the Court of irst

Instan#e of 7anila for the purpose of re#overin" fro/ the respondentthe su/ of P-$,5& a%ove /entioned. The theor0 of the petitioner is

that the insured /er#handise were %urned up after the poli#0 issued in

1-41 in favor of the respondent #orporation has #eased to %e eJe#tive

%e#ause of the out%rea! of the war %etween the 3nited States and

er/an0 on De#e/%er 1&, 1-41, and that the pa0/ent /ade %0 the

petitioner to the respondent #orporation durin" the apanese /ilitar0

o##upation was under pressure. (fter trial, the Court of irst Instan#e of

7anila dis/issed the a#tion without pronoun#e/ent as to #osts. 3pon

appeal to the Court of (ppeals, the ud"/ent of the Court of irst

Instan#e of 7anila was aGr/ed, with #osts. The #ase is now %efore us

on appeal %0 'ertiorari fro/ the de#ision of the Court of (ppeals.

The Court of (ppeals overruled the #ontention of the petitioner that the

respondent #orporation %e#a/e an ene/0 when the 3nited States

de#lared war a"ainst er/an0, rel0in" on En"lish and (/eri#an #ases

whi#h held that a #orporation is a #itien of the #ountr0 or state %0 and

under the laws of whi#h it was #reated or or"anied. It ree#ted the

theor0 that nationalit0 of private #orporation is deter/ine %0 the

#hara#ter or #itienship of its #ontrollin" sto#!holders.

There is no >uestion that /aorit0 of the sto#!holders of the

respondent #orporation were er/an su%e#ts. This %ein" so, we have

to rule that said respondent %e#a/e an ene/0 #orporation upon the

out%rea! of the war %etween the 3nited States and er/an0. The

En"lish and (/eri#an #ases relied upon %0 the Court of (ppeals have

lost their for#e in view of the latest de#ision of the Supre/e Court of

the 3nited States in Clar! !s. 3e%ersee inan Qorporation, de#ided on

De#e/%er ', 1-4=, -$ 2aw. Ed. (dvan#e Opinions, No. 4, pp. 14'+16,

in whi#h the #ontrols test has %een adopted. In :Ene/0 Corporation:

%0 7artin Do/!e, a paper presented to the Se#ond International

$6



Conferen#e of the 2e"al Profession held at the @a"ue )Netherlands* in

(u"ust. 1-4' the followin" enli"htenin" passa"es appear

Sin#e Borld Bar I, the deter/ination of ene/0 nationalit0 of

#orporations has %een dis#ussion in /an0 #ountries,

%elli"erent and neutral. ( #orporation was su%e#t to ene/0

le"islation when it was #ontrolled %0 ene/ies, na/el0

/ana"ed under the inKuen#e of individuals or #orporations,the/selves #onsidered as ene/ies. It was the En"lish #ourts

whi#h <rst the Dai%ler #ase applied this new #on#ept of

:pier#in" the #orporate veil,: whi#h was adopted %0 the pea#e

of Treaties of 1-1- and the 7iAed (r%itral esta%lished after the

irst Borld Bar.

The 3nited States of (/eri#a did not adopt the #ontrol test

durin" the irst Borld Bar. Courts refused to re#o"nied the

#on#ept where%0 (/eri#an+re"istered #orporations #ould %e

#onsidered as ene/ies and thus su%e#t to do/esti# le"islation

and ad/inistrative /easures re"ardin" ene/0 propert0.

Borld Bar II revived the pro%le/ a"ain. It was !nown that

er/an and other ene/0 interests were #loa!ed %0 do/esti#

#orporation stru#ture. It was not onl0 %0 le"al ownership of

shares that a /aterial inKuen#e #ould %e eAer#ised on the

/ana"e/ent of the #orporation %ut also %0 lon" ter/ loans

and other fa#tual situations. or that reason, le"islation on

ene/0 propert0 ena#ted in various #ountries durin" Borld Bar

II adopted %0 statutor0 provisions to the #ontrol test and

deter/ined, to various de"rees, the in#idents of #ontrol. Court

de#isions were rendered on the %asis of su#h newl0 ena#ted

statutor0 provisions in deter/inin" ene/0 #hara#ter of

do/esti# #orporation.

The 3nited States did not, in the a/end/ents of the Tradin"

with the Ene/0 (#t durin" the last war, in#lude as did other

le"islations the appli#ations of the #ontrol test and a"ain, as in

Borld Bar I, #ourts refused to appl0 this #on#ept where%0 the

ene/0 #hara#ter of an (/eri#an or neutral+re"istered

#orporation is deter/ined %0 the ene/0 nationalit0 of the

#ontrollin" sto#!holders.

7easures of %lo#!in" forei"n funds, the so #alled freein"

re"ulations, and other ad/inistrative pra#ti#e in the treat/ent

of forei"n+owned propert0 in the 3nited States allowed to lar"e

de"ree the deter/ination of ene/0 interest in do/esti#

#orporations and thus the appli#ation of the #ontrol test. Courtde#isions san#tioned su#h ad/inistrative pra#ti#e ena#ted

under the irst Bar Powers (#t of 1-41, and /ore re#entl0, on

De#e/%er ', 1-4=, the Supre/e Court of the 3nited States

de<nitel0 approved of the #ontrol theor0. In Clar! !s. 3e%ersee

inan Qorporation, (. ., dealin" with a Swiss #orporation

alle"edl0 #ontrolled %0 er/an interest, the Court :The

propert0 of all forei"n interest was pla#ed within the rea#h of

the vestin" power )of the (lien Propert0 Custodian* not to

appropriate friendl0 or neutral assets %ut to rea#h ene/0

interest whi#h /as>ueraded under those inno#ent fronts. . . .

The power of seiure and vestin" was eAtended to all propert0of an0 forei"n #ountr0 or national so that no inno#ent

appearin" devi#e #ould %e#o/e a Troan horse.:

It %e#o/es unne#essar0, therefore, to dwell at len"th on the

authorities #ited in support of the appealed de#ision. @owever, we /a0

add that, in 6aw "ia !s. (hina Ban/ing (orporation,X 4 OJ a.,

)Supp. -* $--, we alread0 held that China ;an!in" Corporation #a/e

within the /eanin" of the word :ene/0: as used in the Tradin" with

the Ene/0 (#ts of #ivilied #ountries not onl0 %e#ause it was

in#orporated under the laws of an ene/0 #ountr0 %ut %e#ause it was

#ontrolled %0 ene/ies.

The Philippine Insuran#e 2aw )(#t No. $4$=, as a/ended,* in se#tion ',

provides that :an0one eA#ept a pu%li# ene/0 /a0 %e insured.: It

stands to reason that an insuran#e poli#0 #eases to %e allowa%le as

soon as an insured %e#o/es a pu%li# ene/0.

27e't of war, generall). W (ll inter#ourse %etween #itiens of

%elli"erent powers whi#h is in#onsistent with a state of war is

prohi%ited %0 the law of nations. Su#h prohi%ition in#ludes all

$4



ne"otiations, #o//er#e, or tradin" with the ene/0H all a#ts

whi#h will in#rease, or tend to in#rease, its in#o/e or

resour#esH all a#ts of voluntar0 su%/ission to itH or re#eivin" its

prote#tionH also all a#ts #on#ernin" the trans/ission of /one0

or "oodsH and all #ontra#ts relatin" thereto are there%0

nulli<ed. It further prohi%its insuran#e upon trade with or %0

the ene/0, upon the life or lives of aliens en"a"ed in servi#e

with the ene/0H this for the reason that the su%e#ts of one#ountr0 #annot %e per/itted to lend their assistan#e to prote#t

%0 insuran#e the #o//er#e or propert0 of %elli"erent, alien

su%e#ts, or to do an0thin" detri/ental too their #ountr0Ls

interest. The purpose of war is to #ripple the power and

eAhaust the resour#es of the ene/0, and it is in#onsistent that

one #ountr0 should destro0 its ene/0Ls propert0 and repa0 in

insuran#e the value of what has %een so destro0ed, or that it

should in su#h /anner in#rease the resour#es of the ene/0, or

render it aid, and the #o//en#e/ent of war deter/ines, for

li!e reasons, all tradin" inter#ourse with the ene/0, whi#h prior

thereto /a0 have %een lawful. (ll individuals therefore, who

#o/pose the %elli"erent powers, eAist, as to ea#h other, in a

state of utter eA#lusion, and are pu%li# ene/ies. )5 Cou#h, C0#.

of Ins. 2aw, pp. 6$+66.*

In the #ase of an ordinar0 <re poli#0, whi#h "rants insuran#e

onl0 fro/ 0ear, or for so/e other spe#i<ed ter/ it is plain that

when the parties %e#o/e alien ene/ies, the #ontra#tual tie is

%ro!en and the #ontra#tual ri"hts of the parties, so far as not

!ested. lost. )9an#e, the 2aw on Insuran#e, Se#. 44, p. 11$.*

The respondent havin" %e#o/e an ene/0 #orporation on De#e/%er

1&, 1-41, the insuran#e poli#0 issued in its favor on O#to%er 1, 1-41,

%0 the petitioner )a Philippine #orporation* had #eased to %e valid and

enfor#i%le, and sin#e the insured "oods were %urned after De#e/%er

1&, 1-41, and durin" the war, the respondent was not entitled to an0

inde/nit0 under said poli#0 fro/ the petitioner. @owever, ele/entar0

rules of usti#e )in the a%sen#e of spe#i<# provision in the Insuran#e

2aw* re>uire that the pre/iu/ paid %0 the respondent for the period

#overed %0 its poli#0 fro/ De#e/%er 11, 1-41, should %e returned %0

the petitioner.

The Court of (ppeals, in de#idin" the #ase, stated that the /ain issue

hin"es on the >uestion of whether the poli#0 in >uestion %e#a/e null

and void upon the de#laration of war %etween the 3nited States and

er/an0 on De#e/%er 1&, 1-41, and its ud"/ent in favor of the

respondent #orporation was predi#ated on its #on#lusion that the poli#0

did not #ease to %e in for#e. The Court of (ppeals ne#essaril0 assu/ed

that, even if the pa0/ent %0 the petitioner to the respondent was

involuntar0, its a#tion is not tena%le in view of the rulin" on the validit0of the poli#0. (s a /atter of fa#t, the Court of (ppeals held that :an0

inti/idation resorted to %0 the appellee was not unust %ut the eAer#ise

of its lawful ri"ht to #lai/ for and re#eived the pa0/ent of the

insuran#e poli#0,: and that the rulin" of the ;ureau of inan#in" to the

eJe#t that :the appellee was entitled to pa0/ent fro/ the appellant

was, well founded.: a#tuall0, there #an %e no dou%t that the Dire#tor

of the ;ureau of inan#in", in orderin" the petitioner to pa0 the #lai/

of the respondent, /erel0 o%e0ed the instru#tion of the apanese

7ilitar0 (d/inistration, as /a0 %e seen fro/ the followin" :In view of

the <ndin"s and #on#lusion of this oG#e #ontained in its de#ision on

(d/inistrative Case dated e%ruar0 -, 1-46 #op0 of whi#h was sent to

0our oG#e and the #on#urren#e therein of the inan#ial Depart/ent of

the apanese 7ilitar0 (d/inistration, and following the instru'tion of

said authorit), 0ou are here%0 ordered to pa0 the #lai/ of 7essrs.

Christern, @uenefeld Co., In#. The pa0/ent of said #lai/, however,

should %e /ade %0 /eans of #rossed #he#!.: )E/phasis supplied.*

It results that the petitioner is entitled to re#over what paid to the

respondent under the #ir#u/stan#es on this #ase. @owever, the

petitioner will %e entitled to re#over onl0 the e>uivalent, in a#tual

Philippines #urren#0 of P-$,5& paid on (pril 1-, 1-46, in a##ordan#e

with the rate <Aed in the ;allant0ne s#ale.

Bherefore, the appealed de#ision is here%0 reversed and the

respondent #orporation is ordered to pa0 to the petitioner the su/ of

P==,$&'.66, Philippine #urren#0, less the a/ount of the pre/iu/, in

Philippine #urren#0, that should %e returned %0 the petitioner for the

uneApired ter/ of the poli#0 in >uestion, %e"innin" De#e/%er 11,

1-41. Bithout #osts. So ordered.

$



G.R. No. L"1616% e*u*: 28, 196%

IGNACIO SATURNINO, <n 3< o=n e3> n- '3e JUICIAL

GUARIAN O CARLOS SATURNINO, <no*, plaintiJs+appellants,vs.

T#E !#ILI!!INE AMERICAN LIE INSURANCECOM!AN$, defendant+appellee.

2leazaro A. 4a%son for plainti7s*appellants.

A#ello 8 Ma'ias for defendant*appellee.

MAALINTAL, J.:

PlaintiJs, now appellants, <led this a#tion in the Court of irst Instan#e

of 7anila to re#over the su/ of P,&&&.&&, #orrespondin" to the fa#evalue of an insuran#e poli#0 issued %0 defendant on the life of

Estefania (. Saturnino, and the su/ of P1,&&.&& as attorne0Ls fees.

Defendant, now appellee, set up spe#ial defenses in its answer, with a

#ounter#lai/ for da/a"es alle"edl0 sustained as a result of the

unwarranted presentation of this #ase. ;oth the #o/plaint and the

#ounter#lai/ were dis/issed %0 the trial #ourtH %ut appellants were

de#lared entitled to the return of the pre/iu/ alread0 paidH plus

interest at 5 up to anuar0 ', 1--, when a #he#! for the

#orrespondin" a/ount W P6-.5 W was sent to the/ %0 appellee.

The poli#0 sued upon is one for $&+0ear endow/ent non+/edi#al

insuran#e. This !ind of poli#0 dispenses with the /edi#al eAa/ination

of the appli#ant usuall0 re>uired in ordinar0 life poli#ies. @owever,

detailed infor/ation is #alled for in the appli#ation #on#ernin" the

appli#antLs health and /edi#al histor0. The written appli#ation in this

#ase was su%/itted %0 Saturnino to appellee on Nove/%er 15, 1-=,

witnessed %0 appelleeLs a"ent Edward (. Santos. The poli#0 was issued

on the sa/e da0, upon pa0/ent of the <rst 0earLs pre/iu/ of

P66-.$. On Septe/%er 1-, 1-' Saturnino died of pneu/onia,

se#ondar0 to inKuena. (ppellants here, who are her survivin"

hus%and and /inor #hild, respe#tivel0, de/anded pa0/ent of the fa#e

value of the poli#0. The #lai/ was ree#ted and this suit was

su%se>uentl0 instituted.

It appears that two /onths prior to the issuan#e of the poli#0 or on

Septe/%er -, 1-=, Saturnino was operated on for #an#er, involvin"

#o/plete re/oval of the ri"ht %reast, in#ludin" the pe#toral /us#les

and the "lands found in the ri"ht ar/pit. She sta0ed in the hospital fora period of ei"ht da0s, after whi#h she was dis#har"ed, althou"h

a##ordin" to the sur"eon who operated on her she #ould not %e

#onsidered de<nitel0 #ured, her ail/ent %ein" of the /ali"nant t0pe.

Notwithstandin" the fa#t of her operation Estefania (. Saturnino did

not /a!e a dis#losure thereof in her appli#ation for insuran#e. On the

#ontrar0, she stated therein that she did not have, nor had she ever

had, a/on" other ail/ents listed in the appli#ation, #an#er or other

tu/orsH that she had not #onsulted an0 ph0si#ian, under"one an0

operation or suJered an0 inur0 within the pre#edin" <ve 0earsH and

that she had never %een treated for nor did she ever have an0 illnessor disease pe#uliar to her seA, parti#ularl0 of the %reast, ovaries,

uterus, and /enstrual disorders. The appli#ation also re#ites that the

fore"oin" de#larations #onstituted :a further %asis for the issuan#e of

the poli#0.:

The >uestion at issue is whether or not the insured /ade su#h false

representations of /aterial fa#ts as to avoid the poli#0. There #an %e

no dispute that the infor/ation "iven %0 her in her appli#ation for

insuran#e was false, na/el0, that she had never had #an#er or tu/ors,

or #onsulted an0 ph0si#ian or under"one an0 operation within the

pre#edin" period of <ve 0ears. (re the fa#ts then falsel0 represented

/aterial The Insuran#e 2aw )Se#tion 6&* provides that :/aterialit0 is

to %e deter/ined not %0 the event, %ut solel0 %0 the pro%a%le and

reasona%le inKuen#e of the fa#ts upon the part0 to who/ the

#o//uni#ation is due, in for/in" his esti/ate of the proposed

#ontra#t, or in /a!in" his in>uiries.: It see/s to %e the #ontention of

appellants that the fa#ts su%e#t of the representation were not

/aterial in view of the :non+/edi#al: nature of the insuran#e applied

for, whi#h does awa0 with the usual re>uire/ent of /edi#al

eAa/ination %efore the poli#0 is issued. The #ontention is without

$5



/erit. If an0thin", the waiver of /edi#al eAa/ination renders even

/ore /aterial the infor/ation re>uired of the appli#ant #on#ernin"

previous #ondition of health and diseases suJered, for su#h infor/ation

ne#essaril0 #onstitutes an i/portant fa#tor whi#h the insurer ta!es into

#onsideration in de#idin" whether to issue the poli#0 or not. It is lo"i#al

to assu/e that if appellee had %een properl0 apprised of the insuredLs

/edi#al histor0 she would at least have %een /ade to under"o /edi#al

eAa/ination in order to deter/ine her insura%ilit0.

(ppellants ar"ue that due infor/ation #on#ernin" the insuredLs

previous illness and operation had %een "iven to appellees a"ent

Edward (. Santos, who <lled the appli#ation for/ after it was si"ned in

%lan! %0 Estefania (. Saturnino. This was denied %0 Santos in his

testi/on0, and the trial #ourt found su#h testi/on0 to %e true. This is a

<ndin" of fa#t whi#h is %indin" upon us, this appeal havin" %een ta!en

upon >uestions of law alone. Be do not dee/ it ne#essar0, therefore,

to #onsider appelleeLs additional ar"u/ent, whi#h was upheld %0 the

trial #ourt, that in si"nin" the appli#ation for/ in %lan! and leavin" it to

Edward (. Santos to <ll )assu/in" that to %e the truth* the insured ineJe#t /ade Santos her a"ent for that purpose and #onse>uentl0 was

responsi%le for the errors in the entries /ade %0 hi/ in that #apa#it0.

In the appli#ation for insuran#e si"ned %0 the insured in this #ase, she

a"reed to su%/it to a /edi#al eAa/ination %0 a dul0 appointed

eAa/iner of appellee if in the latterLs opinion su#h eAa/ination was

ne#essar0 as further eviden#e of insura%ilit0. In not as!in" her to

su%/it to a /edi#al eAa/ination, appellants /aintain, appellee was

"uilt0 of ne"li"en#e, whi#h pre#luded it fro/ <ndin" a%out her a#tual

state of health. No su#h ne"li"en#e #an %e i/puted to appellee. It was

pre#isel0 %e#ause the insured had "iven herself a #lean %ill of health

that appellee no lon"er #onsidered an a#tual /edi#al #he#!up

ne#essar0.

(ppellants also #ontend there was no fraudulent #on#eal/ent of the

truth inas/u#h as the insured herself did not !now, sin#e her do#tor

never told her, that the disease for whi#h she had %een operated on

was #an#er. In the <rst pla#e the #on#eal/ent of the fa#t of the

operation itself was fraudulent, as there #ould not have %een an0

/ista!e a%out it, no /atter what the ail/ent. Se#ondl0, in order to

avoid a poli#0 it is not ne#essar0 to show a#tual fraud on the part of

the insured. In the #ase of Qaspr0! v. 7etropolitan Insuran#e Co., 14&

N..S. $11, $14, it was held

7oreover, if it were the law that an insuran#e #o/pan0 #ould

not depend a poli#0 on the "round of /isrepresentation, unless

it #ould show a#tual !nowled"e on the part of the appli#ant

that the state/ents were false, then it is plain that it would %ei/possi%le for it to prote#t itself and its honest poli#0holders

a"ainst fraudulent and i/proper #lai/s. It would %e wholl0 at

the /er#0 of an0 one who wished to appl0 for insuran#e, as it

would %e i/possi%le to show a#tual fraud eA#ept in the

eAtre/est #ases. It #ould not rel0 on an appli#ation as

#ontainin" infor/ation on whi#h it #ould a#t. There would %e no

in#entive to an appli#ant to tell the truth.

Bherefore, the parties respe#tfull0 pra0 that the fore"oin"

stipulation of fa#ts %e ad/itted and approved %0 this

@onora%le Court, without preudi#e to the parties addu#in"other eviden#e to prove their #ase not #overed %0 this

stipulation of fa#ts. 19wph:1.;<t

In this urisdi#tion a #on#eal/ent, whether intentional or unintentional,

entitles the insurer to res#ind the #ontra#t of insuran#e, #on#eal/ent

%ein" de<ned as :ne"li"en#e to #o//uni#ate that whi#h a part0

!nows and ou"ht to #o//uni#ate: )Se#tions $4 $5, (#t No. $4$=*. In

the #ase of Argente !. 5est (oast $ife -nsuran'e (o., =1 "hil. >?=, >@?,

this Court said, >uotin" fro/ o0#e, The 2aw of Insuran#e, $nd ed., 9ol.

6

:The %asis of the rule vitiatin" the #ontra#t in #ases of

#on#eal/ent is that it /isleads or de#eives the insurer into

a##eptin" the ris!, or a##eptin" it at the rate of pre/iu/

a"reed upon. The insurer, rel0in" upon the %elief that the

assured will dis#lose ever0 /aterial fa#t within his a#tual or

presu/ed !nowled"e, is /isled into a %elief that the

#ir#u/stan#e withheld does not eAist, and he is there%0

indu#ed to esti/ate the ris! upon a false %asis that it does not

eAist.:

$=



The ud"/ent appealed fro/, dis/issin" the #o/plaint and awardin"

the return to appellants of the pre/iu/ alread0 paid, with interest at

5 up to anuar0 $-, 1--, aGr/ed, with #osts a"ainst appellants.

G.R. No. L"44059 O'oe* 28, 19//

T#E INSULAR LIE ASSURANCE COM!AN$, LT., plaintiJ+appellee,

vs.

CAR!ONIA T. ERAO n- !ASCUALA +A. EERAO, defendants+appellants.

MARTIN, J.

This is a novel >uestion in insuran#e law Can a #o//on+law wife

na/ed as %ene<#iar0 in the life insuran#e poli#0 of a le"all0 /arried

/an #lai/ the pro#eeds thereof in #ase of death of the latter

On Septe/%er 1, 1-5', ;uenaventura Cristor E%rado was issued %0

The 2ife (ssuran#e Co., 2td., Poli#0 No. &&--$- on a whole+life for

P,''$.&& with a, rider for (##idental Death for the sa/e a/ount

;uenaventura C. E%rado desi"nated T. E%rado as the revo#a%le

%ene<#iar0 in his poli#0. @e to her as his wife.

On O#to%er $1, 1-5-, ;uenaventura C. E%rado died as a result of an t

when he was hit %0 a failin" %ran#h of a tree. (s the poli#0 was in

for#e, The Insular 2ife (ssuran#e Co., 2td. lia%le to pa0 the #overa"e in

the total a/ount of P11,=4.=6, representin" the fa#e value of the

poli#0 in the a/ount of P,''$.&& plus the additional %ene<ts for

a##idental death also in the a/ount of P,''$.&& and the refund of

P1'.&& paid for the pre/iu/ due Nove/%er, 1-5-, /inus the unpaid

pre/iu/s and interest thereon due for anuar0 and e%ruar0, 1-5-, in

the su/ of P65.$=.

Carponia T. E%rado <led with the insurer a #lai/ for the pro#eeds of the

Poli#0 as the desi"nated %ene<#iar0 therein, althou"h she ad/its that

she and the insured ;uenaventura C. E%rado were /erel0 livin" as

hus%and and wife without the %ene<t of /arria"e.

Pas#uala 9da. de E%rado also <led her #lai/ as the widow of the

de#eased insured. She asserts that she is the one entitled to the

insuran#e pro#eeds, not the #o//on+law wife, Carponia T. E%rado.

In dou%t as to who/ the insuran#e pro#eeds shall %e paid, the insurer,

The Insular 2ife (ssuran#e Co., 2td. #o//en#ed an a#tion for

Interpleader %efore the Court of irst Instan#e of Rial on (pril $-,

1-=&.

(fter the issues have %een oined, a pre+trial #onferen#e was held on

ul0 ', 1-=$, after whi#h, a pre+trial order was entered readin" asfollows ;.CwphE1

Durin" the pre+trial #onferen#e, the parties /anifested

to the #ourt. that there is no possi%ilit0 of a/i#a%le

settle/ent. @en#e, the Court pro#eeded to have the

parties su%/it their eviden#e for the purpose of the

pre+trial and /a!e ad/issions for the purpose of

pretrial. Durin" this #onferen#e, parties Carponia T.

E%rado and Pas#uala E%rado a"reed and stipulated

1* that the de'eased Buena!entura 2#rado was

%arried to "as'uala 2#rado with who% she has six FGlegiti%ateH na%el)I 6ernando, (resen'io, 2lsa,

2rlinda, 3elizardo and 6elen, all surna%ed 2#radoH $*

that durin" the lifeti/e of the de#eased, he was

insured with Insular 2ife (ssuran#e Co. 3nder Poli#0 No.

&&--$- whole life plan, dated Septe/%er 1, 1-5' for

the su/ of P,''$.&& with the rider for a##idental

death %ene<t as eviden#ed %0 EAhi%its ( for plaintiJs

and EAhi%it 1 for the defendant Pas#uala and EAhi%it =

for Carponia E%radoH 6* that during the lifeti%e of

$'



Buena!entura 2#rado, he was li!ing with his 'o%%on*

wife, (arponia 2#rado, with who% she had ? 'hildren

although he was not legall) separated fro% his legal

wifeH 4* that ;uenaventura in a##ident on O#to%er $1,

1-5- as eviden#ed %0 the death EAhi%it 6 and aGdavit

of the poli#e report of his death EAhi%it H * that

#o/plainant Carponia E%rado <led #lai/ with the

Insular 2ife (ssuran#e Co. whi#h was #ontested %0Pas#uala E%rado who also <led #lai/ for the pro#eeds

of said poli#0 5* that in view ofthe adverse #lai/s the

insuran#e #o/pan0 <led this a#tion a"ainst the two

herein #lai/ants Carponia and Pas#uala E%radoH =* that

there is now due fro/ the Insular 2ife (ssuran#e Co. as

pro#eeds of the poli#0 P11,=4.=6H '* that the

%ene<#iar0 desi"nated %0 the insured in the poli#0 is

Carponia E%rado and the insured /ade reservation to

#han"e the %ene<#iar0 %ut althou"h the insured /ade

the option to #han"e the %ene<#iar0, sa/e was never

#han"ed up to the ti/e of his death and the wife did

not have an0 opportunit0 to write the #o/pan0 that

there was reservation to #han"e the desi"nation of the

parties a"reed that a de#ision %e rendered %ased on

and stipulation of fa#ts as to who a/on" the two

#lai/ants is entitled to the poli#0.

3pon /otion of the parties, the0 are "iven ten )1&*

da0s to <le their si/ultaneous /e/oranda fro/ the

re#eipt of this order.

SO ORDERED.

On Septe/%er $, 1-=$, the trial #ourt rendered ud"/ent de#larin"

a/on" others, Carponia T. E%rado dis>uali<ed fro/ %e#o/in"

%ene<#iar0 of the insured ;uenaventura Cristor E%rado and dire#tin"

the pa0/ent of the insuran#e pro#eeds to the estate of the de#eased

insured. The trial #ourt held ;.CwphE1

It is patent fro/ the last para"raph of (rt. =6- of the

Civil Code that a #ri/inal #onvi#tion for adulter0 or

#on#u%ina"e is not essential in order to esta%lish the

dis>uali<#ation /entioned therein. Neither is it also

ne#essar0 that a <ndin" of su#h "uilt or #o//ission of

those a#ts %e /ade in a separate independent a#tion

%rou"ht for the purpose. The "uilt of the donee

)%ene<#iar0* /a0 %e proved %0 preponderan#e of

eviden#e in the sa/e pro#eedin" )the a#tion %rou"ht to

de#lare the nullit0 of the donation*.

It is, however, essential that su#h adulter0 or

#on#u%ina"e eAists at the ti/e defendant Carponia T.

E%rado was /ade %ene<#iar0 in the poli#0 in >uestion

for the dis>uali<#ation and in#apa#it0 to eAist and that

it is onl0 ne#essar0 that su#h fa#t %e esta%lished %0

preponderan#e of eviden#e in the trial. Sin#e it is

a"reed in their stipulation a%ove+>uoted that the

de#eased insured and defendant Carponia T. E%rado

were livin" to"ether as hus%and and wife without %ein"

le"all0 /arried and that the /arria"e of the insuredwith the other defendant Pas#uala 9da. de E%rado was

valid and still eAistin" at the ti/e the insuran#e in

>uestion was pur#hased there is no >uestion that

defendant Carponia T. E%rado is dis>uali<ed fro/

%e#o/in" the %ene<#iar0 of the poli#0 in >uestion and

as su#h she is not entitled to the pro#eeds of the

insuran#e upon the death of the insured.

ro/ this ud"/ent, Carponia T. E%rado appealed to the Court of

(ppeals, %ut on ul0 11, 1-=5, the (ppellate Court #erti<ed the #ase to

3s as involvin" onl0 >uestions of law.

Be aGr/ the ud"/ent of the lower #ourt.

1. It is >uite unfortunate that the Insuran#e (#t )R( $6$=, as a/ended*

or even the new Insuran#e Code )PD No. 51$, as a/ended* does not

#ontain an0 spe#i<# provision "rossl0 resolutor0 of the pri/e >uestion

at hand. Se#tion & of the Insuran#e (#t whi#h provides that :)t*he

insuran#e sha" %e applied eA#lusivel0 to the proper interest of the

person in whose na/e it is /ade: 1 #annot %e validl0 seied upon to

$-



hold that the // in#ludes the %ene<#iar0. The word :interest: hi"hl0

su""ests that the provision refers onl0 to the :insured: and not to the

%ene<#iar0, sin#e a #ontra#t of insuran#e is personal in

#hara#ter. 2 Otherwise, the prohi%itor0 laws a"ainst illi#it relationships

espe#iall0 on propert0 and des#ent will %e rendered nu"ator0, as the

sa/e #ould easil0 %e #ir#u/vented %0 /odes of insuran#e. Rather, the

"eneral rules of #ivil law should %e applied to resolve this void in the

Insuran#e 2aw. (rti#le $&11 of the New Civil Code states :The #ontra#tof insuran#e is "overned %0 spe#ial laws. Matters not expressl)

pro!ided for in su'h spe'ial laws shall #e regulated #) this (ode.:

Bhen not otherwise spe#i<#all0 provided for %0 the Insuran#e 2aw, the

#ontra#t of life insuran#e is "overned %0 the "eneral rules of the #ivil

law re"ulatin" #ontra#ts. % (nd under (rti#le $&1$ of the sa/e Code,

:an0 person who is for%idden fro/ re#eivin" an0 donation under (rti#le

=6- #annot %e na/ed %ene<#iar0 of a <fe insuran#e poli#0 %0 the

person who #annot /a!e a donation to hi/. 4 Co//on+law spouses

are, de<nitel0, %arred fro/ re#eivin" donations fro/ ea#h other. (rti#le

=6- of the new Civil Code provides ;.CwphE1

The followin" donations shall %e void

1. hose %ade #etween persons who were guilt) of

adulter) or 'on'u#inage at the ti%e of donationI

Those /ade %etween persons found "uilt0 of the sa/e

#ri/inal oJense, in #onsideration thereofH

6. Those /ade to a pu%li# oG#er or his wife,

des#endants or as#endants %0 reason of his oG#e.

In the #ase referred to in No. 1, the a#tion for

de#laration of nullit0 /a0 %e %rou"ht %0 the spouse of

the donor or doneeH and the guilt of the donee %a) #e

pro!ed #) preponderan'e of e!iden'e in the sa%e

a'tion.

$. In essen#e, a life insuran#e poli#0 is no diJerent fro/ a #ivil donation

insofar as the %ene<#iar0 is #on#erned. ;oth are founded upon the

sa/e #onsideration li%eralit0. ( %ene<#iar0 is li!e a donee, %e#ause

fro/ the pre/iu/s of the poli#0 whi#h the insured pa0s out of

li%eralit0, the %ene<#iar0 will re#eive the pro#eeds or pro<ts of said

insuran#e. (s a #onse>uen#e, the pros#ription in (rti#le =6- of the new

Civil Code should e>uall0 operate in life insuran#e #ontra#ts. The

/andate of (rti#le $&1$ #annot %e laid aside an0 person who #annot

re#eive a donation #annot %e na/ed as %ene<#iar0 in the life insuran#e

poli#0 of the person who #annot /a!e the donation. 5 3nder (/eri#an

law, a poli#0 of life insuran#e is #onsidered as a testa/ent and in#onstruin" it, the #ourts will, so far as possi%le treat it as a will and

deter/ine the eJe#t of a #lause desi"natin" the %ene<#iar0 %0 rules

under whi#h wins are interpreted. 6

6. Poli#0 #onsiderations and di#tates of /oralit0 ri"htl0 ustif0 the

institution of a %arrier %etween #o//on law spouses in re#ord to

Propert0 relations sin#e su#h hip ulti/atel0 en#roa#hes upon the

nuptial and <lial ri"hts of the le"iti/ate fa/il0 There is ever0 reason to

hold that the %ar in donations %etween le"iti/ate spouses and those

%etween ille"iti/ate ones should %e enfor#ed in life insuran#e poli#ies

sin#e the sa/e are %ased on si/ilar #onsideration (s a%ove pointedout, a %ene<#iar0 in a <fe insuran#e poli#0 is no diJerent fro/ a donee.

;oth are re#ipients of pure %ene<#en#e. So lon" as /ana"e re/ains

the threshold of fa/il0 laws, reason and /oralit0 di#tate that the

i/pedi/ents i/posed upon /arried #ouple should li!ewise %e i/posed

upon eAtra+/arital relationship. If le"iti/ate relationship is

#ir#u/s#ri%ed %0 these le"al disa%ilities, with /ore reason should an

illi#it relationship %e restri#ted %0 these disa%ilities. Thus,

in Mata#uena !. (er!antes, / this Court, throu"h usti#e ernando,

said ;.CwphE1

If the poli#0 of the law is, in the lan"ua"e of the opinion

of the then usti#e .;.2. Re0es of that #ourt )Court of(ppeals*, Lto prohi%it donations in favor of the other

#onsort and his des#endants %e#ause of and undue

and i/proper pressure and inKuen#e upon the donor, a

preudi#e deepl0 rooted in our an#ient lawH: por+>ue no

se en"anen desponandose el uno al otro por a/or >ue

han de #onsunoL )(##ordin" to* the Partidas )Part I9,

Tit. I, 2(B I9*, reiteratin" the rationale LNo 7utuato

a/ore invi#e/ spoliarenturL the Pande#ts );!, $4, Titl.

1, De donat, inter viru/ et uAore/*H then there is ver0

6&



reason to appl0 the sa/e prohi%itive poli#0 to persons

livin" to"ether as hus%and and wife without the %ene<t

of nuptials. or it is not to %e dou%ted that assent to

su#h irre"ular #onne#tion for thirt0 0ears %espea!s

"reater inKuen#e of one part0 over the other, so that

the dan"er that the law see!s to avoid is

#orrespondin"l0 in#reased. 7oreover, as alread0

pointed out %0 3lpian )in his li%. 6$ ad Sa%inu/, fr. 1*,Lit would not %e ust that su#h donations should su%sist,

lest the #ondition 5f those who in#urred "uilt should

turn out to %e %etter.L So lon" as /arria"e re/ains the

#ornerstone of our fa/il0 law, reason and /oralit0

ali!e de/and that the disa%ilities atta#hed to /arria"e

should li!ewise atta#h to #on#u%ina"e.

It is hardl0 ne#essar0 to add that even in the a%sen#e

of the a%ove pronoun#e/ent, an0 other #on#lusion

#annot stand the test of s#rutin0. It would %e to indi#t

the fra/e of the Civil Code for a failure to appl0 alauda%le rule to a situation whi#h in its essentials

#annot %e distin"uished. 7oreover, if it is at all to %e

diJerentiated the poli#0 of the law whi#h e/%odies a

deepl0 rooted notion of what is ust and what is ri"ht

would %e nulli<ed if su#h irre"ular relationship instead

of %ein" visited with disa%ilities would %e attended with

%ene<ts. Certainl0 a le"al nor/ should not %e

sus#epti%le to su#h a reproa#h. If there is ever0 an0

o##asion where the prin#iple of statutor0 #onstru#tion

that what is within the spirit of the law is as /u#h a

part of it as what is written, this is it. Otherwise the

%asi# purpose dis#erni%le in su#h #odal provision wouldnot %e attained. Bhatever o/ission /a0 %e apparent

in an interpretation purel0 literal of the lan"ua"e used

/ust %e re/edied %0 an adheren#e to its avowed

o%e#tive.

4. Be do not thin! that a #onvi#tion for adulter0 or #on#u%ina"e is

eAa#ted %efore the disa%ilities /entioned in (rti#le =6- /a0

eJe#tuate. 7ore spe#i<#all0, with re#ord to the disa%ilit0 on :persons

who were "uilt0 of adulter0 or #on#u%ina"e at the ti/e of the

donation,: (rti#le =6- itself provides ;.CwphE1

In the #ase referred to in No. 1, the a#tion for

de#laration of nullit0 /a0 %e %rou"ht %0 the spouse of

the donor or doneeH and the guilt) of the donee %a)

#e pro!ed #) preponderan'e of e!iden'e in the sa%e

a'tion.

The unders#ored #lause neatl0 #onve0s that no #ri/inal #onvi#tion for

the oJense is a #ondition pre#edent. In fa#t, it #annot even %e fro/ the

afore>uoted provision that a prose#ution is needed. On the #ontrar0,

the law plainl0 states that the "uilt of the part0 /a0 %e proved :in the

sa/e a#tin" for de#laration of nullit0 of donation. (nd, it would %e

suG#ient if eviden#e preponderates upon the "uilt of the #onsort for

the oJense indi#ated. The >uantu/ of proof in #ri/inal #ases is not

de/anded.

In the #aw %efore 3s, the re>uisite proof of #o//on+law relationship%etween the insured and the %ene<#iar0 has %een #onvenientl0

supplied %0 the stipulations %etween the parties in the pre+trial

#onferen#e of the #ase. It #ase a"reed upon and stipulated therein that

the de#eased insured ;uenaventura C. E%rado was /arried to Pas#uala

E%rado with who/ she has siA le"iti/ate #hildrenH that durin" his

lifeti/e, the de#eased insured was livin" with his #o//on+law wife,

Carponia E%rado, with who/ he has two #hildren. These stipulations

are nothin" less than udi'ial ad%issions whi#h, as a #onse>uen#e, no

lon"er re>uire proof and #annot %e #ontradi#ted. 8 ( fortiori, on the

%asis of these ad/issions, a ud"/ent /a0 %e validl0 rendered without

"oin" throu"h the ri"ors of a trial for the sole purpose of provin" the

illi#it liaison %etween the insured and the %ene<#iar0. In fa#t, in that

pretrial, the parties even a"reed :that a de#ision %e rendered %ased on

this a"ree/ent and stipulation of fa#ts as to who a/on" the two

#lai/ants is entitled to the poli#0.:

(CCORDIN2, the appealed ud"/ent of the lower #ourt is here%0

aGr/ed. Carponia T. E%rado is here%0 de#lared dis>uali<ed to %e the

%ene<#iar0 of the late ;uenaventura C. E%rado in his life insuran#e

poli#0. (s a #onse>uen#e, the pro#eeds of the poli#0 are here%0 held

61



pa0a%le to the estate of the de#eased insured. Costs a"ainst Carponia

T. E%rado.

SO ORDERED.

G.R. No. L"%4200 Se&'ee* %0, 1982

REGINA L. EILLON, <'e- : 3e* 3un-, MARCIALEILLON, petitioners+appellants,

vs.

MANILA ANERS LIE INSURANCE COR!ORATION n- '3eCOURT O IRST INSTANCE O RI7AL, RANC# +, ?UE7ONCIT$, respondents+appellees.

J.K. 3a)lona for petitioners*appellants.

$. $. Re)es for respondents*appellees.

+AS?UE7, J.:

The >uestion of law raised in this #ase that usti<ed a dire#t appeal

fro/ a de#ision of the Court of irst Instan#e Rial, ;ran#h 9, Mueon

Cit0, to %e ta!en dire#tl0 to the Supre/e Court is whether or not the

a##eptan#e %0 the private respondent insuran#e #orporation of thepre/iu/ and the issuan#e of the #orrespondin" #erti<#ate of insuran#e

should %e dee/ed a waiver of the eA#lusionar0 #ondition of overa"e

stated in the said #erti<#ate of insuran#e.

The /aterial fa#ts are not in dispute. So/eti/e in (pril 1-5-, Car/en

O, 2apu applied with respondent insuran#e #orporation for insuran#e

#overa"e a"ainst a##ident and inuries. She <lled up the %lan!

appli#ation for/ "iven to her and <led the sa/e with the respondent

insuran#e #orporation. In the said appli#ation for/ whi#h was dated

(pril 1, 1-5-, she "ave the date of her %irth as ul0 11, 1-&4. On the

sa/e date, she paid the su/ of P$&.&& representin" the pre/iu/ for

whi#h she was issued the #orrespondin" re#eipt si"ned %0 an

authoried a"ent of the respondent insuran#e #orporation. )Rollo, p.

$=.* 3pon the <lin" of said appli#ation and the pa0/ent of the

pre/iu/ on the poli#0 applied for, the respondent insuran#e

#orporation issued to Car/en O. 2apu its Certi<#ate of Insuran#e No.

1$''55. )Rollo, p. $'.* The poli#0 was to %e eJe#tive for a period of -&da0s.

On 7a0 61, 1-5- or durin" the eJe#tivit0 of Certi<#ate of Insuran#e

No. 1$''5, Car/en O. 2apu died in a vehi#ular a##ident in the North

Diversion Road.

On une =, 1-5-, petitioner Re"ina 2. Edillon, a sister of the insured and

who was the na/ed %ene<#iar0 in the poli#0, <led her #lai/ for the

pro#eeds of the insuran#e, su%/ittin" all the ne#essar0 papers and

other re>uisites with the private respondent. @er #lai/ havin" %een

denied, Re"ina 2. Edillon instituted this a#tion in the Court of irstInstan#e of Rial on (u"ust $=, 1-5-.

In resistin" the #lai/ of the petitioner, the respondent insuran#e

#orporation relies on a provision #ontained in the Certi<#ate of

Insuran#e, eA#ludin" its lia%ilit0 to pa0 #lai/s under the poli#0 in %ehalf

of :persons who are under the a"e of siAteen )15* 0ears of a"e or over

the a"e of siAt0 )5&* 0ears ...: It is pointed out that the insured %ein"

over siAt0 )5&* 0ears of a"e when she applied for the insuran#e

#overa"e, the poli#0 was null and void, and no ris! on the part of the

respondent insuran#e #orporation had arisen therefro/.

The trial #ourt sustained the #ontention of the private respondent and

dis/issed the #o/plaintH ordered the petitioner to pa0 attorne0Ls fees

in the su/ of ONE T@O3S(ND )P1,&&&.&&* PESOS in favor of the

private respondentH and ordered the private respondent to return the

su/ of TBENT )P$&.&&* PESOS re#eived %0 wa0 of pre/iu/ on the

insuran#0 poli#0. It was reasoned out that a poli#0 of insuran#e %ein" a

#ontra#t of adhesion, it was the dut0 of the insured to !now the ter/s

of the #ontra#t he or she is enterin" intoH the insured in this #ase, upon

learnin" fro/ its ter/s that she #ould not have %een >uali<ed under

6$



the #onditions stated in said #ontra#t, what she should have done is

si/pl0 to as! for a refund of the pre/iu/ that she paid. It was further

ar"ued %0 the trial #ourt that the rulin" #allin" for a li%eral

interpretation of an insuran#e #ontra#t in favor of the insured and

stri#tl0 a"ainst the insurer /a0 not %e applied in the present #ase in

view of the pe#uliar fa#ts and #ir#u/stan#es o%tainin" therein.

Be RE9ERSE the ud"/ent of the trial #ourt. The a"e of the insuredCar/en &. 2apu was not #on#ealed to the insuran#e #o/pan0. @er

appli#ation for insuran#e #overa"e whi#h was on a printed for/

furnished %0 private respondent and whi#h #ontained ver0 few ite/s of

infor/ation #learl0 indi#ated her a"e of the ti/e of <lin" the sa/e to

%e al/ost 5 0ears of a"e. Despite su#h infor/ation whi#h #ould

hardl0 %e overloo!ed in the appli#ation for/, #onsiderin" its

pro/inen#e thereon and its /aterialit0 to the #overa"e applied for, the

respondent insuran#e #orporation re#eived her pa0/ent of pre/iu/

and issued the #orrespondin" #erti<#ate of insuran#e without >uestion.

The a##ident whi#h resulted in the death of the insured, a ris! #overed

%0 the poli#0, o##urred on 7a0 61, 1-5- or ORT+I9E )4* D(S after

the insuran#e #overa"e was applied for. There was suG#ient ti/e for

the private respondent to pro#ess the appli#ation and to noti#e that the

appli#ant was over 5& 0ears of a"e and there%0 #an#el the poli#0 on

that "round if it was /inded to do so. If the private respondent failed

to a#t, it is either %e#ause it was willin" to waive su#h dis>uali<#ationH

or, throu"h the ne"li"en#e or in#o/peten#e of its e/plo0ees for whi#h

it has onl0 itself to %la/e, it si/pl0 overloo!ed su#h fa#t. 3nder the

#ir#u/stan#es, the insuran#e #orporation is alread0 dee/ed in

estoppel. It ina#tion to revo!e the poli#0 despite a departure fro/ the

eA#lusionar0 #ondition #ontained in the said poli#0 #onstituted a waiver

of su#h #ondition, as was held in the #ase of :Mue Chee an vs. 2aw

3nion Insuran#e Co., 2td.,:, -' Phil. '. This #ase involved a #lai/ onan insuran#e poli#0 whi#h #ontained a provision as to the installation of

<re h0drants the nu/%er of whi#h depended on the hei"ht of the

eAternal wan peri/eter of the %ode"a that was insured. Bhen it was

deter/ined that the %ode"a should have eleven )11* <re h0drants in

the #o/pound as re>uired %0 the ter/s of the poli#0, instead of onl0

two )$* that it had, the #lai/ under the poli#0 was resisted on that

"round. In rulin" that the said deviation fro/ the ter/s of the poli#0

did not prevent the #lai/ under the sa/e, this Court stated the

followin"

Be are in a"ree/ent with the trial Court that the

appellant is %arred %0 waiver )or rather estoppel* to

#lai/ violation of the so+#alled <re h0drants warrant0,

for the reason that !nowin" full0 an that the nu/%er of

h0drants de/anded therein never eAisted fro/ the

ver0 %e"innin", the appellant nevertheless issued the

poli#ies in >uestion su%e#t to su#h warrant0, and

re#eived the #orrespondin" pre/iu/s. It would %eperilousl0 #lose to #onnivin" at fraud upon the insured

to allow appellant to #lai/ now as void a% initio the

poli#ies that it had issued to the plaintiJ without

warnin" of their fatal defe#t, of whi#h it was infor/ed,

and after it had /isled the defendant into %elievin"

that the poli#ies were eJe#tive.

The insuran#e #o/pan0 was aware, even %efore the

poli#ies were issued, that in the pre/ises insured there

were onl0 two <re h0drants installed %0 Mue Chee an

and two others near%0, owned %0 the /uni#ipalit0 of

Ta%a#o, #ontrar0 to the re>uire/ents of the warrant0 in

>uestion. Su#h fa#t appears fro/ positive testi/on0 for

the insured that appellantLs a"ents inspe#ted the

pre/isesH and the si/ple denials of appellantLs

representative )a/i#on* #an not over#o/e that proof.

That su#h inspe#tion was /ade it /oreover rendered

pro%a%le %0 its %ein" a prere>uisite for the <Ain" of the

dis#ount on the pre/iu/ to whi#h the insured was

entitled, sin#e the dis#ount depended on the nu/%er of

h0drants, and the <re <"htin" e>uip/ent availa%le

)See:LS#ale of (llowan#es: to whi#h the poli#ies were

eApressl0 /ade su%e#t*. The law, supported %0 a lon"line of #ases, is eApressed %0 (/eri#an urispruden#e

)9ol. $-, pp. 511+51$* to %e as follows

It is usuall0 held that where the insurer,

at the ti/e of the issuan#e of a poli#0

of insuran#e, has !nowled"e of eAistin"

fa#ts whi#h, if insisted on, would

invalidate the #ontra#t fro/ its ver0

in#eption, su#h !nowled"e #onstitutes

66



a waiver of #onditions in the #ontra#t

in#onsistent with the !nown fa#ts, and

the insurer is stopped thereafter fro/

assertin" the %rea#h of su#h

#onditions. The law is #harita%le

enou"h to assu/e, in the a%sen#e of

an0 showin" to the #ontrar0, that an

insuran#e #o/pan0 intends to eAe#utea valid #ontra#t in return for the

pre/iu/ re#eivedH and when the poli#0

#ontains a #ondition whi#h renders it

voida%le at its in#eption, and this result

is !nown to the insurer, it will %e

presu/ed to have intended to waive

the #onditions and to eAe#ute a %indin"

#ontra#t, rather than to have de#eived

the insured into thin!in" he is insured

when in fa#t he is not, and to have

ta!en is /one0 without #onsideration.L

)$- (/. ur., Insuran#e, se#tion '&=, at

pp. 511+51$.*

The reason for the rule is not diG#ult to

<nd.

The plain, hu/an usti#e of this

do#trine is perfe#tl0 apparent. To allow

a #o/pan0 to a##ept oneLs /one0 for a

poli#0 of insuran#e whi#h it then !nows

to %e void and of no eJe#t, thou"h it

!nows as it /ust, that the assured%elieves it to %e valid and %indin", is so

#ontrar0 to the di#tates of honest0 and

fair dealin", and so #losel0 related to

positive fraud, as to %e a%horent to

fair/inded /en. It would %e to allow

the #o/pan0 to treat the poli#0 as valid

lon" enou"h to "et the pre/iu/ on it,

and leave it at li%ert0 to repudiate it

the neAt /o/ent. This #annot %e

dee/ed to %e the real intention of the

parties. To hold that a literal

#onstru#tion of the poli#0 eApressed

the true intention of the #o/pan0

would %e to indi#t it, for fraudulent

purposes and desi"ns whi#h we #annot

%elieve it to %e "uilt0 of )5ilson !s.

(o%%er'ial Lnion Assuran'e (o., -5(tl. 4&, 4644*.

( si/ilar view was upheld in the #ase of Capital Insuran#e Suret0

Co., In#. vs. Plasti# Era Co., In#., 5 SCR( 164, whi#h involved a

violation of the provision of the poli#0 re>uirin" the pa0/ent of

pre/iu/s %efore the insuran#e shall %e#o/e eJe#tive. The #o/pan0

issued the poli#0 upon the eAe#ution of a pro/issor0 note for the

pa0/ent of the pre/iu/. ( #he#! "iven su%se>uent %0 the insured as

partial pa0/ent of the pre/iu/ was dishonored for la#! of funds.

Despite su#h deviation fro/ the ter/s of the poli#0, the insurer was

held lia%le.

Si"ni<#antl0, in the #ase %efore 3s the Capital

Insuran#e a##epted the pro/ise of Plasti# Era to pa0

the insuran#e pre/iu/ within thirt0 )6&* da0s fro/ the

eJe#tive date of poli#0. ;0 so doin", it has i/pliedl0

a"reed to /odif0 the tenor of the insuran#e poli#0 and

in eJe#t, waived the provision therein that it would

onl0 pa0 for the loss or da/a"e in #ase the sa/e

o##urs after the pa0/ent of the pre/iu/. Considerin"

that the insuran#e poli#0 is silent as to the /ode of

pa0/ent, Capital Insuran#e is dee/ed to have

a##epted the pro/issor0 note in pa0/ent of thepre/iu/. This rendered the poli#0 i//ediatel0

operative on the date it was delivered. The view ta!en

in /ost #ases in the 3nited States

... is that althou"h one of #onditions of

an insuran#e poli#0 is that :it shall not

%e valid or %indin" until the <rst

pre/iu/ is paid:, if it is silent as to the

64



/ode of pa0/ent, pro/issor0 notes

re#eived %0 the #o/pan0 /ust %e

dee/ed to have %een a##epted in

pa0/ent of the pre/iu/. In other

words, a re>uire/ent for the pa0/ent

of the <rst or initial pre/iu/ in

advan#e or a#tual #ash /a0 %e waived

%0 a##eptan#e of a pro/issor0 note...

B@EREORE, the ud"/ent appealed fro/ is here%0 RE9ERSED and

SET (SIDE. In lieu thereof, the private respondent insuran#e

#orporation is here%0 ordered to pa0 to the petitioner the su/ of TEN

T@O3S(ND )P1&,&&&.&&* PESOS as pro#eeds of Insuran#e Certi<#ate

No. 1$''55 with interest at the le"al rate fro/ 7a0 61, 1-5- until full0

paid, the further su/ of TBO T@O3S(ND )P$,&&&.&&* PESOS as and for

attorne0Ls fees, and the #osts of suit.

SO ORDERED.

G.R. No. L"%0685 M: %0, 198%

NG GAN 7EE, plaintiJ+appellee,

vs.

ASIAN CRUSAER LIE ASSURANCE COR!ORATION, defendant+

appellant.

Al#erto . L#a) for plainti7*appellee.

4antiago 3. A lidio for defendant*appellant.

ESCOLIN, J.:

This is an appeal fro/ the ud"/ent of the Court of irst Instan#e of

7anila, orderin" the appellant (sian+Crusader 2ife (ssuran#e

Corporation to pa0 the fa#e value of an insuran#e poli#0 issued on the

life of Qwon" Na/ the de#eased hus%and of appellee N" an Yee.

7isrepresentation and #on#eal/ent of /aterial fa#ts in o%tainin" the

poli#0 were pleaded to avoid the poli#0. The lower #ourt ree#ted the

appellantLs theor0 and ordered the latter to pa0 appellee :the a/ount

of P $&,&&&.&&, with interest at the le"al rate fro/ ul0 $4, 1-54, thedate of the <lin" of the #o/plaint, until paid, and the #osts. :

The Court of (ppeals #erti<ed this appeal to 3s, as the sa/e involves

solel0 a >uestion of law.

On 7a0 1$, 1-5$, Qwon" Na/ applied for a $&+0ear endow/ent

insuran#e on his life for the su/ of P$&,&&&.&&, with his wife, appellee

N" an Yee as %ene<#iar0. On the sa/e date, appellant, upon re#eipt

of the re>uired pre/iu/ fro/ the insured, approved the appli#ation

and issued the #orrespondin" poli#0. On De#e/%er 5, 1-56, Qwon"

Na/ died of #an#er of the liver with /etastasis. (ll pre/iu/s had %eenreli"iousl0 paid at the ti/e of his death.

On anuar0 1&, 1-54, his widow N" an Yee presented a #lai/ in due

for/ to appellant for pa0/ent of the fa#e value of the poli#0. On the

sa/e date, she su%/itted the re>uired proof of death of the insured.

(ppellant denied the #lai/ on the "round that the answers "iven %0

the insured to the >uestions appealin" in his appli#ation for life

insuran#e were untrue.

(ppellee %rou"ht the /atter to the attention of the Insuran#e

Co//issioner, the @on. ran#is#o . 7anda/us, and the latter, after

#ondu#tin" an investi"ation, wrote the appellant that he had found no

/aterial #on#eal/ent on the part of the insured and that, therefore,

appellee should %e paid the full fa#e value of the poli#0. This opinion of

the Insuran#e Co//issioner notwithstandin", appellant refused to

settle its o%li"ation.

(ppellant alle"ed that the insured was "uilt0 of /isrepresentation

when he answered :No: to the followin" >uestion appearin" in the

appli#ation for life insuran#e+

6



@as an0 life insuran#e #o/pan0 ever refused 0our

appli#ation for insuran#e or for reinstate/ent of a

lapsed poli#0 or oJered 0ou a poli#0 diJerent fro/ that

applied for If, so, na/e #o/pan0 and date.

In its %rief, appellant rationalied its thesis thus

... (s pointed out in the fore"oin" su//ar0 of theessential fa#ts in this #ase, the insured had in anuar0,

1-5$, applied for reinstate/ent of his lapsed life

insuran#e poli#0 with the Insular 2ife Insuran#e Co.,

2td, %ut this was de#lined %0 the insuran#e #o/pan0,

althou"h later on approved for reinstate/ent with a

ver0 hi"h pre/iu/ as a result of his /edi#al

eAa/ination. Thus notwithstandin" the said insured

answered LNoL to the a%oveF >uestion propounded to

hi/. ... 1

The lower #ourt found the ar"u/ent %ereft of fa#tual %asisH and Be>uote with approval its dis>uisition on the /atter+

On the <rst >uestion there is no eviden#e that the

Insular 2ife (ssuran#e Co., 2td. ever refused an0

appli#ation of Qwon" Na/ for insuran#e. Neither is

there an0 eviden#e that an0 other insuran#e #o/pan0

has refused an0 appli#ation of Qwon" Na/ for

insuran#e.

... The eviden#e shows that the Insular 2ife (ssuran#e

Co., 2td. approved Qwon" Na/Ls re>uest forreinstate/ent and a/end/ent of his lapsed insuran#e

poli#0 on (pril $4, 1-5$ EAh. 2+$ Stipulation of a#ts,

Sept. $$, 1-5*. The Court notes fro/ said appli#ation

for reinstate/ent and a/end/ent, EAh. L2L, that the

a/ount applied for was P$&,&&&.&& onl0 and not for

P&,&&&.&& as it was in the lapsed poli#0. The a/ount

of the reinstated and a/ended poli#0 was also for

P$&,&&&.&&. It results, therefore, that when on 7a0 1$,

1-5$ Qwon" Na/ answered LNoL to the >uestion

whether an0 life insuran#e #o/pan0 ever refused his

appli#ation for reinstate/ent of a lapsed poli#0 he did

not /isrepresent an0 fa#t.

... the eviden#e shows that the appli#ation of Qwon"

Na/ with the Insular 2ife (ssuran#e Co., 2td. was for

the reinstate/ent and a/end/ent of his lapsed

insuran#e poli#0+Poli#0 No. 65-61 +not an appli#ationfor a Lnew insuran#e poli#0. The Insular 2ife (ssuran#e

Co., 2td. approved the said appli#ation on (pril $4,

1-5$. Poli#0 No. 65-61 was reinstated for the a/ount

of P$&,&&&.&& as applied for %0 Qwon" Na/ EAhs. L2L,

L2+lL and L2+$LF. No new poli#0 was issued %0 the Insular

2ife (ssuran#e Co., 2td. to Qwon" Na/ in #onne#tion

with said appli#ation for reinstate/ent and

a/end/ent. Su#h %ein" the #ase, the Court <nds that

there is no /isrepresentation on this /atter. 2

(ppellant further /aintains that when the insured was eAa/ined in#onne#tion with his appli#ation for life insuran#e, he "ave the

appellantLs /edi#al eAa/iner false and /isleadin" infor/ation as to

his ail/ent and previous operation. The alle"ed false state/ents "iven

%0 Qwon" Na/ are as follows

Operated on for a Tu/or /a0o/aF of the sto/a#h.

Clai/s that Tu/or has %een asso#iated with ul#er of

sto/a#h. Tu/or ta!en out was hard and of a henLs e""

sie. Operation was two $F 0ears a"o in Chinese

eneral @ospital %0 Dr. ap. Now, #lai/s he is

#o/pletel0 re#overed.

To de/onstrate the insuredLs /isrepresentation, appellant dire#ts Our

attention to

1F The report of Dr. u Sun uan the ph0si#ian who treated Qwon"

Na/ at the Chinese eneral @ospital on 7a0 $$, 1-5&, i.e., a%out $

0ears %efore he applied for an insuran#e poli#0 on 7a0 1$, 1-5$.

(##ordin" to said report, Dr. u Sun uan had dia"nosed the patientLs

65



ail/ent as Lpepti# ul#erL for whi#h, an operation, !nown as a Lsu%+total

"astri# rese#tion was perfor/ed on the patient %0 Dr. Pa#i<#o apH and

$F The Sur"i#al Patholo"0 Report of Dr. Elias Pantan"#o showin" that

the spe#i/en re/oved fro/ the patientLs %od0 was La portion of the

sto/a#h /easurin" 1$ #/. and 1- #/. alon" the lesser #urvature with

a dia/eter of 1 #/. alon" the "reatest di/ension.

On the %ases of the a%ove undisputed /edi#al data showin" that the

insured was operated on for pepti# ul#er:, involvin" the eA#ision of a

portion of the sto/a#h, appellant ar"ues that the insuredLs state/ent

in his appli#ation that a tu/or, :hard and of a henLs e"" sie,: was

re/oved durin" said operation, #onstituted /aterial #on#eal/ent.

The >uestion to %e resolved /a0 %e propounded thus Bas appellant,

%e#ause of insuredLs aforesaid representation, /isled or de#eived into

enterin" the #ontra#t or in a##eptin" the ris! at the rate of pre/iu/

a"reed upon

The lower #ourt answered this >uestion in the ne"ative, and Be a"ree.

