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Republic of the Philippines
 SUPREME COURT
 Manila EN BANC G.R. No.

L-8151 December 16, 1955

VIRGINIA CALANOC, petitioner, 
 vs.
 COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE CO., respondents. Lucio Javillonar for petitioner.
 J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo A. Reyes for respondents.

BAUTISTA ANGELO, J.: This suit involves the collection of P2,000 representing the value of a supplemental policy covering accidental death which was secured by one Melencio Basilio from the Philippine American Life Insurance Company. The case originated in the Municipal Court of Manila and judgment being favorable to the plaintiff it was appealed to the court of first instance. The latter court affirmed the judgment but on appeal to the Court of Appeals the judgment was reversed and the case is now before us on a petition for review. Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was attached a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of Oroquieta and Zurbaan streets. Virginia Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded the payment of the additional sum of P2,000 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were expressly excluded in the contract and have the effect of exempting the company from liability. The pertinent facts which need to be considered for the determination of the questions raised are those reproduced in the decision of the Court of Appeals as follows:

The circumstances surrounding the death of Melencio Basilio show that when he was killed at about seven o'clock in the night of January 25, 1951, he was on duty as watchman of the Manila Auto Supply at the corner of Avenida Rizal and Zurbaran; that it turned out that Atty.

Antonio Ojeda who had his residence at the corner of Zurbaran and Oroquieta, a block away from Basilio's station, had come home that night and found that his house was well-lighted, but with the windows closed; that getting suspicious that there were culprits in his house, Atty. Ojeda retreated to look for a policeman and finding Basilio in khaki uniform, asked him to accompany him to the house with the latter refusing on the ground that he was not a policeman, but suggesting that Atty. Ojeda should ask the traffic policeman on duty at the corner of Rizal Avenue and Zurbaran; that Atty. Ojeda went to the traffic policeman at said corner and reported the matter, asking the policeman to come along with him, to which the policeman agreed; that on the way to the Ojeda residence, the policeman and Atty. Ojeda passed by Basilio and somehow or other invited the latter to come along; that as the tree approached the Ojeda residence and stood in front of the main gate which was covered with galvanized iron, the fence itself being partly concrete and partly adobe stone, a shot was fired; that immediately after the shot, Atty. Ojeda and the policeman sought cover; that the policeman, at the request of Atty. Ojeda, left the premises to look for reinforcement; that it turned out afterwards that the special watchman Melencio Basilio was hit in the abdomen, the wound causing his instantaneous death; that the shot must have come from inside the yard of Atty. Ojeda, the bullet passing through a hole waist-high in the galvanized iron gate; that upon inquiry Atty. Ojeda found out that the savings of his children in the amount of P30 in coins kept in his aparador contained in stockings were taken away, the aparador having been ransacked; that a month thereafter the corresponding investigation conducted by the police authorities led to the arrest and prosecution of four persons in Criminal Case No. 15104 of the Court of First Instance of Manila for 'Robbery in an Inhabited House and in Band with Murder'.
It is contended in behalf of the company that Basilio was killed which "making an arrest as an officer of the law" or as a result of an "assault or murder" committed in the place and therefore his death was caused by one of the risks excluded by the supplementary contract which exempts the company from liability. This contention was upheld by the Court of Appeals and, in reaching this conclusion, made the following comment:

From the foregoing testimonies, we find that the deceased was a watchman of the Manila Auto Supply, and, as such, he was not boud to leave his place and go with Atty. Ojeda and Policeman Magsanoc to see the trouble, or robbery, that occurred in the house of Atty. Ojeda. In fact, according to the finding of the lower court, Atty. Ojeda finding Basilio in

uniform asked him to accompany him to his house, but the latter refused on the ground that he was not a policeman and suggested to Atty. Ojeda to ask help from the traffic policeman on duty at the corner of Rizal Avenue and Zurbaran, but after Atty. Ojeda secured the help of the traffic policeman, the deceased went with Ojeda and said traffic policeman to the residence of Ojeda, and while the deceased was standing in front of the main gate of said residence, he was shot and thus died. The death, therefore, of Basilio, although unexpected, was not caused by an accident, being a voluntary and intentional act on the part of the one wh robbed, or one of those who robbed, the house of Atty. Ojeda. Hence, it is out considered opinion that the death of Basilio, though unexpected, cannot be considered accidental, for his death occurred because he left his post and joined policeman Magsanoc and Atty. Ojeda to repair to the latter's residence to see what happened thereat. Certainly, when Basilio joined Patrolman Magsanoc and Atty. Ojeda, he should have realized the danger to which he was exposing himself, yet, instead of remaining in his place, he went with Atty. Ojeda and Patrolman Magsanoc to see what was the trouble in Atty. Ojeda's house and thus he was fatally shot.
We dissent from the above findings of the Court of Appeals. For one thing, Basilio was a watchman of the Manila Auto Supply which was a block away from the house of Atty. Ojeda where something suspicious was happening which caused the latter to ask for help. While at first he declied the invitation of Atty. Ojeda to go with him to his residence to inquire into what was going on because he was not a regular policeman, he later agreed to come along when prompted by the traffic policeman, and upon approaching the gate of the residence he was shot and died. The circumstance that he was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on his part to expose his life to danger considering the fact that the place he was in duty-bound to guard was only a block away. In volunteering to extend help under the situation, he might have thought, rightly or wrongly, that to know the truth was in the interest of his employer it being a matter that affects the security of the neighborhood. No doubt there was some risk coming to him in pursuing that errand, but that risk always existed it being inherent in the position he was holding. He cannot therefore be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. And he cannot be considered as making an arrest as an officer of the law, as contended, simply because he went with the traffic policeman, for certainly he did not go there for that purpose nor was he asked to do so by the policeman. Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. In the first place, there is no proof that the death of Basilio is the result of either crime for the record is barren of any

Perhaps this may be clarified in the criminal case now pending in court as regards the incident but before that is done anything that might be said on the point would be a mere conjecture. in fairness to those who purchase insurance. 91 Wash.. and the reason for this rule is that he "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by. Co. The victim could have been either the policeman or Atty. especially where a forfeiture is involved" (29 Am. for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved aganst the one who has caused the obscurity.net An insurer should not be allowed. (Moore vs. and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured. S. complex and difficult for the layman to understand. and may expressly except other risks or causes of loss therefrom" (45 C. In any event.. Policies are prepared by experts who know and can anticipate the bearings and possible complications of every contingency. While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss. L. 324.)lawphi1. to defeat the very purpose for which the policy was procured. LRA 1915D. equivacal.) .. S. the insurance company.. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. are to be construed strictly and most strongly against the insurer. 1174. or uncertain . however. Pacific Mut. the courts must. Aetna Life Insurance Co. intricate and technical provisions. the fact remains that the happening was a pure accident on the part of the victim. new Civil Code) And so it has bene generally held that the "terms in an insurance policy. J. in its nature. LRA 1917A. construe every ambiguity in favor of the insured. 181). p." (44 C. We take note that these defenses are included among the risks exluded in the supplementary contract which enumerates the cases which may exempt the company from liability. (Article 1377. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life. 1237. (Algoe vs. Jur.) Insurance is. Ins. So long as insurance companies insist upon the use of ambiguous. which conceal rather than frankly disclose. . by the use of obscure phrases and exceptions. it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured. while the act may not excempt the triggerman from liability for the damage done. . 264. 781-782). which are ambiguous. their own intentions. and acting exclusively in the interest of. J.circumstance showing how the fatal shot was fired.

BIAGTAN. Juan S. we hereby order the company to pay petitioner-appellant the amount of P2.000.. Araneta.plaintiffs-appellees. for an additional sum of P5. J. concur. Biagtan was insured with defendant Insular Life Assurance Company under Policy No. LTD.. BIAGTAN. B. MAKALINTAL.R. Concepcion. J. No. MIGUEL T. C. Montemayor. defendant-appellant.00 if "the death of the Insured resulted directly from bodily injury effected solely through external and violent means sustained .. and Sañez for plaintiff-appellees.:p This is an appeal from the decision of the Court of First Instance of Pangasinan in its Civil Case No. BIAGTAN.
 THE INSULAR LIFE ASSURANCE COMPANY. reversing the decision appealed from. Padilla. GIL T. Paras. Mendoza and Papa for defendant-appellant. with costs. Serafica.We are therefore persuaded to conclude that the circumstances unfolded in the present case do not warrant the finding that the death of the unfortunate victim comes within the purview of the exception clause of the supplementary policy and. with legal interest from January 26. hence. under a supplementary contract denominated "Accidental Death Benefit Clause. Millora. 1972 EMILIA T.. Tanopo. 
 vs. Jugo. L. JUAN T. Reyes. JR. A. J. 1951 until fully paid. Republic of the Philippines
 SUPREME COURT
 Manila EN BANC G. do not exempt the company from liability. BIAGTAN and GRACIA T.00 and. JJ. Wherefore. BIAGTAN. D-1700. and Reyes.000. L-25579 March 29. Bengzon.. Labrador.000. 398075 for the sum of P5. The facts are stipulated..

1964 or the first hours of May 21.in an accident . on the ground that the insured's death resulted from injuries intentionally inflicted by third parties and therefore was not covered.. the robbers.00 but refused to pay the additional sum of P5.. Biagtan resulting in his death at about 7 a..000. 1964. causing wounds on the body of said Juan S. there was no "proof that the act of receiving thrust (sic) from the sharp-pointed instrument of the robbers was intended to inflict injuries upon the person of the insured or any other person or merely to scare away any person so as to ward off any resistance or obstacle that might be offered in the pursuit of their main objective which was robbery. Plaintiffs filed suit to recover. Biagtan who received thrusts from their sharp-pointed instruments. 1964. while the said life policy and supplementary contract were in full force and effect. What happened then is related in the decision of the trial court as follows: . Biagtan was robbed by a band of robbers who were charged in and convicted by the Court of First Instance of Pangasinan for robbery with homicide. the house of insured Juan S. that on the night of May 20.expressly provided that it would not apply where death resulted from an injury"intentionally inflicted by another party. rushed towards the door of the second floor room. stated that since the parties presented no evidence and submitted the case upon stipulation. five of them mortal and four non-mortal — were inflicted intentionally. where they suddenly met a person near the door of one of the rooms who turned out to be the insured Juan S. 1964. in ruling negatively on the issue.000. on the same day." On the night of May 20. Plaintiffs.m.00 under the accidental death benefit clause. that in committing the robbery. on reaching the staircase landing on the second floor. Biagtan. however. and after due hearing the court a quo rendered judgment in their favor. Hence the present appeal by the insurer." The clause. The only issue here is whether under the facts are stipulated and found by the trial court the wounds received by the insured at the hands of the robbers — nine in all.. or during the first hours of the following day a band of robbers entered the house of the insured Juan S. May 21. filed a claim under the policy. as beneficiaries of the insured.." The trial court committed a plain error in drawing the conclusion it did from the . The insurance company paid the basic amount of P5. and independently of all other causes. The court.

The insured there was a watchman in a certain company. and the robbers have been accused and convicted of the crime of robbery with homicide. Under those circumstances this Court held that it could not be said that the killing was intentional for there was the possibility that the malefactor had fired the shot to scare people around for his own protection and not necessarrily to kill or hit the victim. a shot was fired and it turned out afterwards that the watchman was hit in the abdomen. it is contrary to all reason and logic to say that his injuries are not intentionally inflicted. and by a person who was not even seen aiming at the victim.. even if unexpectedly. together with the owner of the house. the wound causing his death. The facts in that case. regardless of whether they prove fatal or not.admitted facts. however. a hunter who shoots at his prey and hits a person instead. could indeed have been fired without intent to kill or injure. The case of Calanoc vs. an athlete in a competitive game involving physical effort who collides with an opponent and fatally injures him as a result: these are instances where the infliction of the injury is unintentional and therefore would be within the coverage of an accidental death benefit clause such as that in question in this case. As the two of them. Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might offer." A gun which discharges while being cleaned and kills a bystander.. But where a gang of robbers enter a house and coming face to face with the owner. stab him repeatedly. It should be noted that the exception in the accidental benefit clause invoked by the appellant does not speak of the purpose — whether homicidal or not — of a third party in causing the injuries. A similar possibility is clearly ruled out by the facts in the case now before Us. and independently of all other causes. it cannot be denied that the act itself of inflicting the injuries was intentional. Court of Appeals. are different from those obtaining here. As it was. Nine wounds were inflicted upon the deceased. are purely accidental. 98 Phil. in the present case they did prove fatal. all by means of thrusts with sharp-pointed instruments wielded by the robbers. This construction is the basic idea expressed in the coverage of the clause itself. but only of the fact that such injuries have been "intentionally" inflicted — this obviously to distinguish them from injuries which. namely. So is the fact that five of those wounds caused the death of the insured. who happened to be invited by a policeman to come along as the latter was on his way to investigate a reported robbery going on in a private house. that "the death of the insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident . approached and stood in front of the main gate. This is a physical fact as to which there is no dispute. nine wounds inflicted with bladed weapons at close range . 79. is relied upon by the trial court in support of its decision. although received at the hands of a third party. For while a single shot fired from a distance.

8 S. implies the exercise of the reasoning faculties... Co. consciousness and volition. 3 In the case of Hutchcraft's Ex'r v. may shed light on the issue before Us. The policy did not cover death resulting from "intentional injuries inflicted by the insured or any other person. etc. WHEREFORE. concur. Thus. reserves his vote. while working in the coal shed of a railroad company. the insured was shot three times by a person unknown late on a dark and stormy night.cannot conceivably be considered as innocent insofar as such intent is concerned. Rep. In rendering judgment for the insurance company the Court held that while the assassination of the insured was as to him an unforeseen event and therefore accidental.W. Co. Castro. J. Two (2) defenses were interposed to the action to recover indemnity. where similar provisions in accidental death benefit clauses in insurance policies have been construed. 65 Am. 2 If the injuries suffered by the insured clearly resulted from the intentional act of a third person the insurer is relieved from liability as stipulated.W." The inquiry was as to the question whether the shooting that caused the insured's death was accidental or intentional. 570. Zaldivar.. namely: (1) that the insured having been killed by intentional means. 300. in case death or injury is intentionally inflicted by another person. it has been held that "intentional" as used in an accident policy excepting intentional injuries inflicted by the insured or any other person. . showing that the murderer knew his victim and that he fired with intent to kill. JJ. and (2) that the proviso in the policy expressly exempted the insurer from liability in case the insured died from injuries intentionally inflicted by another person. 87 Ky. 12 Am. Travelers' Ins. the decision appealed from is reversed and the complaint dismissed. and the Court found that under the facts. Ins. Makasiar. "the clause of the proviso that excludes the (insurer's) liability. 1 Where a provision of the policy excludes intentional injury. St. 71 S.. 484. applies to this case. his death was not accidental. 61. the insured was waylaid and assassinated for the purpose of robbery. it is the intention of the person inflicting the injury that is controlling. St. without pronouncement as to costs. 536. Rep. Fernando and Villamor. there could be no recovery under the policy which excepted death from intentional injuries inflicted by any person.. 96 Wis." In Butero v. 811. Travelers' Acc. Court decisions in the American jurisdiction. The manner of execution of the crime permits no other conclusion.

as beneficiaries. Winston Surposa.: This is a petition for certiorari with a prayer for the issuance of a restraining order and preliminary mandatory injunction to annul and set aside the decision of the Court of Appeals dated July 11. Bacolod City after attending the celebration of the "Maskarra Annual Festival. NOCON. 08924 with his parents. 100970 September 2. J. 1990 of the Insurance Commission 2 in ordering petitioner Finman General Assurance Corporation to pay private respondent Julia Surposa the proceeds of the personal accident Insurance policy with interest.Republic of the Philippines
 SUPREME COURT
 Manila SECOND DIVISION G." . Chester and Clifton. 3 While said insurance policy was in full force and effect. died on October 18. 1 affirming the decision dated March 20. 1992 FINMAN GENERAL ASSURANCE CORPORATION. 1988 as a result of a stab wound inflicted by one of the three (3) unidentified men without provocation and warning on the part of the former as he and his cousin. were waiting for a ride on their way home along Rizal-Locsin Streets. Carlie Surposa was insured with petitioner Finman General Assurance Corporation under Finman General Teachers Protection Plan Master Policy No. all surnamed.
 THE HONORABLE COURT OF APPEALS and JULIA SURPOSA. 1991. 
 vs. 2005 and Individual Policy No. Charles. No. Surposa. deceased. Aquino and Associates for petitioner. It appears on record that on October 22. Public Attorney's Office for private respondent. Carlie Surposa. the insured. 1986. petitioner. respondents.R. spouses Julia and Carlos Surposa. and brothers Christopher.

said death was committed with deliberate intent which. the pertinent portion of which reads: In the light of the foregoing. As no evidence was submitted to prove the claim for mortuary aid in the sum of P1. and unforeseen. and are construed by the courts in their ordinary and common acceptation. 1991. WHEREFORE. or is an unusual effect of a known cause and. With costs. therefore.00 representing the proceeds of the policy with interest. the same cannot be entertained.000. unusual. Therefore. cannot be indemnified. We do not agree. Thus. not . private respondent filed a complaint with the Insurance Commission which subsequently rendered a decision.Thereafter. petitioner filed this petition alleging grove abuse of discretion on the part of the appellate court in applying the principle of "expresso unius exclusio alterius" in a personal accident insurance policy since death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the former as indicated by the location of the lone stab wound on the insured. 1989. without intention and design.00. Hence. the appellate court affirmed said decision. The terms "accident" and "accidental" as used in insurance contracts have not acquired any technical meaning. 4 On July 11. we find respondent liable to pay complainant the sum of P15. judgment is hereby rendered ordering respondent to pay complainant the sum of P15. On February 24. private respondent and the other beneficiaries of said insurance policy filed a written notice of claim with the petitioner insurance company which denied said claim contending that murder and assault are not within the scope of the coverage of the insurance policy.00 with legal interest from the date of the filing of the complaint until fully satisfied.000.000. by the very nature of a personal accident insurance policy. and which is unexpected. An accident is an event that takes place without one's foresight or expectation — an event that proceeds from an unknown cause. the terms have been taken to mean that which happen by chance or fortuitously.

disability or loss suffered by the insured. while the act may not exempt the unknown perpetrator from criminal liability. There is no accident when a deliberate act is performed unless some additional. not expected. the personal accident insurance policy involved herein specifically enumerated only ten (10) circumstances wherein no liability attaches to petitioner insurance company for any injury. . 5 As correctly pointed out by the respondent appellate court in its decision: In the case at bar. it cannot be pretended that Carlie Surposa died in the course of an assault or murder as a result of his voluntary act considering the very nature of these crimes. and unforeseen happening occurs which produces or brings about the result of injury or death. The record is barren of any circumstance showing how the stab wound was inflicted. the resulting death is within the protection of the policies insuring against death or injury from accident. the failure . Nor can it be pretended that the malefactor aimed at the insured precisely because the killer wanted to take his life. unexpected. unaccompanied by anything unforeseen except the death or injury. the insured and his companion were on their way home from attending a festival. The generally accepted rule is that. In other words. an event that proceeded from an unusual effect of a known cause and. not having been expressly included in the enumeration of the circumstances that would negate liability in said insurance policy cannot be considered by implication to discharge the petitioner insurance company from liability for. death or injury does not result from accident or accidental means within the terms of an accidentpolicy if it is the natural result of the insured's voluntary act. the fact remains that the happening was a pure accident on the part of the victim. any injury. disability or loss suffered by the insured as a result of any of the stimulated causes. Neither can it be said that where was a capricious desire on the part of the accused to expose his life to danger considering that he was just going home after attending a festival. . therefore. 6 Furthermore.expected. Thus. independent. In any event. In the first place. The insured died from an event that took place without his foresight or expectation. The principle of " expresso unius exclusio alterius" — the mention of one thing implies the exclusion of another thing — is therefore applicable in the instant case since murder and assault. where the death or injury is not the natural or probable result of the insured's voluntary act. or if something unforeseen occurs in the doing of the act which produces the injury. . They were confronted by unidentified persons.

the petition for certiorariwith restraining order and preliminary injunction is hereby DENIED for lack of merit. JJ. . 7 WHEREFORE. Padilla. Moreover. 1990 ZENITH INSURANCE CORPORATION. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary. 
 vs. concur. 85296 May 14. C. it is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer.
 COURT OF APPEALS and LAWRENCE FERNANDEZ. Fernandez & Associates for private respondent. respondents.. Regalado and Melo.. Layawen for petitioner.J. Lawrence L. SO ORDERED. Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION G.of the petitioner insurance company to include death resulting from murder or assault among the prohibited risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such death. petitioner. Article 1377 of the Civil Code of the Philippines provides that: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. finding no irreversible error in the decision of the respondent Court of Appeals. Narvasa. Vicente R. No.R.

