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Manila Mahogany Mfg. Corp v. CA (L-52756, 12 Oct. 1987)

Padilla, J.:

Facts:

Manila Mahogany Mfg. Corp (Manila hereinafter) insured its Mercedes Benz with Zenith Insurance Corp.

(Zenith hereinafter). Such was bumped by a truck owned by San Miguel Corporation. Manila and Zenith

amicably settled the amount of damage to P5,000, allowing the latter to be subrogated over all the

formers right to action against San Miguel.

When demanding from San Miguel the amount for the damages, through Insurance Adjusters, Inc., it

said that Manila was already paid P4,500 for the damages to Manilasmotor vehicle, as evidenced by a

cash voucher and a Release of Claim executed by the General Manager of Manila discharging San Miguel

Corporation. Zenith then asked for the reimbursement of P4,500 from Manila, to which the latter

refused. Manila contended that it had a right to both amounts received, as payment for the total

damages the car incurred, amounting to P9,486.43. Zenith filed with the City Court of Manila to recover

the P4,500, to which the latter granted. On appeal the Court of First Instance of Manila affirmed the City

Court's decision in toto, which CFI decision was affirmed by the Court of Appeals, with the modificationthat Manila was to pay Zenith the total amount of P5,000.00 that it had earlier received from Zenith.

Hence, this petition

Issue/s:

Whether or not Manila had the right to receive from Zenith the amount of P5,000 and from San Miguel

the amount of P4,500, covering the deficiency of the total amount of damages

Held:

The Supreme Court upheld the CA, stating that the right of subrogation by the insurer from the insured

was nullified when Manila issued a release claim in favor of San Miguel, after agreeing with Zenith to

receive the P5,000 as per insurance policy. Manila is entitled to keep the sum of P4,500.00 paid by SanMiguel Corporation under its clear right to file a deficiency claim for damages incurred, against the

wrongdoer, should the insurance company not fully pay for the injury caused (Article 2207, New Civil

Code). However, when Manila released San Miguel Corporation from any liability, petitioner's right to

retain the sum of P5,000.00 no longer existed, thereby entitling Zenith to recover the same. The SC also

found it just and equitable (under the general prayer or such further or other relief as may be deemed

just or equitable) to increase the amount from P4,500 to P5,000.

Saura Import Export Co. v. Phil. International Surety, (118 SCRA 150)

FACTS:

Saura mortgaged to PNB a parcel of land to secure the payment of a promissory note of P27,000.

The mortgage was amended to guarantee an increased amount, bringing the total mortgaged debt to

P37,000. The building found on the mortgaged land, as per agreement of the parties, was insured with

Philippine International Surety (PSI hereinafter), an insurance firm acceptable to mortgagee Bank, for

P29,000 against fire for the period of one year. Later on, PSI cancelled the insurance, to which was

received by PNB. Fire broke out in the building, with losses amounting to P40,685.69. Upon refusal by

PSI to pay, Saura filed a civil case with the CFI, including PNB as party defendant. CFI dismissed the

complaint, hence this petition

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Issue/s:

Whether or not the insurance company is liable in spite of not giving notice to Saura

Held:

The policy in question does not provide for the notice, its form or period. The Insurance Law, Act No.

2427, does not likewise provide for such notice. This being the case, it devolves upon the Court to apply

the generally accepted principles of insurance, regarding cancellation of the insurance policy by the

insurer. From what has been heretofore stated, actual notice of cancellation in a clear and unequivocal

manner, preferably in writing, in view of the importance of an insurance contract, should be given by

the insurer to the insured, so that the latter might be given an opportunity to obtain other insurance for

his own protection. The notice should be personal to the insured and not to and/or through any

unauthorized person by the policy. In the case at bar, the defendant insurance company, must have

realized the paramount importance of sending a notice of cancellation, when it sent the notice of

cancellation of the policy to the defendant PNB (as mortgagee), but not to the insured Saura with which

it (insurance company) had direct dealing. It was the primary duty of the defendant-appellee insurance

company to notify the insured, but it did not. The Court held insurance company liable.