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

L-25803 May 29, 1970 LUZ PICAR, NANCY PICAR, JESSE PICAR, assisted by their mother, CONSOLACION PICAR, plaintiffs-appellants, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellee, REPUBLIC OF THE PHILIPPINES, as represented by the PROVINCIAL TREASURER OF CAMARINES SUR, intervenor-appellee. Nilo A. Malanyaon for plaintiffs-appellants. Celso B. Pleta for defendant-appellee. Florecita Flores for intervenor-appelle. BARREDO, J.: Appeal on pure questions of law from the decision of the Court of First Instance of Camarines Sur in its Civil Case No. 5673, dismissing the action instituted by the petitioners as designated beneficiaries in the life insurance policy of one Napoleon F. Picar, a deceased government employee, against the Government Service Insurance System, on the ground that due to the failure of the said petitioners to submit a certificate of clearance from the money and property accountabilities of the deceased, they have no cause of action against the defendant GSIS. The case was submitted by all the parties for decision in the court below upon the following Stipulation of Facts: 1. That Policy No. 170329 issued in favor of the late Napoleon F. Picar, was, on September 13, 1961, in force; 2. That Napoleon F. Picar died on September 13, 1961; 3. That Consolacion J. Picar is the guardian of all the minors who are the plaintiffs herein; 4. That the beneficiaries in the insurance policy issued in favor of Napoleon F. Picar are the following: Nancy Picar, Jesse Picar, Sylvia Picar, Luz Picar and Consolacion Picar; 5. That the administrator of the estate of the late Napoleon F. Picar is the Provincial Treasurer of Camarines Sur; 6. That on September 30, 1961 a claim was presented to the G.S.I.S. for the proceeds of the life insurance policy for relief or payment to the beneficiaries named therein; 7. That the G.S.I.S. is withholding payment of the proceeds of the life insurance policy only on the ground that no clearance was issued to the deceased by the employer of the deceased, the Provincial Treasurer of Camarines Sur; 8. That the Provincial Treasurer filed a claim for P9,746.07 to the intestate estate of the late Napoleon Picar; 9. That the basis of the government represented by the Provincial Treasurer of Camarines Sur in intervening in this case (Civil Case No. 5673) is Section 26 of Commonwealth Act 186, as amended; 10. That the plaintiffs are also withdrawing their claim for moral damages as well as attorney's fees, but insist on the interest due from September 30, 1961 when the claim was made, up to the time the insurance policy is fully paid; 11. That the plaintiffs secured the services of counsel to claim this insurance policy in the amount of P500.00. On the basis of these stipulated facts, the court a quo, on August 30, 1965, dismissed the aforesaid action of the beneficiaries. It ruled thus:

The only issues to be decided in this case are: (1) whether it is legally necessary for the plaintiffs to present a clearance from money and property accountabilities of the deceased to be issued by the authorities concerned, and required by the defendant, GSIS, before the proceeds of the Policy No. 170329 is paid to the beneficiaries designated therein; and (2) whether the Republic of the Philippines, as represented by the Provincial Treasurer of Camarines Sur, can legally lay claim to the proceeds of the policy in question. The contract of insurance entered into by the insured, Napoleon F. Picar and the Government Service Insurance System is governed by Commonwealth Act No. 186, the law creating the said insurance system and not by Act 2427 as contended by the plaintiffs. While Act 2427 governs the contract of insurance between Private Insurance Companies and private persons Commonwealth Act No. 186 on the other hand, governs the contract of insurance between the Government Service Insurance System and employees of the Philippine Government. The Government Service Insurance System was created by Commonwealth Act 186 for the sole purpose and benefit of government employees, so much so, that nobody can be insured with the Government Service Insurance System except when he is a government employee. Hence, General Circular No. 52 of the General Auditing Office dated December 23, 1957 is applicable to the insurance contract between the deceased Napoleon F. Picar and the defendant, Government Service Insurance System. And due to the failure of the plaintiffs to submit a certificate of clearance from the money and property accountabilities of the deceased, Napoleon F. Picar, they have no cause of action against the defendant, Government Service Insurance System. As to the claim of the intervenor, Republic of the Philippines represented by the Provincial Treasurer of Camarines Sur, the court is of the opinion and so holds, that it being the employer of the deceased, Napoleon F. Picar, it has the right to the proceeds of said insurance to satisfy the indebtedness of said deceased to the government, pursuant to the provision of Section 26 of Commonwealth Act 186. In view of all the foregoing considerations, judgment is hereby rendered; (a) dismissing the plaintiffs' complaint with costs against them; and (b) declaring that the intervenor is legally entitled to the proceeds of the life insurance policy of the defendant, Napoleon F. Picar. It is from this holding of the court below that, as earlier stated in the opening paragraph of this decision, the present appeal has been taken to this Court by the designated beneficiaries in the life insurance policy here involved, the widow and the minor children of the late Napoleon F. Picar. Said appellants here allege that the lower court erred: (a) in holding that the plaintiffsappellants have no cause of action against the defendant-appellee due to the failure of the plaintiffs-appellants to submit a certificate of clearance of the deceased Napoleon F. Picar; and (b) in holding that the Republic of the Philippines is the entity legally entitled to the proceeds of the policy on the life of Napoleon F. Picar. Appellants vigorously contend that the proceeds of the life insurance policy here involved upon the death of the insured employee during the endowment period belonged exclusively to the beneficiaries designated in the policy and not to the estate of the insured; that, therefore, the said deceased's employer the Provincial Treasurer of Camarines Sur or the Republic of the Philippines cannot legally lay claim to the proceeds of such life insurance, since it is not part of the estate of said deceased employee; and, consequently, the appellee Government Service Insurance System acted without legal authority when it made the presentation of a certificate of clearance from money and property accountabilities of the deceased to be secured from his employer as a condition precedent to the payment of the proceeds of the life insurance in question to the appellants who are the designated beneficiaries in the policy. This contention is untenable. It is true that under general principles in the law of insurance, if a policy provides that the proceeds shall be payable to the assured, if he lives to a certain date, and, in case of his death
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before that date, then they shall be payable to the beneficiary designated, the benefit of the policy will inure to such beneficiary in case the assured dies before the end of the period designated in the policy, 1 and, generally, that the proceeds of a life insurance in which a third person is named beneficiary belong exclusively to such beneficiary as an individual, they are not the property of the heirs of the insured, are not subject to administration, and cannot properly be claimed or received by the administrator or other legal representative of the insured as assets of his estate. 2 As correctly ruled by the lower court, however, such general principles are not applicable to the life insurance herein involved which is governed by specific law. The law in point is Section 26 of Commonwealth Act 186 (the law creating the Government Service Insurance System), as amended, which provides: SEC. 26. Exemption from legal process and liens. No policy of life insurance issued under this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted under this Act, shall be liable to attachment, garnishment, or other proceeds, or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of such member, or his beneficiary, or any other person who may have a right thereunder; nor shall the proceeds thereof, when not made payable to a named beneficiary, constitute a part of the estate of the member for payment of his debt; Provided, however, That this section shall not apply when obligations or indebtedness to the System and the employer are concerned, nor when the retirement annuity is assigned to any person, corporation, association or bank or other financial institution, which is hereby authorized. The above-quoted provision is too clear to require the application of any rule of statutory construction for purposes of showing the weakness of the position taken by herein appellants. As may be seen, it recognizes the principles relied upon by them, but at the same time, it expressly provides that "this section shall not apply when obligations or indebtedness to the System and the employer are concerned." In other words, in life insurance policies issued by the GSIS in favor of government employees, the proceeds even if not made payable to named beneficiaries and may, therefore, be payable to the estate of the insured shall not constitute part of the estate of the member (insured) for payment of his debt; but such proceeds whether or not made payable to named beneficiaries shall so constitute part of the estate of the insured for payment of his debt and shall thereby be liable to attachment, garnishment and other legal processes, when obligations or indebtedness to the GSIS and the employer, that is, the government are concerned. There can be no doubt then that the appellee Government Service Insurance System was right in requiring herein appellants to submit the necessary clearance from money and property accountabilities of the deceased government employee whose insurance policy is here involved, before paying them the proceeds of the policy concerned; and the lower court did not err in holding that the appellants for their failure to submit the certificate of clearance required of them, have no cause of action against the GSIS. Similarly, since it is not disputed by appellants that the Republic of the Philippines, employer of the deceased employee in this case, is claiming the proceeds of his insurance on the basis of the provisions of the law above-quoted, We agree with the appellee GSIS that the court a quo was right in declaring that the intervenor Republic of the Philippines is legally entitled to the proceeds of the life insurance here put to question. WHEREFORE, the decision appealed from is affirmed. On equitable considerations, no pronouncement as to costs.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 147839 June 8, 2006 GAISANO CAGAYAN, INC. Petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, Respondent. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a petition for review on certiorari of the Decision1 dated October 11, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 61848 which set aside the Decision dated August 31, 1998 of the Regional Trial Court, Branch 138, Makati (RTC) in Civil Case No. 92322 and upheld the causes of action for damages of Insurance Company of North America (respondent) against Gaisano Cagayan, Inc. (petitioner); and the CA Resolution dated April 11, 2001 which denied petitioner's motion for reconsideration. The factual background of the case is as follows: Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained from respondent fire insurance policies with book debt endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."2 The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."3 The policies also provide for the following conditions: 1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering invoice or actual delivery of the merchandise whichever shall first occur. 2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amount shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers. x x x4 xxxx Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI. On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed with respondent their claims under their respective fire insurance policies with book debt endorsements; that as of February 25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against petitioner; that respondent made several demands for payment upon petitioner but these went unheeded.5 In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not be held liable because the property covered by the insurance policies were destroyed due to fortuities event or force majeure; that respondent's right of subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss was due to fire which it could not prevent or foresee; that IMC and LSPI never communicated to it that they insured their properties; that it never consented to paying the claim of the insured. 6

At the pre-trial conference the parties failed to arrive at an amicable settlement. 7 Thus, trial on the merits ensued. On August 31, 1998, the RTC rendered its decision dismissing respondent's complaint. 8 It held that the fire was purely accidental; that the cause of the fire was not attributable to the negligence of the petitioner; that it has not been established that petitioner is the debtor of IMC and LSPI; that since the sales invoices state that "it is further agreed that merely for purpose of securing the payment of purchase price, the above-described merchandise remains the property of the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the delivered goods and must bear the loss. Dissatisfied, petitioner appealed to the CA.9 On October 11, 2000, the CA rendered its decision setting aside the decision of the RTC. The dispositive portion of the decision reads: WHEREFORE, in view of the foregoing, the appealed decision is REVERSED and SET ASIDE and a new one is entered ordering defendant-appellee Gaisano Cagayan, Inc. to pay: 1. the amount of P2,119,205.60 representing the amount paid by the plaintiffappellant to the insured Inter Capitol Marketing Corporation, plus legal interest from the time of demand until fully paid; 2. the amount of P535,613.00 representing the amount paid by the plaintiff-appellant to the insured Levi Strauss Phil., Inc., plus legal interest from the time of demand until fully paid. With costs against the defendant-appellee. SO ORDERED.10 The CA held that the sales invoices are proofs of sale, being detailed statements of the nature, quantity and cost of the thing sold; that loss of the goods in the fire must be borne by petitioner since the proviso contained in the sales invoices is an exception under Article 1504 (1) of the Civil Code, to the general rule that if the thing is lost by a fortuitous event, the risk is borne by the owner of the thing at the time the loss under the principle of res perit domino; that petitioner's obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and as such the obligation to pay is not extinguished, even if the fire is considered a fortuitous event; that by subrogation, the insurer has the right to go against petitioner; that, being a fire insurance with book debt endorsements, what was insured was the vendor's interest as a creditor.11 Petitioner filed a motion for reconsideration12 but it was denied by the CA in its Resolution dated April 11, 2001.13 Hence, the present petition for review on certiorari anchored on the following Assignment of Errors: THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE INSTANT CASE WAS ONE OVER CREDIT. THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATION UNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT.14 Anent the first error, petitioner contends that the insurance in the present case cannot be deemed to be over credit since an insurance "on credit" belies not only the nature of fire insurance but the express terms of the policies; that it was not credit that was insured since respondent paid on the occasion of the loss of the insured goods to fire and not because of the non-payment by petitioner of any obligation; that, even if the insurance is deemed as one over credit, there was no loss as the accounts were not yet due since no prior demands were made by IMC and LSPI against petitioner for payment of the debt and such demands came from respondent only after it had already paid IMC and LSPI under the fire insurance policies.15
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As to the second error, petitioner avers that despite delivery of the goods, petitioner-buyer IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the goods. Concerning the third ground, petitioner submits that there is no subrogation in favor of respondent as no valid insurance could be maintained thereon by IMC and LSPI since all risk had transferred to petitioner upon delivery of the goods; that petitioner was not privy to the insurance contract or the payment between respondent and its insured nor was its consent or approval ever secured; that this lack of privity forecloses any real interest on the part of respondent in the obligation to pay, limiting its interest to keeping the insured goods safe from fire. For its part, respondent counters that while ownership over the ready- made clothing materials was transferred upon delivery to petitioner, IMC and LSPI have insurable interest over said goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire; that petitioner is liable for loss of the ready-made clothing materials since it failed to overcome the presumption of liability under Article 126516 of the Civil Code; that the fire was caused through petitioner's negligence in failing to provide stringent measures of caution, care and maintenance on its property because electric wires do not usually short circuit unless there are defects in their installation or when there is lack of proper maintenance and supervision of the property; that petitioner is guilty of gross and evident bad faith in refusing to pay respondent's valid claim and should be liable to respondent for contracted lawyer's fees, litigation expenses and cost of suit.17 As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from the CA is limited to reviewing questions of law which involves no examination of the probative value of the evidence presented by the litigants or any of them. 18 The Supreme Court is not a trier of facts; it is not its function to analyze or weigh evidence all over again.19 Accordingly, findings of fact of the appellate court are generally conclusive on the Supreme Court.20 Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. 21 Exceptions (4), (5), (7), and (11) apply to the present petition. At issue is the proper interpretation of the questioned insurance policy. Petitioner claims that the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner. The Court disagrees with petitioner's stand. It is well-settled that when the words of a contract are plain and readily understood, there is no room for construction.22 In this case, the questioned insurance policies provide coverage for "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines." 23 ; and defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."24 Nowhere is it provided

in the questioned insurance policies that the subject of the insurance is the goods sold and delivered to the customers and dealers of the insured. Indeed, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract.25 Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered. Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described merchandise remains the property of the vendor until the purchase price thereof is fully paid."26 The Court is not persuaded. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not , except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery; (Emphasis supplied) xxxx Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer.27 Accordingly, petitioner bears the risk of loss of the goods delivered. IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has substantial economic interest in the property.28 Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured. 29 Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.30Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien.31 In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the policies. The next question is: Is petitioner liable for the unpaid accounts? Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code. Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire.
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Accordingly, petitioner's obligation is for the payment of money. As correctly stated by the CA, where the obligation consists in the payment of money, the failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability. 33 The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It does not apply when the obligation is pecuniary in nature. 34 Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation." If the obligation is generic in the sense that the object thereof is designated merely by its class or genus without any particular designation or physical segregation from all others of the same class, the loss or destruction of anything of the same kind even without the debtor's fault and before he has incurred in delay will not have the effect of extinguishing the obligation. 35 This rule is based on the principle that the genus of a thing can never perish. Genus nunquan perit.36 An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.37 Thus, whether fire is a fortuitous event or petitioner was negligent are matters immaterial to this case. What is relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI. With respect to IMC, the respondent has adequately established its claim. Exhibits "C" to "C22"38 show that petitioner has an outstanding account with IMC in the amount of P2,119,205.00. Exhibit "E"39 is the check voucher evidencing payment to IMC. Exhibit "F"40 is the subrogation receipt executed by IMC in favor of respondent upon receipt of the insurance proceeds. All these documents have been properly identified, presented and marked as exhibits in court. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.41 Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. x x x Petitioner failed to refute respondent's evidence. As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No evidentiary weight can be given to Exhibit "F Levi Strauss",42 a letter dated April 23, 1991 from petitioner's General Manager, Stephen S. Gaisano, Jr., since it is not an admission of petitioner's unpaid account with LSPI. It only confirms the loss of Levi's products in the amount of P535,613.00 in the fire that razed petitioner's building on February 25, 1991. Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence. Thus, there is no evidence that respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613.00. WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October 11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are AFFIRMED with the MODIFICATIONthat the order to pay the amount of P535,613.00 to respondent is DELETED for lack of factual basis.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 147839 June 8, 2006 GAISANO CAGAYAN, INC. Petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, Respondent. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a petition for review on certiorari of the Decision 1 dated October 11, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 61848 which set aside the Decision dated August 31, 1998 of the Regional Trial Court, Branch 138, Makati (RTC) in Civil Case No. 92322 and upheld the causes of action for damages of Insurance Company of North America (respondent) against Gaisano Cagayan, Inc. (petitioner); and the CA Resolution dated April 11, 2001 which denied petitioner's motion for reconsideration. The factual background of the case is as follows: Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained from respondent fire insurance policies with book debt endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."2 The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."3 The policies also provide for the following conditions: 1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering invoice or actual delivery of the merchandise whichever shall first occur. 2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amount shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers. x x x4 xxxx Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI. On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed with respondent their claims under their respective fire insurance policies with book debt endorsements; that as of February 25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against petitioner; that respondent made several demands for payment upon petitioner but these went unheeded.5 In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not be held liable because the property covered by the insurance policies were destroyed due to fortuities event or force majeure; that respondent's right of subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss was due to fire which it could not prevent or foresee; that IMC and LSPI never communicated to it that they insured their properties; that it never consented to paying the claim of the insured. 6

At the pre-trial conference the parties failed to arrive at an amicable settlement.7 Thus, trial on the merits ensued. On August 31, 1998, the RTC rendered its decision dismissing respondent's complaint.8 It held that the fire was purely accidental; that the cause of the fire was not attributable to the negligence of the petitioner; that it has not been established that petitioner is the debtor of IMC and LSPI; that since the sales invoices state that "it is further agreed that merely for purpose of securing the payment of purchase price, the above-described merchandise remains the property of the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the delivered goods and must bear the loss. Dissatisfied, petitioner appealed to the CA.9 On October 11, 2000, the CA rendered its decision setting aside the decision of the RTC. The dispositive portion of the decision reads: WHEREFORE, in view of the foregoing, the appealed decision is REVERSED and SET ASIDE and a new one is entered ordering defendant-appellee Gaisano Cagayan, Inc. to pay: 1. the amount of P2,119,205.60 representing the amount paid by the plaintiffappellant to the insured Inter Capitol Marketing Corporation, plus legal interest from the time of demand until fully paid; 2. the amount of P535,613.00 representing the amount paid by the plaintiff-appellant to the insured Levi Strauss Phil., Inc., plus legal interest from the time of demand until fully paid. With costs against the defendant-appellee. SO ORDERED.10 The CA held that the sales invoices are proofs of sale, being detailed statements of the nature, quantity and cost of the thing sold; that loss of the goods in the fire must be borne by petitioner since the proviso contained in the sales invoices is an exception under Article 1504 (1) of the Civil Code, to the general rule that if the thing is lost by a fortuitous event, the risk is borne by the owner of the thing at the time the loss under the principle of res perit domino; that petitioner's obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and as such the obligation to pay is not extinguished, even if the fire is considered a fortuitous event; that by subrogation, the insurer has the right to go against petitioner; that, being a fire insurance with book debt endorsements, what was insured was the vendor's interest as a creditor.11 Petitioner filed a motion for reconsideration12 but it was denied by the CA in its Resolution dated April 11, 2001.13 Hence, the present petition for review on certiorari anchored on the following Assignment of Errors: THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE INSTANT CASE WAS ONE OVER CREDIT. THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATION UNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT.14 Anent the first error, petitioner contends that the insurance in the present case cannot be deemed to be over credit since an insurance "on credit" belies not only the nature of fire insurance but the express terms of the policies; that it was not credit that was insured since respondent paid on the occasion of the loss of the insured goods to fire and not because of the non-payment by petitioner of any obligation; that, even if the insurance is deemed as one over credit, there was no loss as the accounts were not yet due since no prior demands were made by IMC and LSPI against petitioner for payment of the debt and such demands came from respondent only after it had already paid IMC and LSPI under the fire insurance policies. 15
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As to the second error, petitioner avers that despite delivery of the goods, petitioner-buyer IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the goods. Concerning the third ground, petitioner submits that there is no subrogation in favor of respondent as no valid insurance could be maintained thereon by IMC and LSPI since all risk had transferred to petitioner upon delivery of the goods; that petitioner was not privy to the insurance contract or the payment between respondent and its insured nor was its consent or approval ever secured; that this lack of privity forecloses any real interest on the part of respondent in the obligation to pay, limiting its interest to keeping the insured goods safe from fire. For its part, respondent counters that while ownership over the ready- made clothing materials was transferred upon delivery to petitioner, IMC and LSPI have insurable interest over said goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire; that petitioner is liable for loss of the ready-made clothing materials since it failed to overcome the presumption of liability under Article 126516 of the Civil Code; that the fire was caused through petitioner's negligence in failing to provide stringent measures of caution, care and maintenance on its property because electric wires do not usually short circuit unless there are defects in their installation or when there is lack of proper maintenance and supervision of the property; that petitioner is guilty of gross and evident bad faith in refusing to pay respondent's valid claim and should be liable to respondent for contracted lawyer's fees, litigation expenses and cost of suit.17 As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from the CA is limited to reviewing questions of law which involves no examination of the probative value of the evidence presented by the litigants or any of them. 18 The Supreme Court is not a trier of facts; it is not its function to analyze or weigh evidence all over again.19 Accordingly, findings of fact of the appellate court are generally conclusive on the Supreme Court.20 Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.21 Exceptions (4), (5), (7), and (11) apply to the present petition. At issue is the proper interpretation of the questioned insurance policy. Petitioner claims that the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner. The Court disagrees with petitioner's stand. It is well-settled that when the words of a contract are plain and readily understood, there is no room for construction.22 In this case, the questioned insurance policies provide coverage for "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."23 ; and defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."24 Nowhere is it provided

in the questioned insurance policies that the subject of the insurance is the goods sold and delivered to the customers and dealers of the insured. Indeed, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract.25 Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered. Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described merchandise remains the property of the vendor until the purchase price thereof is fully paid."26 The Court is not persuaded. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not , except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery; (Emphasis supplied) xxxx Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer.27 Accordingly, petitioner bears the risk of loss of the goods delivered. IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has substantial economic interest in the property.28 Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured. 29 Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.30Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien.31 In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the policies. The next question is: Is petitioner liable for the unpaid accounts? Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code. Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire.
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Accordingly, petitioner's obligation is for the payment of money. As correctly stated by the CA, where the obligation consists in the payment of money, the failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability. 33 The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It does not apply when the obligation is pecuniary in nature. 34 Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation." If the obligation is generic in the sense that the object thereof is designated merely by its class or genus without any particular designation or physical segregation from all others of the same class, the loss or destruction of anything of the same kind even without the debtor's fault and before he has incurred in delay will not have the effect of extinguishing the obligation. 35 This rule is based on the principle that the genus of a thing can never perish. Genus nunquan perit. 36 An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.37 Thus, whether fire is a fortuitous event or petitioner was negligent are matters immaterial to this case. What is relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI. With respect to IMC, the respondent has adequately established its claim. Exhibits "C" to "C22"38 show that petitioner has an outstanding account with IMC in the amount of P2,119,205.00. Exhibit "E"39 is the check voucher evidencing payment to IMC. Exhibit "F"40 is the subrogation receipt executed by IMC in favor of respondent upon receipt of the insurance proceeds. All these documents have been properly identified, presented and marked as exhibits in court. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.41 Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. x x x Petitioner failed to refute respondent's evidence. As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No evidentiary weight can be given to Exhibit "F Levi Strauss",42 a letter dated April 23, 1991 from petitioner's General Manager, Stephen S. Gaisano, Jr., since it is not an admission of petitioner's unpaid account with LSPI. It only confirms the loss of Levi's products in the amount of P535,613.00 in the fire that razed petitioner's building on February 25, 1991. Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence. Thus, there is no evidence that respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613.00. WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October 11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are AFFIRMED with the MODIFICATIONthat the order to pay the amount of P535,613.00 to respondent is DELETED for lack of factual basis.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 102253 June 2, 1995 SOUTH SEA SURETY AND INSURANCE COMPANY, INC., petitioner, vs. HON. COURT OF APPEALS and VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY, INC., respondents. RESOLUTION VITUG, J.: Two issues on the subject of insurance are raised in this petition, that assails the decision, that assails the decision of the Court of Appeals. (in CA-G.R. NO. CV-20156), the first dealing on the requirement of premium payment and the second relating to the agency relationship of parties under that contract. The court litigation started when Valenzuela Hardwood and Industrial Supply, Inc. ("Hardwood"), filed with the Regional, Trial Court of the National Capital Judicial Region, Branch l71 in Valenzuela, Metro Manila, a complaint for the recovery of the value of lost logs and freight charges from Seven Brothers Shipping Corporation or, to the extent of its alleged insurance cover, from South Sea Surety and insurance Company. The factual backdrop is described briefly by the appellate court thusly: It appears that on 16 January 1984, plaintiff [Valenzuela Hardwood and Industrial Supply, Inc.] entered into an agreement with the defendant Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. On 20 January 1984, plaintiff insured the logs, against loss and/or, damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 end the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date. On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua. In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs. On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps due on the policy was tendered to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. 1 In its decision, dated 11 May 1988, the trial court rendered judgment in favor of plaintiff Hardwood. On appeal perfected by both the shipping firm and the insurance company, the Court of Appeals affirmed the judgment of the court a quo only against the insurance corporation; in absolving the shipping entity from liability, the appellate court ratiocinated: The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter's lost logs. It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss.