56. Branch XX in Civil Case No. 1983 but the same was moved to November 4. After allegedly being given a run around by Zenith for two (2) months. The dispositive portion of the trial court's decision .V. On July 6. The trial court issued an order on August 23. plaintiff-appellee v. 50459 with petitioner Zenith Insurance Corporation. C.000. 1986 (p.000. CEB-1215 and the denial of petitioner's Motion for Reconsideration. Subsequently. Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages resulting from the refusal of Zenith to pay the amount claimed. 1983. 13498 entitled. Petitioner filed a petition for certiorari with the Court of Appeals assailing the order of the trial court submitting the case for decision without petitioner's evidence. After the issues had been joined. J. Fernandez presented his evidence. however. Zenith Insurance Corp. without justifiable reason. The complaint was docketed as Civil Case No. The antecedent facts are as follows: On January 25.00 and litigation expenses of P3. 1983.R. 1983 upon petitioner's motion. the pre-trial was scheduled on October 17. 1984 submitting the case for decision without Zenith's evidence (pp.000. failed to present its evidence in view of its failure to appear in court. Rollo). on the day scheduled for the purpose. the petition was denied due course on April 29.00. 04644. Fernandez. However. Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract which.MEDIALDEA.00. exemplary damages of P5. defendant-appellant" which affirmed in toto the decision of the Regional Trial Court of Cebu. On November 14. 1986. "Lawrence L.00. Fernandez also prayed for moral damages in the amount of P10. 1983.. No.640.00. the car figured in an accident and suffered actual damages in the amount of P3. the private respondent rejected. Rollo). On September 28. private respondent Lawrence Fernandez insured his car for "own damage" under private car Policy No. 10-11. Petitioner Zenith. attorney's fees of P3. 1983. the trial court terminated the pre-trial. On June 4.A. allegedly to explore ways to settle the case although at an amount lower than private respondent's claim.R. The petition was docketed as C.000. CEB-1215. a decision was rendered by the trial court in favor of private respondent Fernandez.: Assailed in this petition is the decision of the Court of Appeals in CA-G. No. Aside from actual damages and interests.-G.

the worst is that. the trial court. On June 10. attorneys fees and exemplary damages. The appeal to respondent court assigned the following errors: I. The lower court erred in awarding moral damages. defendant is hereby ordered to pay to the plaintiff: 1. The amount of P3.Rollo).A.000. The amount of P3. The lower court erred in denying defendant appellant to adduce evidence in its behalf. The amount of P5.640. 2. 3. II.000. Rollo) Upon motion of Fernandez and before the expiration of the period to appeal. 1986. The order was assailed by petitioner in a petition for certiorari with the Court of Appeals on October 23. 4. (p. The notice of appeal was granted in the same order granting private respondent's motion for execution pending appeal.000. 69.provides: WHEREFORE.00 as attorney's fees. 1986.00 in its decision. on June 20.640.000. 9. The amount of P20. Costs. 5.00 by way of exemplary damages. 10420 but which petition was also dismissed on December 24. Rollo) On August 17. The amount of P20. No. 1988. (p.00 representing the damage incurred plus interest at the rate of twice the prevailing interest rates. 1986 (p. It also ruled that the matter of the trial court's . 1986 in C.00 by way of moral damages. and 6. the court awarded damages more than what are prayed for in the complaint. the Court of Appeals rendered its decision affirming in toto the decision of the trial court. ordered the execution of the decision pending appeal. petitioner filed a notice of appeal before the trial court. G.00 as litigation expenses.R. The lower court erred in ordering Zenith Insurance Corporation to pay the amount of P3. 12. III.

927. for lack of merit. to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld. the trial court awarded P5.00 attorney's fees. the lower court awarded twice the amount. Petitioner contends that while the complaint of private respondent prayed for P10. and while private respondent prayed for P3.460. it shall be the duty of the Commissioner or the Court.000. the insurance company shall be adjudged to pay damages which shall consist of attomey's fees and other expenses incurred by the insured person by reason of such unreasonable . The award of damages in case of unreasonable delay in the payment of insurance claims is governed by the Philippine Insurance Code.50 which was arrived at after deducting P250.R. was dismissed.000. while private respondent prayed for P5.000.000. 244. the trial court awarded P20. as the case may be.00. exemplary damages and attomey's fees in an amount more than that prayed for in the complaint. exemplary damages and attorney's fees is the main issue raised herein by petitioner.00 as deductible franchise and 20% depreciation on parts as agreed upon in the contract of insurance. or P20. 1988 on the allegation that respondent Court of Appeals' decision and resolution ran counter to applicable decisions of this Court and that they were rendered without or in excess of jurisdiction.000. The issues raised by petitioners in this petition are: a) The legal basis of respondent Court of Appeals in awarding moral damages. The propriety of the award of moral damages. Hence.00 moral damages. 1988.00 and P274. 04644 wherein Zenith's petition questioning the trial court's order submitting the case for decision without Zenith's evidence.00 without factual or legal basis. which provides: Sec. 1988 was denied on September 29. and in the affirmative case.000.00 instead of only P1. b) The award of actual damages of P3.00. the instant petition was filed by Zenith on October 18.00 exemplary damages. The Motion for Reconsideration of the decision of the Court of Appeals dated August 17. In case of any litigation for the enforcement of any policy or contract of insurance.denial of Fernandez's right to adduce evidence is a closed matter in view of its (CA) ruling in AC-G.

the act of petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to justify an award of P20. That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. L17022. While it is true that no proof of pecuniary loss is necessary in order that moral damages may be adjudicated.R. IAC. Cezar S. January 30. 1965.000. which is the basis for the award of the damages granted under the Insurance Code for unreasonable delay in the payment of the claim. In the pre-trial of the case. As regards the award of moral and exemplary damages. Court of Appeals. Provided. 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured. June 22. 2216. there was a finding that private respondent was given a "run-around" for two months. as the case may be.460. 129 SCRA 745). 14 SCRA 887). and 4) the amount of the claim." (J. 13 SCRA 137.R. until the claim is fully satisfied. the rules under the Civil Code of the Philippines shall govern. Sangco. Moral damages are emphatically not intended to enrich a complainant at the expense of a defendant. Revised Edition.1965. p. 2) other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment. L-20238. G. the damages that may be awarded are: 1) attorney's fees. there must be a showing that the breach was wanton and deliberately injurious or the one responsible acted fraudently or in bad faith (Perez v. No. they are awarded only to enable the injured party to obtain means. 64515. No. from the date following the time prescribed in section two hundred forty-two or in section two hundred fortythree. it is equally true that in awarding moral damages in case of breach of contract. In the instant case. 1984.00 as moral damages. it was shown that there was no total disclaimer by . Inc.. not punishment or correction. Philippine Law on Torts and Damages. Salvador.denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured. taking into consideration also the fact that the actual damage on the car was only P3.R. v. in case of unreasonable delay in the payment of the proceeds of an insurance policy. "The purpose of moral damages is essentially indemnity or reparation. Solis v. G. August 14. G. However. diversions or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action. the assessment of which is left to the discretion of the court according to the circumstances of each case (Art. 539) (See also R and B Surety & Insurance Co. It is clear that under the Insurance Code. New Civil Code). No.

(p. 151 SCRA 227. 13.00 and P274. Respondent court ruled: Under its second assigned error. . G. Respondent appellate court correctly ruled that the deductions of P250. .00 had been established before the trial court and affirmed by the appellate court. the amount of P3.640. 57322.00 as moral damages. The same is true in the case at bar.640. Record). The policy (Exhibit G. had no basis. New Civil Code of the Philippines). .00 as deductible franchise and 20% depreciation on parts. defendant-appellant puts forward two arguments. oppressive or malevolent manner.respondent.00 as actual claim plus interest of twice the ceiling prescribed by the Monetary Board computed from the time of submission of proof of loss. It is contented that the amount recoverable under the insurance policy defendant-appellant issued over the car of plaintiffappellee is subject to deductible franchise.000.000. The reason for petitioner's failure to indemnify private respondent within the two-month period was that the parties could not come to an agreement as regards the amount of the actual damage on the car. . respectively claimed by petitioners as agreed upon in the contract.000.R. the award of moral damages is reduced to P10.000.00 prayed for by private respondent as moral damages is equitable. exemplary or corrective damages are imposed by way of example or correction for the public good (Art. .00 and the award of exemplary damages is hereby deleted. In the case of Noda v. . 4-9. No. Cruz-Arnaldo. On the other hand. pp. 2229. As regards the actual damages incurred by private respondent. does not mntion any deductible franchise. Rollo) Therefore. and . 2) P10. June 22. exemplary damages were not awarded as the insurance company had not acted in wanton. The amount of P10. both of which are entirely without merit. .1987. The amount of P5.00 awarded as attomey's fees is justified under the circumstances of this case considering that there were other petitions filed and defended by private respondent in connection with this case. The awards due to private respondent Fernandez are as follows: 1) P3.

3) P5. COURT OF APPEALS and NERISSA LIM.R.000.. Jr. It argued. respondents. he stood in front of her and pointed the gun at her. SO ORDERED. J. The petitioner agreed that there was no suicide.00. ACCORDINGLY. 1 . at about 10 o'clock in the evening.00 as attorney's fees. 1982. No. Two months later. after his mother's birthday party. 
 vs. Pilar Nalagon. he was dead with a bullet wound in his head. from which he had previously removed the magazine. and 5) Costs. with a face value of P200. As beneficiary. He assured her it was not and then pointed it to his temple. According to Nalagon. was the only eyewitness to his death.00 as litigation expenses. Lim's secretary. 4) P3. his wife Nerissa Lim sought payment on the policy but her claim was rejected. however that there was no accident either.
 THE HON. As she watched television. petitioner.000. the appealed decision is MODIFIED as above stated.000.: The petitioner issued Personal Accident Policy No. 05687 to Felix Lim. Lim was in a happy mood (but not drunk) and was playing with his handgun. He was dead before he fell. 92383 July 17. Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION G. She pushed it aside and said it might he loaded. It happened on October 6. The next moment there was an explosion and Lim slumped to the floor. LTD. CRUZ. 1992 SUN INSURANCE OFFICE.

" There was such a happening.000. P5. and unforeseen. unusual. 3 The petitioner then came to this Court to fault the Court of Appeals for approving the payment of the claim and the award of damages. invoking the case of De la Cruz v.000. and which is unexpected. without intention or design. The definition that has usually been adopted by the courts is that an accident is an event that takes place without one's foresight or expectation — (accidental) an event that proceeds from an unknown cause. representing the face value of the policy. which was the additional unexpected and independent and unforeseen occurrence that led to the insured person's death. and the motion for reconsideration was denied. 2 The petitioner was sentenced to pay her P200. consent.00.00 as moral damages. This decision was affirmed on appeal. and P5. P10. plus the costs of the suit. 6 says that "there is no accident when a deliberate act is performed unless some additional. 4 An accident is an event which happens without any human agency or. In-substance. or is an unusual effect of a known case. under the circumstances. the Court is convinced that the incident that resulted in Lim's death was indeed an accident. The petitioner also cites one of the four exceptions provided for in the insurance contract and contends that the private petitioner's claim is barred by such provision. or voluntary co-operation.000.000. and therefore not expected. P5. This was the firing of the gun. Capital Insurance.00 as attorney's fees. It is there stated: Exceptions — The company shall not be liable in respect of . The petitioner. and when used in an insurance contract are to be construed and considered according to the ordinary understanding and common usage and speech of people generally.000.00 as exemplary damages. if happening through human agency. an event which. The term "accident" has been defined as follows: The words "accident" and "accidental" have never acquired any technical signification in law. It has also been defined as an injury which happens by reason of some violence or casualty to the injured without his design. 5 In light of these definitions. with interest at the legal rate. independent and unforeseen happening occurs which produces or brings about their injury or death.00 as actual and compensatory damages.The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained. the courts are practically agreed that the words "accident" and "accidental" mean that which happens by chance or fortuitously. unexpected. is unusual to and not expected by the person to whom it happens.

Hence. a person who walks a tightrope one thousand meters above the ground and without any safety device may not actually be intending to commit suicide. Lim had willfully exposed himself to needless peril and so came under the exception. Lim had removed the magazine from the gun and believed it was no longer dangerous. The contrary view is expressed by the petitioner thus: Accident insurance policies were never intended to reward the insured for his tendency to show off or for his miscalculations. as suicide imports a positive act of ending such life whereas the second act indicates a reckless risking of it that is almost suicidal in intent. It should be noted at the outset that suicide and willful exposure to needless peril are in pari materia because they both signify a disregard for one's life. To repeat. as the secretary testified. but his act is nonetheless suicidal. He would thus be considered as "willfully exposing himself to needless peril" within the meaning of the exception in question. Bodily injury xxx xxx xxx b. consequent upon i) The insured person attempting to commit suicide or willfully exposing himself to needless peril except in an attempt to save human life. The act was precisely intended to assure Nalagon that the gun was indeed harmless. Nevertheless.1. To illustrate. The petitioner maintains that by the mere act of pointing the gun to hip temple. the parties agree that Lim did not commit suicide. He expressly assured her that the gun was not loaded. That posture is arguable. But what is not is that. The theory is that a gun is per se dangerous and should therefore be handled cautiously in every case. It is submitted that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. when I . They were intended to provide for contingencies. The only difference is in degree. the petitioner contends that the insured willfully exposed himself to needless peril and thus removed himself from the coverage of the insurance policy.

We also agree that under the circumstances narrated. and none of these exceptions is applicable in the case at bar. By contrast. That might frighten the insurance people to death. There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed to his own accident. The Court certainly agrees that a drowned man cannot go to the insurance company to ask for compensation. He wilfully exposed himself to peril. On the second assigned error. There is no reason to deviate from this rule. The private respondent maintains that Lim did not. That is where she says the analogy fails. one of first impression. Lim did not know that the gun he put to his head was loaded. the Court must rule in favor of the petitioner. We hold therefore that the award of moral and exemplary damages and of attorney's fees is unjust and so must be disapproved. But it should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. Indeed. however. . It is evident that the petitioner was acting in good faith then it resisted the private respondent's claim on the ground that the death of the insured was covered by the exception. he deliberately exposed himself to a known peril. I have wilfully exposed myself to peril and must accept the consequences of my act. ** It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor of the assured. The issue was indeed debatable and was clearly not raised only for the purpose of evading a legitimate obligation. Lim was unquestionably negligent and that negligence cost him his own life. If I drown I cannot go to the insurance company to ask them to compensate me for my failure to swim as well as I thought I could. as the petitioner correctly observed. There are only four exceptions expressly made in the contract to relieve the insurer from liability. The petitioner's hypothetical swimmer knew when he dived off the Quezon Bridge that the currents below were dangerous. The insured in the case at bar deliberately put the gun to his head and pulled the trigger. his beneficiary would not be able to collect on the insurance policy for it is clear that when he braved the currents below.miscalculate and jump from the Quezon Bridge into the Pasig River in the belief that I can overcome the current. The basic issue raised in this case is. most accidents are caused by negligence. especially in view of the circumstances of this case as above analyzed.

assisted by her husband. as a rule. The law could not have meant to impose a penalty on the right to litigate. 7 The fact that the results of the trial were adverse to Barreto did not alone make his act in bringing the action wrongful because in most cases one party will lose. For these the law taxes costs. 8 WHEREFORE. If a party wins. SO ORDERED. Otherwise. we would be imposing an unjust condition or limitation on the right to litigate. the law deems the award of costs as sufficient. For those expenses. No.000. the law requires that his act be wrongful. recover attorney's fees and litigation expenses.00 representing the face value of the insurance contract. Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION G. every time a defendant wins. except the costs of the suit. but MODIFIED with the deletion of all awards for damages.R. automatically the plaintiff must pay attorney's fees thereby putting a premium on the right to litigate which should not be so. the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds the petitioner liable to the private respondent in the sum of P200. 2208. such right is so precious that moral damages may not be charged on those who may exercise it erroneously. L-54171 October 28. including attorney's fees. he cannot. 1980 JEWEL VILLACORTA. The adverse result of an action does not per se make the act wrongful and subject the act or to the payment of moral damages. since it is not the fact of winning alone that entitles him to recover such damages of the exceptional circumstances enumerated in Art. GUERRERO . with interest at the legal rate from the date of the filing of the complaint until the full amount is paid. We hold that the award of moral damages in the case at bar is not justified by the facts had circumstances as well as the law.In order that a person may be made liable to the payment of moral damages.

hitting and bumping a gravel and sand truck parked at the right side of the road going south. while it was in the custody of the Sunday Machine Works.00 — Own Damage. Hence.000.. Rizal. On May 11.00 — Third Party Liability. Model 1976. 1978. Barrio Burgos. and one of the passengers died and the other four sustained physical injuries.: The Court sets aside respondent Insurance Commission's dismissal of petitioner's complaint and holds that where the insured's car is wrongfully taken without the insured's consent from the car service and repair shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride. and P30. suffered extensive damage. petitioner.VILLACORTA. P30. respondent insurer is liable and must pay insured for the total loss of the insured vehicle under the theft clause of the policy. insured with respondent company under Private Car Policy No.000. respondents. the car was allegedly taken by six (6) persons and driven out to Montalban. the vehicle was brought to the Sunday Machine Works. effective May 16.000. 1978. The car. Benito Mabasa. 1978. going North at Montalban. MBI/PC-0704 for P35. TEEHANKEE. thereafter. 1977 to May 16. filed a claim for total loss with the respondent company but claim was denied.000. As a consequence.J. the car figured in an accident. in the course of which it was totally smashed in an accident). Complainant.
 THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY. the gravel and sand truck veered to the right side of the pavement going south and the car veered to the right side of the pavement going north. for general check-up and repairs. as well.00 — Theft. 
 vs. complainant. The undisputed facts of the case as found in the appealed decision of April 14. Inc. 1980 of respondent insurance commission are as follows: Complainant [petitioner] was the owner of a Colt Lancer. The driver. The comprehensive motor car insurance policy for P35. While travelling along Mabini St. Rizal. was compelled to institute the present action.. Acting C. Sitio Palyasan. On May 9.00 issued by respondent Empire Insurance Company admittedly undertook to indemnify the .