Se#tion $= of the Insuran#e 2aw (#t $4$=F provides

Se#. $=. Su#h part0 a #ontra#t of insuran#e /ust

#o//uni#ate to the other, in "ood faith, all fa#ts within

his !nowled"e whi#h are /aterial to the #ontra#t, and

whi#h the other has not the /eans of as#ertainin", and

as to whi#h he /a!es no warrant0. %

Thus, :#on#eal/ent eAists where the assured had !nowled"e of a fa#t/aterial to the ris!, and honest0, "ood faith, and fair dealin" re>uires

that he should #o//uni#ate it to the assurer, %ut he desi"nedl0 and

intentionall0 withholds the sa/e.: 4

It has also %een held :that the #on#eal/ent /ust, in the a%sen#e of

in>uiries, %e not onl0 /aterial, %ut fraudulent, or the fa#t /ust have

%een intentionall0 withheld.: 5

(ssu/in" that the aforesaid answer "iven %0 the insured is false, as

#lai/ed %0 the appellant. Se#. $= of the Insuran#e 2aw, a%ove+>uoted,

nevertheless re>uires that fraudulent intent on the part of the insured

%e esta%lished to entitle the insurer to res#ind the #ontra#t. (nd as

#orre#tl0 o%served %0 the lower #ourt, :/isrepresentation as a defense

of the insurer to avoid lia%ilit0 is an LaGr/ativeL defense. The dut0 to

esta%lish su#h a defense %0 satisfa#tor0 and #onvin#in" eviden#e rests

upon the defendant. The eviden#e %efore the Court does not #learl0and satisfa#toril0 esta%lish that defense.:

It %ears e/phasis that Qwon" Na/ had infor/ed the appellantLs

/edi#al eAa/iner that the tu/or for whi#h he was operated on was

:asso#iated with ul#er of the sto/a#h.: In the a%sen#e of eviden#e that

the insured had suG#ient /edi#al !nowled"e as to ena%le hi/ to

distin"uish %etween :pepti# ul#er: and :a tu/or:, his state/ent that

said tu/or was :asso#iated with ul#er of the sto/a#h, : should %e

#onstrued as an eApression /ade in "ood faith of his %elief as to the

nature of his ail/ent and operation. Indeed, su#h state/ent /ust %e

presu/ed to have %een /ade %0 hi/ without !nowled"e of its

in#orre#tness and without an0 deli%erate intent on his part to /islead

the appellant.

Bhile it /a0 %e #on#eded that, fro/ the viewpoint of a /edi#al eApert,

the infor/ation #o//uni#ated was i/perfe#t, the sa/e was

nevertheless suG#ient to have indu#ed appellant to /a!e further

in>uiries a%out the ail/ent and operation of the insured.

Se#tion 6$ of Insuran#e 2aw (#t No. $4$=1 provides as follows

Se#tion 6$. The ri"ht to infor/ation of /aterial fa#ts

/a0%e waived either %0 the ter/s of insuran#e or %0

ne"le#t to /a!e in>uiries as to su#h fa#ts where the0

are distin#tl0 i/plied in other fa#ts of whi#h

infor/ation is #o//uni#ated.

It has %een held that where, upon the fa#e of the appli#ation, a

>uestion appears to %e not answered at all or to %e i/perfe#tl0

answered, and the insurers issue a poli#0 without an0 further in>uir0,

6=



the0 waive the i/perfe#tion of the answer and render the o/ission to

answer /ore full0 i//aterial. 6

(s aptl0 noted %0 the lower #ourt, :if the ail/ent and operation of

Qwon" Na/ had su#h an i/portant %earin" on the >uestion of whether

the defendant would underta!e the insuran#e or not, the #ourt #annot

understand wh0 the defendant or its /edi#al eAa/iner did not /a!e

an0 further in>uiries on su#h /atters fro/ the Chinese eneral@ospital or re>uire #opies of the hospital re#ords fro/ the appellant

%efore a#tin" on the appli#ation for insuran#e. The fa#t of the /atter is

that the defendant was too ea"er to a##ept the appli#ation and re#eive

the insuredLs pre/iu/. It would %e ine>uita%le now to allow the

defendant to avoid lia%ilit0 under the #ir#u/stan#es.:

indin" no reversi%le error #o//itted %0 the trial #ourt, the ud"/ent

appealed fro/ is here%0 aGr/ed, with #osts a"ainst appellant (sian+

Crusader life (ssuran#e Corporation.

SO ORDERED.

G.R. No. 92492 June 1/, 199%

T#ELMA +A. E CANILANG, petitioner,

vs.

#ON. COURT O A!!EALS n- GREAT !ACIIC LIE ASSURANCECOR!ORATION, respondents.

4i%eon (. 4ato for petitioner.

FELICIANO, J.:

&n 1N une 1ON?, ai%e (anilang 'onsulted Dr. 5ilfredo B. (laudio and

was diagnosed as su7ering fro% Psinus ta'h)'ardia.P he do'tor

pres'ri#ed the following fro hi%Q razepa%, a tranuilizerI and Aptin, a

#eta*#lo'/er drug. Mr. (anilang 'onsulted the sa%e do'tor again on @

August 1ON? and this ti%e was found to ha!e Pa'ute #ron'hitis.P

&n next da), August 1ON?, ai%e (anilang applied for a Pnon*

%edi'alP insuran'e poli') with respondent Sreat "a'i' $ife Assuran'e

(o%pan) GPSreat "a'i'PH na%ing his wife, hel%a (anilang, as his

#ene'iar). 1 ai%e (anilang was issued ordinar) life insuran'e "oli')To. @=1U@, with the fa'e !alue of "1O,>VV, e7e'ti!e as of O August

1ON?.

&n = August 1ON@, ai%e (anilang died of P'ongesti!e heart failure,P

Pane%ia,P and P'hroni' ane%ia.P 2 "etitioner, widow and #ene'iar) of

the insured, led a 'lai% with Sreat "a'i' whi'h the insurer denied on

= De'e%#er 1ON@ upon the ground that the insured had 'on'ealed

%aterial infor%ation fro% it.

"etitioner then led a 'o%plaint against Sreat "a'i' with the

-nsuran'e (o%%ission for re'o!er) of the insuran'e pro'eeds. Duringthe hearing 'alled #) the -nsuran'e (o%%issioner, petitioner testied

that she was not aware of an) serious illness su7ered #) her late

hus#and 3 and that, as far as she /new, her hus#and had died #e'ause

of a /idne) disorder. 4 A deposition gi!en #) Dr. 5ilfredo (laudio was

presented #) petitioner. here Dr. (laudio stated that he was the

fa%il) ph)si'ian of the de'eased ai%e (anilang 5 and that he had

pre!iousl) treated hi% for Psinus ta'h)'ardiaP and Pa'ute

#ron'hitis.P 6 Sreat "a'i' for its part presented Dr. 2speranza

uis%orio, a ph)si'ian

and a %edi'al underwriter wor/ing for Sreat "a'i'. 7 4he testied that

the de'eased0s insuran'e appli'ation had #een appro!ed on the #asis

of his %edi'al de'laration. 8 4he explained that as a rule, %edi'alexa%inations are reuired onl) in 'ases where the appli'ant has

indi'ated in his appli'ation for insuran'e 'o!erage that he has

pre!iousl) undergone %edi'al 'onsultation and hospitalization. 9

-n a de'ision dated = To!e%#er 1ON=, -nsuran'e (o%%issioner

Ar%ando Ansaldo ordered Sreat "a'i' to pa) "1O,>VV plus legal

interest and "?,VVV.VV as attorne)0s fees after holding thatQ

6'



1. the ail%ent of ai%e (anilang was not so serious

that, e!en if it had #een dis'losed, it would not ha!e

a7e'ted Sreat "a'i'0s de'ision to insure hi%I

?. Sreat "a'i' had wai!ed its right to inuire into the

health 'ondition of the appli'ant #) the issuan'e of the

poli') despite the la'/ of answers to Pso%e of the

pertinent uestionsP in the insuran'e appli'ationI

@. there was no intentional 'on'eal%ent on the part of

the insured ai%e (anilang as he had thought that he

was %erel) su7ering fro% a %inor ail%ent and si%ple

'oldI 10 and

. Batas "a%#ansa Blg. N> whi'h !oids an insuran'e

'ontra't, whether or not 'on'eal%ent was intentionall)

%ade, was not appli'a#le to (anilang0s 'ase as that

law #e'a%e e7e'ti!e onl) on 1 une 1ON=.

&n appeal #) Sreat "a'i', the (ourt of Appeals re!ersed and set

aside the de'ision of the -nsuran'e (o%%issioner and dis%issed

hel%a (anilang0s 'o%plaint and Sreat "a'i'0s 'ounter'lai%. he

(ourt of Appealed found that the use of the word Pintentionall)P #) the

-nsuran'e (o%%issioner in dening and resol!ing the issue agreed

upon #) the parties at pre*trial #efore the -nsuran'e (o%%issioner was

not supported #) the e!iden'eI that the issue agreed upon #) the

parties had #een whether the de'eased insured, ai%e (anilang, %ade

a %aterial 'on'eal%ent as the state of his health at the ti%e of the

ling of insuran'e appli'ation, ustif)ing respondent0s denial of the

'lai%. he (ourt of Appeals also found that the failure of ai%e

(anilang to dis'lose pre!ious %edi'al 'onsultation and treat%ent

'onstituted %aterial infor%ation whi'h should ha!e #een

'o%%uni'ated to Sreat "a'i' to ena#le the latter to %a/e proper

inuiries. he (ourt of Appeals nall) held that the Tg San Zee 'ase

whi'h had in!ol!ed %isrepresentation was not appli'a#le in respe't of

the 'ase at #ar whi'h in!ol!es 'on'eal%ent.

"etitioner hel%a (anilang is now #efore this (ourt on a "etition for

Re!iew on (ertiorari alleging thatQ

1. . . . the 6onora#le (ourt of Appeals, spea/ing with

due respe't, erred in not holding that the issue in the

'ase agreed upon #etween the parties #efore the

-nsuran'e (o%%ission is whether or not ai%e

(anilang Pintentionall)P %ade %aterial 'on'eal%ent in

stating his state of healthI

?. . . . at an) rate, the non*dis'losure of 'ertain fa'tsa#out his pre!ious health 'onditions does not a%ount

to fraud and pri!ate respondent is dee%ed to ha!e

wai!ed inuir) thereto. 11

he %edi'al de'laration whi'h was set out in the appli'ation for

insuran'e exe'uted #) ai%e (anilang read as followsQ

M2D-(A$ D2($ARA-&T

- here#) de'lare thatQ

G1H - ha!e not #een 'onned in an) hospital, sanitariu%

or inr%ar), nor re'ei!e an) %edi'al or surgi'al

ad!i'eWattention within the last !e G=H )ears.

G?H - ha!e ne!er #een treated nor 'onsulted a

ph)si'ian for a heart 'ondition, high #lood pressure,

'an'er, dia#etes, lung, /idne), sto%a'h disorder, or

an) other ph)si'al i%pair%ent.

G@H - a%, to the #est of %) /nowledge, in good health.

2X(2"-&T4Q

YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY

YYYYYYYYYYYYYYYYYYYYYYYYY

S2T2RA$ D2($ARA-&T

6-



- here#) de'lare that all the foregoing answers and

state%ents are 'o%plete, true and 'orre't. -

here#)agree that if there #e an) fraud or

%isrepresentation in the a#o!e state%ents %aterial to

the ris/, the -T4LRAT(2 (&M"AT upon dis'o!er)

within two G?H )ears fro% the e7e'ti!e date of

insuran'e shall ha!e the right to de'lare su'h

insuran'e null and !oid. hat the lia#ilities of the(o%pan) under the said "oli')WAW(erti'ate shall

a''rue and #egin onl) fro% the date of

'o%%en'e%ent of ris/ stated in the

"oli')WAW(erti'ate, pro!ided that the rst pre%iu% is

paid and the "oli')WAW(erti'ate is deli!ered to, and

a''epted #) %e in person, when - a% in a'tual good

health.

4igned at Manila his th da) of August, 1OO?

-llegi#leFFFFFFFFFF

4ignature of Appli'ant.

5e agree with the (ourt of Appeals that the infor%ation whi'h ai%e

(anilang failed to dis'lose was %aterial to the a#ilit) of Sreat "a'i' to

esti%ate the pro#a#le ris/ he presented as a su#e't of life insuran'e.

6ad (anilang dis'losed his !isits to his do'tor, the diagnosis %ade and

%edi'ines pres'ri#ed #) su'h do'tor, in the insuran'e appli'ation, it

%a) #e reasona#l) assu%ed that Sreat "a'i' would ha!e %ade

further inuiries and would ha!e pro#a#l) refused to issue a non*

%edi'al insuran'e poli') or, at the !er) least, reuired a higher

pre%iu% for the sa%e 'o!erage. 15 he %aterialit) of the infor%ationwithheld #) Sreat "a'i' did not depend upon the state of %ind of

ai%e (anilang. A %an0s state of %ind or su#e'ti!e #elief is not

'apa#le of proof in our udi'ial pro'ess, ex'ept through proof of

external a'ts or failure to a't fro% whi'h inferen'es as to his

su#e'ti!e #elief %a) #e reasona#l) drawn. Teither does %aterialit)

depend upon the a'tual or ph)si'al e!ents whi'h ensue. Materialit)

relates rather to the Ppro#a#le and reasona#le inuen'e of the fa'tsP

upon the part) to who% the 'o%%uni'ation should ha!e #een %ade,

in assessing the ris/ in!ol!ed in %a/ing or o%itting to %a/e further

inuiries and in a''epting the appli'ation for insuran'eI that Ppro#a#le

and reasona#le inuen'e of the fa'tsP 'on'ealed %ust, of 'ourse, #e

deter%ined o#e'ti!el), #) the udge ulti%atel).

he insuran'e Sreat "a'i' applied for was a Pnon*%edi'alP insuran'e

poli'). -n 4aturnino !. "hilippine*A%eri'an $ife -nsuran'e

(o%pan), 16 this (ourt held thatQ

. . . if an)thing, the wai!er of %edi'al exa%ination [in a

non*%edi'al insuran'e 'ontra't\ renders e!en %ore

%aterial the infor%ation reuired of the appli'ant

'on'erning pre!ious 'ondition of health and diseases

su7ered, for su'h infor%ation ne'essaril) 'onstitutes

an i%portant fa'tor whi'h the insurer ta/es into

'onsideration in de'iding whether to issue the poli') or

not . . . . 17 G2%phasis suppliedH

he -nsuran'e (o%%issioner had also ruled that the failure of Sreat"a'i' to 'on!e) 'ertain infor%ation to the insurer was not

PintentionalP in nature, for the reason that ai%e (anilang #elie!ed that

he was su7ering fro% %inor ail%ent li/e a 'o%%on 'old. 4e'tion ?> of

the -nsuran'e (ode of 1O>N as it existed fro% 1O> up to 1ON=, that is,

throughout the ti%e range %aterial for present purposes, pro!ided

thatQ

4e'. ?>. A 'on'eal%ent entitles the inured part) to

res'ind a 'ontra't of insuran'e.

he pre'eding statute, A't To. ??>, as it stood fro% 1O1 up

to 1O>, had pro!idedQ

4e'. ?U. A 'on'eal%ent, whether intentional or

unintentional, entitles the inured part) to res'ind a

'ontra't of insuran'e. G2%phasis suppliedH

Lpon the other hand, in 1ON=, the -nsuran'e (ode of 1O>N was

a%ended #)

4&



B.". Blg. N>. his su#seuent statute %odied 4e'tion ?> of the

-nsuran'e (ode of 1O>N so as to read as followsQ

4e'. ?>. A 'on'eal%ent whether intentional or

unintentional entitles the inured part) to res'ind a

'ontra't of insuran'e. G2%phasis suppliedH

he unspo/en theor) of the -nsuran'e (o%%issioner appears to ha!e#een that #) deleting the phrase Pintentional or unintentional,P the

-nsuran'e (ode of 1O>N Gprior to its a%end%ent #) B.". Blg. N>H

intended to li%it the /inds of 'on'eal%ent whi'h generate a right to

res'ind on the part of the inured part) to Pintentional 'on'eal%ents.P

his argu%ent is not persuasi!e. As a si%ple %atter of gra%%ar, it

%a) #e noted that PintentionalP and PunintentionalP 'an'el ea'h other

out. he net result therefore of the phrase Pwhether intentional or

unitentionalP is pre'isel) to lea!e unualied the ter% P'on'eal%ent.P

hus, 4e'tion ?> of the -nsuran'e (ode of 1O>N is properl) read as

referring to Pan) 'on'eal%entP without regard to whether su'h

'on'eal%ent is intentional or unintentional. he phrase Pwhetherintentional or unintentionalP was in fa't superuous. he deletion of

the phrase Pwhether intentional or unintentionalP 'ould not ha!e had

the e7e't of i%posing an a+r%ati!e reuire%ent that a 'on'eal%ent

%ust #e intentional if it is to entitle the inured part) to res'ind a

'ontra't of insuran'e. he restoration in 1ON= #) B.". Blg. N> of the

phrase Pwhether intentional or unintentionalP %erel) unders'ored the

fa't that all throughout Gfro% 1O1 to 1ON=H, the statute

did not reuire proof that 'on'eal%ent %ust #e PintentionalP in order

to authorize res'ission #) the inured part).

-n an) 'ase, in the 'ase at #ar, the nature of the fa'ts not 'on!e)ed to

the insurer was su'h that the failure to 'o%%uni'ate %ust ha!e#een intentional rather than %erel) inad!ertent. 3or ai%e (anilang

'ould not ha!e #een unaware that his heart #eat would at ti%es rise to

high and alar%ing le!els and that he had 'onsulted a do'tor twi'e in

the two G?H %onths #efore appl)ing for non*%edi'al insuran'e. -ndeed,

the last %edi'al 'onsultation too/ pla'e ust the da) #efore the

insuran'e appli'ation was led. -n all pro#a#ilit), ai%e (anilang went

to !isit his do'tor pre'isel) #e'ause of the dis'o%fort and 'on'ern

#rought a#out #) his experien'ing Psinus ta'h)'ardia.P

5e nd it di+'ult to ta/e seriousl) the argu%ent that Sreat "a'i'

had wai!ed inuir) into the 'on'eal%ent #) issuing the insuran'e

poli') notwithstanding (anilang0s failure to set out answers to so%e of

the uestions in the insuran'e appli'ation. 4u'h failure pre'isel)

'onstituted 'on'eal%ent on the part of (anilang. "etitioner0s

argu%ent, if a''epted, would o#!iousl) erase 4e'tion ?> fro% the

-nsuran'e (ode of 1O>N.

-t re%ains onl) to note that the (ourt of Appeals nding that the

parties had not agreed in the pretrial #efore the -nsuran'e (o%%ission

that the rele!ant issue was whether or not ai%e (anilang

had intentionall) 'on'ealed %aterial infor%ation fro% the insurer, was

supported #) the e!iden'e of re'ord, i.e., the "re*trial &rder itself

dated 1> &'to#er 1ON and the Minutes of the "re*trial (onferen'e

dated 1= &'to#er 1ON, whi'h Preadil) shows that the word

PintentionalP does not appear in the state%ent or denition of the

issue in the said &rder and Minutes.P 18

562R23&R2, the "etition for Re!iew is D2T-2D for la'/ of %erit andthe De'ision of the (ourt of Appeals dated 1U &'to#er 1ONO in (.A.*

S.R. 4" To. VNUOU is here#) A33-RM2D. To pronoun'e%ent as to the

'osts.

4& &RD2R2D.

G.R. No. 1051%5 June 22, 1995

SUNLIE ASSURANCE COM!AN$ O CANAA, petitioner,

vs.

T3e #on. COURT O A!!EALS n- S&oue ROLANO n-ERNARA ACANI, respondents.

41



?UIASON, J.:

This is a petition for review for 'ertiorari under Rule 4 of the Revised

Rules of Court to reverse and set aside the De#ision dated e%ruar0 $1,

1--$ of the Court of (ppeals in C(+.R. C9 No. $-&5', and its

Resolution dated (pril $$, 1--$, den0in" re#onsideration thereof.

Be "rant the petition.

I

On (pril 1, 1-'5, Ro%ert ohn ;. ;a#ani pro#ured a life insuran#e

#ontra#t for hi/self fro/ petitioner. @e was issued Poli#0 No. 6+-&6+

=55+ valued at P1&&,&&&.&&, with dou%le inde/nit0 in #ase of

a##idental death. The desi"nated %ene<#iar0 was his /other,

respondent ;ernarda ;a#ani.

On une $5, 1-'=, the insured died in a plane #rash. Respondent

;ernarda ;a#ani <led a #lai/ with petitioner, see!in" the %ene<ts ofthe insuran#e poli#0 ta!en %0 her son. Petitioner #ondu#ted an

investi"ation and its <ndin"s pro/pted it to ree#t the #lai/.

In its letter, petitioner infor/ed respondent ;ernarda ;a#ani, that the

insured did not dis#lose /aterial fa#ts relevant to the issuan#e of the

poli#0, thus renderin" the #ontra#t of insuran#e voida%le. ( #he#!

representin" the total pre/iu/s paid in the a/ount of P1&,1=$.&& was

atta#hed to said letter.

Petitioner #lai/ed that the insured "ave false state/ents in his

appli#ation when he answered the followin" >uestions

. Bithin the past 0ears have 0ou

a* #onsulted an0 do#tor or other health

pra#titioner

%* su%/itted to

E

+ra0s

%lood tests

other tests

#* attended or %een ad/itted to an0

hospital or other /edi#al fa#ilit0

5. @ave 0ou ever had or sou"ht advi#e for

AAA AAA AAA

%* urine, !idne0 or %ladder disorder )Rollo, p. 6*

The de#eased answered >uestion No. )a* in the aGr/ative %ut li/ited

his answer to a #onsultation with a #ertain Dr. Reinaldo D. Ra0/undo of

the Chinese eneral @ospital on e%ruar0 1-'5, for #ou"h and Ku

#o/pli#ations. The other >uestions were answered in the ne"ative

)Rollo, p. 6*.

Petitioner dis#overed that two wee!s prior to his appli#ation for

insuran#e, the insured was eAa/ined and #on<ned at the 2un" Center

of the Philippines, where he was dia"nosed for renal failure. Durin" his

#on<ne/ent, the de#eased was su%e#ted to urinal0sis, ultra+

sono"raph0 and he/atolo"0 tests.

On Nove/%er 1=, 1-'', respondent ;ernarda ;a#ani and her hus%and,

respondent Rolando ;a#ani, <led an a#tion for spe#i<# perfor/an#e

a"ainst petitioner with the Re"ional Trial Court, ;ran#h 1-1,

9alenuela, 7etro 7anila. Petitioner <led its answer with #ounter#lai/and a list of eAhi%its #onsistin" of /edi#al re#ords furnished %0 the

2un" Center of the Philippines.

On anuar0 14, 1--&, private respondents <led a :Proposed Stipulation

with Pra0er for Su//ar0 ud"/ent: where the0 /anifested that the0

:have no eviden#e to refute the do#u/entar0 eviden#e of

#on#eal/ent8/isrepresentation %0 the de#edent of his health #ondition

)Rollo, p. 5$*.

4$



Petitioner <led its Re>uest for (d/issions relative to the authenti#it0

and due eAe#ution of several do#u/ents as well as alle"ations

re"ardin" the health of the insured. Private respondents failed to

oppose said re>uest or repl0 thereto, there%0 renderin" an ad/ission

of the /atters alle"ed.

Petitioner then /oved for a su//ar0 ud"/ent and the trial #ourt

de#ided in favor of private respondents. The dispositive portion of thede#ision is reprodu#ed as follows

B@EREORE, ud"/ent is here%0 rendered in favor of

the plaintiJs and a"ainst the defendant, #onde/nin"

the latter to pa0 the for/er the a/ount of One

@undred Thousand Pesos )P1&&,&&&.&&* the fa#e value

of insuredLs Insuran#e Poli#0 No. 6-&6=55, and the

(##idental Death ;ene<t in the a/ount of One

@undred Thousand Pesos )P1&&,&&&.&&* and further

su/ of P,&&&.&& in the #on#ept of reasona%le

attorne0Ls fees and #osts of suit.

DefendantLs #ounter#lai/ is here%0 Dis/issed )Rollo,

pp. 46+44*.

In rulin" for private respondents, the trial #ourt #on#luded that the

fa#ts #on#ealed %0 the insured were /ade in "ood faith and under a

%elief that the0 need not %e dis#losed. 7oreover, it held that the health

histor0 of the insured was i//aterial sin#e the insuran#e poli#0 was

:non+/edi#al:.

Petitioner appealed to the Court of (ppeals, whi#h aGr/ed the

de#ision of the trial #ourt. The appellate #ourt ruled that petitioner

#annot avoid its o%li"ation %0 #lai/in" #on#eal/ent %e#ause the #ause

of death was unrelated to the fa#ts #on#ealed %0 the insured. It also

sustained the <ndin" of the trial #ourt that /atters relatin" to the

health histor0 of the insured were irrelevant sin#e petitioner waived the

/edi#al eAa/ination prior to the approval and issuan#e of the

insuran#e poli#0. 7oreover, the appellate #ourt a"reed with the trial

#ourt that the poli#0 was :non+/edi#al: )Rollo, pp. 4+*.

PetitionerLs /otion for re#onsideration was deniedH hen#e, this petition.

II

Be reverse the de#ision of the Court of (ppeals.

The rule that fa#tual <ndin"s of the lower #ourt and the appellate #ourt

are %indin" on this Court is not a%solute and ad/its of eA#eptions,

su#h as when the ud"/ent is %ased on a /isappre#iation of the fa#ts

)eroni/o v. Court of (ppeals, $$4 SCR( 4-4 1--6F*.

In wei"hin" the eviden#e presented, the trial #ourt #on#luded that

indeed there was #on#eal/ent and /isrepresentation, however, the

sa/e was /ade in :"ood faith: and the fa#ts #on#ealed or

/isrepresented were irrelevant sin#e the poli#0 was :non+/edi#al:. Be

disa"ree.

Se#tion $5 of The Insuran#e Code is eApli#it in re>uirin" a part0 to a

#ontra#t of insuran#e to #o//uni#ate to the other, in "ood faith, allfa#ts within his !nowled"e whi#h are /aterial to the #ontra#t and as to

whi#h he /a!es no warrant0, and whi#h the other has no /eans of

as#ertainin". Said Se#tion provides

( ne"le#t to #o//uni#ate that whi#h a part0 !nows

and ou"ht to #o//uni#ate, is #alled #on#eal/ent.

7aterialit0 is to %e deter/ined not %0 the event, %ut solel0 %0 the

pro%a%le and reasona%le inKuen#e of the fa#ts upon the part0 to who/

#o//uni#ation is due, in for/in" his esti/ate of the disadvanta"es of

the proposed #ontra#t or in /a!in" his in>uiries )The Insuran#e Code,Se#. 61*.

The ter/s of the #ontra#t are #lear. The insured is spe#i<#all0 re>uired

to dis#lose to the insurer /atters relatin" to his health.

The infor/ation whi#h the insured failed to dis#lose were /aterial and

relevant to the approval and issuan#e of the insuran#e poli#0. The

/atters #on#ealed would have de<nitel0 aJe#ted petitionerLs a#tion on

46



his appli#ation, either %0 approvin" it with the #orrespondin"

adust/ent for a hi"her pre/iu/ or ree#tin" the sa/e. 7oreover, a

dis#losure /a0 have warranted a /edi#al eAa/ination of the insured

%0 petitioner in order for it to reasona%l0 assess the ris! involved in

a##eptin" the appli#ation.

In Kda. de (anilang ! . (ourt of Appeals, $$6 SCR( 446 )1--6*, we held

that /aterialit0 of the infor/ation withheld does not depend on thestate of /ind of the insured. Neither does it depend on the a#tual or

ph0si#al events whi#h ensue.

Thus, :"oad faith: is no defense in #on#eal/ent. The insuredLs failure

to dis#lose the fa#t that he was hospitalied for two wee!s prior to

<lin" his appli#ation for insuran#e, raises "rave dou%ts a%out

his #onades. It appears that su#h #on#eal/ent was deli%erate on his

part.

The ar"u/ent, that petitionerLs waiver of the /edi#al eAa/ination of

the insured de%un!s the /aterialit0 of the fa#ts #on#ealed, isuntena%le. Be reiterate our rulin" in 4aturnino !. "hilippine A%eri'an

$ife -nsuran'e (o%pan) , = SCR( 615 )1-56*, that : . . . the waiver of a

/edi#al eAa/ination in a non+/edi#al insuran#e #ontra#tF renders

even /ore /aterial the infor/ation re>uired of the appli#ant

#on#ernin" previous #ondition of health and diseases suJered, for su#h

infor/ation ne#essaril0 #onstitutes an i/portant fa#tor whi#h the

insurer ta!es into #onsideration in de#idin" whether to issue the poli#0

or not . . . :

7oreover, su#h ar"u/ent of private respondents would /a!e Se#tion

$= of the Insuran#e Code, whi#h allows the inured part0 to res#ind a

#ontra#t of insuran#e where there is #on#eal/ent, ineJe#tive )4ee 9da.

de Canilan" v. Court of (ppeals, supra*.

(nent the <ndin" that the fa#ts #on#ealed had no %earin" to the #ause

of death of the insured, it is well settled that the insured need not die

of the disease he had failed to dis#lose to the insurer. It is suG#ient

that his non+dis#losure /isled the insurer in for/in" his esti/ates of

the ris!s of the proposed insuran#e poli#0 or in /a!in" in>uiries

)@enson v. The Philippine (/eri#an 2ife Insuran#e Co., 5 O.. No. 4'

1-5&F*.

Be, therefore, rule that petitioner properl0 eAer#ised its ri"ht to res#ind

the #ontra#t of insuran#e %0 reason of the #on#eal/ent e/plo0ed %0

the insured. It /ust %e e/phasied that res#ission was eAer#ised

within the two+0ear #ontesta%ilit0 period as re#o"nied in Se#tion 4' of

The Insuran#e Code.

B@EREORE, the petition is R(NTED and the De#ision of the Court of

(ppeals is RE9ERSED and SET (SIDE.

SO ORDERED.

@G.R. No. 820%6. M: 22, 199/

TRA+ELLERS INSURANCE B SURET$ COR!ORATION, petitioner,

v. #ON. COURT O A!!EALS n- +ICENTEMENO7A, repon!ent.

E C I S I O N

#ERMOSISIMA, JR., J.

The petition herein see!s the review and reversal of the

de#ision1F of respondent Court of (ppeals$F aGr/in" in toto the ud"/ent6F of the Re"ional Trial Court 4F in an a#tion for da/a"esF <led

%0 private respondent 9i#ente 7endoa, r. as heir of his /other who

was !illed in a vehi#ular a##ident.

;efore the trial #ourt, the #o/plainant lu/ped the errin" taAi#a%

driver, the owner of the taAi#a%, and the alle"ed insurer of the vehi#le

whi#h featured in the vehi#ular a##ident into one #o/plaint. The errin"

44

http://sc.judiciary.gov.ph/jurisprudence/1997/may1997/82036.htm#_edn1














taAi#a% was alle"edl0 #overed %0 a third+part0 lia%ilit0 insuran#e poli#0

issued %0 petitioner Travellers Insuran#e Suret0 Corporation.

The eviden#e presented %efore the trial #ourt esta%lished the

followin" fa#ts

(t a%out 6& o#lo#! in the /ornin" of ul0 $&, 1-'&, a ='+0ear old

wo/an %0 the na/e of elia 9inea de 7endoa was on her wa0 tohear /ass at the Ta0u/an Cathedral. Bhile wal!in" alon" Ta0u/an

#orner re"orio Perfe#to Streets, she was %u/ped %0 a taAi that was

runnin" fast. Several persons witnessed the a##ident, a/on" who/

were Rolando 7arvilla, Ernesto 2ope and Eulo"io Ta%alno. (fter the

%u/pin", the old wo/an was seen sprawled on the pave/ent. Ri"ht

awa0, the "ood Sa/aritan that he was, 7arvilla ran towards the old

wo/an and held her on his lap to in>uire fro/ her what had happened,

%ut o%viousl0 she was alread0 in sho#! and #ould not tal!. (t this

/o/ent, a private eep stopped. Bith the driver of that vehi#le, the two

helped %oard the old wo/an on the eep and %rou"ht her to the 7ar0

ohnston @ospital in Tondo.

A A A Ernesto 2ope, a driver of a passen"er eepne0 pl0in" alon"

Ta0u/an Street fro/ Pritil, Tondo, to Rial (venue and vi#e+versa, also

witnessed the in#ident. It was on his return trip fro/ Rial (venue when

2ope saw the plaintiJ and his %rother who were #r0in" near the s#ene

of the a##ident. 3pon learnin" that the two were the sons of the old

wo/an, 2ope told the/ what had happened. The 7endoa %rothers

were then a%le to tra#e their /other at the 7ar0 ohnston @ospital

where the0 were advised %0 the attendin" ph0si#ian that the0 should

%rin" the patient to the National Orthopedi# @ospital %e#ause of her

fra#tured %ones. Instead, the vi#ti/ was %rou"ht to the 3.S.T. @ospital

where she eApired at -&& o#lo#! that sa/e /ornin". Death was #aused%0 trau/ati# sho#! as a result of the severe inuries she sustained A A A

A.

A A A The eviden#e shows that at the /o/ent the vi#ti/ was %u/ped

%0 the vehi#le, the latter was runnin" fast, so /u#h so that %e#ause of

the stron" i/pa#t the old wo/an was thrown awa0 and she fell on the

pave/ent. A A A In truth, in that related #ri/inal #ase a"ainst defendant

Du/lao A A A the trial #ourt found as a fa#t that therein a##used was

drivin" the su%e#t taAi#a% in a #areless, re#!less and i/prudent

/anner and at a speed "reater than what was reasona%le and proper

without ta!in" the ne#essar0 pre#aution to avoid a##ident to persons A

A A #onsiderin" the #ondition of the traG# at the pla#e at the ti/e

afore/entioned A A A. 7oreover, the driver Ked fro/ the s#ene of the

a##ident and without renderin" assistan#e to the vi#ti/. A A A

A A A Three )6* witnesses who were at the s#ene at the ti/e identi<edthe taAi involved, thou"h not ne#essaril0 the driver thereof. 7arvilla saw

a lone taAi speedin" awa0 ust after the %u/pin" whi#h, when it passed

%0 hi/, said witness noti#ed to %e a 2ad0 2ove TaAi with Plate No. 46',

painted /aroon, with %a""a"e %ar atta#hed on the %a""a"e

#o/part/ent and with an antenaesi#F atta#hed at the ri"ht rear

side.The sa/e des#riptions were revealed %0 Ernesto 2ope, who further

des#ri%ed the taAi to have A A A reKe#toried de#orations on the ed"es

of the "lass at the %a#!. A A A ( third witness in the person of Eulo"io

Ta%alno A A A /ade si/ilar des#riptions althou"h, %e#ause of the fast

speed of the taAi, he was onl0 a%le to dete#t the last di"it of the plate

nu/%er whi#h is '. A A A TFhe poli#e pro#eeded to the "ara"e of 2ad0

2ove TaAi and then and there the0 too! possession of su#h a taAi and

later i/pounded it in the i/poundin" area of the a"en#0 #on#erned. A A

A TFhe e0ewitnesses A A A were unani/ous in pointin" to that 2ad0

2ove TaAi with Plate No. 46', o%viousl0 the vehi#le involved herein.

A A A Durin" the investi"ation, defendant (r/ando (%ellon, the

re"istered owner of 2ad0 2ove TaAi %earin" No. 46'+@( Pilipinas TaAi

1-'&, #erti<ed to the fa#t that the vehi#le was driven last ul0 $&, 1-'&

%0 one Rodri"o Du/lao A A A A A A It was on the %asis of this aGdavit of

the re"istered owner that #aused the poli#e to apprehend Rodri"o

Du/lao, and #onse>uentl0 to have hi/ prose#uted and eventuall0

#onvi#ted of the oJense A A A. A A A SFaid Du/lao a%s#onded in that#ri/inal #ase, spe#iall0 at the ti/e of the pro/ul"ation of the ud"/ent

therein so /u#h so that he is now a fu"itive fro/ usti#e.5F

Private respondent <led a #o/plaint for da/a"es a"ainst

(r/ando (%ellon as the owner of the 2ad0 2ove TaAi and Rodri"o

Du/lao as the driver of the 2ad0 2ove taAi#a% that %u/ped private

respondents /other. Su%se>uentl0, private respondent a/ended his

4





#o/plaint to in#lude petitioner as the #o/pulsor0 insurer of the said

taAi#a% under Certi<#ate of Cover No. 144=='+6.

(fter trial, the trial #ourt rendered ud"/ent in favor of private

respondent, the dispositive portion of whi#h reads

B@EREORE, ud"/ent is here%0 rendered in favor of the plaintiJ, or

/ore parti#ularl0 the @eirs of the late elia 9inea de 7endoa, anda"ainst defendants Rodri"o Du/lao, (r/ando (%ellon and Travellers

Insuran#e and Suret0 Corporation, %0 orderin" the latter to pa0, ointl0

and severall0, the for/er the followin" a/ounts

GaH he su% of "?,O?.>V, as a'tual and 'o%pensator) da%ages, with

interest thereon at the rate of 1?] per annu% fro% &'to#er 1>, 1ONV,

when the 'o%plaint was led, until the said a%ount is full) paidI

G#H "@V,VVV.VV as death inde%nit)I

G'H "?=,VVV.VV as %oral da%agesI

GdH "1V,VVV.VV as #) wa) of 'orre'ti!e or exe%plar) da%agesI and

GeH Another "1V,VVV.VV #) wa) of attorne)s fees and other litigation

expenses.

Defendants are further ordered to pa0, ointl0 and severall0, the #osts

of this suit.

SO ORERE.=F

Petitioner appealed fro/ the afore#ited de#ision to the respondent

Court of (ppeals. The de#ision of the trial #ourt was aGr/ed %0

respondent appellate #ourt. Petitioners 7otion for Re#onsideration'F of

Septe/%er $$, 1-'= was denied in a Resolution-F dated e%ruar0 -,

1-''.

@en#e this petition.

Petitioner /ainl0 #ontends that it did not issue an insuran#e poli#0

as #o/pulsor0 insurer of the 2ad0 2ove TaAi and that,

assu/in" arguendo that it had indeed #overed said taAi#a% for third+

part0 lia%ilit0 insuran#e, private respondent failed to <le a written

noti#e of #lai/ with petitioner as re>uired %0 Se#tion 6'4 of P.D. No.

51$, otherwise !nown as the Insuran#e Code.

Be <nd the petition to %e /eritorious.

I

Bhen private respondent <led his a/ended #o/plaint to i/plead

petitioner as part0 defendant and therein alle"ed that petitioner was

the third+part0 lia%ilit0 insurer of the 2ad0 2ove taAi#a% that fatall0 hit

private respondents /other, private respondent did not atta#h a #op0

of the insuran#e #ontra#t to the a/ended #o/plaint. Private

respondent does not den0 this o/ission.

It is si"ni<#ant to point out at this un#ture that the ri"ht of a thirdperson to sue the insurer depends on whether the #ontra#t of

insuran#e is intended to %ene<t third persons also or onl0 the insured.

(F poli#0 A A A where%0 the insurer a"reed to inde/nif0 the insured

a"ainst all su/s A A A whi#h the Insured shall %e#o/e le"all0 lia%le to

pa0 in respe#t of a. death of or %odil0 inur0 to an0 person A A A is one

for inde/nit0 a"ainst lia%ilit0H fro/ the fa#t then that the insured is

lia%le to the third person, su#h third person is entitled to sue the

insurer.

The ri"ht of the person inured to sue the insurer of the part0 at fault)insured*, depends on whether the #ontra#t of insuran#e is intended to

%ene<t third persons also or on the insured. (nd the test applied has

%een this Bhere the #ontra#t provides for inde/nit0 a"ainst lia%ilit0 to

third persons, then third persons to who/ the insured is lia%le #an sue

the insurer. Bhere the #ontra#t is for inde/nit0 a"ainst a#tual loss or

pa0/ent, then third persons #annot pro#eed a"ainst the insurer, the

#ontra#t %ein" solel0 to rei/%urse the insured for lia%ilit0 a#tuall0

dis#har"ed %0 hi/ thru pa0/ent to third persons, said third persons

re#ourse %ein" thus li/ited to the insured alone.1&F

45












Sin#e private respondent failed to atta#h a #op0 of the insuran#e

#ontra#t to his #o/plaint, the trial #ourt #ould not have %een a%le to

apprise itself of the real nature and pe#uniar0 li/its of petitioners

lia%ilit0. 7ore i/portantl0, the trial #ourt #ould not have possi%l0

as#ertained the ri"ht of private respondent as third person to sue

petitioner as insurer of the 2ad0 2ove taAi#a% %e#ause the trial #ourt

never saw nor read the insuran#e #ontra#t and learned of its ter/s and

#onditions.

Petitioner, understanda%l0, did not volunteer to present an0

insuran#e #ontra#t #overin" the 2ad0 2ove taAi#a% that fatall0 hit

private respondents /other, #onsiderin" that petitioner pre#isel0

presented the defense of la#! of insuran#e #overa"e %efore the trial

#ourt. Neither did the trial #ourt issue a su#poena du'es te'u% to have

the insuran#e #ontra#t produ#ed %efore it under pain of #onte/pt.

Be thus <nd hardl0 a %asis in the re#ords for the trial #ourt to

have validl0 found petitioner lia%le ointl0 and severall0 with the owner

and the driver of the 2ad0 2ove taAi#a%, for da/a"es a##ruin" to

private respondent.

(pparentl0, the trial #ourt did not distin"uish %etween the private

respondents #ause of a#tion a"ainst the owner and the driver of the

2ad0 2ove taAi#a% and his #ause of a#tion a"ainst petitioner. The

for/er is %ased on torts and uasi*deli'ts while the latter is %ased on

#ontra#t. Confusin" these two sour#es of o%li"ations as the0 arise fro/

the sa/e a#t of the taAi#a% fatall0 hittin" private respondents /other,

and in the fa#e of overwhel/in" eviden#e of the re#!less i/pruden#e

of the driver of the 2ad0 2ove taAi#a%, the trial #ourt %rushed aside its

i"noran#e of the ter/s and #onditions of the insuran#e #ontra#t and

forthwith found all three + the driver of the taAi#a%, the owner of thetaAi#a%, and the alle"ed insurer of the taAi#a% + ointl0 and severall0

lia%le for a#tual, /oral and eAe/plar0 da/a"es as well as attorne0s

fees and liti"ation eApenses. This is #learl0 a /isappli#ation of the law

%0 the trial #ourt, and respondent appellate #ourt "rievousl0 erred in

not havin" reversed the trial #ourt on this "round.

Bhile it is true that where the insuran#e #ontra#t provides for

inde/nit0 a"ainst lia%ilit0 to third persons, su#h third persons #an

dire#tl0 sue the insurer, however, the dire#t lia%ilit0 of the insurer

under inde/nit0 #ontra#ts a"ainst third+part0 lia%ilit0 does not /ean

that the insurer #an %e held solidaril0 lia%le with the insured and8or the

other parties found at fault. The lia%ilit0 of the insurer is %ased on

#ontra#tH that of the insured is %ased on tort. 11F

(ppl0in" this prin#iple underl0in" solidar0 o%li"ation and insuran#e

#ontra#ts, we ruled in one #ase that

In solidar0 o%li"ation, the #reditor /a0 enfor#e the entire o%li"ation

a"ainst one of the solidar0 de%tors. On the other hand, insuran#e is

de<ned as a #ontra#t where%0 one underta!es for a #onsideration to

inde/nif0 another a"ainst loss, da/a"e or lia%ilit0 arisin" fro/ an

un!nown or #ontin"ent event.

In the #ase at %ar, the trial #ourt held petitioner to"ether with

respondents Sio Cho0 and San 2eon Ri#e 7ills In#. solidaril0 lia%le to

respondent 9alleos for a total a/ount of P$-,1&6.&&, with the

>uali<#ation that petitioners lia%ilit0 is onl0 up to P$&,&&&.&&. In the#onteAt of a solidar0 o%li"ation, petitioner /a0 %e #o/pelled %0

respondent 9alleos to pa0 the entire o%li"ation of P$-,1&6.&&,

notwithstandin" the >uali<#ation /ade %0 the trial #ourt. ;ut, how #an

petitioner %e o%li"ed to pa0 the entire o%li"ation when the a/ount

stated in its insuran#e poli#0 with respondent Sio Cho0 for inde/nit0

a"ainst third+part0 lia%ilit0 is onl0 P$&,&&&.&& 7oreover, the

>uali<#ation /ade in the de#ision of the trial #ourt to the eJe#t that

petitioner is senten#ed to pa0 up to P$&,&&&.&& onl0 when the

o%li"ation to pa0 P$-,1&6.&& is /ade solidar0 is an evident %rea#h of

the #on#ept of a solidar0 o%li"ation.1$F

The a%ove prin#iples ta!e on /ore si"ni<#an#e in the li"ht of the

#ounter+alle"ation of petitioner that, assu/in" arguendo that it is the

insurer of the 2ad0 2ove taAi#a% in >uestion, its lia%ilit0 is li/ited to

onl0 P&,&&&.&&, this %ein" its standard a/ount of #overa"e in vehi#le

insuran#e poli#ies. It %ears repeatin" that no #op0 of the insuran#e

#ontra#t was ever proJered %efore the trial #ourt %0 the private

respondent, notwithstandin" !nowled"e of the fa#t that the latters

#o/plaint a"ainst petitioner is one under a written #ontra#t. Thus, the

trial #ourt pro#eeded to hold petitioner lia%le for an award of da/a"es

4=







eA#eedin" its li/ited lia%ilit0 of P&,&&&.&&. This onl0 shows %e0ond

dou%t that the trial #ourt was under the erroneous presu/ption that

petitioner #ould %e found lia%le a%sent proof of the #ontra#t and %ased

/erel0 on the proof of re#!less i/pruden#e on the part of the driver of

the 2ad0 2ove taAi#a% that fatall0 hit private respondents /other.

II

Petitioner did not tire in ar"uin" %efore the trial #ourt and the

respondent appellate #ourt that, assu/in" arguendo that it had issued

the insuran#e #ontra#t over the 2ad0 2ove taAi#a%, private respondents

#ause of a#tion a"ainst petitioner did not su##essfull0 a##rue %e#ause

he failed to <le with petitioner a written noti#e of #lai/ within siA )5*

/onths fro/ the date of the a##ident as re>uired %0 Se#tion 6'4 of the

Insuran#e Code.

(t the ti/e of the vehi#ular in#ident whi#h resulted in the death of

private respondents /other, durin" whi#h ti/e the Insuran#e Code had

not 0et %een a/ended %0 ;atas Pa/%ansa );.P.* ;l". '=4, Se#tion 6'4provided as follows

(n0 person havin" an0 #lai/ upon the poli#0 issued pursuant to this

#hapter shall, without an0 unne#essar0 dela0, present to the insuran#e

#o/pan0 #on#erned a written noti#e of #lai/ settin" forth the a/ount

of his loss, and8or the nature, eAtent and duration of the inuries

sustained as #erti<ed %0 a dul0 li#ensed ph0si#ian. Noti#e of #lai/

/ust %e <led within siA /onths fro/ date of the a##ident, otherwise,

the #lai/ shall %e dee/ed waived. (#tion or suit for re#over0 of

da/a"e due to loss or inur0 /ust %e %rou"ht in proper #ases, with the

Co//ission or the Courts within one 0ear fro/ date of a##ident,

otherwise the #lai/ants ri"ht of a#tion shall pres#ri%e e/phasis and

unders#orin" suppliedF.

In the land/ar! #ase of 4u%%it Suarant) and -nsuran'e (o., -n'.

!. De Suz%an,16F we ruled that the one 0ear pres#ription period to

%rin" suit in #ourt a"ainst the insurer should %e #ounted fro/ the ti/e

that the insurer ree#ts the written #lai/ <led therewith %0 the insured,

the %ene<#iar0 or the third person interested under the insuran#e

poli#0. Be eAplained

It is ver0 o%vious that petitioner #o/pan0 is tr0in" to use Se#tion 6'4

of the Insuran#e Code as a #loa! to hide itself fro/ its lia%ilities. The

fa#ts of these #ases evidentl0 reKe#t the deli%erate eJorts of petitioner

#o/pan0 to prevent the <lin" of a for/al a#tion a"ainst it. ;earin" in

/ind that if it su##eeds in doin" so until one 0ear lapses fro/ the date

of the a##ident it #ould set up the defense of pres#ription, petitioner

#o/pan0 /ade private respondents %elieve that their #lai/s would %e

settled in order that the latter will not <nd it ne#essar0 to i//ediatel0%rin" suit. In violation of its duties to adopt and i/ple/ent reasona%le

standards for the pro/pt investi"ation of #lai/s and to eJe#tuate

pro/pt, fair and e>uita%le settle/ent of #lai/s, and with /anifest %ad

faith, petitioner #o/pan0 devised /eans and wa0s of stallin" the

settle/ent pro#eedin"s. A A A NFo steps were ta!en to pro#ess the

#lai/ and no ree#tion of said #lai/ was ever /ade even if private

respondent had alread0 #o/plied with all the re>uire/ents. A A A

This Court has /ade the o%servation that so/e insuran#e #o/panies

have %een inventin" eA#uses to avoid their ust o%li"ations and it is

onl0 the State that #an "ive the prote#tion whi#h the insurin" pu%li#

needs fro/ possi%le a%uses of the insurers.14F

It is si"ni<#ant to note that the afore#ited Se#tion 6'4 was

a/ended %0 ;.P. ;l". '=4 to #ate"ori#all0 provide that a#tion or suit for

re#over0 of da/a"e due to loss or inur0 /ust %e %rou"ht in proper

#ases, with the Co//issioner or the Courts within one

0ear *o -en<> o '3e ><, otherwise the #lai/ants ri"ht of

a#tion shall pres#ri%e e/phasis oursF.1F

Be have #ertainl0 ruled with #onsisten#0 that the pres#riptive

period to %rin" suit in #ourt under an insuran#e poli#0, %e"ins to run

fro/ the date of the insurers ree#tion of the #lai/ <led %0 the insured,the %ene<#iar0 or an0 person #lai/in" under an insuran#e

#ontra#t. This rulin" is pre/ised upon the #o/plian#e %0 the persons

suin" under an insuran#e #ontra#t, with the indispensa%le re>uire/ent

of havin" <led the written #lai/ /andated %0 Se#tion 6'4 of the

Insuran#e Code %efore and after its a/end/ent. (%sent su#h written

#lai/ <led %0 the person suin" under an insuran#e #ontra#t, no #ause

of a#tion a##rues under su#h insuran#e #ontra#t, #onsiderin" that it is

the ree#tion of that #lai/ that tri""ers the runnin" of the one+0ear

4'









pres#riptive period to %rin" suit in #ourt, and there #an %e no

opportunit0 for the insurer to even ree#t a #lai/ if none has %een <led

in the <rst pla#e, as in the instant #ase.

The one+0ear period should instead %e #ounted fro/ the date of

ree#tion %0 the insurer as this is the ti/e when the #ause of a#tion

a##rues. A A A

In Ea"le Star Insuran#e Co., 2td., et al. vs. Chia u, this Court ruled

The plaintiJs #ause of a#tion did not a##rue until his #lai/ was <nall0

ree#ted %0 the insuran#e #o/pan0. This is %e#ause, %efore su#h <nal

ree#tion, there was no real ne#essit0 for %rin"in" suit.

The philosoph0 of the a%ove pronoun#e/ent was pointed out in the

#ase of (CC( vs. (lpha Insuran#e and Suret0 Co., !iz .

Sin#e a #ause of a#tion re>uires, as essential ele/ents, not onl0 a le"al

ri"ht of the plaintiJ and a #orrelative o%li"ation of the defendant %utalso an a#t or o/ission of the defendant in violation of said le"al ri"ht,

the #ause of a#tion does not a##rue until the part0 o%li"ated refuses,

eApressl0 or i/pliedl0, to #o/pl0 with its dut0. 15F

Bhen petitioner asseverates, thus, that no written #lai/ was <led

%0 private respondent and ree#ted %0 petitioner, and private

respondent does not dispute su#h asseveration throu"h a denial in his

pleadin"s, we are #onstrained to rule that respondent appellate #ourt

#o//itted reversi%le error in <ndin" petitioner lia%le under an

insuran#e #ontra#t the eAisten#e of whi#h had not at all %een proven in

#ourt. Even if there were su#h a #ontra#t, private respondents #ause of a#tion #an not prevail %e#ause he failed to <le the written #lai/

/andated %0 Se#tion 6'4 of the Insuran#e Code. @e is dee/ed, under

this le"al provision, to have waived his ri"hts as a"ainst petitioner+

insurer.

#EREORE, the instant petition is @ERE; R(NTED. The

de#ision of the Court of (ppeals in C(+.R. C9 No. &-415 and the

de#ision of the Re"ional Trial Court in Civil Case No. 164'5 are

RE9ERSED and SET (SIDE insofar as Travellers Insuran#e Suret0

Corporation was found ointl0 and severall0 lia%le to pa0 a#tual, /oral

and eAe/plar0 da/a"es, death inde/nit0, attorne0s fees and liti"ation

eApenses in Civil Case No. 164'5. The #o/plaint a"ainst Travellers

Insuran#e Suret0 Corporation in said #ase is here%0 ordered

dis/issed.

No pronoun#e/ent as to #osts.

SO ORERE.

G.R. No. 11%899 O'oe* 1%, 1999

GREAT !ACIIC LIE ASSURANCE COR!., petitioner,

vs.

COURT O A!!EALS AN MEARA +. LEUTERIO, respondents.

?UISUMING, J.:

This petition for review, under Rule 4 of the Rules of Court, assails the

De#ision 1 dated 7a0 1=, 1--6, of the Court of (ppeals and its

Resolution 2 dated anuar0 4, 1--4 in C(+.R. C9 No. 1'641. The

appellate #ourt aGr/ed in toto the ud"/ent of the 7isa/is Oriental

Re"ional Trial Court, ;ran#h 1', in an insuran#e #lai/ <led %0 private

respondent a"ainst reat Pa#i<# 2ife (ssuran#e Co. The dispositive

portion of the trial #ourtLs de#ision reads

B@EREORE, ud"/ent is rendered adud"in" the

defendant RE(T P(CIIC 2IE (SS3R(NCE

CORPOR(TION as insurer under its roup poli#0 No. +

1-&=, in relation to Certi<#ation ;+1'' lia%le and

ordered to pa0 to the DE9E2OP7ENT ;(NQ O T@E

P@I2IPPINES as #reditor of the insured Dr. Bilfredo

2euterio, the a/ount of EI@T SI T@O3S(ND TBO

4-





@3NDRED PESOS )P'5,$&&.&&*H dis/issin" the #lai/s

for da/a"es, attorne0Ls fees and liti"ation eApenses in

the #o/plaint and #ounter#lai/, with #osts a"ainst the

defendant and dis/issin" the #o/plaint in respe#t to

the plaintiJs, other than the widow+%ene<#iar0, for la#!

of #ause of a#tion. %

The fa#ts, as found %0 the Court of (ppeals, are as follows

( #ontra#t of "roup life insuran#e was eAe#uted %etween petitioner

reat Pa#i<# 2ife (ssuran#e Corporation )hereinafter repalife* and

Develop/ent ;an! of the Philippines )hereinafter D;P*. repalife

a"reed to insure the lives of eli"i%le housin" loan /ort"a"ors of D;P.

On Nove/%er 11, 1-'6, Dr. Bilfredo 2euterio, a ph0si#ian and a

housin" de%tor of D;P applied for /e/%ership in the "roup life

insuran#e plan. In an appli#ation for/, Dr. 2euterio answered >uestions

#on#ernin" his health #ondition as follows

=. @ave 0ou ever had, or #onsulted, a

ph0si#ian for a heart #ondition, hi"h

%lood pressure, #an#er, dia%etes, lun"H

!idne0 or sto/a#h disorder or an0

other ph0si#al i/pair/ent

(nswer To. If so "ive details

ZZZZZZZZZZZZZ.

'. (re 0ou now, to the %est of 0our

!nowled"e, in "ood health

(nswer AF es F NO. 4

On Nove/%er 1, 1-'6, repalife issued Certi<#ate No. ;+1'', as

insuran#e #overa"e of Dr. 2euterio, to the eAtent of his D;P /ort"a"e

inde%tedness a/ountin" to ei"ht0+siA thousand, two hundred

)P'5,$&&.&&* pesos.1âwphi1.n^t

On (u"ust 5, 1-'4, Dr. 2euterio died due to :/assive #ere%ral

he/orrha"e.: Conse>uentl0, D;P su%/itted a death #lai/ to repalife.

repalife denied the #lai/ alle"in" that Dr. 2euterio was not ph0si#all0

health0 when he applied for an insuran#e #overa"e on Nove/%er 1,

1-'6. repalife insisted that Dr. 2euterio did not dis#lose he had %een

suJerin" fro/ h0pertension, whi#h #aused his death. (lle"edl0, su#h

non+dis#losure #onstituted #on#eal/ent that usti<ed the denial of the

#lai/.

On O#to%er $&, 1-'5, the widow of the late Dr. 2euterio, respondent

7edarda 9. 2euterio, <led a #o/plaint with the Re"ional Trial Court of

7isa/is Oriental, ;ran#h 1', a"ainst repalife for :Spe#i<#

Perfor/an#e with Da/a"es.: 5 Durin" the trial, Dr. @ernando 7eia,

who issued the death #erti<#ate, was #alled to testif0. Dr. 7eiaLs

<ndin"s, %ased partl0 fro/ the infor/ation "iven %0 the respondent

widow, stated that Dr. 2euterio #o/plained of heada#hes presu/a%l0

due to hi"h %lood pressure. The inferen#e was not #on#lusive %e#ause

Dr. 2euterio was not autopsied, hen#e, other #auses were not ruled out.

On e%ruar0 $$, 1-'', the trial #ourt rendered a de#ision in favor of

respondent widow and a"ainst repalife. On 7a0 1=, 1--6, the Court

of (ppeals sustained the trial #ourtLs de#ision. @en#e, the present

petition. Petitioners interposed the followin" assi"ned errors

1. T@E 2OBER CO3RT ERRED IN

@O2DIN DEEND(NT+(PPE22(NT

2I(;2E TO T@E DE9E2OP7ENT ;(NQ

O T@E P@I2IPPINES )D;P* B@IC@ IS

NOT ( P(RT TO T@E C(SE OR

P(7ENT O T@E PROCEEDS O (

7ORT(E REDE7PTION INS3R(NCEON T@E 2IE O P2(INTILS @3S;(ND

BI2REDO 2E3TERIO ONE O ITS 2O(N

;ORROBERS, INSTE(D O DIS7ISSIN

T@E C(SE ((INST DEEND(NT+

(PPE22(NT Petitioner repalifeF OR

2(CQ O C(3SE O (CTION.

&



$. T@E 2OBER CO3RT ERRED IN NOT

DIS7ISSIN T@E C(SE OR B(NT O

3RISDICTION O9ER T@E S3;ECT OR

N(T3RE O T@E (CTION (ND O9ER

T@E PERSON O T@E DEEND(NT.


ORDERIN DEEND(NT+(PPE22(NT TOP( TO D;P T@E (7O3NT O

P'5,$&&.&& IN T@E (;SENCE O (N

E9IDENCE TO S@OB @OB 73C@ B(S

T@E (CT3(2 (7O3NT P((;2E TO D;P

IN (CCORD(NCE BIT@ ITS RO3P

INS3R(NCE CONTR(CT BIT@

DEEND(NT+(PPE22(NT.


@O2DIN T@(T T@ERE B(S NO

CONCE(27ENT O 7(TERI(2

INOR7(TION ON T@E P(RT O

BI2REDO 2E3TERIO IN @IS

(PP2IC(TION OR 7E7;ERS@IP IN T@E

RO3P 2IE INS3R(NCE P2(N

;ETBEEN DEEND(NT+(PPE22(NT O

T@E INS3R(NCE C2(I7 (RISIN RO7

T@E DE(T@ O BI2REDO 2E3TERIO. 6

S0nthesied %elow are the assi"ned errors for our resolution

1. Bhether the Court of (ppeals erred

in holdin" petitioner lia%le to D;P as%ene<#iar0 in a "roup life insuran#e

#ontra#t fro/ a #o/plaint <led %0 the

widow of the de#edent8/ort"a"or

$. Bhether the Court of (ppeals erred

in not <ndin" that Dr. 2euterio

#on#ealed that he had h0pertension,

whi#h would vitiate the insuran#e

#ontra#t

6. Bhether the Court of (ppeals erred

in holdin" repalife lia%le in the

a/ount of ei"ht0 siA thousand, two

hundred )P'5,$&&.&&* pesos without

proof of the a#tual outstandin"/ort"a"e pa0a%le %0 the /ort"a"or to

D;P.

Petitioner alle"es that the #o/plaint was instituted %0 the widow of Dr.

2euterio, not the real part0 in interest, hen#e the trial #ourt a#>uired no

urisdi#tion over the #ase. It ar"ues that when the Court of (ppeals

aGr/ed the trial #ourtLs ud"/ent, repalife was held lia%le to pa0 the

pro#eeds of insuran#e #ontra#t in favor of D;P, the indispensa%le part0

who was not oined in the suit.

