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FIRST DIVISION

G.R. No. 76452

July 26, 1994

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS REYES, petitioners,
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance Commissioner, and RAMON
MONTILLA PATERNO, JR., respondents.
Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners.
Oscar Z. Benares for private respondent.
QUIASON, J.:

In said hearing, private respondent was required by respondent Commissioner to specify the
provisions of the agency contract which he claimed to be illegal.
On August 4, private respondent submitted a letter of specification to respondent
Commissioner dated July 31, 1986, reiterating his letter of April 17, 1986 and praying that the
provisions on charges and fees stated in the Contract of Agency executed between Philamlife
and its agents, as well as the implementing provisions as published in the agents' handbook,
agency bulletins and circulars, be declared as null and void. He also asked that the amounts
of such charges and fees already deducted and collected by Philamlife in connection
therewith be reimbursed to the agents, with interest at the prevailing rate reckoned from the
date when they were deducted.
Respondent Commissioner furnished petitioner De los Reyes with a copy of private
respondent's letter of July 31, 1986, and requested his answer thereto.

This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court,
with preliminary injunction or temporary restraining order, to annul and set aside the Order
dated November 6, 1986 of the Insurance Commissioner and the entire proceedings taken in
I.C. Special Case No. 1-86.

Petitioner De los Reyes submitted an Answer dated September 8, 1986, stating inter alia
that:

We grant the petition.

(1)
Private respondent's letter of August 11, 1986 does not contain any of the
particular information which Philamlife was seeking from him and which he promised to
submit.

The instant case arose from a letter-complaint of private respondent Ramon M. Paterno, Jr.
dated April 17, 1986, to respondent Commissioner, alleging certain problems encountered by
agents, supervisors, managers and public consumers of the Philippine American Life
Insurance Company (Philamlife) as a result of certain practices by said company.
In a letter dated April 23, 1986, respondent Commissioner requested petitioner Rodrigo de
los Reyes, in his capacity as Philamlife's president, to comment on respondent Paterno's
letter.
In a letter dated April 29, 1986 to respondent Commissioner, petitioner De los Reyes
suggested that private respondent "submit some sort of a 'bill of particulars' listing and citing
actual cases, facts, dates, figures, provisions of law, rules and regulations, and all other
pertinent data which are necessary to enable him to prepare an intelligent reply" (Rollo, p.
37). A copy of this letter was sent by the Insurance Commissioner to private respondent for
his comments thereon.
On May 16, 1986, respondent Commissioner received a letter from private respondent
maintaining that his letter-complaint of April 17, 1986 was sufficient in form and substance,
and requested that a hearing thereon be conducted.
Petitioner De los Reyes, in his letter to respondent Commissioner dated June 6, 1986,
reiterated his claim that private respondent's letter of May 16, 1986 did not supply the
information he needed to enable him to answer the letter-complaint.
On July 14, a hearing on the letter-complaint was held by respondent Commissioner on the
validity of the Contract of Agency complained of by private respondent.

(2)
That since the Commission's quasi-judicial power was being invoked with regard to
the complaint, private respondent must file a verified formal complaint before any further
proceedings.
In his letter dated September 9, 1986, private respondent asked for the resumption of the
hearings on his complaint.
On October 1, private respondent executed an affidavit, verifying his letters of April 17, 1986,
and July 31, 1986.
In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior Assistant VicePresident and Executive Assistant to the President, asked that respondent Commission first
rule on the questions of the jurisdiction of the Insurance Commissioner over the subject
matter of the letters-complaint and the legal standing of private respondent.
On October 27, respondent Commissioner notified both parties of the hearing of the case on
November 5, 1986.
On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice on the following
grounds;
1.

The Subpoena/Notice has no legal basis and is premature because:

(1)

No complaint sufficient in form and contents has been filed;

(2)
No summons has been issued nor received by the respondent De los Reyes, and
hence, no jurisdiction has been acquired over his person;
(3)
No answer has been filed, and hence, the hearing scheduled on November 5, 1986
in the Subpoena/Notice, and wherein the respondent is required to appear, is premature and
lacks legal basis.
II.

In addition to the administrative sanctions provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his discretion, to impose upon insurance companies,
their directors and/or officers and/or agents, for any willful failure or refusal to comply with,
or violation of any provision of this Code, or any order, instruction, regulation or ruling of the
Insurance Commissioner, or any commission of irregularities, and/or conducting business in
an unsafe and unsound manner as may be determined by the the Insurance Commissioner,
the following:

The Insurance Commission has no jurisdiction over;
(a)

fines not in excess of five hundred pesos a day; and

(b)
agents.

suspension, or after due hearing, removal of directors and/or officers and/or

(2) over the parties involved (Rollo, p. 102).
In the Order dated November 6, 1986, respondent Commissioner denied the Motion to
Quash. The dispositive portion of said Order reads:

A plain reading of the above-quoted provisions show that the Insurance Commissioner has
the authority to regulate the business of insurance, which is defined as follows:

NOW, THEREFORE, finding the position of complainant thru counsel tenable and considering
the fact that the instant case is an informal administrative litigation falling outside the
operation of the aforecited memorandum circular but cognizable by this Commission, the
hearing officer, in open session ruled as it is hereby ruled to deny the Motion to Quash
Subpoena/Notice for lack of merit (Rollo, p. 109).

(2)
The term "doing an insurance business" or "transacting an insurance business,"
within the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not
as merely incidental to any other legitimate business or activity of the surety; (c) doing any
kind of business, including a reinsurance business, specifically recognized as constituting the
doing of an insurance business within the meaning of this Code; (d) doing or proposing to do
any business in substance equivalent to any of the foregoing in a manner designed to evade
the provisions of this Code. (Insurance Code, Sec. 2[2]; Emphasis supplied).

(1) the subject matter or nature of the action; and

Hence, this petition.
II
The main issue to be resolved is whether or not the resolution of the legality of the Contract
of Agency falls within the jurisdiction of the Insurance Commissioner.
Private respondent contends that the Insurance Commissioner has jurisdiction to take
cognizance of the complaint in the exercise of its quasi-judicial powers. The Solicitor General,
upholding the jurisdiction of the Insurance Commissioner, claims that under Sections 414 and
415 of the Insurance Code, the Commissioner has authority to nullify the alleged illegal
provisions of the Contract of Agency.
III
The general regulatory authority of the Insurance Commissioner is described in Section 414
of the Insurance Code, to wit:
The Insurance Commissioner shall have the duty to see that all laws relating to insurance,
insurance companies and other insurance matters, mutual benefit associations and trusts for
charitable uses are faithfully executed and to perform the duties imposed upon him by this
Code, . . .
On the other hand, Section 415 provides:

Since the contract of agency entered into between Philamlife and its agents is not included
within the meaning of an insurance business, Section 2 of the Insurance Code cannot be
invoked to give jurisdiction over the same to the Insurance Commissioner. Expressio unius
est exclusio alterius.
With regard to private respondent's contention that the quasi-judicial power of the Insurance
Commissioner under Section 416 of the Insurance Code applies in his case, we likewise rule in
the negative. Section 416 of the Code in pertinent part, provides:
The Commissioner shall have the power to adjudicate claims and complaints involving any
loss, damage or liability for which an insurer may be answerable under any kind of policy or
contract of insurance, or for which such insurer may be liable under a contract of suretyship,
or for which a reinsurer may be used under any contract or reinsurance it may have entered
into, or for which a mutual benefit association may be held liable under the membership
certificates it has issued to its members, where the amount of any such loss, damage or
liability, excluding interest, costs and attorney's fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not exceed in any
single claim one hundred thousand pesos.
A reading of the said section shows that the quasi-judicial power of the Insurance
Commissioner is limited by law "to claims and complaints involving any loss, damage or
liability for which an insurer may be answerable under any kind of policy or contract of

insurance, . . ." Hence, this power does not cover the relationship affecting the insurance
company and its agents but is limited to adjudicating claims and complaints filed by the
insured against the insurance company.
While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of the
Insurance Code, the provisions of said Chapter speak only of the licensing requirements and
limitations imposed on insurance agents and brokers.
The Insurance Code does not have provisions governing the relations between insurance
companies and their agents. It follows that the Insurance Commissioner cannot, in the
exercise of its quasi-judicial powers, assume jurisdiction over controversies between the
insurance companies and their agents.
We have held in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445
(1989), and Investment Planning Corporation of the Philippines v. Social Security
Commission, 21 SCRA 904 (1962), that an insurance company may have two classes of agents
who sell its insurance policies: (1) salaried employees who keep definite hours and work
under the control and supervision of the company; and (2) registered representatives, who
work on commission basis.
Under the first category, the relationship between the insurance company and its agents is
governed by the Contract of Employment and the provisions of the Labor Code, while under
the second category, the same is governed by the Contract of Agency and the provisions of
the Civil Code on the Agency. Disputes involving the latter are cognizable by the regular
courts.
WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986 of the Insurance
Commission is SET ASIDE.
SO ORDERED.

FIRST DIVISION
[G.R. No. 125678. March 18, 2002]
PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT OF APPEALS and JULITA TRINOS,
respondents.
DECISION
YNARES-SANTIAGO, J.:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care
coverage with petitioner Philamcare Health Systems, Inc. In the standard application form,
he answered no to the following question:

WHEREFORE, in view of the forgoing, the Court renders judgment in favor of the plaintiff
Julita Trinos, ordering:
1.
Defendants to pay and reimburse the medical and hospital coverage of the late Ernani
Trinos in the amount of P76,000.00 plus interest, until the amount is fully paid to plaintiff
who paid the same;
2.

3.
Defendants to pay the reduced amount of P10,000.00 as exemplary damages to
plaintiff;
4.

Have you or any of your family members ever consulted or been treated for high blood
pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give
details).[1]
The application was approved for a period of one year from March 1, 1988 to March 1, 1989.
Accordingly, he was issued Health Care Agreement No. P010194. Under the agreement,
respondent’s husband was entitled to avail of hospitalization benefits, whether ordinary or
emergency, listed therein. He was also entitled to avail of “out-patient benefits” such as
annual physical examinations, preventive health care and other out-patient services.
Upon the termination of the agreement, the same was extended for another year from
March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of
coverage was increased to a maximum sum of P75,000.00 per disability.[2]
During the period of his coverage, Ernani suffered a heart attack and was confined at the
Manila Medical Center (MMC) for one month beginning March 9, 1990. While her husband
was in the hospital, respondent tried to claim the benefits under the health care agreement.
However, petitioner denied her claim saying that the Health Care Agreement was void.
According to petitioner, there was a concealment regarding Ernani’s medical history. Doctors
at the MMC allegedly discovered at the time of Ernani’s confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus,
respondent paid the hospitalization expenses herself, amounting to about P76,000.00.
After her husband was discharged from the MMC, he was attended by a physical therapist at
home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties,
however, respondent brought her husband home again. In the morning of April 13, 1990,
Ernani had fever and was feeling very weak. Respondent was constrained to bring him back
to the Chinese General Hospital where he died on the same day.

Defendants to pay the reduced amount of moral damages of P10,000.00 to plaintiff;

Defendants to pay attorney’s fees of P20,000.00, plus costs of suit.

SO ORDERED.[3]
On appeal, the Court of Appeals affirmed the decision of the trial court but deleted all
awards for damages and absolved petitioner Reverente.[4] Petitioner’s motion for
reconsideration was denied.[5] Hence, petitioner brought the instant petition for review,
raising the primary argument that a health care agreement is not an insurance contract;
hence the “incontestability clause” under the Insurance Code[6] does not apply.
Petitioner argues that the agreement grants “living benefits,” such as medical check-ups and
hospitalization which a member may immediately enjoy so long as he is alive upon effectivity
of the agreement until its expiration one-year thereafter. Petitioner also points out that only
medical and hospitalization benefits are given under the agreement without any
indemnification, unlike in an insurance contract where the insured is indemnified for his loss.
Moreover, since Health Care Agreements are only for a period of one year, as compared to
insurance contracts which last longer,[7] petitioner argues that the incontestability clause
does not apply, as the same requires an effectivity period of at least two years. Petitioner
further argues that it is not an insurance company, which is governed by the Insurance
Commission, but a Health Maintenance Organization under the authority of the Department
of Health.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify another against loss, damage or liability
arising from an unknown or contingent event. An insurance contract exists where the
following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated peril;

On July 24, 1990, respondent instituted with the Regional Trial Court of Manila, Branch 44, an
action for damages against petitioner and its president, Dr. Benito Reverente, which was
docketed as Civil Case No. 90-53795. She asked for reimbursement of her expenses plus
moral damages and attorney’s fees. After trial, the lower court ruled against petitioners, viz:

3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a
large group of persons bearing a similar risk; and

[8] Section 3 of the Insurance Code states that any contingent or unknown event. medical or any other expense arising from sickness.[9] Once the member incurs hospital. treatment or any other medical advice or examination. but is obligated to make further inquiry. any and all information relative to any hospitalization. of which death or illness might delay or prevent the performance.5. In consideration of the insurer’s promise. if the statement is obviously of the foregoing character. consultation. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. “a concealment entitles the injured party to rescind a contract of insurance. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. It appears that in the application for health coverage. or the impossibility of which is shown by the facts within his knowledge.[13] of any person upon whose life any estate or interest vested in him depends.[15] (Underscoring ours) The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. The health care agreement was in the nature of non-life insurance. the insured pays a premium. Section 10 provides: I hereby authorize any person. that which he then knows. petitioner is liable for claims made under the contract.” The right to rescind should be exercised previous to the commencement of an action on the contract. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. respecting property or service. and this is likewise the rule although the statement is material to the risk. treatment or any other medical advice or examination.[10] Specifically. A photographic copy of this authorization shall be as valid as the original. especially coming from respondent’s husband who was not a medical doctor. (2) of any person on whom he depends wholly or in part for education or support. the insurable interest of respondent’s husband in obtaining the health care agreement was his own health. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. the Health Care Agreement signed by respondent’s husband states: We hereby declare and agree that all statement and answers contained herein and in any addendum annexed to this application are full. Every person has an insurable interest in the life and health of himself. with or without the authority to investigate. Where matters of opinion or judgment are called for. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. thus: The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. and (4) Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. that there shall be no contract of health care coverage unless and until an Agreement is issued on this application and the full Membership Fee according to the mode of payment applied for is actually paid during the lifetime and good health of proposed Members. as a matter of expectation or belief. of his spouse and of his children. opinion. which may damnify a person having an insurable interest against him. or its acceptance at a lower rate of premium. consultation. complete and true and bind all parties in interest under the Agreement herein applied for. that any physician is.[16] Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. Inc. . (3) of any person under a legal obligation to him for the payment of money. belief. the health care provider must pay for the same to the extent agreed upon under the contract. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. In the end. to be actually untrue.[17] In this case. Under Section 27 of the Insurance Code. whether intentional or unintentional. [12] (Underscoring ours) Every person has an insurable interest in the life and health: Petitioner cannot rely on the stipulation regarding “Invalidation of agreement” which reads: (1) of himself. that no information acquired by any Representative of PhilamCare shall be binding upon PhilamCare unless set out in writing in the application. no rescission was made. whether past or future.[14] Thus. petitioners required respondent’s husband to sign an express authorization for any person. expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members and that the acceptance of any Agreement issued on this application shall be a ratification of any correction in or addition to this application as stated in the space for Home Office Endorsement.[11] (Underscoring ours) In addition to the above condition. intention. organization. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. petitioner additionally required the applicant for authorization to inquire about the applicant’s medical history. injury or other stipulated contingent. which is primarily a contract of indemnity. This largely depends on opinion rather than fact. petitioner is bound to answer the same to the extent agreed upon. This authorization is in connection with the application for health care coverage only. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. Having assumed a responsibility under the agreement. since in such case the insurer is not justified in relying upon such statement. (A)lthough false. In the case at bar. or entity that has any record or knowledge of my health and/or that of __________ to give to the PhilamCare Health Systems. Petitioner argues that respondent’s husband concealed a material fact in his application. may be insured against. by these presents. a representation of the expectation. or in whom he has a pecuniary interest. In any case.

the terms of an insurance contract are to be construed strictly against the party which prepared the contract – the insurer. 4. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. to furnish facts on which cancellation is based. It is not controverted that respondent paid all the hospital and medical expenses. especially to avoid forfeiture. The health care agreement is in the nature of a contract of indemnity. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. the deceased was previously married to another woman who was still alive.[19] Being a contract of adhesion. medication and the professional fees of the attending physicians. The records adequately prove the expenses incurred by respondent for the deceased’s hospitalization. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. The periods having expired. courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Hence. The phraseology used in medical or hospital service contracts. 2.[22] Anent the incontestability of the membership of respondent’s husband. 3. such as the one at bar. Must be in writing. SO ORDERED. and exclusionary clauses of doubtful import should be strictly construed against the provider.[23] Finally. 1995 is AFFIRMED. When the terms of insurance contract contain limitations on liability.[24] WHEREFORE. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. mailed or delivered to the insured at the address shown in the policy. the defense of concealment or misrepresentation no longer lie. Prior notice of cancellation to insured. . ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. must be liberally construed in favor of the subscriber. The assailed decision of the Court of Appeals dated December 14.Besides.[18] None of the above pre-conditions was fulfilled in this case.[20] By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract.[21] This is equally applicable to Health Care Agreements. She is therefore entitled to reimbursement. in view of the foregoing. the defendant Philamcare Health Systems Inc. payment should be made to the party who incurred the expenses. we quote with approval the following findings of the trial court: (U)nder the title Claim procedures of expenses. petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time of their marriage. the petition is DENIED.