external explosion. dismissed petitioner's complaint for recovery of the total loss of the vehicle against private respondent.' It is therefore clear that if the person driving is other than the insured. With these declarations of complainant and her husband. (b) by fire. the policy limits the use of the insured vehicle to two (2) persons only. 5 of the complaint). and the . however." and that "Such was not the case in this instance. Apparently. of withholding it with the character of permanency (People vs. 7 Appt. 13). this is a violation of the 'Authorized Driver' clause of the policy. with the intention. on the insured's order or with his permission. and (c) by malicious act.. and the intent must be an intent permanently to deprive the insured of his car. Her husband likewise admitted that he neither knew this driver Benito Mabasa (Exhibit '4'). ruling that "The element of 'taking' in Article 308 of the Revised Penal Code means that the act of depriving another of the possession and dominion of a movable thing is coupled . or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear. we hold that the person who drove the vehicle.. 1 Respondent commission upheld private respondent's contention on the "Authorized Driver" clause in this wise: "It must be observed that under the above-quoted provisions.petitioner-insured against loss or damage to the car (a) by accidental collision or overturning. there must have been shown a felonious intent upon the part of the taker of the car. much less consented to the use of the same (par. is not an authorized driver of the complainant. In other words. The fact that the car was taken by one of the residents of the Sunday Machine Works. Ct. Complainant admitted that she did not know the person who drove her vehicle at the time of the accident. namely: the insured himself or any person on his (insured's) permission. Under the second category.. housebreaking or theft. at the time of the 'taking'. Rep. Respondent commission likewise upheld private respondent's assertion that the car was not stolen and therefore not covered by the Theft clause. self-ignition or lightning or burglary. Respondent insurance commission.. he must have been duly authorized by the insured. Galang. sustaining respondent insurer's contention that the accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage. to drive the vehicle to make the insurance company liable for the driver's negligence. in the person of Benito Mabasa. it is to be noted that the words "any person' is qualified by the phrase . invoking the policy provision on "Authorized Driver" clause.

as may be seen from its text. A temporary taking is held not a taking insured against (48 A LR 2d. who drives the car on the insured's order. There is no question of his being an "authorized driver" which allows recovery of the loss although his trip was for a personal or illicit purpose without the owner's authorization. or with his permission. was one of the residents of the Sunday Machine Works. 2 The main purpose of the "authorized driver" clause. respondent commission's ruling that the person who drove the vehicle in the person of Benito Mabasa. 308 of the Revised Penal Code. provided that such employee is duly qualified to drive under a valid driver's license. such as his regular driver. being contracts of adhesion where the only participation of the other party is the signing of his signature or his "adhesion" thereto. Inc. the same was merely temporary in nature. such as a friend or member of the family or the employees of a car service or repair shop must be duly licensed drivers and have no disqualification to drive a motor vehicle. and independently of the foregoing (since when a car is unlawfully . according to its finding." The Court finds respondent commission's dismissal of the complaint to be contrary to the evidence and the law. for a joy ride should not be construed to mean 'taking' under Art.. Secondly.withholding of the same. "obviously call for greater strictness and vigilance on the part of courts of justice with a view of protecting the weaker party from abuse and imposition. page 15). The mere happenstance that the employee(s) of the shop owner diverts the use of the car to his own illicit or unauthorized purpose in violation of the trust reposed in the shop by the insured car owner does not mean that the "authorized driver" clause has been violated such as to bar recovery. First. A car owner who entrusts his car to an established car service and repair shop necessarily entrusts his car key to the shop owner and employees who are presumed to have the insured's permission to drive the car for legitimate purposes of checking or road-testing the car. and prevent their becoming traps for the unwary. If at all there was a 'taking'. who instead of carrying out the owner's order to fetch the children from school takes out his girl friend instead for a joy ride and instead wrecks the car. is that a person other than the insured owner. to whom the car had been entrusted for general checkup and repairs was not an "authorized driver" of petitioner-complainant is too restrictive and contrary to the established principle that insurance contracts. supra. The situation is no different from the regular or family driver. who.

taken, it is the theft clause, not the "authorized driver" clause, that applies), where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be they employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban without the owner's consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in Article 308 of the Revised Penal Code, viz. "Who are liable for theft. — Theft is committed by any person who, with intent to gain but without violence against or intimidation of persons nor force upon things, shall take personal property of another without the latter's consent," for purposes of recovering the loss under the policy in question. The Court rejects respondent commission's premise that there must be an intent on the part of the taker of the car "permanently to deprive the insured of his car" and that since the taking here was for a "joy ride" and "merely temporary in nature," a "temporary taking is held not a taking insured against."
The evidence does not warrant respondent commission's findings that it was a mere "joy ride". From the very investigator's report cited in its comment, 3 the police found from the waist of the car driver Benito Mabasa Bartolome who smashed the car and was found dead right after the incident "one cal. 45 Colt. and one apple type grenade," hardly the materials one would bring along on a "joy ride". Then, again, it is equally evident that the taking proved to be quite permanent rather than temporary, for the car was totally smashed in the fatal accident and was never returned in serviceable and useful condition to petitioner-owner. Assuming, despite the totally inadequate evidence, that the taking was "temporary" and for a "joy ride", the Court sustains as the better view that which holds that when a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C. Aquino cites in his work Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it "hurt de uso. " 4

The insurer must therefore indemnify the petitioner-owner for the total loss of the insured car in the sum of P35,000.00 under the theft clause of the policy, subject to the filing of such claim for reimbursement or payment as it may have as subrogee against the Sunday Machine Works, Inc. ACCORDINGLY, the appealed decision is set aside and judgment is hereby rendered sentencing private respondent to pay petitioner the sum of P35,000.00 with legal interest from the filing of the complaint until full payment is made and

to pay the costs of suit. SO ORDERED.

Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION

G.R. No. L-36480 May 31, 1988 ANDREW PALERMO, plaintiff-appellee, 
 vs.
 PYRAMID INSURANCE CO., INC., defendant- appellant.

GRIÑO-AQUINO, J: The Court of Appeals certified this case to Us for proper disposition as the only question involved is the interpretation of the provision of the insurance contract regarding the "authorized driver" of the insured motor vehicle. On March 7, 1969, the insured, appellee Andrew Palermo, filed a complaint in the Court of First Instance of Negros Occidental against Pyramid Insurance Co., Inc., for payment of his claim under a Private Car Comprehensive Policy MV1251 issued by the defendant (Exh. A). In its answer, the appellant Pyramid Insurance Co., Inc., alleged that it disallowed the claim because at the time of the accident, the insured was driving his car with an expired driver's license. After the trial, the court a quo rendered judgment on October 29, 1969 ordering the defendant "to pay the plaintiff the sum of P20,000.00, value of the insurance of the motor vehicle in question and to pay the costs." On November 26, 1969, the plaintiff filed a "Motion for Immediate Execution Pending Appeal." It was opposed by the defendant, but was granted by the trial court on December 15, 1969. The trial court found the following facts to be undisputed:

On October 12,1968, after having purchased a brand new Nissan Cedric de Luxe Sedan car bearing Motor No. 087797 from the Ng Sam Bok Motors Co. in Bacolod City, plaintiff insured the same with the defendant insurance company against any loss or damage for P 20,000.00 and against third party liability for P 10,000.00. Plaintiff paid the defendant P 361.34 premium for one year, March 12, 1968 to March 12, 1969, for which defendant issued Private Car Comprehensive Policy No. MV-1251, marked Exhibit "A." The automobile was, however, mortgaged by the plaintiff with the vendor, Ng Sam Bok Motors Co., to secure the payment of the balance of the purchase price, which explains why the registration certificate in the name of the plaintiff remains in the hands of the mortgagee, Ng Sam Bok Motors Co. On April 17, 1968, while driving the automobile in question, the plaintiff met a violent accident. The La Carlota City fire engine crashed head on, and as a consequence, the plaintiff sustained physical injuries, his father, Cesar Palermo, who was with am in the car at the time was likewise seriously injured and died shortly thereafter, and the car in question was totally wrecked. The defendant was immediately notified of the occurrence, and upon its orders, the damaged car was towed from the scene of the accident to the compound of Ng Sam Bok Motors in Bacolod City where it remains deposited up to the present time. The insurance policy, Exhibit "A," grants an option unto the defendant, in case of accident either to indemnify the plaintiff for loss or damage to the car in cash or to replace the damaged car. The defendant, however, refused to take either of the abovementioned alternatives for the reason as alleged, that the insured himself had violated the terms of the policy when he drove the car in question with an expired driver's license. (Decision, Oct. 29, 1969, p. 68, Record on Appeal.) Appellant alleges that the trial court erred in interpreting the following provision of the Private Car Comprehensive Policy MV-1251: AUTHORIZED DRIVER:

It however renders him subject to the penal sanctions of the Motor Vehicle Law.Any of the following: (a) The Insured. the insured himself. where it was held that: The main purpose of the "authorized driver" clause. (b) Any person driving on the Insured's order or with his permission. is not a bar to recovery under the insurance contract. The driver of the insured motor vehicle at the time of the accident was." It does not apply when the person driving is the insured himself. such as a friend or member of the family or the employees of a car service or repair shop. who drives the car on the insured's order. (Exh. her license having expired prior to . Provided that the person driving is permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of law or by reason of any enactment or regulation in that behalf." applies only when the driver" is driving on the insured's order or with his permission. is that a person other than the insured owner. This view may be inferred from the decision of this Court in Villacorta vs. an infraction of the Motor Vehicle Law on the part of the insured. 100 SCRA 467. "A. or with his permission. as may be seen from its text. such as his regular driver. where the insured herself was personally operating her automobile but without a license to operate it.") There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the insured motor vehicle because his driver's license had expired. must be duly licensed drivers and have no disqualification to drive a motor vehicle. In an American case. Insurance Commission. While the Motor Vehicle Law prohibits a person from operating a motor vehicle on the highway without a license or with an expired license. The requirement that the driver be "permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of Law or by reason of any enactment or regulation in that behalf. hence an "authorized driver" under the policy.

1992 FIGURACION VDA.: . Branch II.
 HONORABLE FRANCISCO Z. No." (Drew C.L. the Supreme Court of Massachusetts was more explicit: . Hannah Pearlman. SO ORDERED. ROMERO. Angel E. which act is a statutory crime is not precluded by public policy from enforcing a policy indemnifying her against liability for bodily injuries The inflicted by use of the automobile. Jose B. 
 vs. FIGURACION VDA. Guyo for petitioners. MALLARI. 1467. the appealed decision is affirmed with costs against the defendant-appellant. CONSOLACION.. J.) WHEREFORE. and AFISCO INSURANCE CORPORATION. JR.E. CRUZ. EDITHA M. et al. and ELVIRA. Drewfield McMahon vs. petitioners.. DE MAGLANA. ERLINDA M. DE MAGLANA.. 60506 August 6. respondents. LEONILA M. 136 N. Republic of the Philippines
 SUPREME COURT
 Manila THIRD DIVISION G. 23 A. 154. Fernandez for private respondent. 242 Mass. LOPE.R.the issuance of the policy. GILDA ANTONIO and the minors LEAH. Presiding Judge of Davao City. MASESAR. 367.R.. Operating an automobile on a public highway without a license. herein represented by their mother. all surnamed MAGLANA.

Sr. 7. The point of impact was on the lane of the motorcycle and the deceased was thrown from the road and met his untimely death. Branch II. the PUJ jeep was overtaking another passenger jeep that was going towards the city poblacion. to pay plaintiffs the sum of .00 for loss of income. 1 Consequently. the Court finds judgment in favor of the plaintiffs against defendant Destrajo. The facts as found by the trial court are as follows: .000. An information for homicide thru reckless imprudence was also filed against Pepito Into. in the amount of twelve thousand pesos (P12. the lower court rendered a decision finding that Destrajo had not exercised sufficient diligence as the operator of the jeepney.The nature of the liability of an insurer sued together with the insured/operatorowner of a common carrier which figured in an accident causing the death of a third person is sought to be defined in this petition for certiorari. here petitioners. Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa. Davao City. with all the accessory penalties provided by law. he met an accident that resulted in his death. driving a motorcycle owned by the Bureau of Customs. From the investigation conducted by the traffic investigator. During the pendency of the civil case.000. Lope Maglana was on his way to his work station. At Km. operated and owned by defendant Destrajo. eight (8) months and one (1) day of prision correccional. 1978. to four (4) years. While overtaking. . early morning. here in Davao City. . Into was sentenced to suffer an indeterminate penalty of one (1) year. Sr. filed an action for damages and attorney's fees against operator Patricio Destrajo and the Afisco Insurance Corporation (AFISCO for brevity) before the then Court of First Instance of Davao. the heirs of Lope Maglana. bumped the motorcycle driven by the deceased who was going towards the direction of Lasa. plus five thousand pesos (P5. The dispositive portion of the decision reads: WHEREFORE. Lanang. and to indemnify the heirs of Lope Maglana. the PUJ jeep of defendant Destrajo running abreast with the overtaken jeep. He died on the spot. No appeal was interposed by accused who later applied for probation. as maximum. nine (9) months and eleven (11) days ofprision correccional.000. as minimum. 2 On December 14.00) in the concept of moral and exemplary damages with costs.. 1981.00) with subsidiary imprisonment in case of insolvency. ordering him to pay plaintiffs the sum of P28. The PUJ jeep that bumped the deceased was driven by Pepito Into. On December 20.

SO ORDERED. to pay plaintiffs the sum of P5. In its Order of February 9. is a stipulation pour autrui. they argued that the P20.000. petitioners filed the instant petition for certiorari which." 4 Hence.P12. 6 This motion was likewise denied for lack of merit. AFISCO argued that since the Insurance Code does not expressly provide for a solidary obligation. 3527-D against the driver.00 as attorney's fees and to pay the costs of suit. 1982. then the liability of the insurer is secondary only up to the extent of the insurance coverage. In its comment on the motion for reconsideration.00 as moral damages which shall be deducted in the event judgment (sic) in Criminal Case No. accused Into. primary and solidary with the jeepney operator because the petitioners became direct beneficiaries under the provision of the policy which.901. . should have been awarded in their favor.000.00 which amount shall be deducted in the event judgment in Criminal Case No." 5 Petitioners filed a second motion for reconsideration reiterating that the liability of the insurer is direct.000. accused Into. Petitioners reassert their position that the insurance company is directly and solidarily liable with the negligent operator up to the extent of its insurance coverage. although it does not seek the reversal of the lower court's decision in its entirety. shall have been enforced. the presumption is that the obligation is joint. 3 Petitioners filed a motion for the reconsideration of the second paragraph of the dispositive portion of the decision contending that AFISCO should not merely be held secondarily liable because the Insurance Code provides that the insurer's liability is "direct and primary and/or jointly and severally with the operator of the vehicle. The defendant insurance company is ordered to reimburse defendant Destrajo whatever amounts the latter shall have paid only up to the extent of its insurance coverage. prays for the setting aside or modification of the second paragraph of the dispositive portion of said decision. to pay plaintiffs the sum of P3. in effect. 3527-D against the driver. Hence. although only up to the extent of the insurance coverage.00 coverage of the insurance policy issued by AFISCO. the lower court denied the motion for reconsideration ruling that since the insurance contract "is in the nature of suretyship. to pay plaintiffs the sum of P5.70 representing funeral and burial expenses of the deceased.000.

However. pay all sums necessary to discharge liability of the insured in respect of (a) death of or bodily injury to any THIRD PARTY (b) . As this Court ruled in Shafer vs. The particular provision of the insurance policy on which petitioners base their claim is as follows: Sec. . Br. 75. the Company will." 8 The underlying reason behind the third party liability (TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of the insured who causes such injury. AFISCO's liability is now limited to P15.We grant the petition. the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the ." 9 Since petitioners had received from AFISCO the sum of P5. .000. .00 under the no-fault clause. in respect of the liability incurred to such person indemnify his personal representatives in terms of. 2. 1 — LIABILITY TO THE PUBLIC 1. . 10 this Court had the opportunity to resolve the issue as to the nature of the liability of the insurer and the insured vis-avis the third party injured in an accident. such third persons can directly sue the insurer. and subject to the terms and conditions hereof. The Company will. RTC of Olongapo City. We categorically ruled thus: While it is true that where the insurance contract provides for indemnity against liability to third persons. the insurer's liability accrues immediately upon the occurrence of the injury or even upon which the liability depends. Inc. we cannot agree that AFISCO is likewise solidarily liable with Destrajo.000. . v. In Malayan Insurance Co. and does not depend on the recovery of judgment by the injured party against the insured. Judge. and to give such injured person a certain beneficial interest in the proceeds of the policy . however. . . Court of Appeals.. In the event of the death of any person entitled to indemnity under this Policy. . . 3. 7 The above-quoted provision leads to no other conclusion but that AFISCO can be held directly liable by petitioners. subject to the Limits of Liability. "[w]here an insurance policy insures directly against liability.00.

00.000. Inc. in an insurance contract." we opt to . While in solidary obligations. petitioners have the option either to claim the P15. under the insurance contract is liable only up to P20. but it cannot.000. two (2) respondents by reason of the indemnity contract against third party liability — under which an insurer can be directly sued by a third party — this will result in a violation of the principles underlying solidary obligation and insurance contracts. is liable to respondent Vallejos (the injured third party).insured and/or the other parties found at fault. While the petition seeks a definitive ruling only on the nature of AFISCO's liability.00. namely respondents Sio Choy and San Leon Rice Mill. it awarded P28. 12 As such.00.000. In fine.000.000.00. can not be made solidarily liable with the insured for the entire obligation of P29. In the case at bar.00. that of the insured is based on tort." Similarly.013. the correct amount is P192.00 otherwise there would result "an evident breach of the concept of solidary obligation.901. 11 Thus. 13Upon recomputation. we conclude that the liability of AFISCO based on the insurance contract is direct. the second paragraph of the dispositive portion of the decision in question may have unwittingly sown confusion among the petitioners and their counsel. petitioner therein. but not solidary with that of Destrajo which is based on Article 2180 of the Civil Code. (emphasis supplied) The Court then proceeded to distinguish the extent of the liability and manner of enforcing the same in ordinary contracts from that of insurance contracts. which. petitioner as insurer of Sio Choy. we noticed that the lower court erred in the computation of the probable loss of income. Since under both the law and the insurance policy.70 in accordance with the decision of the lower court. as incorrectly held by the trial court. Using the formula: 2/3 of (80-56) x P12.800. can be held solidarily liable with Destrajo for the total amount of P53.00. the creditor may enforce the entire obligation against one of the solidary debtors. AFISCO's liability is only up to P20. whose liability under the insurance policy is also P20. petitioners herein cannot validly claim that AFISCO. the insurer undertakes for a consideration to indemnify the insured against loss. Being a "plain error. The liability of the insurer is based on contract. For if petitioner-insurer were solidarily liable with said. be made "solidarily" liable with the two principal tortfeasors.000 from AFISCO and the balance from Destrajo or enforce the entire judgment from Destrajo subject to reimbursement from AFISCO to the extent of the insurance coverage. What should have been clearly stressed as to leave no room for doubt was the liability of AFISCO under the explicit terms of the insurance contract. damage or liability arising from an unknown or contingent event.

in accordance with prevailing jurisprudence. INC.
 THE COURT OF APPEALS. one filed by Perla Compania de Seguros. G. premises considered.correct the same. J. Tee for respondents Herminio and Evelyn Lim. 14 Furthermore. The award of P28. petitioner. No. 1992 FCP CREDIT CORPORATION. Loyola for petitioner.00 and the death indemnity of P12. SO ORDERED. 96452 May 7.800. Wilson L.000. NOCON. No. respondents.R. HERMINIO LIM and EVELYN LIM. vs. Special Third Division. respondents. 
 vs.R. . in G. petitioner.000. 96452.: These are two petitions for review on certiorari.R. 15 WHEREFORE. No.00 to P50. the death indemnity is hereby increased to P50.000. the present petition is hereby GRANTED. Yolanda Quisumbing-Javellana and Nelson A.R.00. THE COURT OF APPEALS. 1992 PERLA COMPANIA DE SEGUROS.000.00. 96493 May 7.00 representing loss of income is INCREASED to P192. and the other by FCP Credit Corporation in G. HERMINIO LIM and EVELYN LIM. Inc. Republic of the Philippines
 SUPREME COURT
 Manila SECOND DIVISION G. No.