To resolve the issue, we /ust #onsider the insura%le interest in/ort"a"ed properties and the parties to this t0pe of #ontra#t. The

rationale of a "roup insuran#e poli#0 of /ort"a"ors, otherwise !nown

as the :/ort"a"e rede/ption insuran#e,: is a devi#e for the prote#tion

of %oth the /ort"a"ee and the /ort"a"or. On the part of the

/ort"a"ee, it has to enter into su#h for/ of #ontra#t so that in the

event of the uneApe#ted de/ise of the /ort"a"or durin" the

su%sisten#e of the /ort"a"e #ontra#t, the pro#eeds fro/ su#h

insuran#e will %e applied to the pa0/ent of the /ort"a"e de%t,

there%0 relievin" the heirs of the /ort"a"or fro/ pa0in" the

o%li"ation. / In a si/ilar vein, a/ple prote#tion is "iven to the

/ort"a"or under su#h a #on#ept so that in the event of deathH the

/ort"a"e o%li"ation will %e eAtin"uished %0 the appli#ation of theinsuran#e pro#eeds to the /ort"a"e inde%tedness. 8 Conse>uentl0,

where the /ort"a"or pa0s the insuran#e pre/iu/ under the "roup

insuran#e poli#0, /a!in" the loss pa0a%le to the /ort"a"ee, the

insuran#e is on the /ort"a"orLs interest, and the /ort"a"or #ontinues

to %e a part0 to the #ontra#t. In this t0pe of poli#0 insuran#e, the

/ort"a"ee is si/pl0 an appointee of the insuran#e fund, su#h loss+

pa0a%le #lause does not /a!e the /ort"a"ee a part0 to the #ontra#t. 9

1



Se#. ' of the Insuran#e Code provides

3nless the poli#0 provides, where a /ort"a"or of

propert0 eJe#ts insuran#e in his own na/e providin"

that the loss shall %e pa0a%le to the /ort"a"ee, or

assi"ns a poli#0 of insuran#e to a /ort"a"ee, the

insuran#e is dee/ed to %e upon the interest of the

/ort"a"or, who does not #ease to %e a part0 to theori"inal #ontra#t, and an0 a#t of his, prior to the loss,

whi#h would otherwise avoid the insuran#e, will have

the sa/e eJe#t, althou"h the propert0 is in the hands

of the /ort"a"ee, %ut an0 a#t whi#h, under the

#ontra#t of insuran#e, is to %e perfor/ed %0 the

/ort"a"or, /a0 %e perfor/ed %0 the /ort"a"ee

therein na/ed, with the sa/e eJe#t as if it had %een

perfor/ed %0 the /ort"a"or.

The insured private respondent did not #ede to the /ort"a"ee all his

ri"hts or interests in the insuran#e, the poli#0 statin" that :In the

event of the de%torLs death %efore his inde%tedness with the Creditor

D;PF shall have %een full0 paid, an a/ount to pa0 the outstandin"

inde%tedness shall <rst %e paid to the #reditor and the %alan#e of su/

assured, if there is an0, shall then %e paid to the %ene<#iar08ies

desi"nated %0 the de%tor.: 10 Bhen D;P su%/itted the insuran#e #lai/

a"ainst petitioner, the latter denied pa0/ent thereof, interposin" the

defense of #on#eal/ent #o//itted %0 the insured. Thereafter, D;P

#olle#ted the de%t fro/ the /ort"a"or and too! the ne#essar0 a#tion

of fore#losure on the residential lot of private

respondent. 11 In Sonzales $a & !s. e/ ong $in 3ire 8 Marine -ns.

(o. 12 we held

Insured, %ein" the person with who/ the #ontra#t was

/ade, is pri/aril0 the proper person to %rin" suit

thereon. D D D Su%e#t to so/e eA#eptions, insured /a0

thus sue, althou"h the poli#0 is ta!en wholl0 or in part

for the %ene<t of another person na/ed or unna/ed,

and althou"h it is eApressl0 /ade pa0a%le to another

as his interest /a0 appear or otherwise. D D D (lthou"h

a poli#0 issued to a /ort"a"or is ta!en out for the

%ene<t of the /ort"a"ee and is /ade pa0a%le to hi/,

0et the /ort"a"or /a0 sue thereon in his own na/e,

espe#iall0 where the /ort"a"eeLs interest is less than

the full a/ount re#overa%le under the poli#0, D D D.

(nd in volu/e 66, pa"e '$, of the sa/e wor!, we read

the followin"

Insured /a0 %e re"arded as the real part0 in interest,

althou"h he has assi"ned the poli#0 for the purpose of

#olle#tion, or has assi"ned as #ollateral se#urit0 an0

ud"/ent he /a0 o%tain. 1%

(nd sin#e a poli#0 of insuran#e upon life or health /a0 pass %0

transfer, will or su##ession to an0 person, whether he has an insura%le

interest or not, and su#h person /a0 re#over it whatever the insured

/i"ht have re#overed,14 the widow of the de#edent Dr. 2euterio /a0

<le the suit a"ainst the insurer, repalife.

The se#ond assi"ned error refers to an alle"ed #on#eal/ent that the

petitioner interposed as its defense to annul the insuran#e #ontra#t.

Petitioner #ontends that Dr. 2euterio failed to dis#lose that he had

h0pertension, whi#h /i"ht have #aused his death. Con#eal/ent eAists

where the assured had !nowled"e of a fa#t /aterial to the ris!, and

honest0, "ood faith, and fair dealin" re>uires that he should

#o//uni#ate it to the assured, %ut he desi"nedl0 and intentionall0

withholds the sa/e. 15

Petitioner /erel0 relied on the testi/on0 of the attendin" ph0si#ian,

Dr. @ernando 7eia, as supported %0 the infor/ation "iven %0 the

widow of the de#edent. repalife asserts that Dr. 7eiaLs te#hni#al

dia"nosis of the #ause of death of Dr. 2euterio was a dul0 do#u/ented

hospital re#ord, and that the widowLs de#laration that her hus%and had

:possi%le h0pertension several 0ears a"o: should not %e #onsidered as

hearsa0, %ut as part of res gestae.

On the #ontrar0 the /edi#al <ndin"s were not #on#lusive %e#ause Dr.

7eia did not #ondu#t an autops0 on the %od0 of the de#edent. (s the

attendin" ph0si#ian, Dr. 7eia stated that he had no !nowled"e of Dr.

$



2euterioLs an0 previous hospital #on<ne/ent. 16 Dr. 2euterioLs death

#erti<#ate stated that h0pertension was onl0 :the possi%le #ause of

death.: The private respondentLs state/ent, as to the /edi#al histor0

of her hus%and, was due to her unrelia%le re#olle#tion of events.

@en#e, the state/ent of the ph0si#ian was properl0 #onsidered %0 the

trial #ourt as hearsa0.

The >uestion of whether there was #on#eal/ent was aptl0 answered%0 the appellate #ourt, thus

The insured, Dr. 2euterio, had answered in his

insuran#e appli#ation that he was in "ood health and

that he had not #onsulted a do#tor or an0 of the

enu/erated ail/ents, in#ludin" h0pertensionH when he

died the attendin" ph0si#ian had #erti<ed in the death

#erti<#ate that the for/er died of #ere%ral he/orrha"e,

pro%a%l0 se#ondar0 to h0pertension. ro/ this report,

the appellant insuran#e #o/pan0 refused to pa0 the

insuran#e #lai/. (ppellant alle"ed that the insured had

#on#ealed the fa#t that he had h0pertension.

Contrar0 to appellantLs alle"ations, there was no

suG#ient proof that the insured had suJered fro/

h0pertension. (side fro/ the state/ent of the

insuredLs widow who was not even sure if the

/edi#ines ta!en %0 Dr. 2euterio were for h0pertension,

the appellant had not proven nor produ#ed an0 witness

who #ould attest to Dr. 2euterioLs /edi#al histor0 . . .

AAA AAA AAA

(ppellant insuran#e #o/pan0 had failed to esta%lish

that there was #on#eal/ent /ade %0 the insured,

hen#e, it #annot refuse pa0/ent of the #lai/. 1/

The fraudulent intent on the part of the insured /ust %e esta%lished to

entitle the insurer to res#ind the #ontra#t.18 7isrepresentation as a

defense of the insurer to avoid lia%ilit0 is an aGr/ative defense and

the dut0 to esta%lish su#h defense %0 satisfa#tor0 and #onvin#in"

eviden#e rests upon the insurer. 19 In the #ase at %ar, the petitioner

failed to #learl0 and satisfa#toril0 esta%lish its defense, and is therefore

lia%le to pa0 the pro#eeds of the insuran#e.1âwphi1.n^t

(nd that %rin"s us to the last point in the review of the #ase at %ar.

Petitioner #lai/s that there was no eviden#e as to the a/ount of Dr.

2euterioLs outstandin" inde%tedness to D;P at the ti/e of the

/ort"a"orLs death. @en#e, for private respondentLs failure to esta%lishthe sa/e, the a#tion for spe#i<# perfor/an#e should %e dis/issed.

PetitionerLs #lai/ is without /erit. ( life insuran#e poli#0 is a valued

poli#0. 20 3nless the interest of a person insured is sus#epti%le of eAa#t

pe#uniar0 /easure/ent, the /easure of inde/nit0 under a poli#0 of

insuran#e upon life or health is the su/ <Aed in the poli#0. 21 The

/ort"a"or paid the pre/iu/ a##ordin" to the #overa"e of his

insuran#e, whi#h states that

The poli#0 states that upon re#eipt of due proof of the

De%torLs death durin" the ter/s of this insuran#e, a

death %ene<t in the a/ount of P'5,$&&.&& shall %e

paid.

In the event of the de%torLs death %efore his

inde%tedness with the #reditor shall have %een full0

paid, an a/ount to pa0 the outstandin" inde%tedness

shall <rst %e paid to the Creditor and the %alan#e of the

Su/ (ssured, if there is an0 shall then %e paid to the

%ene<#iar08ies desi"nated %0 the de%tor.:22 )E/phasis

o/itted*

@owever, we noted that the Court of (ppealsL de#ision was

pro/ul"ated on 7a0 1=, 1--6. In private respondentLs /e/orandu/,she states that D;P fore#losed in 1-- their residential lot, in

satisfa#tion of /ort"a"orLs outstandin" loan. Considerin" this

supervenin" event, the insuran#e pro#eeds shall inure to the %ene<t of

the heirs of the de#eased person or his %ene<#iaries. E>uit0 di#tates

that D;P should not unustl0 enri#h itself at the eApense of another

)Te%o 'u% alterius detri%enio protest *. @en#e, it #annot #olle#t the

insuran#e pro#eeds, after it alread0 fore#losed on the /ort"a"e. The

6



pro#eeds now ri"htl0 %elon" to Dr. 2euterioLs heirs represented %0 his

widow, herein private respondent 7edarda 2euterio.

B@EREORE, the petition is here%0 DENIED. The De#ision and

Resolution of the Court of (ppeals in C(+.R. C9 1'641 is (IR7ED

with 7ODIIC(TION that the petitioner is ORDERED to pa0 the

insuran#e pro#eeds a/ountin" to Ei"ht0+siA thousand, two hundred

)P'5,$&&.&&* pesos to the heirs of the insured, Dr. Bilfredo 2euterio)de#eased*, upon presentation of proof of prior settle/ent of

/ort"a"orLs inde%tedness to Develop/ent ;an! of the Philippines.

Costs a"ainst petitioner.1âwphi1.n^t

SO ORDERED.

G.R. No. 1%/1/2 June 15, 1999

UC! GENERAL INSURANCE CO., INC., petitioner,

vs.

MASAGANA TELAMART, INC., respondent.

!ARO, J.:

The #ase is an appeal !ia 'ertiorari see!in" to set aside the de#ision ofthe Court of (ppeals, 1 aGr/in" with /odi<#ation that of the Re"ional

Trial Court, ;ran#h ', 7a!ati, orderin" petitioner to pa0 respondent

the su/ of P1',54,&&&.&&, as the pro#eeds of the insuran#e #overa"e

of respondentLs propert0 raed %0 <reH $ of the total a/ount due as

attorne0Ls fees and P$,&&&.&& as liti"ation eApenses, and #osts.

The fa#ts are undisputed and /a0 %e related as follows

On (pril 1, 1--1, petitioner issued <ve )* insuran#e poli#ies #overin"

respondentLs various propert0 des#ri%ed therein a"ainst <re, for the

period fro/ 7a0 $$, 1--1 to 7a0 $$, 1--$.

In 7ar#h 1--$, petitioner evaluated the poli#ies and de#ided not to

renew the/ upon eApiration of their ter/s on 7a0 $$, 1--$. Petitioner

advised respondentLs %ro!er, Yuelli" Insuran#e ;ro!ers, In#. of its

intention not to renew the poli#ies.

On (pril 5, 1--$, petitioner "ave written noti#e to respondent of the

non+renewal of the poli#ies at the address stated in the poli#ies.

On une 16, 1--$, <re raed respondentLs propert0 #overed %0 three of

the insuran#e poli#ies petitioner issued.

On ul0 16, 1--$, respondent presented to petitionerLs #ashier at its

head oG#e <ve )* /ana"erLs #he#!s in the total a/ount of

P$$,=6.-, representin" pre/iu/ for the renewal of the poli#ies

fro/ 7a0 $$, 1--$ to 7a0 $$, 1--6. No noti#e of loss was <led %0respondent under the poli#ies prior to ul0 14, 1--$.

On ul0 14, 1--$, respondent <led with petitioner its for/al #lai/ for

inde/ni<#ation of the insured propert0 raed %0 <re.

On the sa/e da0, ul0 14, 1--$, petitioner returned to respondent the

<ve )* /ana"erLs #he#!s that it tendered, and at the sa/e ti/e

ree#ted respondentLs #lai/ for the reasons )a* that the poli#ies had

eApired and were not renewed, and )%* that the <re o##urred on une

16, 1--$, %efore respondentLs tender of pre/iu/ pa0/ent.

On ul0 $1, 1--$, respondent <led with the Re"ional Trial Court, ;ran#h

', 7a!ati Cit0, a #ivil #o/plaint a"ainst petitioner for re#over0 of

P1',54,&&&.&&, representin" the fa#e value of the poli#ies #overin"

respondentLs insured propert0 raed %0 <re, and for attorne0Ls fees. 2

On O#to%er $6, 1--$, after its /otion to dis/iss had %een denied,

petitioner <led an answer to the #o/plaint. It alle"ed that the

#o/plaint :fails to state a #ause of a#tion:H that petitioner was not

lia%le to respondent for insuran#e pro#eeds under the poli#ies %e#ause

4



at the ti/e of the loss of respondentLs propert0 due to <re, the poli#ies

had lon" eApired and were not renewed. %

(fter due trial, on 7ar#h 1&, 1--6, the Re"ional Trial Court, ;ran#h ',

7a!ati, rendered de#ision, the dispositive portion of whi#h reads

B@EREORE, pre/ises #onsidered, ud"/ent is here%0

rendered in favor of the plaintiJ and a"ainst thedefendant, as follows

)1* (uthoriin" and allowin" the plaintiJ to

#onsi"n8deposit with this Court the su/ of P$$,=6.-

)refused %0 the defendant* as full pa0/ent of the

#orrespondin" pre/iu/s for the repla#e/ent+renewal

poli#ies for EAhi%its (, ;, C, D and EH

)$* De#larin" plaintiJ to have full0 #o/plied with its

o%li"ation to pa0 the pre/iu/ there%0 renderin" the

repla#e/ent+renewal poli#0 of EAhi%its (, ;, C, D and EeJe#tive and %indin" for the duration 7a0 $$, 1--$

until 7a0 $$, 1--6H and, orderin" defendant to deliver

forthwith to plaintiJ the said repla#e/ent+renewal

poli#iesH

)6* De#larin" EAhi%its ( ;, in for#e fro/ (u"ust $$,

1--1 up to (u"ust $6, 1--$ and (u"ust -, 1--1 to

(u"ust -, 1--$, respe#tivel0H and

)4* Orderin" the defendant to pa0 plaintiJ the su/s of

)a* P1',54,&&&.&& representin" the latterLs #lai/ for

inde/nit0 under EAhi%its (, ; C and8or its

repla#e/ent+renewal poli#iesH )%* $ of the total

a/ount due as and for attorne0Ls feesH )#* P$,&&&.&&

as ne#essar0 liti"ation eApensesH and, )d* the #osts of

suit.

(ll other #lai/s and #ounter#lai/s asserted %0 the

parties are denied and8or dis/issed, in#ludin"

plaintiJLs #lai/ for interests.

SO ORDERED.

7a!ati, 7etro+7anila, 7ar#h 1&, 1--6.

YOSI7O Y. (NE2ES.

ud"e. 4

In due ti/e, petitioner appealed to the Court of (ppeals. 5

On Septe/%er =, 1--', the Court of (ppeals pro/ul"ated its

de#ision 6 aGr/in" that of the Re"ional Trial Court with the

/odi<#ation that ite/ No. 6 of the dispositive portion was deleted, and

the award of attorne0Ls fees was redu#ed to 1& of the total a/ount

due. /

The Court of (ppeals held that followin" previous pra#tise, respondent

was allowed a siAt0 )5&* to ninet0 )-&* da0 #redit ter/ for the renewal

of its poli#ies, and that the a##eptan#e of the late pre/iu/ pa0/entsu""ested an understandin" that pa0/ent #ould %e /ade later.

@en#e, this appeal.

;0 resolution adopted on 7ar#h $4, 1---, we re>uired respondent to

#o//ent on the petition, not to <le a /otion to dis/iss within ten )1&*

da0s fro/ noti#e. 8 On (pril $$, 1---, respondent <led its #o//ent. 9

Respondent su%/its that the Court of (ppeals #orre#tl0 ruled that no

ti/el0 noti#e of non+renewal was sent. The noti#e of non+renewal sent

to %ro!er Yuelli" whi#h #lai/ed that it ver%all0 noti<ed the insuran#ea"en#0 %ut not respondent itself did not suG#e. Respondent su%/its

further that the Court of (ppeals did not err in <ndin" that there

eAisted a siAt0 )5&* to ninet0 )-&* da0s #redit a"ree/ent %etween

3CP; and 7asa"ana, and that, <nall0, the Supre/e Court #ould not

review fa#tual <ndin"s of the lower #ourt aGr/ed %0 the Court of

(ppeals. 10

Be "ive due #ourse to the appeal.



The %asi# issue raised is whether the <re insuran#e poli#ies issued %0

petitioner to the respondent #overin" the period 7a0 $$, 1--1 to 7a0

$$, 1--$, had eApired on the latter date or had %een eAtended or

renewed %0 an i/plied #redit arran"e/ent thou"h a#tual pa0/ent of

pre/iu/ was tendered on a later date after the o##urren#e of the ris!

)<re* insured a"ainst.

The answer is easil0 found in the Insuran#e Code. No, an insuran#epoli#0, other than life, issued ori"inall0 or on renewal, is not valid and

%indin" until a#tual pa0/ent of the pre/iu/. (n0 a"ree/ent to the

#ontrar0 is void. 11 The parties /a0 not a"ree eApressl0 or i/pliedl0 on

the eAtension of #reditor ti/e to pa0 the pre/iu/ and #onsider the

poli#0 %indin" %efore a#tual pa0/ent.

The #ase of Mala)an -nsuran'e (o., -n'. !s. (ruz*Arnaldo, 12 #ited %0

the Court of (ppeals, is not appli#a%le. In that #ase, pa0/ent of the

pre/iu/ was in fa#t a#tuall0 /ade on De#e/%er $4, 1-'1, and the <re

o##urred on anuar0 1', 1-'$. @ere, the pa0/ent of the pre/iu/ for

renewal of the poli#ies was tendered on ul0 16, 1--$, a /onth after

the <re o##urred on une 16, 1--$. The assured did not even "ive the

insurer a noti#e of loss within a reasona%le ti/e after o##urren#e of the

<re.

B@EREORE, the Court here%0 RE9ERSES and SETS (SIDE the de#ision

of the Court of (ppeals in C(+.R. C9 No. 4$6$1. In lieu thereof the

Court renders ud"/ent dis/issin" respondentLs #o/plaint and

petitionerLs #ounter#lai/s thereto <led with the Re"ional Trial Court,

;ran#h ', 7a!ati Cit0, in Civil Case No. -$+$&$6. Bithout

#osts.1âwphi1.n^t

SO ORDERED.

G.R. No. 1256/8 M*3 18, 2002

!#ILAMCARE #EALT# S$STEMS, INC., petitioner,

vs.

COURT O A!!EALS n- JULITA TRINOS, respondents.

$NARES"SANTIAGO, J.:

Ernani Trinos, de#eased hus%and of respondent ulita Trinos, applied for

a health #are #overa"e with petitioner Phila/#are @ealth S0ste/s, In#.In the standard appli#ation for/, he answered no to the followin"

>uestion

@ave 0ou or an0 of 0our fa/il0 /e/%ers ever #onsulted or

%een treated for hi"h %lood pressure, heart trou%le, dia%etes,

#an#er, liver disease, asth/a or pepti# ul#er )If es, "ive

details*.1

The appli#ation was approved for a period of one 0ear fro/ 7ar#h 1,

1-'' to 7ar#h 1, 1-'-. (##ordin"l0, he was issued @ealth Care

("ree/ent No. P&1&1-4. 3nder the a"ree/ent, respondent?s hus%andwas entitled to avail of hospitaliation %ene<ts, whether ordinar0 or

e/er"en#0, listed therein. @e was also entitled to avail of :out+patient

%ene<ts: su#h as annual ph0si#al eAa/inations, preventive health #are

and other out+patient servi#es.

3pon the ter/ination of the a"ree/ent, the sa/e was eAtended for

another 0ear fro/ 7ar#h 1, 1-'- to 7ar#h 1, 1--&, then fro/ 7ar#h 1,

1--& to une 1, 1--&. The a/ount of #overa"e was in#reased to a

/aAi/u/ su/ of P=,&&&.&& per disa%ilit0.$

Durin" the period of his #overa"e, Ernani suJered a heart atta#! and

was #on<ned at the 7anila 7edi#al Center )77C* for one /onth

%e"innin" 7ar#h -, 1--&. Bhile her hus%and was in the hospital,

respondent tried to #lai/ the %ene<ts under the health #are

a"ree/ent. @owever, petitioner denied her #lai/ sa0in" that the

@ealth Care ("ree/ent was void. (##ordin" to petitioner, there was a

#on#eal/ent re"ardin" Ernani?s /edi#al histor0. Do#tors at the 77C

alle"edl0 dis#overed at the ti/e of Ernani?s #on<ne/ent that he was

h0pertensive, dia%eti# and asth/ati#, #ontrar0 to his answer in the

5



appli#ation for/. Thus, respondent paid the hospitaliation eApenses

herself, a/ountin" to a%out P=5,&&&.&&.

(fter her hus%and was dis#har"ed fro/ the 77C, he was attended %0 a

ph0si#al therapist at ho/e. 2ater, he was ad/itted at the Chinese

eneral @ospital. Due to <nan#ial diG#ulties, however, respondent

%rou"ht her hus%and ho/e a"ain. In the /ornin" of (pril 16, 1--&,

Ernani had fever and was feelin" ver0 wea!. Respondent was#onstrained to %rin" hi/ %a#! to the Chinese eneral @ospital where

he died on the sa/e da0.

On ul0 $4, 1--&, respondent instituted with the Re"ional Trial Court of

7anila, ;ran#h 44, an a#tion for da/a"es a"ainst petitioner and its

president, Dr. ;enito Reverente, whi#h was do#!eted as Civil Case No.

-&+6=-. She as!ed for rei/%urse/ent of her eApenses plus /oral

da/a"es and attorne0?s fees. (fter trial, the lower #ourt ruled a"ainst

petitioners, !izQ

B@EREORE, in view of the for"oin", the Court renders

ud"/ent in favor of the plaintiJ ulita Trinos, orderin"

1. Defendants to pa0 and rei/%urse the /edi#al and hospital

#overa"e of the late Ernani Trinos in the a/ount of P=5,&&&.&&

plus interest, until the a/ount is full0 paid to plaintiJ who paid

the sa/eH

$. Defendants to pa0 the redu#ed a/ount of /oral da/a"es of

P1&,&&&.&& to plaintiJH

6. Defendants to pa0 the redu#ed a/ount of P1&,&&&.&& as

eAe/plar0 da/a"es to plaintiJH

4. Defendants to pa0 attorne0?s fees of P$&,&&&.&&, plus #osts

of suit.

SO ORDERED.6

On appeal, the Court of (ppeals aGr/ed the de#ision of the trial #ourt

%ut deleted all awards for da/a"es and a%solved petitioner

Reverente.4 Petitioner?s /otion for re#onsideration was denied. @en#e,

petitioner %rou"ht the instant petition for review, raisin" the pri/ar0

ar"u/ent that a health #are a"ree/ent is not an insuran#e #ontra#tH

hen#e the :in#ontesta%ilit0 #lause: under the Insuran#e Code5 does not

appl0.1âwphi1.n^t

Petitioner ar"ues that the a"ree/ent "rants :livin" %ene<ts,: su#h as

/edi#al #he#!+ups and hospitaliation whi#h a /e/%er /a0

i//ediatel0 eno0 so lon" as he is alive upon eJe#tivit0 of the

a"ree/ent until its eApiration one+0ear thereafter. Petitioner also

points out that onl0 /edi#al and hospitaliation %ene<ts are "iven

under the a"ree/ent without an0 inde/ni<#ation, unli!e in an

insuran#e #ontra#t where the insured is inde/ni<ed for his loss.

7oreover, sin#e @ealth Care ("ree/ents are onl0 for a period of one

0ear, as #o/pared to insuran#e #ontra#ts whi#h last lon"er,= petitioner

ar"ues that the in#ontesta%ilit0 #lause does not appl0, as the sa/e

re>uires an eJe#tivit0 period of at least two 0ears. Petitioner further

ar"ues that it is not an insuran#e #o/pan0, whi#h is "overned %0 theInsuran#e Co//ission, %ut a @ealth 7aintenan#e Or"aniation under

the authorit0 of the Depart/ent of @ealth.

Se#tion $ )1* of the Insuran#e Code de<nes a #ontra#t of insuran#e as

an a"ree/ent where%0 one underta!es for a #onsideration to

inde/nif0 another a"ainst loss, da/a"e or lia%ilit0 arisin" fro/ an

un!nown or #ontin"ent event. (n insuran#e #ontra#t eAists where the

followin" ele/ents #on#ur

1. The insured has an insura%le interestH

$. The insured is su%e#t to a r is! of loss %0 the happenin" of

the desi"nated perilH

6. The insurer assu/es the ris!H

4. Su#h assu/ption of ris! is part of a "eneral s#he/e to

distri%ute a#tual losses a/on" a lar"e "roup of persons

%earin" a si/ilar ris!H and

=



. In #onsideration of the insurer?s pro/ise, the insured pa0s a

pre/iu/.'

Se#tion 6 of the Insuran#e Code states that an0 #ontin"ent or un!nown

event, whether past or future, whi#h /a0 da/nif0 a person havin" an

insura%le interest a"ainst hi/, /a0 %e insured a"ainst. Ever0 person

has an insura%le interest in the life and health of hi/self. Se#tion 1&

provides

Ever0 person has an insura%le interest in the life and health

)1* of hi/self, of his spouse and of his #hildrenH

)$* of an0 person on who/ he depends wholl0 or in part for

edu#ation or support, or in who/ he has a pe#uniar0 interestH

)6* of an0 person under a le"al o%li"ation to hi/ for the

pa0/ent of /one0, respe#tin" propert0 or servi#e, of whi#h

death or illness /i"ht dela0 or prevent the perfor/an#eH and

)4* of an0 person upon whose life an0 estate or interest vested

in hi/ depends.

In the #ase at %ar, the insura%le interest of respondent?s hus%and in

o%tainin" the health #are a"ree/ent was his own health. The health

#are a"ree/ent was in the nature of non+life insuran#e, whi#h is

pri/aril0 a #ontra#t of inde/nit0.- On#e the /e/%er in#urs hospital,

/edi#al or an0 other eApense arisin" fro/ si#!ness, inur0 or other

stipulated #ontin"ent, the health #are provider /ust pa0 for the sa/e

to the eAtent a"reed upon under the #ontra#t.

Petitioner ar"ues that respondent?s hus%and #on#ealed a /aterial fa#t

in his appli#ation. It appears that in the appli#ation for health

#overa"e, petitioners re>uired respondent?s hus%and to si"n an

eApress authoriation for an0 person, or"aniation or entit0 that has

an0 re#ord or !nowled"e of his health to furnish an0 and all infor/ation

relative to an0 hospitaliation, #onsultation, treat/ent or an0 other

/edi#al advi#e or eAa/ination.1& Spe#i<#all0, the @ealth Care

("ree/ent si"ned %0 respondent?s hus%and states

Be here%0 de#lare and a"ree that all state/ent and answers

#ontained herein and in an0 addendu/ anneAed to this

appli#ation are full, #o/plete and true and %ind all parties in

interest under the ("ree/ent herein applied for, that there

shall %e no #ontra#t of health #are #overa"e unless and until an

("ree/ent is issued on this appli#ation and the full

7e/%ership ee a##ordin" to the /ode of pa0/ent applied for

is a#tuall0 paid durin" the lifeti/e and "ood health of proposed7e/%ersH that no infor/ation a#>uired %0 an0 Representative

of Phila/Care shall %e %indin" upon Phila/Care unless set out

in writin" in the appli#ationHthat an0 ph0si#ian is, %0 these

presents, eApressl0 authoried to dis#lose or "ive testi/on0 at

an0ti/e relative to an0 infor/ation a#>uired %0 hi/ in his

professional #apa#it0 upon an0 >uestion aJe#tin" the eli"i%ilit0

for health #are #overa"e of the Proposed 7e/%ers and that the

a##eptan#e of an0 ("ree/ent issued on this appli#ation shall

%e a rati<#ation of an0 #orre#tion in or addition to this

appli#ation as stated in the spa#e for @o/e OG#e

Endorse/ent.11 )3nders#orin" ours*

In addition to the a%ove #ondition, petitioner additionall0 re>uired the

appli#ant for authoriation to in>uire a%out the appli#ant?s /edi#al

histor0, thus

I here%0 authorie an0 person, or"aniation, or entit0 that has

an0 re#ord or !nowled"e of /0 health and8or that of ZZZZZZZZZZ

to "ive to the Phila/Care @ealth S0ste/s, In#. an0 and all

infor/ation relative to an0 hospitaliation, #onsultation,

treat/ent or an0 other /edi#al advi#e or eAa/ination. This

authoriation is in #onne#tion with the appli#ation for health

#are #overa"e onl0. ( photo"raphi# #op0 of this authoriationshall %e as valid as the ori"inal.1$ )3nders#orin" ours*

Petitioner #annot rel0 on the stipulation re"ardin" :Invalidation of

a"ree/ent: whi#h reads

ailure to dis#lose or /isrepresentation of an0 /aterial

infor/ation %0 the /e/%er in the appli#ation or /edi#al

eAa/ination, whether intentional or unintentional, shall

'



auto/ati#all0 invalidate the ("ree/ent fro/ the ver0

%e"innin" and lia%ilit0 of Phila/#are shall %e li/ited to return

of all 7e/%ership ees paid. (n undis#losed or /isrepresented

infor/ation is dee/ed /aterial if its revelation would have

resulted in the de#lination of the appli#ant %0 Phila/#are or the

assess/ent of a hi"her 7e/%ership ee for the %ene<t or

%ene<ts applied for.16

The answer assailed %0 petitioner was in response to the >uestion

relatin" to the /edi#al histor0 of the appli#ant. This lar"el0 depends on

opinion rather than fa#t, espe#iall0 #o/in" fro/ respondent?s hus%and

who was not a /edi#al do#tor. Bhere /atters of opinion or ud"/ent

are #alled for, answers /ade in "ood faith and without intent to

de#eive will not avoid a poli#0 even thou"h the0 are untrue.14 Thus,

)(*lthou"h false, a representation of the eApe#tation, intention,

%elief, opinion, or ud"/ent of the insured will not avoid the

poli#0 if there is no a#tual fraud in indu#in" the a##eptan#e of

the ris!, or its a##eptan#e at a lower rate of pre/iu/, and this

is li!ewise the rule althou"h the state/ent is /aterial to the

ris!, if the state/ent is o%viousl0 of the fore"oin" #hara#ter,

sin#e in su#h #ase the insurer is not usti<ed in rel0in" upon

su#h state/ent, %ut is o%li"ated to /a!e further in>uir0. There

is a #lear distin#tion %etween su#h a #ase and one in whi#h the

insured is fraudulentl0 and intentionall0 states to %e true, as a

/atter of eApe#tation or %elief, that whi#h he then !nows, to

%e a#tuall0 untrue, or the i/possi%ilit0 of whi#h is shown %0

the fa#ts within his !nowled"e, sin#e in su#h #ase the intent to

de#eive the insurer is o%vious and a/ounts to a#tual

fraud.1 )3nders#orin" ours*

The fraudulent intent on the part of the insured /ust %e esta%lished to

warrant res#ission of the insuran#e #ontra#t.15 Con#eal/ent as a

defense for the health #are provider or insurer to avoid lia%ilit0 is an

aGr/ative defense and the dut0 to esta%lish su#h defense %0

satisfa#tor0 and #onvin#in" eviden#e rests upon the provider or

insurer. In an0 #ase, with or without the authorit0 to investi"ate,

petitioner is lia%le for #lai/s /ade under the #ontra#t. @avin"

assu/ed a responsi%ilit0 under the a"ree/ent, petitioner is %ound to

answer the sa/e to the eAtent a"reed upon. In the end, the lia%ilit0 of

the health #are provider atta#hes on#e the /e/%er is hospitalied for

the disease or inur0 #overed %0 the a"ree/ent or whenever he avails

of the #overed %ene<ts whi#h he has prepaid.

3nder Se#tion $= of the Insuran#e Code, :a #on#eal/ent entitles the

inured part0 to res#ind a #ontra#t of insuran#e.: The ri"ht to res#ind

should %e eAer#ised previous to the #o//en#e/ent of an a#tion onthe #ontra#t.1= In this #ase, no res#ission was /ade. ;esides, the

#an#ellation of health #are a"ree/ents as in insuran#e poli#ies re>uire

the #on#urren#e of the followin" #onditions

1. Prior noti#e of #an#ellation to insuredH

$. Noti#e /ust %e %ased on the o##urren#e after eJe#tive date of the

poli#0 of one or /ore of the "rounds /entionedH

6. 7ust %e in writin", /ailed or delivered to the insured at the address

shown in the poli#0H

4. 7ust state the "rounds relied upon provided in Se#tion 54 of the

Insuran#e Code and upon re>uest of insured, to furnish fa#ts on whi#h

#an#ellation is %ased.1'

None of the a%ove pre+#onditions was ful<lled in this #ase. Bhen the

ter/s of insuran#e #ontra#t #ontain li/itations on lia%ilit0, #ourts

should #onstrue the/ in su#h a wa0 as to pre#lude the insurer fro/

non+#o/plian#e with his o%li"ation.1- ;ein" a #ontra#t of adhesion, the

ter/s of an insuran#e #ontra#t are to %e #onstrued stri#tl0 a"ainst the

part0 whi#h prepared the #ontra#t the insurer.$& ;0 reason of the

eA#lusive #ontrol of the insuran#e #o/pan0 over the ter/s and

phraseolo"0 of the insuran#e #ontra#t, a/%i"uit0 /ust %e stri#tl0

interpreted a"ainst the insurer and li%erall0 in favor of the insured,

espe#iall0 to avoid forfeiture.$1 This is e>uall0 appli#a%le to @ealth Care

("ree/ents. The phraseolo"0 used in /edi#al or hospital servi#e

#ontra#ts, su#h as the one at %ar, /ust %e li%erall0 #onstrued in favor

of the su%s#ri%er, and if dou%tful or reasona%l0 sus#epti%le of two

interpretations the #onstru#tion #onferrin" #overa"e is to %e adopted,

-



and eA#lusionar0 #lauses of dou%tful i/port should %e stri#tl0

#onstrued a"ainst the provider.$$

(nent the in#ontesta%ilit0 of the /e/%ership of respondent?s hus%and,

we >uote with approval the followin" <ndin"s of the trial #ourt

)3*nder the title Clai/ pro#edures of eApenses, the defendant

Phila/#are @ealth S0ste/s In#. had twelve /onths fro/ thedate of issuan#e of the ("ree/ent within whi#h to #ontest the

/e/%ership of the patient if he had previous ail/ent of

asth/a, and siA /onths fro/ the issuan#e of the a"ree/ent if

the patient was si#! of dia%etes or h0pertension. The periods

havin" eApired, the defense of #on#eal/ent or

/isrepresentation no lon"er lie.$6

inall0, petitioner alle"es that respondent was not the le"al wife of the

de#eased /e/%er #onsiderin" that at the ti/e of their /arria"e, the

de#eased was previousl0 /arried to another wo/an who was still

alive. The health #are a"ree/ent is in the nature of a #ontra#t of

inde/nit0. @en#e, pa0/ent should %e /ade to the part0 who in#urred

the eApenses. It is not #ontroverted that respondent paid all the

hospital and /edi#al eApenses. She is therefore entitled to

rei/%urse/ent. The re#ords ade>uatel0 prove the eApenses in#urred

%0 respondent for the de#eased?s hospitaliation, /edi#ation and the

professional fees of the attendin" ph0si#ians.$4

#EREORE, in view of the fore"oin", the petition is ENIE. The

assailed de#ision of the Court of (ppeals dated De#e/%er 14, 1--

is AIRME.

SO ORERE.

@G.R. No. 154514. Ju>: 28, 2005

#ITE GOL MARINE SER+ICES, INC., petitioner , v. !IONEERINSURANCE AN SURET$ COR!ORATION AN T#ESTEAMS#I! MUTUAL UNERRITING ASSOCIATION(ERMUA) LT., repon!ent.

E C I S I O N

?UISUMING, J.

This petition for review assails the e<<on1F dated ul0 6&, $&&$

of the Court of (ppeals in C(+.R. SP No. 5&144, aGr/in"

the e<<on$F dated 7a0 6, $&&& of the Insuran#e Co//ission in I.C.

(d/. Case No. RD+$==. ;oth de#isions held that there was no violation

of the Insuran#e Code and the respondents do not need li#ense as

insurer and insuran#e a"ent8%ro!er.

The fa#ts are undisputed.

Bhite old 7arine Servi#es, In#. )Bhite old* pro#ured aprote#tion and inde/nit0 #overa"e for its vessels fro/ The Stea/ship

7utual 3nderwritin" (sso#iation );er/uda* 2i/ited )Stea/ship

7utual* throu"h Pioneer Insuran#e and Suret0 Corporation )Pioneer*.

Su%se>uentl0, Bhite old was issued a Certi<#ate of Entr0 and

(##eptan#e.6F Pioneer also issued re#eipts eviden#in" pa0/ents for the

#overa"e. Bhen Bhite old failed to full0 pa0 its a##ounts, Stea/ship

7utual refused to renew the #overa"e.

Stea/ship 7utual thereafter <led a #ase a"ainst Bhite old for

#olle#tion of su/ of /one0 to re#over the latters unpaid %alan#e.

Bhite old on the other hand, <led a #o/plaint %efore the Insuran#e

Co//ission #lai/in" that Stea/ship 7utual violated Se#tions

1'54F and 1'=F of the Insuran#e Code, while Pioneer violated Se#tions

$--,5F 6&&=F and 6&1'F in relation to Se#tions 6&$ and 6&6, thereof.

The Insuran#e Co//ission dis/issed the #o/plaint. It said that

there was no need for Stea/ship 7utual to se#ure a li#ense %e#ause it

was not en"a"ed in the insuran#e %usiness. It eAplained that

Stea/ship 7utual was a Prote#tion and Inde/nit0 Clu% )P I Clu%*.

2i!ewise, Pioneer need not o%tain another li#ense as insuran#e a"ent

5&

http://sc.judiciary.gov.ph/jurisprudence/2005/jul2005/154514.htm#_ftn1




















and8or a %ro!er for Stea/ship 7utual %e#ause Stea/ship 7utual was

not en"a"ed in the insuran#e %usiness. 7oreover, Pioneer was alread0

li#ensed, hen#e, a separate li#ense solel0 as a"ent8%ro!er of Stea/ship

7utual was alread0 superKuous.

The Court of (ppeals aGr/ed the de#ision of the Insuran#e

Co//issioner. In its de#ision, the appellate #ourt distin"uished

%etween P I Clu%s !is**!is #onventional insuran#e. The appellate#ourt also held that Pioneer /erel0 a#ted as a #olle#tion a"ent of

Stea/ship 7utual.

In this petition, petitioner assi"ns the followin" errors alle"edl0

#o//itted %0 the appellate #ourt,

IRST (SSIN7ENT O ERROR

T@E CO3RT ( M3O ERRED B@EN IT R32ED T@(T RESPONDENT

STE(7S@IP IS NOT DOIN ;3SINESS IN T@E P@I2IPPINES ON T@E

RO3ND T@(T IT CO3RSED . . . ITS TR(NS(CTIONS T@RO3@ ITS(ENT (ND8OR ;ROQER @ENCE (S (N INS3RER IT NEED NOT SEC3RE

( 2ICENSE TO EN(E IN INS3R(NCE ;3SINESS IN T@E P@I2IPPINES.

SECOND (SSIN7ENT O ERROR

T@E CO3RT ( M3O ERRED B@EN IT R32ED T@(T T@E RECORD IS

;ERET O (N E9IDENCE T@(T RESPONDENT STE(7S@IP IS EN(ED

IN INS3R(NCE ;3SINESS.

T@IRD (SSIN7ENT O ERROR

T@E CO3RT ( M3O ERRED B@EN IT R32ED, T@(T RESPONDENT

PIONEER NEED NOT SEC3RE ( 2ICENSE B@EN COND3CTIN ITS

((IR (S (N (ENT8;ROQER O RESPONDENT STE(7S@IP.

O3RT@ (SSIN7ENT O ERROR

T@E CO3RT ( M3O ERRED IN NOT RE9OQIN T@E 2ICENSE O

RESPONDENT PIONEER (ND IN NOT RE7O9INF T@E OICERS (ND

DIRECTORS O RESPONDENT PIONEER.-F

Si/pl0, the %asi# issues %efore us are )1* Is Stea/ship 7utual, a P

I Clu%, en"a"ed in the insuran#e %usiness in the Philippines )$*

Does Pioneer need a li#ense as an insuran#e a"ent8%ro!er for

Stea/ship 7utual

The parties ad/it that Stea/ship 7utual is a P I Clu%.

Stea/ship 7utual ad/its it does not have a li#ense to do %usiness in

the Philippines althou"h Pioneer is its resident a"ent. This relationship

is reKe#ted in the #erti<#ations issued %0 the Insuran#e Co//ission.

Petitioner insists that Stea/ship 7utual as a P I Clu% is en"a"ed

in the insuran#e %usiness. To %uttress its assertion, it #ites the

de<nition of a P I Clu% in 6)opsung Mariti%e (o., $td. !. (ourt of

Appeals1&F as an asso#iation #o/posed of shipowners in "eneral who

%and to"ether for the spe#i<# purpose of providin" insuran#e #over on

a /utual %asis a"ainst lia%ilities in#idental to shipownin" that the

/e/%ers in#ur in favor of third parties. It stresses that as a P I Clu%,

Stea/ship 7utuals pri/ar0 purpose is to soli#it and provide prote#tion

and inde/nit0 #overa"e and for this purpose, it has en"a"ed the

servi#es of Pioneer to a#t as its a"ent.

Respondents #ontend that althou"h Stea/ship 7utual is a P I

Clu%, it is not en"a"ed in the insuran#e %usiness in the Philippines. It is

/erel0 an asso#iation of vessel owners who have #o/e to"ether to

provide /utual prote#tion a"ainst lia%ilities in#idental to shipownin".11F Respondents aver 6)opsung is inappli#a%le in this #ase %e#ause the

issue in 6)opsung was the urisdi#tion of the #ourt over 6)opsung.

Is Stea/ship 7utual en"a"ed in the insuran#e %usiness

Se#tion $)$* of the Insuran#e Code enu/erates what #onstitutes

doin" an insuran#e %usiness or transa#tin" an insuran#e %usiness.

These are

51









)a* /a!in" or proposin" to /a!e, as insurer, an0 insuran#e

#ontra#tH

)%* /a!in", or proposin" to /a!e, as suret0, an0 #ontra#t of

suret0ship as a vo#ation and not as /erel0 in#idental to an0

other le"iti/ate %usiness or a#tivit0 of the suret0H

)#* doin" an0 !ind of %usiness, in#ludin" a reinsuran#e %usiness,spe#i<#all0 re#o"nied as #onstitutin" the doin" of an

insuran#e %usiness within the /eanin" of this CodeH

)d* doin" or proposin" to do an0 %usiness in su%stan#e e>uivalent

to an0 of the fore"oin" in a /anner desi"ned to evade the

provisions of this Code.

. . .

The sa/e provision also provides, the fa#t that no pro<t is derived

fro/ the /a!in" of insuran#e #ontra#ts, a"ree/ents or transa#tions, orthat no separate or dire#t #onsideration is re#eived therefor, shall not

pre#lude the eAisten#e of an insuran#e %usiness.1$F

The test to deter/ine if a #ontra#t is an insuran#e #ontra#t or not,

depends on the nature of the pro/ise, the a#t re>uired to %e

perfor/ed, and the eAa#t nature of the a"ree/ent in the li"ht of the

o##urren#e, #ontin"en#0, or #ir#u/stan#es under whi#h the

perfor/an#e %e#o/es re>uisite. It is not %0 what it is #alled.16F

;asi#all0, an insuran#e #ontra#t is a #ontra#t of inde/nit0. In it,

one underta!es for a #onsideration to inde/nif0 another a"ainst loss,da/a"e or lia%ilit0 arisin" fro/ an un!nown or #ontin"ent event.14F

In parti#ular, a /arine insuran#e underta!es to inde/nif0 the

assured a"ainst /arine losses, su#h as the losses in#ident to a /arine

adventure. 1F Se#tion --15F of the Insuran#e Code enu/erates the

#overa"e of /arine insuran#e.

Relatedl0, a /utual insuran#e #o/pan0 is a #ooperative

enterprise where the /e/%ers are %oth the insurer and insured. In it,

the /e/%ers all #ontri%ute, %0 a s0ste/ of pre/iu/s or assess/ents,

to the #reation of a fund fro/ whi#h all losses and lia%ilities are paid,

and where the pro<ts are divided a/on" the/selves, in proportion to

their interest.1=F (dditionall0, /utual insuran#e asso#iations, or #lu%s,

provide three t0pes of #overa"e, na/el0, prote#tion and inde/nit0,

war ris!s, and defense #osts.1'F

( P I Clu% is a o* o <nu*ne a"ainst third part0 lia%ilit0,

where the third part0 is an0one other than the P I Clu% and the

/e/%ers.1-F ;0 de<nition then, Stea/ship 7utual as a P I Clu% is a

/utual insuran#e asso#iation en"a"ed in the /arine insuran#e

%usiness.

The re#ords reveal Stea/ship 7utual is doin" %usiness in the

#ountr0 al%eit without the re>uisite #erti<#ate of authorit0 /andated

%0 Se#tion 1'=$&F of the Insuran#e Code. It /aintains a resident a"ent

in the Philippines to soli#it insuran#e and to #olle#t pa0/ents in its

%ehalf. Be note that Stea/ship 7utual even renewed its P I Clu%

#over until it was #an#elled due to non+pa0/ent of the #alls. Thus, to

#ontinue doin" %usiness here, Stea/ship 7utual or throu"h its a"ent

Pioneer, /ust se#ure a li#ense fro/ the Insuran#e Co//ission.

Sin#e a #ontra#t of insuran#e involves pu%li# interest, re"ulation

%0 the State is ne#essar0. Thus, no insurer or insuran#e #o/pan0 is

allowed to en"a"e in the insuran#e %usiness without a li#ense or a

#erti<#ate of authorit0 fro/ the Insuran#e Co//ission.$1F

Does Pioneer, as a"ent8%ro!er of Stea/ship 7utual, need a spe#ial

li#ense

Pioneer is the resident a"ent of Stea/ship 7utual as eviden#ed %0

the #erti<#ate of re"istration$$F issued %0 the Insuran#e Co//ission. It

has %een li#ensed to do or transa#t insuran#e %usiness %0 virtue of the

#erti<#ate of authorit0$6F issued %0 the sa/e a"en#0. @owever, a

Certi<#ation fro/ the Co//ission states that Pioneer does not have a

separate li#ense to %e an a"ent8%ro!er of Stea/ship 7utual.$4F

5$

































(lthou"h Pioneer is alread0 li#ensed as an insuran#e #o/pan0, it

needs a separate li#ense to a#t as insuran#e a"ent for Stea/ship

7utual. Se#tion $-- of the Insuran#e Code #learl0 states

SEC. $-- . . .

No person shall a#t as an insuran#e a"ent or as an insuran#e %ro!er in

the soli#itation or pro#ure/ent of appli#ations for insuran#e, or re#eivefor servi#es in o%tainin" insuran#e, an0 #o//ission or other

#o/pensation fro/ an0 insuran#e #o/pan0 doin" %usiness in the

Philippines or an0 a"ent thereof, without <rst pro#urin" a li#ense so to

a#t fro/ the Co//issioner, whi#h /ust %e renewed annuall0 on the

<rst da0 of anuar0, or within siA /onths thereafter. . .

inall0, Bhite old see!s revo#ation of Pioneers #erti<#ate of

authorit0 and re/oval of its dire#tors and oG#ers. Re"retta%l0, we are

not the foru/ for these issues.

#EREORE, the petition is P(RTI(22 R(NTED. The De#isiondated ul0 6&, $&&$ of the Court of (ppeals aGr/in" the De#ision

dated 7a0 6, $&&& of the Insuran#e Co//ission is here%0 RE9ERSED

(ND SET (SIDE. The Stea/ship 7utual 3nderwritin" (sso#iation

);er/uda* 2td., and Pioneer Insuran#e and Suret0 Corporation are

ORDERED to o%tain li#enses and to se#ure proper authoriations to do

%usiness as insurer and insuran#e a"ent, respe#tivel0. The petitioners

pra0er for the revo#ation of Pioneers Certi<#ate of (uthorit0 and

re/oval of its dire#tors and oG#ers, is DENIED. Costs a"ainst

respondents.

SO ORERE.

G.R. No. 15616/ M: 16, 2005

GUL RESORTS, INC., petitioner,vs.!#ILI!!INE C#ARTER INSURANCE COR!ORATION, respondent.

D E C I S I O N

!UNO, J.

;efore the Court is the petition for 'ertiorari under Rule 4 of theRevised Rules of Court %0 petitioner 32 RESORTS, INC., a"ainstrespondent P@I2IPPINE C@(RTER INS3R(NCE CORPOR(TION. Petitionerassails the appellate #ourt de#ision1 whi#h dis/issed its two appealsand aGr/ed the ud"/ent of the trial #ourt.

or review are the warrin" interpretations of petitioner and respondenton the s#ope of the insuran#e #o/pan0?s lia%ilit0 for earth>ua!eda/a"e to petitioner?s properties. Petitioner avers that, pursuant to itsearth>ua!e sho#! endorse/ent rider, Insuran#e Poli#0 No. 61-44#overs all da/a"es to the properties within its resort #aused %0earth>ua!e. Respondent #ontends that the rider l i/its its lia%ilit0 forloss to the two swi//in" pools of petitioner.

The fa#ts as esta%lished %0 the #ourt a uo, and aGr/ed %0 theappellate #ourt are as follows

PFlaintiJ is the owner of the Plaa Resort situated at ("oo, 2a3nion and had its properties in said resort insured ori"inall0with the (/eri#an @o/e (ssuran#e Co/pan0 )(@(C+(I3*. Inthe <rst four insuran#e poli#ies issued %0 (@(C+(I3 fro/ 1-'4+'H 1-'+'5H 1-'5+1-'=H and 1-'=+'' )EAhs. :C:, :D:, :E: and::H also EAhs. :1:, :$:, :6: and :4: respe#tivel0*, the ris! ofloss fro/ earth>ua!e sho#! was eAtended onl0 to plaintiJ?s twoswi//in" pools, thus, :earth>ua!e sho#! endt.: )Ite/ onl0*

)EAhs. :C+1:H :D+1,: and :E: and two )$* swi//in" pools onl0)EAhs. :C+1:H [D+1:, :E: and :+1:*. :Ite/ : in those poli#iesreferred to the two )$* swi//in" pools onl0 )EAhs. :1+;:, :$+;:,:6+;: and :+$:*H that su%se>uentl0 (@(C)(I3* issued inplaintiJ?s favor Poli#0 No. $&5+41'$6'6+& #overin" the period7ar#h 14, 1-'' to 7ar#h 14, 1-'- )EAhs. :: also :+1:* and insaid poli#0 the earth>ua!e endorse/ent #lause as indi#ated inEAhi%its :C+1:, :D+1:, EAhi%its :E: and :+1: was deleted andthe entr0 under Endorse/ents8Barranties at the ti/e of issueread that plaintiJ renewed its poli#0 with (@(C )(I3* for theperiod of 7ar#h 14, 1-'- to 7ar#h 14, 1--& under Poli#0 No.

56

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$&5+45'&51+- )EAh. :@:* whi#h #arried the entr0 under:Endorse/ent8Barranties at Ti/e of Issue:, whi#h read:Endorse/ent to In#lude Earth>ua!e Sho#! )EAh. :5+;+1:* inthe a/ount of P1&,=&&.&& and paid P4$,5'.14 )EAhs. :5+(:and :5+;:* as pre/iu/ thereof, #o/puted as follows

Ite/ + P=,5-1,&&&.&& + on the Clu%house onl0

\ .6-$H

+ 1,&&,&&&.&& + on the furniture, et#. #ontained in the %uildin"a%ove+/entioned\ .4-&H

+ 6-6,&&&.&& + on the two swi//in" pools, onl0 )a"ainst the peril of earth>ua!e sho#! onl0* \ &.1&&

+ 115,5&&.&& other %uildin"s in#lude as follows

a* Tilter @ouse + P1-,'&&.&& + &.1

%* Power @ouse + P41,&&&.&& + &.1

#* @ouse Shed + P,&&&.&& + &.4&

P1&&,&&&.&& + for furniture, <Atures, lines air+#on and operatin"e>uip/ent

that plaintiJ a"reed to insure with defendant the properties#overed %0 (@(C )(I3* Poli#0 No. $&5+45'&51+- )EAh. :@:*provided that the poli#0 wordin" and rates in said poli#0 %e#opied in the poli#0 to %e issued %0 defendantH that defendantissued Poli#0 No. 61-44 to plaintiJ #overin" the period of7ar#h 14, 1--& to 7ar#h 14, 1--1 for P1&,=&&,5&&.&& for atotal pre/iu/ of P4,1-.-$ )EAh. :I:*H that in the #o/putationof the pre/iu/, defendant?s Poli#0 No. 61-44 )EAh. :I:*, whi#his the poli#0 in >uestion, #ontained on the ri"ht+hand upperportion of pa"e = thereof, the followin"

Rate+9arious

Pre/iu/ P6=,4$&.5& 82

$,&51.$ T0phoon

1,&6&.=5 EC

6-6.&& ES

Do#. Sta/ps 6,&5'.1&

.S.T. ==5.'-

Pre/. TaA 4&-.&

54



TOT(2 4,1-.-$H

In #onsideration of the pa0/ent %0 the insured to the#o/pan0 of the su/ in#luded additional pre/iu/ theCo/pan0 a"rees, notwithstandin" what is stated in the

printed #onditions of this poli#0 due to the #ontrar0,that this insuran#e #overs loss or da/a"e to sho#!to an0 of the propert0 insured %0 this Poli#0 o##asioned%0 or throu"h or in #onse>uen#e of earth>ua!e )EAhs.:1+D:, :$+D:, :6+(:, :4+;:, :+(:, :5+D: and :=+C:*H

that in EAhi%it :=+C: the word :in#luded: a%ove the underlinedportion was deletedH that on ul0 15, 1--& an earth>ua!estru#! Central 2uon and Northern 2uon and plaintiJ?sproperties #overed %0 Poli#0 No. 61-44 issued %0 defendant,in#ludin" the two swi//in" pools in its ("oo Pla0a Resort wereda/a"ed.$

(fter the earth>ua!e, petitioner advised respondent that it would %e/a!in" a #lai/ under its Insuran#e Poli#0 No. 61-44 for da/a"es on itsproperties. Respondent instru#ted petitioner to <le a for/al #lai/, thenassi"ned the investi"ation of the #lai/ to an independent #lai/saduster, ;a0ne (dusters and Surve0ors, In#.6 On ul0 6&, 1--&,respondent, throu"h its aduster, re>uested petitioner to su%/itvarious do#u/ents in support of its #lai/. On (u"ust =, 1--&, ;a0ne(dusters and Surve0ors, In#., throu"h its 9i#e+President (.R. de2eon,4 rendered a preli/inar0 report <ndin" eAtensive da/a"e #aused%0 the earth>ua!e to the #lu%house and to the two swi//in" pools.7r. de 2eon stated that :eA#ept for the swi//in" pools, all aJe#tedite/s have no #overa"e for earth>ua!e sho#!s.:5 On (u"ust 11, 1--&,petitioner <led its for/al de/and= for settle/ent of the da/a"e to all

its properties in the ("oo Pla0a Resort. On (u"ust $6, 1--&,respondent denied petitioner?s #lai/ on the "round that its insuran#epoli#0 onl0 aJorded earth>ua!e sho#! #overa"e to the two swi//in"pools of the resort.'Petitioner and respondent failed to arrive at asettle/ent.- Thus, on anuar0 $4, 1--1, petitioner <led a#o/plaint1& with the re"ional trial #ourt of Pasi" pra0in" for thepa0/ent of the followin"

1.* The su/ of P,4$=,==-.&&, representin" losses sustained %0the insured properties, with interest thereon, as #o/putedunder par. $- of the poli#0 )(nneA :;:* until full0 paidH

$.* The su/ of P4$','4$.&& per /onth, representin"#ontinuin" losses sustained %0 plaintiJ on a##ount ofdefendant?s refusal to pa0 the #lai/sH

6.* The su/ of P&&,&&&.&&, %0 wa0 of eAe/plar0 da/a"esH

4.* The su/ of P&&,&&&.&& %0 wa0 of attorne0?s fees andeApenses of liti"ationH

.* Costs.11

Respondent <led its (nswer with Spe#ial and (Gr/ative Defenses withCo/pulsor0 Counter#lai/s.1$

On e%ruar0 $1, 1--4, the lower #ourt after trial ruled in favor of therespondent, !iz

The a%ove s#hedule #learl0 shows that plaintiJ paid onl0 apre/iu/ of P6-6.&& a"ainst the peril of earth>ua!e sho#!, thesa/e pre/iu/ it paid a"ainst earth>ua!e sho#! onl0 on thetwo swi//in" pools in all the poli#ies issued %0 (@(C)(I3*)EAhi%its :C:, :D:, :E:, :: and ::*. ro/ this fa#t the Court/ust #onse>uentl0 a"ree with the position of defendant thatthe endorse/ent rider )EAhi%it :=+C:* /eans that onl0 the twoswi//in" pools were insured a"ainst earth>ua!e sho#!.

PlaintiJ #orre#tl0 points out that a poli#0 of insuran#e is a#ontra#t of adhesion hen#e, where the lan"ua"e used in an

insuran#e #ontra#t or appli#ation is su#h as to #reate a/%i"uit0the sa/e should %e resolved a"ainst the part0 responsi%letherefor, i.e., the insuran#e #o/pan0 whi#h prepared the#ontra#t. To the /ind of theF Court, the lan"ua"e used in thepoli#0 in liti"ation is #lear and una/%i"uous hen#e there is noneed for interpretation or #onstru#tion %ut onl0 appli#ation ofthe provisions therein.

ro/ the a%ove o%servations the Court <nds that onl0 the two)$* swi//in" pools had earth>ua!e sho#! #overa"e and wereheavil0 da/a"ed %0 the earth>ua!e whi#h stru#! on ul0 15,

5





























1--&. Defendant havin" ad/itted that the da/a"e to theswi//in" pools was appraised %0 defendant?s adusterat P6'5,&&&.&&, defendant /ust, %0 virtue of the #ontra#t ofinsuran#e, pa0 plaintiJ said a/ount.

;e#ause it is the <ndin" of the Court as stated in thei//ediatel0 pre#edin" para"raph that defendant is lia%le onl0for the da/a"e #aused to the two )$* swi//in" pools and that

defendant has /ade !nown to plaintiJ its willin"ness andreadiness to settle said lia%ilit0, there is no %asis for the "rantof the other da/a"es pra0ed for %0 plaintiJ. (s to the#ounter#lai/s of defendant, the Court does not a"ree that thea#tion <led %0 plaintiJ is %aseless and hi"hl0 spe#ulative sin#esu#h a#tion is a lawful eAer#ise of the plaintiJ?s ri"ht to #o/eto Court in the honest %elief that their Co/plaint is /eritorious.

The pra0er, therefore, of defendant for da/a"es is li!ewisedenied.

B@EREORE, pre/ises #onsidered, defendant is ordered to pa0plaintiJs the su/ of T@REE @3NDRED EI@T SI T@O3S(NDPESOS )P6'5,&&&.&&* representin" da/a"e to the two )$*

swi//in" pools, with interest at 5 per annu/ fro/ the dateof the <lin" of the Co/plaint until defendant?s o%li"ation toplaintiJ is full0 paid.

No pronoun#e/ent as to #osts.16

Petitioner?s 7otion for Re#onsideration was denied. Thus, petitioner<led an appeal with the Court of (ppeals %ased on the followin"assi"ned errors14

(. T@E TRI(2 CO3RT ERRED IN INDIN T@(T P2(INTI+(PPE22(NT C(N ON2 RECO9ER OR T@E D(7(E TO ITS TBO

SBI77IN POO2S 3NDER ITS IRE PO2IC NO. 61-44,CONSIDERIN ITS PRO9ISIONS, T@E CIRC37ST(NCESS3RRO3NDIN T@E ISS3(NCE O S(ID PO2IC (ND T@E(CT3(TIONS O T@E P(RTIES S3;SEM3ENT TO T@EE(RT@M3(QE O 32 15, 1--&.