The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. Under American jurisprudence, a common carrier undertaking to carry a special or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24). The shipping corporation should not therefore be held liable for the loss of the logs. 2 In this petition for review on certiorari brought by South Sea Surety and Insurance Co., Inc., petitioner argues that it likewise should have been freed from any liability to Hardwood. It faults the appellate court (a) for having Supposedly disregarded Section 77 of the insurance Code and (b) for holding Victorio Chua to have been an authorized representative of the insurer. Section 77 of the Insurance Code provides: Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. Undoubtedly, the payment of the premium is a condition precedent to, and essential for, the efficaciousness of the contract. The only two statutorily provided exceptions are (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies and (b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be then conclusive evidence of the premium payment (Secs. 77-78, Insurance Code). The appellate court, contrary to what the petition suggests, did not make any pronouncement to the contrary. Indeed, it has said: Concerning the issue as to whether there is a valid contract of insurance between plaintiff-appellee and defendant-appellant South Sea Surety and Insurance Co., Inc., Section 77 of the Insurance Code explicitly provides that notwithstanding any agreement to the contrary, no policy issued by an insurance company is valid and binding unless and until premium thereof has been paid. It is therefore important to determine whether at the time of the loss, the premium was already paid. 3 No attempt becloud the issues can disguise the fact that the sole question raised in the instant petition is really evidentiary in nature, i.e., whether or not Victorio Chua, in receiving the check for the insurance premium prior to the occurrence of the risk insured against has so acted as an agent of petitioner. The appellate court, like the trial court, has found in the affirmative. Said the appellate court: In the instant case, the Marine Cargo Insurance Policy No. 84/24229 was issued by defendant insurance company on 20 January 1984. At the time the vessel sank on 25 January 1984 resulting in the loss of the insured logs, the insured had already delivered to Victorio Chua the check in payment of premium. But, as Victorio Chua testified, it was only in the morning of 30 January 1984 or 5 days after the vessel sank when his messenger tendered the check to defendant South Sea Surety and Insurance Co., Inc. (TSN, pp. 3-27, 16-17, 22 October 1985). The pivotal issue to be resolved to determine the liability, of the surety corporation is whether Mr. Chua acted as an agent of the surety company or of the insured when he received the check for insurance premiums. Appellant surety company insists that Mr. Chua is an administrative assistant for the past ten years and an agent for less than ten years of the Columbia Insurance Brokers, Ltd. He is paid a salary as a administrative assistant and a commission as agent based on the premiums he turns over to the broker. Appellant therefore argues that Mr. Chua, having
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received the insurance premiums as an agent of the Columbia Insurance Broker, acted as an agent of the insured under Section 301 of the Insurance Code which provides as follows: Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or aids in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself, shall be an insurance broker within the intent of this Code, and shall thereby become liable to all the duties requirements, liabilities and penalties to which an insurance broker is subject. The appellees, upon the other hand, claim that the second paragraph of Section 306 of the Insurance Code provide as follows: Sec. 306. . . . Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy of contract of insurance at the time of its issuance or delivery or which becomes due thereon. On cross-examination in behalf of South Sea Surety and Insurance Co., Inc. Mr. Chua testified that the marine cargo insurance policy for the plaintiff's logs was delivered to him on 21 January 1984 at his office to be delivered to the plaintiff. When the appellant South Sea Surety and Insurance Co., Inc. delivered to Mr. Chua the marine cargo insurance policy for the plaintiffs logs, he is deemed to have been authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium which is due on its behalf. When therefore the insured logs were lost, the insured had already paid the premium to an agent of the South Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds under the policy it issued to the insured. 4 We see no valid reason to discard the factual conclusions of the appellate court. Just as so correctly pointed out by private respondent, it is not the function of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide. WHEREFORE, the resolution, dated 01 February 1993, granting due course to the petition is RECALLED, and the petition is DENIED. Costs against petitioner.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-31845 April 30, 1979 GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs. HONORABLE COURT OF APPEALS, respondents. G.R. No. L-31878 April 30, 1979 LAPULAPU D. MONDRAGON, petitioner, vs. HON. COURT OF APPEALS and NGO HING, respondents. Siguion Reyna, Montecillo & Ongsiako and Sycip, Salazar, Luna & Manalo for petitioner Company. Voltaire Garcia for petitioner Mondragon. Pelaez, Pelaez & Pelaez for respondent Ngo Hing. DE CASTRO, J.: The two above-entitled cases were ordered consolidated by the Resolution of this Court dated April 29, 1970, (Rollo, No. L-31878, p. 58), because the petitioners in both cases seek similar relief, through these petitions for certiorari by way of appeal, from the amended decision of respondent Court of Appeals which affirmed in toto the decision of the Court of First Instance of Cebu, ordering "the defendants (herein petitioners Great Pacific Ligfe Assurance Company and Mondragon) jointly and severally to pay plaintiff (herein private respondent Ngo Hing) the amount of P50,000.00 with interest at 6% from the date of the filing of the complaint, and the sum of P1,077.75, without interest. It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twentyyear endownment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent supplied the essential data which petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting (Exhibit I-M). Mondragon finally type-wrote the data on the application form which was signed by private respondent Ngo Hing. The latter paid the annual premuim the sum of P1,077.75 going over to the Company, but he reatined the amount of P1,317.00 as his commission for being a duly authorized agebt of Pacific Life. Upon the payment of the insurance premuim, the binding deposit receipt (Exhibit E) was issued to private respondent Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from Pacific Life disapproving the insurance application (Exhibit 3-M). The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for such coverage (Exhibit 4-M). It was when things were in such state that on May 28, 1957 Helen Go died of influenza with complication of bronchopneumonia. Thereupon, private respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of

the same before the Court of First Instance of Cebu, which rendered the adverse decision as earlier refered to against both petitioners. The decisive issues in these cases are: (1) whether the binding deposit receipt (Exhibit E) constituted a temporary contract of the life insurance in question; and (2) whether private respondent Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void the aforesaid Exhibit E. 1. At the back of Exhibit E are condition precedents required before a deposit is considered a BINDING RECEIPT. These conditions state that: A. If the Company or its agent, shan have received the premium deposit ... and the insurance application, ON or PRIOR to the date of medical examination ... said insurance shan be in force and in effect from the date of such medical examination, for such period as is covered by the deposit ...,PROVIDED the company shall be satisfied that on said date the applicant was insurable on standard rates under its rule for the amount of insurance and the kind of policy requested in the application. D. If the Company does not accept the application on standard rate for the amount of insurance and/or the kind of policy requested in the application but issue, or offers to issue a policy for a different plan and/or amount ..., the insurance shall not be in force and in effect until the applicant shall have accepted the policy as issued or offered by the Company and shall have paid the full premium thereof. If the applicant does not accept the policy, the deposit shall be refunded. E. If the applicant shall not have been insurable under Condition A above, and the Company declines to approve the application the insurance applied for shall not have been in force at any time and the sum paid be returned to the applicant upon the surrender of this receipt. (Emphasis Ours). The aforequoted provisions printed on Exhibit E show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant. Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly, merely conditional and does not insure outright. As held by this Court, where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264). It bears repeating that through the intra-company communication of April 30, 1957 (Exhibit 3M), Pacific Life disapproved the insurance application in question on the ground that it is not offering the twenty-year endowment insurance policy to children less than seven years of age. What it offered instead is another plan known as the Juvenile Triple Action, which private respondent failed to accept. In the absence of a meeting of the minds between petitioner
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Pacific Life and private respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the noncompliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between thenl Accordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life. As held in De Lim vs. Sun Life Assurance Company of Canada , supra, "a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents ... The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be dione, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement." We are not impressed with private respondent's contention that failure of petitioner Mondragon to communicate to him the rejection of the insurance application would not have any adverse effect on the allegedly perfected temporary contract (Respondent's Brief, pp. 1314). In this first place, there was no contract perfected between the parties who had no meeting of their minds. Private respondet, being an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably aware that said company does not offer the life insurance applied for. When he filed the insurance application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will approve the recommendation of Mondragon for the acceptance and approval of the application in question along with his proposal that the insurance company starts to offer the 20-year endowment insurance plan for children less than seven years. Nonetheless, the record discloses that Pacific Life had rejected the proposal and recommendation. Secondly, having an insurable interest on the life of his one-year old daughter, aside from being an insurance agent and an offense associate of petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on the processing of such application and could not pretend ignorance of the Company's rejection of the 20-year endowment life insurance application. At this juncture, We find it fit to quote with approval, the very apt observation of then Appellate Associate Justice Ruperto G. Martin who later came up to this Court, from his dissenting opinion to the amended decision of the respondent court which completely reversed the original decision, the following: Of course, there is the insinuation that neither the memorandum of rejection (Exhibit 3M) nor the reply thereto of appellant Mondragon reiterating the desire for applicant's father to have the application considered as one for a 20-year endowment plan was ever duly communicated to Ngo; Hing, father of the minor applicant. I am not quite conninced that this was so. Ngo Hing, as father of the applicant herself, was precisely the "underwriter who wrote this case" (Exhibit H-1). The unchallenged statement of appellant Mondragon in his letter of May 6, 1957) (Exhibit 4-M), specifically admits that said Ngo Hing was "our associate" and that it was the latter who "insisted that the plan be placed on the 20-year endowment plan." Under these circumstances, it is inconceivable that the progress in the processing of the application was not brought home to his knowledge. He must have been duly apprised of the rejection of the application for a 20year endowment plan otherwise Mondragon would not have asserted that it was Ngo Hing himself who insisted on the application as originally filed, thereby implictly declining the offer to consider the application under the Juvenile Triple Action Plan. Besides, the associate of Mondragon that he was, Ngo Hing should only be presumed to know what kind of policies are available in the company for minors below 7 years old. What he and Mondragon were apparently trying to do in the premises was merely to prod the company into going into the business of issuing endowment policies for minors just as other insurance companies allegedly do. Until such a definite policy is however, adopted by the company, it can hardly be said that it could have been bound at all under

the binding slip for a plan of insurance that it could not have, by then issued at all. (Amended Decision, Rollo, pp- 52-53). 2. Relative to the second issue of alleged concealment. this Court is of the firm belief that private respondent had deliberately concealed the state of health and piysical condition of his daughter Helen Go. Wher private regpondeit supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor disguished. Nonetheless, private respondent, in apparent bad faith, withheld the fact materal to the risk to be assumed by the insurance compary. As an insurance agent of Pacific Life, he ought to know, as he surely must have known. his duty and responsibility to such a material fact. Had he diamond said significant fact in the insurance application fom Pacific Life would have verified the same and would have had no choice but to disapprove the application outright. The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect candor or openness and honesty; the absence of any concealment or demotion, however slight [Black's Law Dictionary, 2nd Edition], not for the alone but equally so for the insurer (Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70). Concealment is a neglect to communicate that which a partY knows aDd Ought to communicate (Section 25, Act No. 2427). Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil 930; Satumino vs. Philippine American Life Insurance Company, 7 SCRA 316). Private respondent appears guilty thereof. We are thus constrained to hold that no insurance contract was perfected between the parties with the noncompliance of the conditions provided in the binding receipt, and concealment, as legally defined, having been comraitted by herein private respondent. WHEREFORE, the decision appealed from is hereby set aside, and in lieu thereof, one is hereby entered absolving petitioners Lapulapu D. Mondragon and Great Pacific Life Assurance Company from their civil liabilities as found by respondent Court and ordering the aforesaid insurance company to reimburse the amount of P1,077.75, without interest, to private respondent, Ngo Hing. Costs against private respondent.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-48563 May 25, 1979 VICENTE E. TANG, petitioner, vs. HON. COURT OF APPEALS and PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents. Ambrosio D. Go for petitioner. Ferry, De la Rosa, Deligero Salonga & Associates for private respondent. ABAD SANTOS, J.: This is a petition to review on certiorari of the decision of the Court of Appeals (CA-G.R. No. 55407-R, June 8, 1978) which affirmed the decision of the Court of First Instance of Manila in Civil Case No. 90062 wherein the petitioner herein was the plaintiff and Philippine American Life Insurance Co. the herein respondent was the defendant. The action was for the enforcement of two insurance policies that had been issued by the defendant company under the following circumstances. On September 25, 1965, Lee See Guat, a widow, 61 years old, and an illiterate who spoke only Chinese, applied for an insurance on her life for P60,000 with the respondent Company. The application consisted of two parts, both in the English language. The second part of her application dealt with her state of health and because her answers indicated that she was healthy, the Company issued her Policy No. 0690397, effective October 23, 1965, with her nephew Vicente E. Tang, herein Petitioner, as her beneficiary, On November 15, 1965, Lee See Guat again applied with the respondent Company for an additional insurance on her life for P40,000. Considering that her first application had just been approved, no further medical examination was made but she was required to accomplish and submit Part I of the application which reads: "I/WE HEREBY DECLARE AND AGREE that all questions, statements answers contained herein, as well as those made to or to be made to the Medical Examiner in Part II are full, complete and true and bind all parties in interest under the policy herein applied for; that there shall be no contract of insurance unless a policy is issued on this application and the fun first premium thereon, according to the mode of payment specified in answer to question 4D above, actually paid during the lifetime and good health of the Proposed Insured." Moreover, her answers in Part II of her previous application were used in appraising her insurability for the second insurance. On November 28, 1965, Policy No. 695632 was issued to Lee See Guat with the same Vicente E. Tang as her beneficiary. On April 20, 1966, Lee See Guat died of lung cancer. Thereafter, the beneficiary of the two policies, Vicente E. Tang claimed for their face value in the amount of P100,000 which the insurance company refused to pay on the ground that the insured was guilty of concealment and misrepresentation at the time she applied for the two policies. Hence, the filing of Civil Case No. 90062 in the Court of First Instance of Manila which dismissed the claim because of the concealment practised by the insured in violation of the Insurance Law. On appeal, the Court of Appeals, affirmed the decision. In its decision, the Court of Appeals stated, inter alia: "There is no doubt that she deliberately concealed material facts about her physical condition and history and/or conspired with whoever assisted her in relaying false information to the medical examiner, assuming that the examiner could not communicate directly with her." The issue in this appeal is the application of Art. 1332 of the Civil Code which stipulates: Art. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the

person enforcing the contract must show that the terms thereof have been fully explained to the former. According to the Code Commission: "This rule is especially necessary in the Philippines where unfortunately there is still a fairly large number of illiterates, and where documents are usually drawn up in English or Spanish." (Report of the Code Commission, p. 136.) Art. 1332 supplements Art. 24 of the Civil Code which provides that " In all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the court must be vigilant for his protection. It is the position of the petitioner that because Lee See Guat was illiterate and spoke only Chinese, she could not be held guilty of concealment of her health history because the applications for insurance were in English and the insurer has not proved that the terms thereof had been fully explained to her. It should be noted that under Art. 1332 above quoted, the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it. Here the insurance company is not seeking to enforce the contracts; on the contrary, it is seeking to avoid their performance. It is petitioner who is seeking to enforce them even as fraud or mistake is not alleged. Accordingly, respondent company was under no obligation to prove that the terms of the insurance contracts were fully explained to the other party. Even if we were to say that the insurer is the one seeking the performance of the contracts by avoiding paying the claim, it has to be noted as above stated that there has been no imputation of mistake or fraud by the illiterate insured whose personality is represented by her beneficiary the petitioner herein. In sum, Art. 1332 is inapplicable to the case at bar. Considering the findings of both the CFI and Court of Appeals that the insured was guilty of concealment as to her state of health, we have to affirm. WHEREFORE, the decision of the Court of Appeals is hereby affirmed. No special pronouncement as to costs.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 105135 June 22, 1995 SUNLIFE ASSURANCE COMPANY OF CANADA, petitioner, vs. The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI, respondents. QUIASON, J.: This is a petition for review for certiorari under Rule 45 of the Revised Rules of Court to reverse and set aside the Decision dated February 21, 1992 of the Court of Appeals in CAG.R. CV No. 29068, and its Resolution dated April 22, 1992, denying reconsideration thereof. We grant the petition. I On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from petitioner. He was issued Policy No. 3-903-766-X valued at P100,000.00, with double indemnity in case of accidental death. The designated beneficiary was his mother, respondent Bernarda Bacani. On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim with petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its findings prompted it to reject the claim. In its letter, petitioner informed respondent Bernarda Bacani, that the insured did not disclose material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter. Petitioner claimed that the insured gave false statements in his application when he answered the following questions: 5. Within the past 5 years have you: a) consulted any doctor or other health practitioner? b) submitted to: EGG? X-rays? blood tests? other tests? c) attended or been admitted to any hospital or other medical facility? 6. Have you ever had or sought advice for: xxx xxx xxx b) urine, kidney or bladder disorder? (Rollo, p. 53) The deceased answered question No. 5(a) in the affirmative but limited his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for cough and flu complications. The other questions were answered in the negative (Rollo, p. 53). Petitioner discovered that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultrasonography and hematology tests. On November 17, 1988, respondent Bernarda Bacani and her husband, respondent Rolando Bacani, filed an action for specific performance against petitioner with the Regional Trial

Court, Branch 191, Valenzuela, Metro Manila. Petitioner filed its answer with counterclaim and a list of exhibits consisting of medical records furnished by the Lung Center of the Philippines. On January 14, 1990, private respondents filed a "Proposed Stipulation with Prayer for Summary Judgment" where they manifested that they "have no evidence to refute the documentary evidence of concealment/misrepresentation by the decedent of his health condition (Rollo, p. 62). Petitioner filed its Request for Admissions relative to the authenticity and due execution of several documents as well as allegations regarding the health of the insured. Private respondents failed to oppose said request or reply thereto, thereby rendering an admission of the matters alleged. Petitioner then moved for a summary judgment and the trial court decided in favor of private respondents. The dispositive portion of the decision is reproduced as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant, condemning the latter to pay the former the amount of One Hundred Thousand Pesos (P100,000.00) the face value of insured's Insurance Policy No. 3903766, and the Accidental Death Benefit in the amount of One Hundred Thousand Pesos (P100,000.00) and further sum of P5,000.00 in the concept of reasonable attorney's fees and costs of suit. Defendant's counterclaim is hereby Dismissed (Rollo, pp. 43-44). In ruling for private respondents, the trial court concluded that the facts concealed by the insured were made in good faith and under a belief that they need not be disclosed. Moreover, it held that the health history of the insured was immaterial since the insurance policy was "non-medical". Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. The appellate court ruled that petitioner cannot avoid its obligation by claiming concealment because the cause of death was unrelated to the facts concealed by the insured. It also sustained the finding of the trial court that matters relating to the health history of the insured were irrelevant since petitioner waived the medical examination prior to the approval and issuance of the insurance policy. Moreover, the appellate court agreed with the trial court that the policy was "non-medical" (Rollo, pp. 4-5). Petitioner's motion for reconsideration was denied; hence, this petition. II We reverse the decision of the Court of Appeals. The rule that factual findings of the lower court and the appellate court are binding on this Court is not absolute and admits of exceptions, such as when the judgment is based on a misappreciation of the facts (Geronimo v. Court of Appeals, 224 SCRA 494 [1993]). In weighing the evidence presented, the trial court concluded that indeed there was concealment and misrepresentation, however, the same was made in "good faith" and the facts concealed or misrepresented were irrelevant since the policy was "non-medical". We disagree. Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section provides: A neglect to communicate that which a party knows and ought to communicate, is called concealment. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec. 31). The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health.
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The information which the insured failed to disclose were material and relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part. The argument, that petitioner's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. We reiterate our ruling in Saturnino v. Philippine American Life Insurance Company, 7 SCRA 316 (1963), that " . . . the waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not . . . " Moreover, such argument of private respondents would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective (See Vda. de Canilang v. Court of Appeals, supra). Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries (Henson v. The Philippine American Life Insurance Co., 56 O.G. No. 48 [1960]). We, therefore, rule that petitioner properly exercised its right to rescind the contract of insurance by reason of the concealment employed by the insured. It must be emphasized that rescission was exercised within the two-year contestability period as recognized in Section 48 of The Insurance Code. WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED and SET ASIDE.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 92492 June 17, 1993 THELMA VDA. DE CANILANG, petitioner, vs. HON. COURT OF APPEALS and GREAT PACIFIC LIFE ASSURANCE CORPORATION, respondents. Simeon C. Sato for petitioner. FELICIANO, J.: On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was diagnosed as suffering from "sinus tachycardia." The doctor prescribed the following fro him: Trazepam, a tranquilizer; and Aptin, a beta-blocker drug. Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." On next day, 4 August 1982, Jaime Canilang applied for a "non-medical" insurance policy with respondent Great Pacific Life Assurance Company ("Great Pacific") naming his wife, Thelma Canilang, as his beneficiary. 1 Jaime Canilang was issued ordinary life insurance Policy No. 345163, with the face value of P19,700, effective as of 9 August 1982. On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia." 2 Petitioner, widow and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied on 5 December 1983 upon the ground that the insured had concealed material information from it. Petitioner then filed a complaint against Great Pacific with the Insurance Commission for recovery of the insurance proceeds. During the hearing called by the Insurance Commissioner, petitioner testified that she was not aware of any serious illness suffered by her late husband 3 and that, as far as she knew, her husband had died because of a kidney disorder. 4 A deposition given by Dr. Wilfredo Claudio was presented by petitioner. There Dr. Claudio stated that he was the family physician of the deceased Jaime Canilang 5 and that he had previously treated him for "sinus tachycardia" and "acute bronchitis." 6 Great Pacific for its part presented Dr. Esperanza Quismorio, a physician and a medical underwriter working for Great Pacific. 7 She testified that the deceased's insurance application had been approved on the basis of his medical declaration. 8 She explained that as a rule, medical examinations are required only in cases where the applicant has indicated in his application for insurance coverage that he has previously undergone medical consultation and hospitalization. 9 In a decision dated 5 November 1985, Insurance Commissioner Armando Ansaldo ordered Great Pacific to pay P19,700 plus legal interest and P2,000.00 as attorney's fees after holding that: 1. the ailment of Jaime Canilang was not so serious that, even if it had been disclosed, it would not have affected Great Pacific's decision to insure him; 2. Great Pacific had waived its right to inquire into the health condition of the applicant by the issuance of the policy despite the lack of answers to "some of the pertinent questions" in the insurance application; 3. there was no intentional concealment on the part of the insured Jaime Canilang as he had thought that he was merely suffering from a minor ailment and simple cold; 10 and 4. Batas Pambansa Blg. 847 which voids an insurance contract, whether or not concealment was intentionally made, was not applicable to Canilang's case as that law became effective only on 1 June 1985. On appeal by Great Pacific, the Court of Appeals reversed and set aside the decision of the Insurance Commissioner and dismissed Thelma Canilang's complaint and Great Pacific's

counterclaim. The Court of Appealed found that the use of the word "intentionally" by the Insurance Commissioner in defining and resolving the issue agreed upon by the parties at pretrial before the Insurance Commissioner was not supported by the evidence; that the issue agreed upon by the parties had been whether the deceased insured, Jaime Canilang, made a material concealment as the state of his health at the time of the filing of insurance application, justifying respondent's denial of the claim. The Court of Appeals also found that the failure of Jaime Canilang to disclose previous medical consultation and treatment constituted material information which should have been communicated to Great Pacific to enable the latter to make proper inquiries. The Court of Appeals finally held that the Ng Gan Zee case which had involved misrepresentation was not applicable in respect of the case at bar which involves concealment. Petitioner Thelma Canilang is now before this Court on a Petition for Review on Certiorari alleging that: 1. . . . the Honorable Court of Appeals, speaking with due respect, erred in not holding that the issue in the case agreed upon between the parties before the Insurance Commission is whether or not Jaime Canilang "intentionally" made material concealment in stating his state of health; 2. . . . at any rate, the non-disclosure of certain facts about his previous health conditions does not amount to fraud and private respondent is deemed to have waived inquiry thereto. 11 The medical declaration which was set out in the application for insurance executed by Jaime Canilang read as follows: MEDICAL DECLARATION I hereby declare that: (1) I have not been confined in any hospital, sanitarium or infirmary, nor receive any medical or surgical advice/attention within the last five (5) years. (2) I have never been treated nor consulted a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney, stomach disorder, or any other physical impairment. (3) I am, to the best of my knowledge, in good health. EXCEPTIONS: ________________________________________________________________________ GENERAL DECLARATION I hereby declare that all the foregoing answers and statements are complete, true and correct. I herebyagree that if there be any fraud or misrepresentation in the above statements material to the risk, the INSURANCE COMPANY upon discovery within two (2) years from the effective date of insurance shall have the right to declare such insurance null and void. That the liabilities of the Company under the said Policy/TA/Certificate shall accrue and begin only from the date of commencement of risk stated in the Policy/TA/Certificate, provided that the first premium is paid and the Policy/TA/Certificate is delivered to, and accepted by me in person, when I am in actual good health. Signed at Manila his 4th day of August, 1992. Illegible Signature of Applicant. 12 We note that in addition to the negative statements made by Mr. Canilang in paragraph 1 and 2 of the medical declaration, he failed to disclose in the appropriate space, under the caption "Exceptions," that he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis." The relevant statutory provisions as they stood at the time Great Pacific issued the contract of insurance and at the time Jaime Canilang died, are set out in P.D. No. 1460, also known as
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the Insurance Code of 1978, which went into effect on 11 June 1978. These provisions read as follows: Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment. xxx xxx xxx Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factorswithin his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. (Emphasis supplied) Under the foregoing provisions, the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]," that is to say, information which was "material to the contract." The test of materiality is contained in Section 31 of the Insurance Code of 1978 which reads: Sec. 31. Materially is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries. (Emphasis supplied) "Sinus tachycardia" is considered present "when the heart rate exceeds 100 beats per minute." 13 The symptoms of this condition include pounding in the chest and sometimes faintness and weakness of the person affected. The following elaboration was offered by Great Pacific and set out by the Court of Appeals in its Decision: Sinus tachycardia is defined as sinus-initiated; heart rate faster than 100 beats per minute. (Harrison' s Principles of Internal Medicine, 8th ed. [1978], p. 1193.) It is, among others, a common reaction to heart disease, including myocardial infarction, and heart failure per se. (Henry J.L. Marriot, M.D., Electrocardiography, 6th ed., [1977], p. 127.) The medication prescribed by Dr. Claudio for treatment of Canilang's ailment on June 18, 1982, indicates the condition that said physician was trying to manage. Thus, he prescribed Trazepam, (Philippine Index of Medical Specialties (PIMS), Vol. 14, No. 3, Dec. 1985, p. 112) which is anti-anxiety, anti-convulsant, muscle-relaxant; and Aptin, (Idem, p. 36) a cardiac drug, for palpitations and nervous heart. Such treatment could have been a very material information to the insurer in determining the action to be take on Canilang's application for life insurance coverage. 14 We agree with the Court of Appeals that the information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. 15 The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge ultimately. The insurance Great Pacific applied for was a "non-medical" insurance policy. In Saturnino v. Philippine-American Life Insurance Company, 16 this Court held that:

. . . if anything, the waiver of medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not . . . . 17 (Emphasis supplied) The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain information to the insurer was not "intentional" in nature, for the reason that Jaime Canilang believed that he was suffering from minor ailment like a common cold. Section 27 of the Insurance Code of 1978 as it existed from 1974 up to 1985, that is, throughout the time range material for present purposes, provided that: Sec. 27. A concealment entitles the injured party to rescind a contract of insurance. The preceding statute, Act No. 2427, as it stood from 1914 up to 1974, had provided: Sec. 26. A concealment, whether intentional or unintentional, entitles the injured party to rescind a contract of insurance. (Emphasis supplied) Upon the other hand, in 1985, the Insurance Code of 1978 was amended by B.P. Blg. 874. This subsequent statute modified Section 27 of the Insurance Code of 1978 so as to read as follows: Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. (Emphasis supplied) The unspoken theory of the Insurance Commissioner appears to have been that by deleting the phrase "intentional or unintentional," the Insurance Code of 1978 (prior to its amendment by B.P. Blg. 874) intended to limit the kinds of concealment which generate a right to rescind on the part of the injured party to "intentional concealments." This argument is not persuasive. As a simple matter of grammar, it may be noted that "intentional" and "unintentional" cancel each other out. The net result therefore of the phrase "whether intentional or unitentional" is precisely to leave unqualified the term "concealment." Thus, Section 27 of the Insurance Code of 1978 is properly read as referring to "any concealment" without regard to whether such concealment is intentional or unintentional. The phrase "whether intentional or unintentional" was in fact superfluous. The deletion of the phrase "whether intentional or unintentional" could not have had the effect of imposing an affirmative requirement that a concealment must be intentional if it is to entitle the injured party to rescind a contract of insurance. The restoration in 1985 by B.P. Blg. 874 of the phrase "whether intentional or unintentional" merely underscored the fact that all throughout (from 1914 to 1985), the statute did not require proof that concealment must be "intentional" in order to authorize rescission by the injured party. In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. For Jaime Canilang could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the two (2) months before applying for non-medical insurance. Indeed, the last medical consultation took place just the day before the insurance application was filed. In all probability, Jaime Canilang went to visit his doctor precisely because of the discomfort and concern brought about by his experiencing "sinus tachycardia." We find it difficult to take seriously the argument that Great Pacific had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from the Insurance Code of 1978. It remains only to note that the Court of Appeals finding that the parties had not agreed in the pretrial before the Insurance Commission that the relevant issue was whether or not Jaime Canilang had intentionally concealed material information from the insurer, was supported by
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the evidence of record, i.e., the Pre-trial Order itself dated 17 October 1984 and the Minutes of the Pre-trial Conference dated 15 October 1984, which "readily shows that the word "intentional" does not appear in the statement or definition of the issue in the said Order and Minutes." 18 WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of Appeals dated 16 October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED. No pronouncement as to the costs.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 48049 June 29, 1989 EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners, vs. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents. O.F. Santos & P.C. Nolasco for petitioners. Ferry, De la Rosa and Associates for private respondent. GUTIERREZ, JR., J.: This is a petition for review on certiorari of the Court of Appeals' decision affirming the decision of the Insurance Commissioner which dismissed the petitioners' complaint against respondent Philippine American Life Insurance Company for the recovery of the proceeds from their late father's policy. The facts of the case as found by the Court of Appeals are: Petitioners appeal from the Decision of the Insurance Commissioner dismissing herein petitioners' complaint against respondent Philippine American Life Insurance Company for the recovery of the proceeds of Policy No. 1082467 in the amount of P 80,000.00. On September 23,1973, Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of P 80,000.00 with respondent company. Said application was approved and Policy No. 1082467 was issued effective November 6,1973, with petitioners the beneficiaries thereof (Exhibit A). On April 26,1975, Tan Lee Siong died of hepatoma (Exhibit B). Petitioners then filed with respondent company their claim for the proceeds of the life insurance policy. However, in a letter dated September 11, 1975, respondent company denied petitioners' claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance (Exhibit 3). The premiums paid on the policy were thereupon refunded . Alleging that respondent company's refusal to pay them the proceeds of the policy was unjustified and unreasonable, petitioners filed on November 27, 1975, a complaint against the former with the Office of the Insurance Commissioner, docketed as I.C. Case No. 218. After hearing the evidence of both parties, the Insurance Commissioner rendered judgment on August 9, 1977, dismissing petitioners' complaint. (Rollo, pp. 91-92) The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's decision for lack of merit Hence, this petition. The petitioners raise the following issues in their assignment of errors, to wit: A. The conclusion in law of respondent Court that respondent insurer has the right to rescind the policy contract when insured is already dead is not in accordance with existing law and applicable jurisprudence. B. The conclusion in law of respondent Court that respondent insurer may be allowed to avoid the policy on grounds of concealment by the deceased assured, is contrary to the provisions of the policy contract itself, as well as, of applicable legal provisions and established jurisprudence. C. The inference of respondent Court that respondent insurer was misled in issuing the policy are manifestly mistaken and contrary to admitted evidence. (Rollo, p. 7) The petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