the shoulder of the highway in order to avoid the jeep.. while being driven by one Juan P. making it liable for the amounts claimed by the plaintiff and/or ordering said San Leon Rice Mill. employees and in the maintenance of its motor vehicles. and that it had observed the diligence of a good father of a family to prevent damage. pursuant to Art.00. in view of the foregoing findings of this Court judgment is hereby rendered in favor of the plaintiff and against Sio Choy and Malayan Insurance Co..000.00. INC. COURT OF APPEALS (THIRD DIVISION) MARTIN C. No. Rosales. Pangasinan. in his cross-claim against the herein petitioner. judgment was rendered as follows: During the effectivity of said insurance policy. collided with a passenger bus belonging to the respondent Pangasinan Transportation Co. L-36413 September 26. to Malayan Insurance Co. Vallejos.. MRO/PV-15753. in their answer. and. the herein petitioner sought...00.. ET-03023 Serial No.00 representing the unearned income of plaintiff Martin C. at the time of the accident.000.. and that. Juan P. The insurance coverage was for "own damage" not to exceed P600. covering a Willys jeep with Motor No. PADILLA. The antecedent facts of the case are as follows: On 29 March 1967. Answering.00 as attomey's fees or the total of P29. Quezon City. at about 3:30 o'clock in the afternoon. for the damage to his motor vehicle. Inc. U-2021. Inc.00 as moral damages. Inc. (PANTRANCO. Inc. Inc. VALLEJOS. Juan P. was an employee of the San Leon Rice Mill. He prayed therein that the defendants be ordered to pay him. and third-party defendant San Leon Rice Mill. for attorney's fees. PANTRANCO claimed that the jeep of Sio Choy was then operated at an excessive speed and bumped the PANTRANCO bus which had moved to. No. SAN LEON RICE MILL.000. with some modifications.000. SIO CHOY. The herein petitioner prayed that judgment be rendered against the San Leon Rice Mill. . as the San Leon Rice Mill. The above-named parties against whom this judgment is rendered are hereby held jointly and severally liable. (d) P2. After trial. Nemesio Callanta for respondent Sio Choy and San Leon Rice Mill. THE HON.. dated 22 February 1973. however. as reimbursement for medical and hospital expenses.00.000. (c) P5. as follows: (a) P4. B. Freqillana Jr. (b) P18. Inc.000. and stopped at. With respect. It prayed that it be absolved from any and all liability. to reimburse and indemnify the petitioner for any sum that it may be ordered to pay the plaintiff. 1988 MALAYAN INSURANCE CO. petitioner.103. he alleged that the petitioner had issued in his favor a private car comprehensive policy wherein the insurance company obligated itself to indemnify Sio Choy.. Vicente Erfe Law Office for respondent Pangasinan Transportation Co. Estrella & Associates for respondent Martin Vallejos. issued in favor of private respondent Sio Choy Private Car Comprehensive Policy No. the insured jeep. respondents. Defendant Sio Choy and the petitioner insurance company. who was riding in the ill-fated jeep. claiming that the fault in the accident was solely imputable to the PANTRANCO. Sio Choy. Inc.. Vallejos. jointly and severally. Campollo.103 as actual damages. Vallejos filed an action for damages against Sio Choy.SECOND DIVISION G. Inc.. Campollo. Malayan Insurance Co. as insured. Campollo an employee of the respondent San Leon Rice Mill. later filed a separate answer with a cross-claim against the herein petitioner wherein he alleged that he had actually paid the plaintiff. Vallejos for the period of three (3) years. 47319-R. its liability will be up to only P20. vs. the amount of P15. causing damage to the insured vehicle and injuries to the driver. moral and compensatory damages. which policy was in full force and effect when the vehicular accident complained of occurred. Inc. for lost income.R. Martin C. As a result. is the employer of the deceased driver.00.00 as actual.00 and "third-party liability" in the amount of P20. Inc. and was granted.00 for hospitalization and other expenses. J-21536. which was docketed as Civil Case No.R. 351672.000. plus costs. U-2021 of the Court of First Instance of Pangasinan. also denied liability to the plaintiff. 2180 of the Civil Code. as well as for any liability to third persons arising out of any accident during the effectivity of such insurance contract. and not an employee of Sio Choy.. J. which affirmed. INC. P51. Inc. the decision. Inc. for petitioner. effective from 18 April 1967 to 18 April 1968.000. Also later. for the reason that the person driving the jeep of Sio Choy. the amount of P5. Inc. leave to file a third-party complaint against the San Leon Rice Mill. for short) at the national highway in Barrio San Pedro.F. and more particularly on 19 December 1967.. He prayed that he be reimbursed by the insurance company for the amount that he may be ordered to pay. especially in the selection and supervision of its WHEREFORE. herein petitioner. and PANGASINAN TRANSPORTATION CO.: Review on certiorari of the judgment * of the respondent appellate court in CA-G.00.000. and the respondent Martin C.. and the PANTRANCO before the Court of First Instance of Pangasinan. however. and P5..000. performing his duties within the scope of his assigned task. INC. 1967. and Plate No.. Inc. Malayan Insurance Co. rendered in Civil Case No. P6. ** dated 27 April 1970. it should be liable for the acts of its employee. Martin C.

However. 4 Therefore. 5 a passenger of a jeepney had just alighted therefrom. to reimburse petitioner any amount. that petitioner and respondents Sio Choy and San Leon Rice Mill. We do not agree with the aforesaid ruling. is not a privy to the contract of insurance between Sio Choy and the insurance company. execution may already issue in favor of respondent Martin C. and the Malayan Insurance Co. Inc. Inc. who was in the vehicle. it being understood that no other aspect of the decision of the Court of Appeals shall be reviewed. when he was bumped by another passenger jeepney. acting upon the petition. in order to determine the alleged liability of respondent San Leon Rice Mill. but also for those of persons for whom one is responsible. 2180. 1 On appeal. Its counter-claim for attorney's fees is also dismissed for not being proved. however. has no obligation to indemnify or reimburse the petitioner insurance company for whatever amount it has been ordered to pay on its policy. It thus appears that respondents Sio Choy and San Leon Rice Mill. could have. He died as a result thereof. the provisions of article 2180 are applicable. xxx xxx xxx The responsibility treated in this article shall cease when the persons herein mentioned proved that they observed all the diligence of a good father of a family to prevent damage. as affirmed by the appellate court. without prejudice to the determination of whether or not petitioner shall be entitled to reimbursement by respondent San Leon Rice Mill. adjudged the owner and the driver of the jeepney at fault jointly and severally liable to the heirs of the victim in the total amount of P9. Hence. to petitioner. by the use of due diligence.. Vallejos. in the alternative. (to the exclusion of the petitioner) that are solidarily liable to respondent Vallejos for the damages awarded to Vallejos.500. Inc. the basis of petitioner's liability is its insurance contract with respondent Sio Choy. since the San Leon Rice Mill. In Guingon vs. Inc. Inc. Inc.000. while the insurance company was sentenced to pay the heirs the amount of P5. We hold instead that it is only respondents Sio Choy and San Leon Rice Mill. for the whole or part of whatever the former may pay on the P20. Art.00. Inc.00 which was to be applied as partial satisfaction of the judgment rendered against said owner and driver of the jeepney. it is noted that the basis of liability of respondent San Leon Rice Mill. the trial court. Inc. As to the first issue. that the San Leon Rice Mill. In motor vehicle mishaps. pursuant to Article 2184 of the Civil Code which provides: Art. in said Guingon case." 3 xxx xxx Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks.000. for whatever amount petitioner has been adjudged to pay respondent Vallejos on its insurance policy. the San Leon Rice Mill. Inc. 2184. to order the San Leon Rice Mill. the two (2) principal issues to be resolved are (1) whether the trial court. even though the former are not engaged ill any business or industry. . the present recourse by petitioner insurance company. prevented the misfortune it is disputably presumed that a driver was negligent. Inc. On the other hand. to petitioner. the owner is solidarily liable with his driver. It ruled. Inc. or. are jointly and severally liable to respondent Vallejos.As no satisfactory proof of cost of damage to its bus was presented by defendant Pantranco. in excess of onehalf (1/2) of the entire amount of damages. 2 It must be observed that respondent Sio Choy is made liable to said plaintiff as owner of the ill-fated Willys jeep. and (2) whether petitioner is entitled to be reimbursed by respondent San Leon Rice Mill. The law states that the responsibility of two or more persons who are liable for a quasi-delict is solidarily. Inc. "solidarily liable" to respondent Vallejos. On the other hand. no award should be made in its favor. if the former. Inc. this is on account of its being the insurer of respondent Sio Choy under the third party liability clause included in the private car comprehensive policy existing between petitioner and respondent Sio Choy at the time of the complained vehicular accident. are the principal tortfeasors who are primarily liable to respondent Vallejos.572. In the damage suit filed by the heirs of said passenger against the driver and owner of the jeepney at fault as well as against the insurance company which insured the latter jeepney against third party liability. if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months. Del Monte. Inc. Vallejos against the respondents. as upheld by the Court of Appeals. gave due course to the same. xxx The Court. it is noted that the trial court found. If the owner was not in the motor vehicle. Thus. as compared to that of respondents Sio Choy and San Leon Rice Mill. are jointly and severally liable for the damages awarded to the plaintiff Martin C. petitioner may be ordered to pay jointly and severally with Sio Choy. If petitioner is adjudged to pay respondent Vallejos in the amount of not more than P20. it is important to determine first the nature or basis of the liability of petitioner to respondent Vallejos. Inc. hence. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions.95 as damages and attorney's fees. is Article 2180 of the Civil Code which reads: The petitioner prays for the reversal of the appellate court's judgment. affirmed by this Court. the former being the employer of the driver of the Willys jeep at the time of the motor vehicle mishap. the respondent Court of Appeals affirmed the judgment of the trial court that Sio Choy. was correct in holding petitioner and respondents Sio Choy and San Leon Rice Mill. but "only insofar as it concerns the alleged liability of respondent San Leon Rice Mill.00 it has been adjudged to pay respondent Vallejos. to plaintiff Vallejos.

in affirming the decision of the trial court. the creditor may choose which offer to accept. Jur. The appellate court overlooked the principle of subrogation in insurance contracts. 477). who were held solidarily liable to the heirs of the victim. that petitioner. Ins.C. the respondent Sio Choy. petitioner as insurer of Sio Choy.. petitioner may be compelled by respondent Vallejos to pay the entire obligation of P29. Co. is hereby AFFIRMED. 264 N. as subrogee of Sio Choy as against San Leon Rice Mills. 382). as upheld by the Court of Appeals. on the ground that said respondent is not privy to the contract of insurance existing between petitioner and respondent Sio Choy.it was only the owner and the driver of the jeepney at fault.00? Moreover. damage. Payment made by one of the solidary debtors extinguishes the obligation. Article 1217 of the Civil Code gives to a solidary debtor who has paid the entire obligation the right to be reimbursed by his co-debtors for the share which corresponds to each. He who made the payment may claim from his co-debtors only the share which corresponds to each. as incorrectly held by the trial court. As to the second issue.00 ) WHEREFORE. The decision of the trial court. In the case at bar. Cincinnati Ins. as affirmed by the Court of Appeals.00.00 is made solidary. and payment to the insured makes the insurer assignee in equity (Shambley v. Inc. While it is true that where the insurance contract provides for indemnity against liability to third persons. Co.103. 456. 142 SE 2d 18). 7 On the other hand. upon payment to respondent Vallejos and thereby becoming the subrogee of solidary debtor Sio Choy. The liability of the insurer is based on contract. Stated otherwise. or liability arising from an unknown or contingent event. the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. .000. such third persons can directly sue the insurer.000. as such. If two or more solidary debtors offer to pay.000. solidarily liable with respondents Sio Choy and San Leon Rice Mill. it is subrogated to whatever rights the latter has against respondent San Leon Rice Mill. ruled that petitioner is not entitled to be reimbursed by respondent San Leon Rice Mill. nor does it grow out of any privity of contract (emphasis supplied) or upon written assignment of claim. Thus. In the context of a solidary obligation. such payment operates as an equitable assignment to the insurer of the property and all remedies which the insured may have for the recovery thereof. Upon payment of the loss. Jobe-Blackley Plumbing and Heating Co. with the qualification that petitioner's liability is only up to P20." 8 In the case at bar. is entitled to reimbursement from respondent San Leon Rice Mill. Vallejos may enforce the entire obligation on only one of said solidary debtors.000. note 16. 530. We hold that the trial court. 75 L. 9 It follows. The loss in the first instance is that of the insured but after reimbursement or compensation.. upon paying respondent Vallejos the amount of riot exceeding P20. 283 U. Jur. Subrogation is a normal incident of indemnity insurance (Aetna L. the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act caused the loss (44 Am. ed.103.103.S. petitioner.551. Co. how can petitioner be obliged to pay the entire obligation when the amount stated in its insurance policy with respondent Sio Choy for indemnity against third party liability is only P20. shall become the subrogee of the insured. Inc. 6 however. In solidary obligation. be made "solidarily" liable with the two principal tortfeasors namely respondents Sio Choy and San Leon Rice Mill. with the modification above-mentioned. it becomes the loss of the insurer (44 Am. Inc. the trial court held petitioner together with respondents Sio Choy and San Leon Rice Mills Inc.00. We disagree. 1217.000. Inc. That right is not dependent upon . 746. xxx xxx xxx In accordance with Article 1217.00 only when the obligation to pay P29. 2nd 746). that of the insured is based on tort. To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill. vs. Inc.00 of said entire obligation. erred in holding petitioner. 2d. no interest for the intervening period may be demanded. the Court of Appeals.103.00) and petitioner. are solidarily liable to the respondent Martin C.. is liable to respondent Vallejos. For if petitioner-insurer were solidarily liable with said two (2) respondents by reason of the indemnity contract against third party liability-under which an insurer can be directly sued by a third party — this will result in a violation of the principles underlying solidary obligation and insurance contracts.00. the creditor may enforce the entire obligation against one of the solidary debtors. citing Standard Marine Ins. but it cannot. the equitable right of subrogation as the legal effect of payment inures to the insurer without any formal assignment or any express stipulation to that effect in the policy" (44 Am. SO ORDERED. Inc. is an evident breach of the concept of a solidary obligation. ed.. 77 L. the petition is GRANTED. when the insurance company pays for the loss. 2nd 745. vs. therefore. with the interest for the payment already made. 287 U. Inc. and thus determine the rights of the insurer in this respect. notwithstanding the qualification made by the trial court.013. 284. not including the insurance company. as insurer of Sio Choy. 22 Ohio St. If Sio Choy as solidary debtor is made to pay for the entire obligation (P29. If the payment is made before the debt is due. insurance is defined as "a contract whereby one undertakes for a consideration to indemnify another against loss.S. Scottish Metropolitan Assurance Co. 1037).00. But. is compelled to pay P20. Thus — . to respondent Vallejos. solidarily liable to respondent Vallejos for a total amount of P29. to be reimbursed by the latter in the amount of P14. The right of subrogation is of the highest equity. Jur.00. Moses.. Although many policies including policies in the standard form. Without pronouncement as to costs. Art. petitioner would be entitled. now provide for subrogation.. citing Newcomb vs. the qualification made in the decision of the trial court to the effect that petitioner is sentenced to pay up to P20.50 (which is 1/2 of P29. Vallejos for the amount of P29.103.