M. 1990 1of the Court of Appeals in CA-G. 2 The facts as found by the trial court are as follows: On December 24. said vehicle was carnapped while parked at the back of Broadway Centrum along N. Inc. Cubao to make a police report regarding said incident. Supercars..000. Inc. title and interest on said promissory note and chattel mortgage as shown by the Deed of Assignment. 7 . Inc. and attorney's fees of P10. 6 At around 2:30 P. and the costs of suit both in the lower court and in this appeal. private respondents spouses Herminio and Evelyn Lim executed a promissory note in favor Supercars. went to the nearest police substation at Araneta. (Perla for brevity) for comprehensive coverage under Policy No. while said appellants are ordered to pay appellee FCP Credit Corporation all the unpaid installments that were due and payable before the date said vehicle was carnapped. Inc. Inc. is also ordered to pay appellants moral damages of P12. in the sum of P77. SUPJYK-03780. PC/41PP-QCB-43383.000.96493. both seeking to annul and set aside the decision dated July 30.R. No. immediately called up the Anti-Carnapping Unit of the Philippine Constabulary to report said incident and thereafter. 83-19098 for replevin and damages. which is registered under the name of private respondent Herminio Lim 4 and insured with the petitioner Perla Compania de Seguros.'s unreasonable refusal on sham grounds to honor the just insurance claim of appellants by way of example and correction for public good.00 for appellee Perla Compania de Seguros.940. assigned to petitioner FCP Credit Corporation (FCP for brevity) its rights.00.00 as a just and equitable reimbursement for the expenses incurred therefor by appellants. Quezon City. who was driving said car before it was carnapped. with notice to private respondents spouses. of November 9. 5 On the same date. 1981. as shown by the certification issued by the Quezon City police. 1982. the decision appealed from is reversed. which reversed the decision of the Regional Trial Court of Manila. Domingo Street. payable in monthly installments according to the schedule of payment indicated in said note. 13037. 3 and secured by a chattel mortgage over a brand new red Ford Laser 1300 5DR Hatchback 1981 model with motor and serial No. Private respondent Evelyn Lim.000. Branch VIII in Civil Case No. exemplary damages of P20. and appellee Perla Compania de Seguros.00 for the latter's mental sufferings. The dispositive portion of the decision of the Court of Appeals reads. as follows: WHEREFORE. is ordered to indemnify appellants Herminio and Evelyn Lim for the loss of their insured vehicle. and appellee Perla Compania de Seguros. Inc.

denied private respondents' claim. however. Constabulary Highway Patrol Group. 1982.93 plus interest thereon at the rate of 24% per annum from July 2. 1983. said insurance company should be made to pay the remaining balance of the promissory note and the chattel mortgage contract. Ordering defendants Herminio Lim and Evelyn Lim to pay. . private respondent filed a claim for loss with the petitioner Perla but said claim was denied on November 18. in accordance with the licensing or other laws or regulations. 1982 10 on the ground that Evelyn Lim. 11 On November 17. 1982. or with his permission. She also filed a complaint with the Headquarters. 1983. plaintiff the sum of P55. private respondents requests from petitioner FCP for a suspension of payment on the monthly amortization agreed upon due to the loss of the vehicle and. 1982. jointly and severally. 1983 until fully paid. as shown by the letter of her counsel to said office. or has been permitted and is not disqualified by order of a Court of Law or by reason of any enactment or regulation in that behalf. petitioner FCP filed a complaint against private respondents.055. Perla. judgment is hereby rendered as follows: 1. the dispositive portion which reads: WHEREFORE. which states. After trial on the merits. On July 25. 8 in compliance with the insurance requirement. who was using the vehicle before it was carnapped. the trial court rendered a decision. 9 On November 11. private respondent Evelyn Lim reported said incident to the Land Transportation Commission in Quezon City. petitioner FCP demanded that private respondents pay the whole balance of the promissory note or to return the vehicle 12 but the latter refused. Providedthat the person driving is permitted. Consequently. to drive the Scheduled Vehicle. to wit: AUTHORIZED DRIVER: Any of the following: (a) The Insured (b) Any person driving on the Insured's order. who in turn filed an amended third party complaint against petitioner Perla on December 8. was in possession of an expired driver's license at the time of the loss of said vehicle which is in violation of the authorized driver clause of the insurance policy. in view of the foregoing.On November 10. since the carnapped vehicle insured with petitioner Perla.

Upon the other hand. although it may proceed or result from negligence.2. ordering the DISMISSAL of the ThirdParty Complaint filed against Third-Party Defendant. As correctly stated by the respondent court in its decision: . . selfignition or lightning or burglary. private respondents appealed the same to the Court of Appeals. and (c) by malicious act. Petitioner Perla alleged that there was grave abuse of discretion on the part of the appellate court in holding that private respondents did not violate the insurance contract because the authorized driver clause is not applicable to the "Theft" clause of said Contract. and the costs of suit. After petitioners' separate motions for reconsideration were denied by the Court of Appeals in its resolution of December 10. 1990.00 as and for attorney's fees. litigation expenses and attorney's fees. Ordering defendants to pay plaintiff P50. housebreaking or theft. We find no merit in Perla's petition. Theft is an entirely different legal concept from that of accident. Theft is committed by a person with the intent to gain or. it is the "THEFT"' clause. and. external explosion. and not the "AUTHORIZED DRIVER" clause that should apply. For its part. therefore. 14 Where a car is admittedly. . accident. The comprehensive motor car insurance policy issued by petitioner Perla undertook to indemnify the private respondents against loss or damage to the car (a) by accidental collision or overturning. petitioner FCP raised the issue of whether or not the loss of the collateral exempted the debtor from his admitted obligations under the promissory note particularly the payment of interest. such taking constitutes theft. petitioners filed these separate petitions for review on certiorari. 13 Not satisfied with said decision. as in this case. or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear.000. unlawfully and wrongfully taken without the owner's consent or knowledge. is the happening of an event without the concurrence of the will of the person by whose agency it was . which reversed said decision. likewise. (b) by fire. On the other hand. with the concurrence of the doer's will. to put it in another way.

the risk against accident is distinct from the risk against theft. 101). . 15 It is worthy to note that there is no causal connection between the possession of a valid driver's license and the loss of a vehicle. appellee Perla Compania could properly resist appellants' claim for indemnification for the loss or destruction of the vehicle resulting from the accident. i. But in the present case. Vol. (Bouvier's Law Dictionary. The distinction — often seized upon by insurance companies in resisting claims from their assureds — between death occurring as a result of accident and death occurring as a result of intent may. We however find the petition of FCP meritorious. then. The loss of the insured vehicle did not result from an accident where intent was involved. Being the principal contract. the commission of which was attended by intent. by analogy. the unpaid balance on the promissory note should be paid. The chattel mortgage constituted over the automobile is merely an accessory contract to the promissory note. The "authorized driver clause" in a typical insurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim. litigation expenses and attorney's fees stipulated in the promissory note. and not just the installments due and payable before the automobile was carnapped. However. Therefore. the promissory note.. as erronously held by the Court of Appeals. despite the fact that at first glance there is no relationship whatsoever between the parties thereto. this does not mean that private respondents are bound to pay the interest.caused. Thus. Because of the peculiar relationship between the three contracts in this case. the promissory note is unaffected by whatever befalls the subject matter of the accessory contract. p. if the insured vehicle had figured in an accident at the time she drove it with an expired license. 1914 ed. and not in contemplation or anticipation of an event such as theft. thereby reducing indemnity to a shadow. this Court is compelled to construe all three contracts as intimately interrelated to each other. apply to the case at bar. This Court agrees with petitioner FCP that private respondents are not relieved of their obligation to pay the former the installments due on the promissory note on account of the loss of the automobile. the chattel mortgage contract and the insurance policy.. the loss in the present case was caused by theft. Clearly.e. I.

private respondents constituted a chattel mortgage in favor of Supercars. Inc. . The chattel mortgage. that is. in turn. to petitioner FCP. . the amount stated therein in accordance with the schedule provided for. Inc. Private respondents were able to secure an insurance policy from petitioner Perla. Because petitioner Perla had unreasonably denied their valid claim. private respondents were justified in asking petitioner FCP to demand the unpaid installments from petitioner Perla. Therefore. the . required private respondents to insure the automobile and to make the proceeds thereof payable to Supercars. the insurance company Perla undertakes to pay directly to the mortgagor or to their assignee. private respondents should not be made to pay the interest. THAT HE/IT WILL MAKE ALL LOSS. liquidated damages and attorney's fees as stipulated in the promissory note. UNDER SUCH POLICY OR POLICIES.Under the promissory note. it would have paid the proceeds thereof directly to petitioner FCP. and the same was made specifically payable to petitioner FCP. The Chattel Mortgage Contract provided that: THE SAID MORTGAGOR COVENANTS AND AGREES THAT HE/IT WILL CAUSE THE PROPERTY/IES HEREIN-ABOVE MORTGAGED TO BE INSURED AGAINST LOSS OR DAMAGE BY ACCIDENT. If the claim on the insurance policy had been approved by petitioner Perla. the outstanding balance of the mortgage at the time of said loss under the mortgage contract. over the automobile the former purchased from the latter. with the knowledge of private respondents. . . As mentioned above. and this would have had the effect of extinguishing private respondents' obligation to petitioner FCP. THEFT AND FIRE FOR A PERIOD OF ONE YEAR FROM DATE HEREOF AND EVERY YEAR THEREAFTER UNTIL THE MORTGAGE OBLIGATION IS FULLY PAID WITH AN INSURANCE COMPANY OR COMPANIES ACCEPTABLE TO THE MORTGAGEE IN AN AMOUNT NOT LESS THAN THE OUTSTANDING BALANCE OF THE MORTGAGE OBLIGATION. to insure that the promissory note will still be paid in case the automobile is lost through accident or theft. FCP. Inc. 17 It is clear from the abovementioned provision that upon the loss of the insured vehicle. PAYABLE TO THE MORTGAGE OR ITS ASSIGNS AS ITS INTERESTS MAY APPEAR AND FORTHWITH DELIVER SUCH POLICY OR POLICIES TO THE MORTGAGEE. IF ANY. 16 The insurance policy was therefore meant to be an additional security to the principal contract. private respondents are obliged to pay Supercars. To secure said promissory note. Inc. The promissory note and chattel mortgage were assigned by Supercars.

as shown in the statement of account prepared by petitioner FCP. 1982 up to July 1. will not be disturbed on appeal. private respondents are legally entitled to the same since petitioner Perla had acted in bad faith by unreasonably refusing to honor the insurance claim of the private respondents. We hold that the Court of Appeals did not err in requiring petitioner Perla to indemnify private respondents for the loss of their insured vehicle. and the unjustified refusal of petitioner Perla to recognize the valid claim of the private respondents should not in any way prejudice the latter. 18 plus legal interest from July 2. awards for moral and exemplary damages. Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION G. 1983. the latter should be ordered to pay petitioner FCP the amount of P55.055.055. 1983 until fully paid. the assailed decision of the Court of Appeals is hereby MODIFIED to require private respondents to pay petitioner FCP the amount of P55. 114427 February 6.R. 1995 .93. Private respondents can not be said to have unduly enriched themselves at the expense of petitioner FCP since they will be required to pay the latter the unpaid balance of its obligation under the promissory note. with legal interest from July 2.93. However. No. representing the unpaid installments from December 30. SO ORDERED. In view of the foregoing discussion. 1983 until fully paid. 19 WHEREFORE. as well as attorney's fees are left to the sound discretion of the Court.contract of indemnity was procured to insure the return of the money loaned from petitioner FCP. The decision appealed from is hereby affirmed as to all other respects. exemplary damages and attorney's fees. Such discretion. No pronouncement as to costs. if well exercised. As to the award of moral damages. Besides.

On 22 December 1989.: Four our review under Rule 45 of the Rules of Court is the decision 1 of the Court of Appeals in CA-G.50 250. respondents. SP No.00. F-14622 2 for P100." The petitioner declared in the policy under the subheading entitled COINSURANCE that Mercantile Insurance Co.00. From 1989 to 1990. The petitioner is the owner of Norman's Mart located in the public market of San Francisco. 31916.. Legaspi Gen.000. was the co-insurer for P50. Agusan del Sur. itemized as follows: Zenco Sales.C. petitioner. entitled "Country Bankers Insurance Corporation versus Armando Geagonia. Inc. Merchandise Cebu Tesing Textiles P55. The period of the policy was from 22 December 1989 to 22 December 1990 and covered the following: "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business.
 COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION.130.000. and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code. goods in process and/or inventories only hereby insured. F.R. by or on behalf of the Company before the occurrence of any loss or . DAVIDE.698.00 (on credit) ————— P392. the petitioner had in his inventory stocks amounting to P392. covering any of the property or properties consisting of stocks in trade.50 The policy contained the following condition: 3.130. J.432. or which may subsequently be effected.ARMANDO GEAGONIA.50." reversing the decision of the Insurance Commission in I. he obtained from the private respondent fire insurance policy No.. JR. The insured shall give notice to the Company of any insurance or insurances already affected. 3340 which awarded the claim of petitioner Armando Geagonia against private respondent Country Bankers Insurance Corporation. Case No.00 86.000. 
 vs. Inc.

Cebu City as their interest may appear subject to the terms of this policy.000. He admitted in the said letter that at the time he obtained the private respondent's fire insurance policy he knew that the two policies issued by the PFIC were already in existence. The petitioner then filed a complaint 5 against the private respondent with the Insurance Commission (Case No. He further asserted that the total of the amounts claimed under the three policies was below the actual value of his stocks at the time of loss. — Phils. The petitioner's insured stock-in-trade were completely destroyed prompting him to file with the private respondent a claim under the policy..00 under fire insurance policy No.00 each. the private respondent denied the claim because it found that at the time of the loss the petitioner's stocks-in-trade were likewise covered by fire insurance policies No.000. (hereinafter PFIC). all benefits under this policy shall be deemed forfeited. Prop. which was P1. Armando Geagonia. issued by the Cebu Branch of the Philippines First Insurance Co.000. he would not have withheld such information.)" with a mortgage clause reading: MORTGAGE: Loss. that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200. GA-28146 and No. Agusan del Sur. Inc. 7 the private respondent specifically denied the allegations in the complaint and set up as its principal defense the violation of Condition 3 of the policy. These findings were based on the petitioner's testimony that he came to know of the PFIC . 8 the Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC.00. for P100. CO-INSURANCE DECLARED: P100.000. this requirement was not mentioned to him by the private respondent's agent. he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies. He attached as Annex "AM" 6 thereof his letter of 18 January 1991 which asked for the reconsideration of the denial.m. however.damage. if any shall be payable to Messrs. F-14622 and for attorney's fees and costs of litigation. at the public market of San Francisco. 3 These policies indicate that the insured was "Messrs. GA-28144. fire of accidental origin broke out at around 7:30 p. and that Cebu Tesing Textile. that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or securing his consent.000. provided however. On 27 May 1990. First CEB/F 24758. In its decision of 21 June 1993. had insurable interest on the stocks. and had it been mentioned. Discount Mart (Mr. as his creditor.00. 4 The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. On 28 December 1990. In its answer. Cebu Tesing Textiles.000. 3340) for the recovery of P100.

Its motion for the reconsideration of the decision 9 having been denied by the Insurance Commission in its resolution of 20 August 1993. the premiums on both policies were paid for by private respondent. Indeed private respondent's allegation of lack of knowledge of the provisions insurances is belied by his letter to petitioner [of . With costs." In is clear that it was the private respondent [petitioner herein] who took out the policies on the same property subject of the insurance with petitioner. 1462. This is shown by Premium Invoices nos. 11 the Court of Appeals reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC.00 as attorney's fees. The petition was docketed as CA-G. ARMANDO GEAGONIA. ARMANDO GEAGONIA).00 with legal interest from the time the complaint was filed until fully satisfied plus the amount of P10. The compulsory counterclaim of respondent is hereby dismissed. In its decision of 29 December 1993. The policy states that "DISCOUNT MART (MR. 3 of Fire Policy No. not by the Tesing Textiles which is alleged to have taken out the other insurance without the knowledge of private respondent. 31916. 28144 that the insurance was taken in the name of private respondent [petitioner herein]. Hence. 10 the private respondent appealed to the Court of Appeals by way of a petition for review. It said: It is apparent from the face of Fire Policy GA 28146/Fire Policy No. . Tesing Textiles is indicated to be only the mortgagee of the goods insured but the party to which they were issued were the "DISCOUNT MART (MR. 46632 and 46630. In addition. judgment is hereby rendered ordering the respondent company to pay complainant the sum of P100. The Insurance Commission then decreed: WHEREFORE. SP No.000. PROP)" was the assured and that "TESING TEXTILES" [was] only the mortgagee of the goods.policies only when he filed his claim with the private respondent and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof. (Annexes M and N). . In both invoices. in failing to disclose the existence of these insurances private respondent violated Condition No.000. .R.