;. T@E TRI(2 CO3RT ERRED IN DETER7ININ P2(INTI+(PPE22(NT?S RI@T TO RECO9ER 3NDER DEEND(NT+(PPE22EE?S PO2IC )NO. 61-44H E@ :I:* ; 2I7ITIN ITSE2

TO ( CONSIDER(TION O T@E S(ID PO2IC ISO2(TED RO7 T@E CIRC37ST(NCES S3RRO3NDIN ITS ISS3(NCE (ND T@E

(CT3(TIONS O T@E P(RTIES (TER T@E E(RT@M3(QE O 3215, 1--&.

C. T@E TRI(2 CO3RT ERRED IN NOT @O2DIN T@(T P2(INTI+(PPE22(NT IS ENTIT2ED TO T@E D(7(ES C2(I7ED, BIT@INTEREST CO7P3TED (T $4 PER (NN37 ON C2(I7S ONPROCEEDS O PO2IC.

On the other hand, respondent <led a partial appeal, assailin" thelower #ourt?s failure to award it attorne0?s fees and da/a"es on its#o/pulsor0 #ounter#lai/.

(fter review, the appellate #ourt aGr/ed the de#ision of the trial #ourtand ruled, thus

@owever, after #arefull0 perusin" the do#u/entar0 eviden#e of %oth parties, Be are not #onvin#ed that the last two )$*insuran#e #ontra#ts )EAhs. :: and :@:*, whi#h the plaintiJ+appellant had with (@(C )(I3* and upon whi#h the su%e#tinsuran#e #ontra#t with Philippine Charter Insuran#eCorporation is said to have %een %ased and #opied )EAh. :I:*,#overed an eAtended earth>ua!e sho#! insuran#e on all theinsured properties.

A A A

Be also <nd that the Court a >uo was #orre#t in not "rantin"the plaintiJ+appellant?s pra0er for the i/position of interest $4 on the insuran#e #lai/ and 5 on loss of in#o/e alle"edl0a/ountin" toP4,$'&,&&&.&&. Sin#e the defendant+appellant haseApressed its willin"ness to pa0 the da/a"e #aused on the two)$* swi//in" pools, as the Court a >uo and this Court #orre#tl0found it to %e lia%le onl0, it then #annot %e said that it was in

default and therefore lia%le for interest.

Co/in" to the defendant+appellant?s pra0er for an attorne0?sfees, lon"+standin" is the rule that the award thereof is su%e#tto the sound dis#retion of the #ourt. Thus, if su#h dis#retion iswell+eAer#ised, it will not %e distur%ed on appeal )Castro et al.v. C(, et al., .R. No. 11'6', ul0 1', $&&$*. 7oreover, %ein"the award thereof an eA#eption rather than a rule, it isne#essar0 for the #ourt to /a!e <ndin"s of fa#ts and law thatwould %rin" the #ase within the eA#eption and ustif0 the "rant

55








of su#h award )Countr0 ;an!ers Insuran#e Corp. v. 2ian"a ;a0and Co//unit0 7ulti+Purpose Coop., In#., .R. No. 165-14,

anuar0 $, $&&$*. Therefore, holdin" that the plaintiJ+appellant?s a#tion is not %aseless and hi"hl0 spe#ulative, Be<nd that the Court a >uo did not err in "rantin" the sa/e.

B@EREORE, in view of all the fore"oin", %oth appeals arehere%0 DIS7ISSED and ud"/ent of the Trial Court here%0

(IR7ED in toto. No #osts.1

Petitioner <led the present petition raisin" the followin" issues15

(. B@ET@ER T@E CO3RT O (PPE(2S CORRECT2 @E2D T@(T3NDER RESPONDENT?S INS3R(NCE PO2IC NO. 61-44, ON2

T@E TBO )$* SBI77IN POO2S, R(T@ER T@(N (22 T@EPROPERTIES CO9ERED T@ERE3NDER, (RE INS3RED ((INST

T@E RISQ O E(RT@M3(QE S@OCQ.

;. B@ET@ER T@E CO3RT O (PPE(2S CORRECT2 DENIEDPETITIONER?S PR(ER OR D(7(ES BIT@ INTEREST T@EREON(T T@E R(TE C2(I7ED, (TTORNE?S EES (ND EPENSES O2ITI(TION.

Petitioner #ontends

<*', that the poli#0?s earth>ua!e sho#! endorse/ent #learl0 #oversall of the properties insured and not onl0 the swi//in" pools. It usedthe words :an0 propert0 insured %0 this poli#0,: and it should %einterpreted as all in#lusive.

Seon-, the un>uali<ed and unrestri#ted nature of the earth>ua!esho#! endorse/ent is #on<r/ed in the %od0 of the insuran#e poli#0itself, whi#h states that it is :sFu%e#t to Other Insuran#e Clause,

T0phoon Endorse/ent,E*'3uFe S3oF En-'., EAtended Covera"eEndt., E( Barrant0 (nnual Pa0/ent ("ree/ent On 2on" Ter/Poli#ies.:1=

T3<*-, that the >uali<#ation referrin" to the two swi//in" pools hadalread0 %een deleted in the earth>ua!e sho#! endorse/ent.

ou*'3, it is un%elieva%le for respondent to #lai/ that it onl0 /ade aninadvertent o/ission when it deleted the said >uali<#ation.

<'3, that the earth>ua!e sho#! endorse/ent rider should %e "ivenpre#eden#e over the wordin" of the insuran#e poli#0, %e#ause the rideris the /ore deli%erate eApression of the a"ree/ent of the #ontra#tin"parties.

S<'3, that in their previous insuran#e poli#ies, li/its were pla#ed onthe endorse/ents8warranties enu/erated at the ti/e of issue.

Seen'3, an0 a/%i"uit0 in the earth>ua!e sho#! endorse/ent should%e resolved in favor of petitioner and a"ainst respondent. It wasrespondent whi#h #aused the a/%i"uit0 when it /ade the poli#0 inissue.

E<3'3, the >uali<#ation of the endorse/ent li/itin" the earth>ua!esho#! endorse/ent should %e interpreted as a #aveat on the standard<re insuran#e poli#0, su#h as to re/ove the two swi//in" pools fro/the #overa"e for the ris! of <re. It should not %e used to li/it therespondent?s lia%ilit0 for earth>ua!e sho#! to the two swi//in" poolsonl0.

N<n'3, there is no %asis for the appellate #ourt to hold that theadditional pre/iu/ was not paid under the eAtended #overa"e. Thepre/iu/ for the earth>ua!e sho#! #overa"e was alread0 in#luded inthe pre/iu/ paid for the poli#0.

Ten'3, the parties? #onte/poraneous and su%se>uent a#ts show thatthe0 intended to eAtend earth>ua!e sho#! #overa"e to all insuredproperties. Bhen it se#ured an insuran#e poli#0 fro/ respondent,petitioner told respondent that it wanted an eAa#t repli#a of its latestinsuran#e poli#0 fro/ (/eri#an @o/e (ssuran#e Co/pan0 )(@(C+(I3*,whi#h #overed all the resort?s properties for earth>ua!e sho#! da/a"eand respondent a"reed. (fter the ul0 15, 1--& earth>ua!e, respondentassured petitioner that it was #overed for earth>ua!e sho#!.

Respondent?s insuran#e aduster, ;a0ne (dusters and Surve0ors, In#.,li!ewise re>uested petitioner to su%/it the ne#essar0 do#u/ents for its%uildin" #lai/s and other repair #osts. Thus, under the do#trine ofe>uita%le estoppel, it #annot den0 that the insuran#e poli#0 it issued topetitioner #overed all of the properties within the resort.

E>een'3, that it is proper for it to avail of a petition for review%0 'ertiorari under Rule 4 of the Revised Rules of Court as its re/ed0,and there is no need for #ali%ration of the eviden#e in order toesta%lish the fa#ts upon whi#h this petition is %ased.

5=









On the other hand, respondent /ade the followin" #ounterar"u/ents1'

<*', none of the previous poli#ies issued %0 (@(C+(I3 fro/ 1-'6 to1--& eApli#itl0 eAtended #overa"e a"ainst earth>ua!e sho#! topetitioner?s insured properties other than on the two swi//in" pools.Petitioner ad/itted that fro/ 1-'4 to 1-'', onl0 the two swi//in"pools were insured a"ainst earth>ua!e sho#!. ro/ 1-'' until 1--&,

the provisions in its poli#0 were pra#ti#all0 identi#al to its earlierpoli#ies, and there was no in#rease in the pre/iu/ paid. (@(C+(I3, ina letter1- %0 its representative 7anuel C. Muiano, #ate"ori#all0 statedthat its previous poli#0, fro/ whi#h respondent?s poli#0 was #opied,#overed onl0 earth>ua!e sho#! for the two swi//in" pools.

Seon-, petitioner?s pa0/ent of additional pre/iu/ in the a/ountof P6-6.&& shows that the poli#0 onl0 #overed earth>ua!e sho#!da/a"e on the two swi//in" pools. The a/ount was the sa/ea/ount paid %0 petitioner for earth>ua!e sho#! #overa"e on the twoswi//in" pools fro/ 1--&+1--1. No additional pre/iu/ was paid towarrant #overa"e of the other properties in the resort.

T3<*-, the deletion of the phrase pertainin" to the li/itation of theearth>ua!e sho#! endorse/ent to the two swi//in" pools in thepoli#0 s#hedule did not eApand the earth>ua!e sho#! #overa"e to all of petitioner?s properties. (s per its a"ree/ent with petitioner,respondent #opied its poli#0 fro/ the (@(C+(I3 poli#0 provided %0petitioner. (lthou"h the <rst <ve poli#ies #ontained the said>uali<#ation in their rider?s title, in the last two poli#ies, this>uali<#ation in the title was deleted. (@(C+(I3, throu"h 7r. . ;arandaIII, stated that su#h deletion was a /ere inadverten#e. Thisinadverten#e did not /a!e the poli#0 in#o/plete, nor did it %roadenthe s#ope of the endorse/ent whose des#riptive title was /erel0enu/erated. (n0 a/%i"uit0 in the poli#0 #an %e easil0 resolved %0loo!in" at the other provisions, spe#iall0 the enu/eration of the ite/s

insured, where onl0 the two swi//in" pools were noted as #overed forearth>ua!e sho#! da/a"e.

ou*'3, in its Co/plaint, petitioner alle"ed that in its poli#ies fro/1-'4 throu"h 1-'', the phrase :Ite/ P6-6,&&&.&& on the twoswi//in" pools onl0 )a"ainst the peril of earth>ua!e sho#! onl0*:/eant that onl0 the swi//in" pools were insured for earth>ua!eda/a"e. The sa/e phrase is used in toto in the poli#ies fro/ 1-'- to1--&, the onl0 diJeren#e %ein" the desi"nation of the two swi//in"pools as :Ite/ 6.:

<'3, in order for the earth>ua!e sho#! endorse/ent to %e eJe#tive,pre/iu/s /ust %e paid for all the properties #overed. In all of its seveninsuran#e poli#ies, petitioner onl0 paid P6-6.&& as pre/iu/ for#overa"e of the swi//in" pools a"ainst earth>ua!e sho#!. No otherpre/iu/ was paid for earth>ua!e sho#! #overa"e on the otherproperties. In addition, the use of the >uali<er :(N: instead of :(22:to des#ri%e the propert0 #overed was done deli%eratel0 to ena%le theparties to spe#if0 the properties in#luded for earth>ua!e #overa"e.

S<'3, petitioner did not infor/ respondent of its re>uire/ent that allof its properties /ust %e in#luded in the earth>ua!e sho#! #overa"e.Petitioner?s own eviden#e shows that it onl0 re>uired respondent tofollow the eAa#t provisions of its previous poli#0 fro/ (@(C+(I3.Respondent #o/plied with this re>uire/ent. Respondent?s onl0deviation fro/ the a"ree/ent was when it /odi<ed the provisionsre"ardin" the repla#e/ent #ost endorse/ent. Bith re"ard to the issueunder liti"ation, the riders of the old poli#0 and the poli#0 in issue areidenti#al.

Seen'3, respondent did not do an0 a#t or "ive an0 assuran#e topetitioner as would estop it fro/ /aintainin" that onl0 the two

swi//in" pools were #overed for earth>ua!e sho#!. The aduster?sletter notif0in" petitioner to present #ertain do#u/ents for its %uildin"#lai/s and repair #osts was "iven to petitioner %efore the aduster!new the full #overa"e of its poli#0.

Petitioner an#hors its #lai/s on (@(C+(I3?s inadvertent deletion of thephrase :Ite/ Onl0: after the des#riptive na/e or title of theEarth>ua!e Sho#! Endorse/ent. @owever, the words of the poli#0reKe#t the parties? #lear intention to li/it earth>ua!e sho#! #overa"eto the two swi//in" pools.

;efore petitioner a##epted the poli#0, it had the opportunit0 to read its#onditions. It did not o%e#t to an0 de<#ien#0 nor did it institute an0

a#tion to refor/ the poli#0. The poli#0 %inds the petitioner.

E<3'3, there is no %asis for petitioner to #lai/ da/a"es, attorne0?sfees and liti"ation eApenses. Sin#e respondent was willin" and a%le topa0 for the da/a"e #aused on the two swi//in" pools, it #annot %e#onsidered to %e in default, and therefore, it is not lia%le for interest.

Be hold that the petition is devoid of /erit.

5'








In Insuran#e Poli#0 No. 61-44, four !e0 ite/s are i/portant in theresolution of the #ase at %ar.

<*', in the desi"nation of lo#ation of ris!, onl0 the two swi//in"pools were spe#i<ed as in#luded, !iz

ITE7 6 6-6,&&&.&& On the two )$* swi//in" pools onl0)a"ainst the peril of earth>ua!e sho#! onl0*$&

Seon-, under the %rea!down for pre/iu/ pa0/ents,$1 it was statedthat

PRE7I37 REC(PIT32(TION

ITE7 NOS. (7O3NT R(TES PRE7I37

A A A

6 6-6,&&&.&& &.1&&+E8S 6-6.&&$$F

T3<*-, Poli#0 Condition No. 5 stated

5. This insuran#e does not #over an0 loss or da/a"eo##asioned %0 or throu"h or in #onse>uen#e, dire#tl0 or

indire#tl0 of an0 of the followin" o##urren#es, na/el0++

)a* Earth>ua!e, vol#ani# eruption or other #onvulsion of nature. $6

ou*'3, the rider atta#hed to the poli#0, titled :EAtended Covera"eEndorse/ent )To In#lude the Perils of EAplosion, (ir#raft, 9ehi#le andS/o!e*,: stated, !iz

(NN3(2 P(7ENT (REE7ENT ON2ON TER7 PO2ICIES

T@E INS3RED 3NDER T@IS PO2IC @(9IN EST(;2IS@ED(RE(TE S37S INS3RED IN ECESS O I9E 7I22IONPESOS, IN CONSIDER(TION O ( DISCO3NT O OR = ] O T@E NET PRE7I37 A A A PO2IC @ERE; 3NDERT(QES TOCONTIN3E T@E INS3R(NCE 3NDER T@E (;O9E N(7ED A A A

(ND TO P( T@E PRE7I37.

Earth>ua!e Endorse/ent

In #onsideration of the pa0/ent %0 the Insured to the Co/pan0of the su/ of P. . . . . . . . . . . . . . . . . additional pre/iu/ theCo/pan0 a"rees, notwithstandin" what is stated in the printed#onditions of this Poli#0 to the #ontrar0, that this insuran#e#overs loss or da/a"e )in#ludin" loss or da/a"e %0 <re* to an0of the propert0 insured %0 this Poli#0 o##asioned %0 or throu"hor in #onse>uen#e of Earth>ua!e.

Provided alwa0s that all the #onditions of this Poli#0 shall appl0)eA#ept in so far as the0 /a0 %e here%0 eApressl0 varied* andthat an0 referen#e therein to loss or da/a"e %0 <re should %edee/ed to appl0 also to loss or da/a"e o##asioned %0 orthrou"h or in #onse>uen#e of Earth>ua!e.$4

Petitioner #ontends that pursuant to this rider, no >uali<#ations werepla#ed on the s#ope of the earth>ua!e sho#! #overa"e. Thus, thepoli#0 eAtended earth>ua!e sho#! #overa"e to all of the insuredproperties.

It is %asi# that all the provisions of the insuran#e poli#0 should %eeAa/ined and interpreted in #onsonan#e with ea#h other.$ (ll its parts

are reKe#tive of the true intent of the parties. The poli#0 #annot %e#onstrued pie#e/eal. Certain stipulations #annot %e se"re"ated andthen /ade to #ontrolH neither do parti#ular words or phrasesne#essaril0 deter/ine its #hara#ter. Petitioner #annot fo#us on theearth>ua!e sho#! endorse/ent to the eA#lusion of the otherprovisions. (ll the provisions and riders, ta!en and interpretedto"ether, indu%ita%l0 show the intention of the parties to eAtendearth>ua!e sho#! #overa"e to the two swi//in" pools onl0.

5-
















( #areful eAa/ination of the pre/iu/ re#apitulation will show that it isthe #lear intent of the parties to eAtend earth>ua!e sho#! #overa"eonl0 to the two swi//in" pools. Se#tion $)1* of the Insuran#e Codede<nes a #ontra#t of insuran#e as an a"ree/ent where%0 oneunderta!es for a #onsideration to inde/nif0 another a"ainst loss,da/a"e or lia%ilit0 arisin" fro/ an un!nown or #ontin"ent event. Thus,an insuran#e #ontra#t eAists where the followin" ele/ents #on#ur


$. The insured is su%e#t to a r is! of loss %0 the happenin" ofthe desi"nated perilH


4. Su#h assu/ption of ris! is part of a "eneral s#he/e todistri%ute a#tual losses a/on" a lar"e "roup of persons%earin" a si/ilar ris!H and

. In on<-e*'<on o '3e <nu*e*H &*o<e, '3e <nu*e-

&: &*e<u.$5

)2%phasis ours*

(n insuran#e pre/iu/ is the #onsideration paid an insurer forunderta!in" to inde/nif0 the insured a"ainst a spe#i<ed peril.$= In <re,#asualt0, and /arine insuran#e, the pre/iu/ pa0a%le %e#o/es a de%tas soon as the ris! atta#hes.$' In the su%e#t poli#0, no pre/iu/pa0/ents were /ade with re"ard to earth>ua!e sho#! #overa"e,eA#ept on the two swi//in" pools. There is no /ention of an0pre/iu/ pa0a%le for the other resort properties with re"ard toearth>ua!e sho#!. This is #onsistent with the histor0 of petitioner?sprevious insuran#e poli#ies fro/ (@(C+(I3. (s %orne out %0 petitioner?switnesses

CROSS E(7IN(TION O 2EOPO2DO 7(NTO@(C TSN,Nove/%er $, 1--1pp. 1$+16

M. Now 7r. 7antoha#, will it %e #orre#t to state also that insofaras 0our insuran#e poli#0 durin" the period fro/ 7ar#h 4, 1-'4to 7ar#h 4, 1-' the #overa"e on earth>ua!e sho#! wasli/ited to the two swi//in" pools onl0

(. es, sir. It is li/ited to the two swi//in" pools, spe#i<#all0shown in the warrant0, there is a provision here that it was onl0for ite/ .

M. 7ore spe#i<#all0 Ite/ states the a/ount of P6-6,&&&.&&#orrespondin" to the two swi//in" pools onl0

(. es, sir.

CROSS E(7IN(TION O 2EOPO2DO 7(NTO@(C TSN,Nove/%er $, 1--1

pp. $6+$5

M. or the period fro/ 7ar#h 14, 1-'' up to 7ar#h 14, 1-'-,did 0ou personall0 arran"e for the pro#ure/ent of this poli#0

(. es, sir.

M. Did 0ou also do this throu"h 0our insuran#e a"en#0

(. If 0ou are referrin" to orte Insuran#e ("en#0, 0es.

M. Is orte Insuran#e ("en#0 a depart/ent or division of 0our#o/pan0

(. No, sir. The0 are our insuran#e a"en#0.

M. (nd the0 are independent of 0our #o/pan0 insofar asoperations are #on#erned

(. es, sir, the0 are separate entit0.

M. ;ut insofar as the pro#ure/ent of the insuran#e poli#0 is#on#erned the0 are of #ourse su%e#t to 0our instru#tion, is thatnot #orre#t

(. es, sir. The <nal a#tion is still with us althou"h the0 #anre#o//end what insuran#e to ta!e.

=&










M. In the pro#ure/ent of the insuran#e poli#e )si'* fro/ 7ar#h14, 1-'' to 7ar#h 14, 1-'-, did 0ou "ive written instru#tion toorte Insuran#e ("en#0 advisin" it that the earth>ua!e sho#!#overa"e /ust eAtend to all properties of ("oo Pla0a Resort in2a 3nion

(. No, sir. Be did not /a!e an0 written instru#tion, althou"h we/ade an oral instru#tion to that eJe#t of eAtendin" the

#overa"e on )si'* the other properties of the #o/pan0.

M. (nd that instru#tion, a##ordin" to 0ou, was ver0 i/portant%e#ause in (pril 1-'= there was an earth>ua!e tre/or in 2a3nion

(. es, sir.

M. (nd 0ou wanted to prote#t all 0our properties a"ainst si/ilartre/ors in the futureF, is that #orre#t

(. es, sir.

M. Now, after this poli#0 was delivered to 0ou did 0ou %other to#he#! the provisions with respe#t to 0our instru#tions that allproperties /ust %e #overed a"ain %0 earth>ua!e sho#!endorse/ent

(. (re 0ou referrin" to the insuran#e poli#0 issued %0 (/eri#an@o/e (ssuran#e Co/pan0 /ar!ed EAhi%it ::

(tt0. 7eia es.

Bitness

(. I eAa/ined the poli#0 and seein" that the warrant0 on theearth>ua!e sho#! endorse/ent has no /ore li/itationreferrin" to the two swi//in" pools onl0, I was #ontentedalread0 that the previous li/itation pertainin" to the twoswi//in" pools was alread0 re/oved.

Petitioner also #ited and relies on the atta#h/ent of the phrase:Sue' 'o O'3e* Inu*ne C>ue, T:&3oon En-o*een',E*'3uFe S3oF En-o*een', E'en-e- Coe*e

En-o*een', EA **n': B Annu> !:en' A*eeen' onLon Te* !o><<e$- to the insuran#e poli#0 as proof of the intent ofthe parties to eAtend the #overa"e for earth>ua!e sho#!. @owever, thisphrase is /erel0 an enu/eration of the des#riptive titles of the riders,#lauses, warranties or endorse/ents to whi#h the poli#0 is su%e#t, asre>uired under Se#tion &, para"raph $ of the Insuran#e Code.

Be also hold that no si"ni<#an#e #an %e pla#ed on the deletion of the

>uali<#ation li/itin" the #overa"e to the two swi//in" pools. Theearth>ua!e sho#! endorse/ent #annot stand alone. (s eAplained %0the testi/on0 of uan ;aranda III, underwriter for (@(C+(I3

DIRECT E(7IN(TION O 3(N ;(R(ND( III6& TSN, (u"ust 11, 1--$pp. -+1$

(tt0. 7eia

Be respe#tfull0 /anifest that the sa/e eAhi%its C to @in#lusive have %een previousl0 /ar!ed %0 #ounsel fordefendant as EAhi%itsF 1+5 in#lusive. Did 0ou haveo##asion to review of )si'* these siA )5* poli#ies issued%0 0our #o/pan0 in favorF of ("oo Pla0a Resort

BITNESS

es,F I re/e/%er havin" "one over these poli#ies atone point of ti/e, sir.

M. Now, wa#h )si'* of these siA )5* poli#ies /ar!ed in eviden#eas EAhi%its C to @ respe#tivel0 #arries an earth>ua!e sho#!endorse/entF 70 >uestion to 0ou is, on the %asis on )si'* thewordin"s indi#ated in EAhi%its C to @ respe#tivel0 what was the

eAtent of the #overa"e a"ainstF the peril of earth>ua!e sho#!as provided for in ea#h of the siA )5* poli#ies

A A A

BITNESS

The eAtent of the #overa"e is onl0 up to the two )$*swi//in" pools, sir.

=1









M. Is that for ea#h of the siA )5* poli#ies na/el0 EAhi%its C, D,E, , and @

(. es, sir.

(TT. 7EI(

Bhat is 0our %asis for statin" that the #overa"e a"ainst

earth>ua!e sho#! as provided for in ea#h of the siA )5*poli#ies eAtend to the two )$* swi//in" pools onl0

BITNESS

;e#ause it sa0s here in the poli#ies, in the enu/eration:Earth>ua!e Sho#! Endorse/ent, in the Clauses andBarranties Ite/ onl0 )Earth>ua!e Sho#!Endorse/ent*,: sir.

(TT. 7EI(

Bitness referrin" to EAhi%it C+1, 0our @onor.

BITNESS

Be do not nor/all0 #over earth>ua!e sho#!endorse/ent on stand alone %asis. or swi//in" poolswe do #over earth>ua!e sho#!. or %uildin" we #overedit for full earth>ua!e #overa"e whi#h in#ludesearth>ua!e sho#!^

CO3RT

(s far as earth>ua!e sho#! endorse/ent 0ou do nothave a spe#i<# #overa"e for other thin"s other thanswi//in" pool ou are #overin" %uildin" The0 are#overed %0 a "eneral insuran#e

BITNESS

Earth>ua!e sho#! #overa"e #ould not stand alone. Ifwe are #overin" %uildin" or another we #an issue

earth>ua!e sho#! solel0 %ut that the /o/ent I seethis, the thin" that #o/es to /0 /ind is either insurin"a swi//in" pool, foundations, the0 are nor/all0aJe#ted %0 earth>ua!e %ut not %0 <re, sir.

DIRECT E(7IN(TION O 3(N ;(R(ND( III TSN, (u"ust 11, 1--$pp. $6+$

M. PlaintiJ?s witness, 7r. 7antoha# testi<ed and he alle"ed thatonl0 EAhi%its C, D, E and in#lusive re/ainedF its #overa"ea"ainst earth>ua!e sho#! to two )$* swi//in" pools onl0 %utthat EAhi%its and @ respe#tivel0 entend the #overa"e a"ainstearth>ua!e sho#! to all the properties indi#ated in therespe#tive s#hedules atta#hed to said poli#ies, what #an 0ousa0 a%out that testi/on0 of plaintiJ?s witness

BITNESS

(s I have /entioned earlier, earth>ua!e sho#! #annotstand alone without the other half of it. I assure 0outhat this one #overs the two swi//in" pools withrespe#t to earth>ua!e sho#! endorse/ent. ;ased on it,if we are "oin" to loo! at the pre/iu/ there has %eenno #han"e with respe#t to the rates. Ever0ti/e )si'*there is a renewal if the intention of the insurer was toin#lude the earth>ua!e sho#!, I thin! there is asu%stantial in#rease in the pre/iu/. Be are not onl0"oin" to #onsider the two )$* swi//in" pools of theother as stated in the poli#0. (s I see, there is noin#rease in the a/ount of the pre/iu/. I /ust sa0 thatthe #overa"e was not %roaden )si'* to in#lude the otherite/s.

CO3RT

The0 are the sa/e, the pre/iu/ rates

BITNESS

The0 are the sa/e in the sen#e )si'*, in the a/ount ofthe #overa"e. If 0ou are "oin" to do so/e #o/putation

=$



%ased on the rates 0ou will arrive at the sa/epre/iu/s, 0our @onor.

CROSS+E(7IN(TION O 3(N ;(R(ND( III TSN, Septe/%er =, 1--$pp. 4+5

(TT. (NDRES

Bould 0ou as a /atter of pra#ti#e insureF swi//in"pools for <re insuran#e

BITNESS

No, we don?t, sir.

M. That is wh0 the phrase :earth>ua!e sho#! to the two )$*swi//in" pools onl0: was pla#ed, is it not

(. es, sir.

(TT. (NDRES

Bill 0ou not also a"ree with /e that these eAhi%its,EAhi%its and @ whi#h 0ou have pointed to durin"0our dire#t+eAa/ination, the phrase :Ite/ no. onl0:/eanin" to )si'* the two )$* swi//in" pools wasdeleted fro/ the poli#ies issued %0 (I3, is it not

A A A

(TT. (NDRES

(s an insuran#e eAe#utive will 0ou not atta#h an0si"ni<#an#e to the deletion of the >ualif0in" phrase forthe poli#ies

BITNESS

70 answer to that would %e, the deletion of thatparti#ular phrase is inadvertent. ;ein" a #o/pan0

underwriter, we do not #over. . it was inadvertent%e#ause of the previous poli#ies that we have issuedwith no spe#i<# atta#h/ents, pre/iu/ rates and so on.It was inadvertent, sir.

The Court also ree#ts petitioner?s #ontention that respondent?s#onte/poraneous and su%se>uent a#ts to the issuan#e of theinsuran#e poli#0 falsel0 "ave the petitioner assuran#e that the

#overa"e of the earth>ua!e sho#! endorse/ent in#luded all itsproperties in the resort. Respondent onl0 insured the properties asintended %0 the petitioner. Petitioner?s own witness testi<ed to thisa"ree/ent, !iz

CROSS E(7IN(TION O 2EOPO2DO 7(NTO@(C TSN, anuar0 14, 1--$pp. 4+

M. ust to %e #lear a%out this parti#ular answer of 0ours 7r.Bitness, what eAa#tl0 did 0ou tell (tt0. O/las )si#* to #op0 fro/EAhi%it :@: for purposes of pro#urin" the poli#0 fro/ PhilippineCharter Insuran#e Corporation

(. I told hi/ that the insuran#e that the0 will have to "et willhave the sa/e provisions as this (/eri#an @o/e Insuran#ePoli#0 No. $&5+45'&51+-.

M. ou are referrin" to EAhi%it :@: of #ourse

(. es, sir, to EAhi%it :@:.

M. So, all the provisions here will %e the sa/e eA#ept that ofthe pre/iu/ rates

(. es, sir. @e assured /e that with re"ards to the insuran#epre/iu/ rates that the0 will %e #har"in" will %e li/ited to thisone. I )si'* #an even %e lesser.

CROSS E(7IN(TION O 2EOPO2DO 7(NTO@(C TSN, anuar0 14, 1--$pp. 1$+14

(tt0. 7eia

=6



M. Bill it %e #orre#t to state,F 7r. Bitness, that 0ou /ade a#o/parison of the provisions and s#ope of #overa"e of EAhi%its:I: and :@: so/eti/e in the third wee! of 7ar#h, 1--& ortherea%out

(. es, sir, a%out that ti/e.

M. (nd at that ti/e did 0ou noti#e an0 dis#repan#0 or

diJeren#e %etween the poli#0 wordin"s as well as s#ope of#overa"e of EAhi%its :I: and :@: respe#tivel0

(. No, sir, I did not dis#over an0 diJeren#e inas/u#h )si'* as Iwas assured alread0 that the poli#0 wordin"s and rates were#opied fro/ the insuran#e poli#0 I sent the/ %ut it was onl0when this #ase erupted that we dis#overed so/edis#repan#ies.

M. Bith respe#t to the ite/s de#lared for insuran#e #overa"edid 0ou noti#e an0 dis#repan#0 at an0 ti/e %etween thoseindi#ated in EAhi%it :I: and those indi#ated in EAhi%it :@:respe#tivel0

(. Bith re"ard to the wordin"s I did not noti#e an0 diJeren#e%e#ause it was eAa#tl0 the sa/e P6-6,&&&.&& on the two )$*swi//in" pools onl0 a"ainst the peril of earth>ua!e sho#!whi#h I understood %efore that this provision will have to %epla#ed here %e#ause this parti#ular provision under the peril ofearth>ua!e sho#! onl0 is re>uested %e#ause this is aninsuran#e poli#0 and therefore #annot %e insured a"ainst <re,so this has to %e pla#ed.

The ver%al assuran#es alle"edl0 "iven %0 respondent?s representative(tt0. 3/las were not proved. (tt0. 3/las #ate"ori#all0 denied havin"

"iven su#h assuran#es.

inall0, petitioner puts /u#h stress on the letter of respondent?sindependent #lai/s aduster, ;a0ne (dusters and Surve0ors, In#. ;utas testi<ed to %0 the representative of ;a0ne (dusters and Surve0ors,In#., respondent never /eant to lead petitioner to %elieve that theendorse/ent for earth>ua!e sho#! #overed properties other than thetwo swi//in" pools, !iz

DIRECT E(7IN(TION O (2;ERTO DE 2EON );a0ne (dustersand Surve0ors, In#.*

TSN, anuar0 $5, 1--6pp. $$+$5

M. Do 0ou re#all the #ir#u/stan#es that led to 0our dis#ussionre"ardin" the eAtent of #overa"e of the poli#0 issued %0Philippine Charter Insuran#e Corporation

(. I re/e/%er that when I returned to the oG#e after theinspe#tion, I "ot a photo#op0 of the insuran#e #overa"e poli#0and it was indi#ated under Ite/ 6 spe#i<#all0 that the#overa"e is onl0 for earth>ua!e sho#!. Then, I re/e/%er I hada tal! with (tt0. 3/las )si'*, and I rela0ed to hi/ what I hadfound out in the poli#0 and he #on<r/ed to /e indeed onl0Ite/ 6 whi#h were the two swi//in" pools have #overa"e forearth>ua!e sho#!.

A A A

M. Now, /a0 we !now fro/ 0ou En"r. de 2eon 0our %asis, ifan0, for statin" that eA#ept for the swi//in" pools all aJe#tedite/s have no #overa"e for earth>ua!e sho#!

A A A

(. I %ased /0 state/ent on /0 <ndin"s, %e#ause upon /0eAa/ination of the poli#0 I found out that under Ite/ 6 it wasspe#i<# on the wordin"s that on the two swi//in" pools onl0,then en#losed in parenthesis )a"ainst the perilsF of earth>ua!esho#! onl0*, and se#ondl0, when I eAa/ined the su//ar0 ofpre/iu/ pa0/ent onl0 Ite/ 6 whi#h refers to the swi//in"pools have a #o/putation for pre/iu/ pa0/ent for earth>ua!e

sho#! and all the other ite/s have no #o/putation forpa0/ent of pre/iu/s.

In su/, there is no a/%i"uit0 in the ter/s of the #ontra#t and itsriders. Petitioner #annot rel0 on the "eneral rule that insuran#e#ontra#ts are #ontra#ts of adhesion whi#h should %e li%erall0 #onstruedin favor of the insured and stri#tl0 a"ainst the insurer #o/pan0 whi#husuall0 prepares it.61 ( #ontra#t of adhesion is one wherein a part0,usuall0 a #orporation, prepares the stipulations in the #ontra#t, whilethe other part0 /erel0 aGAes his si"nature or his :adhesion: thereto.

=4

h h h h h h ld h i h f i





Throu"h the 0ears, the #ourts have held that in these t0pe of #ontra#ts,the parties do not %ar"ain on e>ual footin", the wea!er part0Lsparti#ipation %ein" redu#ed to the alternative to ta!e it or leave it.

Thus, these #ontra#ts are viewed as traps for the wea!er part0 who/the #ourts of usti#e /ust prote#t.6$Conse>uentl0, an0 a/%i"uit0therein is resolved a"ainst the insurer, or #onstrued li%erall0 in favor of the insured.66

The #ase law will show that this Court will onl0 rule out %lind adheren#eto ter/s where fa#ts and #ir#u/stan#es will show that the0 are%asi#all0 one+sided.64 Thus, we have #alled on lower #ourts to re/ain#areful in s#rutiniin" the fa#tual #ir#u/stan#es %ehind ea#h #ase todeter/ine the eG#a#0 of the #lai/s of #ontendin" parties.In ee>o&en' nF o '3e !3<><&&<ne . N'<on>Me*3n-<<n Co*&o*'<on, e' >.,6 the parties, who were a#ute%usiness/en of eAperien#e, were presu/ed to have assented to theassailed do#u/ents with full !nowled"e.

Be #annot appl0 the "eneral rule on #ontra#ts of adhesion to the #aseat %ar. Petitioner #annot #lai/ it did not !now the provisions of thepoli#0. ro/ the in#eption of the poli#0, petitioner had re>uired the

respondent to #op0!er#ati% the provisions and ter/s of its latestinsuran#e poli#0 fro/ (@(C+(I3. The testi/on0 of 7r. 2eopoldo7antoha#, a dire#t parti#ipant in se#urin" the insuran#e poli#0 ofpetitioner, is reKe#tive of petitioner?s !nowled"e,!iz

DIRECT E(7IN(TION O 2EOPO2DO 7(NTO@(C65

TSN, Septe/%er $6, 1--1pp. $&+$1

M. Did 0ou indi#ate to (tt0. O/las )si'* what !ind of poli#0 0ouwould want for those fa#ilities in ("oo Pla0a

(. es, sir. I told hi/ that I will a"ree to that renewal of thispoli#0 under Philippine Charter Insuran#e Corporation as lon"as it will follow the sa/e or eAa#t provisions of the previousinsuran#e poli#0 we had with (/eri#an @o/e (ssuran#eCorporation.

M. Did 0ou ta!e an0 step 7r. Bitness to ensure that theprovisions whi#h 0ou wanted in the (/eri#an @o/e Insuran#epoli#0 are to %e in#orporated in the PCIC poli#0

(. es, sir.

M. Bhat steps did 0ou ta!e

(. Bhen I eAa/ined the poli#0 of the Philippine CharterInsuran#e Corporation I spe#i<#all0 told hi/ that the poli#0 andwordin"s shall %e #opied fro/ the (I3 Poli#0 No. $&5+45'&51+-.

Respondent, in #o/plian#e with the #ondition set %0 the petitioner,#opied (I3 Poli#0 No. $&5+45'&51+- in draftin" its Insuran#e Poli#0 No.61-44. It is true that there was varian#e in so/e ter/s, spe#i<#all0 inthe repla#e/ent #ost endorse/ent, %ut the prin#ipal provisions of thepoli#0 re/ained essentiall0 si/ilar to (@(C+(I3?s poli#0. Conse>uentl0,we #annot appl0 the :<ne print: or :#ontra#t of adhesion: rule in this#ase as the parties? intent to li/it the #overa"e of the poli#0 to the twoswi//in" pools onl0 is not a/%i"uous.6=

IN +IE #EREO, the ud"/ent of the Court of (ppeals is aGr/ed. The petition for 'ertiorari is dis/issed. No #osts.

SO ORERE.

RE!ULIC O T#E G.R. No. 156956

!#ILI!!INES, Re&*een'e-

: EUARO T. MALINIS, Present

<n #< C&<': Inu*ne

Co<<one*, P(N(NI;(N, (, Chairperson,

Petitioner, N(RES+S(NTI(O,

(3STRI(+

7(RTINEY,

C(22EO, SR., and

=

C@ICO N(Y(RIO















+ versus + C@ICO+N(Y(RIO,

EL MONTE MOTORS, INC., Pro/ul"ated

Respondent. O#to%er -, $&&5

"" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" "" """ "" "" "" ""

"ECI#ION

!ANGANIAN, CJ:

The se#urities re>uired %0 the Insuran#e Code to %e deposited with

the Insuran#e Co//issioner are intended to answer for the #lai/s

of all poli#0 holders in the event that the depositin" insuran#e

#o/pan0 %e#o/es insolvent or otherwise una%le to satisf0 their

#lai/s. The se#urit0 deposit /ust %e rata%l0 distri%uted a/on" all the

insured who are entitled to their respe#tive sharesH it #annot %e

"arnished or levied upon %0 a sin"le #lai/ant, to the detri/ent of the

others.

T3e Ce

;efore us is a Petition for Review1F under Rule 4 of the Rules of Court,

see!in" to reverse the anuar0 15, $&&6 Order $F of the Re"ional Court

)RTC* ofMueon Cit0 );ran#h $$1* in Civil Case No. M+-=+6&41$. The

RTC found Insuran#e Co//issioner Eduardo T. 7alinis "uilt0 of indire#t

#onte/pt for refusin" to #o/pl0 with the De#e/%er 1',

$&&$ Resolution6F of the lower #ourt. The anuar0 15, $&&6 Order

states in full

On anuar0 ', $&&6, respondentF <led a 7otion

to Cite Co//issioner Eduardo T. 7alinis of the OG#e of

the Insuran#e Co//ission in Conte/pt of Court

%e#ause of his failure and refusal to o%e0 the lawful

order of this #ourt e/%odied in a Resolution datedDe#e/%er 1', $&&$ dire#tin" hi/ to allow the

withdrawal of the se#urit0 deposit of Capital Insuran#e

and Suret0 Co. )CISCO* in the a/ount

of P11,'6,6=.& to %e paid to SheriJ

7anuel Pa"u0o in the satisfa#tion of the Noti#e of

arnish/ent pursuant to a De#ision of this Court whi#h

has %e#o/e <nal and eAe#utor0.

=5

http://sc.judiciary.gov.ph/jurisprudence/2006/october2006/156956.htm#_ftn1









Durin" the hearin" of the 7otion set last

anuar0 1&, $&&6, Co//issioner 7alinis or his #ounsel

or his dul0 authoried representative failed to appear

despite noti#e in utter disre"ard of the order of this

Court. @owever, Co//issioner 7alinis <led on anuar0

1, $&&6 a written Co//ent reiteratin" the sa/e

"rounds alread0 passed upon and ree#ted %0 this

Court. This Court <nds no lawful usti<#ation or eA#use

for Co//issioner 7alinis refusal to i/ple/ent the

lawful orders of this Court.

Bherefore, pre/ises #onsidered and after due

hearin", Co//issioner Eduardo T. 7alinis is here%0

de#lared "uilt0 of Indire#t Conte/pt of Court pursuant

to Se#tion 6 ofF Rule =1 of the 1--= Rules of Civil

Pro#edure for willfull0 diso%e0in" and refusin" toi/ple/ent and o%e0 a lawful order of this Court.4F

T3e '

On anuar0 1, $&&$, the RTC rendered a De#ision in Civil Case No. M+

-=+6&41$, <ndin" the defendants )9ilfran 2iner, In#., @ilaria 9ille"as

and 7aura 9ille"as* ointl0 and severall0 lia%le to pa0 Del 7onte

7otors, In#., P11,'6,6=.& representin" the %alan#e of 9ilfran 2iners

servi#e #ontra#ts with respondent. The trial #ourt further ordered the

eAe#ution of the De#ision a"ainst the #ounter%ond posted

%0 9ilfran 2iner on une 1&, 1--=, and issued %0 Capital Insuran#e and

Suret0 Co., In#. )CISCO*.

On (pril 1', $&&$, CISCO opposed the 7otion for EAe#ution <led %0

respondent, #lai/in" that the latter had no re#ord or do#u/ent

re"ardin" the alle"ed issuan#e of the #ounter%ondH thus, the %ond was

not valid and enfor#ea%le.

==

urther/ore the Co//issioner of the OG#e of the





On une 16, $&&$, the RTC "ranted the 7otion for EAe#ution and issued

the #orrespondin" Brit. (r/ed with this Brit, SheriJ 7anuel

S. Pa"u0opro#eeded to lev0 on the properties of CISCO. @e also issued

a Noti#e of arnish/ent on several depositor0 %an!s of the insuran#e

#o/pan0. 7oreover, he served a si/ilar noti#e on the Insuran#e

Co//ission, so as to enfor#e the Brit on the se#urit0 deposit <led %0

CISCO with the Co//ission in a##ordan#e with Se#tion $&6 of the

Insuran#e Code.

On De#e/%er 1', $&&$, after a hearin" on all the pendin" 7otions, the

RTC ruled that the Noti#e of arnish/ent served %0 SheriJ Pa"u0o on

the insuran#e #o//ission was valid. The trial #ourt added that the

letter and spirit of the law /ade the se#urit0 deposit answera%le for

#ontra#tual o%li"ations in#urred %0 CISCO under the insuran#e

#ontra#ts the latter had entered into. The RTC resolved thus

urther/ore, the Co//issioner of the OG#e of the

Insuran#e Co//ission is here%0 ordered to #o/pl0

with its o%li"ations under the Insuran#e Code %0

upholdin" the inte"rit0 and eG#a#0 of %onds validl0

issued %0 dul0 a##redited ;ondin" and Insuran#e

Co/paniesH and to safe"uard the pu%li# interest %0

insurin" the faithful perfor/an#e to enfor#e #ontra#tual

o%li"ations under eAistin" %onds. (##ordin"l0 said

oG#e is ordered to withdraw fro/ the se#urit0 deposit

of Capital Insuran#e Suret0 Co/pan0, In#. the

a/ount of P11,'6.& to %e paid to SheriJ 7anuel

S. Pa"u0o in satisfa#tion of the Noti#e of arnish/ent

served on (u"ust 15, $&&$.F

On anuar0 ', $&&6, respondent /oved to #ite Insuran#e Co//issioner

Eduardo T. 7alinis in #onte/pt of #ourt for his refusal to o%e0 the

De#e/%er 1', $&&$ Resolution of the trial #ourt.

Ru><n o '3e T*<> Cou*'

='





The RTC held Insuran#e Co//issioner 7alinis in #onte/pt for his

refusal to i/ple/ent its Order. It eAplained that the #o//issioner had

no le"al usti<#ation for his refusal to allow the withdrawal

of CISCOs se#urit0 deposit.

@en#e, this Petition.5F

Iue

Petitioner raises this sole issue for the Courts #onsideration

Bhether or not the se#urit0 deposit held %0 the

Insuran#e Co//issioner pursuant to Se#tion $&6 of the

Insuran#e Code /a0 %e levied or "arnished in favor of

onl0 one insured.=F

T3e Cou*' Ru><n

The Petition is /eritorious.

!*e><<n*: Iue

$ropriet% o& 'evie(

;efore dis#ussin" the prin#ipal issue, the Court will <rst dispose of the

>uestion of /ootness.

Prior to the <lin" of the instant Petition, Insuran#e

Co//issioner 7alinis sent the treasurer of the Philippines a letter

dated 7ar#h $5, $&&6, statin" that the for/er had no o%e#tion to the

release of the se#urit0 deposit to Del 7onte 7otors. Portions of the

fund were #onse>uentl0 released to respondent in ul0, O#to%er, and

De#e/%er $&&6. Thus, the issue arises whether these #ir#u/stan#es

render the #ase /oot.

=-







Petitioner, however, #ontends that the partial releases should

not %e #onstrued as an a%andon/ent of its stand that se#urit0 deposits

under Se#tion $&6 of the Insuran#e Code are eAe/pt fro/ lev0 and

"arnish/ent. The Repu%li# #lai/s that the releases were /ade

pursuant to the #o//issioners power of #ontrol over the fund, not to

the lower #ourts Order of "arnish/ent. Petitioner further invo!es the

urisdi#tion of this Court to put to rest the prin#ipal issue of whether

se#urit0 deposits /ade with the Insuran#e Co//ission /a0 %e levied

and "arnished.

The issue is not totall0 /oot. To stress, onl0 a portion of respondents

#lai/ was satis<ed, and the Insuran#e Co//ission has re>uired CISCO

to replenish the latters se#urit0 deposit. Respondent, therefore, /a0

one da0 de#ide to further "arnish the se#urit0 deposit, on#e

replenished. 7oreover, after the >uestioned Order of the lower #ourt

was issued, si/ilar #lai/s on the se#urit0 deposits of various insuran#e

#o/panies have %een /ade %efore the Insuran#e Co//ission. To set

aside the resolution of the issue will onl0 postpone a tas! that is

#ertain to #rop up in the future.

;esides, the %usiness of insuran#e is i/%ued with pu%li# interest. It is

su%e#t to re"ulation %0 the State, with respe#t not onl0 to the relations

%etween the insurer and the insured, %ut also to the internal aJairs of

insuran#e #o/panies.'F (s this #ase is undenia%l0 endowed with pu%li#

interest and involves a /atter of pu%li# poli#0, this Court shall not shir!

fro/ its dut0 to edu#ate the %en#h and the %ar %0 for/ulatin" "uidin"

and #ontrollin" prin#iples, pre#epts, do#trines and rules.-F

!*<n<&> Iue

E)e*ption o& #e+rit% "epoit

&ro* Lev% or -rni/*ent

'&

*eu<*een' o '3e Co<<one* )E/phasis








Se#tion $&6 of the Insuran#e Code provides as follows

Se#. $&6. Ever0 do/esti# insuran#e #o/pan0 shall, to

the eAtent of an a/ount e>ual in value to twent0+

<ve per 'entu% of the /ini/u/ paid+up #apital

re>uired under se#tion one hundred ei"ht0+ei"ht,

invest its funds onl0 in se#urities, satisfa#tor0 to the

Co//issioner, #onsistin" of %onds or other eviden#es

of de%t of the overn/ent of the Philippines or its

politi#al su%divisions or instru/entalities, or of "overn/ent+owned or #ontrolled #orporations and

entities, in#ludin" the Central ;an! of the

Philippines "ro!ided, That su#h invest/ents shall at all

ti/es %e /aintained free fro/ an0 lien or

en#u/%ran#eH and "ro!ided, further, That su#h

se#urities shall %e deposited with and held %0 the

Co//issioner for the faithful perfor/an#e %0 the

depositin" insurer of <' o><'<on un-e* <'<nu*ne on'*'. The provisions of se#tion one

hundred ninet0+two shall, so far as pra#ti#a%le, appl0 to

the se#urities deposited under this se#tion.

EA#ept as otherwise provided in this Code, no u-en' *e-<'o* o* o'3e* ><n' 3>> 3e'3e *<3' 'o >e: u&on n: o '3e eu*<'<e o '3e<nu*e* 3e>- on -e&o<' &u*un' 'o '3e

*eu<*een' o '3e Co<<one*. )E/phasis

supplied*

Respondent notes that Se#tion $&6 does not provide

for an a%solute prohi%ition on the lev0 and

"arnish/ent of the se#urit0 deposit. It #ontends that

the law re>uires the deposit, pre#isel0 to ensure

faithful perfor/an#e of all the o%li"ations of the

depositin" insurer under the latters various insuran#e

#ontra#ts. @en#e, respondent #lai/s that the se#urit0

deposit should %e answera%le for

the #ounter%ond issued %0 CISCO.

The Court is not #onvin#ed. (s worded, the law eApressl0 and

#learl0 states that the se#urit0 deposit shall %e )1* answera%le

for all the o%li"ations of the depositin" insurer under its insuran#e

#ontra#tsH )$* at all ti%es free fro/ an0 liens or en#u/%ran#eH and )6*

eAe/pt fro/ lev0 %0 an0 #lai/ant.

To %e sure, CISCO, thou"h presentl0 under #onservatorship,

has valid outstandin" poli#ies. Its poli#0 holders have a ri"ht under the

law to %e e>uall0 prote#ted %0 its se#urit0 deposit. To allow the

"arnish/ent of that deposit would i/pair the fund %0 de#reasin" it to

less than the per#enta"e of paid+up #apital that the law re>uires to %e

'1



/aintained. urther, this /ove would #reate, in favor of respondent, a

preferen#e of #redit over the other poli#0 holders and %ene<#iaries.

Our Insuran#e Code is patterned after that of California.

1&F Thus, the rulin" of the states Supre/e Court on a si/ilar #on#ept as

that of the se#urit0 deposit is instru#tive. 2ngwi'ht !. "a'i' 4tates $ife

Assuran'e (o.11F held that the /one0 re>uired to %e deposited %0 a

/utual assess/ent insuran#e #o/pan0 with the state treasurer was a

trust fund to %e rata%l0 distri%uted a/on"st all the #lai/ants entitled

to share in it. Su#h a distri%ution #annot %e had eA#ept in an a#tion in

the nature of a #reditors %ill, upon the hearin" of whi#h, and with all

the parties interested in the fund %efore it, the #ourt /a0 /a!e

e>uita%le distri%ution of the fund, and appoint a re#eiver to #arr0 that

distri%ution into eJe#t.

1$F

;asi# is the statutor0 #onstru#tion rule that provisions of a

statute should %e #onstrued in a##ordan#e with the purpose for whi#h

it was ena#ted.16F That is, the se#urities are held as a #ontin"en#0 fund

to answer for the #lai/s a"ainst the insuran#e #o/pan0 %0 all its

poli#0 holders and their %ene<#iaries.This step is ta!en in the event

that the #o/pan0 %e#o/es insolvent or otherwise una%le to satisf0 the

#lai/s a"ainst it. Thus, a sin"le #lai/ant /a0 not la0 sta!e on the

se#urities to the eA#lusion of all others. The other parties /a0 have

their own #lai/s a"ainst the insuran#e #o/pan0 under other insuran#e

#ontra#ts it has entered into.

'epon!ent In+/ote 'i/t

The ri"ht to la0 #lai/ on the fund is dependent on the solven#0

of the insurer and is su%e#t to all other o%li"ations of the #o/pan0

arisin" fro/ its insuran#e #ontra#ts. Thus, respondents interest is

/erel0 in#hoate. ;ein" a /ere eApe#tan#0, it has no attri%ute of

propert0. (t this ti/e, it is noneAistent and /a0 never eAist. 14F @en#e,

'$














it would %e pre/ature to /a!e the se#urit0 deposit answera%le

for CISCOs present o%li"ation to Del 7onte 7otors.

7oreover, sin#e insolven#0 pro#eedin"s a"ainst CISCO have

0et to %e #ondu#ted, it would %e i/possi%le to esta%lish at this ti/e

whi#h #lai/ants are entitled to the se#urit0 deposit and in what pro+

rated a/ounts. Onl0 after all other #lai/ants under su%sistin" poli#ies

issued %0 CISCO have %een heard #an respondents share %e

deter/ined.

$o(er o& t/e Co**iioner

The Insuran#e Code has vested the OG#e of the Insuran#e

Co//ission with %oth regulator) and adudi'ator) authorit0 over

insuran#e /atters.1F

The "eneral re"ulator0 authorit0 of the insuran#e

#o//issioner is des#ri%ed in Se#tion 414 of the Code as follows

Se#. 414. The Insuran#e Co//issioner shallhave the dut0 to see that all laws relatin" to insuran#e,

insuran#e #o/panies and other insuran#e /atters,

/utual %ene<t asso#iations, and trusts for #harita%le

uses are faithfull0 eAe#uted and to perfor% the duties

i%posed upon hi% #) this (ode, and shall,

notwithstandin" an0 eAistin" laws to the #ontrar0, have

sole and eA#lusive authorit0 to re"ulate the issuan#e

and sale of varia%le #ontra#ts as de<ned in se#tion two

hundred thirt0+two and to provide for the li#ensin" of

persons sellin" su#h #ontra#ts, and to issue su#h

reasona%le rules and re"ulations "overnin" the sa/e.

he (o%%issioner %a) issue su'h rulings,

instru'tions, 'ir'ulars, orders and de'isions as he %a)

dee% ne'essar) to se'ure the enfor'e%ent of the

pro!isions of this (ode, su%e#t to the approval of the

Se#retar0 of inan#e. EA#ept as otherwise spe#i<ed,

de#isions /ade %0 the Co//issioner shall

%e appeala%le to the Se#retar0 of inan#e. )E/phasis

supplied*

'6

sa/e, %ut shall as lon" as the #o/pan0 is solvent,





Pursuant to these re"ulator0 powers, the #o//issioner is authoried

to )1* issue )or to refuse to issue* #erti<#ates of authorit0 to persons or

entities desirin" to en"a"e in insuran#e %usiness in the PhilippinesH

15F )$* revo!e or suspend these #erti<#ates of authorit0 upon <ndin"

"rounds for the revo#ation or suspensionH1=F )6* i/pose upon insuran#e

#o/panies, their dire#tors and8or oG#ers and8or a"ents appropriate

penalties ++ <nes, suspension or re/oval fro/ oG#e ++ for failin" to

#o/pl0 with the Code or with an0 of the #o//issioners orders,

instru#tions, re"ulations or rulin"s, or for otherwise #ondu#tin"

%usiness in an unsafe or unsound /anner. 1'F

In#luded in the a%ove re"ulator0 responsi%ilities is the dut0 to hold the

se#urit0 deposits under Se#tions 1-11-F and $&6 of the Code, for the

%ene<t and se#urit0 of all poli#0 holders. In relation to these provisions,

Se#tion 1-$ of the Insuran#e Code states

Se#. 1-$. The Co//issioner shall hold the se#urities,

deposited as aforesaid, for the %ene<t and se#urit0 of

all the poli#0holders of the #o/pan0 depositin" the

, " p 0 ,

per/it the #o/pan0 to #olle#t the interest or dividends

on the se#urities so deposited, and, fro/ ti/e to

ti/e, with his assent, to withdraw an) of su'h

se'urities, upon depositin" with said Co//issioner

other li!e se#urities, the /ar!et value of whi#h shall %e

e>ual to the /ar!et value of su#h as /a0 %e

withdrawn. In the event of an0 #o/pan0 #easin" to do

%usiness in the Philippines the se'urities deposited asaforesaid shall #e returned upon the 'o%pan)s %a/ing

appli'ation therefor and pro!ing to the satisfa'tion of

the (o%%issioner that it has no further lia#ilit) under

an) of its poli'ies in the"hilippines. )E/phasis

supplied*

3ndenia%l0, the insuran#e #o//issioner has %een "iven a wide

latitude of dis#retion to re"ulate the insuran#e industr0 so as to prote#t

the insurin" pu%li#. The law spe#i<#all0 #onfers #ustod0 over the

se#urities upon the #o//issioner, with who/ these invest/ents are

re>uired to %e deposited. (n i/plied trust $&F is #reated %0 the law for

the %ene<t of all #lai/ants under su%sistin" insuran#e #ontra#ts issued

%0 the insuran#e #o/pan0.$1F

'4
















(s the oG#er vested with #ustod0 of the se#urit0 deposit, the

insuran#e #o//issioner is in the %est position to deter/ine if and

when it /a0 %e released without preudi#in" the ri"hts of other poli#0

holders. ;efore allowin" the withdrawal or the release of the deposit,

the #o//issioner /ust %e satis<ed that the #onditions #onte/plated

%0 the law are /et and all poli#0 holders prote#ted.

Co**iioner A+tion

Entite! to -ret 'epe+t

In this #ase, Co//issioner 7alinis refused to release the

se#urit0 deposit of CISCO. ;elievin" that the funds were eAe/pt fro/

eAe#ution as provided %0 law, he sou"ht to prote#t other poli#0

holders. @is interpretation of the provisions of the law #arries "reat

wei"ht and #onsideration,$$F as he is the head of a spe#ialied %od0

tas!ed with the re"ulation of insuran#e /atters and pri/aril0 #har"ed

with the i/ple/entation of the Insuran#e Code.

The e/er"en#e of the /ultifarious needs of /odern so#iet0

ne#essitates the esta%lish/ent of diverse ad/inistrative a"en#ies. In

addressin" these needs, the ad/inistrative a"en#ies #har"ed with

appl0in" and i/ple/entin" parti#ular statutes have a##u/ulated

eAperien#e and spe#ialied #apa%ilities.Thus, in a lon" line of #ases,

this Court has re#o"nied that their #onstru#tion of a statute is entitled

to "reat respe#t and should ordinaril0 %e #ontrollin", unless #learl0

shown to %e in sharp #onKi#t with the "overnin" statute or the

Constitution and other laws.$6F

Clearl0, then, the trial #ourt erred in issuin" the Brit of

arnish/ent a"ainst the se#urit0 deposit of CISCO. It follows that

without the issuan#e of a valid order, the insuran#e #o//issioner

#ould not have %een in #onte/pt of #ourt.$4F

B@EREORE, the Petition is -'ANE" and the assailed

Order #E A#I"E. No #osts.

SO ORDERED.

'

the #overin" invoi#e or a#tual deliver0 of the /er#handise










G.R. No. 14/8%9 June 8, 2006

GAISANO CAGA$AN, INC. Petitioner,

vs.

INSURANCE COM!AN$ O NORT# AMERICA, Respondent.

D E C I S I O N

AUSTRIA"MARTINE7, J.:

;efore the Court is a petition for review on #ertiorari of the

De#ision1 dated O#to%er 11, $&&& of the Court of (ppeals )C(* in C(+

.R. C9 No. 51'4' whi#h set aside the De#ision dated (u"ust 61, 1--'

of the Re"ional Trial Court, ;ran#h 16', 7a!ati )RTC* in Civil Case No.

-$+6$$ and upheld the #auses of a#tion for da/a"es of Insuran#e

Co/pan0 of North (/eri#a )respondent* a"ainst aisano Ca"a0an, In#.

)petitioner*H and the C( Resolution dated (pril 11, $&&1 whi#h denied

petitionerLs /otion for re#onsideration.

The fa#tual %a#!"round of the #ase is as follows

Inter#apitol 7ar!etin" Corporation )I7C* is the /a!er of Bran"ler ;lue

eans. 2evi Strauss )Phils.* In#. )2SPI* is the lo#al distri%utor of produ#ts

%earin" trade/ar!s owned %0 2evi Strauss Co.. I7C and 2SPI

separatel0 o%tained fro/ respondent <re insuran#e poli#ies with %oo!

de%t endorse/ents. The insuran#e poli#ies provide for #overa"e on

:%oo! de%ts in #onne#tion with read0+/ade #lothin" /aterials whi#h

have %een sold or delivered to various #usto/ers and dealers of the

Insured an0where in the Philippines.:$

The poli#ies de<ned %oo! de%tsas the :unpaid a##ount still appearin" in the ;oo! of (##ount of the

Insured 4 da0s after the ti/e of the loss #overed under this

Poli#0.:6 The poli#ies also provide for the followin" #onditions

1. Barranted that the Co/pan0 shall not %e lia%le for an0

unpaid a##ount in respe#t of the /er#handise sold and

delivered %0 the Insured whi#h are outstandin" at the date of

loss for a period in eA#ess of siA )5* /onths fro/ the date of

" 0

whi#hever shall <rst o##ur.