the instant appeal is hereby GRANTED and the assailed Decision dated 2 February 2009 REVERSED and SET ASIDE. own damage and theft. since its proximate cause was the reckless driving of the Nissan Bus driver. docketed as CA-G..[6] Maintaining that it has been subrogated to the rights and interests of the assured by operation of law upon its payment to the latter. INC.[7] In their Answer. Branch 51 in Manila. When the Nissan Bus abruptly stopped. The Nissan Bus. 2. Makati City. Inc. 2012 VELASCO. respondents filed an appeal with the CA. involving four (4) vehicles.[8] After the termination of the pre-trial proceedings. these two vehicles were shoved forward and the front left portion of the Mitsubishi Galant rammed into the rear right portion of the Isuzu Tanker. a motor car claim adjuster.R.00 and.[9] Dissatisfied. Respondents. 1994. Having insured the vehicle against such risks. CV No.versus RODELIO ALBERTO and ENRICO ALBERTO REYES. J. Malayan Insurance claimed in its Complaint dated October 18. The July 28. 2010 Resolution[2] denying the motion for reconsideration filed by petitioner Malayan Insurance Co. SO ORDERED. . in turn. The Facts At around 5 o’clock in the morning of December 17. They alleged that the speeding bus. seeking to reverse and set aside the July 28.00 with legal interest from the time of the filing of the complaint. particularly on December 15. the foregoing considered.[10] The CA held that the evidence on record has failed to establish not only negligence on the part of respondents. (2) an Isuzu Tanker with plate number PLR 684. the Isuzu Tanker was in front of the Mitsubishi Galant with the Nissan Bus on their right side shortly before the vehicular incident.[5] Previously. the CA reversed and set aside the Decision of the trial court and ruled in favor of respondents. registered owner and the driver. Petitioner. (3) a Fuzo Cargo Truck with plate number PDL 297. Senior Police Officer 1 Alfredo M. but also compliance with the other requisites and the consequent right . respondents asserted that they cannot be held liable for the vehicular accident.000. Cost of suit.[4] Based on the Police Report issued by the on-the-spot investigator. Respondents. 2010 CA Decision reversed and set aside the Decision[3] dated February 2. Malayan Insurance sent several demand letters to respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes).. and (4) a Mitsubishi Galant with plate number TLM 732. maneuvered its way towards the middle lane without due regard to Reyes’ right of way. 194320 February 1. asserting that it was based solely on the biased narration of the Nissan Bus driver. G.. among others. an accident occurred at the corner of EDSA and Ayala Avenue. to wit: (1) a Nissan Bus operated by Aladdin Transit with plate number NYS 381. In its Decision dated July 28. 3. the trial court. who attested that he processed the insurance claim of the assured and verified the documents submitted to him.: The Case Before Us is a Petition for Review on Certiorari under Rule 45.000. on the other hand. Due to the strong impact. disposing: WHEREFORE. failed to present any evidence. ruled in favor of Malayan Insurance and declared respondents liable for damages. As a consequence. (Malayan Insurance).THIRD DIVISION MALAYAN INSURANCE CO. 2010 Decision[1] of the Court of Appeals (CA) and its October 29. 2010. 2009. hit the rear end of the vehicle in front of it. Attorney’s fees of P10. Reyes stepped hard on the brakes but the braking action could not cope with the inertia and failed to gain sufficient traction. insuring the aforementioned Mitsubishi Galant against third party liability. requiring them to pay the amount it had paid to the assured. No costs. the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant. the In its Decision dated February 2. Malayan Insurance issued Car Insurance Policy No. SO ORDERED. of the Fuzo Cargo Truck. Malayan Insurance presented the testimony of its lone witness. coming from the service road of EDSA. 1995. causing damage to the latter in the amount of PhP 20.. 2009 of the Regional Trial Court. No. Respondents also controverted the results of the Police Report. The dispositive portion reads: WHEREFORE. judgment is hereby rendered in favor of the plaintiff against defendants jointly and severally to pay plaintiff the following: 1. The amount of P700. on the other hand.000. trial ensued. 93112. The Complaint dated 18 October 1999 is hereby DISMISSED for lack of merit.000. respectively. When respondents refused to settle their liability. Malayan Insurance was constrained to file a complaint for damages for gross negligence against respondents. All three (3) vehicles were at a halt along EDSA facing the south direction when the Fuzo Cargo Truck simultaneously bumped the rear portion of the Mitsubishi Galant and the rear left portion of the Nissan Bus. JR. sideswiped the Fuzo Cargo Truck. PV-025-00220 in favor of First Malayan Leasing and Finance Corporation (the assured). 99-95885. Dungga (SPO1 Dungga). 1999 that it paid the damages sustained by the assured amounting to PhP 700. which.R. in Civil Case No.

[13] In its Resolution dated October 29. even without the presentation of the police investigator who prepared the police report. v. 2011: I WHETHER THE CA IS CORRECT IN DISMISSING THE COMPLAINT FOR FAILURE OF MALAYAN INSURANCE TO OVERCOME THE BURDEN OF PROOF REQUIRED TO ESTABLISH THE NEGLIGENCE OF RESPONDENTS. Malayan Insurance raises the following issues for Our consideration: I WHETHER THE CA ERRED IN REFUSING ADMISSIBILITY OF THE POLICE REPORT SINCE THE POLICE INVESTIGATOR WHO PREPARED THE SAME DID NOT ACTUALLY TESTIFY IN COURT THEREON. which must have been acquired by the public officer or other person personally or through official information. In Alvarez v.[19] Such testimony is considered hearsay and may not be received as proof of the truth of what the witness has learned. the on-the-spot investigator. prepared the report. under the rules of evidence.” There are several exceptions to the hearsay rule under the Rules of Court. held that an appellate court. and (c) that the public officer or other person had sufficient knowledge of the facts by him or her stated. II WHETHER THE SUBROGATION OF MALAYAN INSURANCE IS IMPAIRED AND/OR DEFICIENT.[11] It noted that the police report. as long as the above requisites could be adequately proved. CA. what is not clear is whether SPO1 Dungga had sufficient personal knowledge of the facts contained in his report. PICOP Resources. Admissibility of the Police Report Indeed. II WHETHER THE PIECES OF EVIDENCE PRESENTED BY MALAYAN INSURANCE ARE SUFFICIENT TO CLAIM FOR THE AMOUNT OF DAMAGES. a witness may not testify on matters which he or she merely learned from others either because said witness was told or read or heard those matters. This is known as the hearsay rule. Malayan Insurance filed the instant petition. said report is still admissible in evidence. which are derived from the witness’ own perception. Hence. On the other hand. was not properly identified by the police officer who conducted the on-the-spot investigation of the subject collision. respondents submit the following issues in its Memorandum[15] dated July 7. respondents are deemed to have waived their right to question its authenticity and due execution.[20] As discussed in D. the presentation of the police report itself is admissible as an exception to the hearsay rule even if the police investigator who prepared it was not presented in court. (b) that it was made by the public officer in the performance of his or her duties.[22] Section 44. the issues boil down to the following: (1) the admissibility of the police report. Consunji.[16] Respondents counter that since the police report was never confirmed by the investigating police officer. which has been made part of the records of the trial court. especially since respondents failed to make a timely objection to its presentation in evidence. And inasmuch as they never questioned the presentation of the report in evidence. among which are entries in official records. as an exception to the hearsay rule of entries in official records. or by such other person in the performance of a duty specially enjoined by law. (2) the sufficiency of the evidence to support a claim for gross negligence. and he did so in the performance of his duty. cannot rightly appreciate firsthand the genuineness of an unverified and unidentified document. that is. Notably. arguing that a police report is a prima facie evidence of the facts stated in it. thus: (a) that the entry was made by a public officer or by another person specially enjoined by law to do so. a witness can testify only to those facts which the witness knows of his or her personal knowledge. III WHETHER THE SUBROGATION OF MALAYAN INSURANCE HAS PASSED COMPLIANCE AND REQUISITES AS PROVIDED UNDER PERTINENT LAWS. as a reviewing body. The petition has merit. 2010. and (3) the validity of subrogation in the instant case. 2011. the CA denied the motion for reconsideration. the general rule that excludes hearsay as evidence applies to written. . Thus.[12] Our Ruling Subsequently. there is no dispute that SPO1 Dungga. the third requisite is lacking. Rule 130 provides: Entries in official records made in the performance of his duty by a public officer of the Philippines. or by a person in the performance of a duty specially enjoined by law are prima facie evidence of the facts therein stated.[23] this Court reiterated the requisites for the admissibility in evidence. it cannot be considered as part of the evidence on record.[17] The Issues In its Memorandum[14] dated June 27. It.[18] Concomitantly.M. as well as oral statements. thus. However.of Malayan Insurance to subrogation.[21] “Hearsay is not limited to oral testimony or statements. Here. Inc. Malayan Insurance filed its Motion for Reconsideration.[24] Essentially. much less accord it evidentiary value. Malayan Insurance contends that.

and therefore is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence. that the thing or instrumentality speaks for itself. another court has said. a project superintendent. a carpenter leadman and others who are in complete control of the situation therein.] the last requisite is also present. The concept of res ipsa loquitur has been explained in this wise: While negligence is not ordinarily inferred or presumed. whether culpable or innocent. Sufficiency of Evidence Malayan Insurance contends that since Reyes. All the requisites for the application of the rule of res ipsa loquitur are present.[27] We agree with Malayan Insurance.M. It further contends that respondents failed to present any evidence to overturn the presumption of negligence. in the absence of explanation by the defendant. bumped the rear of the Mitsubishi Galant. or in one jurisdiction. some courts add to the three prerequisites for the application of the res ipsa loquitur doctrine the further requirement that for the res ipsa loquitur doctrine to apply. thus a reasonable presumption or inference of appellant’s negligence arises. or at least permit an inference of negligence on the part of the defendant. is practically accessible to the defendant but inaccessible to the injured person..[26] Contrarily. or that the party to be charged with negligence has superior knowledge or opportunity for explanation of the accident. Consunji. the doctrine of res ipsa loquitur is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence. Inc. he is presumed to be negligent unless proved otherwise. resulting to his death. there is sufficient evidence.Respondents failed to make a timely objection to the police report’s presentation in evidence. without knowledge of the cause. case is quite elucidating: Petitioner’s contention. and direct proof of defendant’s negligence is beyond plaintiff’s power. One of the theoretical bases for the doctrine is its necessity. which means. i.] the second requisite is also present. The res ipsa loquitur doctrine. loses relevance in the face of the application of res ipsa loquitur by the CA. respondents cannot evade liability by virtue of the res ipsa loquitur doctrine. reaches over to defendant who knows or should know the cause. respondents claim that since Malayan Insurance did not present any witness who shall affirm any negligent act of Reyes in driving the Fuzo Cargo truck before and after the incident. Accordingly. On the other hand. the first requisite for the application of the rule of res ipsa loquitur is present. No worker is going to fall from the 14th floor of a building to the basement while performing work in a construction site unless someone is negligent[. The D. The inference which the doctrine permits is grounded upon the fact that the chief evidence of the true cause. The CA held that all the requisites of res ipsa loquitur are present in the case at bar: There is no dispute that appellee’s husband fell down from the 14th floor of a building to the basement while he was working with appellant’s construction project.] thus[. provided the following requisites are present: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent. Res ipsa loquitur is a rule of necessity and it applies where evidence is absent or not readily available. (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence. It has been said that the doctrine of res ipsa loquitur furnishes a bridge by which a plaintiff. It has a safety engineer. as sometimes stated. As explained earlier. reasonable evidence. however. is a rule of necessity. the driver of the Fuzo Cargo truck. for any explanation of care exercised by the defendant in respect of the matter of which the plaintiff complains. or some other person who is charged with negligence. the facts or circumstances accompanying an injury may be such as to raise a presumption. there is no evidence which would show negligence on the part of respondents. it must appear that the injured party had no knowledge or means of knowledge as to the cause of the accident. The construction site is within the exclusive control and management of appellant. No contributory negligence was attributed to the appellee’s deceased husband[. . under the doctrine of res ipsa loquitur. they are deemed to have waived their right to do so. that the injury arose from or was caused by the defendant’s want of care. and while the mere happening of an accident or injury will not generally give rise to an inference or presumption that it was due to negligence on defendant’s part. the thing or transaction speaks for itself. As a rule of evidence. and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.[25] As a result. The circumstances of any accident that would occur therein are peculiarly within the knowledge of the appellant or its employees. it is within the power of the defendant to show that there was no negligence on his part. x x x.] thus. that necessary evidence is absent or not available. thus. Even if We consider the inadmissibility of the police report in evidence. the appellee is not in a position to know what caused the accident. still. x x x where it is shown that the thing or instrumentality which caused the injury complained of was under the control or management of the defendant. literally. and that the occurrence resulting in the injury was such as in the ordinary course of things would not happen if those who had its control or management used proper care. in that it proceeds on the theory that under the peculiar circumstances in which the doctrine is applicable. The res ipsa loquitur doctrine is based in part upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge. the police report is still admissible in evidence.e. or.] thus[. the construction site with all its paraphernalia and human resources that likely caused the injury is under the exclusive control and management of appellant[. x x x. The effect of the doctrine is to warrant a presumption or inference that the mere fall of the elevator was a result of the person having charge of the instrumentality was negligent.

the evidence becomes part of the evidence in the case. Even if respondents avert liability by putting the blame on the Nissan Bus driver. ASIAKONSTRUCT could not object to COMFAC’s offer of evidence nor present evidence in its defense. Evidence by the defendant of say. And assuming that this allegation is. As explained in Keppel Cebu Shipyard. true. however. To reiterate. Consunji. and. on its own. the Fuzo Cargo Truck would not have had hit the rear end of the Mitsubishi Galant unless someone is negligent. this allegation was self-serving and totally unfounded. Validity of Subrogation Malayan Insurance contends that there was a valid subrogation in the instant case. the presumption of negligence remains. Thereafter. it is partly based upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge. all the parties are considered bound by any outcome arising from the offer of evidence properly presented. v. the requisites for the application of the res ipsa loquitur rule are the following: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent. As explained in D. respondents had all the opportunity. Reyes.M. Pioneer Insurance and Surety Corporation: Subrogation is the substitution of one person by another with reference to a lawful claim or right.000 to the assured. hit the rear end of the vehicle in front of it. including its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. As noted by Malayan Insurance. COMFAC Corporation: The rule is that failure to object to the offered evidence renders it admissible. Finally. (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence. thereby creating a reasonable presumption of negligence on the part of respondents. disregard such evidence. the burden then shifts to defendant to explain. under appropriate circumstances a disputable presumption. all the requisites for the application of the doctrine of res ipsa loquitur are present. that respondents failed to present any evidence before the trial court. Thus. Bernard Dy. claim that the documents presented by Malayan Insurance do not indicate certain important details that would show proper subrogation. Consequently.[28] In the case at bar. indeed. The presumption or inference may be rebutted or overcome by other evidence and. so that he who is substituted succeeds to the rights of the other in relation to a debt or claim. still. aside from the statement in the police report.[29] In the instant case. respondents are deemed to have waived their right to make an objection. It is unfortunate. due care. It is worth mentioning that just like any other disputable presumptions or inferences. comes into play only after the circumstances for the application of the doctrine has been established. Once the plaintiff makes out a prima facie case of all the elements. As stated earlier.Petitioner does not dispute the existence of the requisites for the application of res ipsa loquitur.” Petitioner apparently misapprehends the procedural effect of the doctrine. Thus. no contributory negligence was attributed to the driver of the Mitsubishi Galant. in turn. As mentioned above. What is at once evident from the instant case. is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence.[32] (Emphasis supplied. however. which. Also. Because of a party’s failure to timely object. but failed to object to the presentation of its evidence. which allegation is totally unsupported by any evidence on record. Atty. it is astonishing that respondents never even bothered to file a cross-claim against the owner or driver of the Nissan Bus. the defendant’s negligence is presumed or inferred when the plaintiff establishes the requisites for the application of res ipsa loquitur. none of the parties disputes the fact that the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant. point to the reckless driving of the Nissan Bus driver as the proximate cause of the collision. who actively participated in the initial stages of the case stopped attending the hearings when COMFAC was about to end its presentation. We note that ASIAKONSTRUCT’s counsel of record before the trial court. however. ASIAKONSTRUCT was deemed by the trial court to have waived its chance to do so. such as that of due care or innocence. Note also that when a party desires the court to reject the evidence offered. indeed. however. and since it is not disputed that the insurance company. and as We have mentioned earlier. res ipsa loquitur is a rule of necessity which applies where evidence is absent or not readily available. the CA erred in dismissing the complaint for Malayan Insurance’s adverted failure to prove negligence on the part of respondents. and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured. Respondents. Inc. Consequently. Respondents. and the court cannot. is the presence of all the requisites for the application of the rule of res ipsa loquitur.) Bearing in mind that the claim check voucher and the Release of Claim and Subrogation Receipt presented by Malayan Insurance are already part of the evidence on record.. As this Court held in Asian Construction and Development Corporation v. It . the presumption of negligence may be rebutted or overcome by other evidence to the contrary. as evidenced by the claim check voucher[30] and the Release of Claim and Subrogation Receipt[31] presented by it before the trial court. It is not for the defendant to explain or prove its defense to prevent the presumption or inference from arising. Thus. then there is a valid subrogation in the case at bar. paid PhP 700. Inc. it must so state in the form of a timely objection and it cannot raise the objection to the evidence for the first time on appeal. may outweigh the inference. but argues that the presumption or inference that it was negligent did not arise since it “proved that it exercised due care to avoid the accident which befell respondent’s husband. therefore. the Fuzo Cargo Truck was under the exclusive control of its driver.

nor does it grow out of. The Decision dated February 2. No pronouncement as to cost. it is only but proper that Malayan Insurance be subrogated to the rights of the assured. ought to pay. any privity of contract. WHEREFORE. CV No. . 2010 Decision and October 29.R. and he may use all means that the creditor could employ to enforce payment. 93112 are hereby REVERSED and SET ASIDE. The CA’s July 28. and good conscience. 99-95885 is hereby REINSTATED. SO ORDERED. 2010 Resolution in CA-G. 2009 issued by the trial court in Civil Case No. It accrues simply upon payment by the insurance company of the insurance claim. The right of subrogation is not dependent upon. and is the mode that equity adopts to compel the ultimate payment of a debt by one who. We have held that payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the insured may have against the third party whose negligence or wrongful act caused the loss. the petition is hereby GRANTED.[33] Considering the above ruling.contemplates full substitution such that it places the party subrogated in the shoes of the creditor. It is designed to promote and to accomplish justice. The doctrine of subrogation has its roots in equity. in justice. equity.