The contention is without merit. The pertinent section in the Insurance Code provides: Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. According to the petitioners, the Insurance Law was amended and the second paragraph of Section 48 added to prevent the insurance company from exercising a right to rescind after the death of the insured. The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years." As noted by the Court of Appeals, to wit: The policy was issued on November 6,1973 and the insured died on April 26,1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27,1975. (Rollo, pp. 99-100) xxx xxx xxx The petitioners contend that there could have been no concealment or misrepresentation by their late father because Tan Lee Siong did not have to buy insurance. He was only pressured by insistent salesmen to do so. The petitioners state: Here then is a case of an assured whose application was submitted because of repeated visits and solicitations by the insurer's agent. Assured did not knock at the door of the insurer to buy insurance. He was the object of solicitations and visits. Assured was a man of means. He could have obtained a bigger insurance, not just P 80,000.00. If his purpose were to misrepresent and to conceal his ailments in anticipation of death during the two-year period, he certainly could have gotten a bigger insurance. He did not. Insurer Philamlife could have presented as witness its Medical Examiner Dr. Urbano Guinto. It was he who accomplished the application, Part II, medical. Philamlife did not. Philamlife could have put to the witness stand its Agent Bienvenido S. Guinto, a relative to Dr. Guinto, Again Philamlife did not. (pp. 138139, Rollo) xxx xxx xxx This Honorable Supreme Court has had occasion to denounce the pressure and practice indulged in by agents in selling insurance. At one time or another most of us have been subjected to that pressure, that practice. This court took judicial cognizance of the whirlwind pressure of insurance selling-especially of the agent's practice of 'supplying the information, preparing and answering the application, submitting the application to their companies, concluding the transactions and otherwisesmoothing out all difficulties. We call attention to what this Honorable Court said in Insular Life v. Feliciano, et al., 73 Phil. 201; at page 205:
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It is of common knowledge that the selling of insurance today is subjected to the whirlwind pressure of modern salesmanship. Insurance companies send detailed instructions to their agents to solicit and procure applications. These agents are to be found all over the length and breadth of the land. They are stimulated to more active efforts by contests and by the keen competition offered by the other rival insurance companies. They supply all the information, prepare and answer the applications, submit the applications to their companies, conclude the transactions, and otherwise smooth out all difficulties. The agents in short do what the company set them out to do. The Insular Life case was decided some forty years ago when the pressure of insurance salesmanship was not overwhelming as it is now; when the population of this country was less than one-fourth of what it is now; when the insurance companies competing with one another could be counted by the fingers. (pp. 140-142, Rollo) xxx xxx xxx In the face of all the above, it would be unjust if, having been subjected to the whirlwind pressure of insurance salesmanship this Court itself has long denounced, the assured who dies within the two-year period, should stand charged of fraudulent concealment and misrepresentation." (p. 142, Rollo) The legislative answer to the arguments posed by the petitioners is the "incontestability clause" added by the second paragraph of Section 48. The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners' interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts. The petitioners argue that no evidence was presented to show that the medical terms were explained in a layman's language to the insured. They state that the insurer should have presented its two medical field examiners as witnesses. Moreover, the petitioners allege that the policy intends that the medical examination must be conducted before its issuance otherwise the insurer "waives whatever imperfection by ratification." We agree with the Court of Appeals which ruled: On the other hand, petitioners argue that no evidence was presented by respondent company to show that the questions appearing in Part II of the application for insurance were asked, explained to and understood by the deceased so as to prove concealment on his part. The same is not well taken. The deceased, by affixing his signature on the application form, affirmed the correctness of all the entries and answers appearing therein. It is but to be expected that he, a businessman, would not have affixed his signature on the application form unless he clearly understood its significance. For, the presumption is that a person intends the ordinary consequence of his voluntary act and takes ordinary care of his concerns. [Sec. 5(c) and (d), Rule 131, Rules of Court]. The evidence for respondent company shows that on September 19,1972, the deceased was examined by Dr. Victoriano Lim and was found to be diabetic and hypertensive; that by January, 1973, the deceased was complaining of progressive weight loss and abdominal pain and was diagnosed to be suffering from hepatoma, (t.s.n. August 23, 1976, pp. 8-10; Exhibit 2). Another physician, Dr. Wenceslao Vitug, testified that the deceased came to see him on December 14, 1973 for consolation and claimed to have been diabetic for five years. (t.s.n., Aug. 23,1976, p. 5; Exhibit 6) Because of the

concealment made by the deceased of his consultations and treatments for hypertension, diabetes and liver disorders, respondent company was thus misled into accepting the risk and approving his application as medically standard (Exhibit 5- C) and dispensing with further medical investigation and examination (Exhibit 5-A). For as long as no adverse medical history is revealed in the application form, an applicant for insurance is presumed to be healthy and physically fit and no further medical investigation or examination is conducted by respondent company. (t.s.n., April 8,1976, pp. 6-8). (Rollo, pp. 96-98) There is no strong showing that we should apply the "fine print" or "contract of adhesion" rule in this case. (Sweet Lines, Inc. v. Teves, 83 SCRA 361 [1978]). The petitioners cite: It is a matter of common knowledge that large amounts of money are collected from ignorant persons by companies and associations which adopt high sounding titles and print the amount of benefits they agree to pay in large black-faced type, following such undertakings by fine print conditions which destroy the substance of the promise. All provisions, conditions, or exceptions which in any way tend to work a forfeiture of the policy should be construed most strongly against those for whose benefit they are inserted, and most favorably toward those against whom they are meant to operate. (Trinidad v. Orient Protective Assurance Assn., 67 Phil. 184) There is no showing that the questions in the application form for insurance regarding the insured's medical history are in smaller print than the rest of the printed form or that they are designed in such a way as to conceal from the applicant their importance. If a warning in bold red letters or a boxed warning similar to that required for cigarette advertisements by the Surgeon General of the United States is necessary, that is for Congress or the Insurance Commission to provide as protection against high pressure insurance salesmanship. We are limited in this petition to ascertaining whether or not the respondent Court of Appeals committed reversible error. It is the petitioners' burden to show that the factual findings of the respondent court are not based on substantial evidence or that its conclusions are contrary to applicable law and jurisprudence. They have failed to discharge that burden. WHEREFORE, the petition is hereby DENIED for lack of merit. The questioned decision of the Court of Appeals is AFFIRMED.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 114427 February 6, 1995 ARMANDO GEAGONIA, petitioner, vs. COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION, respondents. DAVIDE, JR., J.: Four our review under Rule 45 of the Rules of Court is the decision 1 of the Court of Appeals in CA-G.R. SP No. 31916, entitled "Country Bankers Insurance Corporation versus Armando Geagonia," reversing the decision of the Insurance Commission in I.C. Case No. 3340 which awarded the claim of petitioner Armando Geagonia against private respondent Country Bankers Insurance Corporation. The petitioner is the owner of Norman's Mart located in the public market of San Francisco, Agusan del Sur. On 22 December 1989, he obtained from the private respondent fire insurance policy No. F-14622 2 for P100,000.00. 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." The petitioner declared in the policy under the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, the petitioner had in his inventory stocks amounting to P392,130.50, itemized as follows: Zenco Sales, Inc. P55,698.00 F. Legaspi Gen. Merchandise Cebu Tesing Textiles 86,432.50 250,000.00 (on credit) P392,130.50 The policy contained the following condition: 3. The insured shall give notice to the Company of any insurance or insurances already affected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, 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, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, 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 P200,000.00. On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San Francisco, Agusan del Sur. The petitioner's insured stock-in-trade were completely destroyed prompting him to file with the private respondent a claim under the policy. On 28 December 1990, 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. GA-28146 and No. GA-28144, for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC). 3 These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause reading:

MORTGAGE: Loss, if any shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy. CO-INSURANCE DECLARED: P100,000. Phils. First CEB/F 24758. 4 The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. The petitioner then filed a complaint 5 against the private respondent with the Insurance Commission (Case No. 3340) for the recovery of P100,000.00 under fire insurance policy No. F-14622 and for attorney's fees and costs of litigation. He attached as Annex "AM" 6 thereof his letter of 18 January 1991 which asked for the reconsideration of the denial. 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; however, he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by the private respondent's agent; and had it been mentioned, he would not have withheld such information. 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, which was P1,000,000.00. In its answer, 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. In its decision of 21 June 1993, 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; that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on the petitioner's testimony that he came to know of the PFIC 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. The Insurance Commission then decreed: WHEREFORE, judgment is hereby rendered ordering the respondent company to pay complainant the sum of P100,000.00 with legal interest from the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as attorney's fees. With costs. The compulsory counterclaim of respondent is hereby dismissed. Its motion for the reconsideration of the decision 9 having been denied by the Insurance Commission in its resolution of 20 August 1993, 10 the private respondent appealed to the Court of Appeals by way of a petition for review. The petition was docketed as CA-G.R. SP No. 31916. In its decision of 29 December 1993, 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. It said: It is apparent from the face of Fire Policy GA 28146/Fire Policy No. 28144 that the insurance was taken in the name of private respondent [petitioner herein]. The policy states that "DISCOUNT MART (MR. ARMANDO GEAGONIA, PROP)" was the assured and that "TESING TEXTILES" [was] only the mortgagee of the goods. In addition, the premiums on both policies were paid for by private respondent, not by the Tesing Textiles which is alleged to have taken out the other insurance without the knowledge of private respondent. This is shown by Premium Invoices nos. 46632 and 46630. (Annexes M and N). In both invoices, 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. ARMANDO GEAGONIA)." 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. Hence, in failing to disclose the existence of these insurances private respondent violated Condition No. 3 of Fire Policy No. 1462. . . .
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Indeed private respondent's allegation of lack of knowledge of the provisions insurances is belied by his letter to petitioner [of 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-in-trade 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 madeante 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. GA-28146 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. 20Thus, 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 On the other hand, 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. 24 It has been noted, however, that although the mortgagee is himself the insured, as where he applies for a policy, fully informs the authorized agent of his interest, pays the premiums, and obtains on the assurance that it insures him, the policy is in fact in the form used to insure a mortgagor with loss payable clause. 25
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The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a mortgage clause which reads: Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of this policy. This is clearly a simple loss payable clause, not a standard mortgage clause. It must, however, be underscored that unlike the "other insurance" clauses involved in General Insurance and Surety Corp. vs. Ng Hua 26 or in Pioneer Insurance & Surety Corp. vs. Yap, 27 which read: The insured shall give notice to the company of any insurance or insurances already effected, or which may subsequently be effected covering any of the property hereby insured, 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, all benefits under this Policy shall be forfeited. or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co. 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, without which such policy shall be null and void, and the insured will not be entitled to indemnity in case of loss," Condition 3 in the private respondent's policy No. F-14622 does not absolutely declare void any violation thereof. 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 P200,000.00." 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, the reason being, undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any construction which would result in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture. 29 Stated differently, provisions, 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, and most favorably toward those against whom they are intended to operate. 30 The reason for this is that, except for riders which may later be inserted, 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. On the other hand, 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. 31 With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally free from ambiguity and must, perforce, be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. 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, goods in process and/or inventories only hereby insured," and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. As earlier stated, the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double insurance exists. The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy.

Furthermore, 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 P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured. 32 WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Commission in Case No. 3340 is REINSTATED. Costs against private respondent Country Bankers Insurance Corporation.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-41014 November 28, 1988 PACIFIC BANKING CORPORATION, petitioner, vs. COURT OF APPEALS and ORIENTAL ASSURANCE CORPORATION, respondents. Flores, Ocampo, Dizon and Domingo Law Office for petitioner. Cabochan and Reyes Law Office for respondents. PARAS, J.: This is a petition for review on certiorari of the decision of respondent Court of Appeals * in CA-G.R. No. 41735-R, entitled "Pacific Banking Corporation vs. Oriental Assurance Corporation", which set aside the decision of the Court of First Instance (CFI) of Manila, ** which had in turn granted the complaint for a sum of money in Civil Case No. 56889. As gathered from the records, the undisputed facts of this case are as follows: On October 21,1963, Fire Policy No. F-3770 (Exhibit "A"), an open policy, was issued to the Paramount Shirt Manufacturing Co. (hereinafter referred to as the insured, for brevity), by which private respondent Oriental Assurance Corporation bound itself to indemnify the insured for any loss or damage, not exceeding P61,000.00, caused by fire to its property consisting of stocks, materials and supplies usual to a shirt factory, including furniture, fixtures, machinery and equipment while contained in the ground, second and third floors of the building situated at number 256 Jaboneros St., San Nicolas, Manila, for a period of one year commencing from that date to October 21, 1964. The insured was at the time of the issuance of the policy and is up to this time, a debtor of petitioner in the amount of not less than Eight Hundred Thousand Pesos (P800,000.00) and the goods described in the policy were held in trust by the insured for the petitioner under thrust receipts (Record on Appeal, p. 4). Said policy was duly endorsed to petitioner as mortgagee/ trustor of the properties insured, with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation". On January 4, 1964, while the aforesaid policy was in full force and effect, a fire broke out on the subject premises destroying the goods contained in its ground and second floors (Record on Appeal, p.5) On January 24, 1964, counsel for the petitioner sent a letter of demand to private respondent for indemnity due to the loss of property by fire under the endorsement of said policy (Brief for Plaintiff-Appellee, pp. 16-17). On January 28, 1964, private respondent informed counsel for the petitioner that it was not yet ready to accede to the latter's demand as the former is awaiting the final report of the insurance adjuster, H.H. Bayne Adjustment Company (Brief for Plaintiff-Appellee, pp. 17-18). On March 25, 1964, the said insurance adjuster notified counsel for the petitioner that the insured under the policy had not filed any claim with it, nor submitted proof of loss which is a clear violation of Policy Condition No.11, and for which reason, determination of the liability of private respondent could not be had (Supra, pp. 19-20). On April 24, 1964, petitioner's counsel replied to aforesaid letter asking the insurance adjuster to verify from the records of the Bureau of Customs the entries of merchandise taken into the customs bonded warehouse razed by fire as a reliable proof of loss (Supra, pp. 21-22). For failure of the insurance company to pay the loss as demanded, petitioner (plaintiff therein) on April 28, 1 964, filed in the court a quo an action for a sum of money against the private

respondent, Oriental Assurance Corporation, in the principal sum of P61,000.00 issued in favor of Paramount Shirt Manufacturing Co. (Record on Appeal, pp. 1-36). On May 25, 1964, private respondent raised the following defenses in its answer to wit: (a) lack of formal claim by insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof, either to the private respondent or its ad . adjuster H.H. Bayne Adjustment Co., both in violation of Policy Condition No.11 (Record on Appeal, pp. 37-38). At the trial, petitioner presented in evidence Exhibit "H", which is a communication dated December 22, 1965 of the insurance adjuster, H.H. Bayne Adjustment Co. to Asian Surety Insurance Co., Inc., revealing undeclared co-insurances with the following: P30,000.00 with Wellington Insurance; P25,000. 00 with Empire Surety and P250,000.00 with Asian Surety ; undertaken by insured Paramount on the same property covered by its policy with private respondent whereas the only co-insurances declared in the subject policy are those of P30,000.00 with Malayan P50,000.00 with South Sea and P25.000.00 with Victory (Brief for the Defendant pp. 13-14). It will be noted that the defense of fraud and/or violation of Condition No. 3 in the Policy, in the form of non-declaration of co-insurances which was not pleaded in the answer was also not pleaded in the Motion to Dismiss. At any rate, on June 30, 1967, the trial court denied private respondent's motion on the ground that the defense of lack of proof of loss or defects therein was raised for the first time after the commencement of the suit and that it must be deemed to have waived the requirement of proof of loss (Sections 83 and 84, Insurance Act; Record on Appeal, p. 61). On September 9, 1967, the case was considered submitted for decision from which order private respondent filed a motion for reconsideration to set the case or further reception of private respondent's additional evidence, "in order to prove that 'insured has committed a violation of condition No. 3 of the policy in relation to the other Insurance Clause.' " (Record on Appeal, pp. 61-69). On September 30,1967, the case was set for the continuation of the hearing for the reception merely of the testimony of Alejandro Tan Gatue, Manager of the Adjustment Co., over the vehement opposition of the petitioner (Record on Appeal, p. 129). On April 18, 1 968, the trial court rendered a decision adjudging private respondent liable to the petitioner under the said contract of insurance, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff P61,000.00, with interest at the rate of 8% per annum from January 4, 1964, to April 28, 1964, and 12% from April 29, 1964, until the amount is fully paid, P6,100.00, as attorney's fees, and the costs. SO ORDERED. (Record on Appeal, pp. 140-141) On appeal, the Court of Appeals reversed the decision of the trial court (Decision promulgated on April 23, 1975, Rollo, pp. 21-33). Petitioner filed a motion for reconsideration of the said decision of the respondent Court of Appeals, but this was denied on July 3,1975 for lack of merit (Rollo, pp. 54-67), resulting in this petition with the following assigned errors; I RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN CONCLUDING FRAUD FROM THE BARE FACT THAT THE INSURED PARAMOUNT PROCURED ADDITIONAL INSURANCES OTHER THAN THOSE STATED IN THE POLICY IN SPITE OF THE EXISTENCE OF CONTRARY PRESUMPTIONS AND ADMITTED FACT AND CIRCUMSTANCES WHICH NEGATE THE CORRECTNESS OF SAID CONCLUSION.

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(a) The respondent Court did not consider the legal presumption against the existence of fraud, which should be established with such quantum of proof as is required for any crime. (b) The record of the case is bereft of proof of such fraud. (c) The private respondent insurer did not even plead or in anywise raise fraud as a defense in its answer or motion to dismiss and, therefore, it should have been considered waived. (d) The total amount of insurance procured by the insured from the different companies amounted to hardly onehalf () of the value of the goods insured. II RESPONDENT COURT ERRED IN NOT HOLDING THAT CONSIDERING THE VOTING ON THE PARTICULAR QUESTION OF FRAUD, THE FINDING OF THE TRIAL COURT THEREON SHOULD BE CONSIDERED AFFIRMED. III THE CONCURRING OPINION OF MR. JUSTICE CHANCO IS LEGALLY ERRONEOUS IN HOLDING THAT THE ACTION WAS PREMATURELY BROUGHT BECAUSE THE REQUIRED CLAIM UNDER THE INSURANCE LAW HAS NOT BEEN FILED, NOTWITHSTANDING THE LETTER, (EXHIBIT "C") OF PETITIONER-APPELLANT'S LAWYER WHICH IS A SUBSTANTIAL COMPLIANCE OF THE LEGAL REQUIREMENTS AND NOT HOLDING THAT PRIVATE RESPONDENT INSURER HAD ALREADY WAIVED THE SUPPOSED DEFECTS IN THE CLAIM FILED BY PETITIONER-APPELLANT FOR ITS FAILURE TO CALL THE ATTENTION OF THE LAYER TO SUCH ALLEGED DEFECTS AND FOR ENDORSING THE CLAIM TO ITS ADJUSTER FOR PROCESSING. IV RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN NOT INTERPRETING THE PROVISIONS OF THE POLICY LIBERALLY IN FAVOR OF THE HEREIN PETITIONER-APPELLANT, WHO IS NOT THE INSURED BUT ONLY THE ASSIGNEE/MORTGAGEE OF THE PROPERTY INSURED. V RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN DISMISSING THE CASE AND IN NOT AFFIRMING THE APPEALED DECISION OF THE TRIAL COURT. (Brief for Petitioners, pp. 1-3) The crux of the controversy centers on two points: (a) unrevealed co-insurances which violated policy conditions No. 3 and (b) failure of the insured to file the required proof of loss prior to court action. Policy Condition No. 3 explicitly provides: 3. The Insured shall give notice to the Company of any insurance already effected, or which may subsequently be effected, covering any of the property hereby insured, 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, all benefit under this policy shall be forfeited. (Record on Appeal, p. 12) It is not disputed that the insured failed to reveal before the loss three other insurances. As found by the Court of Appeals, by reason of said unrevealed insurances, the insured had been guilty of a false declaration; a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not, that was deception. Otherwise stated, had the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud (Rollo, p. 25).

Petitioner's contention that the allegation of fraud is but a mere inference or suspicion is untenable. In fact, concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of coinsurances taken over the subject property. Consequently, "the whole foundation of the contract fails, the risk does not attach and the policy never becomes a contract between the parties. Representations of facts are the foundation of the contract and if the foundation does not exist, the superstructure does not arise. Falsehood in such representations is not shown to vary or add to the contract, or to terminate a contract which has once been made, but to show that no contract has ever existed (Tolentino, Commercial Laws of the Philippines, p. 991, Vol. II, 8th Ed.) A void or inexistent contract is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or by ratification Tongoy v. C.A., 123 SCRA 99 [1983]; Avila v. C.A. 145 SCRA [1986]). As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy (Sta. Ana v. Commercial Union Assurance Co., 55 Phil. 333 [1930]; Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc., 47 SCRA 276 [1972]; Pioneer Ins. & Surety Corp., v. Yap, 61 SCRA 432 [1974]). The argument that notice of co-insurances may be made orally is preposterous and negates policy condition No. 20 which requires every notice and other communications to the insurer to be written or printed. Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause" supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee. Particularly referring to the mortgage clause of the policy, petitioner argues that considering the purpose for which the endorsement or assignment was made, that is, to protect the mortgagee/assignee against any untoward act or omission of the insured, it would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured (Rollo, Brief for the petitioner, pp, 33-35). It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides: Mortgage Clause Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act or neglectexcept fraud or misrepresentation, or arsonof the mortgagor or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same. (Rollo, p. 26) The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. As correctly found by the Court of Appeals, concealment of the aforecited co-insurances can easily be fraud, or in the very least, misrepresentation (Rollo, p. 27). Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right, with more reason petitioner which is merely claiming as indorsee of said insured, cannot be entitled to such proceeds. Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss, should be deemed to have been waived. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Petitioner did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence.
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Be that as it may, it is established that the Supreme Court has ample authority to give beyond the pleadings where in the interest of justice and the promotion of public policy, there is a need to make its own finding to support its conclusion. Otherwise stated, the Court can consider a fact which surfaced only after trial proper (Maharlika Publishing Corp. v. Tagle, 142 SCRA 561 [1986]). Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment (Eagle Star Insurance v. Chia Yu, 55 Phil 701 [1955]). In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any. Likewise, insured was required "at his own expense to produce, procure and give to the company all such further particulars, plans, specifications, books, vouchers, invoices, duplicates or copies thereof, documents, proofs and information with respect to the claim". (Record on Appeal, pp. 18-20). The evidence adduced shows that twenty-four (24) days after the fire, petitioner merely wrote letters to private respondent to serve as a notice of loss, thereafter, the former did not furnish the latter whatever pertinent documents were necessary to prove and estimate its loss. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. It is noteworthy that private respondent and its adjuster notified petitioner that insured had not yet filed a written claim nor submitted the supporting documents in compliance with the requirements set forth in the policy. Despite the notice, the latter remained unheedful. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No. 11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of petitioner's right can be attributable to private respondent. This is so, as before such final rejection, there was no real necessity for bringing suit. Petitioner should have endeavored to file the formal claim and procure all the documents, papers, inventory needed by private respondent or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its claim. Indeed, the law does not encourage unnecessary litigation (Eagle Star Insurance Co., Ltd., et al. v. Chia Yu, p. 701, supra).<re||an1w> Verily, petitioner prematurely filed Civil Case No. 56889 and dismissal thereof was warranted under the circumstances. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurer company (Eagle Star Insurance Co., Ltd., et al. v. Chia Yu, p. 702, supra; Taurus Taxi Co., Inc. v. The Capital Ins. & Surety Co., Inc., 24 SCRA 458 [1968]; National Power Corp. v. CA, 145 SCRA 533 [1986]), yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense (Young v. Midland Textile Ins. Co., 30 Phil. 617 [1919]; Union Manufacturing Co., Inc. v. Phil. Guaranty Co., Inc., p. 277 supra; Pichel v. Alonzo, III SCRA 341 [1982]; Gonzales v. CA, 124 SCRA 630 [1983]; GSIS v. CA, 145 SCRA 311 [1986]; Herrera v. Petrophil Corp., 146 SCRA 385 [1986]). Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. The agreement has the force of law between the parties. The terms of the policy constitute the measure of the insurer's

liability, and in order to recover, the insured must show himself within those terms. The compliance of the insured with the terms of the policy is a condition precedent to the light of recovery (Stokes v. Malayan Insurance Co., Inc., 127 SCRA 766 [1984]). It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived by the insurer, the insured cannot recover, much less the herein petitioner. Courts are not permitted to make contracts for the parties; the function and duty of the courts is simply to enforce and carry out the contracts actually made (Young v. Midland Textile Ins. Co., 30 Phil. 617 [1915]; Union Manufacturing Co. Inc. v. Phil. Guaranty Co. Inc., p. 276 supra). Finally, the established rule in this jurisdiction that findings of fact of the Court of Appeals when supported by substantial evidence, are not reviewable on appeal by certiorari, deserves reiteration. Said findings of the appellate court are final and cannot be disturbed by the Supreme Court except in certain cases Lereos v. CA, 117 SCRA 395 [1985]; Dalida v. CA, 117 SCRA 480 [1982] Director of Lands v. CA, 117 SCRA 346 [1982]; Montesa v. CA, 117 SCRA 770 [1982]; Sacay v. Sandiganbayan, 142 SCRA 609 [1986]; Guita v. CA, 139 SCRA 576 [1985]; Manlapaz v. CA, 147 SCRA 238-239 [1987]). PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, and the decision appealed from is AFFIRMED. No costs.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-41432 July 30, 1979 IVOR ROBERT DAYTON GIBSON, petitioner, vs. HON. PEDRO A. REVILLA, in his official capacity as Presiding Judge of Branch XIII, Court of First Instance of Rizal, and LEPANTO CONSOLIDATED MINING COMPANY, respondents. Quasha, Asperilla, Ancheta, Valmonte, Pe;a & Marcos for petitioner. Sycip, Salazar, Feliciano, Hernandez & Castillo for respondents. GUERRERO, J.:1wph1.t This is a petition for review 1 seeking to set aside the Order of the Court of First Instance of Rizal Branch XIII, presided by respondent Judge Pedro A. Revilla, in Civil Case No. 20046 entitled "Lepanto Consolidated Mining Company versus Malayan Insurance Company, Inc." denying the motion of the petitioner Ivor Robert Dayton Gibson for leave to intervene in said case, and to order the respondent Judge to admit him as intervenor therein. The antecedent facts of this case are as follows: Lepanto Consolidated Mining Company (hereinafter referred to as Lepanto) filed on September 27, 1974 in the Court of First Instance of Rizal, Branch XIII a complaint with a plea for preliminary mandatory injunction against Malayan Insurance Company, Inc., (hereinafter referred to as Malayan), docketed as Civil Case No. 20046 seeking the following relief: (a) upon the firing of this complaint, a writ of preliminary mandatory injunction be issued directing defendant to advance to plaintiff an interest-free loan of P1,831,695.75; and (b) upon trial on the merits (i) an accounting or average adjustments be made for the liquidation of the general average losses, damages and expenses arising from the marine accidents subject of this action and the determination of the contributions due from subject cargoes under the Policy; (ii) defendant be ordered to pay plaintiff the amounts under item (i) above, with interest thereon at the rate of 12% per annum, from February 20, 1972 as to the cargo's contribution relative to the 'Hermonsa' and from March 27, 1972 as to the cargo's contribution relative to the 'General Aguinaldo;' (iii) the amount of P1,831,695.75 as interest-free loan due plaintiff from defendant be declared repayable upon and only to the extent of any corresponding recovery from the owners of the 'Hermosa' and 'General Aguinaldo; ... Lepanto also sought payment of interest on delayed loan amounts, exemplary damages of at least P500,000.00, attorney's fees and other litigation expenses, and other cumulative and/or alternative reliefs as may be lawful, just or equitable in the premises. The civil suit thus instituted by Lepanto against Malayan was founded on the fact that on Sept. 9, 1971, Malayan issued Marine Open Policy No. LIDC-MOP-001/71 covering an shipments of copper, gold and silver concentrates in bulk from Poro, San Fernando, La Union to Tacoma, Washington or to other places in the United States which Lepanto may make on and after August 1, 1971 and until the cancellation of the policy upon thirty (30) days' written notice. Thereafter, Malayan obtained reinsurance abroad through Sedgwick, Collins & Co., Limited, a London insurance brokerage. The Memorandum of Insurance issued by Sedgwick to Malayan on September 24, 1971 listed three groups of underwriters or re-insurers and their reinsurance interest are as follows:

Lloyds 62.808% Companies (I.L.U.) 34.705% Other Companies 2.487% 100.000% At the top of the list of underwriting members of Lloyds is Syndicate No. 448, assuming 2.48% of the risk assumed by the reinsurer, which syndicate number petitioner Ivor Robert Dayton Gibson claims to be himself. In November, 1971, a cargo of concentrates was shipped by Lepanto on the M/V Hermosa at Poro, San Fernando, La Union destined for Tacoma, Washington. During the sea voyage, while the vessel was in the Northern Pacific Ocean south of Japan on or about Nov. 11, 1971, it encountered heavy weather and rough seas which caused it to roll, pitch and vibrate heavily so that certain shifting boards in the vessel broke and part of the cargo shifted transversely, thereby causing a list. The vessel deviated to Moji, Japan and after the shifting boards were repaired and/or replaced, it proceeded on its trip to Tacoma, but about the end of the month, the ship once again met with strong winds, monsoon rains, severe winter and very rough seas and it roiled, pitched and vibrated heavily so other shifting boards broke and part of the cargo also shifted causing a heavier list. The captain of the boat, fearing that the vessel might sink, sailed to Osaka and unloaded the cargo. Expenses were incurred by Lepanto relative to the cargo while in Japan but eventually the cargo was transhipped to Tacoma via another vessel. Also in November, 1971, another cargo of concentrates was shipped by Lepanto on board the MIV General Aguinaldo at Poro, San Fernando, La Union and destined for Tacoma, Washington. Similarly, during the sea voyage on or about November 30, 1971 in the Northern Pacific Ocean southeast of Japan, it met with heavy weather and rough seas, causing it to pitch, roll and vibrate heavily so that certain shifting boards in the vessel broke and part of the cargo shifted transversely which caused the listing of the vessel The captain, fearing also that the vessel The captain, fearing also that the vessel might sink, sailed for Miyako, Japan, unloaded the cargo and expenses were incurred relative to the cargo while in Japan. Thereafter, the cargo was transhipped to Tacoma on board another vessel. Lepanto notified Malayan and another insurer, Commercial Union in London in November and December, 1971 of the accidents. Formal claims under the open policy were also filed by Lepanto with Malayan in March and July, 1972 upon the conclusion of the voyages and the determination of the shortweight. The claims were denied by Malayan tentatively at first claiming that it needed time to determine whether or not the marine accidents resulted from the inherent vice or nature of the cargo and finally Malayan rejected Lepanto's insurance claim for the reason that the cargoes were inherently vicious on loading and such condition caused the listing of the vessel. Hence, the complaint filed by Lepanto against Malayan in Civil Case No. 20046 for the interest-free loan to Lepanto as stipulated in the policy computed at P1,831,695.75. Malayan filed a motion to dismiss the case on three grounds: 1. that the instant case has been brought in the name of other than the real party in interest; 2. that the complaint states no cause of action; and 3. that the claim set forth in the complaint has been extinguished. On December 4, 1974, Malayan's motion to dismiss was denied. On January 17, 1975, Malayan filed its Answers incorporating as part of its special and affirmative defenses the following allegations: (5) Defendant acted in good faith in rejecting plaintiff's insurance claims, not only because of the circumstances and reasons set forth in the preceding sub-paragraphs (1) to (4) which defendant had been reasonably led to believe by reports of reputed experts and/or by legal advice as justifying rejection, but also because, as plaintiff had been repeatedly told, it is under constraint, on one hand, by customs of the insurance trade to adhere to the decisions of the lead insurers, and on another hand, by its contract with its reinsurer which among others, prohibit settlement of the reinsured claims without the reinsurer's assent.
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On January 27, 1975, Lepanto filed its reply. On January 30, 1975, the Court denied Lepanto's motion for mandatory preliminary injunction "without prejudice to reconsider the said motion after the pre-trial of this case shall have been concluded." On March 19, 1975, the first pretrial conference was held and on March 25, 1975, the parties filed their Stipulation of Facts and Issues, which Stipulations was approved en toto in the trial court's order of April 1, 1975. Subsequently, pre-trial conferences were held on April 3, 1975, May 21, 1975, and June 19, 1975 when Lepanto concluded its evidence. Defendant through counsel reserved its right to make a formal offer of its evidence at the continuation of the hearing scheduled on July 16, 1975. Then on June 25, 1975, petitioner Ivor Robert Dayton Gibson filed a motion to intervene as defendant, which motion is as follows: MOTION TO INTERVENE COMES NOW Ivor Robert Dayton Gibson, Reinsurer in the above-entitled case, through undersigned counsel, and to this Honorable Court respectfully & Heges that: 1. Movant is of legal age, a British citizen, with address at Lloyd's Lime Street, London, EC 3; 2. Movant is the leading re-insurer of the risks and liabilities assumed by defendant Malayan Insurance Co., Inc. in a contract of marine insurance involving two (2) separate shipments of copper' concentrates aboard the MV "Hermosa" and the MV "General Aguinaldo" shipped by Lepanto Consolidated Mining Co., Inc. to American Smelting & Refining Co. from Poro Point, San Fernando, La Union, to Tacoma, Washington for which defendant issued Policy No. LIDC-MOP-001/71 dated September 9, 1971, in the amount of 20% of the declared value of each shipment but not to exceed US $2,000,000 per shipment. 3. Prior to these two shipments and after defendant Malayan contracted with Lepanto to insure these two (2) copper concentrates shipments against risks of loss and damage, defendant Malayan in turn, re-insured its liabilities for losses and damages in accordance with the terms of their reinsurance contract. 4. After the defendant Malayan filed Answer to this suit, movant was informed that defendant made express reservations "to file in due time a third-party complaint against the lead insurers and/or its reinsurers" (par. XVIII, Answer). 5. Movant has a legal interest in the subject matter of litigation in that he stands to be held liable to pay on its re-insurance contract should judgment be rendered requiring the defendant to pay the claim of the plaintiff. 6. To avoid multiplicity of suits and allow all parties who have any relation to the cause of action, whether legally or in equity, to ventilate expeditiously every issue relevant to the suit, it is respectfully submitted that movant be allowed to intervene as a defendant in the interest of justice. 7. By the very nature of a contract of reinsurance and considering that the reinsurer is obliged "to pay as may be paid thereon" (referring to the original policies), although this is subject to other stipulations and conditions of the re-insurance contract, it will serve better the ends of justice if a full disclosure of all pertinent facts and issues is made with the participation of the movant at this trial where his interests have been and are already inevitably at stake. Counsel for the movant submitted the foregoing motion for the consideration and resolution of the Court on June 30, 1975. The motion to intervene was opposed by Lepanto on the following grounds: 1. Movant Ivor Robert Dayton Gibson has no legal interest in the matter in litigation or in the success of either plaintiff or defendant; 2. Movant is estopped by his laches from intervening in this action; 3. The intervention is intended for delay and if allowed, win unduly delay the proceedings between plaintiff and defendant; and 4. The rights, if any, of movant are not prejudiced by the present suit and win be fully protected in a separate action against him and his co-insurers by defendant herein.

Replying to Lepanto's opposition, movant Ivor Robert Dayton Gibson contended that 1. Contrary to oppositors contention, movant Gibson has a legal interest in the matter in litigation because a contract of reinsurance between the defendant Malayan Insurance Company, Inc. and the movant herein is a contract of indemnity against liability, and not merely against damage, and therefore, movant has a direct and immediate interest in the success of defendant Malayan Insurance Company, Inc.; 2. Neither estoppel nor laches applies to the movant since the motion to intervene was filed seasonably on June 25, 1975 during the period of introduction of evidence by defendant Malayan; 3. The intervention is not intended for delay; movant is merely asserting a legal right or interest in the pending case with the request for opportunity to appear and be joined so that he could protect or assert such right or interest; and 4. The filing of an independent and separate suit proposed by the plaintiff is condemned by the basic and fundamental principles against multiplicity of suits. On July 26, 1975, Lepanto filed a Rejoinder to the movant's "Reply to Opposition." On July 28, 1975, Malayan made a manifestation that it had no objection to the "Motion to Intervene" of Ivor Robert Dayton Gibson and on July 31, 1975, movant made a Sur-Rejoinder to Lepanto's Rejoinder. On August 18, 1975, the Court a quo resolved to deny the Motion for Intervention in the following: ORDER Ivor Robert Dayton Gibson, thru counsel, has presented before this Court a motion to intervene on June 25, 1975. In his motion, he alleges that he is a British citizen with address at Lloyd's Lime Street, London, EC3; that he is the leading re-insurer of the risks and liabilities assumed by defendant Malayan Insurance Company, Inc. in the contract of marine insurance involving the shipments subject of the instant suit. He further contends that he has a legal interest in the subject matter of litigation for he stands liable on his reinsurances contract should judgment be rendered against the defendant and that this intervention would avoid a multiplicity of suits. Plaintiff vigorously opposed the motion contending that movant Ivor Robert Dayton Gibson has no legal interest in the matter in litigation or in the success of either parties in this suit; that he is estopped by laches; that the intervention is intended for delay and will unduly delay the proceedings between plaintiff and defendant; and that movant will not be prejudiced by the present suit and can be fully protected in any separate action which defendant may file against him and his coinsurers. Considering the grounds of the opposition, the Court believes that the third and fourth grounds raised in the opposition appear highly meritorious. Since movant Ivor Robert Dayton Gibson appears to be only one of several re-insurers of the risks and liabilities assumed by Malayan Insurance Company, Inc., it is highly probable that other re-insurers may likewise intervene. This would definitely disrupt the trial between plaintiff and defendant, the principal protagonists in this suit. To allow the intervention would certainly unduly delay the proceedings between plaintiff and defendant especially at this stage where plaintiff had already rested its case. It would also compound the issues as more parties and more matters will have to be litigated. At any rate, Ivor Robert Dayton Gibson may protect whatever interest he has in a separate action. IN VIEW OF ALL THE FOREGOING, the Court resolves to deny the motion for intervention. SO ORDERED. Pasig, Rizal, August 18, 1975. (SGD) PEDRO A. REVILLA Judge Not satisfied with the denial of his Motion to Intervene, petitioner now comes before Us seeking to set aside the order of denial and to order the respondent Judge to admit him as intervenor. By resolution of this Court dated November 17, 1975, the petition was denied due
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course for lack of merit, but upon petitioner's motion for reconsideration, the petition was allowed in the Resolution of February 18, 1976, treating it as a special civil action. The principal issue is whether the lower court committed reversible error in refusing the intervention of petitioner Ivor Robert Dayton Gibson in the suit between Lepanto and Malayan. We lay down the law on Intervention as found in Sec. 2, Rule 12 of the Rules of Court: Section 2. Intervention. A person may, before or during a trial, be permitted by the court, in its discretion, to intervene in an action, if he has legal interest in the matter in litigation, or in the success of either of the parties or an interest against both, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof. (a) Motion for intervention. A person desiring to intervene shall file a motion for leave of court with notice upon all the parties to the action. (b) Discretion of court. In allowing or disallowing a motion for intervention, the court, in the exercise of discretion, shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor's rights may be fully protected in a separate proceeding. (c) Complaint or answer in intervention. The intervention shall be made by complaint filed and served in a regular form, and may be answered as if it were an original complaint; but where intervenor unites with the defendant in resisting the claims of the plaintiff, the intervention may be made in the form of an answer to the complaint, (d) Time. Unless a different period is fixed by the court, the complaint or answer in intervention shall be filed within ten (10) days from notice of the order permitting such intervention. According to pertinent jurisprudence, the term "intervention" refers to the proceeding by which one not originally a party to an action is permitted, on his own application, to appear therein and join one of the original parties in maintaining the action or defense, or to assert a claim or defense against some or all of the parties to the proceeding as originally instituted. Such a third party may, upon the discretion of the court, become a party to a pending proceedings between others for the protection of some rights or interest alleged by him to be affected by such proceedings. 2 Intervention is not a matter of absolute right but may be permitted by the court when the applicant shows facts which satisfy the requirements of the statute authorizing intervention. 3 Under our rules of Court, what qualifies a person to intervene is his possession of a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both; or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or an officer thereof. 4 As regards the legal interest as qualifying factor, tills Court has ruled that such interest must be of a direct and immediate character so that the intervenor wig either gain or lose by the direct legal operation of the judgment. The interest must be actual and material, a concern which is more than mere curiosity, or academic or sentimental desire; it must not be indirect and contingent, indirect and remote, conjectural, consequential or collateral. 5 However, notwithstanding the presence of a legal interest, permission to intervene is subject to the sound discretion of the court, the exercise of which is limited by considering I 'whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor's rights may be fully protected in a separate proceeding. 6Once judicial discretion is exercised, the action of the court cannot be reviewed or controlled by mandamus however erroneous it may be, except only when there is an arbitrary or capricious exercise of discretion, in which case, the fault is correctible by mandamus if there be no other adequate and speedy remedy. 7 As may be noted in the questioned Order, respondent Judge denied the Motion to Intervene on the last two grounds of Lepanto's Opposition, namely: "3. The intervention is intended for

delay and if allowed, will unduly delay the proceedings between plaintiff and defendant; and 4. The rights, if any, of movant are not prejudiced by the present suit and will be fully protected in a separate action against him and his co-insurers by defendant herein. Respondent Judge, reasoning out his Order, ruled that "(s)ince movant Ivor Robert Dayton Gibson appears to be only one of several co-insurers of the risks and liabilities assumed by Malayan Insurance Company, Inc., it is highly probable that other re-insurers may likewise intervene. This would definitely disrupt the trial between plaintiff and defendant, the principal protagonists in this suit. To allow the intervention would certainly unduly delay the proceedings between plaintiff and defendant especially at this stage where plaintiff had already rested its case. It would also compound the issues as more parties and more matters will have to be litigated. At any rate, Ivor Robert Dayton Gibson may protect whatever interest he has in a separate action." In his petition, petitioner submits that the respondent Judge, in refusing to permit/allow him to intervene in Civil Case No. 20046, incorrectly interpreted and/or appreciated the purpose/intent of the pertinent rules of procedure that govern intervention of parties in a given action and that the respondent Judge erred: (1) In concluding that to allow the intervention of herein petitioner "would definitely disrupt the trial" and "would certainly unduly delay the proceedings," when such apprehension appears to be clearly immaterial in determining when intervention is proper or not; (2) In viewing the alleged availability of another recourse on the part of herein petitioner to protect his interest, i.e. separate action, as an added justification to deny his intervention, despite the fact that the applicable rule of procedure in this regard (Section 2, Rule 12) does not preclude intervention even if another separate action is appropriate and for available; and (3) In its obvious disregard of the very rule (Section 2, Rule 12) precisely designed to apply on cases where intervention is sought, thereby departing from the accepted and usual procedure under the premises. After carefully considering the arguments of both the petitioner and Lepanto, the facts and circumstances obtaining in the case at bar and applying Rule 12, Sec. 2 of the Rules of Court and the doctrines enunciated by the Supreme Court on the matter, We rule that the respondent Judge committed no error of law in denying petitioner's Motion to Intervene. And neither has he abused his discretion in his denial of petitioner's Motion for Intervention. It is quite crystal clear that the questioned Order of the respondent Court was based strictly and squarely on Section 2(b) of Rule 12 which specifically directs the Court in allowing or disallowing a motion for intervention in the exercise of discretion to consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor's rights may be fully protected in a separate proceeding. The Court a quo has specifically and correctly complied with the Rule's mandate and We cannot fault the respondent Judge therefore. We reject the contention of the petitioner that the question regarding delay in the adjudication of the rights of the original contending parties, while recognized as factors in allowing or disallowing intervention, should assume a secondary role to the primary and imperative requirement that the legal interest of the would-be intervenor in the matter under litigation must be clearly shown and that once the legal interest of the would be intervenor is clearly shown, the fact that his intervention may work to delay a little the main conflict between the parties should not by itself justify the denial of intervention. Petitioner's contention is untenable. The first paragraph of Section 2, Rule 12 prescribes the time to intervene and also who may intervene, that is, one who has legal interest in the matter in litigation, or in the success of either of the parties or an interest against both or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof Paragraph (b) of the same section directs what matter are to be considered in exercising discretion to snow or disallow a motion for intervention, which are whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor's rights may
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be fully protected in a separate proceeding. Clearly, for the Court to permit intervention, it must be shown that movant is possession of legal interest in the matter in litigation or otherwise qualified under the first paragraph of Section 2, and the Court must also consider the matters mentioned in paragraph (b) thereof. The latter are not and should not be taken as secondary to the former for both must concur since they are equally important, requisite and necessary for consideration in the exercise of discretion by the Court to allow or disallow intervention. We cannot invest nor render primary or secondary importance to either of these requirements for the law does not make any distinction. Each case must be decided according to its facts and merits, subject to the discretion of the Court. From the particular facts and circumstances of the case at bar, We are satisfied that the respondent Judge has not abused his discretion in denying petitioner's Motion to Intervene. We agree with the holding of the respondent Court that since movant Ivor Robert Dayton Gibson appears to be only one of several re-insurers of the risks and liabilities assumed by Malayan Insurance Company, Inc., it is highly probable that other re- insurers may likewise intervene. The record shows that aside from the petitioner there are sixty-three (63) other syndicate members of Lloyds, the twenty-six (26) companies in the " I.L.U. " group holding a 34.705 % reinsurance interest and the two (2) "Other Companies" holding the balance of the reinsurances, as listed in Annex "A", Sur-Rejoinder to Lepanto's Rejoinder, pp. 136-138, Records. The high probability that these other re-insurers like the petitioner herein may likewise intervene if the latter's motion is granted is not an arbitrary assumption of the Court. Considering petitioner's assertion that he will have the opportunity to show, among others, that the losses and damages purportedly sustained by Lepanto occurred not from the perils of the seas but from perils of the ships; that Lepanto is not the real party in interest; that it has no cause of action; and, neither has it complied with its obligations under the policy which makes the filing of the complaint premature (p. 118, Records, Reply to Opposition) if petitioner is allowed to intervene, We hold that there is good and sufficient basis for the Court a quoto declare that. the trial between Lepanto and Malayan would be definitely disrupted and would certainly unduly delay the proceedings between the parties especially at the stage where Lepanto had already rested its case and that the issues would also be compounded as more parties and more matters will have to be litigated. In other words, the Court's discretion is justified and reasonable. We also hold that respondent Judge committed no reversible error in further sustaining the fourth ground of Lepanto's Opposition to the Motion to Intervene that the rights, if any, of petitioner are not prejudiced by the present suit and win be fully protected in a separate action against him and his co-insurers by Malayan. Petitioner contends that this rights would not be fully protected in a separate proceeding because "(a) decision in favor of Lepanto, declaring Malayan liable on its insurance policies would necessarily and injuriously affect the interests of petitioner, (which) interest as a reinsurer of Malayan's risk is not only inchoate but material, direct and immediate and for such interest to be in any manner prejudiced without first giving petitioner a chance to be heard would be violative of due process. Upon the other hand, a decision in favor of Malayan, recognizing it as not liable under its insurance policies, could subject petitioner to the danger of having to admit that Malayan had not breached its insurance contract with the entity (Lloyds) of which petitioner is the leading syndicate member." (Petitioner's Memorandum p. 230, Records). Petitioner also asserts that "by the very nature of a contract of reinsurance and considering that the re-insurer is obliged 'to pay as may be paid thereon' (referring to the original policies), although this is subject to other stipulations and conditions of the reinsurance contract, it will serve better the ends of justice if a full disclosure of all pertinent facts and issues is made with the participation of the movant at this trial where his interests have been and are already inevitably at stake." (Petition, p. 18, Records). On the contrary, Lepanto insists that petitioner win have his day in court and his rights can be fully protected in a separate proceeding. According to Lepanto, if it loses the case against

Malayan, petitioner cannot possibly be liable to Malayan for indemnity on the reinsurances. If Lepanto wins, then petitioner, the sixty-three (63) other syndicate members of Lloyds, the twenty-six (26) companies in the "I.L.U." group holding a 34.705% reinsurance interest and the two (2) "Other Companies" holding the balance of the reinsurances are free either to pay Malayan or to resist Malayan and thus force Malayan to sue in whatever country most of them, qualitatively and not quantitatively, may be served with summons. Petitioner's contention that he has to pay once Malayan is finally adjudged to pay Lepanto because of the very nature of a contract of reinsurance and considering that the re-insurer is obliged 'to pay as may be paid thereon' (referring to the original policies), although this is subject to other stipulations and conditions of the reinsurance contract, is without merit. The general rule in the law of reinsurance is that the re-insurer is entitled to avail itself of every defense which the re-insured (which is Malayan) might urge in an action by the person originally insured (which is Lepanto). Specifically, the rule is stated thus Sec. 1238. In an action on a contract of reinsurance, as a general rule the reinsurer is entitled to avail itself of every defense which the reinsured might urge in an action by the person originally insured; ... The same rule is stated otherwise in 44 An-L Jur. 2d, Sec. 1862, p. 793, as follows: Moreover, where an action is brought against the reinsurer by the reinsured, the former may assert any defense that the latter might have made in an action on the policy of original insurance. (Eagle Ins. Co. vs. Lafayette, Ins. Co., 9 Ind. 443) As to the effect of the clause "to pay as may be paid thereon" contained in petitioner's reinsurance contract, Arnould, on the Law of Marine Insurance and Average, 13th Ed., Vol. 1, Section 327, p. 315, states the rule, thus: It has been decided that this clause does not preclude the reinsurer from insisting upon proper proof that a loss strictly within the terms of the original policy has taken place. This clause does not enable the original underwriter to recover from his re-insurer to an extent beyond the subscription of the latter. It is significant and revealing that petitioner himself admits in his Memorandum, p. 231, Records, that "(o)f course, petitioner, if finally sued in London, (he) could avail himself of remedies available to him." He adds that "such a procedure, if not entirely time-consuming, would actually beg the issue on hand. Petitioner believes that his defenses on the claims ventilated in the court a quo can be appreciated only here; elsewhere in view of the peculiar circumstances surrounding Lepanto's claims the basic issue win be obfuscated and perhaps even obliterated by arguments on procedural niceties." However, such a procedural problem is no legal ground to compel allowance of and insist on his intervention. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby dismiss. No costs.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 152133 February 9, 2006 ROLLIE CALIMUTAN, Petitioner, vs. PEOPLE OF THE PHILIPPINES, ET AL., Respondents. DECISION CHICO-NAZARIO, J.: In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, petitioner Rollie Calimutan prays for the reversal of the Decision of the Court of Appeals in CA-G.R. CR No. 23306, dated 29 August 2001,1affirming the Decision of the Regional Trial Court (RTC), Branch 46, of Masbate, Masbate, in Criminal Case No. 8184, dated 19 November 1998,2 finding petitioner Calimutan guilty beyond reasonable doubt of the crime of homicide under Article 249 of the Revised Penal Code. The Information3 filed with the RTC charged petitioner Calimutan with the crime of homicide, allegedly committed as follows That on or about February 4, 1996, in the morning thereof, at sitio Capsay, Barangay Panique, Municipality of Aroroy, Province of Masbate, Philippines within the jurisdiction of this Honorable Court, the above-named accused with intent to kill, did then and there willfully, unlawfully and feloniously attack, assault and throw a stone at PHILIP CANTRE, hitting him at the back left portion of his body, resulting in laceration of spleen due to impact which caused his death a day after. CONTRARY TO LAW. Masbate, Masbate, September 11, 1996. Accordingly, the RTC issued, on 02 December 1996, a warrant4 for the arrest of petitioner Calimutan. On 09 January 1997, however, he was provisionally released 5 after posting sufficient bailbond.6 During the arraignment on 21 May 1997, petitioner Calimutan pleaded not guilty to the crime of homicide charged against him.7 In the course of the trial, the prosecution presented three witnesses, namely: (1) Dr. Ronaldo B. Mendez, a Senior Medico-Legal Officer of the National Bureau of Investigation (NBI); (2) Belen B. Cantre, mother of the victim, Philip Cantre; and (3) Rene L. Saano, companion of the victim Cantre when the alleged crime took place. Their testimonies are collectively summarized below. On 04 February 1996, at around 10:00 a.m., the victim Cantre and witness Saano, together with two other companions, had a drinking spree at a videoke bar in Crossing Capsay, Panique, Aroroy, Masbate. From the videoke bar, the victim Cantre and witness Saano proceeded to go home to their respective houses, but along the way, they crossed paths with petitioner Calimutan and a certain Michael Bulalacao. Victim Cantre was harboring a grudge against Bulalacao, suspecting the latter as the culprit responsible for throwing stones at the Cantres house on a previous night. Thus, upon seeing Bulalacao, victim Cantre suddenly punched him. While Bulalacao ran away, petitioner Calimutan dashed towards the backs of victim Cantre and witness Saano. Petitioner Calimutan then picked up a stone, as big as a mans fist, which he threw at victim Cantre, hitting him at the left side of his back. When hit by the stone, victim Cantre stopped for a moment and held his back. Witness Saano put himself between the victim Cantre and petitioner Calimutan, and attempted to pacify the two, even convincing petitioner Calimutan to put down another stone he was already holding. He also urged victim Cantre and petitioner Calimutan to just go home. Witness Saano accompanied victim Cantre to the latters house, and on the way, victim Cantre complained of the pain in the left side of his back hit by the stone. They arrived at the Cantres house at

around 12:00 noon, and witness Saano left victim Cantre to the care of the latters mother, Belen.8 Victim Cantre immediately told his mother, Belen, of the stoning incident involving petitioner Calimutan. He again complained of backache and also of stomachache, and was unable to eat. By nighttime, victim Cantre was alternately feeling cold and then warm. He was sweating profusely and his entire body felt numb. His family would have wanted to bring him to a doctor but they had no vehicle. At around 3:00 a.m. of the following day, 05 February 1996, Belen was wiping his son with a piece of cloth, when victim Cantre asked for some food. He was able to eat a little, but he also later vomited whatever he ate. For the last time, he complained of backache and stomachache, and shortly thereafter, he died. 9 Right after his death, victim Cantre was examined by Dr. Conchita S. Ulanday, the Municipal Health Officer of Aroroy, Masbate. The Post-Mortem Examination Report10 and Certification of Death,11 issued and signed by Dr. Ulanday, stated that the cause of death of victim Cantre was cardio-respiratory arrest due to suspected food poisoning. The body of victim Cantre was subsequently embalmed and buried on 13 February 1996. Unsatisfied with the findings of Dr. Ulanday, the Cantre family, with the help of the Lingkod Bayan-Circulo de Abogadas of the ABS-CBN Foundation, requested for an exhumation and autopsy of the body of the victim Cantre by the NBI. The exhumation and autopsy of the body of the victim Cantre was conducted by Dr. Ronaldo B. Mendez on 15 April 1996, 12 after which, he reported the following findings Body; fairly well-preserved with sign of partial autopsy; clad in white Barong Tagalog and blue pants placed inside a wooden golden-brown coffin and buried in a concrete niche. Contused-abrasion, 2.3 x 1.0 cms., posterior chest wall, left side. Hematoma, 16.0 x 8.0 cms., abdomen, along mid-line. Hemoperitoneum, massive, clotte [ sic]. Laceration, spleen. Other visceral organ, pale and embalmed. Stomach contains small amount of whitish fluid and other partially digested food particles. xxxx CAUSE OF DEATH: TRAUMATIC INJURY OF THE ABDOMEN. In his testimony before the RTC, Dr. Mendez affirmed the contents of his exhumation and autopsy report. He explained that the victim Cantre suffered from an internal hemorrhage and there was massive accumulation of blood in his abdominal cavity due to his lacerated spleen. The laceration of the spleen can be caused by any blunt instrument, such as a stone. Hence, Dr. Mendez confirmed the possibility that the victim Cantre was stoned to death by petitioner Calimutan.13 To counter the evidence of the prosecution, the defense presented the sole testimony of the accused, herein petitioner, Calimutan. According to petitioner Calimutan, at about 1:00 p.m. on 04 February 1996, he was walking with his house helper, Michael Bulalacao, on their way to Crossing Capsay, Panique, Aroroy, Masbate, when they met with the victim Cantre and witness Saano. The victim Cantre took hold of Bulalacao and punched him several times. Petitioner Calimutan attempted to pacify the victim Cantre but the latter refused to calm down, pulling out from his waist an eight-inch Batangas knife and uttering that he was looking for trouble, either "to kill or be killed." At this point, petitioner Calimutan was about ten meters away from the victim Cantre and was too frightened to move any closer for fear that the enraged man would turn on him; he still had a family to take care of. When he saw that the victim Cantre was about to stab Bulalacao, petitioner Calimutan picked up a stone, which he described as approximately one-inch in diameter, and threw it at the victim Cantre. He was able to hit the victim Cantre on his right buttock. Petitioner Calimutan and Bulalacao then started to run away, and victim Cantre chased after them, but witness Saano was able to pacify the victim Cantre. Petitioner Calimutan allegedly reported the incident to a kagawad of Barangay Panique and to the police
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authorities and sought their help in settling the dispute between Bulalacao and the victim Cantre. Bulalacao, meanwhile, refused to seek medical help despite the advice of petitioner Calimutan and, instead, chose to go back to his hometown. 14 Petitioner Calimutan was totally unaware of what had happened to the victim Cantre after the stoning incident on 04 February 1996. Some of his friends told him that they still saw the victim Cantre drinking at a videoke bar on the night of 04 February 1996. As far as he knew, the victim Cantre died the following day, on 05 February 1996, because of food poisoning. Petitioner Calimutan maintained that he had no personal grudge against the victim Cantre previous to the stoning incident.15 On 19 November 1998, the RTC rendered its Decision,16 essentially adopting the prosecutions account of the incident on 04 February 1996, and pronouncing that It cannot be legally contended that the throwing of the stone by the accused was in defense of his companion, a stranger, because after the boxing Michael was able to run. While it appears that the victim was the unlawful aggressor at the beginning, but the aggression already ceased after Michael was able to run and there was no more need for throwing a stone. The throwing of the stone to the victim which was a retaliatory act can be considered unlawful, hence the accused can be held criminally liable under paragraph 1 of Art. 4 of the Revised Penal Code. The act of throwing a stone from behind which hit the victim at his back on the left side was a treacherous one and the accused committed a felony causing physical injuries to the victim. The physical injury of hematoma as a result of the impact of the stone resulted in the laceration of the spleen causing the death of the victim. The accused is criminally liable for all the direct and natural consequences of this unlawful act even if the ultimate result had not been intended. (Art. 4, Par. 1, Revised Penal Code; People vs. Narciso, CA-G.R. No. 03532CR, Jan. 13, 1964) One is not relieved from criminal liability for the natural consequences of ones illegal acts merely because one does not intend to produce such consequences (U.S. vs. Brobst, 14 Phil. 310). The crime committed is Homicide as defined and penalized under Art. 249 of the Revised Penal Code. WHEREFORE, the Court finds and so holds that accused ROLLIE CALIMUTAN is GUILTY beyond reasonable doubt of the crime of Homicide defined and penalized under Art. 249 of the Revised Penal Code with no mitigating or aggravating circumstance and applying the Indeterminate Sentence Law hereby imposes the penalty of imprisonment from EIGHT (8) YEARS of Prision Mayor as minimum, to TWELVE (12) YEARS and ONE (1) DAY of Reclusion Temporal as maximum, and to indemnify the heirs of Philip Cantre the sum of Fifty Thousand (P50,000.00) Pesos as compensatory damages and the sum of Fifty Thousand (P50,000.00) Pesos as moral damages, without subsidiary imprisonment in case of insolvency. Petitioner Calimutan appealed the Decision of the RTC to the Court of Appeals. The Court of Appeals, in its Decision, dated 29 August 2001,17 sustained the conviction of homicide rendered by the RTC against petitioner Calimutan, ratiocinating thus The prosecution has sufficiently established that the serious internal injury sustained by the victim was caused by the stone thrown at the victim by the accused which, the accusedappellant does not deny. It was likewise shown that the internal injury sustained by the victim was the result of the impact of the stone that hit the victim. It resulted to a traumatic injury of the abdomen causing the laceration of the victims spleen. This is clearly shown by the autopsy report prepared by Dr. Ronaldo Mendez, a Senior Medico Legal Officer of the NBI after the exhumation of the victims cadaver The Court cannot give credence to the post mortem report prepared by Municipal Health Officer Dr. Conchita Ulanday stating that the cause of the victims death was food poisoning. Dr. Ulanday was not even presented to testify in court hence she was not even able to identify and/or affirm the contents of her report. She was not made available for cross-examination on the accuracy and correctness of her findings.