$. Barranted that the Insured shall su%/it to the Co/pan0

within twelve )1$* da0s after the #lose of ever0 #alendar /onth

all a/ount shown in their %oo!s of a##ounts as unpaid and

thus %e#o/e re#eiva%le ite/ fro/ their #usto/ers and dealers.

A A A4

A A A A

Petitioner is a #usto/er and dealer of the produ#ts of I7C and 2SPI. On

e%ruar0 $, 1--1, the aisano Superstore Co/pleA in Ca"a0an de Oro

Cit0, owned %0 petitioner, was #onsu/ed %0 <re. In#luded in the ite/s

lost or destro0ed in the <re were sto#!s of read0+/ade #lothin"

/aterials sold and delivered %0 I7C and 2SPI.

On e%ruar0 4, 1--$, respondent <led a #o/plaint for da/a"es a"ainst

petitioner. It alle"es that I7C and 2SPI <led with respondent their

#lai/s under their respe#tive <re insuran#e poli#ies with %oo! de%t

endorse/entsH that as of e%ruar0 $, 1--1, the unpaid a##ounts of

petitioner on the sale and deliver0 of read0+/ade #lothin" /aterials

with I7C was P$,11-,$&.&& while with 2SPI it was P6,516.&&H that

respondent paid the #lai/s of I7C and 2SPI and, %0 virtue thereof,

respondent was su%ro"ated to their ri"hts a"ainst petitionerH that

respondent /ade several de/ands for pa0/ent upon petitioner %ut

these went unheeded.

In its (nswer with Counter Clai/ dated ul0 4, 1--, petitioner

#ontends that it #ould not %e held lia%le %e#ause the propert0 #overed

%0 the insuran#e poli#ies were destro0ed due to fortuities event orfor#e /aeureH that respondentLs ri"ht of su%ro"ation has no %asis

inas/u#h as there was no %rea#h of #ontra#t #o//itted %0 it sin#e the

loss was due to <re whi#h it #ould not prevent or foreseeH that I7C and

2SPI never #o//uni#ated to it that the0 insured their propertiesH that

it never #onsented to pa0in" the #lai/ of the insured.5

(t the pre+trial #onferen#e the parties failed to arrive at an a/i#a%le

settle/ent.= Thus, trial on the /erits ensued.

'5

On (u"ust 61, 1--', the RTC rendered its de#ision dis/issin" "oods %ut the pa0/ent of its unpaid a##ount and as su#h the


















respondentLs #o/plaint.' It held that the <re was purel0 a##identalH

that the #ause of the <re was not attri%uta%le to the ne"li"en#e of the

petitionerH that it has not %een esta%lished that petitioner is the de%tor

of I7C and 2SPIH that sin#e the sales invoi#es state that :it is further

a"reed that /erel0 for purpose of se#urin" the pa0/ent of pur#hase

pri#e, the a%ove+des#ri%ed /er#handise re/ains the propert0 of the

vendor until the pur#hase pri#e is full0 paid:, I7C and 2SPI retained

ownership of the delivered "oods and /ust %ear the loss.

Dissatis<ed, petitioner appealed to the C(.- On O#to%er 11, $&&&, the

C( rendered its de#ision settin" aside the de#ision of the RTC. The

dispositive portion of the de#ision reads

B@EREORE, in view of the fore"oin", the appealed de#ision is

RE9ERSED and SET (SIDE and a new one is entered orderin"

defendant+appellee aisano Ca"a0an, In#. to pa0

1. the a/ount of P$,11-,$&.5& representin" the a/ount paid

%0 the plaintiJ+appellant to the insured Inter Capitol 7ar!etin"Corporation, plus le"al interest fro/ the ti/e of de/and until

full0 paidH

$. the a/ount of P6,516.&& representin" the a/ount paid %0

the plaintiJ+appellant to the insured 2evi Strauss Phil., In#.,

plus le"al interest fro/ the ti/e of de/and until full0 paid.

Bith #osts a"ainst the defendant+appellee.

SO ORDERED.1&

The C( held that the sales invoi#es are proofs of sale, %ein" detailed

state/ents of the nature, >uantit0 and #ost of the thin" soldH that loss

of the "oods in the <re /ust %e %orne %0 petitioner sin#e

the pro!iso #ontained in the sales invoi#es is an eA#eption under

(rti#le 1&4 )1* of the Civil Code, to the "eneral rule that if the thin" is

lost %0 a fortuitous event, the ris! is %orne %0 the owner of the thin" at

the ti/e the loss under the prin#iple of res perit do/inoH that

petitionerLs o%li"ation to I7C and 2SPI is not the deliver0 of the lost

o%li"ation to pa0 is not eAtin"uished, even if the <re is #onsidered a

fortuitous eventH that %0 su%ro"ation, the insurer has the ri"ht to "o

a"ainst petitionerH that, %ein" a <re insuran#e with %oo! de%t

endorse/ents, what was insured was the vendorLs interest as a

#reditor.11

Petitioner <led a /otion for re#onsideration1$ %ut it was denied %0 the

C( in its Resolution dated (pril 11, $&&1.16

@en#e, the present petition for review on #ertiorari an#hored on the

followin" (ssi"n/ent of Errors

T@E CO3RT O (PPE(2S ERRED IN @O2DIN T@(T T@E INS3R(NCE IN

T@E INST(NT C(SE B(S ONE O9ER CREDIT.

T@E CO3RT O (PPE(2S ERRED IN @O2DIN T@(T (22 RISQ O9ER T@E

S3;ECT OODS IN T@E INST(NT C(SE @(D TR(NSERRED TO

PETITIONER 3PON DE2I9ER T@EREO.

T@E CO3RT O (PPE(2S ERRED IN @O2DIN T@(T T@ERE B(S

(3TO7(TIC S3;RO(TION 3NDER (RT. $$&= O T@E CI9I2 CODE IN

(9OR O RESPONDENT.14

(nent the <rst error, petitioner #ontends that the insuran#e in the

present #ase #annot %e dee/ed to %e over #redit sin#e an insuran#e

:on #redit: %elies not onl0 the nature of <re insuran#e %ut the eApress

ter/s of the poli#iesH that it was not #redit that was insured sin#e

respondent paid on the o##asion of the loss of the insured "oods to <re

and not %e#ause of the non+pa0/ent %0 petitioner of an0 o%li"ationH

that, even if the insuran#e is dee/ed as one over #redit, there was noloss as the a##ounts were not 0et due sin#e no prior de/ands were

/ade %0 I7C and 2SPI a"ainst petitioner for pa0/ent of the de%t and

su#h de/ands #a/e fro/ respondent onl0 after it had alread0 paid

I7C and 2SPI under the <re insuran#e poli#ies.1

(s to the se#ond error, petitioner avers that despite deliver0 of the

"oods, petitioner+%u0er I7C and 2SPI assu/ed the ris! of loss when

the0 se#ured <re insuran#e poli#ies over the "oods.

'=

Con#ernin" the third "round, petitioner su%/its that there is no the <ndin"s of fa#ts are #onKi#tin"H )5* when in /a!in" its <ndin"s the




















su%ro"ation in favor of respondent as no valid insuran#e #ould %e

/aintained thereon %0 I7C and 2SPI sin#e all ris! had transferred to

petitioner upon deliver0 of the "oodsH that petitioner was not priv0 to

the insuran#e #ontra#t or the pa0/ent %etween respondent and its

insured nor was its #onsent or approval ever se#uredH that this la#! of

privit0 fore#loses an0 real interest on the part of respondent in the

o%li"ation to pa0, li/itin" its interest to !eepin" the insured "oods safe

fro/ <re.

or its part, respondent #ounters that while ownership over the read0+

/ade #lothin" /aterials was transferred upon deliver0 to petitioner,

I7C and 2SPI have insura%le interest over said "oods as #reditors who

stand to suJer dire#t pe#uniar0 loss fro/ its destru#tion %0 <reH that

petitioner is lia%le for loss of the read0+/ade #lothin" /aterials sin#e it

failed to over#o/e the presu/ption of lia%ilit0 under (rti#le 1$515 of

the Civil CodeH that the <re was #aused throu"h petitionerLs ne"li"en#e

in failin" to provide strin"ent /easures of #aution, #are and

/aintenan#e on its propert0 %e#ause ele#tri# wires do not usuall0 short

#ir#uit unless there are defe#ts in their installation or when there is la#!of proper /aintenan#e and supervision of the propert0H that petitioner

is "uilt0 of "ross and evident %ad faith in refusin" to pa0 respondentLs

valid #lai/ and should %e lia%le to respondent for #ontra#ted law0erLs

fees, liti"ation eApenses and #ost of suit.1=

(s a "eneral rule, in petitions for review, the urisdi#tion of this Court in

#ases %rou"ht %efore it fro/ the C( is li/ited to reviewin" >uestions of

law whi#h involves no eAa/ination of the pro%ative value of the

eviden#e presented %0 the liti"ants or an0 of the/.1' The Supre/e

Court is not a trier of fa#tsH it is not its fun#tion to anal0e or wei"h

eviden#e all over a"ain.1- (##ordin"l0, <ndin"s of fa#t of the appellate

#ourt are "enerall0 #on#lusive on the Supre/e Court.$&

Nevertheless, urispruden#e has re#o"nied several eA#eptions in

whi#h fa#tual issues /a0 %e resolved %0 this Court, su#h as )1* when

the <ndin"s are "rounded entirel0 on spe#ulation, sur/ises or

#one#turesH )$* when the inferen#e /ade is /anifestl0 /ista!en,

a%surd or i/possi%leH )6* when there is "rave a%use of dis#retionH )4*

when the ud"/ent is %ased on a /isapprehension of fa#tsH )* when

C( went %e0ond the issues of the #ase, or its <ndin"s are #ontrar0 to

the ad/issions of %oth the appellant and the appelleeH )=* when the

<ndin"s are #ontrar0 to the trial #ourtH )'* when the <ndin"s are

#on#lusions without #itation of spe#i<# eviden#e on whi#h the0 are

%asedH )-* when the fa#ts set forth in the petition as well as in the

petitionerLs /ain and repl0 %riefs are not disputed %0 the respondentH

)1&* when the <ndin"s of fa#t are pre/ised on the supposed a%sen#e

of eviden#e and #ontradi#ted %0 the eviden#e on re#ordH and )11*when the C( /anifestl0 overloo!ed #ertain relevant fa#ts not disputed

%0 the parties, whi#h, if properl0 #onsidered, would ustif0 a diJerent

#on#lusion.$1 EA#eptions )4*, )*, )=*, and )11* appl0 to the present

petition.

(t issue is the proper interpretation of the >uestioned insuran#e poli#0.

Petitioner #lai/s that the C( erred in #onstruin" a <re insuran#e poli#0

on %oo! de%ts as one #overin" the unpaid a##ounts of I7C and 2SPI

sin#e su#h insuran#e applies to loss of the read0+/ade #lothin"

/aterials sold and delivered to petitioner.

The Court disa"rees with petitionerLs stand.

It is well+settled that when the words of a #ontra#t are plain and readil0

understood, there is no roo/ for #onstru#tion.$$ In this #ase, the

>uestioned insuran#e poli#ies provide #overa"e for :%oo! de%ts in

#onne#tion with read0+/ade #lothin" /aterials whi#h have %een sold

or delivered to various #usto/ers and dealers of the Insured an0where

in the Philippines.:$6 H and de<ned %oo! de%ts as the :unpaid a##ount

still appearin" in the ;oo! of (##ount of the Insured 4 da0s after the

ti/e of the loss #overed under this Poli#0.:$4 Nowhere is it provided in

the >uestioned insuran#e poli#ies that the su%e#t of the insuran#e is

the "oods sold and delivered to the #usto/ers and dealers of the

insured.

Indeed, when the ter/s of the a"ree/ent are #lear and eApli#it that

the0 do not ustif0 an atte/pt to read into it an0 alle"ed intention of

the parties, the ter/s are to %e understood literall0 ust as the0 appear

on the fa#e of the #ontra#t.$ Thus, what were insured a"ainst were the

a##ounts of I7C and 2SPI with petitioner whi#h re/ained unpaid 4

''

da0s after the loss throu"h <re, and not the loss or destru#tion of the %ut whether insured has su%stantial e#ono/i# interest in the





























"oods delivered.

Petitioner ar"ues that I7C %ears the ris! of loss %e#ause it eApressl0

reserved ownership of the "oods %0 stipulatin" in the sales invoi#es

that :iFt is further a"reed that /erel0 for purpose of se#urin" the

pa0/ent of the pur#hase pri#e the a%ove des#ri%ed /er#handise

re/ains the propert0 of the vendor until the pur#hase pri#e thereof is

full0 paid.:$5

The Court is not persuaded.

The present #ase #learl0 falls under para"raph )1*, (rti#le 1&4 of the

Civil Code

(RT. 1&4. 3nless otherwise a"reed, the "oods re/ain at the sellerLs

ris! until the ownership therein is transferred to the %u0er, %ut when

the ownership therein is transferred to the %u0er the "oods are at the

%u0erLs ris! whether a#tual deliver0 has %een /ade or not, eA#ept that

)1* Bhere deliver0 of the "oods has %een /ade to the %u0er or to a

%ailee for the %u0er, in pursuan#e of the #ontra#t and the ownership in

the "oods has %een retained %0 the seller /erel0 to se#ure

perfor/an#e %0 the %u0er of his o%li"ations under the #ontra#t, the

"oods are at the %u0erLs ris! fro/ the ti/e of su#h deliver0H )E/phasis

supplied*

A A A A

Thus, when the seller retains ownership onl0 to insure that the %u0er

will pa0 its de%t, the ris! of loss is %orne %0 the %u0er.$= (##ordin"l0,petitioner %ears the ris! of loss of the "oods delivered.

I7C and 2SPI did not lose #o/plete interest over the "oods. The0 have

an insura%le interest until full pa0/ent of the value of the delivered

"oods. 3nli!e the #ivil law #on#ept of res perit do/ino, where

ownership is the %asis for #onsideration of who %ears the ris! of loss, in

propert0 insuran#e, oneLs interest is not deter/ined %0 #on#ept of title,

propert0.$'

Se#tion 16 of our Insuran#e Code de<nes insura%le interest as :ever0

interest in propert0, whether real or personal, or an0 relation thereto,

or lia%ilit0 in respe#t thereof, of su#h nature that a #onte/plated peril

/i"ht dire#tl0 da/nif0 the insured.: Parentheti#all0, under Se#tion 14

of the sa/e Code, an insura%le interest in propert0 /a0 #onsist in )a*

an eAistin" interestH )%* an in#hoate interest founded on eAistin"

interestH or )#* an eApe#tan#0, #oupled with an eAistin" interest in that

out of whi#h the eApe#tan#0 arises.

Therefore, an insura%le interest in propert0 does not ne#essaril0 i/pl0

a propert0 interest in, or a lien upon, or possession of, the su%e#t

/atter of the insuran#e, and neither the title nor a %ene<#ial interest is

re>uisite to the eAisten#e of su#h an interest, it is suG#ient that the

insured is so situated with referen#e to the propert0 that he would %e

lia%le to loss should it %e inured or destro0ed %0 the peril a"ainst

whi#h it is insured.$- (n0one has an insura%le interest in propert0 who

derives a %ene<t fro/ its eAisten#e or would suJer loss fro/ itsdestru#tion.6&Indeed, a vendor or seller retains an insura%le interest in

the propert0 sold so lon" as he has an0 interest therein, in other words,

so lon" as he would suJer %0 its destru#tion, as where he has a

vendorLs lien.61 In this #ase, the insura%le interest of I7C and 2SPI

pertain to the unpaid a##ounts appearin" in their ;oo!s of (##ount 4

da0s after the ti/e of the loss #overed %0 the poli#ies.

The neAt >uestion is Is petitioner lia%le for the unpaid a##ounts

PetitionerLs ar"u/ent that it is not lia%le %e#ause the <re is a fortuitous

event under (rti#le 11=46$

of the Civil Code is /ispla#ed. (s heldearlier, petitioner %ears the loss under (rti#le 1&4 )1* of the Civil

Code.

7oreover, it /ust %e stressed that the insuran#e in this #ase is not for

loss of "oods %0 <re %ut for petitionerLs a##ounts with I7C and 2SPI

that re/ained unpaid 4 da0s after the <re. (##ordin"l0, petitionerLs

o%li"ation is for the pa0/ent of /one0. (s #orre#tl0 stated %0 the C(,

where the o%li"ation #onsists in the pa0/ent of /one0, the failure of

'-

the de%tor to /a!e the pa0/ent even %0 reason of a fortuitous event66

(rt. $$&=. If the plaintiJLs propert0 has %een insured, and he has






















shall not relieve hi/ of his l ia%ilit0.66 The rationale for this is that the

rule that an o%li"or should %e held eAe/pt fro/ lia%ilit0 when the loss

o##urs thru a fortuitous event onl0 holds true when the o%li"ation

#onsists in the deliver0 of a deter/inate thin" and there is no

stipulation holdin" hi/ lia%le even in #ase of fortuitous event. It does

not appl0 when the o%li"ation is pe#uniar0 in nature.64

3nder (rti#le 1$56 of the Civil Code, :iFn an o%li"ation to deliver a

"eneri# thin", the loss or destru#tion of an0thin" of the sa/e !ind does

not eAtin"uish the o%li"ation.: If the o%li"ation is "eneri# in the sense

that the o%e#t thereof is desi"nated /erel0 %0 its #lass or "enus

without an0 parti#ular desi"nation or ph0si#al se"re"ation fro/ all

others of the sa/e #lass, the loss or destru#tion of an0thin" of the

sa/e !ind even without the de%torLs fault and %efore he has in#urred

in dela0 will not have the eJe#t of eAtin"uishin" the o%li"ation.6 This

rule is %ased on the prin#iple that the "enus of a thin" #an never

perish. enus nun>uan perit.65 (n o%li"ation to pa0 /one0 is "eneri#H

therefore, it is not eA#used %0 fortuitous loss of an0 spe#i<# propert0 of

the de%tor.6=

Thus, whether <re is a fortuitous event or petitioner was ne"li"ent are

/atters i//aterial to this #ase. Bhat is relevant here is whether it has

%een esta%lished that petitioner has outstandin" a##ounts with I7C

and 2SPI.

Bith respe#t to I7C, the respondent has ade>uatel0 esta%lished its

#lai/. EAhi%its :C: to :C+$$:6' show that petitioner has an outstandin"

a##ount with I7C in the a/ount of P$,11-,$&.&&. EAhi%it :E:6- is the

#he#! vou#her eviden#in" pa0/ent to I7C. EAhi%it ::4& is the

su%ro"ation re#eipt eAe#uted %0 I7C in favor of respondent upon

re#eipt of the insuran#e pro#eeds. (ll these do#u/ents have %een

properl0 identi<ed, presented and /ar!ed as eAhi%its in #ourt. The

su%ro"ation re#eipt, %0 itself, is suG#ient to esta%lish not onl0 the

relationship of respondent as insurer and I7C as the insured, %ut also

the a/ount paid to settle the insuran#e #lai/. The ri"ht of su%ro"ation

a##rues si/pl0 upon pa0/ent %0 the insuran#e #o/pan0 of the

insuran#e #lai/.41RespondentLs a#tion a"ainst petitioner is s>uarel0

san#tioned %0 (rti#le $$&= of the Civil Code whi#h provides

re#eived inde/nit0 fro/ the insuran#e #o/pan0 for the inur0 or loss

arisin" out of the wron" or %rea#h of #ontra#t #o/plained of, the

insuran#e #o/pan0 shall %e su%ro"ated to the ri"hts of the insured

a"ainst the wron"doer or the person who has violated the #ontra#t. A A

A

Petitioner failed to refute respondentLs eviden#e.

(s to 2SPI, respondent failed to present suG#ient eviden#e to prove its

#ause of a#tion. No evidentiar0 wei"ht #an %e "iven to EAhi%it : 2evi

Strauss:,4$ a letter dated (pril $6, 1--1 fro/ petitionerLs eneral

7ana"er, Stephen S. aisano, r., sin#e it is not an ad/ission of

petitionerLs unpaid a##ount with 2SPI. It onl0 #on<r/s the loss of 2eviLs

produ#ts in the a/ount of P6,516.&& in the <re that raed

petitionerLs %uildin" on e%ruar0 $, 1--1.

7oreover, there is no proof of full settle/ent of the insuran#e #lai/ of

2SPIH no su%ro"ation re#eipt was oJered in eviden#e. Thus, there is no

eviden#e that respondent has %een su%ro"ated to an0 ri"ht whi#h 2SPI/a0 have a"ainst petitioner. ailure to su%stantiate the #lai/ of

su%ro"ation is fatal to petitionerLs #ase for re#over0 of the a/ount

of P6,516.&&.

B@EREORE, the petition is partl0 GRANTE. The assailed De#ision

dated O#to%er 11, $&&& and Resolution dated (pril 11, $&&1 of the

Court of (ppeals in C(+.R. C9 No. 51'4' are AIRME with

the MOIICATIONthat the order to pa0 the a/ount of P6,516.&&

to respondent is ELETE for la#! of fa#tual %asis.

No pronoun#e/ent as to #osts.

SO ORDERED.

-&

+ICENTE ONG LIM SING, JR., G.R. No. 168115



























!e'<'<one*,

" e*u "

E LEASING B INANCE COR!ORATION,

Re&on-en'.

Present

N(RES+S(NTI(O, .,

(hairperson,

(3STRI(+7(RTINEY,

C@ICO+N(Y(RIO, and

N(C@3R(, .

Pro/ul"ated

une ', $&&=

A++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++A

E C I S I O N

NAC#URA, J.

This is a petition for review on #ertiorari assailin" the

De#ision1F dated 7ar#h 1, $&& and the Resolution$F dated 7a0 $6,

$&& of the Court of (ppeals )C(* in C(+.R. C9 No. ==4-'.

The fa#ts are as follows

On 7ar#h -, 1--, E; 2easin" and inan#e Corporation )E;* entered

into a lease

6F

of e>uip/ent and /otor vehi#les with 92 ood Produ#ts)92*. On the sa/e date, 9i#ente On" 2i/ Sin", r. )2i/* eAe#uted an

Individual uarant0 ("ree/ent4F with E; to "uarantee the pro/pt

and faithful perfor/an#e of the ter/s and #onditions of the aforesaid

lease a"ree/ent. Correspondin" 2ease S#hedules with Deliver0 and

(##eptan#e Certi<#atesF over the e>uip/ent and /otor vehi#les

for/ed part of the a"ree/ent.3nder the #ontra#t, 92 was o%li"ed to

pa0 E; an a""re"ate "ross /onthl0 rental of One @undred Sevent0

Thousand our @undred Ninet0+our Pesos )P1=&,4-4.&&*.

92 defaulted in the pa0/ent of the /onthl0 rentals. (s of ul0 61,

$&&&, the a/ount in arrears, in#ludin" penalt0 #har"es and insuran#e

pre/iu/s, a/ounted to Three 7illion our @undred ourteen Thousand

-1

our @undred SiAt0+Ei"ht and =81&& Pesos )P6,414,45'.=*. On (u"ust In upholdin" 92 and 2i/s stan#e, the trial #ourt stressed the

http://sc.judiciary.gov.ph/jurisprudence/2007/june2007/168115.htm#_ftn1













our @undred SiAt0 Ei"ht and =81&& Pesos )P6,414,45'.=*. On (u"ust

$6, $&&&, E; sent a letter to 92 de/andin" pa0/ent of the said

a/ount. @owever, 92 failed to pa0. 5F

On De#e/%er 5, $&&&, E; <led a Co/plaint=F with the

Re"ional Trial Court of 7anila, do#!eted as Civil Case No. &&+--41, for

su/ of /one0, da/a"es, and replevin a"ainst 92, 2i/, and ohn Doe.

In the (/ended (nswer,'F 92 and 2i/ ad/itted the eAisten#e

of the lease a"ree/ent %ut asserted that it is in realit0 a sale of

e>uip/ent on install/ent %asis, with E; a#tin" as the <nan#ier. 92

and 2i/ #lai/ed that this intention was apparent fro/ the fa#t that

the0 were /ade to %elieve that when full pa0/ent was eJe#ted, a

Deed of Sale will %e eAe#uted %0 E; as vendor in favor of 92 and 2i/

as vendees.-F E; purportedl0 assured the/ that do#u/entin" the

transa#tion as a lease a"ree/ent is ust an industr0 pra#ti#e and that

the proper do#u/entation would %e eJe#ted as soon as full pa0/ent

for ever0 ite/ was /ade. The0 also #ontended that the lease

a"ree/ent is a #ontra#t of adhesion and should, therefore, %e

#onstrued a"ainst the part0 who prepared it, i.e., E;.

In upholdin" 92 and 2i/s stan#e, the trial #ourt stressed the

#ontradi#tor0 ter/s it found in the lease a"ree/ent. The pertinent

portions of the De#ision dated Nove/%er $$, $&&$ read

( profound s#rutin0 of the provisions of the #ontra#twhi#h is a #ontra#t of adhesion at on#e eAposed the

use of several #ontradi#tor0 ter/s. To na/e a few, in

Se#tion - of the said #ontra#t dis#lai/in" warrant0, it is

stated that the lessor is not the /anufa#turer nor the

latters a"ent and therefore does not "uarantee an0

feature or aspe#t of the o%e#t of the #ontra#t as to its

/er#hanta%ilit0. 7er#hanta%ilit0 is a ter/ applied in a

#ontra#t of sale of "oods where #onditions and

warranties are /ade to appl0. (rti#le 14= of the Civil

Code provides that unless a #ontrar0 intention appears

an i/plied warrant0 on the part of the seller that he

has the ri"ht to sell and to pass ownership of the o%e#tis furnished %0 law to"ether with an i/plied warrant0

that the thin" shall %e free fro/ hidden faults or

defe#ts or an0 #har"e or en#u/%ran#e not !nown to

the %u0er.

In an adhesion #ontra#t whi#h is drafted and printed in

advan#e and parties are not "iven a real ar/s len"th

opportunit0 to transa#t, the Courts treat this !ind of

#ontra#t stri#tl0 a"ainst their ar#hite#ts for the reason

that the part0 enterin" into this !ind of #ontra#t has no

#hoi#e %ut to a##ept the ter/s and #onditions found

therein even if he is not in a##ord therewith and for

that /atter /a0 not have understood all the ter/s and

stipulations pres#ri%ed thereat. Contra#ts of

this #hara#ter are prepared unilaterall0 %0 the stron"er

part0 with the %est le"al talents at itsdisposal. It is

upon that thou"ht that the Courts are #alled upon to

-$

anal0e #losel0 said #ontra#ts so that the wea!er part0

#ould %e full0 prote#ted

Still another o%servation is the eAisten#e in the re#ords

of a Deed of (%solute Sale %0 and %etween the sa/e












#ould %e full0 prote#ted.

(nother instan#e is when the alle"ed lessee was

re>uired to insure the thin" a"ainst loss, da/a"e or

destru#tion.

In propert0 insuran#e a"ainst loss or other a##idental

#auses, the assured /ust have an insura%le interest,

6$ Corpus uris 1&-.

A A A A

It has also %een held that the test of insura%le interestin propert0 is whether the assured has a ri"ht, title or

interest therein that he will %e %ene<ted %0 its

preservation and #ontinued eAisten#e or suJer a dire#t

pe#uniar0 loss fro/ its destru#tion or inur0 %0 the peril

insured a"ainst. If the defendants were to %e re"arded

as onl0 a lessee, lo"i#all0 the lessor who asserts

ownership will %e the one dire#tl0 %ene<ted or inured

and therefore the lessee is not supposed to %e the

assured as he has no insura%le interest.

There is also an o%servation fro/ the re#ords that the

a#tual value of ea#h o%e#t of the #ontra#t would %e

the result after #o/putin" the /onthl0 rentals %0

/ultipl0in" the said rentals %0 the nu/%er of /onths

spe#i<ed when the rentals ou"ht to %e paid.

of a Deed of (%solute Sale %0 and %etween the sa/e

parties, plaintiJ and defendants whi#h was an eAhi%it

of the defendant where the plaintiJ sold to the sa/e

defendants one unit 1-- 7itsu%ishi 2+$&& STR(D( DC

PICQ 3P and in said Deed, The Court noti#ed that the

sa/e ter/s as in the alle"ed lease were used in

respe#t to warrant0, as well as lia%ilit0 in #ase of loss

and other #onditions. This a#tion of the plaintiJ une>uivo#all0 eAhi%ited their real intention to eAe#ute

the #orrespondin" Deed after the defendants have paid

in full and as heretofore dis#ussed and for the sa!e of

e/phasis the o%s#urit0 in the written #ontra#t #annot

favor the part0 who #aused the o%s#urit0.

;ased on su%stantive Rules on Interpretation, if the

ter/s are #lear and leave no dou%t upon the intention

of the #ontra#tin" parties, the literal /eanin" of its

stipulations shall #ontrol. If the words appear to %e#ontrar0 to the evident intention of the parties, their

#onte/poraneous and su%se>uent a#ts shall %e

prin#ipall0 #onsidered. If the dou%ts are #ast upon the

prin#ipal o%e#t of the #ontra#t in su#h a wa0 that it

#annot %e !nown what /a0 have %een the intention or

will of the parties, the #ontra#t shall %e null and void.1&F

Thus, the #ourt #on#luded with the followin" disposition

In this #ase, whi#h is held %0 this Court as a sale on

install/ent there is no #hattel /ort"a"e on the thin"

sold, %ut it appears a/on"st the Co/plaints pra0er,

-6

that the plaintiJ ele#ted to eAa#t ful<ll/ent of the

o%li"ation

;. Bhen it ruled that the appli#a%le law on the #ase is

(rti#le 14'4 )of the Civil Code* and not R ( No '5H





o%li"ation.

or the vehi#les returned, the plaintiJ #an onl0 re#over

the unpaid %alan#e of the pri#e %e#ause of the

previous pa0/ents /ade %0 the defendants for the

reasona%le use of the units, spe#iall0 so, as it appears,these returned vehi#les were sold at au#tion and that

the plaintiJ #an appl0 the pro#eeds to the %alan#e.

@owever, with respe#t to the unreturned units and

/a#hineries still in the possession of the defendants, it

is this Courts view and so hold that the defendants are

lia%le therefore and a##ordin"l0 are ordered ointl0 and

severall0 to pa0 the pri#e thereof to the plaintiJ

to"ether with attorne0s fee and the #osts of suit in the

su/ of Php$,&&&.&&.

SO ORDERED.11F

On De#e/%er $=, $&&$, E; <led its Noti#e of (ppeal.

1$F (##ordin"l0, on anuar0 1=, $&&6, the #ourt issued an

Order16F elevatin" the entire re#ords of the #ase to the C(. E; averred

that the trial #ourt erred

(. Bhen it ruled that the a"ree/ent %etween the

Parties+2iti"ants is one of sale of personal properties on

install/ent and not of leaseH

(rti#le 14'4 )of the Civil Code* and not R.(. No. '5H

C. Bhen it ruled that the PlaintiJ+(ppellant #an

no lon"er re#over the unpaid %alan#e of the pri#e

%e#ause of the previous pa0/ents /ade %0 the

defendants for the reasona%le use of the unitsH

D. Bhen it failed to /a!e a rulin" or

ud"/ent on the oint and Solidar0 2ia%ilit0 of 9i#ente

On" 2i/, r. to the PlaintiJ+(ppellant.14F

On 7ar#h 1, $&&, the C( issued its De#ision1F

de#larin" the

transa#tion %etween the parties as a <nan#ial lease a"ree/ent under

Repu%li# (#t )R.(.* No. '5.15F The fallo of the assailed De#ision reads

#EREORE, the instant appeal is GRANTE and the

assailed De#ision dated $$ Nove/%er $&&$ rendered

%0 the Re"ional Trial Court of 7anila, ;ran#h 4- in Civil

Case No. &&+--41 isRE+ERSE and SET ASIE, and

a new ud"/ent is here%0 ENTERE orderin"

appellees 92 ood Produ#ts and 9i#ente On" 2i/, r. to

solidaril0 pa0 appellant E; 2easin" and inan#e

Corporation the a/ount of T3*ee M<>><on ou*#un-*e- ou*'een T3oun- ou* #un-*e- S<':E<3' !eo n- /5K100 (!3&%,414,468./5), with

interest at the rate of twelve per#ent )1$* per

annu% startin" fro/ the date of udi#ial de/and on &5

-4

De#e/%er $&&&, until full pa0/ent thereof. Costs

a"ainst appellees
















a"ainst appellees.

SO ORERE.1=F

2i/ <led the instant Petition for Review on Certiorari under Rule 4

#ontendin" that

I

T@E @ONOR(;2E CO3RT O (PPE(2S ERRED B@EN IT

(I2ED TO CONSIDER T@(T T@E 3ND(TED CO7P2(INT

B(S I2ED ; S(T3RNINO . (2(N, R., BIT@O3T

(N (3T@ORIT RO7 RESPONDENTS ;O(RD O

DIRECTORS (ND8OR SECRET(RS CERTIIC(TE.

II

T@E @ONOR(;2E CO3RT O (PPE(2S ERRED B@EN IT

(I2ED TO STRICT2 (PP2 SECTION =, R32E 1' O T@E

1--= R32ES O CI9I2 PROCED3RE (ND NOB ITE7 1,

()'* O (.7. NO. &6+1+&- SC )3NE ', $&&4*.

III

T@E @ONOR(;2E CO3RT O (PPE(2S ERRED IN NOT

DIS7ISSIN T@E (PPE(2 OR (I23RE O T@E

RESPONDENT TO I2E ON TI7E ITS (PPE22(NTS ;RIE

(ND TO SEP(R(TE2 R32E ON T@E PETITIONERS

7OTION TO DIS7ISS.

I9

T@E @ONOR(;2E CO3RT O (PPE(2S ERRED IN

INDIN T@(T T@E CONTR(CT ;ETBEEN T@E P(RTIES

IS ONE O ( IN(NCI(2 2E(SE (ND NOT O (

CONTR(CT O S(2E.

9

T@E @ONOR(;2E CO3RT O (PPE(2S ERRED IN R32IN

T@(T T@E P(7ENTS P(ID ; T@E PETITIONER TO T@E

RESPONDENT (RE RENT(2S (ND NOT INST(227ENTS

P(ID OR T@E P3RC@(SE PRICE O T@E S3;ECT

7OTOR 9E@IC2ES, @E(9 7(C@INES (ND EM3IP7ENT.

9I


T@(T T@E PRE9IO3S CONTR(CT O S(2E IN9O29IN

T@E PICQ+3P 9E@IC2E IS O NO CONSEM3ENCE.

-

9IIrepresentative of E; in the pro#eedin"s %efore the trial #ourt up to the





T@E @ONOR(;2E CO3RT O (PPE(2S (I2ED TO T(QE

INTO CONSIDER(TION T@(T T@E CONTR(CT O 2E(SE,

( CONTR(CT O (D@ESION, CONCE(2ED T@E TR3E

INTENTION O T@E P(RTIES, B@IC@ IS ( CONTR(CT

O S(2E.

9III


T@(T T@E PETITIONER IS ( 2ESSEE BIT@ INS3R(;2E

INTEREST O9ER T@E S3;ECT PERSON(2 PROPERTIES.

I

T@E @ONOR(;2E CO3RT O (PPE(2S ERRED IN

CONSTR3IN T@E INTENTIONS O T@E CO3RT A

L& IN ITS 3S(E O T@E TER7 7ERC@(NT(;I2IT.1'F

Be aGr/ the rulin" of the appellate #ourt.

3irst , 2i/ #an no lon"er >uestion alan"s authorit0 as E;s

authoried representative in <lin" the suit a"ainst 2i/. alan" was the

appellate #ourt. Petitioner never pla#ed in issue the validit0 of alan"s

representation %efore the trial and appellate #ourts. Issues raised for

the <rst ti/e on appeal are %arred %0 estoppel. (r"u/ents not raised

in the ori"inal pro#eedin"s #annot %e #onsidered on reviewH otherwise,

it would violate %asi# prin#iples of fair pla0.1-F

4e'ond, there is no le"al %asis for 2i/ to >uestion the authorit0

of the C( to "o %e0ond the /atters a"reed upon durin" the pre+trial

#onferen#e, or in not dis/issin" the appeal for failure of E; to <le its

%rief on ti/e, or in not rulin" separatel0 on the petitioners /otion to

dis/iss.

Courts have the prero"ative to relaA pro#edural rules of even

the /ost /andator0 #hara#ter, /indful of the dut0 to re#on#ile %oth

the need to speedil0 put an end to liti"ation and the parties ri"ht to

due pro#ess. In nu/erous #ases, this Court

has allowed li%eral #onstru#tion of the rules when to do so would serve

the de/ands of su%stantial usti#e and e>uit0.$&F

In Agua% !. (ourt of Appeals, the Court eAplained

The #ourt has the dis#retion to dis/iss or not to

dis/iss an appellantLs appeal. It is a power #onferred

on the #ourt, not a dut0. The :dis#retion /ust %e a

-5

sound one, to %e eAer#ised in a##ordan#e with the

tenets of usti#e and fair pla0 havin" in /ind the without o%e#tion, then the #ontra#t serves as the law %etween the




http://127.0.0.1:7860/source/Decisions.zip%3E8649,df%7CDecisions/2000/may2000/137672.html









tenets of usti#e and fair pla0, havin" in /ind the

#ir#u/stan#es o%tainin" in ea#h #ase.: Te#hni#alities,

however, /ust %e avoided. The law a%hors

te#hni#alities that i/pede the #ause of usti#e. The

#ourtLs pri/ar0 dut0 is to render or dispense usti#e.

:( liti"ation is not a "a/e of te#hni#alities.: :2awsuits

unli!e duels are not to %e won %0 a rapierLs thrust.

Te#hni#alit0, when it deserts its proper oG#e as an aidto usti#e and %e#o/es its "reat hindran#e and #hief

ene/0, deserves s#ant #onsideration fro/

#ourts.: 2iti"ations /ust %e de#ided on their /erits

and not on te#hni#alit0. Ever0 part0 liti"ant /ust %e

aJorded the a/plest opportunit0 for the proper and

ust deter/ination of his #ause, free fro/ the

una##epta%le plea of te#hni#alities. Thus, dis/issal of

appeals purel0 on te#hni#al "rounds is frowned upon

where the poli#0 of the #ourt is to en#oura"e hearin"s

of appeals on their /erits and the rules of pro#edure

ou"ht not to %e applied in a ver0 ri"id, te#hni#al senseH

rules of pro#edure are used onl0 to help se#ure, not

override su%stantial usti#e. It is a far %etter and /ore

prudent #ourse of a#tion for the #ourt to eA#use a

te#hni#al lapse and aJord the parties a review of the

#ase on appeal to attain the ends of usti#e rather than

dispose of the #ase on te#hni#alit0 and #ause a "rave

inusti#e to the parties, "ivin" a false i/pression of

speed0 disposal of #ases while a#tuall0 resultin" in

/ore dela0, if not a /is#arria"e of usti#e.$1F

hird, while we aGr/ that the su%e#t lease a"ree/ent is a #ontra#t of

adhesion, su#h a #ontra#t is not void per se. It is as %indin" as an0

ordinar0 #ontra#t. ( part0 who enters into an adhesion #ontra#t is free

to ree#t the stipulations entirel0. $$F If the ter/s thereof are a##epted

parties.

In Se#tion $6 of the lease #ontra#t, it was eApressl0 stated

that

SECTION $6. 2T-R2 ASR22M2TI 42K2RAB-$-

($AL42

$6.1. The 2ESSOR and the 2ESSEE a"ree this

instru/ent #onstitute the entire a"ree/ent %etween

the/, and that no representations have %een /ade

other than as set forth herein. This ("ree/ent shall not

%e a/ended or altered in an0 /anner, unless su#h

a/end/ent %e /ade in writin" and si"ned %0 the

parties hereto.

Petitioners #lai/ that the real intention of the parties was a #ontra#t of

sale of personal propert0 on install/ent %asis is /ore li!el0 a /ere

afterthou"ht in order to defeat the ri"hts of the respondent.

The 2ease Contra#t with #orrespondin" 2ease S#hedules with Deliver0

and (##eptan#e Certi<#ates is, in point of fa#t, a <nan#ial lease within

-=

the purview of R.(. No. '5.Se#tion 6)d* thereof de<nes <nan#ial leasin" transa#tion is to ena%le the prospe#tive %u0er of e>uip/ent,







leasin" as

(F /ode of eAtendin" #redit throu"h a non+#an#ela%le

lease #ontra#t under whi#h the lessor pur#hases or

a#>uires, at the instan#e of the lessee, /a#hiner0,

e>uip/ent, /otor vehi#les, applian#es, %usiness

and oG#e /a#hines, and other /ova%le or i//ova%le

propert0 in #onsideration of the periodi# pa0/ent %0

the lessee of a <Aed a/ount of

/one0 suG#ient to a/ortie at least sevent0 )=&* of

the pur#hase pri#e or a#>uisition #ost, in#ludin" an0

in#idental eApenses and a /ar"in of pro<t over an

o%li"ator0 period of not less than two )$* 0ears durin"

whi#h the lessee has the ri"ht to hold and use the

leased propert0 with the ri"ht to eApense the lease

rentals paid to the lessor and %ears the #ost of repairs,/aintenan#e, insuran#e and preservation thereof, %ut

with no o%li"ation or option on his part to pur#hase the

leased propert0 fro/ the owner+lessor at the end of the

lease #ontra#t.

E; leased the su%e#t e>uip/ent and /otor vehi#les to 92 in

#onsideration of a /onthl0 periodi# pa0/ent of P1=&,4-4.&&. The

periodi# pa0/ent %0 petitioner is suG#ient to a/ortie at least =& of

the pur#hase pri#e or a#>uisition #ost of the said /ova%les in

a##ordan#e with the 2ease S#hedules with

Deliver0 and (##eptan#eCerti<#ates. The %asi# purpose of a <nan#ial

who is una%le to pa0 for su#h e>uip/ent in #ash in one lu/p su/, to

lease su#h e>uip/ent in the /eanti/e for his use, at a <Aed rental

suG#ient to a/ortie at least =& of the a#>uisition #ost )in#ludin" the

eApenses and a /ar"in of pro<t for the <nan#ial lessor* with the

eApe#tation that at the end of the lease period the %u0er8<nan#ial

lessee will %e a%le to pa0 an0 re/ainin" %alan#e of the pur#hase pri#e.

$6F

The alle"ation of petitioner that the rent for the use of ea#h

/ova%le #onstitutes the value of the vehi#le or e>uip/ent leased is of

no /o/ent. The law on <nan#ial lease does not prohi%it su#h a

#ir#u/stan#e and this alone does not /a!e the transa#tion %etween

the parties a sale of personal propert0 on install/ent. In fa#t, the value

of the lease, usuall0 #onstitutin" the value or a/ount of the propert0

involved, is a %ene<t allowed %0 law to the lessor for the use of the

propert0 %0 the lessee for the duration of the lease. It is re#o"nied

that the value of these /ova%les depre#iates throu"h wear and tear

upon use %0 the lessee. In Beltran !. "A-( 3inan'e (orporation,$4F we

stated that

enerall0 spea!in", a <nan#in" #o/pan0 is not a %u0er

or seller of "oodsH it is not a tradin" #o/pan0. Neither

is it an ordinar0 leasin" #o/pan0H it does not /a!e its

pro<t %0 %u0in" e>uip/ent and repeatedl0 leasin"

out su#h e>uip/ent to diJerent users thereof. ;ut a

-'

<nan#ial lease /ust %e pre#eded %0 a pur#hase and

sale #ontra#t #overin" the e>uip/ent whi#h %e#o/es law, /orals, "ood #usto/s, pu%li# poli#0, or pu%li# order, the0 shall









sale #ontra#t #overin" the e>uip/ent whi#h %e#o/es

the su%e#t /atter of the <nan#ial lease. The <nan#ial

lessor ta!es the role of the %u0er of the e>uip/ent

leased. (nd so the for/al or do#u/entar0 tie %etween

the seller and the real %u0er of the e>uip/ent, i.e., the

<nan#ial lessee, is apparentl0 severed. In e#ono/i#

realit0, however, that relationship re/ains. The sale of

the e>uip/ent %0 the supplier thereof tothe <nan#ial lessor and the latterLs le"al ownership

thereof are intended to se#ure the repa0/ent over

ti/e of the pur#hase pri#e of the e>uip/ent, plus

<nan#in" #har"es, throu"h the pa0/ent of lease

rentalsH that le"al title is the upfront se#urit0 held %0

the <nan#ial lessor, a se#urit0 pro%a%l0 superior in

so/e instan#es to a #hattel /ort"a"eeLs lien.$F

3ourth, the validit0 of 2ease No. $=-$& %etween E; and 92

should %e upheld. 92 entered into the lease #ontra#t with full

!nowled"e of its ter/s and #onditions.The #ontra#t was in for#e for

/ore than four 0ears. Sin#e its in#eption on 7ar#h -, 1--, 92 and 2i/

never >uestioned its provisions. The0 onl0 atta#!ed the validit0 of the

#ontra#t after the0 were udi#iall0 /ade to answer for their default in

the pa0/ent of the a"reed rentals.

It is settled that the parties are free to a"ree to su#h

stipulations, #lauses, ter/s, and #onditions as the0 /a0 want to

in#lude in a #ontra#t. (s lon" as su#h a"ree/ents are not #ontrar0 to

have the for#e of law %etween the parties. $5F Contra#tin" parties /a0

stipulate on ter/s and #onditions as the0 /a0 see <t and these have

the for#e of law %etween the/.$=F

The stipulation in Se#tion 14$'F of the lease #ontra#t, that the

e>uip/ent shall %e insured at the #ost and eApense of the lessee

a"ainst loss, da/a"e, or destru#tion fro/ <re, theft, a##ident, or other

insura%le ris! for the full ter/ of the lease, is a %indin" and valid

stipulation. Petitioner, as a lessee, has an insura%le interest in the

e>uip/ent and /otor vehi#les leased. Se#tion 1= of the Insuran#e

Code provides that the /easure of an insura%le interest in propert0 is

the eAtent to whi#h the insured /i"ht %e da/ni<ed %0 loss or inur0

thereof. It #annot %e denied that 92 will %e dire#tl0 da/ni<ed in #ase

of loss, da/a"e, or destru#tion of an0 of the properties leased.

2i!ewise, the stipulation in Se#tion -.1 of the lease #ontra#t

that the lessor does not warrant the /er#hanta%ilit0 of the e>uip/ent

is a valid stipulation. Se#tion -.1 of the lease #ontra#t is stated as

-.1 IT IS 3NDERSTOOD ;ETBEEN T@E P(RTIES T@(T

T@E 2ESSOR IS NOT T@E 7(N3(CT3RER OR S3PP2IER

O T@E EM3IP7ENT NOR T@E (ENT O T@E

7(N3(CT3RER OR S3PP2IER T@EREO. T@E 2ESSEE

@ERE; (CQNOB2EDES T@(T IT @(S SE2ECTED T@E

--

EM3IP7ENT (ND T@E S3PP2IER

T@EREO (NDT@(T T@ERE (RE NO B(RR(NTIES, 3ifth, petitioner further proJers the view that the real intention












,

CONDITIONS, TER7S, REPRESENT(TION OR

IND3CE7ENTS, EPRESS OR I7P2IED, ST(T3TOR OR

OT@ERBISE, 7(DE ; OR ON ;E@(2 O T@E 2ESSOR

(S TO (N E(T3RE OR (SPECT O T@E EM3IP7ENT

OR (N P(RT T@EREO, OR (S TO ITS ITNESS,

S3IT(;I2IT, C(P(CIT, CONDITION OR

7ERC@(NT(;I2IT, NOR (S TO B@ET@ER T@EEM3IP7ENT

BI22 7EET T@E REM3IRE7ENTS O (N 2(B, R32E,

SPECIIC(TIONS OR CONTR(CT B@IC@ PRO9IDE OR

SPECIIC 7(C@INER OR (PP(R(T3S OR SPECI(2

7ET@ODS.$-F

In the <nan#ial lease a"ree/ent, E; did not assu/e

responsi%ilit0 as to the >ualit0, /er#hanta%ilit0, or #apa#it0 of the

e>uip/ent. This stipulation provides that, in #ase of defe#t of an0 !ind

that will %e found %0 the lessee in an0 of the e>uip/ent, re#ourse

should %e /ade to the /anufa#turer. The <nan#ial lessor, %ein" a

<nan#in" #o/pan0, i.e., an eAtender of #redit rather than an ordinar0

e>uip/ent rental #o/pan0, does not eAtend a warrant0 of the <tness

of the e>uip/ent for an0 parti#ular use. Thus, the <nan#ial lessee was

pre#isel0 in a position to enfor#e su#h warrant0 dire#tl0 a"ainst the

supplier of the e>uip/ent and not a"ainst the <nan#ial lessor. Be <nd

nothin" 'ontra lege% or #ontrar0 to pu%li# poli#0 in su#h a #ontra#tual

arran"e/ent. 6&F

of the parties was to enter into a #ontra#t of sale on install/ent in the

sa/e /anner that a previous transa#tion %etween the parties over a

1-- 7itsu%ishi 2+$&& Strada DC+Pi#!+3p was initiall0 #overed %0 an

a"ree/ent deno/inated as a lease and eventuall0 %e#a/e the su%e#t

of a Deed of (%solute Sale.

Be oin the C( in ree#tin" this view %e#ause to allow the

transa#tion involvin" the pi#!+up to %e read into the ter/s of the lease

a"ree/ent would eApand the #overa"e of the a"ree/ent, in violation

of (rti#le 16=$ of the New Civil Code. 61F The lease #ontra#t su%e#t of

the #o/plaint spea!s onl0 of a lease. (n0 a"ree/ent %etween the

parties after the lease #ontra#t has ended is a diJerent transa#tion

alto"ether and should not %e in#luded as part of the

lease. urther/ore, it is a #ardinal rule in the interpretation of

#ontra#ts that if the ter/s of a #ontra#t are #lear and leave no dou%t

as to the intention of the #ontra#tin" parties, the literal /eanin" of its

stipulations shall #ontrol. No a/ount of eAtrinsi# aid is ne#essar0 in

order to deter/ine the partiesL intent.6$F

#EREORE, in the li"ht of all the fore"oin", the petition

is ENIE. The De#ision of the C( in C(+.R. C9 No. ==4-'

dated 7ar#h 1, $&& and Resolution dated7a0 $6,

$&& are AIRME. Costs a"ainst petitioner.

1&&

On De#e/%er 1&, 1-'&, respondent Philippine (/eri#an 2ife Insuran#e











SO ORERE.

ETERNAL GARENS MEMORIAL G.R. No. 166245

!AR COR!ORATION,Petitioner,

PresentC(RPIO 7OR(2ES,+ versus + (#tin" Chairperson,

TIN(,9E2(SCO, R.,C@ICO+N(Y(RIO,X and;RION, .T#E !#ILI!!INE AMERICAN Pro/ul"atedLIE INSURANCE COM!AN$,Respondent. (pril -, $&&'A+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++A

E C I S I O N

+ELASCO, JR., J.

T3e Ce

Central to this Petition for Review on Certiorari under Rule 4 whi#h

see!s to reverse and set aside the Nove/%er $5, $&&4 De#ision 1F of

the Court of (ppeals )C(* in C(+.R. C9 No. ='1& is the >uer0 7a0

the ina#tion of the insurer on the insuran#e appli#ation %e #onsidered

as approval of the appli#ation

T3e '

Co/pan0 )Phila/life* entered into an a"ree/ent deno/inated as

Creditor roup 2ife Poli#0 No. P+1-$&$F with petitioner Eternal ardens

7e/orial Par! Corporation )Eternal*. 3nder the poli#0, the #lients of

Eternal who pur#hased %urial lots fro/ it on install/ent %asis would %e

insured %0 Phila/life. The a/ount of insuran#e #overa"e depended

upon the eAistin" %alan#e of the pur#hased %urial lots. The poli#0 was

to %e eJe#tive for a period of one 0ear, renewa%le on a 0earl0 %asis.

The relevant provisions of the poli#0 are E2II;I2IT. (n0 2ot Pur#haser of the (ssured who is at least 1' %utnot /ore than 5 0ears of a"e, is inde%ted to the

(ssured for the unpaid %alan#e of his loan with the(ssured, and is a##epted for 2ife Insuran#e #overa"e%0 the Co/pan0 on its eJe#tive date is eli"i%le forinsuran#e under the Poli#0. E9IDENCE O INS3R(;I2IT. No /edi#al eAa/ination shall %e re>uired for a/ountsof insuran#e up to P&,&&&.&&. @owever, a de#larationof "ood health shall %e re>uired for all 2ot Pur#hasersas part of the appli#ation. The Co/pan0 reserves theri"ht to re>uire further eviden#e of insura%ilit0satisfa#tor0 to the Co/pan0 in respe#t of the followin"

1. (n0 a/ount of insuran#e in eA#ess of P&,&&&.&&.

$. (n0 lot pur#haser who is /ore than 0ears of a"e.

2IE INS3R(NCE ;ENEIT.

The 2ife Insuran#e #overa"e of an0 2ot Pur#haser atan0 ti/e shall %e the a/ount of the unpaid %alan#e of his loan )in#ludin" arrears up to %ut not eA#eedin" $/onths* as reported %0 the (ssured to the Co/pan0 or

1&1

the su/ of P1&&,&&&.&&, whi#hever is s/aller. Su#h%ene<t shall %e paid to the (ssured if the 2ot Pur#haserdi hil i d d h li

its insuran#e #lai/ for Chuan"s death )1* Certi<#ate of Clai/ant )with

http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/166245.htm#_ftn1









dies while insured under the Poli#0. EECTI9E D(TE O ;ENEIT.

The insuran#e of an0 eli"i%le 2ot Pur#haser shall %eeJe#tive on the date he #ontra#ts a loan with the(ssured. @owever, there shall %e no insuran#e if the

appli#ation of the 2ot Pur#haser is not approved %0 theCo/pan0.6F

Eternal was re>uired under the poli#0 to su%/it to Phila/life a list of all

new lot pur#hasers, to"ether with a #op0 of the appli#ation of ea#h

pur#haser, and the a/ounts of the respe#tive unpaid %alan#es of all

insured lot pur#hasers. In relation to the instant petition, Eternal

#o/plied %0 su%/ittin" a letter dated De#e/%er $-, 1-'$,4F #ontainin"

a list of insura%le %alan#es of its lot %u0ers for O#to%er 1-'$. One of

those in#luded in the list as new %usiness was a #ertain ohn Chuan".

@is %alan#e of pa0/ents was PhP 1&&,&&&. On(u"ust $, 1-'4, Chuan"

died.

Eternal sent a letter dated (u"ust $&, 1-'4F to Phila/life, whi#h

served as an insuran#e #lai/ for Chuan"s death. (tta#hed to the #lai/

were the followin" do#u/ents )1* Chuan"s Certi<#ate of DeathH )$*

Identi<#ation Certi<#ate statin" that Chuan" is a naturalied ilipino

CitienH )6* Certi<#ate of Clai/antH )4* Certi<#ate of (ttendin"

Ph0si#ianH and )* (ssureds Certi<#ate.

In repl0, Phila/life wrote Eternal a letter on Nove/%er 1$,

1-'4,5F re>uirin" Eternal to su%/it the followin" do#u/ents relative to

for/ atta#hed*H )$* (ssureds Certi<#ate )with for/ atta#hed*H )6*

(ppli#ation for Insuran#e a##o/plished and si"ned %0 the insured,

Chuan", while still livin"H and )4* State/ent of (##ount showin" the

unpaid %alan#e of Chuan" %efore his death.

Eternal trans/itted the re>uired do#u/ents throu"h a letter

dated Nove/%er 14, 1-'4,=F whi#h was re#eived %0 Phila/life

on Nove/%er 1, 1-'4.

(fter /ore than a 0ear, Phila/life had not furnished Eternal

with an0 repl0 to the latters insuran#e #lai/. This pro/pted Eternal to

de/and fro/ Phila/life the pa0/ent of the #lai/ for PhP 1&&,&&&

on (pril $, 1-'5.'F

In response to Eternals de/and, Phila/life denied Eternals

insuran#e #lai/ in a letter dated 7a0 $&, 1-'5,-F a portion of whi#h

reads

The de#eased was - 0ears old when he entered intoContra#t _-' and -$-with Eternal ardens 7e/orial Par! in O#to%er 1-'$

for the total /aAi/u/ insura%le a/ount of P1&&,&&&.&& ea#h. No appli#ation for roup Insuran#ewas su%/itted in our oG#e prior to his death on (u"ust$, 1-'4. In a##ordan#e with our Creditors roup 2ife Poli#0 No.P+1-$&, under Eviden#e of Insura%ilit0 provision, ade#laration of "ood health shall %e re>uired for all 2otPur#hasers as part0 of the appli#ation. Be #ite furtherthe provision on EJe#tive Date of Covera"e under the

1&$

poli#0 whi#h states that there shall %e no insuran#e if the appli#ation is not approved %0 the Co/pan0. Sin#e

li ti h d % % itt d % th

the su%/ission of the re>uire/ents of the "roup insuran#e



















no appli#ation had %een su%/itted %0 theInsured8(ssured, prior to his death, for our approval %utwas su%/itted instead on Nove/%er 1, 1-'4, after hisdeath, 7r. ohn 30 Chuan" was not #overed under thePoli#0. Be wish to point out that Eternal ardens %ein"the (ssured was a part0 to the Contra#t and wastherefore aware of these pertinent provisions.

Bith re"ard to our a##eptan#e of pre/iu/s, these donot #onnote our approval per se of the insuran#e#overa"e %ut are held %0 us in trust for the pa0or untilthe prere>uisites for insuran#e #overa"e shall have%een /et. Be will however, return all the pre/iu/swhi#h have %een paid in %ehalf of ohn 30 Chuan".

Conse>uentl0, Eternal <led a #ase %efore the 7a!ati Cit0 Re"ional Trial

Court )RTC* for a su/ of /one0 a"ainst Phila/life, do#!eted as Civil

Case No. 14=65. The trial #ourt de#ided in favor of Eternal, the

dispositive portion of whi#h reads

B@EREORE, pre/ises #onsidered, ud"/ent is here%0rendered in favor of PlaintiJ ETERN(2, a"ainstDefendant P@I2(72IE, orderin" the DefendantP@I2(72IE, to pa0 the su/ of P1&&,&&&.&&,representin" the pro#eeds of the Poli#0 of ohn 30Chuan", plus le"al rate of interest, until full0 paidH and,to pa0 the su/ of P1&,&&&.&& as attorne0s fees. SO ORDERED.

The RTC found that Eternal su%/itted Chuan"s appli#ation for

insuran#e whi#h he a##o/plished %efore his death, as testi<ed to %0

Eternals witness and eviden#ed %0 the letter dated De#e/%er $-,

1-'$, statin", a/on" others En#l Phil+(/ 2ife Insuran#e (ppli#ation

or/s Cert.1&F It further ruled that due to Phila/lifes ina#tion fro/

on De#e/%er $-, 1-'$ to Chuan"s death on (u"ust $, 1-'4, as well as

Phila/lifes a##eptan#e of the pre/iu/s durin" the sa/e period,

Phila/life was dee/ed to have approved Chuan"s appli#ation. The RTC

said that sin#e the #ontra#t is a "roup life insuran#e, on#e proof of

death is su%/itted, pa0/ent /ust follow.

Phila/life appealed to the C(, whi#h ruled, thus

#EREORE, the de#ision of the Re"ional

Trial Court of 7a!ati in Civil Case No. ='1&is RE+ERSE n- SET ASIE, and the #o/plaintis ISMISSE. No #osts.

SO ORDERED.11F

The C( %ased its De#ision on the fa#tual <ndin" that Chuan"s

appli#ation was not en#losed in Eternals letter dated De#e/%er $-,

1-'$. It further ruled that the non+a##o/plish/ent of the su%/itted

appli#ation for/ violated Se#tion $5 of the Insuran#e Code. Thus, the

C( #on#luded, there %ein" no appli#ation for/, Chuan" was not

#overed %0 Phila/lifes insuran#e.

@en#e, we have this petition with the followin" "rounds

The @onora%le Court of (ppeals has de#ided a>uestion of su%stan#e, not therefore deter/ined %0this @onora%le Court, or has de#ided it in a wa0 not ina##ord with law or with the appli#a%le urispruden#e, inholdin" that

1&6

I. The appli#ation for insuran#e was not dul0su%/itted to respondent Phila/2ife %efore thed th f h Ch







death of ohn Chuan"H

II. There was no valid insuran#e #overa"eH and

III. Reversin" and settin" aside the De#ision of theRe"ional Trial Court dated 7a0 $-, 1--5.

T3e Cou*' Ru><n

(s a "eneral rule, this Court is not a trier of fa#ts and will not

re+eAa/ine fa#tual issues raised %efore the C( and <rst level #ourts,

#onsiderin" their <ndin"s of fa#ts are #on#lusive and %indin" on this

Court. @owever, su#h rule is su%e#t to eA#eptions, as enun#iated

in 4a%pa)an !. (ourt of Appeals

)1* when the <ndin"s are "rounded entirel0 onspe#ulation, sur/ises or #one#turesH )$* when theinferen#e /ade is /anifestl0 /ista!en, a%surd ori/possi%leH )6* when there is "rave a%use of dis#retionH)4* when the ud"/ent is %ased on a /isapprehensionof fa#tsH )* when the <ndin"s of fa#ts are #onKi#tin"H)5* when in /a!in" its <ndin"s the C(F went %e0ondthe issues of the #ase, or its <ndin"s are #ontrar0 tothe ad/issions of %oth the appellant and theappelleeH (/) =3en '3e n-<n @o '3e CA *eon'**: 'o '3e '*<> ou*' )'* when the <ndin"s are#on#lusions without #itation of spe#i<# eviden#e onwhi#h the0 are %asedH )-* when the fa#ts set forth in

the petition as well as in the petitioners /ain and repl0%riefs are not disputed %0 the respondentH )1&* whenthe <ndin"s of fa#t are pre/ised on the supposeda%sen#e of eviden#e and #ontradi#ted %0 the eviden#eon re#ordH and )11* when the Court of (ppeals/anifestl0 overloo!ed #ertain relevant fa#ts notdisputed %0 the parties, whi#h, if properl0 #onsidered,would ustif0 a diJerent #on#lusion.1$F )E/phasissupplied.*

In the instant #ase, the fa#tual <ndin"s of the RTC were reversed %0 the

C(H thus, this Court /a0 review the/.