No. a 1994 Toyota Corolla XL with chassis number EE-100-9524505. 1998 Order of the Regional Trial Court of Makati City. The full text of said Order3 reads: Before the Court is an action filed by the plaintiffs.5 After presentation of respondents’ evidence. petitioner filed a Demurrer to Evidence. respondents interposed an appeal to the Court of Appeals (appellate court). In this case. Accordingly. It appears that on 26 May 1994. Inc. 2012 PARAMOUNT INSURANCE CORPORATION. SO ORDERED. During the effectivity of said insurance. 2005 and Resolution2 dated July 20. They alleged the loss of the vehicle and claimed the same to be covered by the policy’s provision on "Theft. 61490. which involved the loss of the same vehicle under the same circumstances although under a different policy and insurance company. Then on 1 December 1994. however. Branch 63.). 1994. PERALTA. It appears. This. that plaintiff had successfully prosecuted and had been awarded the amount claimed in this action.: Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and setting aside of the Decision1 dated April 12. 2006. The undisputed facts follow.THIRD DIVISION G. defendant-appellee herein petitioner denied the reimbursement for the lost vehicle on the ground that the said loss could not fall within the concept of the "theft clause" under the insurance policy x x x xxxx As a result. defendants received from plaintiff a demand letter asking for the payment of the proceeds in the Petitioner.6 . In its Decision dated April 12. plaintiffs insured their vehicle. thereafter. J. however. spouses Yves and Maria Teresa Remondeulaz against the defendant. In its petition. On May 26. 95-1524 entitled Sps. the Standard Insurance Company. 2006 of the Court of Appeals in CA-G. Sales failed to return the subject vehicle within the agreed three-day period. the trial court erred when it dismissed the action on the ground of double recovery since it is clear that the subject car is different from the one insured with another insurance company. petitioner refused to pay.00 under their policy. 173773 November 28. with defendant under Private Car Policy No. Acting thereon. Yves and Maria Teresa Remondeulaz versus Standard Insurance Company. making Paramount liable for the alleged "theft" of respondents’ vehicle. Petitioner. the appellate court reversed and set aside the Order issued by the trial court. considered with the principle that an insured may not recover more than its interest in any property subject of an insurance. Paramount Insurance Corporation. PC-37396 for Own Damage. In said complaint sheet. SO ORDERED. respondents lodged a complaint for a sum of money against petitioner before the Regional Trial Court of Makati City (trial court) praying for the payment of the insured value of their car plus damages on April 21. 2005. they immediately reported the theft to the Traffic Management Command of the PNP who made them accomplish a complaint sheet. respondents notified petitioner to claim for the reimbursement of their lost vehicle.000. to recover from the defendant the insured value of the motor vehicle. for the period commencing 26 May 1994 to 26 May 1995. is hereby REVERSED and SET ASIDE x x x. CV No. amount of PhP409. the trial court dismissed the complaint filed by respondents. Respondents. the October 7.R. Third-Party Property Damage and Third-Party Personal Injury. Consequently." Defendant disagreed and refused to pay. respondents alleged that a certain Ricardo Sales (Sales) took possession of the subject vehicle to add accessories and improvements thereon. but the same was denied by the appellate court in a Resolution dated July 20. leads the court to dismiss this action.R.4 Not in conformity with the trial court’s Order. filed a motion for reconsideration against said Decision. Hence. However. to wit: Indeed. vs. respondents’ car was unlawfully taken. SPOUSES YVES and MARIA TERESA REMONDEULAZ. Theft. petitioner raises this issue for our resolution: Whether or not the Court of Appeals decided the case a quo in a way not in accord with law and/or applicable jurisprudence when it promulgated in favor of the respondents Remondeulaz. respondents insured with petitioner their 1994 Toyota Corolla sedan under a comprehensive motor vehicle insurance policy for one year. in another action (Civil Case No. 1995. petitioner filed a petition for review on certiorari before this Court praying that the appellate court’s Decision and Resolution be reversed and set aside. WHEREFORE.

and is therefore. we now resolve the issue of whether the loss of respondents’ vehicle falls within the concept of the "theft clause" under the insurance policy. However. and not to permanently deprive them of possession thereof. housebreaking or theft. Since.11 We do not agree. the owner of a car entrusted his vehicle to therein petitioner Lauro Santos who owns a repair shop for carburetor repair and repainting. rail.7 All told. the case of Santos v. petitioner is liable under the policy for the loss of respondents’ vehicle under the "theft clause. WHEREFORE. the fact that Sales failed to return the subject vehicle to respondents constitutes Qualified Theft. The Court therein clarified the distinction between the crime of Estafa and Theft. since the car cannot be classified as stolen as respondents entrusted the possession thereof to another person. x x x The principal distinction between the two crimes is that in theft the thing is taken while in estafa the accused receives the property and converts it to his own use or benefit. However. there may be theft even if the accused has possession of the property. or soon after the transfer of physical possession of the movable property. However. subject to the Limits of Liability." (c) by malicious act. to wit: Petitioner argues that the loss of respondents’ vehicle is not a peril covered by the policy. If he was entrusted only with the material or physical (natural) or de facto possession of the thing. indemnify the insured against loss of or damage to the Scheduled Vehicle and its accessories and spare parts whilst thereon: – (a) by accidental collision or overturning. In the instant case. in Malayan Insurance Co. his misappropriation of the same constitutes theft. (b) by fire. Hence. Adverse to petitioner’s claim. the Court found that Santos was only guilty of the crime of Theft and merely considered the qualifying circumstance as an aggravating circumstance in the . but if he has the juridical possession of the thing his conversion of the same constitutes embezzlement or estafa. Hence. the crime that was actually committed was Qualified Theft. SO ORDERED. she was not able to do so since Santos had abandoned his shop.12 Apropos. Court of Appeals. compensable. it is apparent that the taking of repondents’ vehicle by Sales is without any consent or authority from the former. imposition of the appropriate penalty. In the said case. Inc. v. Similarly in Santos. the Court explained that when one takes the motor vehicle of another without the latter’s consent even if the motor vehicle is later returned.Essentially. which is a qualifying circumstance. there is theft – there being intent to gain as the use of the thing unlawfully taken constitutes gain. In People v. The Company will. In this case. People10 is worthy of note. Moreover. the issue is whether or not petitioner is liable under the insurance policy for the loss of respondents’ vehicle.. Sales did not have juridical possession over the vehicle. It maintains that it is not liable for the loss. Theft can also be committed through misappropriation. Sales’ act of depriving respondents of their motor vehicle at.8 this Court had the occasion to interpret the "theft clause" of an insurance policy. the instant petition is DENIED. since repondents’ car is undeniably covered by a Comprehensive Motor Vehicle Insurance Policy that allows for recovery in cases of theft. self-ignition or lightning or burglary. 2006 of the Court of Appeals are hereby AFFIRMED in toto. the Court held that because of the fact that it was not alleged in the information that the object of the crime was a car. to wit: SECTION III – LOSS OR DAMAGE 1. inland waterway. 2005 and Resolution dated July 20. (d) whilst in transit (including the process of loading and unloading) incidental to such transit by road. or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear. The Decision dated April 12. Bustinera. constitutes theft under the insurance policy. lift or elevator. when the owner tried to retrieve her car. external explosion. Also. which is compensable. Records would show that respondents entrusted possession of their vehicle only to the extent that Sales will introduce repairs and improvements thereon.9 this Court held that the taking of a vehicle by another person without the permission or authority from the owner thereof is sufficient to place it within the ambit of the word theft as contemplated in the policy. respondents’ policy clearly undertook to indemnify the insured against loss of or damage to the scheduled vehicle when caused by theft.

and also exhibited chloride reactions on testing with silver nitrate. Toplis and Harding.[11] covering 217 bundles of steel pipes to be discharged at Vancouver. It issued Bills of Lading Nos. insured the goods with respondent Chubb and Sons. which revealed moderate to heavy amounts of patchy and streaked dark red/orange rust on all lifts which were visible.84[4] on board the vessel M/V Lorcon IV. The facts are as follows: On November 21.. 61334 and March 28. DAV/OAK 1 to 7. Samples of the shipment were tested with a solution of silver nitrate revealing both positive and occasional negative chloride reactions. Inc. Evidently. In addition.: On appeal is the Court of Appeals’ August 14. Inc.S. for short). carried the goods on board its vessel M/V San Mateo Victory to the United States. Ltd. Mayer Steel Pipe Corporation of Binondo.” prior to being laden on board the vessel “SAN MATEO VICTORY” in Davao.. the surveyor noted that the cargo hold of the M/V Lorcon IV was flooded with seawater. and the tank top was “rusty. 1987. 1987. U. Sumitomo Corporation of San Francisco. (Transmarine Carriers. 2004] LORENZO SHIPPING CORP. California. the aforementioned rust damages were apparently sustained while the shipment was in the custody of the vessel “LORCON IV. It then sailed to Vancouver.R. 115090. Ltd. which describes conditions of the cargo as sighted aboard the vessel “LORCON IV. 1987. Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping. was the carrier of 581 bundles of black steel pipes. Inc. 87-19 under B/L No. The survey report. a foreign corporation organized and licensed to engage in insurance business under the laws of the United States of America. Inc.A. loaded 581 bundles of ERW black steel pipes worth US$137. of San Franciso.. June 8. a foreign corporation licensed as a common carrier under the laws of Norway and doing business in the Philippines through its agent. Please find herewith a copy of the survey report which we had arranged for after unloading of our cargo from your vessel in Davao.912. T-3[5] for the account of the consignee. Philippines. The letter reads: Please be advised that the merchandise herein below noted has been landed in bad order exManila voyage No. Del Pan’s Survey Report[8] dated December 4. No.[13] dated January 28. 1987.R. which in turn. 1988 states: xxx We entered the hold for a close examination of the pipe. Inc. Washington..[9] After the survey. 2001 Resolution[2] affirming the March 19. DAV/SEA 1 to 6.J. Respondent Transmarine Carriers received the subject shipment which was discharged on December 4. GEARBULK.A.S. On January 17.A. 1998 Decision[3] of the Regional Trial Court of Manila which found petitioner liable to pay respondent Chubb and Sons. and with several holes at different places. from Manila to Davao City. CV No. 2000 Decision[1] in CA-G. 1987. and also discovered the latter heavily rusted. thinning. J. We reserve the right to claim as soon as the amount of claim is determined and the necessary supporting documents are available. the subject shipment. Sumitomo informed petitioner Lorenzo Shipping that it will be filing a claim based on the damaged cargo once such damage had been ascertained. U. for shipment to Davao City. We trust that you shall make everything in order. to petitioner Lorenzo Shipping. owned by petitioner Lorenzo Shipping.” The rusty condition of the cargo was noted on the mate’s receipts and the checker of M/V Lorcon IV signed his conforme thereon. respondent Gearbulk. 1987.. for short).” prior to and subsequent to discharge at Davao City. 147724. . From Davao City. indicating pipe had come in contact with salt water. Washington on January 23.” While the cargo was in transit from Davao City to the U. DECISION PUNO. All bills of lading were marked “ALL UNITS HEAVILY RUSTED. INC. U.A.[7] It discovered seawater in the hatch of M/V Lorcon IV.SECOND DIVISION [G.. CHUBB and SONS. December 4. and found the steel pipes submerged in it. for carriage to the United States. California. respondent Philippine Transmarine Carriers.” Attached herein is a copy of a survey report issued by Del Pan Surveyors of Davao City. 1987 showed that the subject shipment was no longer in good condition. Moreover. the pipes were found with rust formation on top and/or at the sides. When the steel pipes were tested with a silver nitrate solution. a domestic corporation. Philippines dated. all tension applied metal straps were very heavily rusted. T-3 which arrived at the port of Davao City on December 2. for the account of Sumitomo Corporation. It insured the shipment with respondent Chubb and Sons. petitioner. Inc. as in fact. xxx It should be noted that subject bills of lading bore the following remarks as to conditions of goods: “ALL UNITS HEAVILY RUSTED. which the latter received on December 9. Manila.S. consignee Sumitomo sent a letter[12] of intent dated December 7. evidenced by Delivery Cargo Receipt No. and Bills of Lading Nos. attorney's fees and costs of suit. Toplis and Harding found that they had come in contact with salt water. where it unloaded 364 bundles of the subject steel pipes. M/V San Mateo Victory arrived at Oakland. respondent Gearbulk loaded the shipment on board its vessel M/V San Mateo Victory. the consignee.. respondents. vs. and PHILIPPINE TRANSMARINE CARRIERS. 1987 at Davao City. The consignee Sumitomo then hired the services of R. The extent of the loss and/or damage has not yet been determined but apparently all bundles are corroded. a domestic corporation engaged in coastwise shipping. Petitioner Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No.. California. 1988. surveyed the steel pipes.S.[6] The M/V Lorcon IV arrived at the Sasa Wharf in Davao City on December 2. Del Pan Surveyors to inspect the shipment prior to and subsequent to discharge.[10] covering 364 bundles of steel pipes to be discharged at Oakland. is a foreign corporation organized under the laws of the United States of America. USA. The latter. 1988 where it unloaded the remaining 217 bundles.

the attorney’s fees in the sum of P50.151. (e) the law of the country of destination. are to share liability for their separate negligence in handling the cargo. and. It denied liability. as well as the two defendants’ cross-claim against Defendant Lorenzo Shipping Corporation. Inc. alleged that it is not doing business in the Philippines. has no capacity to sue before Philippine courts. which created a prima facie presumption that the carrier received the shipment in good condition. (b) the action should be dismissed on the ground of forum non conveniens.[21] In brief. (2) Whether or not Sumitomo. among others: (a) that rust easily forms on steel by mere exposure to air. Petitioner Lorenzo Shipping submits the following issues for resolution: (1) Whether or not the prohibition provided under Art. 1989. whether or not Gearbulk and Transmarine. petitioner failed to raise the defense that Sumitomo is a foreign corporation doing business in the Philippines without a license.[23] It contemplates full substitution such that it places the party subrogated in the shoes of the creditor. including its remedies or securities. (b) petitioner Lorenzo Shipping was not negligent in the performance of its obligations as carrier of the goods. In the first place. Chubb’s predecessor-in-interest. The Court of Appeals likewise denied petitioner Lorenzo Shipping’s Motion for Reconsideration[19] dated September 3. and he may use all means which the creditor could employ to enforce payment..[14] It then filed a marine insurance claim with respondent Chubb and Sons. and. in a Resolution[20] promulgated on March 28. however. for lack of factual basis. it was merely subrogated to the rights of its insured. likewise a foreign corporation admittedly doing business in the Philippines without a license. this petition. moisture and other marine elements. and Philippine Transmarine Carriers. 2001. Petitioner argues that respondent Chubb and Sons is a foreign corporation not licensed to do business in the Philippines. (3) Whether or not a delivery cargo receipt without a notation on it of damages or defects in the shipment. which the latter settled in the amount of US$104. has been overcome by convincing evidence. and. 2000. as subrogee. (2) petitioner Lorenzo Shipping was negligent in the performance of its obligations as a carrier. for lack of merit. laches. Ltd. Inc. It is therefore estopped from litigating the issue on appeal especially because it involves a question of fact which this Court cannot resolve.000. Gearbulk. Petitioner Lorenzo Shipping filed its answer with counterclaim on February 28.[15] On December 2. petitioner then concludes that. and amended it on May 24. Inc.. Sumitomo. 88-47096. (c) that the goods were improperly packed. (c) damage to the steel pipes was due to the inherent nature of the goods or to the insufficiency of packing thereof. Since Sumitomo does not have capacity to sue.[24] . Secondly. so that he who is substituted succeeds to the rights of the other in relation to a debt or claim. the consignee Sumitomo. Respondent Chubb and Sons.00 or its equivalent in Philippine peso at the current rate of exchange with interest thereon at the legal rate from the date of the institution of this case until fully paid. governs the contract of carriage. is a foreign corporation doing business in the Philippines without a license and does not have capacity to sue before Philippine courts. assuming arguendo that Sumitomo cannot sue in the Philippines. The appellate court denied the petition and affirmed the decision of the trial court. and. validly made a claim for damages against Lorenzo Shipping within the period prescribed by the Code of Commerce. Inc. 133 of the Corporation Code applies to respondent Chubb. the consignee Sumitomo rejected the damaged steel pipes and declared them unfit for the purpose they were intended. (d) prescription. and the two defendants’ counterclaim. (2) whether petitioner Lorenzo Shipping is negligent in carrying the subject cargo. We disagree with petitioner. and that it is suing under an isolated transaction.[22] The principle covers the situation under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. has the right to institute this action. (b) that it made a disclaimer in the bill of lading.00. we resolve the following issues: (1) whether respondent Chubb and Sons has capacity to sue before the Philippine courts. U. finding that: (1) respondent Chubb and Sons. and. and is not suing on an isolated transaction. and Transmarine. docketed as Civil Case No. after paying the latter’s policy claim..[18] Petitioner Lorenzo Shipping appealed to the Court of Appeals insisting that: (a) respondent Chubb and Sons does not have capacity to sue before Philippine courts. and dismissing the plaintiff’s complaint against defendants Gearbulk.S. as common carriers. against respondents Lorenzo Shipping. (d) damage to the steel pipes was not due to their fault or negligence.Due to its heavily rusted condition. It contends that because the respondent Chubb and Sons is an insurance company.151. (4) Assuming that Lorenzo Shipping was guilty of some lapses in transporting the steel pipes. plus the costs of the suit. Inc. and extinguishment of obligations and actions had set in. 1989. The dispositive portion of its Decision states: WHEREFORE. 1989. it being a mere subrogee or assignee of the rights of Sumitomo Corporation. Inc. Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right. The Regional Trial Court ruled in favor of the respondent Chubb and Sons. the judgment is hereby rendered ordering Defendant Lorenzo Shipping Corporation to pay the plaintiff the sum of US$104. alleging. On February 21. has also no capacity to sue in our jurisdiction. respondents Gearbulk and Transmarine filed their answer[17] with counterclaim and cross-claim against petitioner Lorenzo Shipping denying liability on the following grounds: (a) respondent Chubb and Sons.A. there being no showing that the plaintiff had filed this case against said defendants in bad faith. neither the subrogee-respondent Chubb and Sons could sue before Philippine courts. respondent Chubb and Sons. Inc.00. it does not follow that respondent. 1988. Hence. filed a complaint[16] for collection of a sum of money.