Dr. Conchita Ulandays post mortem report cannot prevail over the autopsy report (Exh. "C") of the Medico-Legal Officer of the NBI who testified and was cross-examined by the defense. Besides, if accused-appellant was convinced that the victim indeed died of food poisoning, as reported by Dr. Conchita Ulanday, why did they not present her as their witness to belie the report of the Medico-Legal Officer of the NBI. The trial courts evaluation of the testimony of Dr. Mendez is accorded the highest respect because it had the opportunity to observe the conduct and demeanor of said witness. WHEREFORE, in view of the foregoing, the decision of the Regional Trial Court of Masbate, Branch 46, finding accused-appellant guilty beyond reasonable doubt of the crime of homicide is hereby AFFIRMED. The Court of Appeals, in its Resolution, dated 15 January 2002, 18 denied the Motion for Reconsideration filed by petitioner Calimutan for lack of merit since the issues raised therein had already been passed and ruled upon in its Decision, dated 29 August 2001. Comes now petitioner Calimutan, by way of the present Petition for Review on Certiorari, seeking (1) the reversal of the Decisions of the RTC, dated 19 November 1998, and of the Court of Appeals, dated 29 August 2001, convicting him of the crime of homicide; and, (2) consequently, his acquittal of the said crime based on reasonable doubt. Petitioner Calimutan contended that the existence of the two autopsy reports, with dissimilar findings on the cause of death of the victim Cantre, constituted reasonable doubt as to the liability of petitioner Calimutan for the said death, arguing that x x x [I]t was Dra. Conchita Ulanday, Municipal Health Officer of Aroroy, Masbate was the first physician of the government who conducted an examination on the cadaver of the victim Philip Cantre whose findings was that the cause of his death was due to food poisoning while the second government physician NBI Medico Legal Officer Dr. Ronaldo Mendez whose findings was that the cause of the death was due to a traumatic injury of the abdomen caused by a lacerated spleen and with these findings of two (2) government physicians whose findings are at variance with each other materially, it is humbly contended that the same issue raised a reasonable doubt on the culpability of the petitioner. As there are improbabilities and uncertainties of the evidence for the prosecution in the case at bar, it suffices to reaise [sic] reasonable doubt as to the petitioners guilt and therefore, he is entitled to acquittal (People vs. Delmendo, G.R. No. 32146, November 23, 1981). 19 In this jurisdiction, an accused in a criminal case may only be convicted if his or her guilt is established by proof beyond reasonable doubt. Proof beyond reasonable doubt requires only a moral certainty or that degree of proof which produces conviction in an unprejudiced mind; it does not demand absolute certainty and the exclusion of all possibility of error. 20 In the Petition at bar, this Court finds that there is proof beyond reasonable doubt to hold petitioner Calimutan liable for the death of the victim Cantre. Undoubtedly, the exhumation and autopsy report and the personal testimony before the RTC of prosecution witness, NBI Senior Medico-Legal Officer Dr. Mendez, are vital pieces of evidence against petitioner Calimutan. Dr. Mendez determined that the victim Cantre died of internal hemorrhage or bleeding due to the laceration of his spleen. In his testimony, Dr. Mendez clearly and consistently explained that the spleen could be lacerated or ruptured when the abdominal area was hit with a blunt object, such as the stone thrown by petitioner Calimutan at the victim Cantre. It bears to emphasize that Dr. Mendez was presented by the prosecution as an expert witness, whose "competency and academic qualification and background" was admitted by the defense itself.21 As a Senior Medico-Legal Officer of the NBI, Dr. Mendez is presumed to possess sufficient knowledge of pathology, surgery, gynecology, toxicology, and such other branches of medicine germane to the issues involved in a case.22 Dr. Mendezs testimony as an expert witness is evidence,23 and although it does not necessarily bind the courts, both the RTC and the Court of Appeals had properly accorded it great weight and probative value. Having testified as to matters undeniably within his area of
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expertise, and having performed a thorough autopsy on the body of the victim Cantre, his findings as to the cause of death of the victim Cantre are more than just the mere speculations of an ordinary person. They may sufficiently establish the causal relationship between the stone thrown by the petitioner Calimutan and the lacerated spleen of the victim Cantre which, subsequently, resulted in the latters death. With no apparent mistake or irregularity, whether in the manner by which Dr. Mendez performed the autopsy on the body of the victim Cantre or in his findings, then his report and testimony must be seriously considered by this Court. Moreover, reference to other resource materials on abdominal injuries would also support the conclusion of Dr. Mendez that the stone thrown by petitioner Calimutan caused the death of the victim Cantre. One source explains the nature of abdominal injuries24 in the following manner The skin may remain unmarked inspite of extensive internal injuries with bleeding and disruption of the internal organs. The areas most vulnerable are the point of attachment of internal organs, especially at the source of its blood supply and at the point where blood vessels change direction. The area in the middle superior half of the abdomen, forming a triangle bounded by the ribs on the two sides and a line drawn horizontally through the umbilicus forming its base is vulnerable to trauma applied from any direction. In this triangle are found several blood vessels changing direction, particularly the celiac trunk, its branches (the hepatic, splenic and gastric arteries) as well as the accompanying veins. The loop of the duodenum, the ligament of Treitz and the pancreas are in the retroperitoneal space, and the stomach and transverse colon are in the triangle, located in the peritoneal cavity. Compression or blow on the area may cause detachment, laceration, stretch-stress, contusion of the organs (Legal Medicine 1980, Cyril H. Wecht et., p. 41). As to injuries to the spleen, in particular,25 the same source expounds that The spleen usually suffers traumatic rupture resulting from the impact of a fall or blow from the crushing and grinding effects of wheels of motor vehicles. Although the organ is protected at its upper portion by the ribs and also by the air-containing visceral organs, yet on account of its superficiality and fragility, it is usually affected by trauma. x x x. Certainly, there are some terms in the above-quoted paragraphs difficult to comprehend for people without medical backgrounds. Nevertheless, there are some points that can be plainly derived therefrom: (1) Contrary to common perception, the abdominal area is more than just the waist area. The entire abdominal area is divided into different triangles, and the spleen is located in the upper triangle, bounded by the rib cage; (2) The spleen and all internal organs in the same triangle are vulnerable to trauma from all directions. Therefore, the stone need not hit the victim Cantre from the front. Even impact from a stone hitting the back of the victim Cantre, in the area of the afore-mentioned triangle, could rupture the spleen; and (3) Although the spleen had already been ruptured or lacerated, there may not always be a perceptible external injury to the victim. Injury to the spleen cannot, at all times, be attributed to an obvious, external injury such as a cut or bruise. The laceration of the victim Cantres spleen can be caused by a stone thrown hard enough, which qualifies as a nonpenetrating trauma 26 Nonpenetrating Trauma. The spleen, alone or in combination with other viscera, is the most frequently injured organ following blunt trauma to the abdomen or the lower thoracic cage. Automobile accidents provide the predominating cause, while falls, sledding and bicycle injuries, and blows incurred during contact sports are frequently implicated in children. x x x The sheer impact of the stone thrown by petitioner Calimutan at the back of the victim Cantre could rupture or lacerate the spleen an organ described as vulnerable, superficial, and fragile even without causing any other external physical injury. Accordingly, the findings of Dr. Mendez that the victim Cantre died of internal hemorrhage from his lacerated spleen, and the cause of the laceration of the spleen was the stone thrown by petitioner Calimutan at the back of the victim Cantre, does not necessarily contradict his testimony before the RTC that none of the external injuries of the victim Cantre were fatal.

Based on the foregoing discussion, the prosecution was able to establish that the proximate cause of the death of the victim Cantre was the stone thrown at him by petitioner Calimutan. Proximate cause has been defined as "that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred."27 The two other witnesses presented by the prosecution, namely Saano and Belen Cantre, had adequately recounted the events that transpired on 04 February 1996 to 05 February 1996. Between the two of them, the said witnesses accounted for the whereabouts, actions, and physical condition of the victim Cantre during the said period. Before the encounter with petitioner Calimutan and Bulalacao, the victim Cantre seemed to be physically fine. However, after being hit at the back by the stone thrown at him by petitioner Calimutan, the victim Cantre had continuously complained of backache. Subsequently, his physical condition rapidly deteriorated, until finally, he died. Other than being stoned by petitioner Calimutan, there was no other instance when the victim Cantre may have been hit by another blunt instrument which could have caused the laceration of his spleen. Hence, this Court is morally persuaded that the victim Cantre died from a lacerated spleen, an injury sustained after being hit by a stone thrown at him by petitioner Calimutan. Not even the post-mortem report of Dr. Ulanday, the Municipal Health Officer who first examined the body of the victim Cantre, can raise reasonable doubt as to the cause of death of the victim Cantre. Invoking Dr. Ulandays post-mortem report, the defense insisted on the possibility that the victim Cantre died of food poisoning. The post-mortem report, though, cannot be given much weight and probative value for the following reasons First, a closer scrutiny of the words used by Dr. Ulanday in her post-mortem report, as well as in the death certificate of the victim Cantre, reveals that although she suspected food poisoning as the cause of death, she held back from making a categorical statement that it was so. In the post-mortem report, 28 she found that "x x x the provable (sic) cause of death was due to cardio-respiratory arrest. Food poisoning must be confirm (sic) by laboratory e(x)am." In the death certificate of the victim Cantre, 29 she wrote that the immediate cause of death was "Cardio-Respiratory Arrest" and the antecedent cause was "Food Poisoning Suspect." There was no showing that further laboratory tests were indeed conducted to confirm Dr. Ulandays suspicion that the victim Cantre suffered from food poisoning, and without such confirmation, her suspicion as to the cause of death remains just that a suspicion. Second, Dr. Ulanday executed before the NBI a sworn statement30 in which she had explained her findings in the post-mortem report, to wit 05. Q: Did you conduct an autopsy on his cadaver? A: I did sir, but not as exhaustive as that done by the NBI Medico-legal. 06. Q: Now, what do you want to state regarding your certification on the death of PHILIP B. CANTRE? A: I stated in the certification and even in the Death Certificate about "Food Poisoning". What I stated in the Death Certificate was that CANTRE was a SUSPECTED victim of food poisoning. I didnt state that he was a case of food poisoning. And in the Certification, I even recommended that an examination be done to confirm that suspicion. 07. Q: What gave you that suspicion of poisoning? A: As there were no external signs of fatal injuries except that of the contusion or abrasion, measuring as that size of a 25 centavo coin, I based my suspicion from the history of the victim and from the police investigation. 08. Q: You also mentioned in your Certification that there was no internal hemorrhage in the cadaver. Did you open the body of the cadaver? A: As I have already stated sir, I did not conduct an exhaustive autopsy. I made an incision on the abdomen and I explored the internal organs of the cadaver with my hand in search for any clotting inside. But I found none. I did not open the body of the cadaver.
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09. Q: You mentioned about a contusion you have observed on the cadaver. Where was it located? A: On the left portion of his back, sir. 10. Q: Now, is it possible that if somebody be hit by a hard object on that part of his body, his SPLEEN could be injured? A: Yes, sir. But that would depend on how strong or forceful the impact was. In contrast, Dr. Mendez described in his testimony before the RTC31 how he conducted the autopsy of the body of the victim Cantre, as follows Q What specific procedure did you do in connection with the exhumation of the body of the victim in this case? A We opened the head, chest and the abdomen. Q That was part of the autopsy you have conducted? A Yes, sir. Q Aside from opening the head as well as the body of the victim Philip Cantre, what other matters did you do in connection therewith? A We examined the internal organs. Q What in particular internal organs you have examined? A The brain, the heart, the lungs, the liver, the kidneys, the pancreas plus the intestines. xxxx Q The cause of death as you have listed here in your findings is listed as traumatic injury of the abdomen, will you kindly tell us Doctor what is the significance of this medical term traumatic injury of the abdomen? A We, medico-legal officers of the NBI dont do what other doctors do as they make causes of death as internal hemorrhage we particularly point to the injury of the body like this particular case the injury was at the abdomen of the victim. Q Will you tell as Doctor what particular portion of the abdomen of the victim this traumatic injury is located? A Along the midline but the damaged organ was at the left. Q What particular organ are you referring to? A The spleen, sir. The difference in the extent of the examinations conducted by the two doctors of the body of the victim Cantre provides an adequate explanation for their apparent inconsistent findings as to the cause of death. Comparing the limited autopsy conducted by Dr. Ulanday and her unconfirmed suspicion of food poisoning of the victim Cantre, as opposed to the exhaustive autopsy performed by Dr. Mendez and his definitive finding of a ruptured spleen as the cause of death of the victim Cantre, then the latter, without doubt, deserves to be given credence by the courts. Third, that the prosecution no longer presented Dr. Ulanday before the RTC despite being included in its list of witnesses did not amount to a willful suppression of evidence that would give rise to the presumption that her testimony would be adverse to the prosecution if produced.32 As this Court already expounded in the case ofPeople v. Jumamoy33 The prosecution's failure to present the other witnesses listed in the information did not constitute, contrary to the contention of the accused, suppression of evidence. The prosecutor has the exclusive prerogative to determine the witnesses to be presented for the prosecution. If the prosecution has several eyewitnesses, as in the instant case, the prosecutor need not present all of them but only as many as may be needed to meet the quantum of proof necessary to establish the guilt of the accused beyond reasonable doubt. The testimonies of the other witnesses may, therefore, be dispensed with for being merely corroborative in nature. This Court has ruled that the non-presentation of corroborative witnesses would not constitute suppression of evidence and would not be fatal to the prosecution's case. Besides, there is no showing that the eyewitnesses who were not presented in court as witnesses were not available to the accused. We reiterate the rule that the adverse presumption from a suppression of

evidence is not applicable when (1) the suppression is not willful; (2) the evidence suppressed or withheld is merely corroborative or cumulative; (3) the evidence is at the disposal of both parties; and (4) the suppression is an exercise of a privilege. Moreover, if the accused believed that the failure to present the other witnesses was because their testimonies would be unfavorable to the prosecution, he should have compelled their appearance, by compulsory process, to testify as his own witnesses or even as hostile witnesses. It was a judgment call for the prosecution to no longer present Dr. Ulanday before the RTC, perhaps believing that it had already presented sufficient evidence to merit the conviction of petitioner Calimutan even without her testimony. There was nothing, however, preventing the defense from calling on, or even compelling, with the appropriate court processes, Dr. Ulanday to testify in court as its witness if it truly believed that her testimony would be adverse to the case presented by the prosecution. While this Court is in accord with the factual findings of the RTC and the Court of Appeals and affirms that there is ample evidence proving that the death of the victim Cantre was caused by his lacerated spleen, an injury which resulted from being hit by the stone thrown at him by petitioner Calimutan, this Court, nonetheless, is at variance with the RTC and the Court of Appeals as to the determination of the appropriate crime or offense for which the petitioner should have been convicted for. Article 3 of the Revised Penal Code classifies felonies according to the means by which they are committed, in particular: (1) intentional felonies, and (2) culpable felonies. These two types of felonies are distinguished from each other by the existence or absence of malicious intent of the offender In intentional felonies, the act or omission of the offender is malicious. In the language of Art. 3, the act is performed with deliberate intent (with malice). The offender, in performing the act or in incurring the omission, has the intention to cause an injury to another. In culpable felonies, the act or omission of the offender is not malicious. The injury caused by the offender to another person is "unintentional, it being simply the incident of another act performed without malice." (People vs. Sara, 55 Phil. 939). As stated in Art. 3, the wrongful act results from imprudence, negligence, lack of foresight or lack of skill. 34 In the Petition at bar, this Court cannot, in good conscience, attribute to petitioner Calimutan any malicious intent to injure, much less to kill, the victim Cantre; and in the absence of such intent, this Court cannot sustain the conviction of petitioner Calimutan for the intentional crime of homicide, as rendered by the RTC and affirmed by the Court of Appeals. Instead, this Court finds petitioner Calimutan guilty beyond reasonable doubt of the culpable felony of reckless imprudence resulting in homicide under Article 365 of the Revised Penal Code. Article 365 of the Revised Penal Code expressly provides for the definition of reckless imprudence Reckless imprudence consists in voluntarily, but without malice, doing or failing to do an act from which material damage results by reason of inexcusable lack of precaution on the part of the person performing or failing to perform such act, taking into consideration his employment or occupation, degree of intelligence, physical condition and other circumstances regarding persons, time and place. There are several circumstances, discussed in the succeeding paragraphs, that demonstrate petitioner Calimutans lack of intent to kill the victim Cantre, and conversely, that substantiate the view of this Court that the death of victim Cantre was a result of petitioner Calimutans reckless imprudence. The RTC and the Court of Appeals may have failed to appreciate, or had completely overlooked, the significance of such circumstances. It should be remembered that the meeting of the victim Cantre and witness Saano, on the one hand, and petitioner Calimutan and his helper Bulalacao, on the other, was a chance encounter as the two parties were on their way to different destinations. The victim Cantre and witness Saano were on their way home from a drinking spree in Crossing Capsay, while petitioner Calimutan and his helper Bulalacao were walking from the market to Crossing Capsay. While
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the evidence on record suggests that a running grudge existed between the victim Cantre and Bulalacao, it did not establish that there was likewise an existing animosity between the victim Cantre and petitioner Calimutan.1avvphil.net In both versions of the events of 04 February 1996 submitted by the prosecution and the defense, it was the victim Cantre who was the initial aggressor. He suddenly punched Bulalacao, the helper and companion of petitioner Calimutan, when they met on the road. The attack of the victim Cantre was swift and unprovoked, which spurred petitioner Calimutan into responsive action. Given that this Court dismisses the claim of petitioner Calimutan that the victim Cantre was holding a knife, it does take into account that the victim Cantre was considerably older and bigger, at 26 years of age and with a height of five feet and nine inches, compared to Bulalacao, the boy he attacked, who was only 15 years old and stood at about five feet. Even with his bare hands, the victim Cantre could have hurt Bulalacao. Petitioner Calimutan sought only to protect Bulalacao and to stop the assault of the victim Cantre against the latter when he picked up a stone and threw it at the victim Cantre. The stone was readily available as a weapon to petitioner Calimutan since the incident took place on a road. That he threw the stone at the back of the victim Cantre does not automatically imply treachery on the part of petitioner Calimutan as it is highly probable that in the midst of the fray, he threw the stone rashly and impulsively, with no regard as to the position of the victim Cantre. When the victim Cantre stopped his aggression after being hit by the stone thrown by petitioner Calimutan, the latter also desisted from any other act of violence against the victim Cantre. The above-described incident could not have taken more than just a few minutes. It was a very brief scuffle, in which the parties involved would hardly have the time to ponder upon the most appropriate course of action to take. With this in mind, this Court cannot concur in the declaration made by the Court of Appeals that petitioner Calimutan threw the stone at the victim Cantre as a retaliatory act. It was evidently a swift and spontaneous reaction to an unexpected and unprovoked attack by the victim Cantre on Bulalacao. That Bulalacao was already able to run away from the victim Cantre may have escaped the notice of the petitioner Calimutan who, under the pressure of the circumstances, was forced to act as quickly as possible. The prosecution did not establish that petitioner Calimutan threw the stone at the victim Cantre with the specific intent of killing, or at the very least, of harming the victim Cantre. What is obvious to this Court was petitioner Calimutans intention to drive away the attacker who was, at that point, the victim Cantre, and to protect his helper Bulalacao who was, as earlier described, much younger and smaller in built than the victim Cantre. 35 Granting that petitioner Calimutan was impelled by a lawful objective when he threw the stone at the victim Cantre, his act was committed with inexcusable lack of precaution. He failed to consider that a stone the size of a mans fist could inflict substantial injury on someone. He also miscalculated his own strength, perhaps unaware, or even completely disbelieving, that he could throw a stone with such force as to seriously injure, or worse, kill someone, at a quite lengthy distance of ten meters. Since it is irrefragable that the stone thrown by petitioner Calimutan at the victim Cantre was the proximate cause of the latters death, despite being done with reckless imprudence rather than with malicious intent, petitioner Calimutan remains civilly liable for such death. This Court, therefore, retains the reward made by the RTC and the Court of Appeals to the heirs of the victim Cantre of the amount of P50,000.00 as civil indemnity for his death and another P50,000.00 as moral damages. WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CR No. 23306, dated 29 August 2001, affirming the Decision of the RTC in Criminal Case No. 8184, dated 19 November 1998, is hereby MODIFIED. Petitioner Calimutan is found GUILTY beyond reasonable doubt of reckless imprudence resulting in homicide, under Article 365 of the Revised Penal Code, and is accordingly sentenced to imprisonment for a minimum period of 4 months of arresto mayor to a maximum period of two years and one day of prision

correccional. Petitioner Calimutan is further ORDERED to pay the heirs of the victim Cantre the amount of P50,000.00 as civil indemnity for the latters death and P50,000.00 as moral damages.

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Republic of the Philippines SUPREME COURT SECOND DIVISION G.R. No. 137772 July 29, 2005 AMADOR CORPUZ and ROMEO GONZALES, Petitioners, vs. EDISON LUGUE and CATHERINE BALUYOT, Respondents. DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari assailing the Court of Appeals Decision1 affirming the Regional Trial Court (RTC) decision2 finding herein petitioners liable for the injuries suffered by respondent Edison Lugue as a result of an accident involving four (4) vehicles, one of which was then driven by petitioner Romeo Gonzales and owned by petitioner Amador Corpuz. The pertinent facts are as follows: On 14 September 1984, at around 7:15 in the morning, while an Isuzu KC-20 passenger jeep (KC-20), then being driven by Jimmy Basilio, was traversing the right side of the Roman Highway in Barangay Pias, Orion, Bataan, it collided with a tanker truck driven by Gerardo Lim, which was then moving from the right shoulder of the highway. As a result of the collision, the KC-20 was thrown towards the left lane of the highway where it was bumped by a Mazda minibus (minibus) being driven by herein petitioner Gonzales who was then trying to overtake the KC-20. At that point, the KC-20 spun and bumped a Transcon service truck parked on the left side of the highway. As a result of the impact, the KC-20 was thrown across the highway where it was again hit by the minibus pushing the former towards a deep portion on the left side of the road. As a consequence of the accident, passengers of the KC-20, including respondent Lugue, suffered physical injuries. To summarize, the parties involved in the vehicular accident are as follows: VEHICLE OWNER DRIVER Isuzu KC-20 Ricardo Santiago Jimmy Basilio Tanker truck Oscar Jaring Gerardo Lim Mazda minibus Amador Corpuz Romeo Gonzales Respondent Lugue then filed an action for damages arising from the vehicular incident before the Balanga, Bataan RTC, Branch 2, against herein petitioners Amador Corpuz and Romeo Gonzales, owner and driver of the minibus, respectively, and Oscar Jaring and Gerardo Lim, owner and driver of the tanker truck, respectively. Therein defendants filed a third-party complaint against Ricardo Santiago and Jimmy Basilio, owner/operator and driver of the KC20, respectively. After trial, the lower court rendered a decision holding jointly and severally liable Ricardo Santiago, Jimmy Basilio, Oscar Jaring, Gerardo Lim, Amador Corpuz, and Romeo Gonzales. The appurtenant portions of the decision read: There are two (2) versions of the accident in question respectively espoused by the several parties in the instant case. One version is that put forth by plaintiff Edison Lugue (including his witness Remigio Gervacio) and also by defendants and third-party plaintiffs Amador Corpuz and Romeo Gonzales. The other version is that advanced by defendants and thirdparty plaintiffs Oscar Jaring and Gerardo Lim. These two versions shall be discussed and their respective merits analyzed. Whichever version is found to be plausible shall determine the proximate cause earlier mentioned. (1) The Lugue-Corpuz version: The Isuzu KC-20 Edison Lugue was riding on the date in question was being driven by thirdparty defendant Jimmy Basilio on the center of the right lane of the national highway headed toward Lamao, Limay, Bataan. When said KC-20 was about 25 to 30 meters from the tanker