Eternal #lai/s that the eviden#e that it presented %efore the trial #ourt

supports its #ontention that it su%/itted a #op0 of the insuran#e

appli#ation of Chuan" %efore his death. In Eternals letter

dated De#e/%er $-, 1-'$, a list of insura%le interests of %u0ers for

O#to%er 1-'$ was atta#hed, in#ludin" Chuan" in the list of new

%usinesses. Eternal added it was noted at the %otto/ of said letter that

the #orrespondin" Phil+(/ 2ife Insuran#e (ppli#ation or/s Cert.

were en#losed in the letter that was apparentl0 re#eived %0 Phila/life

on anuar0 1, 1-'6. inall0, Eternal alle"ed that it provided a #op0 of

the insuran#e appli#ation whi#h was si"ned %0 Chuan" hi/self and

eAe#uted %efore his death.

On the other hand, Phila/life #lai/s that the eviden#e presented %0

Eternal is insuG#ient, ar"uin" that Eternal /ust present eviden#e

showin" that Phila/life re#eived a #op0 of Chuan"s insuran#e

appli#ation.

The eviden#e on re#ord supports Eternals position.

The fa#t of the /atter is, the letter dated De#e/%er $-, 1-'$, whi#h

Phila/life sta/ped as re#eived, states that the insuran#e for/s for the

atta#hed list of %urial lot %u0ers were atta#hed to the letter. Su#h

1&4

sta/p of re#eipt has the eJe#t of a#!nowled"in" re#eipt of the letter Phila/life pri/aril0 #lai/s that Eternal did not even !now where the






to"ether with the atta#h/ents. Su#h re#eipt is an ad/ission %0

Phila/life a"ainst its own interest.16F The %urden of eviden#e has

shifted to Phila/life, whi#h /ust prove that the letter did not #ontain

Chuan"s insuran#e appli#ation. @owever, Phila/life failed to do soH

thus, Phila/life is dee/ed to have re#eived Chuan"s insuran#e

appli#ation.

To reiterate, it was Phila/lifes %ounden dut0 to /a!e sure that %efore a

trans/ittal letter is sta/ped as re#eived, the #ontents of the letter are

#orre#t and a##ounted for.

Phila/lifes alle"ation that Eternals witnesses ran out of #redi%ilit0 and

relia%ilit0 due to in#onsisten#ies is "roundless. The trial #ourt is in the

%est position to deter/ine the relia%ilit0 and #redi%ilit0 of the

witnesses, %e#ause it has the opportunit0 to o%serve <rsthand the

witnesses de/eanor, #ondu#t, and attitude. indin"s of the trial #ourt

on su#h /atters are %indin" and #on#lusive on the appellate #ourt,

unless so/e fa#ts or #ir#u/stan#es of wei"ht and su%stan#e have

%een overloo!ed, /isapprehended, or /isinterpreted,14F that, if

#onsidered, /i"ht aJe#t the result of the #ase.1F

(n eAa/ination of the testi/onies of the witnesses /entioned %0

Phila/life, however, reveals no overloo!ed fa#ts of su%stan#e and

value.

ori"inal insuran#e appli#ation of Chuan" was, as shown %0 the

testi/on0 of Edil%erto 7endoa(tt0. (revalo

M Bhere is the ori"inal of the appli#ation for/ whi#h isre>uired in #ase of new #overa"e

7endoaF ( It is aF standard operatin" pro#edure for the new#lient to <ll up two #opies of this for/ and the ori"inalof this is su%/itted to Phila/life to"ether with the/onthl0 re/ittan#es and the se#ond #op0 is re/ainedor retained with the /ar!etin" depart/entof Eternal ardens. (tt0. 7iranda Be /ove to stri!e out the answer as it is not

responsive as #ounsel is /erel0 as!in" for the lo#ationand does not as!F for the nu/%er of #op0. (tt0. (revalo M Bhere is the ori"inal 7endoaF ( (s far as I re/e/%er I do not !now where theori"inal %ut when I su%/itted with that pa0/entto"ether with the new #lients all the ori"inals I see to it%efore I si"n the trans/ittal letter the ori"inals areatta#hed therein.15F

In other words, the witness ad/itted not !nowin" where the

ori"inal insuran#e appli#ation was, %ut %elieved that the appli#ation

was trans/itted to Phila/life as an atta#h/ent to a trans/ittal letter.

1&

(s to the see/in" in#onsisten#ies %etween the testi/on0 of (s earlier stated, Phila/life and Eternal entered into an











7anuel Corte on whether one or two insuran#e appli#ation for/s were

a##o/plished and the testi/on0 of 7endoa on who a#tuall0 <lled out

the appli#ation for/, these are /inor in#onsisten#ies that do not aJe#t

the #redi%ilit0 of the witnesses. Thus, we ruled in "eople !.

"aredesthat /inor in#onsisten#ies are too trivial to aJe#t the #redi%ilit0

of witnesses, and these /a0 even serve to stren"then their #redi%ilit0

as these ne"ate an0 suspi#ion that the testi/onies have %een

rehearsed. 1=F

Be reiterated the a%ove rulin" in Meren'illo !. "eople 7inor dis#repan#ies or in#onsisten#ies do not

i/pair the essential inte"rit0 of the prose#utionseviden#e as a whole or reKe#t on the witnesseshonest0. The test is whether the testi/onies a"ree onessential fa#ts and whether the respe#tive versions#orro%orate and su%stantiall0 #oin#ide with ea#h otherso as to /a!e a #onsistent and #oherent whole. 1'F

In the present #ase, the nu/%er of #opies of the insuran#e appli#ation

that Chuan" eAe#uted is not at issue, neither is whether the insuran#e

appli#ation presented %0 Eternal has %een falsi<ed. Thus, the

in#onsisten#ies pointed out %0 Phila/life are /inor and do not aJe#t

the #redi%ilit0 of Eternals witnesses.

@owever, the >uestion arises as to whether Phila/life assu/ed

the ris! of loss without approvin" the appli#ation.

This >uestion /ust %e answered in the aGr/ative.

a"ree/ent deno/inated as Creditor roup 2ife Poli#0 No. P+1-$&

dated De#e/%er 1&, 1-'&. In the poli#0, it is provided that EECTI9E D(TE O ;ENEIT.

The insuran#e of an0 eli"i%le 2ot Pur#haser

shall %e eJe#tive on the date he #ontra#ts a loan withthe (ssured. @owever, there shall %e no insuran#e if the appli#ation of the 2ot Pur#haser is not approved %0the Co/pan0.

(n eAa/ination of the a%ove provision would show a/%i"uit0

%etween its two senten#es. The <rst senten#e appears to state that the

insuran#e #overa"e of the #lients of Eternal alread0 %e#a/e eJe#tive

upon #ontra#tin" a loan with Eternal while the se#ond senten#e

appears to re>uire Phila/life to approve the insuran#e #ontra#t %efore

the sa/e #an %e#o/e eJe#tive.

It /ust %e re/e/%ered that an insuran#e #ontra#t is a #ontra#t

of adhesion whi#h /ust %e #onstrued li%erall0 in favor of the insured

and stri#tl0 a"ainst the insurer in order to safe"uard the latters

interest. Thus, in Mala)an -nsuran'e (orporation !. (ourt of Appeals,

this Court held that

Inde/nit0 and lia%ilit0 insuran#e poli#ies are

#onstrued in a##ordan#e with the "eneral rule of resolvin" an0 a/%i"uit0 therein in favor of the insured,where the #ontra#t or poli#0 is prepared %0 theinsurer. A on'*' o <nu*ne, e<n on'*'o -3e<on, pr e)+een+e, n: <u<':'3e*e<n 3ou>- e *eo>e- <n' '3e <nu*e*H inother words, it should %e #onstrued li%erall0 in favor of the insured and stri#tl0 a"ainst the insurer. 2i/itations

1&5

of lia%ilit0 should %e re"arded with eAtre/e ealous0and /ust %e #onstrued in su#h a wa0 as to pre#ludethe insurer fro/ non#o/plian#e with its o%li"ations

/ere ina#tion of the insurer on the insuran#e appli#ation /ust not







the insurer fro/ non#o/plian#e with its o%li"ations.1-F )E/phasis supplied.*

In the /ore re#ent #ase of "hila%'are 6ealth 4)ste%s, -n'. !.

(ourt of Appeals, we reiterated the a%ove rulin", statin" that

Bhen the ter/s of insuran#e #ontra#t #ontain

li/itations on lia%ilit0, #ourts should #onstrue the/ insu#h a wa0 as to pre#lude the insurer fro/ non+#o/plian#e with his o%li"ation. ;ein" a #ontra#t of adhesion, the ter/s of an insuran#e #ontra#t are to %e#onstrued stri#tl0 a"ainst the part0 whi#h prepared the#ontra#t, the insurer. ;0 reason of the eA#lusive #ontrolof the insuran#e #o/pan0 over the ter/s andphraseolo"0 of the insuran#e #ontra#t, a/%i"uit0 /ust%e stri#tl0 interpreted a"ainst the insurer and li%erall0in favor of the insured, espe#iall0 to avoid forfeiture.$&F

Clearl0, the va"ue #ontra#tual provision, in Creditor roup 2ife

Poli#0 No. P+1-$& dated De#e/%er 1&, 1-'&, /ust %e #onstrued in

favor of the insured and in favor of the eJe#tivit0 of the insuran#e

#ontra#t.

On the other hand, the see/in"l0 #onKi#tin" provisions /ust

%e har/onied to /ean that upon a part0s pur#hase of a /e/orial lot

on install/ent fro/ Eternal, an insuran#e #ontra#t #overin" the lot

pur#haser is #reated and the sa/e is eJe#tive, valid, and %indin" until

ter/inated %0 Phila/life %0 disapprovin" the insuran#e appli#ation.

The se#ond senten#e of Creditor roup 2ife Poli#0 No. P+1-$& on the

EJe#tive Date of ;ene<t is in the nature of a resolutor0 #ondition whi#h

would lead to the #essation of the insuran#e #ontra#t. 7oreover, the

wor! to preudi#e the insuredH it #annot %e interpreted as a ter/ination

of the insuran#e #ontra#t. The ter/ination of the insuran#e #ontra#t %0

the insurer /ust %e eApli#it and una/%i"uous.

(s a <nal note, to #hara#terie the insurer and the insured as

#ontra#tin" parties on e>ual footin" is ina##urate at %est. Insuran#e

#ontra#ts are wholl0 prepared %0 the insurer with vast a/ounts of

eAperien#e in the industr0 purposefull0 used to its advanta"e. 7ore

often than not, insuran#e #ontra#ts are #ontra#ts of adhesion

#ontainin" te#hni#al ter/s and #onditions of the industr0, #onfusin" if

at all understanda%le to la0persons, that are i/posed on those who

wish to avail of insuran#e. (s su#h, insuran#e #ontra#ts are i/%ued

with pu%li# interest that /ust %e #onsidered whenever the ri"hts and

o%li"ations of the insurer and the insured are to %e delineated. @en#e,

in order to prote#t the interest of insuran#e appli#ants, insuran#e

#o/panies /ust %e o%li"ated to a#t with haste upon insuran#e

appli#ations, to either den0 or approve the sa/e, or otherwise %e

%ound to honor the appli#ation as a valid, %indin", and eJe#tive

insuran#e #ontra#t.$1F

#EREORE, we GRANT the petition. The Nove/%er $5, $&&4 C(

De#ision in C(+.R. C9 No. ='1& is RE+ERSE and SET ASIE. The

7a0 $-, 1--5 De#ision of the 7a!ati Cit0 RTC, ;ran#h 16'

is MOIIE. Phila/life is here%0 ORERE

1&=

)1* To pa0 Eternal the a/ount of PhP 1&&,&&& representin" the

d f h 2if I P li f Ch







http://sc.judiciary.gov.ph/jurisprudence/2009/august2009/183526.htm#_ftn2



pro#eeds of the 2ife Insuran#e Poli#0 of Chuan"H

)$* To pa0 Eternal le"al interest at the rate of siA per#ent )5* per

annu/ of PhP 1&&,&&& fro/ the ti/e of eAtra+udi#ial de/and %0

Eternal until Phila/lifes re#eipt of the 7a0 $-, 1--5 RTC De#ision on

une 1=, 1--5H

)6* To pa0 Eternal le"al interest at the rate of twelve per#ent )1$* per

annu/ of PhP 1&&,&&& fro/ une 1=, 1--5 until full pa0/ent of this

awardH and

)4* To pa0 Eternal attorne0s fees in the a/ount of PhP 1&,&&&.

No #osts.

SO ORERE.

+IOLETA R. LALICAN,

Petitioner,

+ !ersus +

G.R. No. 18%526 Present

C(RPIO 7OR(2ES,X

T#E INSULAR LIE ASSURANCECOM!AN$ LIMITE, AS RE!RESENTE$ T#E !RESIENT +ICENTE R. A+ILON,

Respondent.

C@ICO+N(Y(RIO,__

(#tin" Chairperson,

9E2(SCO, R.,

N(C@3R(, and

PER(2T(, .

Pro/ul"ated

(u"ust $, $&&-

A+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +A

E C I S I O N

C@ICO+N(Y(RIO, .

1&'

Challen"ed in this Petition for Review on (ertiorari1F under Rule

4 of the Rules of Court are the De#ision $F dated 6& (u"ust $&&= and

3nder the ter/s of Poli#0 No. -&11--$, Eulo"io was to pa0 the

pre/iu/s on a >uarterl0 %asis in the a/ount of P',&5$.&&, pa0a%le











o e u es o Cou a e e e# s o da ed 6& u"us && a d

the Orders dated 1& (pril $&&'6F and 6 ul0 $&&'4F of the Re"ional Trial

Court )RTC* of apan Cit0, ;ran#h 64, in Civil Case No. $1==. In its

assailed De#ision, the RTC dis/issed the #lai/ for death %ene<ts <led

%0 petitioner 9ioleta R. 2ali#an )9ioleta* a"ainst respondent Insular 2ife

(ssuran#e Co/pan0 2i/ited )Insular 2ife*H while in its >uestionedOrders dated 1& (pril $&&' and 6 ul0 $&&', respe#tivel0, the RTC

de#lared the <nalit0 of the aforesaid De#ision and denied petitioners

Noti#e of (ppeal.

The fa#tual and pro#edural ante#edents of the #ase, as #ulled

fro/ the re#ords, are as follows

9ioleta is the widow of the de#eased Eulo"io C. 2ali#an

)Eulo"io*.

Durin" his lifeti/e, Eulo"io applied for an insuran#e poli#0 with

Insular 2ife. On $4 (pril 1--=, Insular 2ife, throu"h osephine 7alaluan

)7alaluan*, its a"ent in apanCit0, issued in favor of Eulo"io Poli#0 No.

-&11--$,F whi#h #ontained a $&+ear Endow/ent 9aria%le In#o/e

Pa#!a"e leAi Plan worth P&&,&&&.&&,5F with two riders valued

at P&&,&&&.&& ea#h.=F Thus, the value of the poli#0 a/ounted

to P1,&&,&&&.&&. 9ioleta was na/ed as the pri/ar0 %ene<#iar0.

p e u s o a >ua e 0 %as s e a ou o ',&5 &&, pa0a% e

ever0 $4 (pril, $4 ul0, $4 O#to%er and $4 anuar0 of ea#h 0ear, until

the end of the $&+0ear period of the poli#0. (##ordin" to the Poli#0

Contra#t, there was a "ra#e period of 61 da0s for the pa0/ent of ea#h

pre/iu/ su%se>uent to the <rst. If an0 pre/iu/ was not paid on or

%efore the due date, the poli#0 would %e in default, and if the pre/iu/re/ained unpaid until the end of the "ra#e period, the poli#0 would

auto/ati#all0 lapse and %e#o/e void.'F

Eulo"io paid the pre/iu/s due on $4 ul0 1--= and $4 O#to%er

1--=. @owever, he failed to pa0 the pre/iu/ due on $4 anuar0 1--',

even after the lapse of the "ra#e period of 61 da0s. Poli#0

No. -&11--$, therefore, lapsed and %e#a/e void.

Eulo"io su%/itted to the Ca%anatuan Distri#t OG#e of Insular

2ife, throu"h 7alaluan, on $5 7a0 1--', an (ppli#ation for

Reinstate/ent -F of Poli#0 No. -&11--$,to"ether with the a/ount

of P',&5$.&& to pa0 for the pre/iu/ due on $4 anuar0 1--'. In a

letter1&F dated 1= ul0 1--', Insular 2ife noti<ed Eulo"io that his

(ppli#ation for Reinstate/ent #ould not %e full0 pro#essed %e#ause,

althou"h he alread0 deposited P',&5$.&& as pa0/ent for the $4

anuar0 1--' pre/iu/, he left unpaid the overdue interest thereona/ountin" to P6$$.4'. Thus, Insular 2ife instru#ted Eulo"io to pa0 the

a/ount of interest and to <le another appli#ation for

reinstate/ent. Eulo"io was li!ewise advised %0 7alaluan to pa0 the

pre/iu/s that su%se>uentl0 %e#a/e due on $4 (pril 1--' and $4 ul0

1--', plus interest.

1&-

Eulo"ios death, Poli#0 No. -&11--$ had alread0 lapsed, and Eulo"io

failed to reinstate the sa/e. (##ordin" to the (ppli#ation for

























On 1= Septe/%er 1--', Eulo"io went to 7alaluans house and

su%/itted a se#ond (ppli#ation for Reinstate/ent11F of Poli#0

No. -&11--$, in#ludin" the a/ount ofP1=,&&.&&, representin"

pa0/ents for the overdue interest on the pre/iu/ for $4 anuar0

1--', and the pre/iu/s whi#h %e#a/e due on $4 (pril 1--' and $4

ul0 1--'. (s 7alaluan was awa0 on a %usiness errand, her hus%and

re#eived Eulo"ios se#ond (ppli#ation for Reinstate/ent and issued a

re#eipt for the a/ount Eulo"io deposited.

( while later, on the sa/e da0, 1= Septe/%er 1--', Eulo"io

died of #ardio+respirator0 arrest se#ondar0 to ele#tro#ution.

Bithout !nowin" of Eulo"ios death, 7alaluan forwarded to the

Insular 2ife Re"ional OG#e in the Cit0 of San ernando, on 1'

Septe/%er 1--', Eulo"ios se#ond (ppli#ation for Reinstate/ent of

Poli#0 No. -&11--$ and P1=,&&.&& deposit. @owever, Insular 2ife no

lon"er a#ted upon Eulo"ios se#ond (ppli#ation for Reinstate/ent, as

the for/er was infor/ed on $1 Septe/%er 1--' that Eulo"io had

alread0 passed awa0.

On $' Septe/%er 1--', 9ioleta <led with Insular 2ife a #lai/

for pa0/ent of the full pro#eeds of Poli#0 No. -&11--$.

In a letter1$F dated 14 anuar0 1---, Insular 2ife infor/ed

9ioleta that her #lai/ #ould not %e "ranted sin#e, at the ti/e of

" pp

Reinstate/ent, the poli#0 would onl0 %e #onsidered reinstated upon

approval of the appli#ation %0 Insular 2ife durin" the appli#ants lifeti/e

and "ood health, and whatever a/ount the appli#ant paid in

#onne#tion thereto was #onsidered to %e a deposit onl0 until approval

of said appli#ation. En#losed with the 14 anuar0 1--- letter of Insular2ife to 9ioleta was D;P Che#! No. &&&&6&-=64, for the a/ount

of P$,41=.&&, drawn in 9ioletas favor, representin" the full refund of

the pa0/ents /ade %0 Eulo"io on Poli#0 No. -&11--$.

On 1$ e%ruar0 1--', 9ioleta re>uested a re#onsideration of

the disallowan#e of her #lai/. In a letter16F dated 1& 7ar#h 1---,

Insular 2ife stated that it #ould not <nd an0 reason to re#onsider its

de#ision ree#tin" 9ioletas #lai/. Insular 2ife a"ain tendered to 9ioletathe a%ove+/entioned #he#! in the a/ount of P$,41=.&&.

9ioleta returned the letter dated 1& 7ar#h 1--- and the #he#!

en#losed therein to the Ca%anatuan Distri#t OG#e of Insular

2ife. 9ioletas #ounsel su%se>uentl0 sent a letter 14F dated ' ul0 1--- to

Insular 2ife, de/andin" pa0/ent of the full pro#eeds of Poli#0 No.

-&11--$. On 11 (u"ust 1---, Insular 2ife responded to the said

de/and letter %0 a"reein" to #ondu#t a re+evaluation of 9ioletas #lai/.

Bithout waitin" for the result of the re+evaluation %0 Insular

2ife, 9ioleta <led with the RTC, on 11 O#to%er 1---, a Co/plaint for

Death Clai/ ;ene<t,1F whi#h was do#!eted as Civil Case No.

$1==. 9ioleta alle"ed that Insular 2ife en"a"ed in unfair #lai/

11&

settle/ent pra#ti#e and deli%eratel0 failed to a#t with reasona%le

pro/ptness on her insuran#e #lai/. 9ioleta pra0ed that Insular 2ife %e

TheF ar"u/ents of Insular 2ifeF are not without

%asis. Bhen the pre/iu/s for (pril $4 and ul0 $4,

1--' were not paid %0 Eulo"ioF even after the lapse of















p p p 0

ordered to pa0 her death #lai/ %ene<ts on Poli#0 No. -&11--$, in the

a/ount of P1,&&,&&&.&&, plus interests, attorne0s fees, and #ost of

suit.

Insular 2ife <led with the RTC an (nswer with Counter#lai/,

15F assertin" that 9ioletas Co/plaint had no le"al or fa#tual

%ases. Insular 2ife /aintained that Poli#0 No. -&11--$, on whi#h

9ioleta sou"ht to re#over, was rendered void %0 the non+pa0/ent of

the $4 anuar0 1--' pre/iu/ and non+#o/plian#e with the

re>uire/ents for the reinstate/ent of the sa/e. ;0 wa0 of

#ounter#lai/, Insular 2ife pra0ed that 9ioleta %e ordered to pa0

attorne0s fees and eApenses of liti"ation in#urred %0 the for/er.

9ioleta, in her Repl0 and (nswer to Counter#lai/, asserted that

the re>uire/ents for the reinstate/ent of Poli#0 No. -&11--$ had %een

#o/plied with and the defenses put up %0 Insular 2ife were purel0

invented and illusor0.

(fter trial, the RTC rendered, on 6& (u"ust $&&=, a De#ision in

favor of Insular 2ife.

The RTC found that Poli#0 No. -&11--$ had indeed lapsed and

Eulo"io needed to have the sa/e reinstated

1--' were not paid %0 Eulo"ioF even after the lapse of

the 61+da0 "ra#e period, his insuran#e poli#0

ne#essaril0 lapsed. This is #lear fro/ the ter/s and

#onditions of the #ontra#t %etween Insular 2ifeF and

Eulo"ioF whi#h are written in theF Poli#0 provisions of

Poli#0 No. -&11--$ A A A.1=F

The RTC, ta!in" into a##ount the #lear provisions of the Poli#0

Contra#t %etween Eulo"io and Insular 2ife and the (ppli#ation for

Reinstate/ent Eulo"io su%se>uentl0 si"ned and su%/itted to Insular

2ife, held that Eulo"io was not a%le to full0 #o/pl0 with the

re>uire/ents for the reinstate/ent of Poli#0 No. -&11--$

The well+settled rule is that a #ontra#t has the for#e of

law %etween the parties. In the instant #ase, the ter/s

of the insuran#e #ontra#t %etween Eulo"ioF and

Insular 2ifeF were spelled out in the poli#0 provisions

of Insuran#e Poli#0 No. -&11--$. There is li!ewise no

dispute that said insuran#e #ontra#t is %0 nature a

#ontra#t of adhesion,F whi#h is de<ned as one in

whi'h one of the 'ontra'ting parties i%poses a read)*

%ade for% of 'ontra't whi'h the other part) %a)

a''ept or ree't #ut 'annot %odif). G"olotan, 4r. !s. (A,

?OU 4(RA ?>H.

A A A A

111

The New 2eAi#on Be%sters Di#tionar0 de<nes

a/%i"uit0 as the >ualit0 of havin" /ore than one

/eanin" and an idea state/ent or eApression #apa%le

for reinstate/ent, his lapsed poli#0 was not

auto/ati#all0 reinstated and that its approval was

su%e#t to #ertain #onditions No=3e*e <n '3e &o><:








/eanin" and an idea, state/ent or eApression #apa%le

of %ein" understood in /ore than one sense. In Nu. Cou*' o A&&e>, 2%1 SCRA 2%/ (1994), the

Supre/e Court stated thatF

(n0 a/%i"uit0 in a #ontra#t, whose

ter/s are sus#epti%le of diJerent

interpretations as a result there%0,

/ust %e read and #onstrued a"ainst

the part0 who drafted it on the

assu/ption that it #ould have %een

avoided %0 the eAer#ise of a little #are.

In '3e <n'n' e, '3e -<&u'e *<e *o '3eo*e"uo'e- &*o<<on =*<''en on '3e e o '3e eon- &&><'<on o**e<n''een'. E<n<n '3e <- &*o<<on,'3e ou*' n- '3e e >e*>: =*<''en <n 'e*'3' *e <&>e enou3 'o -<' o on>: one<n'e*&*e''<on. T3e: *e >e*>: no' <uou,eu<o> o* une*'<n '3' =ou>- nee- u*'3e*on'*u'<on. T3e e *e =*<''en on '3e e*:e o '3e &&><'<on u' oe '3e &e=3e*e @Eu>o<o <ne- 3< ne. I' <<none<>e '3' 3e <ne- <' =<'3ou' *e-<nn- un-e*'n-<n <' <&o*'.

Si/ilarl0, the provisions of the poli#0 provisions )si#*

earlier /entioned are written in si/ple and #lear

la0/ans lan"ua"e, renderin" it free fro/ an0

a/%i"uit0 that would re>uire a le"al interpretation or

#onstru#tion. Thus, the #ourt %elieves that Eulo"ioF

was well aware that when he <led the said appli#ation

su%e#t to #ertain #onditions. No=3e*e <n '3e &o><:o* <n '3e &&><'<on o* *e<n''een' = <'ee* en'<one- '3' '3e &:en' o &*e<u=ou>- 3e '3e ee' o n u'o'< n-<e-<'e *ene=> o '3e >&e- &o><:. In'e-,=3' = >e*>: ''e- <n '3e &&><'<on o*

*e<n''een' < '3' &en-<n &&*o> '3e*eo,'3e &*e<u &<- =ou>- e '*e'e- -e&o<'on>: n- 3>> no' <n- '3e o&n: un'<> '3<&&><'<on < n>>: &&*oe- -u*<n :Kou*><e'<e n- oo- 3e>'3@.

("ain, the #ourt <nds nothin" in the aforesaid

provisions that would even su""est an a/%i"uit0 either

in the words used or in the /anner the0 were

written. 9ioletaF did not present an0 proof that

Eulo"ioF was not #onversant with the En"lishlan"ua"e. @en#e, his havin" personall0 si"ned the

appli#ation for reinstate/ent,F whi#h #onsisted onl0 of

one pa"e, #ould onl0 /ean that he has read its

#ontents and that he understood the/. A A A

Therefore, #onsistent with the a%ove Supre/e Court

rulin" and <ndin" no a/%i"uit0 %oth in the poli#0

provisions of Poli#0 No. -&11--$ and in the appli#ation

for reinstate/ent su%e#t of this #ase, the #ourt <nds

no /erit in 9ioletasF #ontention that the poli#0provision statin" that the lapsed poli#0 of Eulo"ioF

should %e reinstated durin" his lifeti/e is a/%i"uous

and should %e #onstrued in his favor. It is true that

Eulo"ioF su%/itted his appli#ation for reinstate/ent,

to"ether with his pre/iu/ and interest pa0/ents, to

Insular 2ifeF throu"h its a"ent osephine 7alaluan in

the /ornin" of Septe/%er 1=, 1--'. 3nfortunatel0, he

died in the afternoon of that sa/e da0. It was onl0 on

11$

the followin" da0, Septe/%er 1', 1--' that 7s.

7alaluan %rou"ht the said do#u/ent to the re"ional

oG#e of Insular 2ifeF in San ernando Pa/pan"a for

#EREORE, all the fore"oin" pre/ises #onsidered

and <ndin" that 9ioletaF has failed to esta%lish %0

preponderan#e of eviden#e her #ause of a#tion a"ainst



oG#e of Insular 2ifeF in San ernando, Pa/pan"a for

approval. A o**e'>: &o<n'e- ou' : @Inu>* L<e'3e*e = no o*e &&><'<on 'o &&*oeeue '3e &&><n' = >*e-: -e- n- no<nu*ne o&n: =ou>- <ue n <nu*ne&o><: 'o -e- &e*on.1'F )E/phases ours.*

The RTC, in the end, eAplained that

Bhile the #ourt trul0 e/pathies with the 9ioletaF for

the loss of her hus%and, it #annot eApress the sa/e %0

interpretin" the insuran#e a"ree/ent in her favor

where there is no need for su#h interpretation. It is

#on#eded that Eulo"iosF pa0/ent of overdue

pre/iu/s and interest was re#eived %0 Insular 2ifeF

throu"h its a"ent 7s. 7alaluan. It is also true that theF

appli#ation for reinstate/ent was <led %0 Eulo"ioF ada0 %efore his death. #o=ee*, '3e*e < no'3<n'3' =ou>- u'<: on>u<on '3' u3 *ee<&'oun'e- 'o n u'o'< *e<n''een' o '3e&o><: '3' 3 >*e-: >&e-. T3e e<-eneue' >e*>: '3' no u3 u'o'< *ene=>= on'e&>'e- <n '3e on'*' e'=een@Eu>o<o n- @Inu>* L<e. Ne<'3e* = <' 3o=n'3' M. M>>un = '3e oe* u'3o*<Pe- 'o&&*oe '3e &&><'<on o* *e<n''een' n-'3' 3e* *ee<&' o '3e -ouen' u<''e- :@Eu>o<o oun'e- 'o <' &&*o>.1-F )E/phasis

ours.*

The fallo of the RTC De#ision thus reads

preponderan#e of eviden#e her #ause of a#tion a"ainst

the defendant, let this #ase %e, as it is

here%0 ISMISSE.$&F

On 14 Septe/%er $&&=, 9ioleta <led a 7otion for Re#onsideration$1F of

the afore+/entioned RTC De#ision. Insular 2ife opposed$$F the said

/otion, averrin" that the ar"u/ents raised therein were /erel0 a

rehash of the issues alread0 #onsidered and addressed %0 the RTC. In

an Order$6F dated ' Nove/%er $&&=, the RTC denied 9ioletas 7otion

for Re#onsideration, <ndin" no #o"ent and #o/pellin" reason to distur%

its earlier <ndin"s. Per the Re"istr0 Return Re#eipt on re#ord, the '

Nove/%er $&&= Order of the RTC was re#eived %0 9ioleta on 6

De#e/%er $&&=.

In the interi/, on $$ Nove/%er $&&=, 9ioleta <led with the RTC

a Repl0$4F to the 7otion for Re#onsideration, wherein she reiterated the

pra0er in her 7otion for Re#onsideration for the settin" aside of the

De#ision dated 6& (u"ust $&&=. Despite alread0 re#eivin" on 6

De#e/%er $&&=, a #op0 of the RTC Order dated ' Nove/%er $&&=,

whi#h denied her 7otion for Re#onsideration, 9ioleta still <led with the

RTC, on $5 e%ruar0 $&&', a Repl0 EAtended Dis#ussion ela%oratin" on

the ar"u/ents she had previousl0 /ade in her 7otion for

Re#onsideration and Repl0.

On 1& (pril $&&', the RTC issued an Order,$F de#larin" that the

De#ision dated 6& (u"ust $&&= in Civil Case No. $1== had alread0

116

attained <nalit0 in view of 9ioletas failure to <le the appropriate noti#e

of appeal within the re"le/entar0 period. Thus, an0 further dis#ussions

9ioleta insists that her for/er #ounsel #o//itted an honest /ista!e in

<lin" a Repl0, instead of a Noti#e of (ppeal of the RTC De#ision




















on the issues raised %0 9ioleta in her Repl0 and Repl0 EAtended

Dis#ussion would %e /oot and a#ade/i#.

9ioleta <led with the RTC, on $& 7a0 $&&', a Noti#e of (ppeal with

7otion,$5F pra0in" that the Order dated 1& (pril $&&' %e set aside and

that she %e allowed to <le an appeal with the Court of (ppeals.

In an Order$=F dated 6 ul0 $&&', the RTC denied 9ioletas Noti#e of

(ppeal with 7otion "iven that the De#ision dated 6& (u"ust $&&= had

lon" sin#e attained <nalit0.

9ioleta dire#tl0 elevated her #ase to this Court !ia the instant Petition

for Review on (ertiorari, raisin" the followin" issues for #onsideration

1. Bhether or not the De#ision of the #ourt a

uo dated (u"ust 6&, $&&=, #an still %e

reviewed despite havin" alle"edl0 attained

<nalit0 and despite the fa#t that the /ode of

appeal that has %een availed of %0 9ioleta is

erroneous

$. Bhether or not the Re"ional Trial Court in

its ori"inal urisdi#tion has de#ided the #ase on

a >uestion of law not in a##ord with law and

appli#a%le de#isions of the Supre/e Court

dated 6& (u"ust $&&=H and in the #o/putation of the re"le/entar0

period for appealin" the said ud"/ent. 9ioleta #lai/s that her for/er

#ounsel suJered fro/ poor health, whi#h rapidl0 deteriorated fro/ the

<rst wee! of ul0 $&&' until the latters death ust shortl0 after the <lin"

of the instant Petition on ' (u"ust $&&'. In li"ht of these#ir#u/stan#es, 9ioleta entreats this Court to ad/it and "ive due

#ourse to her appeal even if the sa/e was <led out of ti/e.

9ioleta further posits that the Court should address the

>uestion of law arisin" in this #ase involvin" the interpretation of the

se#ond senten#e of Se#tion 1- of the Insuran#e Code, whi#h provides

Se#tion. 1-. A A A IFnterest in the life or health of a

person insured /ust eAist when the insuran#e ta!es

eJe#t, %ut need not eAist thereafter or when the loss

o##urs.

On the %asis thereof, 9ioleta ar"ues that Eulo"io still had

insura%le interest in his own life when he reinstated Poli#0 No. -&11--$

ust %efore he passed awa0 on 1= Septe/%er 1--'. The RTC should

have #onstrued the provisions of the Poli#0 Contra#t and (ppli#ation for

Reinstate/ent in favor of the insured Eulo"io and a"ainst the insurerInsular 2ife, and #onsidered the spe#ial #ir#u/stan#es of the #ase, to

rule that Eulo"io had #o/plied with the re>uisites for the

reinstate/ent of Poli#0 No. -&11--$ prior to his death, and that 9ioleta

is entitled to #lai/ the pro#eeds of said poli#0 as the pri/ar0

%ene<#iar0 thereof.

114

The Petition la#!s /erit.

(t th t t th C t t th t th l ti f th t

that 9ioletas for/er #ounsel was alread0 suJerin" fro/ ill health

durin" these ti/esH or that the illness of 9ioletas for/er #ounsel would








(t the outset, the Court notes that the elevation of the #ase to

us !ia the instant Petition for Review on (ertiorari is not usti<ed. Rule

41, Se#tion 1 of the Rules of Court, $'F provides that no appeal /a0 %e

ta!en fro/ an order disallowin" or dis/issin" an appeal. In su#h a

#ase, the a""rieved part0 /a0 <le a Petition for (ertiorari under Rule

5 of the Rules of Court.$-F

urther/ore, the RTC De#ision dated 6& (u"ust $&&=, assailed

in this Petition, had lon" %e#o/e <nal and eAe#utor0. 9ioleta <led a

7otion for Re#onsideration thereof, %ut the RTC denied the sa/e in an

Order dated ' Nove/%er $&&=. The re#ords of the #ase reveal that

9ioleta re#eived a #op0 of the ' Nove/%er $&&= Order on %

eee* 200/. Thus, 9ioleta had 15 -:6&F fro/ said date of

re#eipt, or until 18 eee* 200/, to <le a Noti#e of (ppeal. 9ioleta

<led a Noti#e of (ppeal onl0 on 20 M: 2008, /ore than eon'3 after re#eipt of the RTC Order dated ' Nove/%er

$&&= den0in" her 7otion for Re#onsideration.

9ioletas #lai/ that her for/er #ounsels failure to <le the proper

re/ed0 within the re"le/entar0 period was an honest /ista!e,

attri%uta%le to the latters deterioratin" health, is unpersuasive.

9ioleta /erel0 /ade a "eneral aver/ent of her for/er

#ounsels poor health, la#!in" relevant details and supportin"

eviden#e. ;0 9ioletas own ad/ission, her for/er #ounsels healthrapidl0 deteriorated onl0 %0 the *' =eeF o Ju>: 2008. The events

pertinent to 9ioletas Noti#e of (ppeal too! pla#e /onths %efore ul0

$&&', i.e., a #op0 of the RTC Order dated ' Nove/%er $&&=, den0in"

9ioletas 7otion for Re#onsideration of the De#ision dated 6& (u"ust

$&&=, was re#eived on % eee* 200/H and 9ioletas Noti#e of

(ppeal was <led on 20 M: 2008. There is utter la#! of proof to show

have aJe#ted his ud"/ent and #o/peten#e as a law0er.

7oreover, the failure of her for/er #ounsel to <le a Noti#e of

(ppeal within the re"le/entar0 period %inds 9ioleta, whi#h failure thelatter #annot now disown on the %asis of her %are alle"ation and self+

servin" pronoun#e/ent that the for/er was ill. ( #lient is %ound %0 his

#ounsels /ista!es and ne"li"en#e.61F

The Court, therefore, <nds no reversi%le error on the part of the

RTC in den0in" 9ioletas Noti#e of (ppeal for %ein" <led %e0ond the

re"le/entar0 period. Bithout an appeal havin" %een ti/el0 <led, the

RTC De#ision dated 6& (u"ust $&&= in Civil Case No. $1== alread0

%e#a/e <nal and eAe#utor0.

( ud"/ent %e#o/es :<nal and eAe#utor0: %0 operation of law. inalit0

%e#o/es a fa#t when the re"le/entar0 period to appeal lapses and no

appeal is perfe#ted within su#h period. (s a #onse>uen#e, no #ourt

)not even this Court* #an eAer#ise appellate urisdi#tion to review a

#ase or /odif0 a de#ision that has %e#o/e <nal.6$F Bhen a <nal

ud"/ent is eAe#utor0, it %e#o/es i//uta%le and unaltera%le. It /a0

no lon"er %e /odi<ed in an0 respe#t either %0 the #ourt, whi#h

rendered it or even %0 this Court. The do#trine is founded on

#onsiderations of pu%li# poli#0 and sound pra#ti#e that, at the ris! of

o##asional errors, ud"/ents /ust %e#o/e <nal at so/e de<nite point

in ti/e.66F

The onl0 re#o"nied eA#eptions to the do#trine of i//uta%ilit0 and

unaltera%ilit0 are the #orre#tion of #leri#al errors, the so+#alled nun'

11

pro tun' entries, whi#h #ause no preudi#e to an0 part0, and void

ud"/ents.64F The instant #ase does not fall under an0 of these

3pon /ore eAtensive stud0 of the Petition, it %e#o/es evident that the

/atter of insura%le interest is entirel0 irrelevant in the #ase at %ar. It is


















eA#eptions.

Even if the Court i"nores the pro#edural lapses #o//itted herein, and

pro#eeds to resolve the su%stantive issues raised, the Petition /ust still

fail.

9ioleta /a!es it appear that her present Petition involves a >uestion of

law, parti#ularl0, whether Eulo"io had an eAistin" insura%le interest in

his own life until the da0 of his death.

(n insura%le interest is one of the /ost %asi# and essential

re>uire/ents in an insuran#e #ontra#t. In "eneral, an insura%le interest

is that interest whi#h a person is dee/ed to have in the su%e#t /atter

insured, where he has a relation or #onne#tion with or #on#ern in it,

su#h that the person will derive pe#uniar0 %ene<t or advanta"e fro/

the preservation of the su%e#t /atter insured and will suJer pe#uniar0

loss or da/a"e fro/ its destru#tion, ter/ination, or inur0 %0 the

happenin" of the event insured a"ainst.6F The eAisten#e of an

insura%le interest "ives a person the le"al ri"ht to insure the su%e#t

/atter of the poli#0 of insuran#e. 65F Se#tion 1& of the Insuran#e Code

indeed provides that ever0 person has an insura%le interest in his own

life.6=F Se#tion 1- of the sa/e #ode also states that an interest in the

life or health of a person insured /ust eAist when the insuran#e ta!es

eJe#t, %ut need not eAist thereafter or when the loss o##urs.6'F

a#tuall0 %e0ond >uestion that while Eulo"io was still alive, he had an

insura%le interest in his own life, whi#h he did insure under Poli#0

No. -&11--$. The real point of #ontention herein is whether Eulo"io

was a%le to reinstate the lapsed insuran#e poli#0 on his life %efore his

death on 1= Septe/%er 1--'.

The Court rules in the ne"ative.

;efore pro#eedin", the Court /ust #orre#t the erroneous

de#laration of the RTC in its 6& (u"ust $&&= De#ision that Poli#0

No. -&11--$ lapsed %e#ause of Eulo"ios non+pa0/ent of the pre/iu/s

whi#h %e#a/e due on 24 A&*<> 1998 and 24 Ju>: 1998. Poli#0

No. -&11--$ had lapsed and %e#o/e void earlier, on 24 e*u*:

1998, upon the eApiration of the 61+da0 "ra#e period for pa0/ent of

the pre/iu/, whi#h fell due on 24 Jnu*: 1998, without an0pa0/ent havin" %een /ade.

That Poli#0 No. -&11--$ had alread0 lapsed is a fa#t %e0ond

dispute. Eulo"ios <lin" of his <rst (ppli#ation for Reinstate/ent with

Insular 2ife, throu"h 7alaluan, on 26 M: 1998, #onstitutes an

ad/ission that Poli#0 No. -&11--$ had lapsed %0 then. Insular 2ife did

not a#t on Eulo"ios <rst (ppli#ation for Reinstate/ent, sin#e the

a/ount Eulo"io si/ultaneousl0 deposited was suG#ient to #over onl0

the P',&5$.&& overdue pre/iu/ for $4 anuar0 1--', %ut not

the P6$$.4' overdue interests thereon. On 1= Septe/%er 1--',

Eulo"io su%/itted a se#ond (ppli#ation for Reinstate/ent to Insular

2ife, a"ain throu"h 7alaluan, depositin" at the sa/e ti/e P1=,&&.&&,

to #over pa0/ent for the overdue interest on the pre/iu/ for $4

anuar0 1--', and the pre/iu/s that had also %e#o/e due on $4 (pril

1--' and $4 ul0 1--'. On the ver0 sa/e da0, Eulo"io passed awa0.

115

To reinstate a poli#0 /eans to restore the sa/e to pre/iu/+pa0in"

status after it has %een per/itted to lapse. 6-F ;oth the Poli#0 Contra#t

I8Be a"ree that said Poli#0 shall no' e on<-e*e-*e<n''e- un'<> '3< &&><'<on < &&*oe- :'3e Co&n: -u*<n :Kou* ><e'<e n- oo-

















and the (ppli#ation for Reinstate/ent provide for spe#i<# #onditions

for the reinstate/ent of a lapsed poli#0.

The Poli#0 Contra#t %etween Eulo"io and Insular 2ife identi<ed

the followin" #onditions for reinstate/ent should the poli#0 lapse

1&. REINST(TE7ENT

ou /a0 reinstate this poli#0 at an0 ti/e within three

0ears after it lapsed if the followin" #onditions are /et

)1* the poli#0 has not %een surrendered for its #ash

value or the period of eAtension as a ter/ insuran#e

has not eApiredH )$* eviden#e of insura%ilit0

satisfa#tor0 to Insular 2ifeF is furnishedH )6* overduepre/iu/s are paid with #o/pound interest at a rate

not eA#eedin" that whi#h would have %een appli#a%le

to said pre/iu/ and inde%tedness in the poli#0 0ears

prior to reinstate/entH and )4* inde%tedness whi#h

eAisted at the ti/e of lapsation is paid or renewed.4&F

(dditional #onditions for reinstate/ent of a lapsed poli#0 were

stated in the (ppli#ation for Reinstate/ent whi#h Eulo"io si"ned and

su%/itted, to wit

: : 3e>'3 n- un'<> >> o'3e* Co&n: *eu<*een'o* '3e *e<n''een' o <- !o><: *e u>>:'<e-.

I8Be further a"ree that n: &:en' -e o* 'o e-e <n onne'<on =<'3 '3< &&><'<on 3>> eon<-e*e- -e&o<' on>: n- 3>> no' <n- '3eCo&n: un'<> '3< &&><'<on < n>>:&&*oe- : '3e Co&n: -u*<n :Kou* ><e'<en- oo- 3e>'3. If this appli#ation is disapproved,

I8Be also a"ree to a##ept the refund of all pa0/ents

/ade in #onne#tion herewith, without interest, and to

surrender the re#eipts for su#h pa0/ent.41F )E/phases

ours.*

In the instant #ase, Eulo"ios death rendered i/possi%le full #o/plian#e

with the #onditions for reinstate/ent of Poli#0 No. -&11--$. True,

Eulo"io, %efore his death, /ana"ed to <le his (ppli#ation for

Reinstate/ent and deposit the a/ount for pa0/ent of his overdue

pre/iu/s and interests thereon with 7alaluanH %ut Poli#0 No. -&11--$

#ould onl0 %e #onsidered reinstated 'e* the (ppli#ation for

Reinstate/ent had %een pro#essed and approved %0 Insular

2ife -u*<n Eulo"ios lifeti/e and "ood health.

Relevant herein is the followin" pronoun#e/ent of the Court in Andres

!. he (rown $ife -nsuran'e (o%pan) ,4$F #itin" M'Suire !. he

Manufa'turer0s $ife -nsuran'e (o.46F

11=

The stipulation in a life insuran#e poli#0 "ivin"

the insured the privile"e to reinstate it upon written

appli#ation -oe no' <e '3e <nu*e- o>u'e

The Court a"rees with the RTC that the #onditions for

reinstate/ent under the Poli#0 Contra#t and (ppli#ation for












*<3' to su#h reinstate/ent %0 the /ere <lin" of an

appli#ation. The <nu*e* 3 '3e *<3' 'o -en: '3e*e<n''een' i f it is not satis<ed as to the

insura%ilit0 of the insured and if the latter does not pa0

all overdue pre/iu/ and all other inde%tedness to the

insurer. A'e* '3e -e'3 o '3e <nu*e- '3e<nu*ne Co&n: nno' e o&e>>e- 'oen'e*'<n n &&><'<on o* *e<n''een' of the

poli#0 %e#ause the #onditions pre#edent to

reinstate/ent #an no lon"er %e deter/ined and

satis<ed. )E/phases ours.*

It does not /atter that when he died, Eulo"ios (ppli#ation for

Reinstate/ent and deposits for the overdue pre/iu/s and interests

were alread0 with 7alaluan. Insular 2ife, throu"h the Poli#0 Contra#t,eApressl0 li/its the power or authorit0 of its insuran#e a"ents, thus

Our a"ents have no u'3o*<': to /a!e or /odif0 this

#ontra#t, to eAtend the ti/e li/it for pa0/ent of

pre/iu/s, to waive an0 lapsation, forfeiture or an0 of

our ri"hts or re>uire/ents, su#h powers %ein" li/ited

to our president, vi#e+president or persons authoried

%0 the ;oard of Trustees and onl0 in writin".44F )E/phasis ours.*

7alaluan did not have the authorit0 to approve Eulo"ios (ppli#ation for

Reinstate/ent. 7alaluan still had to turn over to Insular 2ife Eulo"ios

(ppli#ation for Reinstate/ent and a##o/pan0in" deposits, for

pro#essin" and approval %0 the latter.

Reinstate/ent were written in #lear and si/ple lan"ua"e, whi#h #ould

not ad/it of an0 /eanin" or interpretation other than those that the0

so o%viousl0 e/%od0. ( #onstru#tion in favor of the insured is not

#alled for, as there is no a/%i"uit0 in the said provisions in the <rst

pla#e. The words thereof are #lear, une>uivo#al, and si/ple enou"h so

as to pre#lude an0 /ista!e in the appre#iation of the sa/e.

9ioleta did not addu#e an0 eviden#e that Eulo"io /i"ht have

failed to full0 understand the i/port and /eanin" of the provisions of

his Poli#0 Contra#t and8or (ppli#ation for Reinstate/ent, %oth of whi#h

he voluntaril0 si"ned. Bhile it is a #ardinal prin#iple of insuran#e law

that a poli#0 or #ontra#t of insuran#e is to %e #onstrued li%erall0 in

favor of the insured and stri#tl0 as a"ainst the insurer #o/pan0, 0et,#ontra#ts of insuran#e, li!e other #ontra#ts, are to %e #onstrued

a##ordin" to the sense and /eanin" of the ter/s, whi#h the parties

the/selves have used. If su#h ter/s are #lear and una/%i"uous, the0

/ust %e ta!en and understood in their plain, ordinar0 and popular

sense.4F

Eulo"ios death, ust hours after <lin" his (ppli#ation for

Reinstate/ent and depositin" his pa0/ent for overdue pre/iu/s andinterests with 7alaluan, does not #onstitute a spe#ial #ir#u/stan#e

that #an persuade this Court to alread0 #onsider Poli#0 No. -&11--$

reinstated. Said #ir#u/stan#e #annot override the #lear and eApress

provisions of the Poli#0 Contra#t and (ppli#ation for Reinstate/ent,

and operate to re/ove the prero"ative of Insular 2ife thereunder to

approve or disapprove the (ppli#ation for Reinstate/ent.Even thou"h

11'

the Court #o//iserates with 9ioleta, as the tra"i# and fateful turn of

events leaves her pra#ti#all0 e/pt0+handed, the Court #annot

!e'<'<one*, Present







ar%itraril0 %urden Insular 2ife with the pa0/ent of pro#eeds on a

lapsed insuran#e poli#0. usti#e and fairness /ust e>uall0 appl0 to all

parties to a #ase. Courts are not per/itted to /a!e #ontra#ts for the

parties. The fun#tion and dut0 of the #ourts #onsist si/pl0 in enfor#in"

and #arr0in" out the #ontra#ts a#tuall0 /ade.45F

Poli#0 No. -&11--$ re/ained lapsed and void, not havin" %een

reinstated in a##ordan#e with the Poli#0 Contra#t and (ppli#ation for

Reinstate/ent %efore Eulo"ios death.9ioleta, therefore, #annot #lai/

an0 death %ene<ts fro/ Insular 2ife on the %asis of Poli#0 No. -&11--$H

%ut she is entitled to re#eive the full refund of the pa0/ents /ade %0

Eulo"io thereon.

#EREORE, pre/ises #onsidered, the Court ENIES the

instant Petition for Review on (ertiorari under Rule 4 of the Rules of

Court. The Court AIRMS the Orders dated 1& (pril $&&' and 6 ul0

$&&' of the RTC of apan Cit0, ;ran#h 64, in Civil Case No. $1==,

den0in" petitioner 9ioleta R. 2ali#ans Noti#e of (ppeal, on the "round

that the De#ision dated 6& (u"ust $&&= su%e#t thereof, was alread0

<nal and eAe#utor0. No #osts.

SO ORERE.

!#ILI!!INE #EALT# CARE .R. No. 15=66&

!RO+IERS, INC.,

P3NO, (.., (hairperson,

CORON(,

" e * u " C@ICO+N(Y(RIO,X

2EON(RDO+DE C(STRO and

;ERS(7IN, .X

COMMISSIONER O

INTERNAL RE+ENUE,

Re&on-en'. Pro/ul"ated

Septe/%er 1',

$&&-

" " "" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "

R E S O L U T I O N

CORONA, J.

(RTIC2E II

De#laration of Prin#iples and State Poli#ies

11-

Se#tion 1. The State shall prote#t and

t th i ht t h lth f th l d i till

s0ste/ or a health /aintenan#e or"aniation to ta!e

#are of the si#! and disa%led persons enrolled in the

health #are plan and to provide for the ad/inistrative,



http://sc.judiciary.gov.ph/jurisprudence/2009/september2009/167330.htm#_ftn1









pro/ote the ri"ht to health of the people and instill

health #ons#iousness a/on" the/.

(RTIC2E III

So#ial usti#e and @u/an Ri"hts

Se#tion 11. The State shall adopt an inte"rated

and #o/prehensive approa#h to health develop/ent

whi#h shall endeavor to /a!e essential "oods, health

and other so#ial servi#es availa%le to all the people at

aJorda%le #ost. There shall %e priorit0 for the needs of

the underprivile"ed si#!, elderl0, disa%led, wo/en, and

#hildren. The State shall endeavor to provide free

/edi#al #are to paupers.1F

or resolution are a /otion for re#onsideration and

supple/ental /otion for re#onsideration dated ul0 1&, $&&' and ul0

14, $&&', respe#tivel0, <led %0 petitioner Philippine @ealth Care

Providers, In#.$F

Be re#all the fa#ts of this #ase, as follows

Petitioner is a do/esti# #orporation whose pri/ar0

purpose is tFo esta%lish, /aintain, #ondu#t and

operate a prepaid "roup pra#ti#e health #are deliver0

le"al, and <nan#ial responsi%ilities of the or"aniation.

Individuals enrolled in its health #are pro"ra/s pa0 an

annual /e/%ership fee and are entitled to various

preventive, dia"nosti# and #urative /edi#al servi#es

provided %0 its dul0 li#ensed ph0si#ians, spe#ialists and

other professional te#hni#al staJ parti#ipatin" in the"roup pra#ti#e health deliver0 s0ste/ at a hospital or

#lini# owned, operated or a##redited %0 it.

AAA AAA AAA

On anuar0 $=, $&&&, respondent Co//issioner

of Internal Revenue CIRF sent petitioner a for/al

de/and letter and the #orrespondin" assess/ent

noti#es de/andin" the pa0/ent of de<#ien#0 taAes,

in#ludin" sur#har"es and interest, for the taAa%le 0ears

1--5 and 1--= in the total a/ount of P$$4,=&$,541.1'.

AAAA

The de<#ien#0 do#u/entar0 sta/p taA )DST*F

assess/ent was i/posed on petitioners health #are

a"ree/ent with the /e/%ers of its health #are pro"ra/

pursuant to Se#tion 1' of the 1--= TaA Code AAAA

AAA AAA AAA

Petitioner protested the assess/ent in a letter

dated e%ruar0 $6, $&&&. (s respondent did not a#t on

the protest, petitioner <led a petition for review in the

1$&

Court of TaA (ppeals )CT(* see!in" the #an#ellation of

the de<#ien#0 9(T and DST assess/ents.

Respondent appealed the CT( de#ision to the

Court of (ppeals )C(*F insofar as it #an#elled the DST

assess/ent. @e #lai/ed that petitioners health #are







On (pril , $&&$, the CT( rendered a de#ision,the dispositive portion of whi#h read

B@EREORE, in view of the

fore"oin", the instant Petition for

Review is P(RTI(22

R(NTED. Petitioner is here%0

ORDERED to P( the de<#ien#0 9(T

a/ountin" to P$$,&4,'61.= in#lusive

of $ sur#har"e plus $& interest

fro/ anuar0 $&, 1--= until full0 paidfor the 1--5 9(T de<#ien#0

and P61,&-4,156.'= in#lusive of $

sur#har"e plus $& interest fro/

anuar0 $&, 1--' until full0 paid for the

1--= 9(T de<#ien#0. (##ordin"l0, 9(T

Rulin" No. $61F+'' is de#lared void

and without for#e and eJe#t. The 1--5

and 1--= de<#ien#0 DST assess/ent

a"ainst petitioner is here%0

C(NCE22ED (ND SET

(SIDE. Respondent is ORDERED to

DESIST fro/ #olle#tin" the said DST

de<#ien#0 taA.

SO ORDERED.

a"ree/ent was a #ontra#t of insuran#e su%e#t to DST

under Se#tion 1' of the 1--= TaA Code.

On (u"ust 15, $&&4, the C( rendered its

de#ision. It held that petitioners health #are a"ree/ent

was in the nature of a non+life insuran#e #ontra#t

su%e#t to DST.

B@EREORE, the petition for

review is R(NTED. The De#ision of the

Court of TaA (ppeals, insofar as it

#an#elled and set aside the 1--5 and

1--= de<#ien#0 do#u/entar0 sta/p

taA assess/ent and ordered petitioner

to desist fro/ #olle#tin" the sa/e is

RE9ERSED and SET (SIDE.

Respondent is ordered to pa0

the a/ounts of P,=45,6$.1-

and P5',4&,$'.=6 as de<#ien#0

Do#u/entar0 Sta/p TaA for 1--5 and

1--=, respe#tivel0, plus $ sur#har"e

for late pa0/ent and $& interest per

annu/ fro/ anuar0 $=, $&&&,

pursuant to Se#tions $4' and $4- of

the TaA Code, until the sa/e shall have

%een full0 paid.

SO ORDERED.

1$1

Petitioner /oved for re#onsideration %ut the

C( denied it @en#e petitioner <led this #ase

3na%le to a##ept our verdi#t, petitioner <led the present /otion for



C( denied it. @en#e, petitioner <led this #ase.

AAA AAA AAA

In a de#ision dated une 1$, $&&', the Court denied the petition

and aGr/ed the C(s de#ision. Be held that petitioners health #are

a"ree/ent durin" the pertinent period was in the nature of non+life

insuran#e whi#h is a #ontra#t of inde/nit0, #itin" Blue (ross

6ealth'are, -n'. !. &li!ares6F and "hila%'are 6ealth 4)ste%s, -n'. !.

(A.4F Be also ruled that petitioners #ontention that it is a health

/aintenan#e or"aniation )@7O* and not an insuran#e #o/pan0 is

irrelevant %e#ause #ontra#ts %etween #o/panies li!e petitioner and

the %ene<#iaries under their plans are treated as insuran#e

#ontra#ts. 7oreover, DST is not a taA on the %usiness transa#ted %ut

an eA#ise on the privile"e, opportunit0 or fa#ilit0 oJered at eA#han"es

for the transa#tion of the %usiness.

re#onsideration and supple/ental /otion for re#onsideration,

assertin" the followin" ar"u/ents

)a* The DST under Se#tion 1' of the National Internal

Revenue of 1--= is i/posed onl0 on a

#o/pan0 en"a"ed in the %usiness of <delit0

%onds and other insuran#e poli#ies. Petitioner,

as an @7O, is a servi#e provider, not an

insuran#e #o/pan0.

)%* The Court, in dis/issin" the appeal in (-R !.

"hilippine Tational Ban/ , aGr/ed in eJe#t the

C(s disposition that health #are servi#es are

not in the nature of an insuran#e %usiness.

)#* Se#tion 1' should %e stri#tl0 #onstrued.

)d* 2e"islative intent to eA#lude health #are

a"ree/ents fro/ ite/s su%e#t to DST is #lear,

espe#iall0 in the li"ht of the a/end/ents

/ade in the DST law in $&&$.

)e* (ssu/in" arguendo that petitioners a"ree/ents

are #ontra#ts of inde/nit0, the0 are not those

#onte/plated under Se#tion 1'.

1$$

)f* (ssu/in" arguendo that petitioners a"ree/ents are

a!in to health insuran#e, health insuran#e is

not #overed %0 Se#tion 1'.In its /otion for re#onsideration, petitioner reveals for the <rst

i h i il d f d =F l !











)"* The a"ree/ents do not fall under the phrase other

%ran#h of insuran#e /entioned in Se#tion 1'.

)h* The une 1$, $&&' de#ision should onl0 appl0

prospe#tivel0.

)i* Petitioner availed of the taA a/nest0 %ene<ts under

R(F -4'& for the taAa%le 0ear $&& and all

prior 0ears. Therefore, the >uestioned

assess/ents on the DST are now rendered

/oot and a#ade/i#.5F

Oral ar"u/ents were held in ;a"uio Cit0 on (pril $$, $&&-. The

parties su%/itted their /e/oranda on une ', $&&-.

ti/e that it availed of a taA a/nest0 under R( -4'& =F )also !nown as

the TaA (/nest0 (#t of $&&=* %0 full0 pa0in" the a/ount

of P,1$=,14-.&' representin" of its net worth as of the 0ear

endin" De#e/%er 61, $&&.'F

Be <nd /erit in petitioners /otion for re#onsideration.