The private respondent may sue in the Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier. – No foreign corporation transacting business in the Philippines without a license. Elser & Company:[30] The object of the statute (Secs. security. The number and quantity are merely evidence of such intention. but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.[25] In other words.The rights to which the subrogee succeeds are the same as. by virtue of the right of subrogation provided for in the policy of insurance. vs. even if it has no license to do business in this country. Corporation Law) was not to prevent the foreign corporation from performing single acts. for it is not the lack of the prescribed license (to do business in the Philippines) but doing business without such license. but is suing only under an isolated transaction.e.[33] three contracts. A foreign corporation needs no license to sue before Philippine courts on an isolated transaction.[34] is the real party in interest in the action for damages before the court a quo against the carrier Lorenzo Shipping to recover for the loss sustained by its insured. or does not have the character or representation he claims. Likewise. The phrase "isolated transaction" has a definite and fixed meaning. they do not constitute doing business in the Philippines. The capacity to sue of respondent Chubb and Sons could not perchance belong to the group of rights. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights. Where the three transactions indicate no intent by the foreign corporation to engage in a continuity of transactions. [Emphasis supplied. The law does not prohibit foreign corporations from performing single acts of business. having reference to the debt due the latter. he does so only in relation to the debt.[29] As held by this Court in the case of Marshall-Wells Company vs.] In the case of Gonzales vs. from seeking redress in the Philippine courts. and casual — not of a character to indicate a purpose to engage in business — do not constitute the doing or engaging in business as contemplated by law. The law on corporations is clear in depriving foreign corporations which are doing business in the Philippines without a license from bringing or maintaining actions before. under the one (1) marine insurance policy issued in favor of the consignee Sumitomo covering the damaged steel pipes. a transaction or series of transactions set apart from the common business of a foreign enterprise in the sense that there is no intention to engage in a progressive pursuit of the purpose and object of the business organization. this Court held that:[32] . a subrogee cannot succeed to a right not possessed by the subrogor. Art. those of the person for whom he is substituted – he cannot acquire any claim. but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts . lack of juridical personality. Raquiza. insanity. Court of Appeals. or any other disqualifications of a party. . What is determinative of "doing business" is not really the number or the quantity of the transactions.[28] Respondent Chubb and Sons who was plaintiff in the trial court does not possess any of these disabilities. an isolated transaction.e. i. two transactions. vs. . . Capacity to sue is a right personal to its holder. or remedy the subrogor did not have. respondent insurer Chubb and Sons. subject of this case. and which amount it now seeks to recover from petitioner Lorenzo Shipping which caused the loss sustained by the insured Sumitomo. Intermediate Appellate Court[31] that: .[27] In the instant case. The stubborn fact remains that these two (2) bills of lading spawned from the single marine insurance policy that respondent Chubb and Sons issued in favor of the consignee Sumitomo. In Eriks Pte. Transactions which are occasional. .. the rights inherited by the insurer. Inc. or who stands to be benefited or injured by it.” Furthermore. covering the damaged steel pipes. Whether a foreign corporation is "doing business" does not necessarily depend upon the frequency of its transactions. Rule 3. which bars a foreign corporation from access to our courts. incidental. or intervening in Philippine courts. but not greater than. Section 2 of the 1997 Rules of Civil Procedure defines a real party in interest as one who is entitled to the avails of any judgment rendered in a suit. after having shown that it is not doing business in the Philippines. It is conferred by law and not by the parties. . the intention of an entity to continue the body of its business in the country. 68 and 69. i. hence three transactions were challenged as void on the ground that the three American corporations which are parties to the contracts are not licensed to do business in the Philippines. when the insurer succeeds to the rights of the insured. 133 of the Corporation Code states: Doing business without a license. respondent Chubb and Sons has satisfactorily proven its capacity to sue. This is because the insurer in such case having fully . the implication of the law (being) that it was never the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business for the Philippines. Ltd. hence. but more importantly. shall be permitted to maintain or intervene in any action. or its successors or assigns. the insurer-subrogee is the only real party in interest and must sue in its own name[35] to enforce its right of subrogation against the third party which caused the loss. respondent Chubb and Sons. pertain only to the payment it made to the insured Sumitomo as stipulated in the insurance contract between them. incompetence. This Court held that “one single or isolated business transaction does not constitute doing business within the meaning of the law. are covered by two (2) bills of lading. or does not have the necessary qualification to appear in the case. It refers to a plaintiff’s general disability to sue. We reject the claim of petitioner Lorenzo Shipping that respondent Chubb and Sons is not suing under an isolated transaction because the steel pipes. The execution of the policy is a single act. On the contrary. this Court ruled in Universal Shipping Lines. Where an insurance company as subrogee pays the insured of the entire loss it suffered. The person substituted (the insurer) will succeed to all the rights of the creditor (the insured). such as on account of minority. . remedies or securities pertaining to the payment respondent insurer made for the loss which was sustained by the insured Sumitomo and covered by the contract of insurance..[26] A subrogee in effect steps into the shoes of the insured and can recover only if insured likewise could have recovered. but more upon the nature and character of the transactions. et al. suit or proceeding in any court or administrative agency of the Philippines. This Court has not construed the term “isolated transaction” to literally mean “one” or a mere single act. However.

thinning. Whereas typically they would not go to that bother . and that the damage was due to the latter’s negligence. evidenced by the clean bills of lading it issued. Respondent Transmarine Carriers as agent of respondent Gearbulk. itself. in which case the claim shall be admitted only at the time of the receipt.A. On the second issue.J. which carried the goods from Davao City to the United States. After the periods mentioned have elapsed. Petitioner Lorenzo Shipping failed to establish that an authorized agent of the consignee Sumitomo received the cargo at Sasa Wharf in Davao City. Costs against petitioner. provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such package. we find no merit to the contention of respondents Gearbulk and Transmarine that American law governs the contract of carriage because the U. the place of destination is Davao City. we affirm the findings of the lower courts that petitioner Lorenzo Shipping was negligent in its care and custody of the consignee’s goods. petitioner Lorenzo Shipping did not even attempt to present any contrary evidence. all of which were marked “ALL UNITS HEAVILY RUSTED.[42] The case law teaches us that mere proof of delivery of goods in good order to a carrier and the subsequent arrival in damaged condition at the place of destination raises a prima facie case against the carrier. John M.”[41] A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein described. we rule that it has not yet prescribed at the time it was made. Operations Manager of respondent Transmarine Carriers. the petition is DENIED. Ltd.. they come in with no plastic on the ends.compensated its insured. there is evidence that the goods were packed in a superior condition.. [45] The unpatched holes allowed seawater.[47] Significantly. They might just be banded. The Decision of the Court of Appeals in CA-G. aside from being a contract[38] and a receipt. Typically. Art. Del Pan Surveyors found the tank top of M/V Lorcon IV to be “rusty. Philippine law applies. issued Bills of Lading Nos. woven plastic. and has not physically inspected the same at the time the shipment was discharged from M/V Lorcon IV in Davao City. which Toplis and Harding employed. When the cargo was unloaded from petitioner Lorenzo Shipping’s vessel at the Sasa Wharf in Davao City. T-3 which reads:[50] NOTE: No claim for damage or loss shall be honored twenty-four (24) hours after delivery. respondent Gearbulk..[44] More so. A somewhat similar provision is embodied in the Bill of Lading No. reaching up to three (3) inches deep. thereby exposing the cargo to sea water. Petitioner Lorenzo Shipping failed to keep its vessel in seaworthy condition. thus possesses the right to enforce the claim and the significant interest in the litigation. 366 of the Code of Commerce within which claims must be presented does not begin to run until the consignee has received such possession of the merchandise that he may exercise over it the ordinary control pertinent to ownership. In the case at bar. 366 C Com. DAV/SEA 1 to 6 covering the entire shipment. The silver nitrate test. 366 of the Code of Commerce states: Within the twenty-four hours following the receipt of the merchandise. may be made. And only then did the 24-hour prescriptive period start to run.[48] It merely alleged that the: (1) packaging of the goods was defective. and with several holes at different places. Petitioner Lorenzo Shipping. further verified this conclusion. There can be no other conclusion than that the cargo was damaged while on board the vessel of petitioner Lorenzo Shipping. Thus. subject of this case. Petitioner Lorenzo Shipping issued clean bills of lading covering the subject shipment. examined the condition of the cargo on board the vessel San Mateo Victory. Neither did it offer any proof to establish any of the causes that would exempt it from liability for such damage. DAV/OAK 1 to 7 and Nos. is subrogated to the insured’s claims arising from such loss.[37] In the case at bar.R.[46] The contact with sea water caused the steel pipes to rust.S. through its M/V Lorcon IV.J. the steel pipes were rusted all over. no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.. Ltd. marine surveyor of Toplis and Harding. the claim against the carrier for damage or average. Ltd. SO ORDERED. carried the goods from Manila to Davao City. consignee Sumitomo has not received possession of the cargo. 2001 are hereby AFFIRMED. . IN VIEW THEREOF. and the principal.[51] In other words. to enter the flooring of the hatch of the vessel where the steel pipes were stowed. not only did the legal presumption of negligence attach to petitioner Lorenzo Shipping upon the occurrence of damage to the cargo. A bill of lading which has no notation of any defect or damage in the goods is called a “clean bill of lading. and (2) claim for damages has prescribed. there must be delivery of the cargo by the carrier to the consignee at the place of destination. submerging the latter in sea water. which received the cargo. (Ref. which payment covers the loss in full. 2000 and its Resolution dated March 28. 61334 dated August 14. CV No.[36] It then.” Witness Captain Pablo Fernan.[43] In the case at bar. it is clear that respondent insurer was suing on its own behalf in order to enforce its right of subrogation. A bill of lading. thus entitled to the entire fruits of the action. He testified that the shipment had superior packing “because the ends were covered with plastic. thinning and perforated. or transportation charges have been paid. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV was flooded with seawater. Art. which may be found therein upon the opening of the packages.”[49] On the issue of prescription of respondent Chubb and Sons’ claim for damages. the negligence of petitioner was sufficiently established. no plastic on the ends . as against petitioner Lorenzo Shipping. Only then was delivery made and completed.) The twenty-four-hour period prescribed by Art. M/V San Mateo Victory of respondent Gearbulk. were in good condition when they were loaded at the port of origin (Manila) on board petitioner Lorenzo Shipping’s M/V Lorcon IV en route to Davao City.[52] In the case at bar. The steel pipes. Graff. M/V Lorcon IV of petitioner Lorenzo Shipping received the steel pipes in good order and condition. R. What is clear from the evidence is that the consignee received and took possession of the entire shipment only when the latter reached the United States’ shore. Finally. is the country of destination. The subrogated insurer becomes the owner of the claim and. To be sure.. likewise observed the presence of holes at the deck of M/V Lorcon IV. Hence.” R. are not the authorized agents as contemplated by law. and the tank top was rusty.[39] is also a symbol[40] of the goods covered by it.

1304 of the Civil Code. and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. and costs of suit. stating. alleging that San Miguel Corporation had already paid petitioner P4. such ease of Claim must be taken as the best evidence of the intent and purpose of the parties. ordering petitioner Manila Mahogany Manufacturing Corporation to pay private respondent Zenith Insurance Corporation the sum of Five Thousand Pesos (P5. 151). without prejudice to the insurer's right of subrogation. Respondent of course disputes this allegation and states that there was no qualification to its right of subrogation under the Release of Claim executed by petitioner.00) with 6% annual interest from 18 January 1973. to demand reimbursement from San Miguel Corporation of the amount it had paid petitioner.R. On 4 May 1970 the insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. 2207 of the Civil Code. respondent company filed suit in the City Court of Manila for the recovery of P4. The City Court ordered petitioner to pay respondent P4. demands and rights of action that now exist or hereafter arising out of or as a consequence of the accident" after the insurer had paid the proceeds of the policythe compromise agreement of P5. If the amount paid by the insurance company does not fully cover the injury or loss the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. respondents. and the resolution of the same Court.43 and only P5. petitioner claims a preferred right to retain the amount coming from San Miguel Corporation. Petitioner also invokes Art. and much more.000. 54 O. which CFI decision was affirmed by the Court of Appeals. the right of action of petitioner against the insurer was also nullified.00 to respondent company as the subrogation in the Release of Claim it executed in favor of respondent was conditioned on recovery of the total amount of damages petitioner had sustained. to the effect that if the amount paid by an insurance company does not fully cover the loss.00 was received by petitioner from respondent.000. Petitioner refused.00 paid by San Miguel Corporation. 61.00. claims. Inc. P5. Ltd.00) in amicable settlement. refused reimbursement. 1987 MANILA MAHOGANY MANUFACTURING CORPORATION. Inc. which states: If the plaintiff's property has been insured. A creditor. 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. as evidenced by a cash voucher and a Release of Claim executed by the General Manager of petitioner discharging San Miguel Corporation from "all actions. 391) Otherwise stated: private respondent may recover the sum of P5.00 that it had earlier received from the respondent insurance company. COURT OF APPEALS AND ZENITH INSURANCE CORPORATION. respondent company wrote Insurance Adjusters. On 11 December 1972. Since total damages were valued by petitioner at P9. the right of subrogation. not embodied in the Release of Claim. demands the rights of action that now exist or hereafter [sic] develop arising out of or as a consequence of the accident.500. No. dated 21 March 1979.00 it had earlier paid to petitioner. vs. Queensland Insurance Co.500.G. 132 cited in Insurance Code and Insolvency Law with comments and annotations. hence. We find petitioners arguments to be untenable and without merit. No. 1 .00 eventually paid to it by the latter. petitioner argues that it was entitled to go after San Miguel Corporation to claim the additional P4.000. thereby defeating private respondents..000. nevertheless when Manila Mahogany executed another release claim (Exhibit K) discharging San Miguel Corporation from "all actions. without having to turn over said amount to respondent. to whom partial payment has been made. New Civil Code.500.B. petitioner. Insurance Adjusters. the aggrieved party shall be entitled to recover the deficiency from the person causing the loss. may exercise his right for the remainder. the Court of Appeals rightly stated: Petitioner argues that the release claim it executed subrogating Private respondent to any right of action it had against San Miguel Corporation did not preclude Manila Mahogany from filing a deficiency claim against the wrongdoer.00.500.000. respondent company paid petitioner five thousand pesos (P5.00 for the damages to petitioner's motor vehicle. From 6 March 1970 to 6 March 1971. petitioner insured its Mercedes Benz 4-door sedan with respondent insurance company.00 being based on the insurance policy-the insurer is entitled to recover from the insured the amount of insurance money paid (Metropolitan Casualty Insurance Company of New York vs.00). Petitioner now contends it is not bound to pay P4.00 paid by San Miguel Corporation. denying petitioner's motion for reconsideration of it's decision. p.S. SP-08642. claims. PADILLA.000.R.000.500. For the damage caused. Badler. with the modification that petitioner was to pay respondent the total amount of P5." Respondent insurance company thus demanded from petitioner reimbursement of the sum of P4. In the absence of any other evidence to support its allegation that a gentlemen's agreement existed between it and respondent. On appeal the Court of First Instance of Manila affirmed the City Court's decision in toto. subrogating respondent company to all its right to action against San Miguel Corporation. dated 8 February 1980. 229 N. Petitioner's general manager executed a Release of Claim. despite the subrogation in favor of Private respondent.486. J: Petition to review the decision * of the Court of Appeals..00.Y. Although petitioners right to file a deficiency claim against San Miguel Corporation is with legal basis. Perez 1976. 132 Misc. To support its alleged right not to return the P4. Since petitioner by its own acts released San Miguel Corporation. Thus. attorney's fees in the sum of five hundred pesos (P500. Citing Article 2207. in CA-G.500. L-52756 October 12. petitioner cites Art.500.SECOND DIVISION G. vs. H. the contents of said deed having expressed all the intents and purposes of the parties. (Sy Keng & Co.