truck owned by defendant Oscar Jaring, which tanker truck was then just beginning to make a headstart from its former parked position on the right shoulder of said highway, the portion on the left headlight of the tanker truck bumped the KC-20 on its middle portion of the right side. As a result, the KC-20 was thrown to the left side of the highway facing Mariveles and, immediately thereafter, it was bumped by the Mazda minibus owned by defendant Amador Corpuz and then driven by defendant Romeo Gonzales. As a result of such second bumping of the KC-20, it spun and bumped a service truck of the Transcon which was parked on the left side of the highway facing Mariveles. Finally, the KC-20 fell crumpled on the left concrete lane of the road facing Balanga. (2) The Jaring-Lim version: While third-party plaintiff Oscar Jarings tanker truck was parked on the asphalted shoulder on the right side of the highway near the Caltex at Barangay Pias, Townsite, Limay, Bataan, on the date in question, and he was having some invoices recorded by Caltex employees at the guardhouse, which was some ten and a half (10-1/2) meters away from said tanker truck, he was not looking at said truck and the KC-20. But just the same he testified that the right fender of the KC-20 hit the left front portion of the fender of the tanker truck. As a result, the KC-20 went to the other side of the road, where it was bumped by the minibus behind it. Then the KC-20 hit the rear portion of the Transcon service truck. The minibus bumped the KC-20 again, after which the latter continued on toward Mariveles for about 100 meters until it finally fell into a deep portion of the road. ... It will be noted that the Lugue-Corpuz version was testified to by at least four (4) witnesses Edison Lugue, Remigio Gervacio, Patrocinio Carillo and Romeo Gonzales, whereas the Jaring-Lim version was testified to by only one (1) witness Ricardo Puno. Oscar Jaring himself did not testify to having witnessed the incident. On the other hand, the driver of the tanker truck defendant Gerardo Lim, admitted expressly in his oral testimony that he was at the guardhouse at the time the accident happened, because he was having some invoices recorded by the Caltex employees. Clearly, therefore, he did not witness the accident involving the KC-20 and the tanker truck becausehe was not looking at said two vehicles. Whatever version he testified to of the subject accident could not have been otherwise than pure hearsay. From the foregoing discussion of the respective two versions of the subject accident and the evidence adduced, it would appear that (1) The tanker truck owned by defendant Oscar Jaring, whose authorized driver at the time of the accident was defendant Gerardo Lim, was not actually parked completely (if it was parked at all) on the right shoulder of the national highway where the accident took place, witness Ricardo Puno testified or as defendant Jarings photographed marked as Exhibits "1," "1 -A" and "1-B" would tend to show. If it was parked at all, the plausible likelihood was that it was so parked that while its right front and rear wheels were touching the right asphalted shoulder of that highway, however its left front and rear wheels were actually on the concrete right lane of said highway, with its left front fender and bumper protruding well into said right lane, thus constituting a stumbling block to vehicles traveling on such right lane facing the direction where plaintiff Edison Lugue was going then. This conclusion is bolstered by the obvious fact that from said photograph Exhibit "1" it can be seen that the right bumper of the tanker truck appears to have detached from its former connection to the left front portion of the tanker truck and such left end now appears to have been bent forward. The fender of the same truck also appears to have been damaged on the same left side, with a vertical long portion cut from said fender. If said tanker truck was thus parked as posted in the two foregoing paragraphs, then it had been parked in a negligent manner by its driver, who thereby did not exercise ordinary or simple human prudence or foresight to avoid any portion of said truck from obstructing the
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way of any oncoming motor vehicle being driven on said right or proper lane of the highway. Any normal or average human being, especially a motor vehicle driver, ought to know that the concrete lanes of highways are intended to be traversed by motor vehicles and are not intended to be used as parking areas. Even in case of emergency, only the shoulders of such highways may be used for parking purposes. (3) There was also the possibility testified to by plaintiff Edison Lugue, his witness Remigio Gervacio and defendant Romeo Gonzales to the effect that the tanker truck was not actually parked but was actually already moving or being driven from its former parked position and its left front wheel (and perhaps even the left rear wheels) had occupied a portion of the concrete right lane of the highway which was also being traversed then by the KC-20. This possibility is silently corroborated by the condition of the front bumper and fender of the tanker truck depicted in the photograph marked as Exhibit "1," as already described hereinbefore, having in mind the fact that not a single witness testified to having seen the Isuzu KC-20 leave the concrete right lane and occupy the asphalted shoulder. On the plane of logic, this version is also supported by the undisputed fact testified by practically all the witnesses who testified that after the physical contact between the tanker truck and the KC-20, the latter vehicle was shoved from its proper right lane to the left lane as a result of the impact. Such resulting shoving effect could have been the consequence of the push it got from the tanker truck which was already moving then toward the concrete right lane. (4) On the other hand, neither may the Lugue-Corpuz version on the physical contact between the KC-20 and the tanker truck be swallowed or considered as entirely correct. This version attempts to show that the tanker truck, while being initially driven away from the right asphalted shoulder of the highway into the concrete right lane of said highway, bumped with its left side the right middle portion of the body of said KC-20, thus causing the latter to be shoved to the left concrete lane of said highway, where it was bumped by the passing or overtaking Mazda minibus. Plaintiff Edison Lugue himself testified on direct examination that the first time he saw the tanker truck was when the KC-20 was about 25 to 30 meters from said truck. At that time, he said, the truck was just beginning to make a headstart and was still on the asphalted shoulder of the highway. On cross-examination, he modified that distance between the two vehicles the first time he saw them to "from 20 to 35 meters." He also stated that at that distance from the truck, the KC-20 did not slow down until it was bumped by the truck; and that all of the four wheels of the truck were originally occupying the shoulder of the highway. If all of the wheels of the tanker truck had originally been occupying the asphalted shoulder of the highway and said vehicle was just beginning to make a headstart toward the right concrete lane of the highway, then the most probable course or direction of said truck could have been forward but slightly oblique toward its left. Very likely, the truck was still running on first gear, which means it was still going very slowly. Even plaintiff Edison Lugue and driver Romeo Gonzales of the Mazda minibus following the KC-20 did not say that the tanker truck was being driven squarely across the right lane of the highway. If defendant driver Jimmy Basilio of the KC-20 had seen the tanker truck while at a distance of 20 to 35 meters away from it, if he had been prudent and careful he could still avoid having his vehicle get in physical contact with said truck. That distance was still adequate for him to swerve the steering wheel slightly to the left so as to avoid such truck getting in contact with his KC-20. But there is no showing whatsoever that he did that. A number of possibilities present themselves. (a) Because Jimmy Basilio was driving the KC-20 fast, as Lugue stated, he must have calculated that it could already safely pass the truck without the need of swerving the steering wheel even slightly to the left.

(b) Basilio might have had in mind the Mazda minibus which was trailing the KC-20 and which was going through the motions of passing or overtaking such KC-20. He may have calculated that if he would swerve the KC-20 even slightly to the left, it might go directly on the path of the minibus. So he avoided swerving the KC-20 and went steadily forward, hoping to safely pass the tanker truck at the fast rate of speed he was then driving. Plaintiff Lugue testified that the KC-20 he was riding in did not change course or position on the right lane of the highway just before the bumping occurred. In other words, the KC-20 did not change course nor relax its speed before the actual physical contact between the tanker truck and the KC-20. In such a situation, wherein there was a truck starting to crawl on the right lane traversed by the KC-20 and there was a minibus trailing it, and in the process of passing or overtaking the KC-20, the driver of the minibus (sic) was expected to exercise caution and prudence to avoid hitting or being hit by either or both other motor vehicles before it or trailing it, the fact that the driver of the KC-20 did not either slacken his speed or even swerve his steering wheel, however slightly, to avoid hitting or being hit by the tanker truck bespeaks reckless imprudence on the part of third-party defendant Jimmy Basilio as driver of said KC-20. Had he even only slackened the speed of the KC-20, he could have avoided any contact between it and the tanker truck, given that distance of "25 to 35 meters" from said truck when the latter was first seen. He chose not to do so. "Reckless imprudence consists in the doing or failing to do an act, voluntarily, but without malice, from which material damage results by reason of inexcusable lack of precaution on the part of the person performing or failing to perform such act, taking into consideration his employment or occupation, degree of intelligence, physical condition and other circumstances regarding persons, time and place. (Art. 365, Revised Penal Code)" (3) Defendant Gerardo Lim, as driver of the subject tanker truck with Plate No. CVC-563 Phil. 84 on the date in question, has been shown to have been grossly negligent in either (a) improperly parking his said truck on the right lane of the national highway instead of totally on the asphalted shoulder of said highway, or (b) driving said tanker truck from said shoulder of the highway into the right lane of said highway without previously carefully observing and making sure that no other vehicle was coming from the rear of his vehicle so as to avoid any possible accident from such direction, which gross negligence constituted the proximate cause of the accident in question. Otherwise stated, had he not parked his truck improperly, or had he made sure that there was no oncoming vehicle from the direction of the rear of his truck, the initial bumping between the said tanker truck and the Isuzu KC-20 would not have taken place and the subsequent bumpings by and among the other vehicles involved in the subject accident would not have occurred. He is also liable due to culpa aquiliana or quasi-delict, under the provisions of Articles 2176 to 2194, inclusive, of the same Code. (4) As far as defendant Amador Corpuz is concerned, who is the owner-operator of the Mazda minibus with Plate No. CVC-563-Phil. 84 being driven by defendant Romeo Gonzales on the date in question, he failed to prove that he had observed all the diligence of a good father of a family to prevent the damage sustained by plaintiff Lugue as a consequence of the proven negligence of his said driver Romeo Gonzales. He is liable for quasi-delict or culpa aquiliana under the provisions of Articles 1733 or 1766, inclusive of the same code. (5) With respect to defendant and third-party plaintiff Oscar Jaring, as owner-operator of the subject tanker truck driven by defendant and third-party plaintiff Gerardo Lim, he failed to prove that he had observed all the diligence of a good father of a family to prevent the damage sustained by plaintiff Lugue as a consequence of the proven negligence of his said driver Gerardo Lim.
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He is liable for culpa aquiliana or quasi-delict under the provisions of Articles 1733 to 1766, inclusive, of the same Civil Code. (6) Concerning defendant Romeo Gonzales, driver of the subject Mazda minibus with Plate No. CVC-563-Phil. 84 on the date of the accident in question, he has been shown to have been grossly negligent in the manner he drove or operated the said motor vehicle, which gross negligence constituted an intervening cause for the accident which occurred and which resulted in the injuries sustained by plaintiff Edison Lugue. He is liable for quasi-delict or culpa aquiliana, provided for under Articles 1733 to 1766, inclusive, of the same Code. WHEREFORE, the Court hereby renders judgment in favor of plaintiffs and against all the defendants and third-party defendants (a) Declaring third-party defendants Ricardo Santiago and Jimmy Basilio liable for culpa contractual and for culpa aquiliana and to plaintiff Edison Lugue in respect to the accident subject of the instant action and ordering them to pay jointly to said plaintiff (1) Nineteen Thousand Nine Hundred Forty-Eight Pesos and Ninety Centavos (P19,948.90), Philippine Currency, as actual or compensatory damages; (2) Actual or compensatory damages in the sum of Two Thousand Eleven Pesos (P2,011.00) every month from 14 September 1985, representing the diminution in the monthly salary of plaintiff Edison Lugue as a result of the physical injuries sustained by him arising from the subject accident, or Twenty-Four Thousand One Hundred Thirty-Two Pesos (P24,132.00) every calendar year from the aforementioned year, until he shall have been fully paid; and (3) Moral damages in the sum of Fifty Thousand Pesos (P50,000.00); (b) Declaring defendants Amador Corpuz, Romeo Gonzales, Oscar Jaring and Gerardo Lim solidarily liable forculpa aquiliana or quasi-delict to Edison Lugue in connection with the same accident and ordering them to pay jointly and severally to said plaintiff the various damages enumerated in Nos. (1) to (3), inclusive, in the foregoing subparagraph (a). In no case shall said plaintiff be allowed to recover twice from the aforementioned defendants the aforestated damages. Plaintiffs having instituted the present action as paupers-litigants, the docket and other fees that they were exempted from paying shall constitute a lien on any amount that they may collect under this decision.3 Aggrieved by said decision of the trial court, Oscar Jaring and Gerardo Lim, owner and driver of the tanker truck respectively, and Amador Corpuz and Romeo Gonzales, owner and driver of the minibus respectively, filed an appeal before the appellate court. Third-party defendants Santiago and Basilio, owner and driver of the KC-20 respectively, did not interpose an appeal. On 09 March 1999, the Court of Appeals granted the appeal of Oscar Jaring and Gerardo Lim, while it dismissed that of plaintiffs Santiago and Basilio in this wise: WHEREFORE, the appealed judgment is MODIFIED as follows: 1.) Defendants Ricardo Santiago and Jimmy Basilio are declared jointly and severally liable with defendants-appellants Amador Corpuz and Romeo Gonzales; and 2.) Defendants-appellants Oscar Jaring and Gerardo Lim are absolved from liability and the Complaint as against them is DISMISSED. In all other respects, the appealed Decision is AFFIRMED.4 Hence, the instant petition by Amador Corpuz and Romeo Gonzales. Petitioners arguments can be summarized in one issue: whether or not the appellate court erred in holding them liable for damages based on the findings of facts adduced by the trial court. Petitioners emphasize that nowhere in the trial courts 43-page decision was there any finding that would remotely support the court a quos conclusion that petitioners are liable for the injuries suffered by respondent Lugue. We find merit in the petition.

A careful perusal of the lower courts decision will show that the following were established during trial through the testimonies of petitioners witnesses: I. According to the testimony of witness Remigio Gervacio during the direct examination, who was then seated on the middle right portion of the minibus, the minibus he was riding was following a KC-20 which was being driven on the right lane of the highway facing Mariveles, while the minibus was occupying the left portion of the road facing the same direction, a little beyond the center line. Then a tanker truck bumped the KC-20, which was thrown to the left portion of the road facing Mariveles. Because the minibus was then already near to the KC-20, it bumped the KC-20.5 II. Petitioner Gonzales, on direct examination, stated that the minibus he was driving on the concrete highway was following a KC-20 vehicle. Then he made a signal to overtake the KC20 because the way was clear. When the minibus was about ten (10) meters from the KC-20, about to overtake the latter, all of a sudden a gasoline tanker entered the road. While doing so, the tanker bumped the KC-20, as a result of which the latter moved to a position blocking the way of the minibus, the left lane facing Mariveles. He did everything to avoid the KC-20. He pressed the brake fully. But the tanker was already too close to the minibus, that was why the latter hit the KC-20.6 III. Witness Patrocinio Carillo, a passenger of the minibus seated beside his wife who was seated on the front seat beside the driver, maintained that the minibus had been running on the superhighway trailing an Isuzu KC-20. When the minibus was right in front of the Caltex place, it attempted to pass or overtake the KC-20 it had been following by swerving to the left lane facing Mariveles. At that moment, the front of the minibus was about eight (8) meters behind the rear portion of the KC-20, the latter was suddenly thrown to the left and thus it blocked the path of the Mazda minibus. As a result, the minibus bumped the left rear portion of the KC-20. This bumping happened when both vehicles were already on the left lane of the highway facing Mariveles.7 From the foregoing testimonies, as well as the discussion of the trial court earlier quoted, it is clear that the proximate cause of the injuries suffered by respondent Lugue was the collision between the KC-20 and the tanker truck. As correctly pointed out by the lower court, proximate legal cause is that acting first and producing the injury either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain immediately effecting the injury as a natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom.8 Having stated such, it now becomes the trial courts responsibility to adjudge who between the drivers of the two colliding vehicles was negligent and thus liable for damages brought about by the injuries suffered by Edison Lugue. This issue was settled by the court a quo in this wise: In such a situation, wherein there was a truck starting to crawl on the right lane traversed by the KC-20 and there was a minibus trailing it, and in the process of passing or overtaking the KC-20, the driver of the minibus (sic) was expected to exercise caution and prudence to avoid hitting or being hit by either or both other motor vehicles before it or trailing it, the fact that the driver of the KC-20 did not either slacken his speed or even swerve his steering wheel, however slightly, to avoid hitting or being hit by the tanker truck bespeaks reckless imprudence on the part of third-party defendant Jimmy Basilio as driver of said KC-20. Had he even only slackened the speed of the KC-20, he could have avoided any contact between it and the tanker truck, given that distance of "25 to 35 meters" from said truck when the latter was first seen. He chose not to do so.9 [Emphasis ours]
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Therefore, it is clear that it was the reckless imprudence of the driver of the KC-20, Jimmy Basilio, that set the other events in motion which eventually led to the passengers of the KC20 sustaining physical injuries. Nonetheless, in a single paragraph of its ten-page Decision, the Court of Appeals discussed the alleged negligence of Romeo Gonzales, and thus attributed liability to the latter, the driver of the minibus, to wit: We however find no merit in the appeal of Amador Corpuz and Romeo Gonzales. Faced with the situation where the truck parked on the side was at a headstart in crawling towards the cemented portion of the highway, still the Mazda mini bus recklessly proceeded in attempting to overtake the Isuzu passenger jeep unmindful of the spatial limitations of the road. Defendant-driver Romeo Gonzales was clearly negligent.10 This conclusion of the appellate court of recklessness on the part of petitioner Gonzales is, however, unwarranted. Based on the unchallenged testimony of petitioner Gonzales, he signaled to overtake the KC-20 because the way was clear.11 That despite his best effort to do everything to avoid hitting the KC-20, petitioner failed to do so because the KC-20 had moved to a position blocking the way of the minibus as a result of the tanker bumping the KC20.12 Furthermore, based on the unrebutted testimony of both Remigio Gervacio 13 and Patrocinio Carillo,14 at the time when the minibus hit the KC-20, the former was already moving towards the middle portion of the highway, occupying the left portion of the road, a little beyond the center line. Certainly, even assuming that petitioner Gonzales had a few seconds before actual collision, he no longer had any opportunity to avoid it.15 Petitioner Gonzales cannot be deemed negligent for failing to prevent the collision even after applying all means available to him within the few instants when he had discovered the impending peril.16 In a similar case where a jeepney bound for Isabela collided with a bus on its regular route to Manila when the latter encroached upon the jeepneys lane while it was negotiating a curve, the Court declared that: [E]ven assuming that the jeepney driver perceived the danger a few seconds before the actual collision, he had no opportunity to avoid it. This Court has held that the last clear chance doctrine "can never apply where the party charged is required to act instantaneously, and if the injury cannot be avoided by the application of all means at hand after the peril is or should have been discovered.17 WHEREFORE, premises considered, the petition is hereby GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 37085, finding petitioners Amador Corpuz and Romeo Gonzales liable, is hereby REVERSED and SET ASIDE. In all other respects, the Court of Appeals Decision is hereby AFFIRMED. No costs.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 138737 July 12, 2001 FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and USIPHIL INCORPORATED, respondents. KAPUNAN, J.: Through this petition for review on certiorari Finman General Assurance Corporation (petitioner) seeks to reverse and set aside the Decision, dated January 14, 1999, of the Court of Appeals (CA) in CA-G.R. CV No. 46721 directing petitioner to pay the insurance claim of Usiphil Incorporated (private respondent). The appellate courts Resolution, dated May 13, 1999, which denied petitioners motion for reconsideration, is likewise sought to be reversed and set aside. The antecedent facts, as culled from the decision of the trial court and the CA, are as follows: On September 15, 1981, private respondent obtained a fire insurance policy from petitioner (then doing business under the name Summa Insurance Corporation) covering certain properties, e.g., office, furniture, fixtures, shop machinery and other trade equipment. Under Policy No. F3100 issued to private respondent, petitioner undertook to indemnify private respondent for any damage to or loss of said properties arising from fire. Sometime in 1982, private respondent filed with petitioner an insurance claim amounting to P987,126.11 for the loss of the insured properties due to fire. Acting thereon, petitioner appointed Adjuster H.H. Bayne to undertake the valuation and adjustment of the loss. H.H. Bayne then required private respondent to file a formal claim and submit proof of loss. In compliance therewith, private respondent submitted its Sworn Statement of Loss and Formal Claim, dated July 22, 1982, signed by Reynaldo Cayetano, private respondents Manager. Respondent likewise submitted Proof of Loss signed by its Accounting Manager Pedro Palallos and countersigned by H.H. Baynes Adjuster F.C. Medina. Palallos personally followed-up private respondents claim with petitioners President Joaquin Ortega. During their meeting, Ortega instructed their Finance Manager, Rosauro Maghirang, to reconcile the records. Thereafter, Maghirang and Palallos signed a Statement/Agreement, dated February 28, 1985, which indicated that the amount due respondent was P842,683.40. Despite repeated demands by private respondent, petitioner refused to pay the insurance claim. Thus, private respondent was constrained to file a complaint against petitioner for the unpaid insurance claim. In its Answer, petitioner maintained that the claim of private respondent could not be allowed because it failed to comply with Policy Condition No. 13 regarding the submission of certain documents to prove the loss. Trial ensued. On July 6, 1994, the trial court rendered judgment in favor of private respondent. The dispositive portion of the decision reads: WHEREFORE, in view of the above observations and findings, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter: 1. To pay the plaintiff the sum of P842,683.40 and to pay 24% interest per annum from February 28, 1985 until fully paid (par. 29 of Exh. K); 2. To pay the plaintiff the sum equivalent to 10% of the principal obligation as and for attorneys fees, plus P1,500.00 per court appearance of counsel; 3. To pay the plaintiff the amount of P30,000.00 as exemplary damages in addition to the actual and compensatory damages awarded; 4. Dismissing the claim of P30,000.00 for actual damages under par. 4 of the prayer, since the actual damages has been awarded under par. 1 of the decisions dispositive portion;

5. Dismissing the claim of interest under par. 2 of the prayer, there being no agreement to such effect; 6. Dismissing the counter-claim for lack of merit; 7. Ordering the defendant to pay the cost of suit. SO ORDERED.1 On appeal, the CA substantially affirmed the decision of the trial court. The dispositive portion of the CA decision reads: WHEREFORE, the appealed decision is hereby AFFIRMED with the modification that defendant-appellant is ordered to pay plaintiff-appellee the sum of P842,683.40 and to pay 24% interest per annum from 03 May 1985 until fully paid. In all other respects, the appealed decision is AFFIRMED IN TOTO. SO ORDERED.2 Petitioner now comes to this Court assailing the decision of the appellate court. Petitioner alleges that: Respondent Court of Appeals erred in finding that there is evidence sufficient to justify the Decision of the lower court; Respondent Court of Appeals erred in failing to consider the fact that Private Respondent committed a violation of the Insurance Policy which justifies the denial of the claim by Petitioner; Respondent Court of Appeals further erred in finding that Petitioner is liable to pay the respondent, Usiphil, Inc., an interest of 24% per annum in addition to the principal amount of P842,683.40.3 Essentially, petitioner argues that the disallowance of private respondents claim is justified by its failure to submit the required documents in accordance with Policy Condition No. 13. Said requirements were allegedly communicated to private respondent in the two letters of H.H. Bayne to private respondent. The first letter stated: To be able to expedite adjustment of this case, please submit to us without delay the following documents and/or particulars: For FFF, Machineries/Equipment Claims 1. Your formal claim (which may be accomplished in the enclosed form) accompanied by a detailed inventory of the documents submitted. 2. Certification from the appropriate government office indicating the date of the occurrence of the fire, the property involved, its location and possible point of origin. 3. Proof of premium payment. 4. Three color photographs of the debris properly captioned/identified/dated and initiated by the claimant at the back. 4.1 Close-up (not more than 2 meters away) of the most severely damaged. 4.2 Close-up (not more than 2 meters away) of the least damaged. 4.3. Original view of the debris (may be from farther than 2 meters away); splice two or more frames if necessary. Though our adjusters will also take photographs in the manner prescribed above, please do not rely on his photographs in the preservations of your evidence of loss thru pictures. 5. Copies of purchase invoices. 6. In the absence of No. 5, suppliers certificates of sales and delivery. 7. Appraisal report, if any. 8. Where initial estimated loss is exceeding P20,000.00, submit estimate by at least 2 contractors/suppliers. 9. Others (to be specified) 1. Repairs cost of the affected items including quotation or invoices in support thereof; 2. Complete lists of furniture, fixtures & fittings including date and cost of acquisition, and; 3. Statement of salvage on burned items.
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Your preferential attention to this request will be fully appreciated. 4 While the other letter stated: Please submit to us without delay the following documents and/or particulars. For Stock Claim 1. Your formal claim (which may be accomplished in the enclosed), accompanied by a detailed inventory of the documents submitted. 2. Certification from the appropriate government office showing that the Insure ds property was involved in the fire as a consequence of which the claim is being filed. 3. Proof of premium payment. 4. Three colored photographs of the debris, property captioned/identified/dated and initiated by the claimant at the back; in a floor plan, indicate the point from where the picture was taken and by an arrow where the camera was facing. 4.1. Close-up (not more than 2 meters away) of the most severely damaged. 4.2. Close-up (not more than 2 meters away) of the least damaged. 4.3. Overall view of the debris (may be from farther than 2 meters away); splice two or more frames if necessary. Our adjuster will also take photographs. 5. Books of accounts bill, invoices and other vouchers, or certified copies thereof if originals be lost. This requirement includes, but is not limited to, purchase and sales invoices, delivery 6. Certified copies of income tax returns for the last three years and the accompanying financial statements. 7. Latest inventory of merchandise filed with a financial institution, the Bureau of Internal Revenue or any government entity prior to the loss. 8. A detailed inventory of the articles damaged or destroyed, showing the cost price of each, extent of loss, if any, if the risk sustained partial or water damaged. 9. Certificates of registration. 10. Bank Statements. 11. For losses where the estimated value of stocks claimed which are burned out of sight and/or which may no longer be subject to actual physical count exceeds P50,000.00, a CPAs detailed computations in support of such estimated value. 12. In the absence of purchase invoices/delivery receipts (state reason for absence), submit suppliers certificate of sales and delivery. 13. Others (to be specified). Statement of salvage of the affected stocks in trade. Your compliance with this request will enable us to expedite adjustment of the loss in caption.5 According to petitioner, in complete disregard of the foregoing requirements, private respondent never submitted any of the documents mentioned therein. Further, petitioner assails the award in favor of private respondent of an interest rate of 24% per annum. Since there was allegedly no express finding that petitioner unreasonably denied or withheld the payment of the subject insurance claim, then the award of 24% per annum is not proper. Petitioner opines that the judgment should only bear the legal interest rate of 12% per annum for the delay in the payment of the claim. The petition is bereft of merit. Well-settled is the rule that factual findings and conclusions of the trial court and the CA are entitled to great weight and respect, and will not be disturbed on appeal in the absence of any clear showing that the trial court overlooked certain facts or circumstances which would substantially affect the disposition of the case.6 There is no cogent reason to deviate from this salutary rule in the present case. Both the trial court and the CA concur in holding that private respondent had substantially complied with Policy Condition No. 13 which reads:

13. The insured shall give immediate written notice to the Company of any loss, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best possible order, furnish a complete inventory of the destroyed, damaged, and undamaged property, showing in detail quantities, costs, actual cash value and the amount of loss claimed; AND WITHIN SIXTY DAYS AFTER THE LOSS, UNLESS SUCH TIME IS EXTENDED IN WRITING BY THE COMPANY, THE INSURED SHALL RENDER TO THE COMPANY A PROOF OF LOSS, signed and sworn to by the insured, stating the knowledge and belief of the insured as to the following: the time and origin of the loss, the interest of the insured and of all others in the property, the actual cash value of each item thereof and the amount of loss thereto, all encumbrances thereon, all other contracts of insurance, whether valid or not, covering any of said property, any changes in the title, use, occupation, location, possession or exposures of said property since the issuing of this policy by whom and for what purpose any buildings herein described and the several parts thereof were occupied at the time of loss and whether or not it then stood on leased ground, and shall furnish a copy of all the descriptions and schedules in all policies, and if required verified plans and specifications of any building, fixtures, or machinery destroyed or damaged. The insured, as often as may be reasonably required, shall exhibit to any person designated by the company all that remains of any property herein described, and submit to examination under oath by any person named by the Company, and subscribe the same; and, as often as may be reasonably required, shall produce for examination all books of account, bills, invoices, and other vouchers or certified copies thereof if originals be lost, at such reasonable time and place as may be designated by the Company or its representative and shall permit extracts and copies thereof to be made. No claim under this policy shall be payable unless the terms of this condition have been complied with.7 A perusal of the records shows that private respondent, after the occurrence of the fire, immediately notified petitioner thereof. Thereafter, private respondent submitted the following documents: (1) Sworn Statement of Loss and Formal Claim (Exhibit C) and; (2) Proof of Loss (Exhibit D). The submission of these documents, to the Courts mind, constitutes substantial compliance with the above provision. Indeed, as regards the submission of documents to prove loss, substantial, not strict as urged by petitioner, compliance with the requirements will always be deemed sufficient.8 In any case, petitioner itself acknowledged its liability when through its Finance Manager, Rosauro Maghirang, it signed the document indicating that the amount due private respondent is P842,683.40 (Exhibit E). As correctly held by the appellate court: Under the aforequoted provision of the insurance policy, the insured was required to submit to the insurer written notice of the loss; and a complete inventory of the properties damaged within 60 days after the fire, as well as a signed and sworn statement of Proof of Loss. It is admitted by all parties that plaintiff-appellee notified the insurer Summa Corporation of the fire which occurred on 27 May 1982. It is likewise admitted by all parties that plaintiff-appellee submitted the following documents in support of its claim: (1) Sworn Statement of Loss (Exhibit C); (2) formal claim dated 22 July 1982; (3) unnotarized sworn statement of proof of loss (Exhibit D). There was, therefore, sufficient compliance with the requirements in Section 13 of the policy. But, even assuming that plaintiff-appellee indeed failed to submit certain required documents as proof of loss per Section 13, such violation was waived by the insurer Summa when it signed the document marked Exhibit E, a breakdown of the amount due to plaintiff-appellee as of February 1985 on the insurance claim. By such act, defendant-appellant acknowledged its liability under the insurance policy. Antecedent to the execution of Exhibit E, there was a conference between Pallalos, representing plaintiff-appellee and Ortega representing Summa Insurance. There is no
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evidence that in that meeting, Summa Insurance questioned plaintiff-appellees submission of the required documents. What happened was that Ortega summoned Maghirang so that he could settle with Pallalos regarding the amount due to plaintiffappellee from insurance claim. The result is a reconciliation of claim in Exhibit E which shows that as of February 1985, the net due sum is P842,683.49. Defendant-appellant alleges that Maghirang was without authority to sign Exhibit E, and therefore without authority to bind defendant-appellant corporation. We do not agree. The evidence indicate that at a meeting between plaintiff-appellees corporate president Pedro Pallalos and his counterpart in defendant-appellant corporation, Joaquin Ortega, the latter summoned Rosauro Maghirang to reconcile the claims of plaintiff-appellee. One who clothes another with apparent authority as his agent and holds him to the public as such, cannot later be allowed to deny the authority of such person to act as his agent when such third person entered into the contract in good faith and in an honest belief that he is such agent. Witness for defendant-appellant Luis Manapats testimony that Maghirang was without authority to bind the defendant-appellant cannot be given credence because, as he himself testified, he was not yet part of the Summa Corporation at the time the negotiations in question were going on.9 Anent the payment of 24% interest per annum computed from May 3, 1985 until fully paid, suffice it to say that the same is authorized by Sections 243 and 244 of the Insurance Code: Sec. 243. The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorneys fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied: Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of reasonable delay in payment. Notably, under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is created by the failure of the insurer to pay the claim within the time fixed in both Sections 243 and 244.10 Further, Section 29 of the policy itself provides for the payment of such interest: 29. Settlement of claim clause. The amount of any loss or damage for which the company may be liable, under this policy shall be paid within thirty days after proof of loss is received by the company and ascertainment of the loss or damage is made either in an agreement between the insured and the company or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the company of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt.Refusal or failure to pay the loss or damage within the time prescribed herein will

entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the grounds (sic) that the claim is fraudulent.11 The policy itself obliges petitioner to pay the insurance claim within thirty days after proof of loss and ascertainment of the loss made in an agreement between private respondent and petitioner. In this case, as found by the CA, petitioner and private respondent signed the agreement (Exhibit E) indicating that the amount due private respondent was P842,683.40 on April 2, 1985. Petitioner thus had until May 2, 1985 to pay private respondents insurance.12 For its failure to do so, the CA and the trial court rightfully directed petitioner to pay,inter alia, 24% interest per annum in accordance with the above quoted provisions. WHEREFORE, the instant petition is hereby DENIED for lack of merit. The Decision, dated January 14, 1999, of the Court of Appeals in CA-G.R. CV No. 46721 and its Resolution, dated May 13, 1999, are AFFIRMED IN TOTO.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 85296 May 14, 1990 ZENITH INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and LAWRENCE FERNANDEZ, respondents. Vicente R. Layawen for petitioner. Lawrence L. Fernandez & Associates for private respondent. MEDIALDEA, J.: Assailed in this petition is the decision of the Court of Appeals in CA-G.R. C.V. No. 13498 entitled, "Lawrence L. Fernandez, plaintiff-appellee v. Zenith Insurance Corp., defendantappellant" which affirmed in toto the decision of the Regional Trial Court of Cebu, Branch XX in Civil Case No. CEB-1215 and the denial of petitioner's Motion for Reconsideration. The antecedent facts are as follows: On January 25, 1983, private respondent Lawrence Fernandez insured his car for "own damage" under private car Policy No. 50459 with petitioner Zenith Insurance Corporation. On July 6, 1983, the car figured in an accident and suffered actual damages in the amount of P3,640.00. After allegedly being given a run around by Zenith for two (2) months, 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. The complaint was docketed as Civil Case No. CEB-1215. Aside from actual damages and interests, Fernandez also prayed for moral damages in the amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00. On September 28, 1983, Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract which, the private respondent rejected. After the issues had been joined, the pre-trial was scheduled on October 17, 1983 but the same was moved to November 4, 1983 upon petitioner's motion, allegedly to explore ways to settle the case although at an amount lower than private respondent's claim. On November 14, 1983, the trial court terminated the pre-trial. Subsequently, Fernandez presented his evidence. Petitioner Zenith, however, failed to present its evidence in view of its failure to appear in court, without justifiable reason, on the day scheduled for the purpose. The trial court issued an order on August 23, 1984 submitting the case for decision without Zenith's evidence (pp. 10-11, Rollo). 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. The petition was docketed as C.A.-G.R. No. 04644. However, the petition was denied due course on April 29, 1986 (p. 56, Rollo). On June 4, 1986, a decision was rendered by the trial court in favor of private respondent Fernandez. The dispositive portion of the trial court's decision provides: WHEREFORE, defendant is hereby ordered to pay to the plaintiff: 1. The amount of P3,640.00 representing the damage incurred plus interest at the rate of twice the prevailing interest rates; 2. The amount of P20,000.00 by way of moral damages; 3. The amount of P20,000.00 by way of exemplary damages; 4. The amount of P5,000.00 as attorney's fees; 5. The amount of P3,000.00 as litigation expenses; and 6. Costs. (p. 9, Rollo) Upon motion of Fernandez and before the expiration of the period to appeal, the trial court, on June 20, 1986, ordered the execution of the decision pending appeal. The order was assailed

by petitioner in a petition forcertiorari with the Court of Appeals on October 23, 1986 in C.A. G.R. No. 10420 but which petition was also dismissed on December 24, 1986 (p. 69, Rollo). On June 10, 1986, petitioner filed a notice of appeal before the trial court. The notice of appeal was granted in the same order granting private respondent's motion for execution pending appeal. The appeal to respondent court assigned the following errors: I. The lower court erred in denying defendant appellant to adduce evidence in its behalf. II. The lower court erred in ordering Zenith Insurance Corporation to pay the amount of P3,640.00 in its decision. III. The lower court erred in awarding moral damages, attorneys fees and exemplary damages, the worst is that, the court awarded damages more than what are prayed for in the complaint. (p. 12,Rollo) On August 17, 1988, the Court of Appeals rendered its decision affirming in toto the decision of the trial court. It also ruled that the matter of the trial court's denial of Fernandez's right to adduce evidence is a closed matter in view of its (CA) ruling in AC-G.R. 04644 wherein Zenith's petition questioning the trial court's order submitting the case for decision without Zenith's evidence, was dismissed. The Motion for Reconsideration of the decision of the Court of Appeals dated August 17, 1988 was denied on September 29, 1988, for lack of merit. Hence, the instant petition was filed by Zenith on October 18, 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. The issues raised by petitioners in this petition are: a) The legal basis of respondent Court of Appeals in awarding moral damages, exemplary damages and attomey's fees in an amount more than that prayed for in the complaint. b) The award of actual damages of P3,460.00 instead of only P1,927.50 which was arrived at after deducting P250.00 and P274.00 as deductible franchise and 20% depreciation on parts as agreed upon in the contract of insurance. Petitioner contends that while the complaint of private respondent prayed for P10,000.00 moral damages, the lower court awarded twice the amount, or P20,000.00 without factual or legal basis; while private respondent prayed for P5,000.00 exemplary damages, the trial court awarded P20,000.00; and while private respondent prayed for P3,000.00 attorney's fees, the trial court awarded P5,000.00. The propriety of the award of moral damages, exemplary damages and attorney's fees is the main issue raised herein by petitioner. The award of damages in case of unreasonable delay in the payment of insurance claims is governed by the Philippine Insurance Code, which provides: Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, 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 denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, 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. It is clear that under the Insurance Code, in case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1) attorney's fees; 2)
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other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim. As regards the award of moral and exemplary damages, the rules under the Civil Code of the Philippines shall govern. "The purpose of moral damages is essentially indemnity or reparation, not punishment or correction. Moral damages are emphatically not intended to enrich a complainant at the expense of a defendant, they are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action." (J. Cezar S. Sangco, Philippine Law on Torts and Damages, Revised Edition, p. 539) (See also R and B Surety & Insurance Co., Inc. v. IAC, G.R. No. 64515, June 22, 1984; 129 SCRA 745). While it is true that no proof of pecuniary loss is necessary in order that moral damages may be adjudicated, the assessment of which is left to the discretion of the court according to the circumstances of each case (Art. 2216, New Civil Code), it is equally true that in awarding moral damages in case of breach of contract, 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. Court of Appeals, G.R. No. L-20238, January 30,1965; 13 SCRA 137; Solis v. Salvador, G.R. No. L-17022, August 14, 1965; 14 SCRA 887). In the instant case, there was a finding that private respondent was given a "runaround" for two months, which is the basis for the award of the damages granted under the Insurance Code for unreasonable delay in the payment of the claim. However, the act of petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to justify an award of P20,000.00 as moral damages, taking into consideration also the fact that the actual damage on the car was only P3,460. In the pre-trial of the case, it was shown that there was no total disclaimer by respondent. 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. The amount of P10,000.00 prayed for by private respondent as moral damages is equitable. On the other hand, exemplary or corrective damages are imposed by way of example or correction for the public good (Art. 2229, New Civil Code of the Philippines). In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227, exemplary damages were not awarded as the insurance company had not acted in wanton, oppressive or malevolent manner. The same is true in the case at bar. The amount of P5,000.00 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. As regards the actual damages incurred by private respondent, the amount of P3,640.00 had been established before the trial court and affirmed by the appellate court. Respondent appellate court correctly ruled that the deductions of P250.00 and P274.00 as deductible franchise and 20% depreciation on parts, respectively claimed by petitioners as agreed upon in the contract, had no basis. Respondent court ruled: Under its second assigned error, defendant-appellant puts forward two arguments, both of which are entirely without merit. It is contented that the amount recoverable under the insurance policy defendant-appellant issued over the car of plaintiffappellee is subject to deductible franchise, and . . . . The policy (Exhibit G, pp. 4-9, Record), does not mntion any deductible franchise, . . . (p. 13, Rollo) Therefore, the award of moral damages is reduced to P10,000.00 and the award of exemplary damages is hereby deleted. The awards due to private respondent Fernandez are as follows: 1) P3,640.00 as actual claim plus interest of twice the ceiling prescribed by the Monetary Board computed from the time of submission of proof of loss; 2) P10,000.00 as moral damages;

3) P5,000.00 as attorney's fees; 4) P3,000.00 as litigation expenses; and 5) Costs. ACCORDINGLY, the appealed decision is MODIFIED as above stated.

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G.R. NO. 147039 January 27, 2006 DBP POOL OF ACCREDITED INSURANCE COMPANIES, Petitioner, vs. RADIO MINDANAO NETWORK, INC., Respondent. DECISION AUSTRIA-MARTINEZ, J.: This refers to the petition for certiorari under Rule 45 of the Rules of Court seeking the review of the Decision1dated November 16, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 56351, the dispositive portion of which reads: Wherefore, premises considered, the appealed Decision of the Regional Trial Court of Makati City, Branch 138 in Civil Case No. 90-602 is hereby AFFIRMED with MODIFICATION in that the interest rate is hereby reduced to 6% per annum. Costs against the defendants-appellants. SO ORDERED.2 The assailed decision originated from Civil Case No. 90-602 filed by Radio Mindanao Network, Inc. (respondent) against DBP Pool of Accredited Insurance Companies (petitioner) and Provident Insurance Corporation (Provident) for recovery of insurance benefits. Respondent owns several broadcasting stations all over the country. Provident covered respondents transmitter equipment and generating set for the amount ofP13,550,000.00 under Fire Insurance Policy No. 30354, while petitioner covered respondents transmitter, furniture, fixture and other transmitter facilities for the amount of P5,883,650.00 under Fire Insurance Policy No. F-66860. In the evening of July 27, 1988, respondents radio station located in SSS Building, Bacolod City, was razed by fire causing damage in the amount of P1,044,040.00. Respondent sought recovery under the two insurance policies but the claims were denied on the ground that the cause of loss was an excepted risk excluded under condition no. 6 (c) and (d), to wit: 6. This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following consequences, namely: (c) War, invasion, act of foreign enemy, hostilities, or warlike operations (whether war be declared or not), civil war. (d) Mutiny, riot, military or popular rising, insurrection, rebellion, revolution, military or usurped power.3 The insurance companies maintained that the evidence showed that the fire was caused by members of the Communist Party of the Philippines/New Peoples Army (CPP/NPA); and consequently, denied the claims. Hence, respondent was constrained to file Civil Case No. 90602 against petitioner and Provident. After trial on the merits, the Regional Trial Court of Makati, Branch 138, rendered a decision in favor of respondent. The dispositive portion of the decision reads: IN VIEW THEREOF, judgment is rendered in favor of plaintiff. Defendant Provident Insurance Corporation is directed to pay plaintiff the amount of P450,000.00 representing the value of the destroyed property insured under its Fire Insurance Policy plus 12% legal interest from March 2, 1990 the date of the filing of the Complaint. Defendant DBP Pool Accredited Insurance Companies is likewise ordered to pay plaintiff the sum of P602,600.00 representing the value of the destroyed property under its Fire Insurance Policy plus 12% legal interest from March 2, 1990. SO ORDERED.4 Both insurance companies appealed from the trial courts decision but the CA affirmed the decision, with the modification that the applicable interest rate was reduced to 6% per annum. A motion for reconsideration was filed by petitioner DBP which was denied by the CA per its Resolution dated January 30, 2001.5 Hence, herein petition by DBP Pool of Accredited Insurance Companies, 6 with the following assignment of errors:

Assignment of Errors THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THERE WERE NO SUFFICIENT EVIDENCE SHOWING THAT THE APPROXIMATELY TENTY [sic] (20) ARMED MEN WHO CUSED [sic] THE FIRE AT RESPONDENTS RMN PROPERTY AT BACOLOD CITY WERE MEMBERS OF THE CPP-NPA. THE HONORABLE COURT OF APPEALS ERRED WHEN IT ADJUDGED THAT RESPONDENT RMN CANNOT BEHELD [sic] FOR DAMAGES AND ATTORNEYS FEES FOR INSTITUTING THE PRESENT ACTION AGAINST THE PETITIONER UNDER ARTICLES 21, 2208, 2229 AND 2232 OF THE CIVIL CODE OF THE PHILIPPINES.7 Petitioner assails the factual finding of both the trial court and the CA that its evidence failed to support its allegation that the loss was caused by an excepted risk, i.e., members of the CPP/NPA caused the fire. In upholding respondents claim for indemnity, the trial court found that: The only evidence which the Court can consider to determine if the fire was due to the intentional act committed by the members of the New Peoples Army (NPA), are the testimony [sic] of witnesses Lt. Col. Nicolas Torres and SPO3 Leonardo Rochar who were admittedly not present when the fire occurred. Their testimony [sic] was [sic] limited to the fact that an investigation was conducted and in the course of the investigation they were informed by bystanders that "heavily armed men entered the transmitter house, poured gasoline in (sic) it and then lighted it. After that, they went out shouting "Mabuhay ang NPA" (TSN, p. 12., August 2, 1995). The persons whom they investigated and actually saw the burning of the station were not presented as witnesses. The documentary evidence particularly Exhibits "5" and "5-C" do not satisfactorily prove that the author of the burning were members of the NPA. Exhibit "5-B" which is a letter released by the NPA merely mentions some dissatisfaction with the activities of some people in the media in Bacolod. There was no mention there of any threat on media facilities.8 The CA went over the evidence on record and sustained the findings of the trial court, to wit: To recapitulate, defendants-appellants presented the following to support its claim, to wit: police blotter of the burning of DYHB, certification of the Negros Occidental Integrated National Police, Bacolod City regarding the incident, letter of alleged NPA members Celso Magsilang claiming responsibility for the burning of DYHB, fire investigation report dated July 29, 1988, and the testimonies of Lt. Col. Nicolas Torres and SFO III Leonardo Rochas. We examined carefully the report on the police blotter of the burning of DYHB, the certification issued by the Integrated National Police of Bacolod City and the fire investigation report prepared by SFO III Rochas and there We found that none of them categorically stated that the twenty (20) armed men which burned DYHB were members of the CPP/NPA. The said documents simply stated that the said armed men were believed to be or suspected of being members of the said group. Even SFO III Rochas admitted that he was not sure that the said armed men were members of the CPP-NPA, thus: In fact the only person who seems to be so sure that that the CPP-NPA had a hand in the burning of DYHB was Lt. Col. Nicolas Torres. However, though We found him to be persuasive in his testimony regarding how he came to arrive at his opinion, We cannot nevertheless admit his testimony as conclusive proof that the CPP-NPA was really involved in the incident considering that he admitted that he did not personally see the armed men even as he tried to pursue them. Note that when Lt. Col. Torres was presented as witness, he was presented as an ordinary witness only and not an expert witness. Hence, his opinion on the identity or membership of the armed men with the CPP-NPA is not admissible in evidence. Anent the letter of a certain Celso Magsilang, who claims to be a member of NPA-NIROC, being an admission of person which is not a party to the present action, is likewise inadmissible in evidence under Section 22, Rule 130 of the Rules of Court. The reason being
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that an admission is competent only when the declarant, or someone identified in legal interest with him, is a party to the action.9 The Court will not disturb these factual findings absent compelling or exceptional reasons. It should be stressed that a review by certiorari under Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of the Court is limited to reviewing only errors of law, not of fact.10 Moreover, when supported by substantial evidence, findings of fact of the trial court as affirmed by the CA are conclusive and binding on the parties,11 which this Court will not review unless there are exceptional circumstances. There are no exceptional circumstances in this case that would have impelled the Court to depart from the factual findings of both the trial court and the CA. Both the trial court and the CA were correct in ruling that petitioner failed to prove that the loss was caused by an excepted risk. Petitioner argues that private respondent is responsible for proving that the cause of the damage/loss is covered by the insurance policy, as stipulated in the insurance policy, to wit: Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise) which are occasioned by or through in consequence directly or indirectly, of any of the said occurrences shall be deemed to be loss or damage which is not covered by the insurance, except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions. In any action, suit or other proceeding where the Companies allege that by reason of the provisions of this condition any loss or damage is not covered by this insurance, the burden of proving that such loss or damage is covered shall be upon the Insured.12 An insurance contract, being a contract of adhesion, should be so interpreted as to carry out the purpose for which the parties entered into the contract which is to insure against risks of loss or damage to the goods. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.13 The "burden of proof" contemplated by the aforesaid provision actually refers to the "burden of evidence" (burden of going forward).14 As applied in this case, it refers to the duty of the insured to show that the loss or damage is covered by the policy. The foregoing clause notwithstanding, the burden of proof still rests upon petitioner to prove that the damage or loss was caused by an excepted risk in order to escape any liability under the contract. Burden of proof is the duty of any party to present evidence to establish his claim or defense by the amount of evidence required by law, which is preponderance of evidence in civil cases. The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. For the plaintiff, the burden of proof never parts.15 For the defendant, an affirmative defense is one which is not a denial of an essential ingredient in the plaintiffs cause of action, but one which, if established, wi ll be a good defense i.e. an "avoidance" of the claim.16 Particularly, in insurance cases, where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, 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. If a proof is made of a loss apparently within a contract of insurance, 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, or from a cause which limits its liability.17 Consequently, it is sufficient for private respondent to prove the fact of damage or loss. Once respondent makes out a prima facie case in its favor, the duty or the burden of evidence shifts to petitioner to controvert respondents prima facie case.18 In this case, since petitioner alleged

an excepted risk, then the burden of evidence shifted to petitioner to prove such exception. It is only when petitioner has sufficiently proven that the damage or loss was caused by an excepted risk does the burden of evidence shift back to respondent who is then under a duty of producing evidence to show why such excepted risk does not release petitioner from any liability. Unfortunately for petitioner, it failed to discharge its primordial burden of proving that the damage or loss was caused by an excepted risk. Petitioner however, insists that the evidence on record established the identity of the author of the damage. It argues that the trial court and the CA erred in not appreciating the reports of witnesses Lt. Col Torres and SFO II Rochar that the bystanders they interviewed claimed that the perpetrators were members of the CPP/NPA as an exception to the hearsay rule as part of res gestae. A witness can testify only to those facts which he knows of his personal knowledge, which means those facts which are derived from his perception.19 A witness may not testify as to what he merely learned from others either because he was told or read or heard the same. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. 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, more importantly, have not been subjected to cross-examination by opposing counsel to test the perception, memory, 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.20 Res gestae, as an exception to the hearsay rule, refers to those exclamations and statements made by either the participants, victims, or spectators to a crime immediately before, during, or after the commission of the crime, when the circumstances are such that the statements were made as a spontaneous reaction or utterance inspired by the excitement of the occasion and there was no opportunity for the declarant to deliberate and to fabricate a false statement. The rule in res gestae applies when the declarant himself did not testify and provided that the testimony of the witness who heard the declarant complies with the following requisites: (1) that the principal act, the res gestae, be a startling occurrence; (2) the statements were made before the declarant had the time to contrive or devise a falsehood; and (3) that the statements must concern the occurrence in question and its immediate attending circumstances. 21 The Court is not convinced to accept the declarations as part of res gestae. While it may concede that these statements were made by the bystanders during a startling occurrence, it cannot be said however, that these utterances were made spontaneously by the bystanders and before they had the time to contrive or devise a falsehood. Both SFO III Rochar and Lt. Col. Torres received the bystanders statements while they were making their investigations during and after the fire. It is reasonable to assume that when these statements were noted down, the bystanders already had enough time and opportunity to mill around, talk to one another and exchange information, not to mention theories and speculations, as is the usual experience in disquieting situations where hysteria is likely to take place. It cannot therefore be ascertained whether these utterances were the products of truth. That the utterances may be mere idle talk is not remote. At best, the testimonies of SFO III Rochar and Lt. Col. Torres that these statements were made may be considered as independently relevant statements gathered in the course of their investigation, and are admissible not as to the veracity thereof but to the fact that they had been thus uttered.22 Furthermore, admissibility of evidence should not be equated with its weight and sufficiency.23 Admissibility of evidence depends on its relevance and competence, while the weight of evidence pertains to evidence already admitted and its tendency to convince and persuade.24 Even assuming that the declaration of the bystanders that it was the members of the CPP/NPA who caused the fire may be admitted as evidence, it does not follow that such declarations are sufficient proof. These declarations should be calibrated vis--vis the other
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evidence on record. And the trial court aptly noted that there is a need for additional convincing proof, viz.: The Court finds the foregoing to be insufficient to establish that the cause of the fire was the intentional burning of the radio facilities by the rebels or an act of insurrection, rebellion or usurped power. Evidence that persons who burned the radio facilities shouted "Mabuhay ang NPA" does not furnish logical conclusion that they are member [sic] of the NPA or that their act was an act of rebellion or insurrection. Additional convincing proof need be submitted. Defendants failed to discharge their responsibility to present adequate proof that the loss was due to a risk excluded.25 While the documentary evidence presented by petitioner, i.e., (1) the police blotter; (2) the certification from the Bacolod Police Station; and (3) the Fire Investigation Report may be considered exceptions to the hearsay rule, being entries in official records, nevertheless, as noted by the CA, none of these documents categorically stated that the perpetrators were members of the CPP/NPA.26 Rather, it was stated in the police blotter that: "a group of persons accompanied by one (1) woman all believed to be CPP/NPA more or less 20 persons suspected to be CPP/NPA,"27 while the certification from the Bacolod Police station stated that " some 20 or more armed menbelieved to be members of the New Peoples Army NPA,"28 and the fire investigation report concluded that "(I)t is therefore believed by this Investigating Team that the cause of the fire is intentional, and the armed men suspected to be members of the CPP/NPA where (sic) the ones responsible "29 All these documents show that indeed, the "suspected" executor of the fire were believed to be members of the CPP/NPA. But suspicion alone is not sufficient, preponderance of evidence being the quantum of proof. All told, the Court finds no reason to grant the present petition. WHEREFORE, the petition is DISMISSED. The Court of Appeals Decision dated November 16, 2000 and Resolution dated January 30, 2001 rendered in CA-G.R. CV No. 56351 are AFFIRMED in toto. SO ORDERED.

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G.R. No. L-28237 August 31, 1982 BAY VIEW HOTEL., INC., plaintiff-appellant, vs. KER & CO., LTD., and PHOENIX ASSURANCE CO., LTD., defendants-appellees. Mariano V. Ampil, Jr. for plaintiff-appellant. Alfonso Felix, Jr. for defendants-appellants. & TEEHANKEE, J.:1wph1.t This appeal was originally brought before the Court of Appeals but was certified to this Court pursuant to the appellate court's resolution of October 13, 1967 since it involved purely questions of law. Sometime in January, 1958, plaintiff-appellant Bay View Hotel, Inc., then the lessee arid operator of the Manila Hotel, secured a fidelity guarantee bond from defendant-appellee Ker & Co., Ltd., for its accountable employees against acts of fraud and dishonesty. Said defendant-appellee Ker & Co., Ltd., is the Philippine general agent of Phoenix Assurance Co., Ltd. a foreign corporation duly licensed to do insurance business in the Philippines. When one of the bonded employees, Tomas E. Ablaza, while acting in his capacity as cashier, was discovered by plaintiff-appellant to have had a cash shortage and unremitted collections in the total amount of P42,490.95, it filed claims for payments on the said fidelity guarantee bond but defendant-appellee Ker & Co. denied and refused indemnification and payment. To enforce its claims, plaintiff-appellant instituted its complaint, dated August 30, 1965 docketed as Civil Case No. 63181 of the Court of First Instance of Manila. In its answer, defendant-appellee Ker & Co. justified its denial of the claims of plaintiffappellant on various reas ns, such as non-compliance with the conditions stipulated in the insurance policy; non-presentation of evidence regarding the various charges of dishonesty and misrepresentation against Tomas E. Ablaza and non-production of the documents to prove the alleged loss. Ker & Co. likewise averred that it was merely an agent and- as such it was not liable under the policy. On June 22, 1966, counsel for Ker & Co. filed a request for admission, furnishing plaintiffappellant's counsel with a copy thereof requesting admission of the following facts: 1wph1.t 1. On February 14, 1967, the Bay View Hotel, Inc., applied to the Phoenix Assurance Co., Ltd., for a fidelity guarantee bond through a proposal form, a true copy of which is annexed to our answer as Annex "A" thereof. 2. Such a policy was actually issued on January 22, 1958 by the Phoenix Assurance Co., Ltd., in favor of the Bay View Hotel, Inc., and was renewed from time to time with amendments. A true copy of the policy as it finally stood at the time of the alleged defalcation is annexed to our answer as Annex 'B ' thereof. 3. This claim filed by the Bay View Hotel, Inc., under this policy was denied on behalf of the Phoenix Assurance Co., Ltd., by a letter dated 18th June, 1965 sent by registered mail to the Bay View Hotel, Inc. on June 22, 1965. A true copy of this letter of denial is annexed to the present request as Annex "C" hereof. " When plaintiff-appellant failed to make any answer to the request for admission within the period prescribed by the rules, defendant-appellee Ker & Co. filed a Motion to Dismiss on Affirmative Defense, dated July 6, 1966, insisting that since under Sec. 2, Rule 26 of the Rules of Court, plaintiff-appellant was deemed to have impliedly admitted each of the matters enumerated in the request for admission, it followed that the proper party in interest against whom plaintiff-appellant might have a claim was the principal Phoenix Assurance Co. (Phoenix) and not the agent Ker & Co. Plaintiff-appellant filed an opposition, dated July 19, 1966 arguing that the proper remedy, under the circumstances was not to dismiss the complaint but to amend it in order to bring the necessary or indispensable parties to the suit. Defendant-appellee Ker & Co. filed a reply to