18 January 1991. The body of the letter reads as follows;] xxx xxx xxx Please be informed that I have no knowledge of the provision requiring me to inform your office about my 
 prior insurance under FGA-28146 and F-CEB-24758. Your representative did not mention about said requirement at the time he was convincing me to insure with you. If he only die or even inquired if I had other existing policies covering my establishment, I would have told him so. You will note that at the time he talked to me until I decided to insure with your company the two policies aforementioned were already in effect. Therefore I would have no reason to withhold such information and I would have desisted to part with my hard earned peso to pay the insurance premiums [if] I know I could not recover anything. Sir, I am only an ordinary businessman interested in protecting my investments. The actual value of my stocks damaged by the fire was estimated by the Police Department to be P1,000,000.00 (Please see xerox copy of Police Report Annex "A"). My Income Statement as of December 31, 1989 or five months before the fire, shows my merchandise inventory was already some P595,455.75. . . . These will support my claim that the amount claimed under the three policies are much below the value of my stocks lost. xxx xxx xxx The letter contradicts private respondent's pretension that he did not know that there were other insurances taken on the stock-intrade and seriously puts in question his credibility. His motion to reconsider the adverse decision having been denied, the petitioner filed the instant petition. He contends therein that the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction:

A — . . . WHEN IT REVERSED THE FINDINGS OF FACTS OF THE INSURANCE COMMISSION, A QUASI-JUDICIAL BODY CHARGED WITH THE DUTY OF DETERMINING INSURANCE CLAIM AND WHOSE DECISION IS ACCORDED RESPECT AND EVEN FINALITY BY THE COURTS; B — . . . WHEN IT CONSIDERED AS EVIDENCE MATTERS WHICH WERE NOT PRESENTED AS EVIDENCE DURING THE HEARING OR TRIAL; AND C — . . . WHEN IT DISMISSED THE CLAIM OF THE PETITIONER HEREIN AGAINST THE PRIVATE RESPONDENT. The chief issues that crop up from the first and third grounds are (a) whether the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the policy, and (b) if he had, whether he is precluded from recovering therefrom.
The second ground, which is based on the Court of Appeals' reliance on the petitioner's letter of reconsideration of 18 January 1991, is without merit. The petitioner claims that the said letter was not offered in evidence and thus should not have been considered in deciding the case. However, as correctly pointed out by the Court of Appeals, a copy of this letter was attached to the petitioner's complaint in I.C. Case No. 3440 as Annex "M" thereof and made integral part of the complaint. 12 It has attained the status of a judicial admission and since its due execution and authenticity was not denied by the other party, the petitioner is bound by it even if it were not introduced as an independent evidence. 13 As to the first issue, the Insurance Commission found that the petitioner had no knowledge of the previous two policies. The Court of Appeals disagreed and found otherwise in view of the explicit admission by the petitioner in his letter to the private respondent of 18 January 1991, which was quoted in the challenged decision of the Court of Appeals. These divergent findings of fact constitute an exception to the general rule that in petitions for review under Rule 45, only questions of law are involved and findings of fact by the Court of Appeals are conclusive and binding upon this Court. 14

We agree with the Court of Appeals that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did

not know about the prior policies since these policies were not new or original. Policy No. GA-28144 was a renewal of Policy No. F-24758, while Policy No. GA28146 had been renewed twice, the previous policy being F-24792.
Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code 15 which provides that "[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy." Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the 
 policy. 16 However, in order to constitute a violation, the other insurance must be upon same subject matter, the same interest therein, and the same risk. 17 As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable interest therein and both interests may be one policy, or each may take out a separate policy covering his interest, either at the same or at separate times. 18 The mortgagor's insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. 19 The mortgagee's insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. 20 Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee. A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual practice. The mortgagee may be made the beneficial payee in several ways. He may become the assignee of the policy with the consent of the insurer; or the mere pledgee without such consent; or the original policy may contain a mortgage clause; or a rider making the policy payable to the mortgagee "as his interest may appear" may be attached; or a "standard mortgage clause," containing a collateral independent contract between the mortgagee and insurer, may be attached; or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by a mortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee acquires an equitable lien upon the proceeds. 21 In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such by the insurer but not made a party to the contract himself. Hence, any act of the mortgagor which defeats his right will also defeat the right of the mortgagee. 22 This kind of policy covers only such interest as the mortgagee has at the issuing of the policy. 23

undoubtedly. all benefits under this Policy shall be forfeited. 27 which read: The insured shall give notice to the company of any insurance or insurances already effected. TESING TEXTILES." It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company. 24 It has been noted. shall be payable to MESSRS. 28 which provided "that any outstanding insurance upon the whole or a portion of the objects thereby assured must be declared by the insured in writing and he must cause the company to add or insert it in the policy. the reason being. It expressly provides that the condition "shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200. if any. to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage. or which may subsequently be effected covering any of the property hereby insured. Commercial Union Assurance 
 Co. not a standard mortgage clause. vs. however. or in the 1930 case of Santa Ana vs. This is clearly a simple loss payable clause.On the other hand. and the insured will not be entitled to indemnity in case of loss. and obtains on the assurance that it insures him. 25 The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a mortgage clause which reads: Loss. the policy is in fact in the form used to insure a mortgagor with loss payable clause. F-14622 does not absolutely declare void any violation thereof. as where he applies for a policy." Condition 3in the private respondent's policy No.00.000. pays the premiums. a mortgagee may also procure a policy as a contracting party in accordance with the terms of an agreement by which the mortgagor is to pay the premiums upon such insurance. Ng Hua 26 or in Pioneer Insurance & Surety Corp. It is also a cardinal principle of law that .vs. It must. Yap. fully informs the authorized agent of his interest. however. without which such policy shall be null and void. Cebu City as their interest may appear subject to the terms of this policy. be underscored that unlike the "other insurance" clauses involved in General Insurance and Surety Corp. that although the mortgagee is himself the insured.

31 With these principles in mind. no double insurance exists.. the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance. as. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured. in the sum of P50. perforce. and (b) the nullity of the policy shall only be to the extent exceeding P200. be meticulously analyzed. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value. Inc. the language of the contract was carefully chosen and deliberated upon by experts and legal advisers who had acted exclusively in the interest of the insurers and the technical language employed therein is rarely understood by ordinary laymen.00. the insured may have an inducement to destroy the property for the purpose of collecting the insurance. Indeed. the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200.00 of the total policies obtained.000." and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co.00. the insured sees the contract already in its final form and has had no voice in the selection or arrangement of the words employed therein. What it had in mind was to discourage over-insurance. Furthermore. for example. As earlier stated.000.000. will be avoided. 32 .00. On the other hand. conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted. The first conclusion is supported by the portion of the condition referring to other insurance "covering any of the property or properties consisting of stocks in trade.000. except for riders which may later be inserted. 30 The reason for this is that. by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200. goods in process and/or inventories only hereby insured. the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud.forfeitures are not favored and that any construction which would result in the forfeiture of the policy benefits for the person claiming thereunder. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent. we are of the opinion that Condition 3 of the subject policy is not totally free from ambiguity and must. by finding a waiver for such forfeiture. 29 Stated differently. if it is possible to construe the policy in a manner which would permit recovery. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. provisions. The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy. and most favorably toward those against whom they are intended to operate.

SO ORDERED. and Payroll Robbery policy it issued to the private respondent or whether recovery thereunder is precluded under the general exceptions clause thereof.R.: The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is liable under the Money. The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its head office in Makati.000.. The case was docketed as Civil Case No.00 under the policy issued by Fortune. Both the trial court and the Court of Appeals held that there should be recovery. The decision of the Court of Appeals in CA-G. 3340 is REINSTATED. 1817 and assigned to Branch 146 thereof. J. No. (hereinafter Fortune) of a complaint for recovery of the sum of P725. 1995 FORTUNE INSURANCE AND SURETY CO. respondents. The petitioner contends otherwise. SP No. INC. This case began with the filing with the Regional Trial Court (RTC) of Makati. 115278 May 23. Security. 31916 is SET ASIDE and the decision of the Insurance Commission in Case No. . DAVIDE.R. petitioner.
 COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES.. Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION G. by private respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner Fortune Insurance and Surety Co. JR..WHEREFORE. Inc. Costs against private respondent Country Bankers Insurance Corporation. Metro Manila. 
 vs.. the instant petition is hereby GRANTED.

532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City. a duplicate original copy of which is hereto attached as Exhibit "C". the duplicate original of which is hereto attached as Exhibit "A". The plaintiff was insured by the defendants and an insurance policy was issued. The robbery took place while the armored car was traveling along Taft Avenue in Pasay City. Metro Manila on June 29. a duplicate original copy of which is hereto attached as Exhibit "B". 1983. A copy of the complaint is hereto attached as Exhibit "D". together with Edelmer Bantigue Y Eulalio. 3. was robbed of the said cash. from its Pasay Branch to its Head Office at 8737 Paseo de Roxas. The Security Guard Atiga was assigned by Unicorn Security Services. 1982. escorted by Security Guard Saturnino Atiga Y Rosete.00 under the custody of its teller. Driver Magalong was assigned by PRC Management Systems with the plaintiff by virtue of an Agreement executed on August 7. The said armored car was driven by Benjamin Magalong Y de Vera. the parties asked the trial court to render judgment based on the following stipulation of facts: 1. 1987. Maribeth Alampay.000. while in the process of transferring cash in the sum of P725. . Makati.D. Inc. After an investigation conducted by the Pasay police authorities. An armored car of the plaintiff. with the plaintiff by virtue of a contract of Security Service executed on October 25. 5.After joinder of issues. Reynaldo Aquino and John Doe. 4. 2. the driver Magalong and guard Atiga were charged. with violation of P.

00. . The dispositive portion thereof reads as follows: WHEREFORE. A copy of the said information is hereto attached as Exhibit "E. Demands were made by the plaintiff upon the defendant to pay the amount of the loss of P725. trustee or authorized representative . The Fiscal of Pasay City then filed an information charging the aforesaid persons with the said crime before Branch 112 of the Regional Trial Court of Pasay City. . The plaintiff opposes the contention of the defendant and contends that Atiga and Magalong are not its "officer. partner. 8.6. . . 7. employee. the Court finds for plaintiff and against defendant. director. at the time of the robbery. and . . which is marked as Exhibit "A-1.000. trustee or authorized representative of the Insured whether acting alone or in conjunction with others. "General Exceptions" Section (b). . employee." specifically under page 1 thereof. fraudulent or criminal act of the insured or any officer. . attached hereto as Exhibit "A. but the latter refused to pay as the loss is excluded from the coverage of the insurance policy. 1 On 26 April 1990. the trial court rendered its decision in favor of Producers." and which reads as follows: GENERAL EXCEPTIONS The company shall not be liable under this policy in report of xxx xxx xxx (b) any loss caused by any dishonest. ." The case is still being tried as of this date. premises considered.

and (c) orders defendant to pay costs of suit.000. The wages and salaries of both Magalong and Atiga are presumably paid by their respective firms. 2 The trial court ruled that Magalong and Atiga were not employees or representatives of Producers.000. SO ORDERED.00 as liability under Policy No. .00).000. It Said: The Court is satisfied that plaintiff may not be said to have selected and engaged Magalong and Atiga. until fully paid.(a) orders defendant to pay plaintiff the net amount of P540.000. 0207 (as mitigated by the P40. their services as armored car driver and as security guard having been merely offered by PRC Management and by Unicorn Security and which latter firms assigned them to plaintiff. (b) orders defendant to pay plaintiff the sum of P30.00 special clause deduction and by the recovered sum of P145.00 as and for attorney's fees. which alone wields the power to dismiss them. All other claims and counterclaims are accordingly dismissed forthwith. The finding is accordingly compelled that neither Magalong nor Atiga were plaintiff's "employees" in avoidance of defendant's liability under the policy. particularly the general exceptions therein embodied. Magalong and Atiga are assigned to plaintiff in fulfillment of agreements to provide driving services and property protection as such — in a context which does not impress the Court as translating into plaintiff's power to control the conduct of any assigned driver or security guard. with interest thereon at the legal rate. beyond perhaps entitling plaintiff to request are replacement for such driver guard.

The word "employee" must be taken to mean in the ordinary sense. it affirmed in toto the appealed decision. vs. are to be construed according to the sense and meaning of the terms which the parties themselves have used. 211 SCRA 554). 32946. Court of Appeals. 1987 money transfer from plaintiff's Pasay Branch to its Makati Head Office.000. Contracts of insurance. it must/should have so stated expressly in the . p. In its decision4 promulgated on 3 May 1994. If such terms are clear and unambiguous. They were merely an assigned armored car driver and security guard. ordinary and popular sense (New Life Enterprises Case. Court of Appeals. supra. vs. ordinary and simple. Had it intended to apply the Labor Code in defining what the word "employee" refers to. Court of Appeals. they must be taken and understood in their plain. Ltd. CV No. respectively. The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were neither employees nor authorized representatives of Producers and ratiocinated as follows: A policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurance company (New Life Enterprises vs. Sun Insurance Office. Sun Insurance Office. 195 SCRA 193). The Labor Code is a special law specifically dealing with/and specifically designed to protect labor and therefore its definition as to employer-employee relationships insofar as the application/enforcement of said Code is concerned must necessarily be inapplicable to an insurance contract which defendant-appellant itself had formulated. like other contracts. 3 Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G. No other interpretation is necessary. and hence plaintiff's then designated "messenger" adverted to in the policy.R. for the June 29.Neither is the Court prepared to accept the proposition that driver Magalong and guard Atiga were the "authorized representatives" of plaintiff. Quite plainly — it was teller Maribeth Alampay who had "custody" of the P725. 207 SCRA 669.00 cash being transferred along a specified money route. The language used by defendant-appellant in the above quoted stipulation is plain. Ltd. 676.

would not obliterate the relationship. According to Fortune. when Producers commissioned a guard and a driver to transfer its funds from one branch to another. (2) the mode of payment of wages. the right-of-control test has been held to be the decisive factor. work premises. (3) the presence or absence of a power to dismiss. on the other. Contractor or subcontractor. among others. and (4) the presence and absence of a power to control the putative employee's conduct. — There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools. 8 and C) except only to ask for their replacements from the contractors. Said driver and security guard cannot be considered as employees of plaintiff-appellee bank because it has no power to hire or to dismiss said driver and security guard under the contracts (Exhs." Thus. and the workers recruited and placed by such persons are performing activities which are directly related to the principal . it cannot be the subject of agreement. 6 It asserts that the power of control over Magalong and Atiga was vested in and exercised by Producers. 106. equipment. and Magalong and Atiga. machineries. employees of Producers. It asserts that the existence of an employer-employee relationship "is determined by law and being such. Fortune filed this petition for review on certiorari. nevertheless. on the one hand. Assuming that they could not be considered authorized representatives. they effectively and necessarily became its authorized representatives in the care and custody of the money. if there was in reality an employeremployee relationship between Producers.insurance policy. they were. 5 On 20 June 1994. Of the four. Fortune further insists that PRC Management System and Unicorn Security Services are but "labor-only" contractors under Article 106 of the Labor Code which provides: Art. It alleges that the trial court and the Court of Appeals erred in holding it liable under the insurance policy because the loss falls within the general exceptions clause considering that driver Magalong and security guard Atiga were Producers' authorized representatives or employees in the transfer of the money and payroll from its branch office in Pasay City to its head office in Makati. Fortune points out that an employer-employee relationship depends upon four standards: (1) the manner of selection and engagement of the putative employee. the provisions in the contracts of Producers with PRC Management System for Magalong and with Unicorn Security Services for Atiga which state that Producers is not their employer and that it is absolved from any liability as an employer.

8 to wit: In determining the existence of employer-employee relationship. Clave. Producers relies on the provision of its contract with Unicorn Security Services which provides that the guards of the latter "are in no sense employees of the CLIENT. and since Producers paid the monthly compensation of P1. vs. In such cases. Producers further asseverates that what should be applied is the rule in American President Lines vs. is not applicable to all cases but only when it becomes necessary to prevent any violation or circumvention of the Labor Code. (3) the power of dismissal. Producers argued that the rule in International Timber Corp. Fortune thus contends that Magalong and Atiga were employees of Producers. their dismissal.00 per driver to PRC Management Systems and not to Magalong. following the ruling in International Timber Corp. Section 174 of . It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is a form of casualty insurance. and the control of their conduct.400. (2) the payment of wages. a social legislation whose provisions may set aside contracts entered into by parties in order to give protection to the working man. NLRC 7 that a finding that a contractor is a "labor-only" contractor is equivalent to a finding that there is an employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor. the payment of their wages." There is merit in this petition. Producers contends that Magalong and Atiga were not its employees since it had nothing to do with their selection and engagement. the following elements are generally considered. it is clear that Magalong was not Producers' employee.business of such employer. On the other hand. Since under Producers' contract with PRC Management Systems it is the latter which assigned Magalong as the driver of Producers' armored car and was responsible for his faithful discharge of his duties and responsibilities. namely: (1) the selection and engagement of the employee. the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. As to Atiga. and (4) the power to control the employee's conduct.

governed by the general provisions applicable to all types of insurance.the Insurance Code provides: Sec. These contracts are. as to preclude the insurer from non-compliance with its obligation. robbery. burglary and theft insurance. the Insurance Code contains no other provisions applicable to casualty insurance or to robbery insurance in particular. motor vehicle liability insurance. Outside of these. many designed to reduce this hazard. . but is not limited to. 9 It has been aptly observed that in burglary. and theft insurance. there is no room for construction and such terms cannot be enlarged or diminished by judicial construction."10 Persons frequently excluded under such provisions are those in the insured's service and employment. employer's liability insurance. public liability insurance. 13 The terms "service" and "employment" are generally associated with the idea of selection. thus any ambiguity therein should be resolved against the insurer. the terms specifying the excluded classes are to be given their meaning as understood in common speech. and other substantially similar kinds of insurance. 174. therefore. 17 It goes without saying then that if the terms of the contract are clear and unambiguous. 15 or it should be construed liberally in favor of the insured and strictly against the insurer. plate glass insurance. 11 The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. Seldom does the insurer assume the risk of all losses due to the hazards insured against. 14 A contract of insurance is a contract of adhesion. excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of insurance such as fire or marine. control. (emphases supplied) Except with respect to compulsory motor vehicle liability insurance. Casualty insurance is insurance covering loss or liability arising from accident or mishap. "the opportunity to defraud the insurer — the moral hazard — is so great that insurers have found it necessary to fill up their policies with countless restrictions. 18 An insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 It is settled that the terms of the policy constitute the measure of the insurer's liability. 20 In the absence of statutory prohibition to the contrary. and compensation. taking into consideration its purpose and always in accordance with the general principles of insurance law.12 In such cases. personal accident and health insurance as written by non-life insurance companies. It includes. 16 Limitations of liability should be regarded with extreme jealousy and must be construed 
 in such a way. the rights and obligations of the parties must be determined by the terms of their contract.

is again quoted: GENERAL EXCEPTIONS The company shall not be liable under this policy in respect of xxx xxx xxx (b) any loss caused by any dishonest. . it may now be asked whether Magalong and Atiga qualify as employees or authorized representatives of Producers under paragraph (b) of the general exceptions clause of the policy which. however." It is clear to us that insofar as Fortune is concerned. Notwithstanding such express assumption of PRC Management Systems and Unicorn Security Services that the drivers and the security guards each shall supply to Producers are not . or criminal acts of persons granted or having unrestricted access to Producers' money or payroll.insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. 22 Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security Services are "labor-only" contracts. director. 21 or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "laboronly" contract as employees of the party employing them and not of the party who supplied them to the employer. partner. it is not the employer of Magalong. or jurisprudentially established in the light of the four standards in the determination of the employeremployee relationship. trustee or authorized representative of the Insured whether acting alone or in conjunction with others. it was its intention to exclude and exempt from protection and coverage losses arising from dishonest. . When it used then the term "employee. insists that by the express terms thereof.employee. for easy reference. fraudulent or criminal act of the insured or any officer. (emphases supplied) There is marked disagreement between the parties on the correct meaning of the terms "employee" and "authorized representatives." it must have had in mind any person who qualifies as such as generally and universally understood. . With the foregoing principles in mind. Producers. fraudulent.

the complaint for violation of P. in the light of the criteria provided for in Article 106 of the Labor Code. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court of Makati in Civil Case No. Howsoever viewed.R. one who represents others or another in a special capacity. the instant petition is hereby GRANTED. its "authorized representatives" who served as such with its teller Maribeth Alampay. Bellosillo and Kapunan. it may. in respect of the transfer of Producer's money from its Pasay City branch to its head office in Makati. and the information therefor filed by the City Fiscal of Pasay City. and Atiga to provide the needed security for the money. Whether they are is. and his two other companions. . we are satisfied that Magalong and Atiga were. Since the parties opted to submit the case for judgment on the basis of their stipulation of facts which are strictly limited to the insurance policy. 1817 is DISMISSED. CV No. as an agent. with Alampay to be responsible for its custody in transit. JJ. Producers entrusted the three with the specific duty to safely transfer the money to its head office. SO ORDERED. the vehicle. "labor-only" contracts. But even granting for the sake of argument that these contracts were not "labor-only" contracts. No. took no part. The complaint in Civil Case No. J. the contracts with PRC Management Systems and Unicorn Security Services. The decision of the Court of Appeals in CA-G. WHEREFORE . No pronouncement as to costs. 1817 are REVERSED and SET ASIDE. the three acted as agents of Producers." 23 In view of the foregoing..the latter's employees. concur. there is a paucity of evidence as to whether the contracts between Producers and PRC Management Systems and Unicorn Security Services are "labor-only" contracts. be that it is because the contracts are. and PRC Management Systems and Unicorn Security Services were truly independent contractors. In short. Fortune is exempt from liability under the general exceptions clause of the insurance policy. a question of fact. and is interchangeable with "agent.D. Padilla. 532.. indeed. in fact. for these particular tasks. Magalong to drive the armored vehicle which would carry the money. A "representative" is defined as one who represents or stands in the place of another.