unless the release was made with the consent of the insurer. then the aggrieved party is the one entitled to recover the deficiency. WHEREFORE.. Rosales vs. Although private respondent prays for the reimbursement of P4. the amount respondent company paid petitioner as insurance. the petition is DENIED.000. the insurer loses his rights against the latter. not of P5. 4 (Emphasis supplied. although not prayed for.00 paid by San Miguel Corporation.000. the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured 3 (Emphasis supplied) The decision of the respondent court ordering petitioner to pay respondent company. 495 . petitioner's right to retain the sum of P5.00 as originally asked for.. but P5. .00. Revised Rules of Court. Air Lines v.00 only and not P5.500.00.500.000.. the trial court should have awarded the latter. Since the insurer can be subrogated to only such rights as the insured may have. We believe the City Court and Court of First Instance erred in not awarding the proper relief. when petitioner released San Miguel Corporation from any liability. the respondent Court acted well within its discretion in awarding P5. If the insurance proceeds are not sufficient to cover the damages suffered by the insured. still. 844. Heald Lumber Co.00 paid under the insurance policy. after receiving payment from the insurer. However. in its companies.00 paid by San Miguel Corporation under its clear right to file a deficiency claim for damages incurred. (Rule 6.. . petitioner is entitled to keep the sum of P4. it is provided in [Article 2207 of the New Civil Code] that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss. 2 If a property is insured and the owner receives the indemnity from the insurer. under the general prayer in the complaint "for such further or other relief as may be deemed just or equitable.. release the wrongdoer who caused the loss. the total amount paid by the insurer. The right of subrogation can only exist after the insurer has paid the otherwise the insured will be deprived of his right to full indemnity. not the P4. thereby entitling private respondent to recover the same.500. should the insured. is also in accord with law and jurisprudence. The judgment appealed from is hereby AFFIRMED with costs against petitioner.00. should the insurance company not fully pay for the injury caused (Article 2207.000. Lim. Sec.. On this score. against the wrongdoer. 77 Phil 120). 3. Cabigao vs. Reyes Ordoveza.As held in Phil. Barrios Tupas.000. To the extent of the amount he has already received from the insurer enjoy's [sic] the right of subrogation.500. Under this legal provision. The Court of Appeals rightly reasoned as follows: It is to be noted that private respondent.000. But in such a case. 50 Phil.) And even if the specific amount asked for in the complaint is P4.. instead of P5. SO ORDERED. premises considered. Baguiro vs. 25 Phil. the Court of Appeals held: .00 San Miguel Corporation had paid to petitioner. the insurer will be entitled to recover from the insured whatever it has paid to the latter.00 it had paid under the insurance policy but P4. In disposing of this issue.500.00 no longer existed. then he may sue the party responsible for the damage for the the [sic] remainder. prays for the recovery. New Civil Code). (Emphasis supplied) As has been observed: .

respondents. For instance. On December 10. 1986. 117 US 312. There are a few recognized exceptions to this rule. of Brooklyn v. vs. CORTES.R. Insurance Company of North America.. Jamilla & Company. Barber Steamship Lines. Erlinda Fabie. Elgin. that on May 26. opposition thereto. 1964. April 7. Erlinda Fabie. 1985. On February 12. Benito P. Consequently. private respondents filed a Motion to Dismiss alleging that PANMALAY had no cause of action against them. the RTC issued an order dated June 16. from liability. upon payment to the assured. L-27427. the RTC denied PANMALAY's motion for reconsideration. . Fabie for private respondents. that the damage caused to the insured car was settled under the "own damage". 1976. where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss. and the latter cannot bring an action against the carrier on his right of subrogation [McCarthy v. On August 19. J. G. coverage of the insurance policy.. 1986 dismissing PANMALAY's complaint for no cause of action. an authorized driver duly licensed to drive the vehicle. DDZ-431 and registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG]. which reads: If the plaintiffs property has been insured. 488 (1923)]. 873 (1886). Joliet & Eastern Railway Co. 1990 PAN MALAYAN INSURANCE CORPORATION. then the insurer. and imprudence" of the unknown driver of a pick-up with plate no. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. the insurer's right of subrogation is defeated [Phoenix Ins. Private respondents. it had indemnified CANLUBANG for the damage to the insured car resulting from a traffic accident allegedly caused by the negligence of the driver of private respondent. failed and refused to pay the claim of PANMALAY. that PANMALAY defrayed the cost of repair of the insured car and.. It accrues simply upon payment of the insurance claim by the insurer [Compania Maritima v. Cabote & Associates for petitioner. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car with plate No.. PANMALAY contended. Ed. the insured car was hit and suffered damages in the amount of P42. the Court finds merit in the petition. 1986. will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. therefore. . In compliance therewith. Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. G. defendants. Inc. No. PANMALAY alleged in its complaint that. 45 Phil. any privity of contract or upon written assignment of claim. and that. nor does it grow out of. 29 L. Co. these orders were upheld by the Court of Appeals on November 27. Deliberating on the various arguments adduced in the pleadings. at the time of the accident. filed a Motion for Bill of Particulars and a supplemental motion thereto. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured. Inc. They argued that payment under the "own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code. Insurance Company of North America v.052. among others. Similarly. 1985. PANMALAY is correct. After hearings conducted on the motion. Erie & Western Transport. 81026 April 3. 12 SCRA 213. COURT OF APPEALS. After private respondents filed its comment to the petition. the Court considered the issues joined and the case submitted for decision. The principal issue presented for resolution before this Court is whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its assured in settlement of an insurance claim against private respondents as the parties allegedly responsible for the damage caused to the insured vehicle. 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. No.R. Fireman's Fund Insurance Company v. pursuant to a motor vehicle insurance policy. petitioner.THIRD DIVISION G. despite repeated demands. L-18965. due to the "carelessness. the settlement is binding on both the assured and the insurer. Co. PANMALAY clarified. PANMALAY also submitted a copy of the insurance policy and the Release of Claim and Subrogation Receipt executed by CANLUBANG in favor of PANMALAY. October 30. and petitioner filed its reply. 229 F 2d 705 (1956)]. recklessness. PANMALAY filed a complaint for damages with the RTC of Makati against private respondents Erlinda Fabie and her driver. and that the driver of the insured car was. ERLINDA FABIE AND HER UNKNOWN DRIVER. PANMALAY filed the present petition for review. was subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer. thereafter. The right of subrogation is not dependent upon.00. On appeal taken by PANMALAY. that its cause of action against private respondents was anchored upon Article 2207 of the Civil Code. PCR-220. And where the insurer pays the assured . the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault.R. if the assured by his own act releases the wrongdoer or third party liable for the loss or damage. 70 SCRA 323]. 1987. . No. reply and rejoinder. therefore. Regulus E.: Petitioner Pan Malayan Insurance Company (PANMALAY) seeks the reversal of a decision of the Court of Appeals which upheld an order of the trial court dismissing for no cause of action PANMALAY's complaint for damages against private respondents Erlinda Fabie and her driver.

the former has no right of subrogation against the third party liable for the loss [Sveriges Angfartygs Assurans Forening v. On the one hand. third parties) and from Section IV-2 which refer to "Property Damage" coverage (liabilities arising from damage caused by the insured vehicle to the properties of third parties). November 14. 21 SCRA 12]. is not found in the insurance policy — to define the basis for its settlement of CANLUBANG's claim under the policy. specifically sub-paragraph (a) thereof. Record. It must be emphasized that the lower court's ruling that the "own damage" coverage under the policy implies damage to the insured car caused by the assured itself. Neither is there merit in the Court of Appeals' ruling that the coverage of insured risks under Section III-1 of the policy does not include to the insured vehicle arising from collision or overturning due to the negligent acts of the third party. the policy will be Section III-1 of the insurance policy which refers to the conditions under which the insurer PANMALAY is liable to indemnify the assured CANLUBANG against damage to or loss of the insured vehicle. L-43706. proceeds from an incorrect comprehension of the phrase "own damage" as used by the insurer. the insurer and the assured. equivocal or uncertain. or bodily injuries suffered by. It is in this sense that the so-called "own damage" coverage under Section III of the insurance policy is differentiated from Sections I and IV-1 which refer to "Third Party Liability" coverage (liabilities arising from the death of. p. Pacific Banking Corporation v. the trial court held that payment by PANMALAY of CANLUBANG's claim under the "own damage" clause of the insurance policy was an admission by the insurer that the damage was caused by the assured and/or its representatives. Inc. On the other hand. PANMALAY contends that the coverage of insured risks under the above section. Inc. CANLUBANG filed its claim with PANMALAY for indemnification of the damage caused to its car. i. September 5. Record. 1986. 1972. L-22146. waterway. Considering that the very parties to the policy were not shown to be in disagreement regarding the meaning and coverage of Section III-1.. but it also violates a fundamental rule on the interpretation of property insurance contracts. National Power Corporation v. No. (d) whilst in transit (including the processes of loading and unloading) incidental to such transit by road. however.. None of the exceptions are availing in the present case. p. housebreaking or (c) by malicious act. 1967.R. G. No. November 28. R. 168 SCRA 1. or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear. Also Articles 1370-1378 of the Civil Code]. L-27932. the driver thereof fled the scene [Record. The above conclusion is without merit. No. determine the import of the various terms and provisions embodied in the policy. In the case of property insurance policies. . indemnify the Insured against loss of or damage to the Scheduled Vehicle and its accessories and spare parts whilst thereon: — (a) by accidental collision or overturning. did not cover damage arising from collision or overturning due to the negligence of third parties as one of the insurable risks. In such an event. such that the parties themselves disagree about the meaning of particular provisions.R. it was improper for the appellate court to indulge in contract construction. It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the sense and meaning of the terms which the parties thereto have used. to apply the ejusdem generis rule. Based on a police report wherein the driver of the insured car reported that after the vehicle was sideswiped by a pick-up. 1. which was the basis for settlement of CANLUBANG's claim. p. incidentally. by fire.R. the Court of Appeals in applying the ejusdem generis rule held that Section III-1 of the policy. xxx xxx xxx [Annex "A-1" of PANMALAY's Compliance with Supplementary Motion for Bill of Particulars. subject to the Limits of Liability. 145 SCRA 533. It is only when the terms of the policy are ambiguous. instead of third parties. G. construed by the courts liberally in favor of the assured and strictly against the insurer [Union Manufacturing Co. that the courts will intervene. Not only does it stem from an erroneous interpretation of the provisions of the section. it simply meant that it had assumed to reimburse the costs for repairing the damage to the insured vehicle [See PANMALAY's Compliance with Supplementary Motion for Bill of Particulars. and therefore did not have any cause of action against private respondents. p. external explosion. G. 31]. When PANMALAY utilized the phrase "own damage" — a phrase which. were of the opinion that PANMALAY was not legally subrogated under Article 2207 of the Civil Code to the rights of CANLUBANG.. October 30. Qua Chee Gan. reads as follows: SECTION III — LOSS OR DAMAGE 1.. No. Emphasis supplied]. 1988. Philippine Guaranty Co.e. The Company will. self ignition or lightning or burglary. 20]. and executed a Release of Claim and Subrogation Receipt in favor of latter. thereby effecting "voluntary payment".. Court of Appeals. inland. v. and to ascribe meaning contrary to the clear intention and understanding of these parties. The lower court and Court of Appeals. It then accepted payment from PANMALAY. the evident intention of the contracting parties. is comprehensive enough to include damage to the insured vehicle arising from collision or overturning due to the fault or negligence of a third party. 47 SCRA 271. CANLUBANG is apparently of the same understanding. lift or elevator. (b) theft. specifically Section III-1(a). Both tribunals concluded that PANMALAY could not now invoke Article 2207 and claim reimbursement from private respondents as alleged wrongdoers or parties responsible for the damage. 34. G.for a loss which is not a risk covered by the policy. rail. Court of Appeals. L-41014.

. Petitioner's complaint for damages against private respondents is hereby REINSTATED. 8 SCRA 343. Qua Chee Gan. 17 SCRA 559. Filipino Merchants Insurance Co. PANMALAY in effect advocates for a more comprehensive coverage of insured risks. June 30. The Capital Insurance & Surety Co.. 98 Phil. Let the case be remanded to the lower court for trial on the merits. recklessness or negligence of third parties. Respondent Court of Appeals therefore committed reversible error in sustaining the lower court's order which dismissed PANMALAY's complaint against private respondents for no cause of action. the Court ruled that the insurer who may have no rights of subrogation due to "voluntary" payment may nevertheless recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code. Court of Appeals.R. The Equitable Insurance and Casualty Co. the present petition is GRANTED. but also to negligent acts of third parties. Del Rosario v. furthermore. the insured vehicle due to negligent or careless acts of third parties is not listed under the general and specific exceptions to the coverage of insured risks which are enumerated in detail in the insurance policy itself [See Annex "A-1" of PANMALAY's Compliance with Supplementary Motion for Bill of Particulars. Inc.. G. a perusal of the provisions of the insurance policy reveals that damage to. G. finds it noteworthy that the meaning advanced by PANMALAY regarding the coverage of Section III-1(a) of the policy is undeniably more beneficial to CANLUBANG than that insisted upon by respondents herein. In the pertinent case of Sveriges Angfartygs Assurans Forening v. supra. Hence. or is an unusual effect of a known cause and. Moreover. Having thus shown from the above discussion that PANMALAY has a cause of action against third parties whose negligence may have caused damage to CANLUBANG's car. it cannot be inferred from jurisprudence that these terms. v.It cannot be said that the meaning given by PANMALAY and CANLUBANG to the phrase "by accidental collision or overturning" found in the first paint of sub-paragraph (a) is untenable. L-16215. L-21574. Inc. WHEREFORE. therefore. the amount which it had paid its assured under the insurance policy. July 16. recklessness and imprudence" of the driver of private respondent Erlinda Fabie. November 28. the Court has on several occasions defined these terms to mean that which takes place "without one's foresight or expectation. is more in keeping with the rationale behind the various rules on the interpretation of insurance contracts favoring the assured or beneficiary so as to effect the dominant purpose of indemnity or payment [See Calanoc v. it is now for the trial court to determine if in fact the damage caused to the insured vehicle was due to the "carelessness. The concept "accident" is not necessarily synonymous with the concept of "no fault". in view of the foregoing. In conclusion.R.. No. Serrano v.. G. 1966. PANMALAY would still have a cause of action against private respondents.R. without qualification. even assuming for the sake of argument that Section III-1(a) of the insurance policy does not cover damage to the insured vehicle caused by negligent acts of third parties. supra. dismissal of PANMALAY's complaint against private respondents for no cause of action would still be a grave error of law. Inc. 79 (1955). Parenthetically. Court of Appeals. By arguing that this section covers losses or damages due not only to malicious. G. 1984. 1989]. June 29.. exclude events resulting in damage or loss due to the fault. No. And this. It may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man. Court of Appeals. L-35529. Certainly. the Court holds that there is no legal obstacle to the filing by PANMALAY of a complaint for damages against private respondents as the third parties allegedly responsible for the damage. 85141. or loss of. not expected" [De la Cruz v. the insurer PANMALAY as subrogee merely prays that it be allowed to institute an action to recover from third parties who allegedly caused damage to the insured vehicle. SO ORDERED. in the final analysis. it must be reiterated that in this present case. . 1963. and that PANMALAY's settlement of CANLUBANG's claim for damages allegedly arising from a collision due to private respondents' negligence would amount to unwarranted or "voluntary payment". No.] The Court. 130 SCRA 327]. an event that proceeds from an unknown cause. Although the terms "accident" or "accidental" as used in insurance contracts have not acquired a technical meaning. No. For even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of its assured under Article 2207 of the Civil Code.R.

Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy No. Pertinent portions of subject policy on the buildings insured. expenses of litigation of P50.R. 112360..604. the decision of the court below is MODIFIED in that defendant New India Assurance Company has and is hereby required to pay plaintiffappellant the amount of P1. and private respondent.000. and not the damage caused by the fire on the two-storey annex building. disposing as follows: "ACCORDINGLY. and (3) Cost against defendant Rizal Surety and Insurance Company.00) Pesos. fire broke out in the compound of Transworld. covering the period from August 14.00 and costs of suit. BLOCK NO. July 18. Inc.. the trial court rendered its decision. METRO MANILA. went to the Court of Appeals. exemplary damages. which came out with its decision of July 15.747. 'Bounds in front partly by one-storey concrete building under galvanized iron roof occupied as canteen and guardhouse. was also destroyed by the fire. 1980 to March 13.00 and Rizal Surety and Insurance Company in the amount of P1.. Inc. praying for judgment ordering Rizal Insurance and New India to pay the amount of P2. 1993 under attack.[7] On January 4. totalling P2.000.. the properties of the Insureds and/or held by them in trust.... (New India).. and upon all the foregoing.376. COURT OF APPEALS and TRANSWORLD KNITTING MILLS.000. transistor-stereo assembly plant. offices. garment and lingerie factory. raw materials and supplies of every kind and description. (Transworld).000. 1980.19 while the other Rizal Surety has to pay the plaintiffappellant P470.R. Rizal Insurance Company.. in Civil Case No.00 as attorney's fees.000. petitioner.. No costs.. PASIG.... 46106. 1993. SO ORDERED.. razing the middle portion of its four-span building and partly gutting the left and right sections thereof. partly by building of two and partly one storey constructed of concrete below. J. vs."[8] Both the petitioner.. read: "‘On stocks of finished and/or unfinished products. On May 26..00 plus legal interest.. 45727 in favor of Transworld Knitting Mills. 1981. Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India Assurance Company but to no avail. which was partly burned.500.. respondents. and at the rear by open spaces..00.. the decretal portion of which reads: The same pieces of property insured with the petitioner were also insured with New India Assurance Company. 1982.328. INC. "WHEREFORE.: At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the July 15.. thence open spaces.000.500. Transworld Knitting Mills.00 representing the actual value of the losses suffered by it..'"[5] (2) Ordering defendant Rizal Surety And Insurance Company to pay Transwrold (sic) Knitting Mills..790. Ltd.. A two- On August 20.000. judgment is hereby rendered as follows: (1)Dismissing the case as against The New India Assurance Co. 46106 before Branch 161 of the then Court of First Instance of Rizal.xxx.. SO ORDERED. No... 1990. timber above undergalvanized iron roof occupied as garage and quarters and partly by open space and/or tracking/ packing...00 as against the amounts of fire insurance coverages respectively extended by New India in the amount of P5. BARRIO UGONG. based on the actual losses sustained by plaintiff Transworld in the fire.. P400.. Branch 161. Ltd. docketed as Civil Case No. 601. 28779. 500. which modified the Ruling[4] of the Regional Trial Court of Pasig. Inc. initially for One Million (P1. 1993 Resolution[2] of the Court of Appeals[3] in CA-G.800. 2000] RIZAL SURETY & INSURANCE COMPANY. warehouse and caretaker's quarters. from the aforesaid judgment of the Court of Appeals New India appealed to this Court theorizing inter alia that the private respondent could not be .818.’ xxx.00) Pesos and eventually increased to One Million Five Hundred Thousand (P1. the amount of P826. private respondent brought against the said insurance companies an action for collection of sum of money and damages. beyond which is the aforementioned Magdalo Street. 1981. The antecedent facts that matter are as follows: On March 13.THIRD DIVISION [G. and location thereof..xxx ‘Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills. CV NO. 1993 Decision[1] and October 22. storey building (behind said four-span building) where fun and amusement machines and spare parts were stored. 867."[9] On January 12. on commission or on joint account with others and/or for which they (sic) responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound at MAGDALO STREET. PURISIMA.67. on its right and left by driveway.[6] Petitioner Rizal Insurance countered that its fire insurance policy sued upon covered only the contents of the four-span building. PHILIPPINES.

2205.SAID DECISION AND RESOLUTION (ANNEXES A AND B) ERRED IN NOT CONSIDERING THE PICTURES (EXHS."[16] Verily. PLUS ATTORNEY'S FEES AND EXPENSES OF LITIGATION (ART. to wit: Petitioner Rizal Insurance and private respondent Transworld. On the other hand. Resolution of the issues posited here hinges on the proper interpretation of the stipulation in subject fire insurance policy regarding its coverage.. 2208 PARS. Therefrom. which petitioner itself cited and invoked.SAID DECISION (ANNEX A) ERRED IN ASSUMING THAT THE ANNEX BUILDING WHERE THE BULK OF THE BURNED PROPERTIES WERE STORED. from May 26. the goods and items stored therein were covered by the same fire insurance policy. and instead. 4 and 11. Court of Appeals). So also.. interposed a Motion for Reconsideration before the Court of Appeals. and on October 22. The rest of the said decision is retained in all other respects. SUSTAINED PARTIAL DAMAGE ONLY.19 and that against Rizal Surety & Insurance Company on the amount of P470. and meets the requisites for compensability under the fire insurance policy sued upon.818. the machines and spare parts stored therein were covered by the fire insurance in dispute. the two-storey building involved. both the trial court and the Court of Appeals found that the so called "annex " was not an annex building but an integral and inseparable part of the fourspan building described in the policy and consequently. ware house and caretaker's quarter..[17] formed part thereof.328.. roof which is adjoining and intercommunicating with the repair of the first right span of the lofty storey building and thence by property fence wall. as regards the imposition of interest. SAID DECISION (ANNEX A) ERRED IN NOT HOLDING THAT TRANSWORLD HAD ACTED IN PALPABLE BAD FAITH AND WITH MALICE IN FILING ITS CLEARLY UNFOUNDED CIVIL ACTION.. As opined by the trial court of origin. raw materials and supplies stored within the premises of respondent Transworld which was an integral part of the four-span building occupied by Transworld.[12] and did not include those stored in the twostorey annex building. II. 1993 is amended but only insofar as the imposition of legal interest is concerned. 1994. It is petitioner's submission that the fire insurance policy litigated upon protected only the contents of the main building (four-span). the Court denied the appeal with finality in G.. 1993. WHERE THE INSURED PROPERTIES WERE LOCATED. petitioner Rizal Surety & Insurance Company found its way to this Court via the present Petition. transistor-stereo assembly plant. 1981. the private respondent theorized that the so called "annex" was not an annex but was actually an integral part of the four-span building[13] and therefore. ruling thus: "WHEREFORE. CIVIL CODE).' SO ORDERED. said areas must form part of the building described in the policy xxx"[14] 'Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills. that. the Decision of July 15.i. 1993. WHICH CLEARLY SHOW THAT THE PREMISES OCCUPIED BY TRANSWORLD. CIVIL CODE). it can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what were stored in the four-span building.[18] petitioner should have specifically excluded the said twostorey building from the coverage of the fire insurance if minded to exclude the same but if did not.[11] The Petition is not impressed with merit. describes the "annex" building as follows: "Two-storey building constructed of partly timber and partly concrete hollow blocks under g.604.R. two requirements must concur in order that the said fun and amusement machines and spare parts would be deemed protected by the fire insurance policy under scrutiny. and the same carry even more weight when the Court of Appeals has affirmed the findings of fact arrived at by the lower court. AND IN NOT ORDERING TRANSWORLD TO PAY TO RIZAL SURETY MORAL AND PUNITIVE DAMAGES (ART.. went on to provide that such fire insurance policy covers the products. said properties must be contained and/or stored in the areas occupied by Transworld and second. ."[10] Undaunted.67. III. 1982 when the complaint was filed until payment is made. having been constructed sometime in 1978. offices. TAKEN IMMEDIATELY AFTER THE FIRE. WAS INCLUDED IN THE COVERAGE OF THE INSURANCE POLICY ISSUED BY RIZAL SURETY TO TRANSWORLD. L-111118 (New India Assurance Company Ltd. the Court of Appeals reconsidered its decision of July 15. vs. contending that: I.compensated for the loss of the fun and amusement machines and spare parts stored at the two-storey building because it (Transworld) had no insurable interest in said goods or items. No. "First. The letter-report of the Manila Adjusters and Surveyor's Company.[15] In the case under consideration. knowing fully well the existence of such building adjoining and intercommunicating with the right section of the four-span building.. 3 TO 7-C-RIZAL SURETY). considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on January 12. "xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound xxx" On February 2. on the assessment against New India Assurance Company on the amount of P1. garment and lingerie factory. which reads: The Court is mindful of the well-entrenched doctrine that factual findings by the Court of Appeals are conclusive on the parties and not reviewable by this Court. a permanent structure which adjoins and intercommunicates with the "first right span of the lofty storey building".

Rizal Surety Insurance Company. the Court in Landicho vs. and so finds. the question of which vessel had been negligent in the collision between the two (2) vessels. or uncertain x x x are to be construed strictly and most strongly against the insurer. Inc. had been adjudicated.R. vs.A. upon the determination of which the finding or judgment was rendered. in contrast to these entered into by parties bargaining on an equal footing.. the Court is of the irresistible conclusion. CV NO.-G. Article 1377 of the New Civil Code provides: "Art.R. the insurance company. equivocal.R. which are ambiguous. and that of this Court..R. Vda. Considering that private respondent's insurable interest in. entitled New India Assurance Company. vs. Sent. Applying the rule of conclusiveness of judgment. The courts cannot ignore that nowadays monopolies. L. the same can no longer be relitigated and passed upon in the present case.[26] All things studiedly considered and viewed in proper perspective. L-48839 in a Resolution dated 6 December 1987. No. No.. in respect of which it is settled that the 'terms in an insurance policy. that the Court of Appeals erred not in holding the petitioner. Rizal Surety Insurance Company. it being the total loss and damage suffered by Transworld for which petitioner Rizal Insurance is liable. that Decision was affirmed by this Court in G."[23] Applying the abovecited pronouncement.67.B.B. Jur. 1994.[21] to wit: "'This rigid application of the rule on ambiguities has become necessary in view of current business practices. De Songco. endowed with overwhelming economic power. especially where forfeiture is involved' (29 Am. and should be indemnified for the loss of the same. vs.. cartels and concentration of capital. which issue had already been passed upon in a case filed by one of the insurers. such contracts (of which policies of insurance and international bills of lading are prime example) obviously call for greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from abuses and imposition.' (44 C. dated February 2.""[20] Equally relevant is the following disquisition of the Court in Fieldmen's Insurance Company. 28779. L-111118.After a careful study. only as those matters actually and directly controverted and determined and not as to matters merely involved therein."[25] The controversy at bar is on all fours with the aforecited case. had been settled in G. Court of Appeals.1377. and compensability for the loss of subject fun and amusement machines and spare parts. Reyes.[19] ruled: "This is particularly true as regards insurance policies. The Court of Appeals fell into clear and reversible error when it disregarded the Decision of this Court affirming the Reyes Decision. No. No. The Reyes Decision thus became final and executory approximately two (2) years before the Sison Decision. 61320-R.S. 27 February 1942. "xxx the judgment in the prior action operates as estoppel only as to those matters in issue or points controverted. resolved that issue in his Decision and held the 'Don Carlos' to have been negligent rather than the 'Yotai Maru' and. and by this Court in G.J. the Court of Appeals correctly adjudged petitioner liable for the amount of P470. The rule on conclusiveness of judgment. Article 24.). and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured. his participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats [sic] d'adhesion). was an issue that was actually. L-111118.. as already noted. controverted and litigated in C. Ineluctably. the previous judgment is conclusive in the second case. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity" Conformably. Private respondent Go Thong was certainly bound by the ruling or judgment of Reyes. Indeed. the stipulation as to the coverage of the fire insurance policy under controversy has created a doubt regarding the portions of the building insured thereby. Ltd. liable for the destruction and loss of the insured buildings and articles of the private respondent. p. directly and expressly raised. and the reason for this is that the 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by.[24] held that the issue of negligence of the shipping line. J. Government Service Insurance System. of Supreme Court of Spain. whose lawyer or managers drafted the fire insurance policy contract under scrutiny. 61206-R. Court of Appeals. the Court opined: "In the case at bar. In fine. Inc. or so negligent as to have proximately caused the collision between them. which obtains under the premises. which is assailed in the case at bar. So also. is conclusive and can no longer be relitigated in a similar case filed by another insurer against the same shipping line on the basis of the same factual circumstances. Citing the aforecited provision of law in point. 1934. and acting exclusively in the interest of. where the appeal of New India from the decision of the Court of Appeals under review. ..R.R. No. the Court does not find any basis for disturbing what the lower courts found and arrived at. settled and sustained by the Court of Appeals in CA-G.A. 13 Dec. 1994. the petitioner.-G. manage to impose upon parties dealing with them cunningly prepared 'agreements' that the weaker party may not change one whit. the issue of which vessel ('Don Carlos' or 'Yotai Maru') had been negligent. which entitles it to be indemnified for the loss thereof. 1174). precludes the relitigation of a particular fact or issue in another action between the same parties based on a different claim or cause of action. L. J. and prevent their becoming traps for the unwary (New Civil Code. was denied with finality by this Court on February 2. the Court.)'"[22] The issue of whether or not Transworld has an insurable interest in the fun and amusement machines and spare parts. it stands to reason that the doubt should be resolved against the petitioner. Ratiocinating further. 181). Rizal Surety Insurance Company. was promulgated. is bound by the ruling of the Court of Appeals and of this Court that the private respondent has an insurable interest in the aforesaid fun and amusement machines and spare parts. in a Resolution.328. in Smith Bell and Company (Phils. had long been settled by this Court and could no longer be relitigated in C.

R. CV NO. dated July 15. dated October 22. 1993. . of the Court of Appeals in CA-G. and the Resolution. 28779 are AFFIRMED in toto. 1993. SO ORDERED. the Decision.WHEREFORE. No pronouncement as to costs.

seeking the remittance of P109. 2005 Decision. both of which are duly organized and existing under the laws of the United States of America and duly licensed to do business in the Philippines.[15] Thirdly. because there was no law or jurisprudence on the treatment of inter-branch deposits between the Philippine branch of a foreign bank and its head office and other branches for purposes of insurance. and Bank of America. the CA found that the money placements were received as part of the bank’s internal dealings by Citibank and BA as agents of their respective head offices. & N.A.081. 170290 April 11. 1976 to June 30. no bank deposit could have arisen from the transactions between the Philippine branch and the head office because there did not exist two separate contracting parties to act as depositor and depositary.[14] Secondly. Thus.10 in dollars. N. such deposits were not included as third-party deposits that must be insured.A. Therefore. 2012 MENDOZA. The RTC further stated that there was no depositor-depository relationship between the respondents and their head office or other branches. 1998. No. Branch 163. the deficiency assessments made by PDIC were improper and erroneous.A. Petitioner.A. the CA cited Section 3(f) of R. Citibank and BA were not liable to pay the same.. as a consequence. 61316.T.83 representing deficiency premium assessments for dollar deposits. (BA) is a national banking association. BA received from its head office and its other foreign branches a total of P629.A.: This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure. PDIC wrote to BA on October 9. 1979.264. No. N. in a letter dated March 16.A.[13] such deposits are excluded from the computation of deposit liabilities.908. S. Citibank and BA sought a declaratory judgment stating that the money placements they received from PDIC raises the issue of whether or not the subject dollar deposits are assessable for insurance purposes under the PDIC Charter with the following assigned errors: .) No. the CA was guided by the procedure observed by the FDIC which considered inter-branch deposits as non-assessable. the CA called attention to the purpose for the creation of PDIC which was to protect the deposits of depositors in the Philippines and not the deposits of the same bank through its head office or foreign branches.163. Aggrieved. Respondents. J.[11] On June 29.[6] Similarly. 3591. G. they were considered inter-branch deposits which were excluded from the assessment base. sometime in 1979.00 in dollars.[3] In 1977.T. 3591. 1978. the Regional Trial Court. Pasig City (RTC) promulgated its Decision[12] in favor of Citibank and BA.R. (Citibank) is a banking corporation while respondent Bank of America.923. S. 3591 (the PDIC Charter) and.311. respectively. 1979 and December 11. received from its head office and other foreign branches a total of P11.R. in accordance with the practice of the United States Federal Deposit Insurance Corporation (FDIC) after which PDIC was patterned.[8] their head office and other foreign branches were not deposits and did not give rise to insurable deposit liabilities under Sections 3 and 4 of R. PDIC examined the books of accounts of BA which revealed that from September 30. 1978. It discovered that Citibank. Philippine Deposit Insurance Corporation.A.”[7] Because BA also excluded these from its deposit liabilities. The RTC reasoned out that the money placements subject of the petitions were not assessable for insurance purposes under the PDIC Charter because said placements were deposits made outside of the Philippines and. 2005 Decision[1] of the Court of Appeals (CA) in CA-G. No. and that the deficiency assessments issued by PDIC were improper and erroneous. The Issues Believing that litigation would inevitably arise from this dispute. with offices in Makati City.” The Facts Petitioner Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality created by virtue of Republic Act (R.THIRD DIVISION PHILIPPINE DEPOSIT INSURANCE CORPORATION.[4] These funds. CV No. In so ruling.869. in the course of its banking business. then such placements could not be subject to assessment under the PDIC Charter.05(b) of the PDIC Rules and Regulations. PDIC appealed to the CA which affirmed the ruling of the RTC in its October 27. under Section 3. Rather. which specifically excludes obligations payable at the office of the bank located outside the Philippines from the definition of a deposit or an insured deposit.[5] As such. . v. Citibank and BA each filed a petition for declaratory relief before the Court of First Instance (now the Regional Trial Court) of Rizal on July 19. This showed that the head office and the Philippine branch were considered as the same entity. entitled “Citibank. this petition. ruling that the subject money placements were not deposits and did not give rise to insurable deposit liabilities. S. & N.versus – CITIBANK.[2] Respondent Citibank. which were lodged in the books of Citibank under the account “Their Account-Head Office/Branches-Foreign Currency.” were not reported to PDIC as deposit liabilities that were subject to assessment for insurance. PDIC assessed Citibank for deficiency in the sum of P1. PDIC conducted an examination of the books of account of Citibank. Since the subject money placements were made in the respective head offices of Citibank and BA located outside the Philippines.A.[10] The cases were then consolidated. Section 3(f) of the PDIC Charter likewise excludes from the definition of the term “deposit” any obligation of a bank payable at the office of the bank located outside the Philippines.[17] Hence.A. 1979. from September 30. As a result.[16] Finally.[9] In their petitions. & N.595.96. N. as amended by R. and BANK OF AMERICA. No. 1977. covered by Certificates of Dollar Time Deposit that were interest-bearing with corresponding maturity dates. 9302. 1974 to June 30.A.T. assailing the October 27. covered by Certificates of Dollar Time Deposit that were interest-bearing with corresponding maturity dates and lodged in their books under the account “Due to Head Office/Branches.