the opposition reiterating its stand that since it merely acted as an agent, the case should be dismissed and plaintiff-appellant should file the necessary action against the principal Phoenix. On August 1, 1966, plaintiff-appellant filed a Motion for Leave to Admit Amended Complaint, attaching copy of the complaint, as amended, this time impleading Phoenix as party defendant. On August 16, 1966, defendants- appellees filed their joint answer to the amended complaint. Again, Ker & Co., Ltd., argued that it was merely an agent and therefore not liable under the policy. On the other hand, Phoenix, averred that under Condition 8 of the insurance policy, plaintiff-appellant was deemed to have abandoned its claim in view of the fact that it did not ask for an arbitration of its claim within twelve (12) months from June 22, 1965 the date of receipt of the denial of the claim. On August 24, 1966, defendants-appellees filed a motion for summary judgment which the trial court granted in its decision of November 4, 1966, ordering the dismissal of the case. After denial of its motion for reconsideration, plaintiff-appellant filed the present appeal, raising the following assignment of errors: 1wph1.t I The lower court erred and acted with grave abuse of discretion in extending the legal effects, if any, of the request for admission filed by Ker & Co., Ltd. to the Phoenix Assurance Co., Ltd., which was not a party-defendant at the time said request was filed and for whom no similar request was ever filed. II The lower court erred and acted with grave abuse of discretion in giving legal effects to a request for admission by the defendant-appellee under the original complaint after the said original complaint was, with leave of court, amended. III The lower court erred and acted with grave abuse of discretion in holding that "Condition No. 8 of the Policy No. FGC-5018-P requires that should there be a controversy in the payment of the claims, it should be submitted to an arbitration" despite the admissions by the parties and the established fact that Condition No. 8 of said Policy No. FGC-5018-P provides for Arbitration if any dispute shall arise as to the amount of company's liability." IV The lower court erred and acted with grave abuse of discretion in granting the Motion for Summary Judgment and dismissing the complaint. The first two errors assigned may be taken jointly. Plaintiff-appellant argues that since the implied admission was made before the amendment of its complaint so as to include Phoenix, it follows that Phoenix has no right to avail of these admissions, and that the trial court committed a grave abuse of discretion in extending to Phoenix the legal effects of the request for admission filed solely by Ker & Co. The argument is untenable, Admission is in the nature of evidence and its legal effects were already part of the records of the case and therefore could be availed of by any party even by one subsequently impleaded. The amendment of the complaint per se cannot set aside the legal effects of the request for admission since its materiality has not been affected by the amendment. If a fact is admitted to be true at any stage of the proceedings, it is not stricken out through the amendment of the complaint. To allow a party to alter the legal effects of the request for admission by the mere amendment of a pleading would constitute a dangerous and undesirable precedent. The legal effects of plaintiff- appellant's failure to answer the request for admission could and should have been corrected below by its filing a motion to be relieved of the consequences of the implied admission with respect to respondent Phoenix. Moreover, since an agent may do such acts as may be conducive to the accomplishment of the purpose of the agency, admissions secured by the agent within the scope of the agency ought to favor the principal. This has to be the rule, for the act or declarations of an agent of the party within the scope of the agency and during its existence are considered and treated in turn
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as the declarations, acts and representations of his principal 1 and may be given in evidence against such party. Plaintiff-appellant insists that since the motion for summary judgment was filed on behalf of defendant-appellee Ker & Co. alone, there was no motion for summary judgment as far as Phoenix was concerned and the trial court's decision dismissing the case should not have included the principal Phoenix. But the motion for summary judgment was filed after the complaint had been amended and answer thereto had been filed. The issues, therefore, with respect to Phoenix had already been likewise joined. Moreover, a reading of the said motion for summary judgment, more particularly the prayer thereof, shows that Phoenix did join Ker & Co. in moving for the dismissal of the case and prayed "that the present action be dismissed as against Ker & Co., Ltd., because being purely and simply the agent of the insurer, it is not liable under the policy and as against the Phoenix Assurance Co., Ltd. because by failing to seek an arbitration within twelve months from the date of its receipt of the denial of its claim on June 22, 1965, plaintiff Bay View Hotel, Inc., is deemed under condition 8 of ,, tie policy, to have abandoned its claim against said defendant phoenix Assurance Co., Ltd." The main issue raised by plaintiff-appellant is with respect to Condition No. 8 of the insurance policy, photostatic copy of which was submitted to the trial court and reproduced as follows: 1wph1.t If any dispute shall arise as to the amount of company's liability under this Policy the matter shall if required by either party be to the decision of two neutral persons as arbitrators one of, whom shall be named by each party or of an umpire who shall be appointed by the said arbitrators before entering on the reference and in case either party or his representative shall neglect or refuse for the space of two months after request in writing from the other party so to do to name an arbitrator the arbitrator of the other party may proceed alone. And it is hereby expressly agreed and declared that it shag be a condition precedent to any right of action or upon this Policy that the award by such arbitrators, arbitrator or umpire of the amount of the loss shall first be obtained. The costs of and connected with the arbitration shag be in the discretion of the arbitrators, arbitrator or umpire.2 Plaintiff-appellant maintains that Condition No. 8 of the policy provides for arbitration only "if any dispute should arise as to the amount of company's liability" consequently, the reference to arbitration is not a condition precedent to the filing of the suit contrary to the insurer company's posture. Plaintiff-appellant points out that in the instant case, there is a total and complete negation of liability. There is no dispute as to the amount of company's liability because this presupposes an admission of responsibility although not to the extent of the cost thereof, while here the insurer denies liability wholly and totally. We find in favor of plaintiff-appellant. The provisions of Condition No. 8, more specifically the portion thereof which reads, "if any dispute shall arise as to the amount of company's liability under this policy ...," do not appear to require any extended interpretation. Condition No. 8 requires arbitration only as to disputes regarding the amountof the insurer's liability but not as to any dispute as to the existence or non- existence of liability. Thus, Condition No. 8 comes into play only if the insurer admits liability but cannot agree with the insured as to the amount thereof and cannot be invoked in cases like that at bar where the insurer completely denies any liability. Defendants-appellees' contention that plaintiff-appellant's failure to request arbitration proceedings is a bar to its filing of the suit at bar against the insurer company cannot be sustained, specially considering the established principle that contracts of adhesion such as the insurance policy in question are to be strictly construed in case of doubt against the insurer. As to appellee Ker & Co., Ltd., however, there appears to be no serious contradiction as to the fact that it merely acted as the agent of its principal, Phoenix. Considering that there was full disclosure of such agency since the insurance policy was actually issued by Phoenix, We find no error in the dismissal of the case against said defendant Ker & Co., Ltd.

Accordingly, the dismissal of the case against Ker & Co., Ltd., is hereby affirmed and maintained, while the dismissal of the case against Phoenix Assurance Co., Ltd. is hereby set aside and the case is remanded to the court of origin for further proceedings and determination on the merits. No costs.

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G.R. No. 150751 September 20, 2004 CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. DECISION PANGANIBAN, J.: A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to prevent or minimize the loss. In the present case, the weather condition encountered by petitioners vessel was not a "storm" or a natural disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss. The Case Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse and set aside the March 23, 2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 48915. The assailed Decision disposed as follows: "WHEREFORE, the decision of the Regional Trial Court of Makati City, Branch 148 dated August 4, 1994 is hereby MODIFIED in so far as the award of attorneys fees is DELETED. The decision is AFFIRMED in all other respects."3 The CA denied petitioners Motion for Reconsideration in its November 7, 2001 Resolution. 4 The Facts The factual antecedents, summarized by the trial court and adopted by the appellate court, are as follows: "On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on board its vessel, the M/V Central Bohol, 376 pieces [of] Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. "The cargo was insured for P3,000,000.00 against total loss under [respondents] Marine Cargo Policy No. MCPB-00170. "On July 25, 1990, upon completion of loading of the cargo, the vessel left Palawan and commenced the voyage to Manila. "At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel listed about 10 degrees starboardside, due to the shifting of logs in the hold. "At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the ship captain ordered his men to abandon ship and at about 0130 hours of the same day the vessel completely sank. Due to the sinking of the vessel, the cargo was totally lost. "[Respondent] alleged that the total loss of the shipment was caused by the fault and negligence of the [petitioner] and its captain and as direct consequence thereof the consignee suffered damage in the sum ofP3,000,000.00. "The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to the [petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer, paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as against the [petitioner]. "[Petitioner], while admitting the sinking of the vessel, interposed the defense that the vessel was fully manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and secured; that the vessels master exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the storm. "It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen."5

The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for the loss of the cargo. Thus, the RTC deducted the salvage value of the logs in the amount of P200,000 from the principal claim of respondent and found that the latter was entitled to be subrogated to the rights of the insured. The court a quo disposed as follows: "WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondent] and against the [petitioner] ordering the latter to pay the following: 1) the amount of P2,800,000.00 with legal interest thereof from the filing of this complaint up to and until the same is fully paid; 2) P80,000.00 as and for attorneys fees; 3) Plus costs of suit."6 Ruling of the Court of Appeals The CA affirmed the trial courts finding that the southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea. The appellate court further held that the weather disturbance was not the sole and proximate cause of the sinking of the vessel, which was also due to the concurrent shifting of the logs in the hold that could have resulted only from improper stowage. Thus, the carrier was held responsible for the consequent loss of or damage to the cargo, because its own negligence had contributed thereto. The CA found no merit in petitioners assertion of the vessels seaworthiness. It held that the Certificates of Inspection and Drydocking were not conclusive proofs thereof. In order to consider a vessel to be seaworthy, it must be fit to meet the perils of the sea. Found untenable was petitioners insistence that the trial court should have given greater weight to the factual findings of the Board of Marine Inquiry (BMI) in the investigation of the Marine Protest filed by the ship captain, Enriquito Cahatol. The CA further observed that what petitioner had presented to the court a quo were mere excerpts of the testimony of Captain Cahatol given during the course of the proceedings before the BMI, not the actual findings and conclusions of the agency. Citing Arada v. CA,7 it said that findings of the BMI were limited to the administrative liability of the owner/operator, officers and crew of the vessel. However, the determination of whether the carrier observed extraordinary diligence in protecting the cargo it was transporting was a function of the courts, not of the BMI. The CA concluded that the doctrine of limited liability was not applicable, in view of petitioners negligence -- particularly its improper stowage of the logs. Hence, this Petition.8 Issues In its Memorandum, petitioner submits the following issues for our consideration: "(i) Whether or not the weather disturbance which caused the sinking of the vessel M/V Central Bohol was a fortuitous event. "(ii) Whether or not the investigation report prepared by Claimsmen Adjustment Corporation is hearsay evidence under Section 36, Rule 130 of the Rules of Court. "(iii) Whether or not the finding of the Court of Appeals that the logs in the hold shifted and such shifting could only be due to improper stowage has a valid and factual basis. "(iv) Whether or not M/V Central Bohol is seaworthy. "(v) Whether or not the Court of Appeals erred in not giving credence to the factual finding of the Board of Marine Inquiry (BMI), an independent government agency tasked to conduct inquiries on maritime accidents. "(vi) Whether or not the Doctrine of Limited Liability is applicable to the case at bar." 9 The issues boil down to two: (1) whether the carrier is liable for the loss of the cargo; and (2) whether the doctrine of limited liability is applicable. These issues involve a determination of
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factual questions of whether the loss of the cargo was due to the occurrence of a natural disaster; and if so, whether its sole and proximate cause was such natural disaster or whether petitioner was partly to blame for failing to exercise due diligence in the prevention of that loss. The Courts Ruling The Petition is devoid of merit. First Issue: Liability for Lost Cargo From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case.10 In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or calamity."11 In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. 12 In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the occurrence of a "storm" under Article 1734(1). It attributes the sinking of its vessel solely to the weather condition between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990. At the outset, it must be stressed that only questions of law13 may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. Questions of fact are not proper subjects in this mode of appeal,14 for "[t]he Supreme Court is not a trier of facts."15 Factual findings of the CA may be reviewed on appeal16 only under exceptional circumstances such as, among others, when the inference is manifestly mistaken,17 the judgment is based on a misapprehension of facts,18 or the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion. 19 In the present case, petitioner has not given the Court sufficient cogent reasons to disturb the conclusion of the CA that the weather encountered by the vessel was not a "storm" as contemplated by Article 1734(1). Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol encountered a southwestern monsoon in the course of its voyage. The Note of Marine Protest,20 which the captain of the vessel issued under oath, stated that he and his crew encountered a southwestern monsoon about 2200 hours on July 25, 1990, and another monsoon about 2400 hours on July 26, 1990. Even petitioner admitted in its Answer that the sinking of M/V Central Bohol had been caused by the strong southwest monsoon.21 Having made such factual representation, it cannot now be allowed to retreat and claim that the southwestern monsoon was a "storm." The pieces of evidence with respect to the weather conditions encountered by the vessel showed that there was a southwestern monsoon at the time. Normally expected on sea voyages, however, were such monsoons, during which strong winds were not unusual. Rosa S. Barba, weather specialist of the Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA), testified that a thunderstorm might occur in the midst of a southwest monsoon. According to her, one did occur between 8:00 p.m. on July 25, 1990, and 2 a.m. on July 26, 1990, as recorded by the PAGASA Weather Bureau.22 Nonetheless, to our mind it would not be sufficient to categorize the weather condition at the time as a "storm" within the absolutory causes enumerated in the law. Significantly, no typhoon was observed within the Philippine area of responsibility during that period.23 According to PAGASA, a storm has a wind force of 48 to 55 knots, 24 equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the wind was blowing around force 7 to 8 on the Beaufort Scale.25 Consequently, the strong winds accompanying the southwestern monsoon could not be classified as a "storm." Such winds are the ordinary vicissitudes of a sea voyage.26

Even if the weather encountered by the ship is to be deemed a natural disaster under Article 1739 of the Civil Code, petitioner failed to show that such natural disaster or calamity was the proximate and only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In other words, the damaging effects blamed on the event or phenomenon must not have been caused, contributed to, or worsened by the presence of human participation.27 The defense of fortuitous event or natural disaster cannot be successfully made when the injury could have been avoided by human precaution.28 Hence, if a common carrier fails to exercise due diligence -- or that ordinary care that the circumstances of the particular case demand -- to prevent or minimize the loss before, during and after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent. The loss or injury is not, in a legal sense, due to a natural disaster under Article 1734(1).29 We also find no reason to disturb the CAs finding that the loss of the vessel was caused not only by the southwestern monsoon, but also by the shifting of the logs in the hold. Such shifting could been due only to improper stowage. The assailed Decision stated: "Notably, in Master Cahatols account, the vessel encountered the first southwestern monsoon at about 1[0]:00 in the evening. The monsoon was coupled with heavy rains and rough seas yet the vessel withstood the onslaught. The second monsoon attack occurred at about 12:00 midnight. During this occasion, the master felt that the logs in the hold shifted, prompting him to order second mate Percival Dayanan to look at the bodega. Complying with the captains order, 2nd mate Percival Dayanan found that there was seawater in the bodega. 2nd mate Dayanans account was: 14.T Kung inyo pong natatandaan ang mga pangyayari, maari mo bang isalaysay ang naganap na paglubog sa barkong M/V Central Bohol? S Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng umaga (dst) habang kami ay nagnanabegar patungong Maynila sa tapat ng Cadlao Island at Cauayan Island sakop ng El Nido, Palawan, inutusan ako ni Captain Enriquito Cahatol na tingnan ko ang bodega; nang ako ay nasa bodega, nakita ko ang loob nang bodega na maraming tubig at naririnig ko ang malakas na agos ng tubig-dagat na pumapasok sa loob ng bodega ng barko; agad bumalik ako kay Captain Enriquito Cahatol at sinabi ko ang malakas na pagpasok ng tubig-dagat sa loob nang bodega ng barko na ito ay naka-tagilid humigit kumulang sa 020 degrees, nag-order si Captain Cahatol na standby engine at tinawag ang lahat ng mga officials at mga crew nang maipon kaming lahat ang barko ay naka-tagilid at ito ay tuloy-tuloy ang pagtatagilid na ang ilan sa mga officials ay naka-hawak na sa barandilla ng barko at dinagtagal sumigaw nang ABANDO[N] SHIP si Captain Cahatol at kami ay nagkanya-kanya nang talunan at languyan sa dagat na malakas ang alon at nang ako ay lumingon sa barko ito ay di ko na nakita. "Additionally, [petitioners] own witnesses, boatswain Eduardo Vias Castro and oiler Frederick Perena, are one in saying that the vessel encountered two weather disturbances, one at around 10 oclock to 11 oclock in the evening and the other at around 12 oclock midnight. Both disturbances were coupled with waves and heavy rains, yet, the vessel endured the first and not the second. Why? The reason is plain. The vessel felt the strain during the second onslaught because the logs in the bodega shifted and there were already seawater that seeped inside."30 The above conclusion is supported by the fact that the vessel proceeded through the first southwestern monsoon without any mishap, and that it began to list only during the second monsoon immediately after the logs had shifted and seawater had entered the hold. In the hold, the sloshing of tons of water back and forth had created pressures that eventually caused the ship to sink. Had the logs not shifted, the ship could have survived and reached at least the port of El Nido. In fact, there was another motor launch that had been buffeted by the same weather condition within the same area, yet it was able to arrive safely at El Nido. 31
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In its Answer, petitioner categorically admitted the allegation of respondent in paragraph 5 of the latters Complaint "[t]hat at about 0125 hours on 26 July 1990, while enroute to Manila, the M/V Central Bohol listed about 10 degrees starboardside, due to the shifting of logs in the hold." Further, petitioner averred that "[t]he vessel, while navigating through this second southwestern monsoon, was under extreme stress. At about 0125 hours, 26 July 1990, a thud was heard in the cargo hold and the logs therein were felt to have shifted. The vessel thereafter immediately listed by ten (10) degrees starboardside."32 Yet, petitioner now claims that the CAs conclusion was grounded on mere speculations and conjectures. It alleges that it was impossible for the logs to have shifted, because they had fitted exactly in the hold from the port to the starboard side. After carefully studying the records, we are inclined to believe that the logs did indeed shift, and that they had been improperly loaded. According to the boatswains testimony, the logs were piled properly, and the entire shipment was lashed to the vessel by cable wire.33 The ship captain testified that out of the 376 pieces of round logs, around 360 had been loaded in the lower hold of the vessel and 16 on deck. The logs stored in the lower hold were not secured by cable wire, because they fitted exactly from floor to ceiling. However, while they were placed side by side, there were unavoidable clearances between them owing to their round shape. Those loaded on deck were lashed together several times across by cable wire, which had a diameter of 60 millimeters, and were secured from starboard to port.34 It is obvious, as a matter of common sense, that the manner of stowage in the lower hold was not sufficient to secure the logs in the event the ship should roll in heavy weather. Notably, they were of different lengths ranging from 3.7 to 12.7 meters. 35 Being clearly prone to shifting, the round logs should not have been stowed with nothing to hold them securely in place. Each pile of logs should have been lashed together by cable wire, and the wire fastened to the side of the hold. Considering the strong force of the wind and the roll of the waves, the loose arrangement of the logs did not rule out the possibility of their shifting. By force of gravity, those on top of the pile would naturally roll towards the bottom of the ship. The adjusters Report, which was heavily relied upon by petitioner to strengthen its claim that the logs had not shifted, stated that "the logs were still properly lashed by steel chains on deck." Parenthetically, this statement referred only to those loaded on deck and did not mention anything about the condition of those placed in the lower hold. Thus, the finding of the surveyor that the logs were still intact clearly pertained only to those lashed on deck. The evidence indicated that strong southwest monsoons were common occurrences during the month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains, strong winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for the loss. Second Issue: Doctrine of Limited Liability The doctrine of limited liability under Article 587 of the Code of Commerce 36 is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain. 37 It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. "Closer supervision on the part of the shipowner could have prevented this fatal miscalculation."38As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule. WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 124520 August 18, 1997 Spouses NILO CHA and STELLA UY CHA, and UNITED INSURANCE CO., INC., petitioners, vs. COURT OF APPEALS and CKS DEVELOPMENT CORPORATION, respondents. PADILLA, J.: This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside a decision of respondent Court of Appeals. The undisputed facts of the case are as follows: 1. Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with private respondent CKS Development Corporation (hereinafter CKS), as lessor, on 5 October 1988. 2. One of the stipulations of the one (1) year lease contract states: 18. . . . The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit; . . . 1 3. Notwithstanding the above stipulation in the lease contract, the Cha spouses insured against loss by fire the merchandise inside the leased premises for Five Hundred Thousand (P500,000.00) with the United Insurance Co., Inc. (hereinafter United) without the written consent of private respondent CKS. 4. On the day that the lease contract was to expire, fire broke out inside the leased premises. 5. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses. 6. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United. 7. On 2 June 1992, the Regional Trial Court, Branch 6, Manila, rendered a decision * ordering therein defendant United to pay CKS the amount of P335,063.11 and defendant Cha spouses to pay P50,000.00 as exemplary damages, P20,000.00 as attorney's fees and costs of suit. 8. On appeal, respondent Court of Appeals in CA GR CV No. 39328 rendered a decision ** dated 11 January 1996, affirming the trial court decision, deleting however the awards for exemplary damages and attorney's fees. A motion for reconsideration by United was denied on 29 March 1996. In the present petition, the following errors are assigned by petitioners to the Court of Appeals: I THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THAT THE STIPULATION IN THE CONTRACT OF LEASE TRANSFERRING THE PROCEEDS OF THE INSURANCE TO RESPONDENT IS NULL AND VOID FOR BEING CONTRARY TO LAW, MORALS AND PUBLIC POLICY II THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THE CONTRACT OF LEASE ENTERED INTO AS A CONTRACT OF ADHESION AND THEREFORE THE QUESTIONABLE PROVISION THEREIN TRANSFERRING THE

PROCEEDS OF THE INSURANCE TO RESPONDENT MUST BE RULED OUT IN FAVOR OF PETITIONER III THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF AN INSURANCE POLICY TO APPELLEE WHICH IS NOT PRIVY TO THE SAID POLICY IN CONTRAVENTION OF THE INSURANCE LAW IV THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF AN INSURANCE POLICY ON THE BASIS OF A STIPULATION WHICH IS VOID FOR BEING WITHOUT CONSIDERATION AND FOR BEING TOTALLY DEPENDENT ON THE WILL OF THE RESPONDENT CORPORATION. 2 The core issue to be resolved in this case is whether or not the aforequoted paragraph 18 of the lease contract entered into between CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy obtained by the lessee (Cha spouses) over their merchandise inside the leased premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained without the prior written consent of the latter. It is, of course, basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or public policy. 3 Sec. 18 of the Insurance Code provides: Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. 4 The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code, which provides: Sec. 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void. In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: Sec. 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof. Therefore, respondent CKS cannot, under the Insurance Code a special law be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein copetitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. The liability of the Cha spouses to CKS for violating their lease contract in that the Cha spouses obtained a fire insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this case. WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 39328 is SET ASIDE and a new decision is hereby entered, awarding the proceeds of the fire insurance policy to petitioners Nilo Cha and Stella Uy-Cha.
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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-44059 October 28, 1977 THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs. CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants. MARTIN, J.: This is a novel question in insurance law: Can a common-law wife named as beneficiary in the life insurance policy of a legally married man claim the proceeds thereof in case of death of the latter? On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado designated T. Ebrado as the revocable beneficiary in his policy. He to her as his wife. On October 21, 1969, Buenaventura C. Ebrado died as a result of an accident when he was hit by a failing branch of a tree. As the policy was in force, The Insular Life Assurance Co., Ltd. liable to pay the coverage in the total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid premiums and interest thereon due for January and February, 1969, in the sum of P36.27. Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado. In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd. commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970. After the issues have been joined, a pre-trial conference was held on July 8, 1972, after which, a pre-trial order was entered reading as follows: +.wph!1 During the pre-trial conference, the parties manifested to the court. that there is no possibility of amicable settlement. Hence, the Court proceeded to have the parties submit their evidence for the purpose of the pre-trial and make admissions for the purpose of pretrial. During this conference, parties Carponia T. Ebrado and Pascuala Ebrado agreed and stipulated: 1) that the deceased Buenaventura Ebrado was married to Pascuala Ebrado with whom she has six (legitimate) namely; Hernando, Cresencio, Elsa, Erlinda, Felizardo and Helen, all surnamed Ebrado; 2) that during the lifetime of the deceased, he was insured with Insular Life Assurance Co. Under Policy No. 009929 whole life plan, dated September 1, 1968 for the sum of P5,882.00 with the rider for accidental death benefit as evidenced by Exhibits A for plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit 7 for Carponia Ebrado; 3) that during the lifetime of Buenaventura Ebrado, he was living with his common-wife, Carponia Ebrado, with whom she had 2 children although he was not legally separated from his legal wife; 4) that Buenaventura in accident on October 21, 1969 as evidenced by the death Exhibit 3 and affidavit of the police report of his death Exhibit 5; 5) that complainant Carponia Ebrado filed claim with the Insular Life Assurance Co. which was contested by Pascuala Ebrado who also filed claim for the proceeds of said policy 6) that in view ofthe adverse claims the insurance company filed this action against the two herein claimants Carponia and Pascuala

Ebrado; 7) that there is now due from the Insular Life Assurance Co. as proceeds of the policy P11,745.73; 8) that the beneficiary designated by the insured in the policy is Carponia Ebrado and the insured made reservation to change the beneficiary but although the insured made the option to change the beneficiary, same was never changed up to the time of his death and the wife did not have any opportunity to write the company that there was reservation to change the designation of the parties agreed that a decision be rendered based on and stipulation of facts as to who among the two claimants is entitled to the policy. Upon motion of the parties, they are given ten (10) days to file their simultaneous memoranda from the receipt of this order. SO ORDERED. On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T. Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the deceased insured. The trial court held: +.wph!1 It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or concubinage is not essential in order to establish the disqualification mentioned therein. Neither is it also necessary that a finding of such guilt or commission of those acts be made in a separate independent action brought for the purpose. The guilt of the donee (beneficiary) may be proved by preponderance of evidence in the same proceeding (the action brought to declare the nullity of the donation). It is, however, essential that such adultery or concubinage exists at the time defendant Carponia T. Ebrado was made beneficiary in the policy in question for the disqualification and incapacity to exist and that it is only necessary that such fact be established by preponderance of evidence in the trial. Since it is agreed in their stipulation above-quoted that the deceased insured and defendant Carponia T. Ebrado were living together as husband and wife without being legally married and that the marriage of the insured with the other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the insurance in question was purchased there is no question that defendant Carponia T. Ebrado is disqualified from becoming the beneficiary of the policy in question and as such she is not entitled to the proceeds of the insurance upon the death of the insured. From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11, 1976, the Appellate Court certified the case to Us as involving only questions of law. We affirm the judgment of the lower court. 1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shag be applied exclusively to the proper interest of the person in whose name it is made" 1 cannot be validly seized upon to hold that the mm includes the beneficiary. The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of insurance is personal in character. 2 Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance. Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. 3 And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides: +.wph!1 The following donations shall be void:
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1. Those made between persons who were guilty of adultery or concubinage at the time of donation; Those made between persons found guilty of the same criminal offense, in consideration thereof; 3. Those made to a public officer or his wife, descendants or ascendants by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the same action. 2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation. 5 Under American law, a policy of life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it as a will and determine the effect of a clause designating the beneficiary by rules under which wins are interpreted. 6 3. Policy considerations and dictates of morality rightly justify the institution of a barrier between common law spouses in record to Property relations since such hip ultimately encroaches upon the nuptial and filial rights of the legitimate family There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration As above pointed out, a beneficiary in a fife insurance policy is no different from a donee. Both are recipients of pure beneficence. So long as manage remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities. Thus, in Matabuena v. Cervantes, 7 this Court, through Justice Fernando, said: +.wph!1 If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that court (Court of Appeals), 'to prohibit donations in favor of the other consort and his descendants because of and undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law;" por-que no se enganen desponjandose el uno al otro por amor que han de consuno' (According to) the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale 'No Mutuato amore invicem spoliarentur' the Pandects (Bk, 24, Titl. 1, De donat, inter virum et uxorem); then there is very reason to apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such donations should subsist, lest the condition 6f those who incurred guilt should turn out to be better.' So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage. It is hardly necessary to add that even in the absence of the above pronouncement, any other conclusion cannot stand the test of scrutiny. It would be to indict the frame of the Civil Code for a failure to apply a laudable rule to a situation which in its essentials cannot be distinguished. Moreover, if it is at all to be differentiated the policy of the law which embodies a deeply rooted notion of what is just and what is right would be nullified if such irregular

relationship instead of being visited with disabilities would be attended with benefits. Certainly a legal norm should not be susceptible to such a reproach. If there is every any occasion where the principle of statutory construction that what is within the spirit of the law is as much a part of it as what is written, this is it. Otherwise the basic purpose discernible in such codal provision would not be attained. Whatever omission may be apparent in an interpretation purely literal of the language used must be remedied by an adherence to its avowed objective. 4. We do not think that a conviction for adultery or concubinage is exacted before the disabilities mentioned in Article 739 may effectuate. More specifically, with record to the disability on "persons who were guilty of adultery or concubinage at the time of the donation," Article 739 itself provides: +.wph!1 In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the donee may be proved by preponderance of evidence in the same action. The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On the contrary, the law plainly states that the guilt of the party may be proved "in the same acting for declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded. In the caw before Us, the requisite proof of common-law relationship between the insured and the beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial conference of the case. It case agreed upon and stipulated therein that the deceased insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate children; that during his lifetime, the deceased insured was living with his commonlaw wife, Carponia Ebrado, with whom he has two children. These stipulations are nothing less than judicial admissions which, as a consequence, no longer require proof and cannot be contradicted. 8 A fortiori, on the basis of these admissions, a judgment may be validly rendered without going through the rigors of a trial for the sole purpose of proving the illicit liaison between the insured and the beneficiary. In fact, in that pretrial, the parties even agreed "that a decision be rendered based on this agreement and stipulation of facts as to who among the two claimants is entitled to the policy." ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life insurance policy. As a consequence, the proceeds of the policy are hereby held payable to the estate of the deceased insured. Costs against Carponia T. Ebrado.

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