Branch V. J.: The question of law raised in this case that justified a direct appeal from a decision of the Court of First Instance Rizal. respondents-appellees. Quezon City. she paid the sum of P20. VASQUEZ. L. 1982 REGINA L. Lapuz its Certificate of Insurance No. MARCIAL EDILLON. p. p. She filled up the blank application form given to her and filed the same with the respondent insurance corporation. 
 vs.
 MANILA BANKERS LIFE INSURANCE CORPORATION and the COURT OF FIRST INSTANCE OF RIZAL. Sometime in April 1969. the respondent insurance corporation issued to Carmen O. No. she gave the date of her birth as July 11. (Rollo. Faylona for petitioners-appellants. BRANCH V.V. petitioners-appellants.00 representing the premium for which she was issued the corresponding receipt signed by an authorized agent of the respondent insurance corporation. K.Quiason. as assisted by her husband. The material facts are not in dispute. Republic of the Philippines
 SUPREME COURT
 Manila FIRST DIVISION G.) Upon the filing of said application and the payment of the premium on the policy applied for. Reyes for respondents-appellees. 128866. (Rollo. 1969.R. 1904. 28. J. On the same date. L-34200 September 30. EDILLON. L. is on leave. Carmen O. In the said application form which was dated April 15. QUEZON CITY.) The policy was to be effective for a period . to be taken directly to the Supreme Court is whether or not the acceptance by the private respondent insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of overage stated in the said certificate of insurance. Lapuz applied with respondent insurance corporation for insurance coverage against accident and injuries. 27..

The age of the insured Carmen 0. 1969. the respondent insurance corporation relies on a provision contained in the Certificate of Insurance. Edillon.000." It is pointed out that the insured being over sixty (60) years of age when she applied for the insurance coverage. On June 7. the insured in this case. The accident . Edillon instituted this action in the Court of First Instance of Rizal on August 27.00) PESOS received by way of premium on the insurancy policy.. In resisting the claim of the petitioner. On May 31. It was further argued by the trial court that the ruling calling for a liberal interpretation of an insurance contract in favor of the insured and strictly against the insurer may not be applied in the present case in view of the peculiar facts and circumstances obtaining therein. Lapuz died in a vehicular accident in the North Diversion Road. The trial court sustained the contention of the private respondent and dismissed the complaint. We REVERSE the judgment of the trial court. petitioner Regina L. it was the duty of the insured to know the terms of the contract he or she is entering into. 1969. upon learning from its terms that she could not have been qualified under the conditions stated in said contract. Lapuz was not concealed to the insurance company. a sister of the insured and who was the named beneficiary in the policy. the policy was null and void. 12886. Her claim having been denied. submitting all the necessary papers and other requisites with the private respondent. Despite such information which could hardly be overlooked in the application form.of 90 days. It was reasoned out that a policy of insurance being a contract of adhesion.. the respondent insurance corporation received her payment of premium and issued the corresponding certificate of insurance without question. what she should have done is simply to ask for a refund of the premium that she paid.00) PESOS in favor of the private respondent. Carmen O. Regina L. considering its prominence thereon and its materiality to the coverage applied for. and ordered the private respondent to return the sum of TWENTY (P20. excluding its liability to pay claims under the policy in behalf of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years . filed her claim for the proceeds of the insurance. 1969 or during the effectivity of Certificate of Insurance No. and no risk on the part of the respondent insurance corporation had arisen therefrom. Her application for insurance coverage which was on a printed form furnished by private respondent and which contained very few items of information clearly indicated her age of the time of filing the same to be almost 65 years of age. ordered the petitioner to pay attorney's fees in the sum of ONE THOUSAND (P1.

If the private respondent failed to act. or. occurred on May 31. a risk covered by the policy. and received the corresponding premiums. the insurance corporation is already deemed in estoppel. It would be perilously close to conniving at fraud upon the insured to allow appellant to claim now as void ab initio the policies that it had issued to the plaintiff without warning of their fatal defect. it is either because it was willing to waive such disqualification. 85. the claim under the policy was resisted on that ground.". That . as was held in the case of "Que Chee Gan vs. through the negligence or incompetence of its employees for which it has only itself to blame. owned by the municipality of Tabaco. of which it was informed. In ruling that the said deviation from the terms of the policy did not prevent the claim under the same. Such fact appears from positive testimony for the insured that appellant's agents inspected the premises. 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for. Under the circumstances. It inaction to revoke the policy despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such condition. for the reason that knowing fully an that the number of hydrants demanded therein never existed from the very beginning. and after it had misled the defendant into believing that the policies were effective.which resulted in the death of the insured. The insurance company was aware. even before the policies were issued. and the simple denials of appellant's representative (Jamiczon) can not overcome that proof. it simply overlooked such fact. When it was determined that the bodega should have eleven (11) fire hydrants in the compound as required by the terms of the policy. This case involved a claim on an insurance policy which contained a provision as to the installation of fire hydrants the number of which depended on the height of the external wan perimeter of the bodega that was insured. contrary to the requirements of the warranty in question. There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so.. Law Union Insurance Co. Ltd. that in the premises insured there were only two fire hydrants installed by Que Chee Gan and two others nearby.. the appellant nevertheless issued the policies in question subject to such warranty. instead of only two (2) that it had. this Court stated the following: We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to claim violation of the socalled fire hydrants warranty. 98 Phil.

pp.' (29 Am. such knowledge constitutes a waiver of conditions in the contract inconsistent with the known facts. and so closely related to positive fraud. supported by a long line of cases. if insisted on. as to be . rather than to have deceived the insured into thinking he is insured when in fact he is not. Jur. The plain. The law is charitable enough to assume. and the insurer is stopped thereafter from asserting the breach of such conditions. that the assured believes it to be valid and binding. human justice of this doctrine is perfectly apparent. that an insurance company intends to execute a valid contract in return for the premium received. it will be presumed to have intended to waive the conditions and to execute a binding contract. though it knows as it must. and to have taken is money without consideration. section 807. would invalidate the contract from its very inception. 29. 611-612) to be as follows: It is usually held that where the insurer. is expressed by American Jurisprudence (Vol. is so contrary to the dictates of honesty and fair dealing. To allow a company to accept one's money for a policy of insurance which it then knows to be void and of no effect. Insurance. since the discount depended on the number of hydrants. and the fire fighting equipment available (See"'Scale of Allowances" to which the policies were expressly made subject). and this result is known to the insurer. and when the policy contains a condition which renders it voidable at its inception. at the time of the issuance of a policy of insurance. has knowledge of existing facts which.such inspection was made it moreover rendered probable by its being a prerequisite for the fixing of the discount on the premium to which the insured was entitled.) The reason for the rule is not difficult to find. in the absence of any showing to the contrary.. at pp. The law. 611612.

waived the provision therein that it would only pay for the loss or damage in case the same occurs after the payment of the premium. 65 SCRA 134. By so doing. This cannot be deemed to be the real intention of the parties. Plastic Era Co. A check given subsequent by the insured as partial payment of the premium was dishonored for lack of funds. which involved a violation of the provision of the policy requiring the payment of premiums before the insurance shall become effective. 543544). a requirement for the payment of the first or initial premium in advance or actual cash may be waived by acceptance of a . Despite such deviation from the terms of the policy. This rendered the policy immediately operative on the date it was delivered. it has impliedly agreed to modify the tenor of the insurance policy and in effect. Considering that the insurance policy is silent as to the mode of payment. A similar view was upheld in the case of Capital Insurance & Surety Co. 96 Atl... Capital Insurance is deemed to have accepted the promissory note in payment of the premium.. the insurer was held liable. To hold that a literal construction of the policy expressed the true intention of the company would be to indict it..abhorent to fairminded men.. Commercial Union Assurance Co.. for fraudulent purposes and designs which we cannot believe it to be guilty of (Wilson vs. is that although one of conditions of an insurance policy is that "it shall not be valid or binding until the first premium is paid". Inc. Inc. in the case before Us the Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within thirty (30) days from the effective date of policy. and leave it at liberty to repudiate it the next moment. vs. 540. The company issued the policy upon the execution of a promissory note for the payment of the premium. It would be to allow the company to treat the policy as valid long enough to get the premium on it. Significantly. The view taken in most cases in the United States: . if it is silent as to the mode of payment. promissory notes received by the company must be deemed to have been accepted in payment of the premium. In other words.

78860 May 28. Republic of the Philippines
 SUPREME COURT
 Manila THIRD DIVISION G. 1990 PERLA COMPANIA DE SEGUROS.000.000.promissory note. respondents..00) PESOS as and for attorney's fees. 
 vs. INC. judgment is hereby rendered ordering defendant Perla Compania de Seguros. WHEREFORE. Inc. SO ORDERED. Dolorfino and Dominguez Law Offices for private respondent. Branch XVI. the private respondent insurance corporation is hereby ordered to pay to the petitioner the sum of TEN THOUSAND (P10.000.R. the judgment appealed from is hereby REVERSED and SET ASIDE. Arandia & Associates for petitioner.000. and the costs of suit.: This is a petition for review on certiorari of the decision of the Court of Appeals 1 affirming in toto the decision of the Regional Trial Court of Cavite.J.00 as reasonable attorney's fee with costs ..
 HONORABLE COURT OF APPEALS and MILAGROS CAYAS.00) PESOS as proceeds of Insurance Certificate No.. to pay plaintiff Milagros Cayas the sum of P50. 1969 until fully paid. FERNAN. the further sum of TWO THOUSAND (P2. C. and the sum of P5. petitioner. No. In lieu thereof. 2 the dispositive portion of which states: IN VIEW OF THE FOREGOING. 128866 with interest at the legal rate from May 31.00 under its maximum liability as provided for in the insurance policy. Yabut.

NC-794.00 for all the claims against her arising from the vehicular accident plus legal and other expenses. SO ORDERED. 4 Said passenger vehicle was insured with Perla Compania de Seguros.00) Pesos for the medical predicament he found himself as damaging consequences of defendant Milagros Cayas complete lack of diligence of a good father of a family' when she secured the driving services of one Oscar Figueroa on December.00) Pesos for Attorney's fees. under our present imperatives. judgment is hereby rendered in favor of the plaintiffs and against the defendant Milagros Cayas who is hereby ordered to compensate the plaintiff' Edgar Perea with damages in the sum of Ten Thousand (Pl0. under the imperatives of the monetary power of the peso today. she was declared as in default. 8 Realizing her procedural mistake. (PCSI) under policy No. PUB-4G-593. When the decision in Civil Case No.000.000. 1978. namely: Rosario del Carmen. SO ORDERED. Ricardo Magsarili and Charlie Antolin. she later withdrew said complaint. NC-794. 1978.00) Pesos for moral damages. 9 . the court rendered a decision 7 in favor of Perea with its dispositive portion reading thus: WHEREFORE. LTO/60CC04241 issued on February 3.000. the sum of Seven Thousand (P7. NC-794 was about to be executed against her. 5 On December 17. With costs against the defendant. the sum of Ten Thousand (P10.000. Branch 6 docketed as Civil Case No.000. sued Milagros Cayas for damages in the Court of First Instance of Cavite. One of them. 3 Private respondent Milagros Cayas was the registered owner of a Mazda bus with serial No. 1978.against said defendant. After trial.00) Pesos for exemplary damages. 17. Cavite injuring several of its passengers. agreed to a settlement of P4. the bus figured in an accident in Naic.00 each with Milagros Cayas. Inc.000. 19-year old Edgardo Perea. At the pre-trial of Civil Case No. Milagros Cayas filed a complaint against PCSI in the Office of the Insurance Commissioner praying that PCSI be ordered to pay P40. the sum of Five Thousand (P5. TA3H4 P-000445 and plate No. while three others. Milagros Cayas failed to appear and hence.

the court promulgated a decision in Civil Case No. refused to make such re-imbursement. 1982. 1982. that she could not have suffered said financial setback had the counsel for PCSI. the dispositive portion of which was quoted earlier. Ricardo Magsarili and Charlie Antolin. Milagros Cayas moved for the reconsideration of the dismissal order.000 to each of the following injured passengers: Rosario del Carmen. 1981. efforts exerted by defendant's lawyers in protecting Cayas' rights proved futile and rendered nugatory. appeared at the trial of Civil Case No. on November 11. her house and lot were levied upon and sold at public auction for P38. finding that: In disavowing its obligation to plaintiff under the insurance policy. She alleged therein that to satisfy the judgment in Civil Case No. Milagros Cayas filed a motion to declare PCSI in default for its failure to file an answer. N-4161). Trial of the case ensued. P5. NC-794 and attended to the claims of the three other victims.000 for compensation of the injured victims.000 as compensation for the injured passengers. On July 13. who also represented her. that she sought reimbursement of said amounts from the defendant.000 as attorney's fees.Consequently. the court motu propio ordered its dismissal without prejudice. Said decision was set aside after the PCSI filed a motion therefor. She prayed that judgment be rendered directing PCSI to pay her P50. such sum as the court might approximate as damages. The motion was granted and plaintiff was allowed to adduce evidence ex-parte. defendant advanced the proposition that before it can be made to pay. Still. N-4161. 11Alleging that she had not received a copy of the answer to the complaint. and that "out of sportsmanship". the court rendered judgment by default ordering PCSI to pay Milagros Cayas P50. And so plaintiffs liability was determined in that case filed against her by Perea in the Naic CFI. she did not file a motion to hold PCSI in default. despite this determination of liability. defendant sought escape from its obligation by positing the theory that plaintiff Milagros Cayas lost the Naic case due to her negligence because of which. In view of Milagros Cayas' failure to prosecute the case. In due course.200.000 as moral damages and P5.000 as attorney's fees. Said motion for reconsideration was acted upon favorably by the court in its order of March 31. the liability must first be determined in an appropriate court action. she paid P4. and P6. Blame was laid entirely on plaintiff by defendant for losing the Naic . which notwithstanding the fact that her claim was within its contractual liability under the insurance policy. Milagros Cayas filed a complaint for a sum of money and damages against PCSI in the Court of First Instance of Cavite (Civil Case No. 10 that to avoid numerous suits and the "detention" of the insured vehicle. and that she was constrained to secure the services of counsel to protect her rights. NC794. About two months later. that she suffered moral damages as a consequence of such refusal.

PCSI appealed to the Court of Appeals.000.000. a decision favorable to Milagros Cayas could have been obtained. the latter could have won the suit and thus relieved of any obligation to Perea Defendant's posture is stretching the factual circumstances of the Naic case too far. . may no longer be addressed to this Court. in its decision of May 8. 1987 affirmed in toto the lower court's decision. Petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the amount of P12. it cannot be said. Said contentions. the court allowed attorney's fees in the amount of P5. Defendant labored under the impression that had Cayas cooperated fully with defendant's lawyers. NC794 because of her negligence and that there is no proof that the decision in said case has been executed. however. This.case. having been raised and threshed out in the Court of Appeals and rejected by it. which. there should be no such award. that if the Naic case had proceeded on trial on the merits. PCSI filed the instant petition charging the Court of Appeals with having erred in affirming in toto the decision of the lower court. Petitioner's other contentions are primarily concerned with the extent of its liability to private respondent under the insurance policy. defendant's lawyers could have mitigated the claim for damages by Perea against Cayas. petitioner's assertions that private respondent lost Civil Case No. 12 The court. It altogether denies liability for the payments made by private respondents to the other three (3) injured passengers Rosario del Carmen. there being proof that she was compelled to engage the services of counsel to protect her rights under the insurance policy.000. held that inasmuch as Milagros Cayas failed to establish that she underwant moral suffering and mental anguish to justify her prayer for damages. At the outset. But even accepting defendant's postulate. There is merit in petitioner's assertions. But.00 each or a total of P12.00.00. nor was it shown positively and convincingly.000. Ricardo Magsarili and Charlie Antolin in the amount of P4. Its motion for reconsideration having been denied by said appellate court. we hold as factual and therefore undeserving of this Court's attention. we consider to be the only issue in this case. Nor was it definitely established that if the pre-trial was undertaken in that case.

bodily injury and damage to property combined so sustained as the result of any one accident. or to prosecute in his (sic) name for its own benefit any claim for indemnity or damages or otherwise.00 per accident.000. (b) "per person" for PASSENGER liability is the limit of the Company's liability for all damages arising out of death or bodily injury sustained by one person as the result of any one accident: (c) "per accident" for PASSENGER liability is. If the Company shall make any payment in settlement of any claim. No admission. and such payment includes any amount not covered by this Policy. and the insured shall give all such information and assistance as the Company may require. and shall have full discretion in the conduct of any proceedings in the settlement of any claim. if it so desires. Conditions Applicable to All Sections xxx xxx xxx 5. offer. promise or payment shall be made by or on behalf of the insured without the written consent of the Company which shall be entitled.The insurance policy involved explicitly limits petitioner's liability to P12. The Limit of Liability stated in Schedule A as applicable (a) to THIRD PARTY is the limit of the Company's liability for all damages arising out of death. to take over and conduct in his (sic) name the defense or settlement of any claim. subject to the above provisions respecting per person.000.00 per person and to P50. the total limit of the Company's liability for all such damages arising out of death or bodily injury sustained by two or more persons as the result of any one accident.13 Pertinent provisions of the policy also state: SECTION I-Liability to the Public xxx xxx xxx 3. the Insured .

the insurance policy clearly and categorically placed petitioner's liability for all damages arising out of death or bodily injury sustained by one person as a result of any one accident at P12.000. sir . Said amount complied with the minimum fixed by the law then prevailing.. said stipulation must be upheld as effective. arbitrary or objectionable in this stipulation as would warrant its nullification. Petitioner's liability under the insurance contract not being less than P12.shall repay the Company the amount not so covered.. There is nothing unreasonable. the Insurance Code of 1978). good customs. We have ruled in Stokes vs. 612 (which was retained by P. In her cross-examination before the trial court. Inc. The same was obviously designed to safeguard the insurer's interest against collusion between the insured and the claimants. the minimum liability is P12. In other words. morals.00. Milagros Cayas admitted. valid and binding as between the parties. public order or public policy. thus: Atty. In the case at bar. Malayan Insurance Co.000 per passenger. Yabut: q With respect to the other injured passengers of your bus wherein you made payments you did not secure the consent of defendant (herein petitioner) Perla Compania de Seguros when you made those payments? a I informed them about that q But they did not give you the written authority that you were supposed to pay those claims? a No. and therefore not contrary to law.000.00. l6 It being specifically required that petitioner's written consent be first secured . 14 that the terms of the contract constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer. under the law. No. we rule as valid and binding upon private respondent the condition above-quoted requiring her to secure the written permission of petitioner before effecting any payment in settlement of any claim against her.000. 1460. Section 377 of Presidential Decree No. which provided that the liability of land transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use of their vehicles shall not be less than P12. 15 In like manner.D.

for contracts are obligatory. 18 we ruled that contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations. if their terms are clear and leave no room for doubt as to the intention of the contracting parties. we stated in Pacific Oxygen & Acetylene Co. cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident. interpretation being called for only when such literal application is impossible. vs. This is patent error.00. no matter what form they may be. whenever the essential requisites for their validity are present. Mutuc. Magsarili and Antolin in view of her failure to comply with the condition contained in the insurance policy.000. An insurance indemnity. In Phil.000. Central Bank. we find no reason to disturb the award of attorney's fees. American General Insurance Co. petitioner was made liable for the amount of P50. Inc vs. WHEREFORE. Clearly.00. We observe that although Milagros Cayas was able to prove a total loss of only P44. Moreover.before any payment in settlement of any claim could be made. SO ORDERED. Republic of the Philippines
 SUPREME COURT
 Manila . it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy. 17 Thus. private respondent is precluded from seeking reimbursement of the payments made to del Carmen.000. 20 Finally. being merely an assistance or restitution insofar as can be fairly ascertained." 19 that the first and fundamental duty of the courts is the application of the law according to its express terms. No pronouncement as to costs. the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case.00. the maximum liability per accident stipulated in the policy.. 00) plus legal interest from the promulgation of the decision of the lower court until it is fully paid and attorney's fees in the amount of P5.000. the decision of the Court of Appeals is hereby modified in that petitioner shall pay Milagros Cayas the amount of Twelve Thousand Pesos (P12.