Petitioner was for/all0 re"istered and in#orporated with the

Se#urities and EA#han"e Co//ission on une 6&, 1-'=.-F It is en"a"ed

in the dispensation of the followin" /edi#al servi#es to individuals who

enter into health #are a"ree/ents with it

!*een'<e /edi#al servi#es su#h as periodi#

/onitorin" of health pro%le/s, fa/il0 plannin"

#ounselin", #onsultation and advi#es on diet, eAer#ise

and other health0 ha%its, and i//uniationH

<no'< /edi#al servi#es su#h as routine

ph0si#al eAa/inations, A+ra0s, urinal0sis, fe#al0sis,

#o/plete %lood #ount, and the li!e and

1$6

Cu*'<e /edi#al servi#es whi#h pertain to the

perfor/in" of other re/edial and therapeuti#

pro#esses in the event of an inur0 or si#!ness on the

part of the enrolled /e/%er 1&F

To avail of petitioners health #are pro"ra/s, the individual

% i d t i d t t d d h lth
















part of the enrolled /e/%er.1&F

Individuals enrolled in its health #are pro"ra/ pa0 an annual

/e/%ership fee. 7e/%ership is on a 0ear+to+0ear %asis. The /edi#al

servi#es are dispensed to enrolled /e/%ers in a hospital or #lini#

owned, operated or a##redited %0 petitioner, throu"h ph0si#ians,

/edi#al and dental pra#titioners under #ontra#t with it. It ne"otiates

with su#h health #are pra#titioners re"ardin" pa0/ent s#he/es,

<nan#in" and other pro#edures for the deliver0 of health

servi#es. EA#ept in #ases of e/er"en#0, the professional servi#es are

to %e provided onl0 %0 petitionerLs ph0si#ians, i.e. those dire#tl0

e/plo0ed %0 it11F or whose servi#es are #ontra#ted %0 it.1$F Petitioner

also provides hospital servi#es su#h as roo/ and %oard

a##o//odation, la%orator0 servi#es, operatin" roo/s, A+ra0 fa#ilities

and "eneral nursin" #are.16F If and when a /e/%er avails of the

%ene<ts under the a"ree/ent, petitioner pa0s the parti#ipatin"

ph0si#ians and other health #are providers for the servi#es rendered, at

pre+a"reed rates.14F

/e/%ers are re>uired to si"n and eAe#ute a standard health #are

a"ree/ent e/%od0in" the ter/s and #onditions for the provision of

the health #are servi#es. The sa/e a"ree/ent #ontains the various

health #are servi#es that #an %e en"a"ed %0 the enrolled /e/%er, i.e.,

preventive, dia"nosti# and #urative /edi#al servi#es. EA#ept for the

#urative aspe#t of the /edi#al servi#e oJered, the enrolled /e/%er

/a0 a#tuall0 /a!e use of the health #are servi#es %ein" oJered %0

petitioner at an0 ti/e.

#EALT#

MAINTENANCE

ORGANI7ATIONS ARE

NOT ENGAGE IN

T#E INSURANCE

USINESS

Be said in our une 1$, $&&' de#ision that it is irrelevant that

petitioner is an @7O and not an insurer %e#ause its a"ree/ents are

treated as insuran#e #ontra#ts and the DST is not a taA on the %usiness

1$4

%ut an eA#ise on the privile"e, opportunit0 or fa#ilit0 used in the

t ti f th % i 1F

stea/ %oiler, %ur"lar, elevator, auto/ati# sprin!ler, o*o'3e* *n3 o <nu*ne (ee&' ><e, *<ne,<n>n-, n- *e <nu*ne), and all %onds,

underta!in"s or re#o"nian#es #onditioned for the















transa#tion of the %usiness.1F

Petitioner, however, su%/its that it is of #riti#al i/portan#e to

#hara#terie the %usiness it is en"a"ed in, that is, to deter/ine

whether it is an @7O or an insuran#e #o/pan0, as this distin#tion is

indispensa%le in turn to the issue of whether or not it is lia%le for DST

on its health #are a"ree/ents.15F

( se#ond hard loo! at the relevant law and urispruden#e

#onvin#es the Court that the ar"u/ents of petitioner are /eritorious.

Se#tion 1' of the National Internal Revenue Code of 1--=

)NIRC of 1--=* provides

Se#tion 1'. 4ta%p tax on delit) #onds and

other insuran'e poli'ies. On >> &o><<e o <nu*ne or %onds or o%li"ations o '3e n'u*e o <n-en<': o* >o, -e, o* ><<><': -e o**ene=e- : n: &e*on, o<'<on o* o&n:o* o*&o*'<on '*n'<n '3e u<neo a##ident, <delit0, e/plo0ers lia%ilit0, plate, "lass,

underta!in"s, or re#o"nian#es, #onditioned for the

perfor/an#e of the duties of an0 oG#e or position, for

the doin" or not doin" of an0thin" therein spe#i<ed,

and on all o%li"ations "uaranteein" the validit0 or

le"alit0 of an0 %ond or other o%li"ations issued %0 an0

provin#e, #it0, /uni#ipalit0, or other pu%li# %od0 oror"aniation, and on all o%li"ations "uaranteein" the

title to an0 real estate, or "uaranteein" an0 /er#antile

#redits, whi#h /a0 %e /ade or renewed %0 an0 su#h

person, #o/pan0 or #orporation, there shall %e

#olle#ted a do#u/entar0 sta/p taA of <ft0 #entavos

)P&.&* on ea#h four pesos )P4.&&*, or fra#tional part

thereof, of the pre/iu/ #har"ed. )E/phasis supplied*

It is a #ardinal rule in statutor0 #onstru#tion that no word,

#lause, senten#e, provision or part of a statute shall %e #onsidered

surplusa"e or superKuous, /eanin"less, void and insi"ni<#ant. To this

end, a #onstru#tion whi#h renders ever0 word operative is preferred

over that whi#h /a!es so/e words idle and nu"ator0.1=F This prin#iple

is eApressed in the /aAi/ Lt %agis !aleat ua% pereat , that is, we

#hoose the interpretation whi#h "ives eJe#t to the whole of the statute

its ever0 word.1'F

1$

ro/ the lan"ua"e of Se#tion 1', it is evident that '=o

*eu<<'e /ust #on#ur %efore the DST #an appl0 na/el0 )1* the

Se#tion $ )$* of PD$&F 145& )otherwise !nown as the Insuran#e

Code* enu/erates what #onstitutes doin" an insuran#e %usiness or














*eu<<'e /ust #on#ur %efore the DST #an appl0, na/el0 )1* the

do#u/ent /ust %e a &o><: o <nu*ne o* n o><'<on <n '3e

n'u*e o <n-en<': n- )$* '3e Fe* 3ou>- e '*n'<n

'3e u<ne o a##ident, <delit0, e/plo0ers lia%ilit0, plate, "lass,

stea/ %oiler, %ur"lar, elevator, auto/ati# sprin!ler, or other %ran#h

of <nu*ne )eA#ept life, /arine, inland, and <re insuran#e*.

Petitioner is ad/ittedl0 an @7O. 3nder R( ='= )or The

National @ealth Insuran#e (#t of 1--*, an @7O is an entit0 that

provides, oJers or arran"es for #overa"e of desi"nated health servi#es

needed %0 plan /e/%ers for a <Aed prepaid pre/iu/.

1-F The pa0/ents do not var0 with the eAtent, fre>uen#0 or t0pe of

servi#es provided.

The >uestion is was petitioner, as an @7O, en"a"ed in the

%usiness of insuran#e durin" the pertinent taAa%le 0ears Be rule that

it was not.

Code* enu/erates what #onstitutes doin" an insuran#e %usiness or

transa#tin" an insuran#e %usiness

a* /a!in" or proposin" to /a!e, as insurer,an0 insuran#e #ontra#tH

%* /a!in" or proposin" to /a!e, as suret0, an0

#ontra#t of suret0ship as a vo#ation and not as

/erel0 in#idental to an0 other le"iti/ate

%usiness or a#tivit0 of the suret0H

#* doin" an0 !ind of %usiness, in#ludin" areinsuran#e %usiness, spe#i<#all0 re#o"nied

as #onstitutin" the doin" of an insuran#e

%usiness within the /eanin" of this CodeH

d* doin" or proposin" to do an0 %usiness in

su%stan#e e>uivalent to an0 of the fore"oin" in

a /anner desi"ned to evade the provisions of

this Code.

In the appli#ation of the provisions of this Code,

the fa#t that no pro<t is derived fro/ the /a!in" of

insuran#e #ontra#ts, a"ree/ents or transa#tions or

that no separate or dire#t #onsideration is re#eived

therefore, shall not %e dee/ed #on#lusive to show that

the /a!in" thereof does not #onstitute the doin" or

transa#tin" of an insuran#e %usiness.

1$5

The rule was enun#iated in ordan !. Sroup 6ealth

Asso'iation$6F wherein the Court of (ppeals of the Distri#t of Colu/%ia







9arious #ourts in the 3nited States, whose urispruden#e has a

persuasive eJe#t on our de#isions,$1F have deter/ined that @7Os are

not in the insuran#e %usiness. One test that the0 have applied is

whether the assu/ption of ris! and inde/ni<#ation of loss )whi#h are

ele/ents of an insuran#e %usiness* are the prin#ipal o%e#t and

purpose of the or"aniation or whether the0 are /erel0 in#idental to its

%usiness. If these are the prin#ipal o%e#tives, the %usiness is that of

insuran#e. ;ut if the0 are /erel0 in#idental and servi#e is the prin#ipal

purpose, then the %usiness is not insuran#e.

(ppl0in" the prin#ipal o%e#t and purpose test,$$F there is

si"ni<#ant (/eri#an #ase law supportin" the ar"u/ent that a

#orporation )su#h as an @7O, whether or not or"anied for pro<t*,

whose /ain o%e#t is to provide the /e/%ers of a "roup with health

servi#es, is not en"a"ed in the insuran#e %usiness.

Asso'iation$6F wherein the Court of (ppeals of the Distri#t of Colu/%ia

Cir#uit held that roup @ealth (sso#iation should not %e #onsidered as

en"a"ed in insuran#e a#tivities sin#e it was #reated pri/aril0 for the

distri%ution of health #are servi#es rather than the assu/ption of

insuran#e ris!.

AAA (lthou"h roup @ealths a#tivities /a0 %e

#onsidered in one aspe#t as #reatin" se#urit0 a"ainst

loss fro/ illness or a##ident /ore trul0 the0 #onstitute

the >uantit0 pur#hase of well+rounded, #ontinuous

/edi#al servi#e %0 its /e/%ers. AAA T3e un'<on o u3 n o*n<P'<on *e no' <-en'<> =<'3 '3oeo <nu*ne o* <n-en<': o&n<e. The latter

are #on#erned pri/aril0, if not eA#lusivel0, with ris!and the #onse>uen#es of its des#ent, not with servi#e,

or its eAtension in !ind, >uantit0 or distri%utionH with

the unusual o##urren#e, not the dail0 routine of livin".

@aard is predo/inant. On '3e o'3e* 3n-, '3eoo&e*'<e < one*ne- &*<n<&>>: =<'3 e''<ne*<e *en-e*e- 'o <' ee* n- -o<n o '>o=e* &*<e -e &o<>e : un'<':&u*3<n n- eono<e <n o&e*'<on. I'&*<*: &u*&oe < 'o *e-ue '3e o' *'3e*'3n '3e *<F o e-<> *e 'o *o-en '3ee*<e 'o '3e <n-<<-u> <n F<n- n- un'<': 'o

en>*e '3e nue* *ee<<n <' 'o *eu>*<Pe <' n ee*:-: <n<-en' o ><<n, ><Fe &u*3<noo- n- >o'3<n o* o<> n- , *'3e* '3ne*e>: &*o'e'<n <n' '3e nn<> >oue- : e'*o*-<n*: n- unuu>ou**ene, u3 -e'3, -<'e* ' e, *en- 'o*n-o. It is, in this instan#e, to ta!e #are of

#olds, ordinar0 a#hes and pains, /inor ills and all the

1$=

te/porar0 %odil0 dis#o/forts as well as the /ore

serious and unusual illness. To u*<Pe, '3e-<'<n'<e e'u*e o '3e oo&e*'<e *e '3e*en-e*<n o e*<e, <' e'en<on, '3e *<n<n

In (alifornia "h)si'ians 4er!i'e !. Sarrison,$F the California

#ourt felt that after s#rutiniin" the plan of operation as a whole of the











*en-e*<n o e*<e, <' e'en<on, '3e *<n<no &3:<<n n- &'<en' 'oe'3e*, '3e &*een'<ee'u*e, '3e *eu>*<P'<on o e*<e =e>> &:en', '3e u'n'<> *e-u'<on <n o' :un'<': &u*3<n <n 3o*', e''<n '3e e-<>

o -one n- &<- o* no', ee&' <n<-en'>>: 'o'3ee e'u*e, '3e <n-en<'<on o* o' 'e*'3e e*<e < *en-e*e-. Ee&' '3e >', '3ee*e no' -<'<n'<e o* ene*>>: 3*'e*<'< o '3e <nu*ne **neen'. There is, therefore, a

su%stantial diJeren#e %etween #ontra#tin" in this wa0

for the renderin" of servi#e, even on the #ontin"en#0

that it %e needed, and #ontra#tin" /erel0 to stand its

#ost when or after it is rendered.

That an in#idental ele/ent of ris! distri%utionor assu/ption /a0 %e present should not outwei"h all

other fa#tors. If attention is fo#used onl0 on that

feature, the line %etween insuran#e or inde/nit0 and

other t0pes of le"al arran"e/ent and e#ono/i#

fun#tion %e#o/es faint, if not eAtin#t. This is espe#iall0

true when the #ontra#t is for the sale of "oods or

servi#es on #ontin"en#0. ;ut o%viousl0 it was not the

purpose of the insuran#e statutes to re"ulate all

arran"e/ents for assu/ption or distri%ution of

ris!. That view would #ause the/ to en"ulf pra#ti#all0

all #ontra#ts, parti#ularl0 #onditional sales and

#ontin"ent servi#e a"ree/ents. T3e >>: < <n>ooF<n on>: ' '3e *<F e>een', 'o '3e e>u<ono >> o'3e* &*een' o* '3e<* uo*-<n'<on 'o <'.T3e ue'<on 'u*n, no' on =3e'3e* *<F <<no>e- o* ue-, u' on =3e'3e* '3' o*oe'3<n e>e 'o =3<3 <' < *e>'e- <n '3e&*'<u>* &>n < <' &*<n<&> oe' &u*&oe.$4F )E/phasis supplied*

#ourt felt that, after s#rutiniin" the plan of operation as a whole of the

#orporation, it was servi#e rather than inde/nit0 whi#h stood as its

prin#ipal purpose.

There is another and /ore #o/pellin" reason

for holdin" that the servi#e is not en"a"ed in the

insuran#e %usiness. Aene o* &*eene o u&'<on o *<F o* &e*<> < no' '3e o>e 'e' 'oe &&><e- <n -e'e*<n<n <' ''u. T3eue'<on, o*e *o->:, < =3e'3e*, >ooF<n ''3e &>n o o&e*'<on =3o>e, e*<e *'3e*'3n <n-en<': < <' &*<n<&> oe' n-&u*&oe. Certainl0 the o%e#ts and purposes of the

#orporation or"anied and /aintained %0 the Californiaph0si#ians have a wide s#ope in the <eld of so#ial

servi#e. !*o>: '3e*e < no o*e <&e>><n nee-'3n '3' o -eu'e e-<> *e on o>un'*:, >o="o' < o* &e*on o >><noe. T3e e-<> &*oe<on un<'e->: <en-eo*<n 'o ee' '3' nee-. Unue'<on>:'3< < e*<e o 3<3 o*-e* n- no' <n-en<':.$5F )E/phasis supplied*

(/eri#an #ourts have pointed out that the /ain diJeren#e

%etween an @7O and an insuran#e #o/pan0 is that @7Os underta!e to

provide or arran"e for the provision of /edi#al servi#es throu"h

parti#ipatin" ph0si#ians while insuran#e #o/panies si/pl0 underta!e

1$'

to inde/nif0 the insured for /edi#al eApenses in#urred up to a pre+

a"reed li/it 4o%erset &rthopedi' Asso'iates " A ! 6orizon Blue

%0 health servi#e #orporation in return o* =3<3 '3e3e>'3 e*<e o*&o*'<on *ee 'o Fe&:en' -<*e'>: 'o '3e &*'<<&'<n &*o<-e*.$'F )E/phasis supplied*









a"reed li/it.4o%erset &rthopedi' Asso'iates, ".A. !. 6orizon Blue

(ross and Blue 4hield of Tew erse) $=F is #lear on this point

The %asi# distin#tion %etween /edi#al servi#e#orporations and ordinar0 health and a##ident insurers

is that the for/er underta!e to provide prepaid /edi#al

servi#es '3*ou3 &*'<<&'<n &3:<<n, thus

relievin" su%s#ri%ers of an0 further <nan#ial %urden,

while the latter onl0 underta!e to inde/nif0 an insured

for /edi#al eApenses up to, %ut not %e0ond, the

s#hedule of rates #ontained in the poli#0.

AAA AAA AAA

The pri/ar0 purpose of a /edi#al servi#e

#orporation, however, is an underta!in" to provide

ph0si#ians who will render servi#es to su%s#ri%ers on a

prepaid %asis. #ene, < '3e*e *e no &3:<<n&*'<<&'<n <n '3e e-<> e*<e o*&o*'<on&>n, no' on>: =<>> '3e u*<e* e -e&*<e- o '3e &*o'e'<on =3<3 '3e: <3' *eon>: 3ee&e'e- =ou>- e &*o<-e-, u' '3e o*&o*'<on=<>>, <n ee', e -o<n u<ne o>e>: 3e>'3 n- <-en' <n-en<': <nu*e* without

havin" >uali<ed as su#h and renderin" itself su%e#t tothe /ore strin"ent <nan#ial re>uire/ents of the

eneral Insuran#e 2aws.

( parti#ipatin" provider of health #are servi#es

is one who a"rees in writin" to render health #are

servi#es to or for persons #overed %0 a #ontra#t issued

)E/phasis supplied*

Conse>uentl0, the /ere presen#e of ris! would %e insuG#ient

to override the pri/ar0 purpose of the %usiness to provide /edi#al

servi#es as needed, with pa0/ent /ade dire#tl0 to the provider of

these servi#es.$-F In short, even if petitioner assu/es the ris! of pa0in"

the #ost of these servi#es even if si"ni<#antl0 /ore than what the

/e/%er has prepaid, it nevertheless #annot %e #onsidered as %ein"

en"a"ed in the insuran#e %usiness.

;0 the sa/e to!en, an0 inde/ni<#ation resultin" fro/ the

pa0/ent for servi#es rendered in #ase of e/er"en#0 %0 non+

parti#ipatin" health providers would still %e in#idental to petitioners

purpose of providin" and arran"in" for health #are servi#es and does

not transfor/ it into an insurer. To ful<ll its o%li"ations to its /e/%ers

under the a"ree/ents, petitioner is re>uired to set up a s0ste/ and

the fa#ilities for the deliver0 of su#h /edi#al servi#es. This indu%ita%l0

shows that inde/ni<#ation is not its sole o%e#t.

1$-

In fa#t, a su%stantial portion of petitioners servi#es #overs

preventive and dia"nosti# /edi#al servi#es intended to !eep /e/%ers

It is i/portant to e/phasie that, in adoptin" the prin#ipal

purpose test used in the a%ove+>uoted 3 S #ases we are not sa0in"








preventive and dia"nosti# /edi#al servi#es intended to !eep /e/%ers

fro/ developin" /edi#al #onditions or diseases.6&F (s an @7O, it is its

o%li"ation to /aintain the "ood health of its /e/%ers. Ao*-<n>:,

<' 3e>'3 *e &*o* *e -e<ne- 'o &*een' o* 'o

<n<<Pe '3e&o<<><': o n: u&'<on o *<F on <'

&*'. Thus, its underta!in" under its a"ree/ents is not to inde/nif0 its

/e/%ers a"ainst an0 loss or da/a"e arisin" fro/ a /edi#al #ondition

%ut, on the #ontrar0, to provide the health and /edi#al servi#es

needed to prevent su#h loss or da/a"e.61F

Overall, petitioner appears to provide insuran#e+t0pe %ene<ts

to its /e/%ers )with respe#t to its u*'<e /edi#al servi#es*, %ut

these are in#idental to the prin#ipal a#tivit0 of providin" the/ /edi#al

#are. The insuran#e+li!e aspe#t of petitioners %usiness is /inis#ule

#o/pared to its noninsuran#e a#tivities. Therefore, sin#e it

su%stantiall0 provides health #are servi#es rather than insuran#e

servi#es, it #annot %e #onsidered as %ein" in the insuran#e %usiness.

purpose test used in the a%ove >uoted 3.S. #ases, we are not sa0in"

that petitioners operations are identi#al in ever0 respe#t to those of the

@7Os or health providers whi#h were parties to those #ases. Bhat we

are statin" is that, for the purpose of deter/inin" what doin" an

insuran#e %usiness /eans, we have to s#rutinie the operations of the

%usiness as a whole and not its /ere #o/ponents. This is of #ourse

onl0 prudent and appropriate, ta!in" into a##ount the %urdenso/e and

stri#t laws, rules and re"ulations appli#a%le to insurers and other

entities en"a"ed in the insuran#e %usiness. 7oreover, we are also not

un/indful that there are other (/eri#an authorities who have found

parti#ular @7Os to %e a#tuall0 en"a"ed in insuran#e a#tivities.6$F

2astl0, it is si"ni<#ant that petitioner, as an @7O, is not part of

the insuran#e industr0. This is evident fro/ the fa#t that it is not

supervised %0 the Insuran#e Co//ission %ut %0 the Depart/ent of

@ealth.66F In fa#t, in a letter dated Septe/%er 6, $&&&, the Insuran#e

Co//issioner #on<r/ed that petitioner is not en"a"ed in the

insuran#e %usiness.This deter/ination of the #o//issioner /ust %e

16&

a##orded "reat wei"ht. It is well+settled that the interpretation of an

ad/inistrative a"en#0 whi#h is tas!ed to i/ple/ent a statute is

CONTRACT

CONTEM!LATE

UNER SECTION 185













ad/inistrative a"en#0 whi#h is tas!ed to i/ple/ent a statute is

a##orded "reat respe#t and ordinaril0 #ontrols the interpretation of

laws %0 the #ourts. The reason %ehind this rule was eAplained in Testle

"hilippines, -n'. !. (ourt of Appeals64F

The rationale for this rule relates not onl0 to

the e/er"en#e of the /ultifarious needs of a /odern

or /oderniin" so#iet0 and the esta%lish/ent of

diverse ad/inistrative a"en#ies for addressin" and

satisf0in" those needsH it also relates to the

a##u/ulation of eAperien#e and "rowth of spe#ialied

#apa%ilities %0 the ad/inistrative a"en#0 #har"ed with

i/ple/entin" a parti#ular statute. In Asturias 4ugar (entral, -n'. !s. (o%%issioner of (usto%s,6F the Court

stressed that eAe#utive oG#ials are presu/ed to have

fa/iliaried the/selves with all the #onsiderations

pertinent to the /eanin" and purpose of the law, and

to have for/ed an independent, #ons#ientious and

#o/petent eApert opinion thereon. The #ourts "ive

/u#h wei"ht to the "overn/ent a"en#0 oG#ials

#har"ed with the i/ple/entation of the law, their

#o/peten#e, eApertness, eAperien#e and infor/ed

ud"/ent, and the fa#t that the0 fre>uentl0 are the

drafters of the law the0 interpret.65F

A #EALT# CARE

AGREEMENT IS NOT

AN INSURANCE

UNER SECTION 185

O T#E NIRC O

199/

Se#tion 1' states that DST is i/posed on all poli#ies of

insuran#e or o%li"ations of the nature of inde/nit0 for loss, da/a"e, or

lia%ilit0. In our de#ision dated une 1$, $&&', we ruled that petitioners

health #are a"ree/ents are #ontra#ts of inde/nit0 and are therefore

insuran#e #ontra#ts

It is in#orre#t to sa0 that the health #are

a"ree/ent is not %ased on loss or da/a"e %e#ause,

under the said a"ree/ent, petitioner assu/es the

lia%ilit0 and inde/ni<es its /e/%er for hospital,

/edi#al and related eApenses )su#h as professional

fees of ph0si#ians*. The ter/ :loss or da/a"e: is %road

enou"h to #over the /onetar0 eApense or lia%ilit0 a

/e/%er will in#ur in #ase of illness or inur0.

3nder the health #are a"ree/ent, the rendition

of hospital, /edi#al and professional servi#es to the

/e/%er in #ase of si#!ness, inur0 or e/er"en#0 or his

avail/ent of so+#alled :out+patient servi#es: )in#ludin"

ph0si#al eAa/ination, A+ra0 and la%orator0 tests,

/edi#al #onsultations, va##ine ad/inistration and

fa/il0 plannin" #ounselin"* is the #ontin"ent event

whi#h "ives rise to lia%ilit0 on the part of the /e/%er.

161

In #ase of eAposure of the /e/%er to lia%ilit0, he would

%e entitled to inde/ni<#ation %0 petitioner.

In #onstruin" this provision, we should %e "uided %0 the

prin#iple that taA statutes are stri#tl0 #onstrued a"ainst the taAin"










urther/ore, the fa#t that petitioner /ust

relieve its /e/%er fro/ lia%ilit0 %0 pa0in" for

eApenses arisin" fro/ the stipulated #ontin"en#ies

%elies its #lai/ that its servi#es are prepaid. The

eApenses to %e in#urred %0 ea#h /e/%er #annot %epredi#ted %eforehand, if the0 #an %e predi#ted at all.

Petitioner assu/es the ris! of pa0in" for the #osts of

the servi#es even if the0 are si"ni<#antl0 and

su%stantiall0 /ore than what the /e/%er has

:prepaid.: Petitioner does not %ear the #osts alone %ut

distri%utes or spreads the/ out a/on" a lar"e "roup of

persons %earin" a si/ilar ris!, that is, a/on" all the

other /e/%ers of the health #are pro"ra/. This is

insuran#e.6=F

Be re#onsider. Be shall >uote on#e a"ain the pertinent portion

of Se#tion 1'

Se#tion 1'. 4ta%p tax on delit) #onds and

other insuran'e poli'ies. On >> &o><<e o <nu*ne or %onds o* o><'<on o '3e n'u*e o <n-en<': o* >o, -e, o* ><<><':/ade or

renewed %0 an0 person, asso#iation or #o/pan0 or

#orporation transa#tin" the %usiness of a##ident,

<delit0, e/plo0ers lia%ilit0, plate, "lass, stea/ %oiler,

%ur"lar, elevator, auto/ati# sprin!ler, or other %ran#h

of insuran#e )eA#ept life, /arine, inland, and <re

insuran#e*, AAAA )E/phasis supplied*

p # p e a a s a u es a e s # 0 #o s ued a"a s e a "

authorit0.6'F This is %e#ause taAation is a destru#tive power whi#h

interferes with the personal and propert0 ri"hts of the people and ta!es

fro/ the/ a portion of their propert0 for the support of the

"overn/ent. 6-F@en#e, taA laws /a0 not %e eAtended %0 i/pli#ation

%e0ond the #lear i/port of their lan"ua"e, nor their operation enlar"ed

so as to e/%ra#e /atters not spe#i<#all0 provided.4&F

Be are aware that, in Blue (ross and "hila%'are, the Court

pronoun#ed that a health #are a"ree/ent is in the nature of non+life

insuran#e, whi#h is pri/aril0 a #ontra#t of inde/nit0. @owever, those

#ases did not involve the interpretation of a taA provision. Instead, the0

dealt with the lia%ilit0 of a health servi#e provider to a /e/%er under

the ter/s of their health #are a"ree/ent. Su#h #ontra#ts, as #ontra#ts

of adhesion, are li%erall0 interpreted in favor of the /e/%er and

stri#tl0 a"ainst the @7O. or this reason, we re#onsider our rulin"

that Blue (ross and "hila%'are are appli#a%le here.

Se#tion $ )1* of the Insuran#e Code de<nes a #ontra#t of

insuran#e as an a"ree/ent where%0 one underta!es for a

16$

#onsideration to inde/nif0 another a"ainst loss, da/a"e or lia%ilit0

arisin" fro/ an un!nown or #ontin"ent event. (n insuran#e #ontra#t

insuran#e #ontra#t, if its pri/ar0 purpose is the renderin" of servi#e, it

is not a #ontra#t of insuran#e













" "

eAists where the followin" ele/ents #on#ur


$. The insured is su%e#t to a ris! of loss %0 the

happenin" of the desi"ned perilH


4. Su#h assu/ption of ris! is part of a "eneral

s#he/e to distri%ute a#tual losses a/on" a lar"e

"roup of persons %earin" a si/ilar ris! and

. In #onsideration of the insurers pro/ise, the

insured pa0s a pre/iu/.41F

Do the a"ree/ents %etween petitioner and its /e/%ers

possess all these ele/ents The0 do not.

3irst . In our urisdi#tion, a #o//entator of our insuran#e laws

has pointed out that, even if a #ontra#t #ontains all the ele/ents of an

It does not ne#essaril0 follow however, that a

#ontra#t #ontainin" all the four ele/ents /entioned

a%ove would %e an insuran#e #ontra#t. T3e &*<*:&u*&oe o '3e &*'<e <n F<n '3e on'*': ne'e '3e e<'ene o n <nu*neon'*'. or eAa/ple, a law <r/ whi#h enters into

#ontra#ts with #lients where%0 in #onsideration of

periodi#al pa0/ents, it pro/ises to represent su#h

#lients in all suits for or a"ainst the/, is not en"a"ed in

the insuran#e %usiness. Its #ontra#ts are si/pl0 for the

purpose of renderin" personal servi#es. On the other

hand, a #ontra#t %0 whi#h a #orporation, in

#onsideration of a stipulated a/ount, a"rees at its own

eApense to defend a ph0si#ian a"ainst all suits forda/a"es for /alpra#ti#e is one of insuran#e, and the

#orporation will %e dee/ed as en"a"ed in the %usiness

of insuran#e. 3nli!e the law0ers retainer #ontra#t, the

essential purpose of su#h a #ontra#t is not to render

personal servi#es, %ut to inde/nif0 a"ainst loss and

da/a"e resultin" fro/ the defense of a#tions for

/alpra#ti#e.4$F )E/phasis supplied*

4e'ond. Not all the ne#essar0 ele/ents of a #ontra#t of

insuran#e are present in petitioners a"ree/ents. To %e"in with, there is

no loss, da/a"e or lia%ilit0 on the part of the /e/%er that should %e

inde/ni<ed %0 petitioner as an @7O. 3nder the a"ree/ent, the

166

/e/%er pa0s petitioner a predeter/ined #onsideration in eA#han"e for

the hospital, /edi#al and professional servi#es rendered %0 the

hird. (##ordin" to the a"ree/ent, a /e/%er #an ta!e

advanta"e of the %ul! of the %ene<ts an0ti/e, e.g. la%orator0 servi#es,








p p 0

petitioners ph0si#ian or aGliated ph0si#ian to hi/. In #ase of avail/ent

%0 a /e/%er of the %ene<ts under the a"ree/ent,petitioner does not

rei/%urse or inde/nif0 the /e/%er as the latter does not pa0 an0

third part0. Instead, it is the petitioner who pa0s the parti#ipatin"

ph0si#ians and other health #are providers for the servi#es rendered at

pre+a"reed rates. The /e/%er does not /a!e an0 su#h pa0/ent.

In other words, there is nothin" in petitionerLs a"ree/ents that

"ives rise to a /onetar0 lia%ilit0 on the part of the /e/%er to an0 third

part0+provider of /edi#al servi#es whi#h /i"ht in turn ne#essitate

inde/ni<#ation fro/ petitioner. The ter/s inde/nif0 or inde/nit0

presuppose that a lia%ilit0 or #lai/ has alread0 %een in#urred. There is

no inde/nit0 pre#isel0 %e#ause the /e/%er /erel0 avails of /edi#al

servi#es to %e paid or alread0 paid in advan#e at a pre+a"reed pri#e

under the a"ree/ents.

" 0 g 0

A+ra0, routine annual ph0si#al eAa/ination and #onsultations, va##ine

ad/inistration as well as fa/il0 plannin" #ounselin", even in the

a%sen#e of an0 peril, loss or da/a"e on his or her part.

3ourth. In #ase of e/er"en#0, petitioner is o%li"ed to rei/%urse

the /e/%er who re#eives #are fro/ a non+parti#ipatin" ph0si#ian or

hospital. @owever, this is onl0 a ver0 /inor part of the list of servi#es

availa%le. The assu/ption of the eApense %0 petitioner is not #on<ned

to the happenin" of a #ontin"en#0 %ut in#ludes in#idents even in the

a%sen#e of illness or inur0.

In Mi'higan "odiatri' Medi'al Asso'iation !. Tational 3oot (are

"rogra%, -n'.,46F althou"h the health #are #ontra#ts #alled for the

defendant to partiall0 rei/%urse a su%s#ri%er for treat/ent re#eived

fro/ a non+desi"nated do#tor, this did not /a!e defendant an insurer.

Citin" ordan, the Court deter/ined that the pri/ar0 a#tivit0 of the

defendant )was* the provision of podiatri# servi#es to su%s#ri%ers in

164

#onsideration of prepa0/ent for su#h servi#es.44F Sin#e inde/nit0 of

the insured was not the fo#al point of the a"ree/ent %ut the eAtension

@owever, assu/in" that petitioners #o//it/ent to provide

/edi#al servi#es to its /e/%ers #an %e #onstrued as an a##eptan#e of








of /edi#al servi#es to the /e/%er at an aJorda%le #ost, it did not

parta!e of the nature of a #ontra#t of insuran#e.

3ifth. (lthou"h ris! is a pri/ar0 ele/ent of an insuran#e

#ontra#t, it is not ne#essaril0 true that ris! alone is suG#ient to

esta%lish it. (l/ost an0one who underta!es a #ontra#tual o%li"ation

alwa0s %ears a #ertain de"ree of <nan#ial ris!. Conse>uentl0, there is a

need to distin"uish prepaid servi#e #ontra#ts )li!e those of petitioner*

fro/ the usual insuran#e #ontra#ts.

Indeed, petitioner, as an @7O, underta!es a %usiness ris! when

it oJers to provide health servi#es the ris! that it /i"ht fail to earn a

reasona%le return on its invest/ent.;ut it is not the ris! of the t0pe

pe#uliar onl0 to insuran#e #o/panies. Insuran#e ris!, also !nown as

a#tuarial ris!, is the ris! that the #ost of insuran#e #lai/s /i"ht %e

hi"her than the pre/iu/s paid. The a/ount of pre/iu/ is #al#ulated

on the %asis of assu/ptions /ade relative to the insured.4F

the ris! that it will shell out /ore than the prepaid fees, it still will not

>ualif0 as an insuran#e #ontra#t %e#ause petitioners o%e#tive is to

provide /edi#al servi#es at redu#ed #ost, not to distri%ute ris! li!e an

insurer.

In su/, an eAa/ination of petitioners a"ree/ents with its

/e/%ers leads us to #on#lude that it is not an insuran#e #ontra#t

within the #onteAt of our Insuran#e Code.

T#ERE AS NO

LEGISLATI+E INTENT

TO IM!OSE ST ON

#EALT# CAREAGREEMENTS O

#MOS

16

urther/ore, /ilitatin" in #onvin#in" fashion a"ainst the i/position of

DST on petitioners health #are a"ree/ents under Se#tion 1' of the

AAA AAA AAA

Third AAA () on >> &o><<e o <nu*ne o* on-





NIRC of 1--= is the provisions le"islative histor0. The teAt of Se#tion

1' #a/e into 3.S. law as earl0 as 1-&4 when @7Os and health #are

a"ree/ents were not even in eAisten#e in this urisdi#tion. It was

i/posed under Se#tion 115, (rti#le I of (#t No. 11'- )otherwise

!nown as the Internal Revenue 2aw of 1-&4*45F ena#ted on ul0 $, 1-&4

and %e#a/e eJe#tive on (u"ust 1, 1-&4. EA#ept for the rate of taA,

Se#tion 1' of the NIRC of 1--= is a ver%ati/ reprodu#tion of the

pertinent portion of Se#tion 115, to wit

(RTIC2E I

S'& Te on Spe#i<ed O%e#ts

Se#tion 115. There shall %e levied, #olle#ted,

and paid for and in respe#t to the several %onds,

de%entures, or #erti<#ates of sto#! and inde%tedness,

and other do#u/ents, instru/ents, /atters, and thin"s

/entioned and des#ri%ed in this se#tion, or for or in

respe#t to the vellu/, par#h/ent, or paper upon whi#hsu#h instru/ent, /atters, or thin"s or an0 of the/

shall %e written or printed %0 an0 person or persons

who shall /a!e, si"n, or issue the sa/e, on and after

anuar0 <rst, nineteen hundred and <ve, the several

taAes followin"

Third AAA () on >> &o><<e o <nu*ne o* on-o* o><'<on o '3e n'u*e o <n-en<': o* >o,-e, o* ><<><': -e o* *ene=e- : n:&e*on, o<'<on, o&n:, o* o*&o*'<on'*n'<n '3e u<ne o <-en', -e><':,

e&>o:e* ><<><':, &>'e >, 'e o<>e*,u*>*, e>e'o*, u'o'< &*<nF>e, o* o'3e**n3 o <nu*ne (ee&' ><e, *<ne, <n>n-,n- *e <nu*ne) AAAA )E/phasis supplied*

On e%ruar0 $=, 1-14, (#t No. $66- )the Internal Revenue 2aw

of 1-14* was ena#ted revisin" and #onsolidatin" the laws relatin" to

internal revenue. The afore#ited pertinent portion of Se#tion 115,

(rti#le I of (#t No. 11'- was #o/pletel0 reprodu#ed as Se#tion 6& )l*,

(rti#le III of (#t No. $66-. The ver0 detailed and eA#lusive enu/eration

of ite/s su%e#t to DST was thus retained.

On De#e/%er 61, 1-15, Se#tion 6& )l*, (rti#le III of (#t No. $66- was

a"ain reprodu#ed as Se#tion 15&4 )l*, (rti#le I9 of (#t No. $5=

)(d/inistrative Code*. 3pon its a/end/ent on 7ar#h 1&, 1-1=, the

165

pertinent DST provision %e#a/e Se#tion 144- )l* of (#t No. $=11,

otherwise !nown as the (d/inistrative Code of 1-1=.

On De#e/%er $6, 1--6, under R( =55&, Se#tion 1' was a/ended %ut,

a"ain, onl0 with respe#t to the rate of taA.





Se#tion 144- )1* eventuall0 %e#a/e Se#. $$$ of

Co//onwealth (#t No. 455 )the NIRC of 1-6-*, whi#h #odi<ed all the

internal revenue laws of the Philippines. In an a/end/ent introdu#ed

%0 R( 4& on O#to%er 1, 1-45, the DST rate was in#reased %ut the

provision re/ained su%stantiall0 the sa/e.

Thereafter, on une 6, 1-==, the sa/e provision with the sa/e DST

rate was reprodu#ed in PD 11' )NIRC of 1-==* as Se#tion $64. 3nder

PDs 14= and 1--, ena#ted on une 11, 1-=' and O#to%er 1&, 1-'4

respe#tivel0, the DST rate was a"ain in#reased.

EJe#tive anuar0 1, 1-'5, pursuant to Se#tion 4 of PD 1--4, Se#tion

$64 of the NIRC of 1-== was renu/%ered as Se#tion 1-'. (nd under

Se#tion $6 of EO4=F $=6 dated ul0 $, 1-'=, it was a"ain renu/%ered

and %e#a/e Se#tion 1'.

Notwithstandin" the #o/prehensive a/end/ent of the NIRC of 1-==

%0 R( '4$4 )or the NIRC of 1--=*, the su%e#t le"al provision was

retained as the present Se#tion 1'. In $&&4, a/end/ents to the DST

provisions were introdu#ed %0 R( -$464'F %ut Se#tion 1' was

untou#hed.

On the other hand, the #on#ept of an @7O was introdu#ed in

the Philippines with the for/ation of ;an#o/ @ealth Care Corporation

in 1-=4. The sa/e pioneer @7O was later reor"anied and rena/ed

Inte"rated @ealth Care Servi#es, In#. )or Inter#are*. @owever, there are

those who #lai/ that @ealth 7aintenan#e, In#. is the @7O industr0

pioneer, havin" set foot in the Philippines as earl0 as 1-5 and havin"

%een for/all0 in#orporated in 1--1. (fterwards, @7Os proliferated

>ui#!l0 and #urrentl0, there are 65 re"istered @7Os with a total

enroll/ent of /ore than $ /illion.4-F

Be #an #learl0 see fro/ these two histories )of the DST on the

one hand and @7Os on the other* that when the law i/posin" the DST

was <rst passed, @7Os were 0et un!nown in the Philippines. @owever,

16=

when the various a/end/ents to the DST law were ena#ted, the0 were

alread0 in eAisten#e in the Philippines and the ter/ had in fa#t alread0

Ta!in" into a##ount that health #are a"ree/ents are #learl0 not

within the a/%it of Se#tion 1' of the NIRC and there was never an0









%een de<ned %0 R( ='=. If it had %een the intent of the le"islature to

i/pose DST on health #are a"ree/ents, it #ould have done so in #lear

and #ate"ori#al ter/s. It had /an0 opportunities to do so. ;ut it did

not. The fa#t that the NIRC #ontained no spe#i<# provision on the DST

lia%ilit0 of health #are a"ree/ents of @7Os at a ti/e the0 were alread0

!nown as su#h, %elies an0 le"islative intent to i/pose it on the/. A

''e* o ', &e'<'<one* = ee- <' ST ><<><': on>: on

Jnu*: 2/, 2000, 'e* o*e '3n -e-e <n '3e u<ne

n #MO.&F

Considerin" that Se#tion 1' did not #han"e sin#e 1-&4

)eA#ept for the rate of taA*, it would %e safe to sa0 that health #are

a"ree/ents were never, at an0 ti/e, re#o"nied as insuran#e

#ontra#ts or dee/ed en"a"ed in the %usiness of insuran#e within the

#onteAt of the provision.

A INAL NOTE

le"islative intent to i/pose the sa/e on @7Os li!e petitioner, the sa/e

should not %e ar%itraril0 and unustl0 in#luded in its #overa"e.

It is a /atter of #o//on !nowled"e that there is a "reat so#ial

need for ade>uate /edi#al servi#es at a #ost whi#h the avera"e wa"e

earner #an aJord. @7Os arran"e, or"anie and /ana"e health #are

treat/ent in the furtheran#e of the "oal of providin" a /ore eG#ient

and ineApensive health #are s0ste/ /ade possi%le %0 >uantit0

pur#hasin" of servi#es and e#ono/ies of s#ale. The0 oJer advanta"es

over the pa0+for+servi#e s0ste/ )wherein individuals are #har"ed a fee

ea#h ti/e the0 re#eive /edi#al servi#es*, in#ludin" the a%ilit0 to

#ontrol #osts. The0 prote#t their /e/%ers fro/ eAposure to the hi"h

#ost of hospitaliation and other /edi#al eApenses %rou"ht a%out %0 a

Ku#tuatin" e#ono/0. (##ordin"l0, the0 pla0 an i/portant role in

so#iet0 as partners of the State in a#hievin" its #onstitutional /andate

of providin" its #itiens with aJorda%le health servi#es.

16'

The rate of DST under Se#tion 1' is e>uivalent to 1$. of

the pre/iu/ #har"ed.=4F Its i/position will elevate the #ost of health

Petitioner, Present

9E2(SCO, R., ., (hairperson,

+ versus + 2EON(RDO+DE C(STRO,X

PER(2T(










#are servi#es. This will in turn ne#essitate an in#rease in the

/e/%ership fees, resultin" in either pla#in" health servi#es %e0ond

the rea#h of the ordinar0 wa"e earner or drivin" the industr0 to the

"round. (t the end of the da0, neither side wins, #onsiderin" the

indispensa%ilit0 of the servi#es oJered %0 @7Os.

#EREORE, the /otion for re#onsideration

is GRANTE. The (u"ust 15, $&&4 de#ision of the Court of (ppeals in

C(+.R. SP No. =&4=- is RE+ERSE and SET ASIE. The 1--5 and

1--= de<#ien#0 DST assess/ent a"ainst petitioner is

here%0 CANCELLE and SET ASIE. Respondent is ordered to desist

fro/ #olle#tin" the said taA.

No #osts.

SO ORERE.

NE ORL INTERNATIONAL G.R. No. 1/1468

E+ELO!MENT (!#ILS.), INC.,

PER(2T(,

(;(D, and

7ENDOY(, .

N$"ILJA!AN S#I!!ING COR!.,

LE! !ROIT INTERNATIONAL,

INC. (OR), LE! INTERNATIONAL

!#ILI!!INES, INC., MT COR!.,

A+ATEC# INUSTRIES, INC.,

MARINA !ORT SER+ICES, INC.,

SERROS CARRIER COR!ORATION,

n- SEAOAR"EASTERN

INSURANCE CO., INC.,

Respondents.

"""""""""""""""""""""""""""""""""""""""""""""""""

NE ORL INTERNATIONAL G.R. No. 1/4241

E+ELO!MENT (!#ILS.), INC.,

Petitioner,

16-

+ versus +

SEAOAR"EASTERN Pro/ul"ated

D7T shipped the "enerator sets %0 tru#!



SEAOAR EASTERN Pro/ul"ated

INSURANCE CO., INC.,

Respondent. (u"ust $4, $&11

A +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ A

"ECI#ION

AA, J.

These #onsolidated petitions involve a #ar"o owners ri"ht to re#over

da/a"es fro/ the loss of insured "oods under the Carria"e of oods

%0 Sea (#t and the Insuran#e Code.

T3e ' n- '3e Ce

Petitioner New Borld International Develop/ent )Phils.*, In#. )New

Borld* %ou"ht fro/ D7T Corporation )D7T* throu"h its a"ent,

(dvate#h Industries, In#. )(dvate#h* three e/er"en#0 "enerator sets

worth 3S`=$1,&&.&&.

fro/ Bis#onsin, 3nited States, to 2EP Pro<t International, In#. )2EP

Pro<t* in Chi#a"o, Illinois. ro/ there, the ship/ent went %0 train

to Oa!land, California, where it was loaded on S8S California 2una 9-,

owned and operated %0 NQ il+apan Shippin" Corporation )NQ* for

deliver0 to petitioner New Borld in 7anila. NQ issued a %ill of ladin",

de#larin" that it re#eived the "oods in "ood #ondition.

NQ unloaded the ship/ent in @on" Qon" and transshipped it to S8S

(C Ru%0 98=$ that it also owned and operated. On its ourne0

to 7anila, however, (C Ru%0 en#ountered t0phoon Jadiang whose

#aptain <led a sea protest on arrival at the 7anila South @ar%or on

O#to%er , 1--6 respe#tin" the loss and da/a"e that the "oods on

%oard his vessel suJered.

7arina Port Servi#es, In#. )7arina*, the 7anila South @ar%or arrastre or

#ar"o+handlin" operator, re#eived the ship/ent on O#to%er =,

1--6. 3pon inspe#tion of the three #ontainer vans separatel0 #arr0in"

the "enerator sets, two vans %ore si"ns of eAternal da/a"e while the

14&

third van appeared uns#athed. The ship/ent re/ained at Pier 6s

Container ard under 7arinas #are pendin" #learan#e fro/ the ;ureau

petitioner New Borld to su%/it to it an ite/ied list of the da/a"ed

units, parts, and a##essories, with #orrespondin" values, for the



of Custo/s. Eventuall0, on O#to%er $&, 1--6 #usto/s authorities

allowed petitioners #usto/s %ro!er, Ser%ros Carrier Corporation

)Ser%ros*, to withdraw the ship/ent and deliver the sa/e to petitioner

New Borlds o% site in 7a!ati Cit0.

(n eAa/ination of the three "enerator sets in the presen#e of

petitioner New Borlds representatives, ederal ;uilders )the proe#t

#ontra#tor* and surve0ors of petitioner New Borlds insurer,

Sea%oardEastern Insuran#e Co/pan0 )Sea%oard*, revealed that all

three sets suJered eAtensive da/a"e and #ould no lon"er %e

repaired. or these reasons, New Borld de/anded re#o/pense for its

loss fro/ respondents NQ, D7T, (dvate#h, 2EP Pro<t, 2EP

International Philippines, In#. )2EP*, 7arina, and Ser%ros. Bhile 2EP and

NQ a#!nowled"ed re#eipt of the de/and, %oth denied lia%ilit0 for the

loss.

Sin#e Sea%oard #overed the "oods with a /arine insuran#e poli#0,

petitioner New Borld sent it a for/al #lai/ dated Nove/%er 15,

1--6. Repl0in" on e%ruar0 14, 1--4, Sea%oard re>uired

pro#essin" of the #lai/.;ut petitioner New Borld did not su%/it what

was re>uired of it, insistin" that the insuran#e poli#0 did not in#lude

the su%/ission of su#h a list in #onne#tion with an insuran#e

#lai/. Rea#tin" to this, Sea%oard refused to pro#ess the #lai/.

On O#to%er 11, 1--4 petitioner New Borld <led an a#tion for

spe#i<# perfor/an#e and da/a"es a"ainst all the respondents %efore

the Re"ional Trial Court )RTC* of7a!ati Cit0, ;ran#h 5$, in Civil Case -4+

$==&.

On (u"ust 15, $&&1 the RTC rendered a de#ision a%solvin" the various

respondents fro/ lia%ilit0 with the eA#eption of NQ. The RTC found

that the "enerator sets were da/a"ed durin" transit while in the #are

of NQs vessel, (C Ru%0. The latter failed, a##ordin" to the RTC, to

eAer#ise the de"ree of dili"en#e re>uired of it in the fa#e of a foretold

ra"in" t0phoon in its path.

141

The RTC ruled, however, that petitioner New Borld <led its #lai/

a"ainst the vessel owner NQ %e0ond the one 0ear provided under the

that the one+0ear pres#riptive period under the COS( did not aJe#t

New Borlds ri"ht under the insuran#e poli#0 sin#e it was the Insuran#e



Carria"e of oods %0 Sea (#t )COS(*. New Borld <led its #o/plaint

on O#to%er 11, 1--4 when the deadline for <lin" the a#tion )on or

%efore O#to%er =, 1--4* had alread0 lapsed. The RTC held that the one+

0ear period should %e #ounted fro/ the date the "oods were delivered

to the arrastre operator and not fro/ the date the0 were delivered to

petitioners o% site.1F

(s re"ards petitioner New Borlds #lai/ a"ainst Sea%oard, its insurer,

the RTC held that the latter #annot %e faulted for den0in" the #lai/

a"ainst it sin#e New Borld refused to su%/it the ite/ied list that

Sea%oard needed for assessin" the da/a"e to the ship/ent. 2i!ewise,

the %elated <lin" of the #o/plaint preudi#ed Sea%oards ri"ht to pursue

a #lai/ a"ainst NQ in the event of su%ro"ation.

On appeal, the Court of (ppeals )C(* rendered ud"/ent on anuar0

61, $&&5,$F aGr/in" the RTCs rulin"s eA#ept with respe#t to Sea%oards

lia%ilit0. The C( held that petitioner New Borld #an still re#oup its loss

fro/ Sea%oards /arine insuran#e poli#0, #onsiderin" a* that the

su%/ission of the ite/ied listin" is an unreasona%le i/position and %*

Code that "overned the relation %etween the insurer and the insured.

(lthou"h petitioner New Borld pro/ptl0 <led a petition for review of

the C( de#ision %efore the Court in .R. 1=145', Sea%oard #hose to <le

a /otion for re#onsideration of that de#ision. On (u"ust 1=, $&&5 the

C( rendered an a/ended de#ision, reversin" itself as re"ards the #lai/

a"ainst Sea%oard. The C( held that the su%/ission of the ite/ied

listin" was a reasona%le re>uire/ent that Sea%oard as!ed of New

Borld. urther, the C( held that the one+0ear pres#riptive period for

/ariti/e #lai/s applied to Sea%oard, as insurer and su%ro"ee of New

Borlds ri"ht a"ainst the vessel owner. New Borlds failure to #o/pl0

pro/ptl0 with what was re>uired of it preudi#ed su#h ri"ht.

Instead of <lin" a /otion for re#onsideration, petitioner instituted a

se#ond petition for review %efore the Court in .R. 1=4$41 , assailin"

the C(s a/ended de#ision.

T3e Iue !*een'e-

14$

The issues presented in this #ase are as follows

In G.R. 1/1468 ""







a* In .R. 1=145', whether or not the C( erred in aGr/in" the

RTCs release fro/ lia%ilit0 of respondents D7T, (dvate#h, 2EP, 2EP

Pro<t, 7arina, and Ser%ros who were at one ti/e or another involved in

handlin" the ship/entH and

%* In .R. 1=4$41, 1* whether or not the C( erred in rulin" that

Sea%oards re>uest fro/ petitioner New Borld for an ite/ied list is a

reasona%le i/position and did not violate the insuran#e #ontra#t

%etween the/H and $* whether or not the C( erred in failin" to rule

that the one+0ear COS( pres#riptive period for /arine #lai/s does

not appl0 to petitioner New Borlds prose#ution of its #lai/ a"ainst

Sea%oard, its insurer.

T3e Cou*' Ru><n

Petitioner New Borld asserts that the roles of respondents

D7T, (dvate#h, 2EP, 2EP Pro<t, 7arina and Ser%ros in handlin" and

transportin" its ship/ent fro/Bis#onsin to 7anila #olle#tivel0 resulted

in the da/a"e to the sa/e, renderin" su#h respondents solidaril0

lia%le with NQ, the vessel owner.

;ut the issue re"ardin" whi#h of the parties to a dispute

in#urred ne"li"en#e is fa#tual and is not a proper su%e#t of a petition

for review on 'ertiorari. (nd petitioner New Borld has %een una%le to

/a!e out an eA#eption to this rule.6F Conse>uentl0, the Court will not

distur% the <ndin" of the RTC, aGr/ed %0 the C(, that the "enerator

sets were totall0 da/a"ed durin" the t0phoon whi#h %eset the vessels

vo0a"e fro/ @on" Qon" to 7anila and that it was her ne"li"en#e in

#ontinuin" with that ourne0 despite the adverse #ondition whi#h

#aused petitioner New Borlds loss.

146

That the loss was o##asioned %0 a t0phoon, an eAe/ptin"

#ause under (rti#le 1=64 of the Civil Code, does not auto/ati#all0

li th i f li %ilit Th l tt h d th % d f

#on#eiva%le loss or da/a"e eA#ept when otherwise eA#luded or when

the loss or da/a"e was due to fraud or intentional /is#ondu#t

itt d % th i d Th li d ll l d i th





relieve the #o//on #arrier of lia%ilit0. The latter had the %urden of

provin" that the t0phoon was the proAi/ate and onl0 #ause of loss and

that it eAer#ised due dili"en#e to prevent or /ini/ie su#h loss %efore,

durin", and after the disastrous t0phoon.4F (s found %0 the RTC and the

C(, NQ failed to dis#har"e this %urden.

In G.R. 1/4241 ""

One. The Court does not re"ard as su%stantial the >uestion of

reasona%leness of Sea%oards additional re>uire/ent of an ite/ied

listin" of the da/a"e that the "enerator sets suJered. The re#ord

shows that petitioner New Borld #o/plied with the do#u/entar0

re>uire/ents eviden#in" da/a"e to its "enerator sets.

The /arine open poli#0 that Sea%oard issued to New Borld was

an all+ris! poli#0. Su#h a poli#0 insured a"ainst all #auses of

#o//itted %0 the insured. The poli#0 #overed all losses durin" the

vo0a"e whether or not arisin" fro/ a /arine peril.F

@ere, the poli#0 enu/erated #ertain eA#eptions li!e unsuita%le

pa#!a"in", inherent vi#e, dela0 in vo0a"e, or vessels unseaworthiness,

a/on" others.5F ;ut Sea%oard had %een una%le to show that

petitioner New Borlds loss or da/a"e fell within so/e or one of the

enu/erated eA#eptions.

Bhat is /ore, Sea%oard had %een una%le to eAplain how it

#ould not verif0 the da/a"e that New Borlds "oods suJered "oin" %0

the do#u/ents that it alread0 su%/itted, na/el0, )1* #op0 of the

Suppliers Invoi#e Q2$&4H )$* #op0 of the Pa#!in" 2istH )6* #op0 of the

;ill of 2adin" &116&E-6&&44'H )4* the Deliver0 of Ba0%ill Re#eipts

116, 1$$$, and 1$$4H )* ori"inal #op0 of 7arine Insuran#e Poli#0 7(+

@O+&&&$55H )5* #opies of Da/a"e Report fro/ Supplier and Insuran#e

(dustersH )=* Consu/ption Report fro/ the Custo/s EAa/inerH and )'*

Copies of Re#eived or/al Clai/ fro/ the followin" a* 2EP

International Philippines, In#.H %* 7arina Port Servi#es, In#.H and #*

144

Ser%ros Carrier Corporation.=F Nota%l0, Sea%oards own /arine surve0or

attended the inspe#tion of the "enerator sets.

;ut whose fault was it that the suit a"ainst NQ, the #o//on











Sea%oard #annot pretend that the a%ove do#u/ents are

inade>uate sin#e the0 were pre#isel0 the do#u/ents listed in its

insuran#e poli#0.'F ;ein" a #ontra#t of adhesion, an insuran#e poli#0 is

#onstrued stron"l0 a"ainst the insurer who prepared it. The Court

#annot read a re>uire/ent in the poli#0 that was not there.

urther, it appears fro/ the eA#han"es of #o//uni#ations

%etween Sea%oard and (dvate#h that su%/ission of the re>uested

ite/ied listin" was in#u/%ent on the latter as the seller D7Ts lo#al

a"ent. Petitioner New Borld should not %e /ade to suJer for

(dvate#hs short#o/in"s.

T=o. Re"ardin" pres#ription of #lai/s, Se#tion 6)5* of the

COS( provides that the #arrier and the ship shall %e dis#har"ed fro/

all lia%ilit0 in #ase of loss or da/a"e unless the suit is %rou"ht within

one 0ear after deliver0 of the "oods or the date when the "oods should

have %een delivered.

#arrier, was not %rou"ht to #ourt on ti/e The last da0 for <lin" su#h a

suit fell on O#to%er =, 1--4. The re#ord shows that petitioner New

Borld <led its for/al #lai/ for its loss with Sea%oard, its insurer, a

re/ed0 it had the ri"ht to ta!e, as earl0 as Nove/%er 15, 1--6 or

a%out 11 /onths %efore the suit a"ainst NQ would have fallen due.

In the ordinar0 #ourse, if Sea%oard had pro#essed that #lai/

and paid the sa/e, Sea%oard would have %een su%ro"ated to

petitioner New Borlds ri"ht to re#over fro/ NQ. (nd it #ould have

then <led the suit as a su%ro"ee. ;ut, as dis#ussed a%ove, Sea%oard

/ade an unreasona%le de/and on e%ruar0 14, 1--4 for an ite/ied

list of the da/a"ed units, parts, and a##essories, with #orrespondin"

values when it appeared settled that New Borlds loss was total and

when the insuran#e poli#0 did not re>uire the produ#tion of su#h a list

in the event of a #lai/.

;esides, when petitioner New Borld de#lined to #o/pl0 with

the de/and for the list, Sea%oard a"ainst who/ a for/al #lai/ was

14

pendin" should not have re/ained o%stinate in refusin" to pro#ess that

#lai/. It should have eAa/ined the sa/e, found it unsu%stantiated %0

do#u/ents if that were the #ase and for/all0 ree#ted it That would

Nota%l0, Sea%oard alread0 in#urred dela0 when it failed to

settle petitioner New Borlds #lai/ as Se#tion $46 re>uired. 3nder

Se#tion $44 a pri%a fa'ie eviden#e of unreasona%le dela0 in pa0/ent






do#u/ents if that were the #ase, and for/all0 ree#ted it. That would

have at least "iven petitioner New Borld a #lear si"nal that it needed

to pro/ptl0 <le its suit dire#tl0 a"ainst NQ and the others. 3lti/atel0,

the fault for the dela0ed #ourt suit #ould %e %rou"ht to Sea%oards

doorstep.

Se#tion $41 of the Insuran#e Code provides that no insuran#e

#o/pan0 doin" %usiness in the Philippines shall refuse without ust

#ause to pa0 or settle #lai/s arisin" under #overa"es provided %0 its

poli#ies. (nd, under Se#tion $46, the insurer has 6& da0s after proof of

loss is re#eived and as#ertain/ent of the loss or da/a"e within whi#h

to pa0 the #lai/. If su#h as#ertain/ent is not had within 5& da0s fro/

re#eipt of eviden#e of loss, the insurer has -& da0s to pa0 or settle the

#lai/. (nd, in #ase the insurer refuses or fails to pa0 within the

pres#ri%ed ti/e, the insured shall %e entitled to interest on the

pro#eeds of the poli#0 for the duration of dela0 at the rate of twi#e the

#eilin" pres#ri%ed %0 the 7onetar0 ;oard.

Se#tion $44, a pri%a fa'ie eviden#e of unreasona%le dela0 in pa0/ent

of the #lai/ is #reated %0 the failure of the insurer to pa0 the #lai/

within the ti/e <Aed in Se#tion $46.

Conse>uentl0, Sea%oard should pa0 interest on the pro#eeds of

the poli#0 for the duration of the dela0 until the #lai/ is full0 satis<ed

at the rate of twi#e the #eilin" pres#ri%ed %0 the 7onetar0 ;oard. The

ter/ #eilin" pres#ri%ed %0 the 7onetar0 ;oard /eans the le"al rate of

interest of 1$ per annu% provided in Central ;an! Cir#ular 415,

pursuant to Presidential De#ree 115.-F Se#tion $44 of the Insuran#e

Code also provides for an award of attorne0s fees and other eApenses

in#urred %0 the assured due to the unreasona%le withholdin" of

pa0/ent of his #lai/.

In "rudential Suarantee and Assuran'e, -n'. !. rans*

Asia 4hipping $ines, -n'.,1&F the Court re"arded as proper an award of

1& of the insuran#e pro#eeds as attorne0s fees. Su#h a/ount is fair

#onsiderin" the len"th of ti/e that has passed in prose#utin" the

#lai/.11F Pursuant to the Courts rulin" in 2astern 4hipping $ines, -n'. !.