1970 in an information 3 which reads as follows: That on or before the 21st day of June. registered under the laws of the Republic of the Philippines. unlawfully and feloniously act as agent in the solicitation or procurement of an application for insurance by soliciting therefor the application of one Eugenio S.R. Republic of the Philippines.FIRST DIVISION G.R. vs.
 THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES.00) dated June 21. appellant's husband. The facts. 1969. for and in behalf of Perla Compania de Seguros. 13243-CR entitled "People of the Philippines. 2427. and to pay the costs. respondents. did then and there. resulting in the issuance of a Broad Personal Accident Policy No. Mapalad Aisporna. 4 as found by the respondent Court of Appeals are quoted hereunder: IT RESULTING: That there is no debate that since 7 March. a duly organized insurance company.: In this petition for certiorari. petitioner-accused Aisporna seeks the reversal of the decision dated August 14. No. 1971 which found the petitioner guilty for having violated Section 189 of the Insurance Act (Act No. L-39419 April 12. 1982 MAPALAD AISPORNA. as amended) and sentenced her to pay a fine of P500. Petitioner Aisporna was charged in the City Court of Cabanatuan for violation of Section 189 of the Insurance Act on November 21.00 with subsidiary imprisonment in case of insolvency.000. petitioner. defendant-appellant" of respondent Court of Appeals affirming the judgment of the City Court of Cabanatuan 2 rendered on August 2. without said accused having first secured a certificate of authority to act as such agent from the office of the Insurance Commissioner. CONTRARY TO LAW. plaintiff-appellee. DE CASTRO. 1969. in the City of Cabanatuan. the above-named accused. Inc. wilfully. 28PI-RSA 0001 in the amount not exceeding FIVE THOUSAND PESOS (P5. . J. Republic of the Philippines. Rodolfo S. 1969. 1969 and as of 21 June. No.. 1974 1 in CA-G. and within the jurisdiction of this Honorable Court. Isidro. 
 vs.

with assistance of private prosecutor. 1975 reiterating his stand that the petitioner has not violated Section 189 of the Insurance Act. insured died by violence during lifetime of policy. 1970. Consequently. People presented evidence that was hardly disputed. her husband. In the comment 7 filed on December 20. "as agent in the solicitation for insurance by soliciting therefore the application of one Eugenio S. unlawfully. 5 In its resolution of October 28. C. In seeking reversal of the judgment of conviction. to require the respondent to comment on the aforesaid petition. Rodolfo S. Exh. and for P5. D was issued by Perla thru its author representative. without said accused having first secured a certificate of authority to act as such agent from the office of the Insurance Commission. petitioner submitted his Brief 9 while the Solicitor General. wilfully. 189 of Insurance Law for having. on that date. . Exh. filed a manifestation 10 in lieu of a Brief on May 3. Hence. charging wife of Rodolfo with violation of Sec. with license to expire on 30 June.. On appeal. Republic of the Philippines. submitted that petitioner may not be considered as having violated Section 189 of the Insurance Act. was absent and so she left a note on top of her husband's desk to renew . 1975. without giving due course to this instant petition. at Cabanatuan City. the respondent.. 6 this Court resolved.. that aforementioned policy was issued with active participation of appellant wife of Rodolfo. for a period of twelve (12) months with beneficiary as Ana M." and in the trial.000. she naturally helped him in his work.. apparently. Isidro for and in behalf of Perla Compaña de Seguros. the trial court found herein petitioner guilty as charged. and for reasons not explained in record. and at that time.Aisporna was duly licensed by Insurance Commission as agent to Perla Compania de Seguros. 1974. 8 On April 3. Personal Accident Policy. Rodolfo. and feloniously acted. present information was filed by Fiscal. the trial court's decision was affirmed by the respondent appellate court finding the petitioner guilty of a violation of the first paragraph of Section 189 of the Insurance Act. petitioner assigns the following errors 11 allegedly committed by the appellate court: . Isidro. as clerk. represented by the Office of the Solicitor General. 1974.00. Aisporna. 1974. this present recourse was filed on October 22. on behalf of the respondent. against which appellant in her defense sought to show that being the wife of true agent. and that policy was merely a renewal and was issued because Isidro had called by telephone to renew. Rodolfo.

The pertinent provision of Section 189 of the Insurance Act reads as follows: No insurance company doing business within the Philippine Islands. TO F-17. No person shall act as agent. or within six months thereafter. and shall be upon a form approved by the . such application being approved and countersigned by the company such person desires to represent. THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT RECEIPT OF COMPENSATION IS NOT AN ESSENTIAL ELEMENT OF THE CRIME DEFINED BY THE FIRST PARAGRAPH OF SECTION 189 OF THE INSURANCE ACT. or broker in the solicitation of procurement of applications for insurance. THE RESPONDENT COURT OF APPEALS ERRED IN NOT ACQUITTING HEREIN PETITIONER. which must be renewed annually on the first day of January. Such certificate shall be issued by the Insurance Commissioner only upon the written application of persons desiring such authority. shall pay any commission or other compensation to any person for services in obtaining new insurance. or receive for services in obtaining new insurance. it is necessary to determine whether or not the agent mentioned in the first paragraph of the aforesaid section is governed by the definition of an insurance agent found on its second paragraph. any commission or other compensation from any insurance company doing business in the Philippine Islands. INCLUSIVE SUFFICIENT TO ESTABLISH PETITIONER'S GUILT BEYOND REASONABLE DOUBT. 2. THE RESPONDENT COURT OF APPEALS ERRED IN GIVING DUE WEIGHT TO EXHIBITS F. We find the petition meritorious. unless such person shall have first procured from the Insurance Commissioner a certificate of authority to act as an agent of such company as hereinafter provided. F-1. sub-agent.1. In other words. The main issue raised is whether or not a person can be convicted of having violated the first paragraph of Section 189 of the Insurance Act without reference to the second paragraph of the same section. nor any agent thereof. without first procuring a certificate of authority so to act from the Insurance Commissioner. or agent thereof. 3.

Insurance Commissioner. the third paragraph thereof prescribes the penalty to be imposed for its violation. liabilities. The Insurance Commissioner shall have the right to refuse to issue or renew and to revoke any such certificate in his discretion. requirements. while its second paragraph defines who is an insurance agent within the intent of this section and. The respondent appellate court ruled that the petitioner is prosecuted not under the second paragraph of Section 189 of the aforesaid Act but under its first paragraph. sub-agent or broker in the solicitation or procurement of applications for insurance without first procuring a certificate of authority so to act from the Insurance Commissioner. giving such information as he may require. the Insurance Commissioner shall immediately revoke the certificate of authority issued to him and no such certificate shall thereafter be issued to such convicted person. however. and received the pay thereof — her defense that she was only acting as helper of her husband can no longer be sustained. finally. shall be an insurance agent within the intent of this section. it can no longer be denied that it was appellant's most active endeavors that resulted in issuance of policy to Isidro. Any person or company violating the provisions of this section shall be fined in the sum of five hundred pesos. neither her point that she received no compensation for issuance of the policy because . On the conviction of any person acting as agent. of the commission of any offense connected with the business of insurance. No such certificate shall be valid. A careful perusal of the above-quoted provision shows that the first paragraph thereof prohibits a person from acting as agent. and penalties to which an agent of such company is subject. Renewal certificates may be issued upon the application of the company.. Any person who for compensation solicits or obtains insurance on behalf of any insurance company. or broker. in any event after the first day of July of the year following the issuing of such certificate. sub-agent. Thus — . she was there and then acting as agent.. and shall thereby become liable to all the duties. or transmits for a person other than himself an application for a policy of insurance to or from such company or offers or assumes to act in the negotiating of such insurance.

a person is an insurance agent if he solicits and obtains an insurance for compensation.any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy of insurance to or from such company or offers or assumes to act in the negotiating of such insurance. or broker. which must be renewed annually on the first day of January. liabilities. Parenthetically. therefore. and penalties. No person shall act as agent. sub-agent. without first procuring a certificate of authority to act from the insurance commissioner. for compensation which is the gist of the offense in Section 189 of the Insurance Law in its 2nd paragraph. or agent thereof. but. the respondent appellate court seems to imply that the definition of an insurance agent under the second paragraph of Section 189 is not applicable to the insurance agent mentioned in the first paragraph. the respondent court concludes that under the second paragraph of Section 189. there was no technical defect in the wording of the charge. or receive for services in obtaining new insurance any commission or other compensation from any insurance company doing business in the Philippine Island. in the solicitation or procurement of applications for insurance. 189. or within six months thereafter. there is . Insurance Law. 189 wherein it is provided that. but what appellant apparently overlooks is that she is prosecuted not under the 2nd but under the 1st paragraph of Sec. Sec. 12 From the above-mentioned ruling. so that Errors 2 and 4 must be overruled. now it is true that information does not even allege that she had obtained the insurance. and shall thereby become liable to all the duties. paragraph 2. in its first paragraph. requirements. to which an agent of such company is subject. shall be an insurance agent within the intent of this section.

13 A statute must be so construed as to harmonize and give effect to all its provisions whenever possible. the doctrine of associated words (Noscitur a Sociis) provides that where a particular word or phrase in a statement is ambiguous in itself or is equally susceptible of various meanings. and kept subservient to the general intent of the whole enactment.. Legislative intent must be ascertained from a consideration of the statute as a whole. to receive a compensation by the agent is an essential element for a violation of the first paragraph of the aforesaid section. The particular words. 16 More importantly. Applying the definition of an insurance agent in the second paragraph to the agent mentioned in the first and second paragraphs would give harmony to the aforesaid three paragraphs of Section 189. 17 Considering that the definition of an insurance agent as found in the second paragraph is also applicable to the agent mentioned in the first paragraph. The second paragraph of Section 189 is a definition and interpretative clause intended to qualify the term "agent" mentioned in both the first and third paragraphs of the aforesaid section. As correctly pointed out by the Solicitor General. We find this to be a reversible error. not separately and independently. the definition of an insurance agent under the second paragraph holds true with respect to the agent mentioned in the other two paragraphs of the said section. in its second paragraph. clauses and phrases should not be studied as detached and isolated expressions. it must be borne in mind. clauses or sentences but from a general consideration or view of the act as a whole. is not to be extracted from any single part. portion or section or from isolated words and phrases. the definition of an insurance agent as found in the second paragraph of Section 189 is intended to define the word "agent" mentioned in the first and second paragraphs of the aforesaid section. shall be an insurance agent within the intent of this section. Nevertheless.no necessity that a person solicits an insurance for compensation in order to be called an insurance agent. This means that every part of the statute must be considered together with the other parts. 15 Every part of the statute must be interpreted with reference to the context. The appellate court has established ultimately that the petitioner-accused did not receive any compensation for the issuance of the insurance policy of Eugenio Isidro. 14 The meaning of the law. the accused . Hence — Any person who for compensation . Patently. .. More significantly. but the whole and every part of the statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious whole. its true meaning may be made clear and specific by considering the company in which it is found or with which it is associated... it is explicitly provided that the definition of an insurance agent is within the intent of Section 189.

respondent. No. 18 In the case of Bolen vs. 2002 COUNTRY BANKERS INSURANCE CORPORATION. It is well-settled in Our jurisprudence that to warrant conviction. in the case at bar. JR. We rule otherwise. This allegation is essential. SO ORDERED. failing to allege that the solicitor was to receive compensation either directly or indirectly. an information. INC. It must be noted that the information. the receipt of compensation for issuing an insurance policy is not an essential element for a violation of the first paragraph of Section 189 of the Insurance Act. does not allege that the negotiation of an insurance contracts by the accused with Eugenio Isidro was one for compensation. Republic of the Philippines
 SUPREME COURT
 Manila SECOND DIVISION G. petitioner. as the Solicitor General maintains.. CV Case No. WHEREFORE. according to the latter.was convicted by the appellate court for. charges no offense. Snyder's Compiled Laws of Oklahoma 1909 is intended to penalize persons only who acted as insurance solicitors without license. that accused did not violate Section 189 of the Insurance Act. Article 689. with costs de oficio. a conviction of the accused could not be sustained. Under the Texas Penal Code 1911.R. Stake. 20 After going over the records of this case. 36902 affirming in .. 
 vs. 136914 January 25. and while acting in such capacity negotiated and concluded insurance contracts for compensation. 19 the provision of Section 3750. We are fully convinced.
 LIANGA BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVE. the judgment appealed from is reversed and the accused is acquitted of the crime charged. 1998 in CA-G. DE LEON. and having been omitted.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 dated December 29. every element of the crime must be alleged and proved. J.R. making it a misdemeanor for any person for direct or indirect compensation to solicit insurance without a certificate of authority to act as an insurance agent.

. as well as Fifty Thousand Pesos (P50. Branch 28. F-1397. Under Fire Insurance Policy No. F-1397.m.00) as litigation expenses. to indemnify another against loss.00) as actual damages. Cornelio Jamero. INP Investigator. the petitioner insured the respondent’s stocks-in-trade against fire loss. the building was set on fire by two (2) NPA rebels who wanted to obtain canned goods.000. namely: . pieces of furnitures and fixtures. denied the insurance claim on the ground that. (b) the Sworn Statement of Jose Lomocso. of any of the following occurrences. Fifty Thousand Pesos (P50. however. The facts are undisputed: The petitioner is a domestic corporation principally engaged in the insurance business wherein it undertakes.000. 1989 in the amount of Two Hundred Thousand Pesos (P200. 6 of the policy conditions of Fire Insurance Policy No. Lianga. for the sum of Two Hundred Thousand Pesos (P200. and that such loss was an excepted risk under paragraph No. It appears that sometime in 1989. in Civil Case No.00) as attorney’s fees. rice and medicines as provisions for their comrades in the forest.000. On July 1. Ten Thousand Pesos (P10.m. Five Thousand Pesos (P5. Juarbal. for a consideration. based on the submitted documents. Surigao del Sur was gutted by fire and reduced to ashes. 1989. with interest at twelve percent (12%) per annum from the date of filing of the complaint until fully paid. and (c) the Sworn Statement of Ernesto Urbiztondo.000.m. Inc. which provides: This insurance does not cover any loss or damage occasioned by or through or in consequence. resulting in the total loss of the respondent’s stocks-in-trade.toto the Decision3 dated December 26. under Fire Insurance Policy No.. to June 20. L-518 which ordered petitioner Country Bankers Insurance Corporation to fully pay the insurance claim of respondent Lianga Bay and Community Multi-Purpose Cooperative.000.000. damage or liability during the period starting from June 20. for loss sustained as a result of the fire that occurred on July 1. at or about 12:40 a. submitting: (a) the Spot Report of Pfc.. Surigao del Sur. Due to the loss.00). 1991 of the Regional Trial Court of Lianga. 1989. the petitioner and the respondent entered into a contract of fire insurance. 1990 at 4:00 p. and the costs of suit. F-1397.00). F-1397. Arturo V. 1989 at 4:00 p.00) as exemplary damages. the respondent’s building located at Barangay Diatagon. directly or indirectly. dated July 1. The petitioner. the respondent filed an insurance claim with the petitioner under its Fire Insurance Policy No. damage or liability from an unknown or contingent event including fire while the respondent is a duly registered cooperative judicially declared insolvent and represented by the elected assignee. equipments and records.

ordering said defendant-Country Bankers to pay the plaintiff-Insolvent Cooperative. Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise) which are occasioned by or through or in consequence. the trial court rendered its Decision dated December 26. such defenses remains (sic) unimpressive and unconvincing. In due time. The petitioner answered the complaint and reiterated the ground it earlier cited to deny the insurance claim. as follows: 1. the respondent then instituted in the trial court the complaint for recovery of "loss. riot. that the defenses raised by defendant-Country Bankers has utterly crumbled on account of its inherent weakness.000. military or usurped power.00. and thus. insurrection. represented in this action by its Assignee. that the loss was due to NPA rebels. logic and the Court’s honest appraisal of the real and actual situation obtaining in this area. incredibility and unreliability. To fully pay the insurance claim for the loss the insuredplaintiff sustained as a result of the fire under its Fire Insurance Policy No.00 with interest of 12% per annum from date of filing of the complaint until the same is fully paid. and after applying those helpful tools like common sense. Finding the denial of its claim unacceptable. 2. an excepted risk under the fire insurance policy. declaring that: Based on its findings. the defendant-Country Bankers has to be irreversibly adjudged liable.000. . to plaintiff-Insolvent Cooperative. directly or indirectly. damage or liability" against petitioner. of any of said occurrences shall be deemed to be loss or damage which is not covered by this insurance. 1991 in favor of the respondent. except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions. it is therefore the considered opinion of this Court. as it should be. that is. revolution. Cornelio Jamero. rebellion. as it so holds. F-1397 in its full face value of P200. and therefore.xxx xxx xxx (d) Mutiny. To pay as and in the concept of actual or compensatory damages in the total sum of P50. military or popular uprising.

4. Petitioner now comes before us via the instant petition anchored on three (3) assigned errors. ATTORNEYS FEES AND COST OF SUIT. On December 29. to obtain a favorable judgment.000. THE HONORABLE COURT OF APPEALS FAILED TO APPRECIATE AND GIVE CREDENCE TO THE SPOT REPORT OF PFC. 4) THAT THE RESPONDENT’S STOCKIN-TRADE WAS BURNED BY THE NPA REBELS. 3. ARTURO JUARBAL (EXH.00. To pay as and in the concept of exemplary damages in the total sum of P50. is preponderance of evidence. 3) AND THE SWORN STATEMENT OF JOSE LOMOCSO (EXH. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THE PETITIONER LIABLE FOR ACTUAL AND EXEMPLARY DAMAGES. the appellate court affirmed the challenged decision of the trial court in its entirety. This is a well-known postulate echoed in Section 1 of Rule 131 of the Revised Rules of Court. and 6. 5.000.000.00. 2.4 to wit: 1. To pay in the concept of litigation expenses the sum of P5. LITIGATION EXPENSES. A party is bound by his own affirmative allegations.5 . the "counterclaim" is dismissed. 1998. IT IS SO ORDERED. For being unsubstantiated with credible and positive evidence. Petitioner interposed an appeal to the Court of Appeals.3. Each party must prove his own affirmative allegations by the amount of evidence required by law which in civil cases. To pay by way of reimbursement the attorney’s fees in the sum of P10. To pay the costs of the suit. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER LIABLE FOR 12% INTEREST PER ANNUM ON THE FACE VALUE OF THE POLICY FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID. HENCE AN EXCEPTED RISK UNDER THE FIRE INSURANCE POLICY. as in this case.00.