145

(ourt of Appeals,1$F a 1$ interest per annu% fro/ the <nalit0 of

ud"/ent until full satisfa#tion of the #lai/ should li!ewise %e i/posed,

the interi/ period e>uivalent to a for%earan#e of #redit

Insuran#e Co/pan0, In#. to pa0 petitioner New Borld International

Develop/ent )Phils.*, In#. 3S`=$1,&&.&& under Poli#0 7(+@O+&&&$55,

with $4 interest per annu% for the duration of dela0 in a##ordan#e












the interi/ period e>uivalent to a for%earan#e of #redit.

Petitioner New Borld is entitled to the value stated in the

poli#0 whi#h is #o//ensurate to the value of the three e/er"en#0

"enerator sets or 3S`=$1,&&.&& with dou%le interest plus attorne0s

fees as dis#ussed a%ove.

#EREORE, the Court ENIES the petition in .R. 1=145'

and AIRMS the Court of (ppeals de#ision of anuar0 61, $&&5

insofar as petitioner New Borld International Develop/ent )Phils.*, In#.

is not allowed to re#over a"ainst respondents D7T Corporation,

(dvate#h Industries, In#., 2EP International Philippines, In#., 2EP Pro<t

International, In#., 7arina Port Servi#es, In#. and Ser%ros Carrier

Corporation.

Bith respe#t to .R. 1=4$41, the Court GRANTS the petition

and RE+ERSES n- SETS ASIE the Court of (ppeals (/ended

De#ision of (u"ust 1=, $&&5. The Court IRECTS Sea%oard+Eastern

with $4 interest per annu% for the duration of dela0 in a##ordan#e

with Se#tions $46 and $44 of the Insuran#e Code and attorne0s fees

e>uivalent to 1& of the insuran#e pro#eeds. Sea%oard shall also pa0,

fro/ <nalit0 of ud"/ent, a 1$ interest per annu% on the total

a/ount due to petitioner until its full satisfa#tion.

SO ORERE.

MA. LOURES S. LORENO, G.R. No. 18698%

Petitioner,

Present

9E2(SCO, R., ., (hairperson,

+ versus + PER(2T(,

(;(D,

7ENDOY(, and

PER2(S+

;ERN(;E, .

!#ILAM !LANS, INC.,

!ERLA ACEE n- Pro/ul"ated

14=

MA. CELESTE ACEE,

Respondents. e%ruar0 $$, $&1$

needed in the appli#ation.$F Respondent 7a. Celeste (%#ede, Perlas

dau"hter, si"ned the appli#ation as sales #ounselor.6F

http://sc.judiciary.gov.ph/jurisprudence/2012/february2012/186983.htm#_ftn2







A +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ A

"ECI#ION

AA, J.

This #ase is a%out an insureds alle"ed #on#eal/ent in his

pension plan appli#ation of his true state of health and its eJe#t on the

life insuran#e portion of that plan in #ase of death.

T3e ' n- '3e Ce

On O#to%er $6, 1--= 7anuel lorendo <led an appli#ation for

#o/prehensive pension plan with respondent Phila/ Plans, In#.

)Phila/ Plans* after so/e #onvin#in" %0 respondent Perla (%#ede. The

plan had a pre+need pri#e of P--=,&&.&&, pa0a%le in 1& 0ears, and

had a /aturit0 value of P$,'-&,&&&.&& after $& 0ears.1F 7anuel si"ned

the appli#ation and left to Perla the tas! of suppl0in" the infor/ation

(side fro/ pension %ene<ts, the #o/prehensive pension plan

also provided life insuran#e #overa"e to lorendo. 4F This was #overed

%0 a roup 7aster Poli#0 that Philippine (/eri#an 2ife Insuran#e

Co/pan0 )Phila/ 2ife* issued to Phila/ Plans.F 3nder the /aster

poli#0, Phila/ 2ife was to auto/ati#all0 provide life insuran#e

#overa"e, in#ludin" a##idental death, to all who si"ned up for Phila/

Plans #o/prehensive pension plan.5F If the plan holder died %efore the

/aturit0 of the plan, his %ene<#iar0 was to instead re#eive the

pro#eeds of the life insuran#e, e>uivalent to the pre+need

pri#e. urther, the life insuran#e was to ta!e #are of an0 unpaid

pre/iu/ until the pension plan /atured, entitlin" the %ene<#iar0 to

the /aturit0 value of the pension plan.=F

On O#to%er 6&, 1--= Phila/ Plans issued Pension Plan

("ree/ent PP46&&'4'F to 7anuel, with petitioner 7a. 2ourdes S.

lorendo, his wife, as %ene<#iar0. In ti/e, 7anuel paid his >uarterl0

pre/iu/s.-F

Eleven /onths later or on Septe/%er 1, 1--', 7anuel died of

%lood poisonin". Su%se>uentl0, 2ourdes <led a #lai/ with Phila/ Plans

for the pa0/ent of the %ene<ts under her hus%ands plan.1&F ;e#ause

7anuel died %efore his pension plan /atured and his wife was to "et

14'

onl0 the %ene<ts of his li fe insuran#e, Phila/ Plans forwarded her #lai/

to Phila/ 2ife.11F

re>uired 7anuel to dis#lose to Phila/ Plans #onditions aJe#tin" the

ris! of whi#h he was aware or /aterial fa#ts that he !new or ou"ht to

!now.1'F

























On 7a0 6, 1--- Phila/ Plans wrote 2ourdes a letter,

1$F de#linin" her #lai/. Phila/ 2ife found that 7anuel was on

/aintenan#e /edi#ine for his heart and had an i/planted

pa#e/a!er. urther, he suJered fro/ dia%etes /ellitus and was ta!in"

insulin. 2ourdes renewed her de/and for pa0/ent under the

plan16F %ut Phila/ Plans ree#ted it,14F pro/ptin" her to <le the present

a#tion a"ainst the pension plan #o/pan0 %efore the Re"ional Trial

Court )RTC* of Mueon Cit0.1F

On 7ar#h 6&, $&&5 the RTC rendered ud"/ent,15F orderin"

Phila/ Plans, Perla and 7a. Celeste, solidaril0, to pa0 2ourdes all the

%ene<ts fro/ her hus%ands pension plan, na/el0 P--=,&&.&&, the

pro#eeds of his ter/ insuran#e, and P$,'-&,&&&.&& lu/p su/ pension

%ene<t upon /aturit0 of his planH P1&&,&&&.&& as /oral da/a"esH and

to pa0 the #osts of the suit. The RTC ruled that 7anuel was not "uilt0 of

#on#ealin" the state of his health fro/ his pension plan appli#ation.

On De#e/%er 1', $&&= the Court of (ppeals )C(* reversed the

RTC de#ision,1=F holdin" that insuran#e poli#ies are traditionall0

#ontra#ts u#erri%ae dae or #ontra#ts of ut/ost "ood faith. (s su#h, it

Iue !*een'e-

The issues presented in this #ase are

1. Bhether or not the C( erred in <ndin" 7anuel "uilt0 of

#on#ealin" his illness when he !ept %lan! and did not answer >uestions

in his pension plan appli#ation re"ardin" the ail/ents he suJered fro/H

$. Bhether or not the C( erred in holdin" that 7anuel was

%ound %0 the failure of respondents Perla and 7a. Celeste to de#lare

the #ondition of 7anuels health in the pension plan appli#ationH and

6. Bhether or not the C( erred in <ndin" that Phila/ Plans

approval of 7anuels pension plan appli#ation and a##eptan#e of his

pre/iu/ pa0/ents pre#luded it fro/ den0in" 2ourdes #lai/.

Ru><n o '3e Cou*'

14-

One. 2ourdes points out that, seein" the un<lled spa#es in 7anuels

pension plan appli#ation relatin" to his /edi#al histor0, Phila/ Plans

should have returned it to hi/ for #o/pletion. Sin#e Phila/ Plans

A A A A
















#hose to approve the appli#ation ust as it was, it #annot #r0

#on#eal/ent on 7anuels part. urther, 2ourdes adds that Phila/ Plans

never >ueried 7anuel dire#tl0 re"ardin" the state of his

health. Conse>uentl0, it #ould not %la/e hi/ for not /entionin" it.1-F

;ut 2ourdes is shiftin" to Phila/ Plans the %urden of puttin" on the

pension plan appli#ation the true state of 7anuels health. She for"ets

that sin#e Phila/ Plans waived /edi#al eAa/ination for 7anuel, it had

to rel0 lar"el0 on his statin" the truth re"ardin" his health in his

appli#ation. or, after all, he !new /ore than an0one that he had %een

under treat/ent for heart #ondition and dia%etes for /ore than <ve

0ears pre#edin" his su%/ission of that appli#ation. ;ut he !ept those

#ru#ial fa#ts fro/ Phila/ Plans.

;esides, when 7anuel si"ned the pension plan appli#ation, he adopted

as his own the written representations and de#larations e/%odied in

it. It is #lear fro/ these representations that he #on#ealed his #hroni#

heart ail/ent and dia%etes fro/ Phila/ Plans. The pertinent portion of

his representations and de#larations read as follows

I here%0 represent and de#lare to the %est of /0

!nowled"e that

() I 3e nee* een '*e'e- o* 3e*' on-<'<on,

hi"h %lood pressure, #an#er, -<e'e, lun",

!idne0 or sto/a#h disorder or an0 other

ph0si#al i/pair/ent <n '3e >' e :e*.

(-) I <n oo- 3e>'3 n- &3:<> on-<'<on.

I :ou* n=e* 'o n: o '3e ''een' oe*ee> o'3e*=<e, please "ive details in the spa#e

provided for

Date of #on<ne/ent

ZZZZZZZZZZZZZZZZZZZZZZZZZZZZ

Na/e of @ospital or Clini#


Na/e of (ttendin" Ph0si#ian


indin"s ZZZZZZZZZZZZZZZZZZZZZZZZZZZZ

Others )Please spe#if0* ZZZZZZZZZZZZZZZZZZZZZZZZZZZZ

A A A A.$&F )E/phasis supplied*

Sin#e 7anuel si"ned the appli#ation without <llin" in the

details re"ardin" his #ontinuin" treat/ents for heart #ondition and

1&

dia%etes, the assu/ption is that he has never %een treated for the said

illnesses in the last <ve 0ears pre#edin" his appli#ation. This is i/pli#it

fro/ the phrase If 0our answer to an0 of the state/ents a%ove

i/planted into the %od0 and #onne#ted to the wall of the heart,

desi"ned to provide re"ular, /ild, ele#tri# sho#! that sti/ulates the

#ontra#tion of the heart /us#les and restores nor/al#0 to the









)spe#i<#all0, the state/ent I have never %een treated for heart

#ondition or dia%etes* reveal otherwise, please "ive details in the

spa#e provided for. ;ut this is untrue sin#e he had %een on Cou/adin,

a treat/ent for venous thro/%osis,$1F and insulin, a dru" used in the

treat/ent of dia%etes /ellitus, at that ti/e.$$F

2ourdes insists that 7anuel had #on#ealed nothin" sin#e Perla,

the soli#itin" a"ent, !new that 7anuel had a pa#e/a!er i/planted on

his #hest in the =&s or a%out $& 0ears %efore he si"ned up for the

pension plan.$6F

;ut %0 its tenor, the responsi%ilit0 for preparin" the

appli#ation %elon"ed to 7anuel. Nothin" in it i/plies that so/eone

else /a0 provide the infor/ation that Phila/ Plans needed. 7anuel

#annot si"n the appli#ation and disown the responsi%ilit0 for havin" it

<lled up. If he furnished Perla the needed infor/ation and dele"ated to

her the <llin" up of the appli#ation, then she a#ted on his instru#tion,

not on Phila/ Plans instru#tion.

2ourdes neAt points out that it /ade no diJeren#e if 7anuel

failed to reveal the fa#t that he had a pa#e/a!er i/plant in the earl0

=&s sin#e this did not fall within the <ve+0ear ti/efra/e that the

dis#losure #onte/plated.$4F ;ut a pa#e/a!er is an ele#troni# devi#e

heart%eat.$F That 7anuel still had his pa#e/a!er when he applied for

a pension plan in O#to%er 1--= is an ad/ission that he re/ained

under treat/ent for irre"ular heart%eat within <ve 0ears pre#edin" that

appli#ation.

;esides, as alread0 stated, 7anuel had %een ta!in" /edi#ine

for his heart #ondition and dia%etes when he su%/itted his pension

plan appli#ation. These #learl0 fell within the <ve+0ear period. 7ore,

even if Perlas !nowled"e of 7anuels pa#e/a!er /a0 %e applied to

Phila/ Plans under the theor0 of i/puted !nowled"e,$5F

it is not

#lai/ed that Perla was aware of his two other ai#tions that needed

/edi#al treat/ents. Pursuant to Se#tion $= $=F of the Insuran#e Code,

7anuels #on#eal/ent entitles Phila/ Plans to res#ind its #ontra#t of

insuran#e with hi/.

T=o. 2ourdes #ontends that the /ere fa#t that 7anuel si"ned the

appli#ation in %lan! and let Perla <ll in the re>uired details did not

/a!e her his a"ent and %ind hi/ to her #on#eal/ent of his true stateof health. Sin#e there is no eviden#e of #ollusion %etween the/, Perlas

fault /ust %e #onsidered solel0 her own and #annot preudi#e 7anuel.

$'F

11

;ut 7anuel for"ot that in si"nin" the pension plan appli#ation, he

#erti<ed that he wrote all the infor/ation stated in it or had so/eone

do it under his dire#tion. Thus

"rantin" the sa/e, Phila/ Plans and Phila/ 2ife were a#tin" on the

truth of the representations #ontained in that appli#ation. Thus




















(PP2IC(TION OR PENSION P2(N

)Co/prehensive*

I here%0 appl0 to pur#hase fro/ !#ILAM !LANS,INC. a Pension Plan Pro"ra/ des#ri%ed herein in

a##ordan#e with the eneral Provisions set forth in this

appli#ation and here%0 e*'<: '3' '3e -'e n-o'3e* <no*'<on ''e- 3e*e<n *e =*<''en :e o* un-e* : -<*e'<on. A A A.$-F )E/phasis

supplied*

(ssu/in" that it was Perla who <lled up the appli#ation for/,

7anuel is still %ound %0 what it #ontains sin#e he #erti<ed that he

authoried her a#tion. Phila/ Plans had ever0 ri"ht to a#t on the faith

of that #erti<#ation.

2ourdes #ould not see! #o/fort fro/ her #lai/ that Perla had

assured 7anuel that the state of his health would not hinder the

approval of his appli#ation and that what is written on his appli#ation

/ade no diJeren#e to the insuran#e #o/pan0. ;ut, indu%ita%l0, 7anuel

was /ade aware when he si"ned the pension plan appli#ation that, in

DEC2(R(TIONS (ND REPRESENT(TIONS

A A A A

I a"ree that '3e <nu*ne oe*e o '3<&&><'<on < e- on '3e '*u'3 o '3e o*eo<n*e&*een''<on and is su%e#t to the provisions of

the roup 2ife Insuran#e Poli#0 issued %0 T@E

P@I2IPPINE (7ERIC(N 2IE INS3R(NCE CO. to P@I2(7

P2(NS, INC.6&F )E/phasis supplied*

(s the Court said in Tew $ife 2nterprises !. (ourt of Appeals61F

It /a0 %e true that A A A insured persons /a0 a##ept

poli#ies without readin" the/, and that this is not

ne"li"en#e per se. ;ut, this is not without an0

eA#eption. It is and was in#u/%ent upon petitioner S0

to read the insuran#e #ontra#ts, and this #an %e

reasona%l0 eApe#ted of hi/ #onsiderin" that he has

%een a %usiness/an sin#e 1-5 and the #ontra#t

#on#erns inde/nit0 in #ase of loss in his /one0+

/a!in" trade of whi#h i/portant #onsideration he

#ould not have %een unaware as it was pre#isel0 the

reason for his pro#urin" the sa/e.6$F

1$

The sa/e /a0 %e said of 7anuel, a #ivil en"ineer and /ana"er

of a #onstru#tion #o/pan0.66F @e #ould %e eApe#ted to !now that one

reasons an0 #lai/ for insuran#e under this ("ree/ent,

eA#ept for the reason that install/ent has not %een

paid )lapsed*, or that 0ou are not insura%le at the ti/e

0ou %ou"ht this pension pro"ra/ %0 reason of a"e. If

this ("ree/ent lapses %ut is reinstated afterwards, the

)1* %ili i d h ll i















p 0 p

/ust read ever0 do#u/ent, espe#iall0 if it #reates ri"hts and

o%li"ations aJe#tin" hi/, %efore si"nin" the sa/e. 7anuel is not

uns#hooled that the Court /ust #o/e to his su##or. It #ould reasona%l0

%e eApe#ted that he would not triKe with so/ethin" that would provide

additional <nan#ial se#urit0 to hi/ and to his wife in his twili"ht 0ears.

T3*ee. In a <nal atte/pt to defend her #lai/ for %ene<ts under

7anuels pension plan, 2ourdes points out that an0 defe#t or

insuG#ien#0 in the infor/ation provided %0 his pension plan

appli#ation should %e dee/ed waived after the sa/e has %een

approved, the poli#0 has %een issued, and the pre/iu/s have %een

#olle#ted. 64F

The Court #annot a"ree. The #o/prehensive pension plan that Phila/

Plans issued #ontains a one+0ear in#ontesta%ilit0 period. It states

+III. INCONTESTAILIT$

(fter this ("ree/ent has re/ained in for#e for

one )1* 0ear, we #an no lon"er #ontest for health

one )1* 0ear #ontesta%ilit0 period shall start a"ain on

the date of approval of 0our re>uest for reinstate/ent.6F

The a%ove in#ontesta%ilit0 #lause pre#ludes the insurer fro/

disownin" lia%ilit0 under the poli#0 it issued on the "round of

#on#eal/ent or /isrepresentation re"ardin" the health of the insured

after a 0ear of its issuan#e.

Sin#e 7anuel died on the eleventh /onth followin" the

issuan#e of his plan,65F the one 0ear in#ontesta%ilit0 period has not 0et

set in. Conse>uentl0, Phila/ Plans was not %arred fro/

>uestionin" 2ourdes entitle/ent to the %ene<ts of her hus%ands

pension plan.

#EREORE, the Court AIRMS in its entiret0 the de#ision of theCourt of (ppeals in C(+.R. C9 '=&' dated De#e/%er 1', $&&=.

SO ORERE.

UNITE MERC#ANTS G.R. No. 198588

16

COR!ORATION,

Petitioner,

Present

This Petition for Review on Certiorari1F see!s to reverse the Court of

(ppeals De#ision$F dated 15 une $&11 and its Resolution 6F dated '









http://sc.judiciary.gov.ph/jurisprudence/2012/july2012/198588.htm#_ftn1








+ versus +

COUNTR$ ANERS INSURANCE COR!ORATION,

Respondent.

C(RPIO, ., Chairperson,

;RION,

PEREY,

SERENO, and

REES, .

Pro/ul"ated

ul0 11, $&1$

" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "" " " " "

E C I S I O N

CAR!IO, J.

T3e Ce

Septe/%er $&11 in C(+.R. C9 No. '===. The Court of (ppeals

reversed the De#ision4F of the Re"ional Trial Court )RTC* of 7anila,

;ran#h 6, and ruled that the #lai/ on the Insuran#e Poli#0 is void.

T3e '

The fa#ts, as #ulled fro/ the re#ords, are as follows

Petitioner 3nited 7er#hants Corporation )37C* is en"a"ed in the

%usiness of %u0in", sellin", and /anufa#turin" Christ/as li"hts. 37C

leased a warehouse at 1-+; Da"ot Street, San ose Su%division, ;arrio

7anresa, Mueon Cit0, where 37C asse/%led and stored its produ#ts.

On 5 Septe/%er 1--, 37Cs eneral 7ana"er (lfredo Tan insured

37Cs sto#!s in trade of Christ/as li"hts a"ainst <re with defendant

Countr0 ;an!ers Insuran#e Corporation )C;IC* for P1,&&&,&&&.&&. The

ire Insuran#e Poli#0 No. +@O8-+=5 )Insuran#e Poli#0* and ireInvoi#e No. 1$--(, valid until 5 Septe/%er 1--5, states

(7O3NT O INS3R(NCE ITEEN

7I22ION PESOS

14

P@I2IPPINE

C3RRENC

#ondu#t a parallel investi"ation. On 5 ul0 1--5, 37C, throu"h CR7,

su%/itted to C;IC its Sworn State/ent of or/al Clai/, with proofs of

its loss.






A A A

PROPERT INS3RED On sto#!s in trade onl0, #onsistin"

of Christ/as 2i"hts, the properties of the (ssured or

held %0 the/ in trust, on #o//issions, or on oint

a##ount with others and8or for whi#h the0 are

responsi%le in the event of loss and8or da/a"e durin"

the #urren#0 of this poli#0, whilst #ontained in the

%uildin" of one loft0 store0 in hei"ht, #onstru#ted of

#on#rete and8or hollow %lo#!s with portion of

"alvanied iron sheets, under "alvanied iron rood,

o##upied as Christ/as li"hts stora"e.F

On = 7a0 1--5, 37C and C;IC eAe#uted Endorse/ent 8-5+14 and

ire Invoi#e No. 15'6( to for/ part of the Insuran#e Poli#0.

Endorse/ent 8-5+14 provides that 37Cs sto#!s in trade were

insured a"ainst additional perils, to wit t0phoon, Kood, eAt. #over, and

full earth>ua!e. The su/ insured was also in#reased to P&,&&&,&&&.&&

eJe#tive = 7a0 1--5 to 1& anuar0 1--=. On - 7a0 1--5, C;IC issued

Endorse/ent 8-5+1= where the na/e of the assured was #han"ed

fro/ (lfredo Tan to 37C.

On 6 ul0 1--5, a <re "utted the warehouse rented %0 37C. C;IC

desi"nated CR7 (dust/ent Corporation )CR7* to investi"ate and

evaluate 37Cs loss %0 reason of the <re. C;ICs reinsurer, Central

Suret0, li!ewise re>uested the National ;ureau of Investi"ation )N;I* to

On $& Nove/%er 1--5, 37C de/anded for at least <ft0 per#ent )&*

pa0/ent of its #lai/ fro/ C;IC. On $ e%ruar0 1--=, 37C re#eived

C;ICs letter, dated 1& anuar0 1--=, ree#tin" 37Cs #lai/ due to

%rea#h of Condition No. 1 of the Insuran#e Poli#0. Condition No. 1

states

If the #lai/ %e in an0 respe#t fraudulent, or if an0 false

de#laration %e /ade or used in support thereof, or if

an0 fraudulent /eans or devi#es are used %0 the

Insured or an0one a#tin" in his %ehalf to o%tain an0%ene<t under this Poli#0H or if the loss or da/a"e %e

o##asioned %0 the willful a#t, or with the #onnivan#e of

the Insured, all the %ene<ts under this Poli#0 shall %e

forfeited.5F

On 1- e%ruar0 1--', 37C <led a Co/plaint =F a"ainst C;IC with the

RTC of 7anila. 37C an#hored its insuran#e #lai/ on the Insuran#e

Poli#0, the Sworn State/ent of or/al Clai/ earlier su%/itted, and the

Certi<#ation dated $4 ul0 1--5 /ade %0 Deput0 ire Chief8Senior

Superintendent ;onifa#io . ar#ia of the ;ureau of ire Prote#tion. The

Certi<#ation dated $4 ul0 1--5 provides that

1

This is to #ertif0 that a##ordin" to availa%le re#ords of

this oG#e, on or a%out 51& P.7. of ul0 6, 1--5, a <re

%ro!e out at 3nited 7er#hants Corporation lo#ated at

1-+; Da"oFt Street, ;r"0. 7anresa, Mueon Cit0

in#urrin" an esti/ated da/a"e of ift0+ive 7illion

Pesos )P &&& &&& &&* to the %uildin" and #ontents

false de#laration %e#ause the invoi#es were "enuine and the

State/ent of Inventor0 was for internal revenue purposes onl0, not for

its insuran#e #lai/.









Pesos )P,&&&,&&&.&&* to the %uildin" and #ontents,

while the reported insuran#e #overa"e a/ounted to

ift0 7illion Pesos )P&,&&&,&&&.&&* with Countr0

;an!ers Insuran#e Corporation.

The ;ureau further #erti<es that no eviden#e was

"athered to prove that the esta%lish/ent was willfull0,

feloniousl0 and intentionall0 set on <re.

That the investi"ation of the <re in#ident is alread0

#losed %ein" (CCIDENT(2 in nature.'F

In its (nswer with Co/pulsor0 Counter#lai/-F dated 4 7ar#h

1--', C;IC ad/itted the issuan#e of the Insuran#e Poli#0 to 37C %utraised the followin" defenses )1* that the Co/plaint states no #ause of

a#tionH )$* that 37Cs #lai/ has alread0 pres#ri%edH and )6* that 37Cs

<re #lai/ is tainted with fraud. C;IC alle"ed that 37Cs #lai/ was

fraudulent %e#ause 37Cs State/ent of Inventor0 showed that it had

no sto#!s in trade as of 61 De#e/%er 1--, and that 37Cs suspi#ious

pur#hases for the 0ear 1--5 did not even a/ount to P$,&&&,&&&.&&.

37Cs IS and inan#ial Reports further revealed that it had insuG#ient

#apital, whi#h /eant 37C #ould not aJord the alle"ed P&,&&&,&&&.&&

worth of sto#!s in trade.

In its Repl01&F dated $& 7ar#h 1--', 37C denied violation of Condition

No. 1 of the Insuran#e Poli#0. 37C #lai/ed that it did not /a!e an0

Durin" trial, 37C presented <ve witnesses. The <rst witness was osie

E%ora )E%ora*, 37Cs dis%ursin" oG#er. E%ora testi<ed that 37Cs

sto#!s in trade, at the ti/e of the <re, #onsisted of )1* raw /aterials

for its Christ/as li"htsH )$* Christ/as li"hts alread0 asse/%ledH and )6*

Christ/as li"hts pur#hased fro/ lo#al suppliers. These sto#!s in trade

were delivered fro/ (u"ust 1-- to 7a0 1--5. She stated that Strai"ht

Car"o Co//er#ial orwarders delivered the i/ported /aterials to the

warehouse, eviden#ed %0 deliver0 re#eipts. @owever, for the 0ear

1--5, 37C had no i/portations and onl0 %ou"ht fro/ its lo#al

suppliers. E%ora identi<ed the suppliers as i%er Te#hnolo"0

Corporation fro/ whi#h 37C %ou"ht sto#!s worth P1,'&&,&&&.&& on $&

7a0 1--5H ue Industries 7anufa#turer Philippines fro/ whi#h 37C

%ou"ht sto#!s worth P1-,&&,&&&.&& fro/ $& anuar0 1--5 to $6

e%ruar0 1--5H and To/#o Co//er#ial Press fro/ whi#h 37C %ou"ht

several Christ/as %oAes. E%ora testi<ed that all these deliveries were

not 0et paid. E%ora also presented 37Cs ;alan#e Sheet, In#o/e

State/ent and State/ent of Cash low. Per her testi/on0, 37Cs

pur#hases a/ounted to P5&',-'5.&& in 1--4H P'$=,5=&.&& in 1--H

and P$&,&&&,&&&.&& in 1--5. E%ora also #lai/ed that 37C had sales

onl0 fro/ its fruits %usiness %ut no sales fro/ its Christ/as li"hts for

the 0ear 1--.

The neAt witness, (nnie Pa%ustan )Pa%ustan*, testi<ed that her

#o/pan0 provided a%out $ wor!ers to asse/%le and pa#! Christ/as

15

li"hts for 37C fro/ $' 7ar#h 1--5 to 6 ul0 1--5. The third witness,

7etropolitan ;an! and Trust Co/pan0 )7;TC* OG#er Cesar 7artine,

stated that 37C opened letters of #redit with 7;TC for the 0ear 1--

onl0. The fourth witness presented was Ernesto 2una )2una*, the

arson was #o//itted %ased fro/ their interview

with #aranga) oG#ials and the pi#tures showin" that %la#!ened

surfa#es were present at diJerent parts of the warehouse. On #ross+

eAa/ination, 2aaro ad/itted that the0 did not #ondu#t a forensi#









0 p

deliver0 #he#!er of Strai"ht Co//er#ial Car"o orwarders. 2una

aGr/ed the deliver0 of 37Cs "oods to its warehouse on 16 (u"ust

1--, 5 Septe/%er 1--, ' Septe/%er 1--, $4 O#to%er 1--, $=O#to%er 1--, - Nove/%er 1--, and 1- De#e/%er 1--. 2astl0, CR7s

aduster Do/inador 9i#torio testi<ed that he inspe#ted 37Cs

warehouse and prepared preli/inar0 reports in this #onne#tion.

On the other hand, C;IC presented the #lai/s /ana"er Ed"ar

Ca"uinda"an )Ca"uinda"an*, a Se#urities and EA#han"e Co//ission

)SEC* representative, (tt0. Ernesto Ca%rera )Ca%rera*, and N;I

Investi"ator (rnold 2aaro )2aaro*. Ca"uinda"an testi<ed that he

inspe#ted the %urned warehouse on ul0 1--5, too! pi#tures of it and

referred the #lai/ to an independent aduster. The SEC representatives

testi/on0 was dispensed with, sin#e the parties stipulated on the

eAisten#e of #ertain do#u/ents, to wit )1* 37Cs IS for 1--4+1--=H )$*

37Cs inan#ial Report as of 61 De#e/%er 1--5H )6* SEC Certi<#ate

that 37C did not <le IS or inan#ial Reports for #ertain 0earsH and )4*

37Cs State/ent of Inventor0 as of 61 De#e/%er 1-- <led with the

;IR.

Ca%rera and 2aaro testi<ed that the0 were hired %0 Central Suret0 to

investi"ate 37Cs #lai/. On 1- Nove/%er 1--5, the0 #on#luded that

0

investi"ation of the warehouse, nor did the0 <le a #ase for arson.

or re%uttal, 37C presented Rosalinda ;atallones );atallones*, !eeper

of the do#u/ents of 3CP; eneral Insuran#e, the insurer of Perfe#t

Invest/ent Co/pan0, In#., the warehouse owner. Bhen as!ed to %rin"

do#u/ents related to the insuran#e of Perfe#t Invest/ent Co/pan0,

In#., ;atallones %rou"ht the papers of Perpetual Invest/ent, In#.

T3e Ru><n o '3e Re<on> T*<> Cou*'

On 15 une $&&, the RTC of 7anila, ;ran#h 6, rendered a De#ision in

favor of 37C, the dispositive portion of whi#h reads

B@EREORE, ud"/ent is here%0 rendered in favor of

plaintiJ and orderin" defendant to pa0 plaintiJ

a* the su/ of P46,-6&,$6&.&& as inde/nit0 with

interest thereon at 5 per annu% fro/ Nove/%er

$&&6 until full0 paidH

%* the su/ of P1&&,&&&.&& for eAe/plar0 da/a"esH

1=

#* the su/ of P1&&,&&&.&& for attorne0s feesH and

d* the #osts of suit.

<re while that of the latter was done 4 /onths later.

Certainl0 it would %e a diJerent situation as the site

was no lon"er the sa/e after the #learin" up operation

whi#h is nor/al after a <re in#ident. The Christ/as

li"hts and parts #ould have %een swept awa0. @en#e

the <ndin" of the latter appears to %e spe#ulative to



Defendants #ounter#lai/ is denied for la#! of

/erit.

SO ORDERED.11F

The RTC found no dispute as to 37Cs <re insuran#e #ontra#t with C;IC.

Thus, the RTC ruled for 37Cs entitle/ent to the insuran#e pro#eeds, as

follows

raud is never presu/ed %ut /ust %e proved %0 #lear

and #onvin#in" eviden#e. )see (lonso v. Ce%u Countr0

Clu%, 41= SCR( 11 $&&6F* Defendant failed to

esta%lish %0 #lear and #onvin#in" eviden#e that the

do#u/ents su%/itted to the SEC and ;IR were true. It

is #o//on %usiness pra#ti#e for #orporations to have

$ sets of reports8state/ents for taA purposes. The

stipulated do#u/ents of plaintiJ )EAhs. $ '* /a0 not

have %een a##urate.

The #onKi#tin" <ndin"s of defendants aduster, CR7

(dust/ent with stressF and that /ade %0 (tt0.

Ca%rera 7r. 2aaro for Central Suret0 shall %e

resolved in favor of the for/er. De<nitel0 the for/ers

<ndin" is /ore #redi%le as it was /ade soon after the

the <ndin" of the latter appears to %e spe#ulative to

%ene<t the reinsurer and whi#h defendant wants to

adopt to avoid lia%ilit0.

The CR7 (dust/ent report found no arson and

#on<r/ed su%stantial sto#!s in the %urned

warehouse )EAhs. MMM* unders#orin" suppliedF. This is

%olstered %0 the ;P #erti<#ation that there was no

proof of arson and the <re was a##idental )EAhs. PPP*.

The #erti<#ation %0 a "overn/ent a"en#0 li!e ;P is

presu/ed to %e a re"ular perfor/an#e of oG#ial dut0.

(%sent #onvin#in" eviden#e to the #ontrar0, the

presu/ption of re"ularit0 in the perfor/an#e of oG#ial

fun#tions has to %e upheld. )People vs. 2apira, $

SCR( '* The report of 3CP; eneral Insuran#esaduster also found no arson so that the %urned

warehouse owner PIC was inde/ni<ed.1$F

@en#e, C;IC <led an appeal with the Court of (ppeals )C(*.

T3e Ru><n o '3e Cou*' o A&&e>

On 15 une $&11, the C( pro/ul"ated its De#ision in favor of C;IC. The

dispositive portion of the De#ision reads

1'

B@EREORE, in view of the fore"oin" pre/ises, the

instant appeal is R(NTED and the De#ision of the

Re"ional Trial Court, of the National udi#ial Capital

Re"ion, ;ran#h 6 of the Cit0 of 7anila dated une 15,

$&& in Civil Case No. -'+'=6=& is RE9ERSED and SET

(SIDE The plaintiJ+appellees #lai/ upon its insuran#e

Se#ond, Be #onsider the reported pur#hases of the

plaintiJ+appellee as shown in its <nan#ial report dated

De#e/%er 61, 1--5 vis++vis the testi/on0 of 7s. E%ora

thus







(SIDE. The plaintiJ appellees #lai/ upon its insuran#e

poli#0 is dee/ed avoided.

SO ORDERED.16F

The C( ruled that 37Cs #lai/ under the Insuran#e Poli#0 is void. The

C( found that the <re was intentional in ori"in, #onsiderin" the arra0 of

eviden#e su%/itted %0 C;IC, parti#ularl0 the pi#tures ta!en and the

reports of Ca%rera and 2aaro, as opposed to 37Cs failure to eAplain

the details of the alle"ed <re a##ident. In addition, it found that 37Cs

#lai/ was overvalued throu"h fraudulent transa#tions. The C( ruled

Be have /eti#ulousl0 "one over the entiret0 of the

eviden#e su%/itted %0 the parties and have #o/e up

with a #on#lusion that the #lai/ of the plaintiJ+

appellee was indeed overvalued %0 transa#tions whi#h

were fraudulentl0 #on#o#ted so that the full #overa"e

of the insuran#e poli#0 will have to %e full0 awarded to

the plaintiJ+appellee.

irst, Be turn to the %a#!drop of the plaintiJ+appellees#ase, thus, oFn Septe/%er 5, 1-- its sto#!s+in+trade

were insured for ifteen 7illion Pesos and on 7a0 =,

1--5 the sa/e was in#reased to & 7illion Pesos. Two

/onths thereafter, a <re "utted the plaintiJ+appellees

warehouse.

1--4+ P5&',-'5.&&

1--+ P'$=,5=&.&&

1--5+ P$&,&&&,&&&.&& )/ore or less* whi#h

were pur#hased for a period of one /onth.

Third, Be shall also dire#t our attention to the alle"ed

true and #o/plete pur#hases of the plaintiJ+appellee

as well as the value of all sto#!+in+trade it had at the

ti/e that the <re o##urred. Thus

E3<<' Sou*e Aoun' (&eo) 'e Coe*

EAhs. P+DD,

in#lusive

ue Industries

7anufa#turer Phils.

1-,&,4&&.&& anuar0 $&, 1--5

anuar0 61, 1--5

e%ruar0 1$, 1--

e%ruar0 $&, 1--

e%ruar0 $6, 1--

EAhs. EE+@@,

in#lusive

To/#o Co//er#ial

Press

1,=1$,&&&.&& De#e/%er 1-, 1-

anuar0 $4, 1--5

e%ruar0 $1, 1--

Nove/%er $4, 1-

EAhs. II+MM, Pre#ious ;elen $,=$&,4&&.&& anuar0 16, 1--5

1-

in#lusive Tradin" anuar0 1-, 1--5

anuar0 $5, 1--5

e%ruar0 6, 1--5

/aterials Septe/%er 4, 1-

O#to%er $, 1--

O#to%er $=, 1--





e%ruar0 16, 1--5

e%ruar0 $&, 1--5

e%ruar0 $=, 1--5

EAhs. RR+

EEE, in#lusive

Bisdo/ 7anpower

Servi#es

651,-55.&& (pril 6, 1--5

(pril 1$, 1--5

(pril 1-, 1--5

(pril $5, 1--5

7a0 6, 1--5

7a0 1&, 1--5

7a0 1=, 1--5

7a0 $4, 1--5

une =, 1--5

une 14, 1--5

une $1, 1--5

une $', 1--5

ul0 , 1--5

EAhs. +

NNN, in#lusive

Costs of 2etters of

Credit for

i/ported raw

1,1-,144.=1 7a0 $-, 1--

une 1, 1--

ul0 , 1--

anuar0 ', 1--5

7ar#h 1-, 1--5

EAhs. +11

+ +$4,

@@@+1$, @@@+$$,

III+11, III+14,

+16, QQQ+11,

222+

SCCI state/ents of

a##ount

6'4,=-4.6' une 1, 1--

une $', 1--

(u"ust 1, 1--

Septe/%er 4, 1-

Septe/%er ', 1-

Septe/%er 11, 1

O#to%er 6&, 1--

Nove/%er 1&, 1-

De#e/%er $1, 1-

TOT(2 44,61,&$4.61

ourth, Be turn to the alle"ation of fraud %0 the

defendant+appellant %0 thorou"hl0 loo!in" throu"h the

pie#es of eviden#e that it addu#ed durin" the trial. The

latter alle"ed that fraud is present in the #ase at %ar asshown %0 the dis#repan#0 of the alle"ed pur#hases

fro/ that of the reported pur#hases /ade %0 plaintiJ+

appellee. It had also averred that fraud is present when

upon veri<#ation of the address of ue Industries, its

oG#e is nowhere to %e found. (lso, the defendant+

appellant eApressed "rave dou%ts as to the pur#hases

of the plaintiJ+appellee so/eti/e in 1--5 when su#h

15&

pur#hases es#alated to a hi"h 1-. 7illion Pesos

without an0 #ontra#t to %a#! it up.14F

O = l $&11 37C <l d 7 i f R id i

(t the outset, C;IC assails this petition as defe#tive sin#e what 37C

ulti/atel0 wants this Court to review are >uestions of fa#t. @owever,

37C ar"ues that where the <ndin"s of the C( are in #onKi#t with those

of the trial #ourt, a review of the fa#ts /a0 %e /ade. On this





On = ul0 $&11, 37C <led a 7otion for Re#onsideration,

1F whi#h the C( denied in its Resolution dated ' Septe/%er $&11.

@en#e, this petition.

T3e Iue

37C see!s a reversal and raises the followin" issues for resolution

I.

B@ET@ER T@E CO3RT O (PPE(2S 7(DE ( R32IN

INCONFSISTENT BIT@ 2(B, (PP2IC(;2E

3RISPR3DENCE (ND E9IDENCE (S TO T@E EISTENCE

O (RSON (ND R(3D IN T@E (;SENCE O

7(TERI(22 CON9INCIN E9IDENCE.

II.

B@ET@ER T@E CO3RT O (PPE(2S 7(DE ( R32IN

INCONSISTENT BIT@ 2(B, (PP2IC(;2E 3RISPR3DENCE

(ND E9IDENCE B@EN IT O3ND T@(T PETITIONER

;RE(C@ED ITS B(RR(NT.

15F

T3e Ru><n o '3e Cou*'

pro#edural issue, we <nd 37Cs #lai/ /eritorious.

( petition for review under Rule 4 of the Rules of Court spe#i<#all0provides that onl0 >uestions of law /a0 %e raised. The <ndin"s of fa#t

of the C( are <nal and #on#lusive and this Court will not review the/

on appeal,1=F su%e#t to eA#eptions as when the <ndin"s of the

appellate #ourt #onKi#t with the <ndin"s of the trial #ourt. 1'F Clearl0,

the present #ase falls under the eA#eption. Sin#e 37C properl0 raised

the #onKi#tin" <ndin"s of the lower #ourts, it is proper for this Court to

resolve su#h #ontradi#tion.

@avin" settled the pro#edural issue, we pro#eed to the pri/ordial issue

whi#h %oils down to whether LM( is entitled to 'lai% fro% (B-( the full

'o!erage of its re insuran'e poli').

37C #ontends that %e#ause it had alread0 esta%lished a pri%a

fa'ie #ase a"ainst C;IC whi#h failed to prove its defense, 37C is

entitled to #lai/ the full #overa"e under the Insuran#e Poli#0. On the

other hand, C;IC #ontends that %e#ause arson and fraud attended the

#lai/, 37C is not entitled to re#over under Condition No. 1 of the

Insuran#e Poli#0.

;urden of proof is the dut0 of an) part0 to present eviden#e to

esta%lish his #lai/ or defense %0 the a/ount of eviden#e re>uired %0

151

law,1-F whi#h is preponderan#e of eviden#e in #ivil #ases.$&F The part0,

whether plaintiJ or defendant, who asserts the aGr/ative of the issue

has the %urden of proof to o%tain a favora%le ud"/ent. $1F Parti#ularl0,

ininsuran#e #ases, on#e an insured /a!es out a pri%a fa'ie #ase in its

a #ri/inal a#tH and )$* the identit0 of the defendants as the one

responsi%le for the #ri/e.$F (orpus deli'ti /eans the su%stan#e of the

#ri/e, the fa#t that a #ri/e has a#tuall0 %een #o//itted. $5F This is

satis<ed %0 proof of the %are o##urren#e of the <re and of its havin"






















favor, the %urden of eviden#e shifts to the insurer to #ontrovert the

insureds pri%a fa'ie #ase.$$F In the present #ase, 37C esta%lished

a pri%a fa'ie #ase a"ainst C;IC. C;IC does not dispute that 37Cssto#!s in trade were insured a"ainst <re under the Insuran#e Poli#0 and

that the warehouse, where 37Cs sto#!s in trade were stored, was

"utted %0 <re on 6 ul0 1--5, within the duration of the <re insuran#e.

@owever, sin#e C;IC alle"ed an eA#epted ris!, then the %urden of

eviden#e shifted to C;IC to prove su#h eA#eption.

(n insurer who see!s to defeat a #lai/ %e#ause of an eA#eption or

li/itation in the poli#0 has the %urden of esta%lishin" that the loss

#o/es within the purview of the eA#eption or li/itation. $6F If loss is

proved apparentl0 within a #ontra#t of insuran#e, the %urden is upon

the insurer to esta%lish that the loss arose fro/ a #ause of loss whi#h is

eA#epted or for whi#h it is not lia%le, or fro/ a #ause whi#h li/its its

lia%ilit0.$4F In the present #ase, C;IC failed to dis#har"e its pri/ordial

%urden of esta%lishin" that the da/a"e or loss was #aused %0 arson, a

li/itation in the poli#0.

In prose#utions for arson, proof of the #ri/e #har"ed is #o/plete where

the eviden#e esta%lishes )1* the 'orpus deli'ti, that is, a <re #aused %0

%een intentionall0 #aused.$=F

In the present #ase, C;ICs eviden#e did not prove that the <re was

intentionall0 #aused %0 the insured. 3irst, the <ndin"s of C;ICs

witnesses, Ca%rera and 2aaro, were %ased on an investi"ation

#ondu#ted /ore than four /onths after the <re. The testi/onies of

Ca%rera and 2aaro, as to the %oAes doused with !erosene as told to

the/ %0 #aranga) oG#ials, are hearsa0 %e#ause the #aranga) oG#ials

were not presented in #ourt. Ca%rera and 2aaro even ad/itted that

the0 did not #ondu#t a forensi# investi"ation of the warehouse nor did

the0 <le a #ase for arson. $'F 4e'ond, the Sworn State/ent of or/al

Clai/ su%/itted %0 37C, throu"h CR7, states that the #ause of the <re

was fault) ele'tri'al wiringWa''idental in nature. C;IC is %ound %0 this

eviden#e %e#ause in its (nswer, it ad/itted that it desi"nated CR7 to

evaluate 37Cs loss. hird, the Certi<#ation %0 the ;ureau of ire

Prote#tion states that the <re was a##idental in ori"in. This Certi<#ation

eno0s the presu/ption of re"ularit0, whi#h C;IC failed to re%ut.

Contrar0 to 37Cs alle"ation, C;ICs failure to prove arson does not

/ean that it also failed to prove fraud. ua (hee San !. $aw

Lnion$-F does not appl0 in the present #ase. Inua (hee San,6&F the

15$

Court dis/issed the alle"ation of fraud %ased on the dis/issal of the

arson #ase a"ainst the insured, %e#ause the eviden#e was identi#al in

%oth #ases, thus

fraudulent, or if an0 false de#laration %e /ade or used in support

thereof, to wit



















Bhile the a#>uittal of the insured in the arson #ase is

not res udi#ata on the present #ivil a#tion, the insurers

eviden#e, to ud"e fro/ the de#ision in the #ri/inal

#ase, is pra#ti#all0 identi#al in %oth #ases and /ust

lead to the sa/e result, sin#e the proof to esta%lish the

defense of #onnivan#e at the <re in order to defraud

the insurer #annot %e /ateriall0 less #onvin#in" than

that re>uired in order to #onvi#t the insured of the

#ri/e of arson );a#hra#h vs. ;ritish (/eri#an

(ssuran#e Co., 1= Phil. 65*. 61F

In the present #ase, arson and fraud are two separate "rounds %ased

on two diJerent sets of eviden#e, either of whi#h #an void the

insuran#e #lai/ of 37C. The a%sen#e of one does not ne#essaril0 result

in the a%sen#e of the

other. Thus, on the alle"ation of fraud, we aGr/ the <ndin"s of the

Court of (ppeals.

Condition No. 1 of the Insuran#e Poli#0 provides that all the %ene<ts

under the poli#0 shall %e forfeited, if the #lai/ %e in an0 respe#t

1. If the #lai/ %e in an0 respe#t fraudulent, or if an0

false de#laration %e /ade or used in support thereof,

or if an0 fraudulent /eans or devi#es are used %0 the

Insured or an0one a#tin" in his %ehalf to o%tain an0

%ene<t under this Poli#0H or if the loss or da/a"e %e

o##asioned %0 the willful a#t, or with the #onnivan#e of

the Insured, all the %ene<ts under this Poli#0 shall %e

forfeited.

In L) 6u 8 (o. !. he "rudential Assuran'e (o., $td.,6$F the Court held

that where a <re insuran#e poli#0 provides that if the #lai/ %e in an0

respe#t fraudulent, or if an0 false de#laration %e /ade or used in

support thereof, or if an0 fraudulent /eans or devi#es are used %0 the

Insured or an0one a#tin" on his %ehalf to o%tain an0 %ene<t under this

Poli#0, and the eviden#e is #on#lusive that the proof of #lai/ whi#h the

insured su%/itted was false and fraudulent %oth as to the !ind, >ualit0

and a/ount of the "oods and their value destro0ed %0 the <re, su#h a

proof of #lai/ is a %ar a"ainst the insured fro/ re#overin" on the poli#0

even for the a/ount of his a#tual loss.

In the present #ase, as proof of its loss of sto#!s in trade

a/ountin" to P&,&&&,&&&.&&, 37C su%/itted its Sworn State/ent of

or/al Clai/ to"ether with the followin" do#u/ents )1* letters of

156

#redit and invoi#es for raw /aterials, Christ/as li"hts and #artons

pur#hasedH )$* #har"es for asse/%lin" the Christ/as li"htsH and )6*

deliver0 re#eipts of the raw /aterials. @owever, the #har"es for

asse/%lin" the Christ/as li"hts and deliver0 re#eipts #ould not

$6 e%ruar0 1--5. The un#ontroverted testi/on0 of Ca%rera revealed

that there was no ue Industries 7anufa#turer Phils. lo#ated at

7ahinhin St., Tea#hers 9illa"e, Mueon Cit0, the %usiness address

appearin" in the invoi#es and the re#ords of the Depart/ent of Trade








support its insuran#e #lai/. The Insuran#e Poli#0 provides that C;IC

a"reed to insure 37Cs sto#!s in trade. 37C de<ned sto#! in trade

as tangi#le personal propert) /ept for sale or tra+'.66F

(ppl0in" 37Csde<nition, onl0 the letters of #redit and invoi#es for raw /aterials,

Christ/as li"hts and #artons /a0 %e #onsidered.

The invoi#es, however, #annot %e ta!en as "enuine. The

invoi#es reveal that the sto#!s in trade pur#hased for 1--5 a/ounts

to P$&,&&&,&&&.&& whi#h were pur#hased in one /onth. Thus, 37C

needs to prove pur#hases a/ountin" to P6&,&&&,&&&.&& worth of

sto#!s in trade for 1-- and prior 0ears. @owever, in the State/ent of

Inventor0 it su%/itted to the ;IR, whi#h is #onsidered an entr0 in

oG#ial re#ords,64F 37C stated that it had no sto#!s in trade as of 61

De#e/%er 1--. In its defense, 37C alle"ed that it did not in#lude as

sto#!s in trade the raw /aterials to %e asse/%led as Christ/as li"hts,

whi#h it had on 61 De#e/%er 1--. @owever, as proof of its loss, 37C

su%/itted invoi#es for raw /aterials, !nowin" that the insuran#e

#overs onl0 sto#!s in trade.

E>uall0 i/portant, the invoi#es )EAhi%its P+DD* fro/ ue Industries

7anufa#turer Phils. were suspi#ious. The pur#hases, %ased on the

invoi#es and without an0 supportin" #ontra#t, a/ounted

to P1-,&,4&&.&& worth of Christ/as li"hts fro/ $& anuar0 1--5 to

Industr0. Ca%rera testi<ed that

( Then we went personall0 to the address as I stated a

while a"o appearin" in the re#ord furnished %0 the

3nited 7er#hants Corporation to the aduster, and the

aduster in turn now, "ave us our %asis in #ondu#tin"

investi"ation, so we went to this pla#e whi#h a##ordin"

to the re#ords, the address of this #o/pan0 %ut there

was no oG#e of this #o/pan0.

M ou /entioned (tt0. Ca%rera that 0ou went toDili/an, Mueon Cit0 and dis#over the address

indi#ated %0 the 3nited 7er#hants as the pla#e of

%usiness of ue Industries 7anufa#turer, Phils. was a

residential pla#e, what then did 0ou do after

deter/inin" that it was a residential pla#e

( Be went to the owner of the alle"ed #o/pan0 as

appearin" in the Depart/ent of Trade Industr0

re#ord, and as appearin" a #ertain Chinese na/e 7r.@uan", and the address as appearin" there is

so/ewhere in ;inondo. Be went personall0 there

to"ether with the N;I ("ent and I a/ with the/ when

the su%poena was served to the/, %ut a /ale person

approa#hed us and a##ordin" to hi/, there was no

ue Industries 7anufa#turer, Phils., #o/pan0 in that

%uildin" sir.6F

154

In u Ban (huan !. 3ield%ens -nsuran'e , (o., -n'.,65F the Court ruled

that the su%/ission of false invoi#es to the adusters esta%lishes a

l f f d d i i hi h id h i

M These pur#hases were /ade for the entire 0ear

of 1-- and 1--4 respe#tivel0, a/ I #orre#t

( es sir, for the 0ear 1--4 and 1--.4&F )E/phasis supplied*














#lear #ase of fraud and /isrepresentation whi#h voids the insurers

lia%ilit0 as per #ondition of the poli#0. Their falsit0 is the %est eviden#e

of the fraudulent #hara#ter of plaintiJs #lai/. 6=F In Kerendia !. (ourt of

Appeals,6'F where the insured presented a fraudulent lease #ontra#t to

support his #lai/ for insuran#e %ene<ts, the Court held that %0 its false

de#laration, the insured forfeited all %ene<ts under the poli#0 provision

si/ilar to Condition No. 1 of the Insuran#e Poli#0 in this #ase.

urther/ore, 37Cs In#o/e State/ent indi#ated that the pur#hases or

#osts of sales are P'$=,5=&.&& for 1-- and P1,1&-,1-&.&& for 1--5 or

a total of P1,-65,'5&.&&.6-F To #orro%orate this fa#t, E%ora testi<ed

that

M ;ased on 0our 1-- pur#hases, how /u#h were the

pur#hases /ade in 1--

( /e pr+/e *!e % nite! er+/nt

Corportion &or t/e t %er 1995 i $ 827,670.

00 ir

M (nd how a%out in 1--4

( In 1--4, its P5&',-'5.&& sir.

In its 1--5 inan#ial Report, whi#h 37C ad/itted as eAistin", authenti#

and dul0 eAe#uted durin" the 4 De#e/%er $&&$ hearin", it

had P1,&&,'5$.=1 as total assets andP15=,&'.4= as total lia%ilities.41F

Thus, either a/ount in 37Cs In#o/e State/ent or inan#ial Reports

is twent)*!e ti%es the #lai/ 37C see!s to enfor#e. The RTC itself

re#o"nied that 37C padded its #lai/ when it onl0

allowed P46,-6&,$6&.&& as insuran#e #lai/. 37C supported its #lai/

of P&,&&&,&&&.&& with the Certi<#ation fro/ the ;ureau of ire

Prote#tion statin" that A A A a <re %ro!e out at 3nited 7er#hants

Corporation lo#ated at 1-+; Da"oFt Street, ;r"0. 7anresa, Mueon Cit0

in#urrin" an esti/ated da/a"e of ift0+ ive 7illion Pesos

)P,&&&,&&&.&&* to the #uilding and 'ontents A A A. @owever, this

Certi<#ation onl0 proved that the esti/ated da/a"e of P,&&&,&&&.&&

is shared %0 %oth the %uildin" and the sto#!s in trade.

It has lon" %een settled that a false and /aterial state/ent /ade with

an intent to de#eive or defraud voids an insuran#e poli#0. 4$F In u (ua

!. 4outh British -nsuran'e (o.,46Fthe #lai/ was fourteen ti/es %i""er

than the real lossH in So $u !. or/shire -nsuran'e (o,44F ei"ht ti/esH

15


















R NO 1=6==6

he (ourt`s rulingQ

Be do not a"ree.



R NO. 1=6==6

P(R(7O3NT INS3R(NCE 9. SPS. 9ES (ND 7(RI( RE7ONDE32(Y

he 3a'tsQ On 7a0 $5, 1--4, spouses ves and 7aria Teresa)Re/ondeula* insured their 1--4 To0ota Corolla sedan under a

#o/prehensive #ar insuran#e poli#0 with . Bhile the #ontra#t was in

eJe#t, the spouses? #ar was ta!en %0 one Ri#ardo Sales, to who/ the0

entrusted the #ar to add a##essories and i/prove/ent, %ut did not

return the sa/e within the a"reed three+da0 period. Thus the0 <led a

#o/plaint sheet and i//ediatel0 reported the theft to the TraG#

7ana"e/ent Co//and of the PNP. The0 the0 noti<ed the insuran#e

#o/pan0, Para/ount Insuran#e Corporation )Para/ount*, to #lai/ for

rei/%urse/ent, %ut the latter refused to pa0, hen#e the0 <led a #ase

for su/ of /one0 a"ainst the #o/pan0 %efore the RTC. 3pon

ter/ination of plaintiJ eviden#e, the #o/pan0 <led a De/urrer toEviden#e, whi#h the trial #ourt "ranted in an Order, rulin" that the

spouses #annot re#over /ore than its interest in an0 propert0 su%e#t

of an insuran#e, sin#e the0 alread0 re#overed fro/ another #o/pan0

)Standard Insuran#e Co/pan0, In#.* in Civil Case No. -+1$4, the

a/ount for the loss of the sa/e #ar, al%eit under a diJerent insuran#e

poli#0 and insuran#e #o/pan0. On appeal to the Court of (ppeals, the

latter reversed and set aside the RTC de#ision. @oldin" that the #ar

su%e#t of the #ase was a diJerent #ar fro/ that of Civil Case No.

-&1$4, the C( said the #o/pan0 is lia%le to the spouses under the

Utheft #lauseV of their insuran#e #ontra#t. The #o/pan0 elevated their

#ase to the Supre/e Court via petition for review on #ertiorari.

he -ssueWsQ Bhether or not the loss of the #ar of the spouses falls

within the Utheft #lauseV of the insuran#e #ontra#t, /a!in" it

#o/pensa%le. The0 ar"ue that it was not stolen %ut was entrusted to

another person.

(dverse to petitioner?s #lai/, respondents? poli#0 #learl0 undertoo! to

inde/nif0 the insured a"ainst loss of or da/a"e to the s#heduled

vehi#le when #aused %0 theft, to wit

SECTION III 2OSS OR D(7(E

1. The Co/pan0 will, su%e#t to the 2i/its of 2ia%ilit0, inde/nif0

the insured a"ainst loss of or da/a"e to the S#heduled

9ehi#le and its a##essories and spare parts whilst thereon

a* %0 a##idental #ollision or overturnin", or #ollision or overturnin" #onse>uent

tearH

)%* %0 <re, eAternal eAplosion, self+i"nition or li"htnin" or %ur"lar0, house%rea!i

)#* %0 /ali#ious a#tH

15=

)d* whilst in transit )in#ludin" the pro#essF of loadin" and unloadin"* in#idental to su#h transit %0 road, rail, inland waterwa0, lift or elevator.(propos, we now resolve the issue of whether the loss of respondents?

vehi#le falls within the #on#ept of the Utheft #lauseV under the

insuran#e poli#0.



In "eople !. Bustinera?, this Court had the o##asion to interpret the

Utheft #lauseV of an insuran#e poli#0. In this #ase, the Court eAplained

that when one ta!es the /otor vehi#le of another without the latter?s

#onsent even if the /otor vehi#le is later returned, there is theft

there %ein" intent to "ain as the use of the thin" unlawfull0 ta!en

#onstitutes "ain.

(lso, in Mala)an -nsuran'e (o., -n'. !. (ourt of Appeals,@ this Court

held that the ta!in" of a vehi#le %0 another person without the

per/ission or authorit0 fro/ the owner thereof is suG#ient to pla#e it

within the a/%it of the word theft as #onte/plated in the poli#0, and is

therefore, #o/pensa%le.

15'

7oreover, the #ase of 4antos !. "eople is worth0 of note. Si/ilarl0 in

Santos, the owner of a #ar entrusted his vehi#le to therein petitioner

2auro Santos who owns a repair shop for #ar%uretor repair and

In the instant #ase, Sales did not have uridi#al possession over the

vehi#le. @ere, it is apparent that the ta!in" of respondents? vehi#le %0

Sales is without an0 #onsent or authorit0 fro/ the for/er.



repaintin". @owever, when the owner tried to retrieve her #ar, she was

not a%le to do so sin#e Santos had a%andoned his shop. In the said

#ase, the #ri/e that was a#tuall0 #o//itted was Muali<ed Theft.

@owever, the Court held that %e#ause of the fa#t that it was not

alle"ed in the infor/ation that the o%e#t of the #ri/e was a #ar, whi#h

is a >ualif0in" #ir#u/stan#e, the Court found that Santos was onl0

"uilt0 of the #ri/e of Theft and /erel0 #onsidered the >ualif0in"

#ir#u/stan#e as an a""ravatin" #ir#u/stan#e in the i/position of the

appropriate penalt0. The Court therein #lari<ed the distin#tion %etween

the #ri/e of Estafa and Theft, to wit

A A A The prin#ipal distin#tion %etween the two #ri/es is that in theft

the thin" is ta!en while in estafa the a##used re#eives the propert0 and

#onverts it to his own use or %ene<t. @owever, there /a0 %e theft even

if the a##used has possession of the propert0. If he was entrusted onl0

with the /aterial or ph0si#al )natural* or de fa'to possession of the

thin", his /isappropriation of the sa/e #onstitutes theft, %ut if he has

Re#ords would show that respondents entrusted possession of their

vehi#le onl0 to the eAtent that Sales will introdu#e repairs and

i/prove/ents thereon, and not to per/anentl0 deprive the/ of

possession thereof. Sin#e, Theft #an also %e #o//itted throu"h

/isappropriation, the fa#t that Sales failed to return the su%e#t vehi#le

to respondents #onstitutes Muali<ed Theft. @en#e, sin#e respondents?

#ar is undenia%l0 #overed %0 a Co/prehensive 7otor 9ehi#le Insuran#e

Poli#0 that allows for re#over0 in #ases of theft, petitioner is lia%le

under the poli#0 for the loss of respondents? vehi#le under the Utheft

#lause.V

(ll told, Sales? a#t of deprivin" respondents of their /otor vehi#le at, or

soon after the transfer of ph0si#al possession of the /ova%le propert0,

#onstitutes theft under the insuran#e poli#0, whi#h is #o/pensa%le.U

B@EREORE, the instant petition is DENIED. The De#ision dated (pril

1$, $&& and Resolution dated ul0 $&, $&&5 of the Court of (ppeals

Documents

Comm2 Insurance (1)