Juarbal dated July 1.7 But petitioner failed to do so. the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable. which means those facts which are derived from his perception. posits the view that the cause of the loss was an excepted risk under the terms of the fire insurance policy.9 The hearsay rule is based upon serious concerns about the trustworthiness and reliability of hearsay evidence inasmuch as such evidence are not given under oath or solemn affirmation and. damage or liability under Fire Insurance Policy No. have not been subjected to crossexamination by opposing counsel to test the perception. If a proof is made of a loss apparently within a contract of insurance. and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. or from a cause which limits its liability.10 . by a preponderance of evidence. 1989.8 Consequently. F. a witness may not testify as to what he merely learned from others either because he was told or read or heard the same. more particularly the following statement therein: xxx investigation revealed by Jose Lomocso that those armed men wanted to get can goods and rice for their consumption in the forest PD investigation further disclosed that the perpetrator are member (sic) of the NPA PD end… x x x A witness can testify only to those facts which he knows of his personal knowledge. The petitioner. Such is the hearsay rule which applies not only to oral testimony or statements but also to written evidence as well.6 Stated else wise. it has the burden of proving the facts upon which such excepted risk is based. more importantly. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. the petitioner does not dispute that the respondent’s stocks-intrade were insured against fire loss. within the duration of said fire insurance. however. veracity and articulateness of the out-of-court declarant or actor upon whose reliability on which the worth of the out-of-court statement depends.In the instant case. Arturo V. since the petitioner in this case is defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire insurance policy.1397 and that the respondent lost its stocks-in-trade in a fire that occurred on July 1. 1989. The petitioner relies on the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo as well as on the Spot Report of Pfc. loss from such a risk constitutes a defense which the insurer may urge. Where a risk is excepted by the terms of a policy which insures against other perils or hazards. memory. since it has not assumed that risk.

11 To be admissible in evidence. gives rise to its liability to the respondent under Fire Insurance Policy No. three (3) requisites must concur. which must have been acquired by him personally or through official information. as the petitioner itself pointed out. for being hearsay. inasmuch as they did not take the witness stand and could not therefore be cross-examined. Arturo V. Arturo Juarbal. independent of the statements gathered from Jose Lomocso.14 The petitioner’s evidence to prove its defense is sadly wanting and thus. or by such other person in the performance of a duty specially enjoined by law. (b) that it was made by the public officer in the performance of his duties. and (c) that the public officer or other person had sufficient knowledge of the facts by him stated. Nonetheless. however. Juarbal since he himself took the witness stand and was available for cross-examination. for the purpose of proving the truth of the statements contained in the said report. was conducted by Pfc. among which are entries in official records. for the Spot Report of Pfc. The rest of the said report relative to the statement of Jose Lomocso may be considered as independently relevant statements gathered in the course of Juarbal’s investigation and may be admitted as such but not necessarily to prove the truth thereof. The said Spot Report is admissible only insofar as it constitutes part of the testimony of Pfc. or by another person specially enjoined by law to do so. Juarbal. litigation expenses and attorney’s fees for lack of legal and valid basis. In fact. . F-1397. citing the testimony of Pfc. to wit: (a) that the entry was made by a public officer.Thus. the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo are inadmissible in evidence.13 the latter’s Spot Report "was based on the personal knowledge of the caretaker Jose Lomocso who witnessed every single incident surrounding the facts and circumstances of the case. we do not sustain the trial court’s imposition of twelve percent (12%) interest on the insurance claim as well as the monetary award for actual and exemplary damages.12 The third requisite was not met in this case since no investigation. Arturo V. for being hearsay. Arturo Juarbal relative to the statement of Jose Lomocso to the effect that NPA rebels allegedly set fire to the respondent’s building is inadmissible in evidence. The portions of his Spot Report which were of his personal knowledge or which consisted of his perceptions and conclusions are not hearsay." This argument undeniably weakens the petitioner’s defense. There are exceptions to the hearsay rule.

.e. however. quasicontracts. i. as follows: 1. delicts or quasi-delicts. 2. Court of Appeals and Mercantile Insurance Co. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. as well as the accrual thereof. a loan or forbearance of money. the rate of interest shall be 12% per annum to be computed from default.Concerning the application of the proper interest rates.e.. i. 3. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. be on the amount finally adjudged. i. With regard particularly to an award of interest in the concept of actual and compensatory damages. the interest due should be that which may have been stipulated in writing.. v. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. 1169. No interest. When an obligation. and it consists in the payment of a sum of money.. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.e. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. Furthermore. regardless of its source. When the obligation is breached. Accordingly. is breached. The actual base for the computation of legal interest shall. When the judgment of the court awarding a sum of money . the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. In the absence of stipulation. law. the rate of interest. is breached. in any case. Inc. not constituting a loan or forbearance of money. contracts. where the demand is established with reasonable certainty. the following guidelines were set in Eastern Shipping Lines. II.:15 I. Inc. the contravenor can be held liable for damages. When an obligation. is imposed. the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). the interest due shall itself earn legal interest from the time it is judicially demanded.

000. They are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. and its imposition is required by public policy to suppress the wanton acts of an offender.000. the insurance claim in this case is evidently not a forbearance of money. Thus.16 That part of the dispositive portion of the Decision of the trial court ordering the petitioner to pay actual damages of Fifty Thousand Pesos (P50. from requiring the borrower or debtor to repay a loan or debt then due and payable. Article 2229 of the New Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good. Attorney’s fees as part of damages are not meant to enrich the winning party at the expense of the losing litigant. We find no justification for the award of actual damages of Fifty Thousand Pesos (P50. We find no cogent and valid reason to award the same in the case at bar. and cannot be presumed. it must be reasonable. if any. this interim period being deemed to be by then an equivalent to a forbearance of credit.00) has no basis at all. we likewise find no legal and valid basis for granting the same. Neither is there any testimonial and documentary evidence on the alleged actual damages of Fifty Thousand Pesos (P50. the rate of legal interest.00). However. Well-entrenched is the doctrine that actual. during a given period of time. and thus the interest rate should be as it is hereby fixed at six percent (6%) computed from the date of filing of the complaint. above. whether the case falls under paragraph 1 or paragraph 2. it cannot be recovered as a matter of right. In the said case of Eastern Shipping.00).00) to warrant such an award. The justification. With respect to the award of litigation expenses and attorney’s fees. compensatory and consequential damages must be proved. shall be 12% per annum from such finality until its satisfaction. it is necessary for the court to make findings of facts and law that would bring .000. They are designed to permit the courts to mould behavior that has socially deleterious consequences. goods or credit. Concerning the award of exemplary damages for Fifty Thousand Pesos (P50. Article 2208 of the New Civil Code17 enumerates the instances where such may be awarded and. just and equitable if the same were to be granted. As such. the same must be deleted.becomes final and executory.000.18 The award of attorney’s fees is the exception rather than the general rule. It is based entirely on the discretion of the court. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. for such an award of actual damages does not appear in the body of the decision of the trial court. in all cases. the Court further observed that a "forbearance" in the context of the usury law is a "contractual obligation of lender or creditor to refrain." Considering the foregoing.

The rate of interest on the adjudged principal amount of Two Hundred Thousand Pesos (P200. is engaged in the coconut oil milling and refining industry.000. Fifty Thousand Pesos (P50.000. 138941.00) as litigation expenses. No. Bellosillo. 52221 promulgated on January 14.the case within the exception and justify the grant of such award. Respondent Tantuco Enterprises. TANTUCO ENTERPRISES.00) shall be six percent (6%) per annum computed from the date of filing of the Complaint in the trial court. In 1988. [G.000.00) as actual damages. petitioner. Branch 53.00) as exemplary damages. It owns two oil mills. respondent. 92-51 dated October 16. We find none in this case to warrant the award by the trial court of litigation expenses and attorney’s fees in the amounts of Five Thousand Pesos (P5. WHEREFORE.000.00) as attorney’s fees are hereby DELETED.00) and Ten Thousand Pesos (P10. 2001] AMERICAN HOME COMPANY.000. Lucena City. which affirmed in toto the Decision of the Regional Trial Court. and Buena. October 8. SO ORDERED. INC. JJ. J. and therefore.00). vs.R. CV No. DECISION PUNO. respectively. Five Thousand Pesos (P5.000. The awards in the amounts of Fifty Thousand Pesos (P50. concur. 1999.R. 1995.000. It appears that respondent commenced its business operations with only one oil mill. Inc. Mendoza. the same must also be deleted. Lucena City in Civil Case No. it started . Both are located at its factory compound at Iyam. and Ten Thousand Pesos (P10.. Quisumbing.: ASSURANCE Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CA-G.. the appealed Decision is MODIFIED. Costs against the petitioner. (Chairman).

Branch 53 of Lucena City. It stated that the description of the insured establishment referred to another building thus: “Our policy nos. 1995. Thereafter. On October 16. 306-7432321-9 for the same term.00) under Policy No. petitioner rejected respondent’s claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. (c) P300. 5.00 for litigation expenses.00 for and as attorney’s fees. The two oil mills were separately covered by fire insurance policies issued by petitioner American Home Assurance Co.406.[2] The new oil mill was insured for six million pesos (P6.000.536.[1] The first oil mill was insured for three million pesos (P3. 1991. the lower court rendered a Decision finding the petitioner liable on the insurance policy thus: “WHEREFORE. 14. and . in a letter dated October 15. Philippine Branch. Respondent immediately notified the petitioner of the incident. The latter came to be commonly referred to as the new oil mill.00) under Policy No.[3] Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent.1991 gutted and consumed the new oil mill. The latter then sent its appraisers who inspected the burned premises and the properties destroyed.000.40 representing damages for loss by fire of its insured property with interest at the legal rate.operating its second oil mill.”[5] A complaint for specific performance and damages was consequently instituted by the respondent with the RTC. whilst the affected oil mill was under Building No. 1991 to 1992. judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff: (a) P4. after trial. (b) P80.000..000.000. 306 -7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No.000.[4] A fire that broke out in the early morning of September 30. 306-7432324-3 for the period March 1.

SO ORDERED. the instant appeal is hereby DISMISSED for lack of merit and the trial court’s Decision dated October 16. The appellate court upheld the same in a Decision promulgated on January 14.(d) Pay the costs. The motion. 1995 is hereby AFFIRMED in toto.”[8] “(2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy. the present course of action. was denied for lack of merit in a Resolution promulgated on June 10. Hence. 1999. where petitioner ascribes to the appellate court the following errors: “(1) The Court of Appeals erred in its conclusion that the issue of non-payment of the premium was beyond its jurisdiction because it was raised for the first time on appeal.”[6] Petitioner assailed this judgment before the Court of Appeals. the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the principle of estoppel is erroneous.”[10] The petition is devoid of merit. According to it. SO ORDERED. the oil mill insured is specifically described in the policy by its boundaries in the following manner: .”[7] Petitioner moved for reconsideration. The primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil mill is not covered by any insurance policy. however.”[9] “(3) With due respect. 1999. the pertinent portion of which states: “WHEREFORE.

however inaccurate the description may be. In other words. petitioner posits. Despite the fact that the policy in question was issued way back in 1988. and despite the “Important Notice” in the policy that “Please read and examine the policy and if incorrect. 28. In construing the words used descriptive of a building insured. the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy. or about three years before the fire. but to the other mill.” respondent apparently did not call petitioner’s attention with respect to the misdescription. No. the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure. the greatest liberality is shown by the courts in giving effect to the insurance. 2. because it retained the policy without having the same corrected before the fire by an endorsement in accordance with its Condition No. is that it did not have the supposed wrong description or mistake corrected.” However.“Front: by a driveway thence at 18 meters distance by Bldg. it argues that this specific boundary description clearly pertains. not to the burned oil mill. Adjoining thence an imperfect wall by Bldg. return it immediately for alteration.” just as it is “barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong. What exacerbates respondent’s predicament. No. 4. 4. petitioner argues that respondent is “barred by the parole evidence rule from presenting evidence (other than the policy in question) of its self-serving intention (sic) that it intended really to insure the burned oil mill. No. by an open space thence at 8 meters distance.” These contentions can not pass judicial muster. Right: Left: Rear: by an open space thence by Bldg.[12] .[11] In view of the custom of insurance agents to examine buildings before writing policies upon them. and since a mistake as to the identity and character of the building is extremely unlikely. By way of conclusion.

As testified to by Mr. This is obvious from the categorical statement embodied in the policy. In fact. ALONG NATIONAL HIGH WAY. It is unthinkable for respondent to obtain the other policy from the very same company. to our mind. The latter ought to know that a second agreement over that same realty results in its overinsurance.Borja: “Atty. situate (sic) at UNNO. I had the policy prepared.”[13] (emphasis supplied. it is beyond dispute. extending its protection: “On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra. As mentioned earlier. The imperfection in the description of the insured oil mill ’s boundaries can be attributed to a misunderstanding between the petitioner’s general agent. the misdescription in the policy. LUCENA CITY UNBLOCKED. Mr. the first oil mill is already covered under Policy No. who made the error of copying the boundaries of the first oil mill when typing the policy to be issued for the new one. that what the parties manifestly intended to insure was the new oil mill.) If the parties really intended to protect the first oil mill. BO. it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. IYAM. therefore.Notwithstanding. Alfredo Borja. and its policy issuing clerk. the policy issuing clerk just merely (sic) copied the wording from the old policy and what she typed is that the description of the boundaries from the old policy was copied but she inserted covering the new oil mill and to me at that time the important thing is that it covered the new oil mill because it is just within one compound and there are only two oil mill[s] and so just enough. 3067432324-4 issued by the petitioner. Camaligan: Q: A: What did you do when you received the report? I told them as will be shown by the map the intention really of Mr. G. copra cake and copra mills whilst contained in the new oil mill building. Edison Tantuco is to cover the new oil mill that is why when I presented the existing policy of the old policy. then there is no need to specify it as new. two policies were prepared having the same . Indeed.

notified Mr. Borja assured Mr. This can be seen from the testimony on cross of Mr. Mr. Tantuco that the use of the adjective new will distinguish the insured property. the insurance will cover the new oil mill. the contractual intention of the parties cannot be understood from a mere reading of the instrument. The assurance convinced respondent that. the boundary description written on the policy concededly pertains to the first oil mill. its failure to express the true intent and agreement of the parties thereto. a party may present evidence to modify. while the contract explicitly stipulated that it was for the insurance of the new oil mill. among others. Evidence on record reveals that respondent’s operating manager. despite the impreciseness in the specification of the boundaries. sir. we find that the same proceeds from a wrong assumption. will you tell us as the manager of the company whether the boundaries stated in Exhibit A-2 are the boundaries of the old (sic) mill that was burned or not. However. sir. explain or add to the terms of the written agreement if he puts in issue in his pleading. Anent petitioner’s argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong. Under the Rules of Court. . that at least in so far as Exhibit A is concern you have read what the policy contents. which will explain the imperfection and clarify the intent of the parties. [15] Here.”[14] (emphasis supplied) It is thus clear that the source of the discrepancy happened during the preparation of the written contract.date one for the old one and the other for the new oil mill and exactly the same policy period. Borja (the petitioner’s agent with whom respondent negotiated for the contract) about the inaccurate description in the policy. Mr.(sic) Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the boundaries of the property insured by the insurance policy Exhibit A. These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule. SALONGA: Q: You mentioned. Thus. Tantuco: "ATTY. Edis on Tantuco. This irreconcilable difference can only be clarified by admitting evidence aliunde.

in accordance with Section 77 of the Insurance Code.: “24.147. Borja. The deficiency. contests this finding of the appellate court. petitioner argues. Mr. you will only do that if you will make to increase the amount and it is by indorsement not by another policy."[16] We again stress that the object of the court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. which the petitioner cited. however. In determining what the parties intended. the courts will read and construe the policy as a whole and if possible.[17] In a further attempt to avoid liability. however.” Petitioner adds that the issue was the subject of the cross-examination of Mr. pursuant to Rule 46. suffices to invalidate the policy. From the admission of respondent’s own witness. Borja said. Mr.20. In determining the intent of the parties to the contract. Borja.20. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date. It held that this issue was raised for the first time on appeal.770. It insists that the issue was raised in paragraph 24 of its Answer. keeping in mind always. beyond its jurisdiction to resolve. hence. the courts will consider the purpose and object of the contract.20 . petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium and breach of the Fire Extinguishing Appliances Warranty. viz.A: It was not. as a matter of fact. leaving a difference of P14. Borja regarding this matter and he told me that what is important is the word new oil mill.623. you can never insured (sic) one property with two (2) policies. The amount of the premium stated on the face of the policy was P89.[19] Petitioner. Section 18 of the Rules of Court. who acknowledged that the paid amount was lacking by P14. the former only paid it P75. I called up Mr.[18] The Court of Appeals refused to consider this contention of the petitioner. this doubt is to be resolved against the insurer.00. the prime rule that in the event of doubt. sir.623. give effect to all the parts of the contract.

361 of the Insurance Code is illegal. implicitly assumed a valid and subsisting insurance policy. both during direct and cross examinations. Yet. The thrust of the cross-examination of Mr. The argument fails to impress. The said warranty provides: “WARRANTED that during the currency of this Policy. It must be remembered that he was called to the stand basically to demonstrate that an existing policy issued by the petitioner covers the burned building. such was made in the course of discussing a discount or rebate. petitioner fatally neglected to present.by reason of a discount or rebate. petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty.PORTABLE EXTINGUISHERS .EXTERNAL HYDRANTS . Borja’s testimony.INTERNAL HYDRANTS . Fire Extinguishing Appliances as mentioned below shall be maintained in efficient working order on the premises to which insurance applies: . or that it did not pay the full amount. the question of the supposed inadequate payment was never raised. when the issues to be resolved in the trial court were formulated at the pre-trial proceedings. Certainly. Borja. Most significant to point. Likewise. was not for the purpose of proving this fact. Though it briefly touched on the alleged deficiency. it did not contain any specific and definite allegation that respondent did not pay the premium. on the other hand. or that it did not pay the amount on time. It is true that the asseverations petitioner made in paragraph 24 of its Answer ostensibly spoke of the policy’s condition for payment of the renewal premium on time and respondent’s noncompliance with it. any witness to testify that respondent indeed failed to pay the full amount of the premium. which the agent apparently gave the respondent. during the whole course of the trial. which rebate under Sec. the whole tenor of Mr. Finally.

Additionally. respondent was able to comply with the warranty. we find that there is no more need for an internal hydrant considering that inside the burned building were: (1) numerous portable fire extinguishers. and (3) a fire hose which has a connection to one of the external hydrants. To be sure. Here. We agree with the appellate court’s conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein. but they should..24-HOUR SECURITY SERVICES BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss which may occur. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. two fire hoses.[24] That reasonableness is to be ascertained in light of the factual conditions prevailing in each case. likewise. In other words. what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property. by themselves be reasonably interpreted. . (2) an emergency fire engine. we find that neither did it require that the appliances are restricted to those mentioned in the warranty.[23] All of these equipments were in efficient working order when the fire occurred. This fact was admitted by the oil mill’s expeller operator. but not limited to. which will serve as the oil mill’s first line of defense in case any part of it bursts into flame.[21] fire hydrant. It ought to be remembered that not only are warranties strictly construed against the insurer. Again.[22] and an emergency fire engine. those identified in the list. Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers.FIRE PUMP . fire fighting equipments such as.”[20] Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. the argument lacks merit. Gerardo Zarsuela.

IN VIEW WHEREOF. SO ORDERED. the instant petition is hereby DISMISSED. finding no reversible error in the impugned Decision. .