District of Columbia Circuit. A depositor in one branch cannot issue checks or drafts upon another branch or demand payment from such other branch. 6426 otherwise known as the “Foreign Currency Deposit Act of the Philippines. however. without a separate legal personality from their parent company. 3591. In the leading case of Sokoloff v. when considered with relation to the parent bank they are not independent agencies. each branch becomes a separate business entity with separate books of account. A branch has no separate legal personality. No. Section 3(b) of R.A. they are not subject to the provisions of Republic Act No. It may choose to incorporate its own subsidiary as a domestic corporation.” In addition. in which case such subsidiary would have its own separate and independent legal personality to conduct business in the country. there is no creditor-debtor relationship and the funds placed in the Philippine branch belong to one and the same bank. which defines the terms “bank” and “banking institutions.[18] The Court begins by examining the manner by which a foreign corporation can establish its presence in the Philippines.A. must be viewed as a part of the parent bank rather than as an independent entity. and are subject to the supervision and control of the parent bank. as such. there must be at least two parties – a depositor and a depository – each with a legal personality distinct from the other. For lack of judicial precedents on this issue. and in many other respects the branches are considered separate corporate entities and as distinct from one another as any other bank. specifically. [22] They also argue that the money placements are not deposits.[20] Under Philippine law. The National City Bank of New York. no such relationship exists because the head office and said foreign branches are deemed to be two distinct entities. Purpose of the PDIC PDIC argues that the head offices of Citibank and BA and their individual foreign branches are separate and independent entities. 7221 (An Act Liberalizing the Entry of Foreign Banks) both require the head office of a foreign bank to guarantee the prompt payment of all the liabilities of its Philippine branch.” PDIC contends that the law treats a branch of a foreign bank as a separate and independent banking unit. and are instrumentalities whereby the parent bank carries on its business. The appellate court erred in ruling that the subject dollar deposits are money placements. what their name imports.[21] The respondents.[24] Respondents similarly identify only one issue in this case: Whether or not the money placements subject matter of these petitions are assessable for insurance purposes under the PDIC Act. and their business conduct and policies are controlled by the parent bank and their property and assets belong to the parent bank.A. Nevertheless. The Court’s Ruling In the case of Citibank and BA. thus. can no longer be disturbed and should be accorded great weight by this Court. the capacity in which the same were received by the respondents and the exclusion of inter-branch deposits from assessment. BCCI Holdings Luxembourg[26] where the United States Court of Appeals.A. with regard to the nature of the money placements. as the name implies. being one and the same entity.[23] This Court is of the opinion that the key to the resolution of this controversy is the relationship of the Philippine branches of Citibank and BA to their respective head offices and their other foreign branches. emphasized that “while individual bank branches may be treated as independent of one another. In the case of foreign branches. and are established for its own particular purposes. although nominally held in the names of the particular branches. Philippine banking laws also support the conclusion that the head office of a foreign bank and its branches are considered as one legal entity. to wit: Republic Act No. It insists that under American jurisprudence. it may create a branch in the Philippines. on the other hand. No. merely branches. They postulate that for a deposit to exist. 8791: .” The appellate court erred in ruling that the subject dollar deposits are not covered by the PDIC insurance. In the alternative. [Emphases supplied] This ruling was later reiterated in the more recent case of United States v. merely branches.[19] The sole question to be resolved in this case is whether the funds placed in the Philippine branch by the head office and foreign branches of Citibank and BA are insurable deposits under the PDIC Charter and. unless separately incorporated. they are. A bank cannot have a deposit with itself. which would not be a legally independent unit. and simply obtain a license to do business in the Philippines. Ultimate liability for a debt of a branch would rest upon the parent bank. the funds placed by the respondents in their respective branches in the Philippines should not be treated as deposits made by third parties subject to deposit insurance under the PDIC Charter. Their Philippine branches are. B. Citibank and BA. each branch. are subject to assessment for insurance premiums. Thus. initially point out that the factual findings of the RTC and the CA. 8791 (The General Banking Law of 2000) and Section 5 of R. Where a bank maintains branches. Because the respondents’ respective head offices and their branches form only a single legal entity.[25] where the Supreme Court of New York held: The Court rules in the negative. the Court seeks guidance from American jurisprudence. Section 75 of R. it is apparent that they both did not incorporate a separate domestic corporation to represent its business interests in the Philippines. No. a bank’s head office and its branches have a principal-agent relationship only if they operate in the same jurisdiction.

suppose the Philippine branch of Citibank suddenly closes for some reason. which amended the PDIC Charter. Citibank N. it is unreasonable for PDIC to require the respondents.It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate. While branches are treated as separate business units for commercial and financial reporting purposes. No. as a basic policy. in the end. Both branches have existing accounts with their head office and when a money placement is made in relation to the acquisition of foreign currency from the international market. When the Philippine branch needs to procure foreign currencies. it defines money placement as a deposit which is received with authority to invest.A. it would result to the incongruous situation where Citibank. maintain faith and confidence in the country's banking system. preserve. Citibank and BA. 6426. the head office remains responsible and answerable for the liabilities of its branches which are under its supervision and control. as the head office. to insure the money placements made by their home office and other branches. 75. Funds not a deposit under the definition of the PDIC Charter.[28] PDIC then goes on to assert that the funds received by Citibank and BA are deposits. – The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine branches. As such. Towards this end. it is clear that the head office of a bank and its branches are considered as one under the eyes of the law. No. No. 3591 (The PDIC Charter) which provides: Section 1. and (3) the respondents maintain 100% foreign currency cover for their deposit liability arising from the dollar time deposits as required by Section 4 of R. the amount is credited to the . as herein provided. and protect it from illegal schemes and machinations.A. .[29] To refute PDIC’s allegations. as in this case.Sec. promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits. Statement of State Policy and Objectives. 6848. No. It has already been sufficiently established by US jurisprudence and Philippine statutes that the head office shall answer for the liabilities of its branch.A. 9576. R. 7721: Sec. Head Office Guarantee. Citing R. would be placed in the ridiculous position of having to reimburse itself. the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits. it argues that the same cannot be considered money placements. Republic Act No. the institution holding the funds and the one which made the placements are one and the same legal entity. would then be required to answer for the deposit liabilities of Citibank Philippines.A. the respondents explain the inter-branch transactions which necessitate the creation of the accounts or placements subject of this case. The purpose of the PDIC is to protect the depositing public in the event of a bank closure.A. Residents and citizens of the Philippines who are creditors of a branch in the Philippines of foreign bank shall have preferential rights to the assets of such branch in accordance with the existing laws. and which shall have the powers hereinafter granted.A. There is no need to complicate the matter when it can be solved by simple logic bolstered by law and jurisprudence. If the Court were to adopt the posture of PDIC that the head office and the branch are two separate entities and that the funds placed by the head office and its foreign branches with the Philippine branch are considered deposits within the meaning of the PDIC Charter. it will coordinate with a branch in another country which handles foreign currency purchases. PDIC must be reminded of the purpose for its creation. (2) the dollar deposits were credited as dollar time accounts and were covered by Certificates of Dollar Time Deposit which were interestbearing and payable upon maturity. Deposit insurance is superfluous and entirely unnecessary when. Excluded from assessment PDIC avers that the funds are dollar deposits and not money placements. Because there is no evidence to indicate that the respondents were authorized to invest the subject dollar deposits. as contemplated by Section 3(f) of R. the Court agrees with the CA ruling that there is nothing in the definition of a “bank” and a “banking institution” in Section 3(b) of the PDIC Charter[27] which explicitly states that the head office of a foreign bank and its other branches are separate and distinct from their Philippine branches. for the following reasons: (1) the dollar deposits were received by Citibank and BA in the course of their banking operations from their respective head office and foreign branches and were recorded in their books as “Account-Head Office/Branches-Time Deposits” pursuant to Central Bank Circular No. and in helping develop a sound and stable banking system at all times. The Corporation shall. 3591. Head Office Guarantee. There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the “Corporation” which shall insure. – In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank. the deposits of all banks which are entitled to the benefits of insurance under this Act.A. reaffirmed the rationale for the establishment of the PDIC: Section 1. the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. as depositor. Surely our law makers could not have envisioned such a preposterous circumstance when they created PDIC. No. No. 6426. Moreover. Now. as espoused in Section 1 of R. for the losses it may incur occasioned by the closure of Citibank Philippines. 5. Based on the foregoing. 343 which implements R. Finally.

after which PDIC was modelled.A. making them fall under the exclusions to deposit liabilities. This is further documented by the issuance of a certificate of time deposit with a stated interest rate and maturity date. Inter-branch deposits refer to funds of one branch deposited in another branch and both branches are part of the same parent company and it is the practice of the FDIC to exclude such inter-branch deposits from a bank’s total deposit liabilities subject to assessment. which is the determination of whether the funds in question are subject to assessment for deposit insurance as required by the PDIC Charter.[30] As regards the maintenance of currency cover over the subject money placements. 6848 cannot aid us in deciding this case. when adopted and confirmed by the CA.A.account of the Philippine branch with its head office while the same is debited from the account of the branch which facilitated the purchase. checking. Reliance on the said law is unfounded because nowhere in the law is the term “money placement” defined. Provided. that any insured bank which is incorporated under the laws of the Philippines may elect to include for insurance its deposit obligation payable only at such branch. then it should be painfully obvious that R. are binding and conclusive on this Court. 2005 Decision of the Court of Appeals in CA-G. Since Citibank and BA are neither Islamic banks nor are they located anywhere near the ARMM. WHEREFORE. and credited to the account of the other branch. No. Noticeably. the petition is DENIED. PDIC does not dispute the veracity of the internal transactions of the respondents which gave rise to the issuance of the certificates of time deposit for the funds the subject of the present dispute.” PDIC desperately cites R. the respondents point out that they maintain foreign currency cover in excess of what is required by law as a matter of prudent banking practice. that inter-branch deposits were excluded from the assessment base. The October 27. the determination of facts of the lower courts shall be accepted at face value by this Court. Provided further. Hence. because it is payable outside of the Philippines. No. In its struggle to find an adequate definition of “money placement. The interest rate represents the cost of obtaining the funds while the maturity date represents the date on which the placement must be returned.[31] PDIC attempts to define money placement in order to impugn the respondents’ claim that the funds received from their head office and other branches are money placements and not deposits. together with the cost for obtaining the funds.A. In the process. and were payable. . 61316 is AFFIRMED. and will generally not be reviewed on appeal.[34] All things considered. Shaffer as to the treatment of such inter-branch deposits by the FDIC. Furthermore. 3(f) The term “deposit” means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial. it is not considered a deposit pursuant to Section 3(f) of the PDIC Charter: Sec. then a Fiscal Agent and Head of the Assessment Section of the FDIC. time or thrift account or which is evidenced by its certificate of deposit. and are consequently subject to assessment for deposit insurance. the amount previously credited to the account of the Philippine branch is debited. The respondents insist that the interest rate and maturity date are simply the basis for the debit and credit entries made by the head office in the accounts of its branches to reflect the inter-branch accommodation. PDIC also fails to impugn the truth of the testimony of John David Shaffer. which resulted from the inter-branch transactions. thus. Additionally. and trust funds held by such bank whether retained or deposited in any department of said bank or deposit in another bank. that any obligation of a bank which is payable at the office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of this Act or included as part of the total deposits or of the insured deposits. savings. took place in the books of account of the respective branches in their head office located in the United States. [Emphasis supplied] The testimony of Mr. thereby causing this case to drag on for more than three decades. as defined under the PDIC Charter. thus. is also persuasive. excluded from assessment. 6848.[32] making it utterly irrelevant to the case at bench. Neither does it question the findings of the RTC and the CA that the money placements were made. following the well-established principle that factual findings of the trial court. No. On the maturity date. Therefore. as contemplated by the PDIC Charter. PDIC heavily relies on the fact that the respondents documented the money placements with certificates of time deposit to simply conclude that the funds involved are deposits. R. outside of the Philippines. 6848 refers to the establishment of an Islamic bank subject to the rulings of Islamic Shari’a to assist in the development of the Autonomous Region of Muslim Mindanao (ARMM). it loses sight of the important issue in this case. It is this kind of reasoning that creates non-existent obscurities in the law and obstructs the prompt resolution of what is essentially a straightforward issue. the Court finds that the funds in question are not deposits within the definition of the PDIC Charter and are. the transfer of funds.R. together with such other obligations of a bank as the Board of Directors shall find and shall prescribe by regulations to be deposit liabilities of the Bank. The Charter of the Al-Amanah Islamic Investment Bank of the Philippines. CV No.[33] As explained by the respondents.

161481 on the life of Hilario Gercio. the insurer. Should the provisions of the Code of Commerce and the Civil Code in force in 1910.000. Adela Garcia de Gercio. This brings us to the main issue. next. or an aleatory contract? The subject is further complicated by the fact that if an insurance contract should be considered a donation. 17955. The case was then submitted for decision on an agreed statement of facts. a donation causa mortis. Sevilla for appellee. On March 4. Feria and La O and P. On the date the policy was issued. Although the authorities have been exhausted. yet there can be found in it no provision either permitting or prohibiting the insured to change the beneficiary. we have decided not to accede to the motion of the appellee and not to order the dismissal of the appeal of the appellant. vs. that the Insurance Act. however. then to his wife. Perkins and Brady and Jesus Trinidad for appellant. 2427. ET AL. In this connection. It will be noticed. with one Andrea Zialcita as beneficiary. this part of the decision can easily be accomplished. 1925 HILARIO GERCIO. we will pass upon the first. the Sun Life Assurance Co. By its terms. discussing its legal aspects. a contract in favor of a third person. whereby the husband names the wife as the beneficiary. it should be remembered that the insurance policy was taken out in 1910. amounts in cash. It will be noticed further that it is stipulated that the insurance company has persistently refused to change the beneficiary as desired by the plaintiff. the insurance company agreed to insure the life of Hilario Gercio for the sum of P/2. With all of these introductory matters disposed of and with the legal question to the forefront. of Canada. guide the court in its decision? On the supposition. a husband may then never insure his life in favor of his wife . SUN LIFE ASSURANCE OF CANADA. became effective in 1914. Fisher. A default judgment was taken in the lower court against the defendant Andrea Zialcita. are the defendants. no legal situation exactly like the one before us has been encountered. 1930. or if the insured should die before said date. As the motion presented by the appellee and the first two errors assigned by the appellant are preliminary in nature. to be paid him on February 1. to test a life insurance policy by its provisions. SUN LIFE ASSURANCE OF CANADA. otherwise to the executors.. or the general principles of law. Hilario Gercio formally notified the Sun Life Assurance Co. No. with costs. The policy was what is known as a twenty-year endowment policy. that the Code of Commerce is applicable.: The question of first impression in the law of life insurance to be here decided is whether the insured — the husband — has the power to change the beneficiary — the former wife — and to name instead his actual wife. where the insured and the beneficiary have been divorced and where the policy of insurance does not expressly reserve to the insured the right to change the beneficiary. or assigns of the insured. Vicente Romualdez. Before. a decree of divorce was issued in civil case no. of Canada that he had revoked his donation in favor of Andrea Zialcita. paid-up policies. first. Towards the end of the year 1919. and that he had designated in her stead his present wife. The complaint is in the nature of mandamus. administrators. or the provisions of the Insurance Act now in force. be denominated a donation inter vivos. Appellee argues that the "substantial defendant" was Andrea Zialcita. the beneficiary. J. however. Should the insurance contract. and that the effort to change the beneficiary was made in 1922. if indeed it is practicable. the Sun Life Assurance Co. of Canada issued insurance policy No. and Andrea Zialcita. As they are stipulated. The Sun Life Assurance Co. MALCOLM. The policy also contained a schedule of reserves. guaranteed. 1922. 1910. and ordered the defendant company to eliminate from the insurance policy the name of Andrea Zialcita as beneficiary and to substitute therefor such name as the plaintiff might furnish to the defendant for that purpose. the insurance company has refused and still refuses to do. The appellee has countered with a motion which asks the court to dismiss the appeal of the defendant Sun Life Assurance Co. the insured. it is advisable to have before us the essential facts. appellant.R. of Canada has appealed and has assigned three errors alleged to have been committed by the lower court. of Canada. the Sun Life Assurance Co. 23703 September 28. first demurred to the complaint and when the demurrer was overruled. The policy did not include any provision reserving to the insured the right to change the beneficiary. The judgment of the trial court was in favor of the plaintiff without costs. 1920. of Canada to change the beneficiary in the policy issued by the defendant company on the life of the plaintiff Hilario Gercio. and renewed insurance. The Sun Life Assurance Co. as the beneficiary of the policy. Andrea Zialcita was the lawful wife of Hilario Gercio. J. the defendant insurance company will only be fully protected if the question at issue is conclusively determined. This. Andrea Zialcita. of Canada has no interest in the appeal. which had the effect of completely dissolving the bonds of matrimony contracted by Hilario Gercio and Andrea Zialcita. it becomes our first duty to determine what law should be applied to the facts. As the rights of Andrea Zialcita in the policy are rights which are enforceable by her only against the insurance company.EN BANC G. filed an answer in the nature of a general denial. On the supposition. DeWitt. should she survive him. On January 29. of Canada. plaintiff-appellee. Gercio requested the insurance company to eliminate Andrea Zialcita as beneficiary. she was convicted of the crime of adultery. defendants. Mrs. that the Civil Code regulates insurance contracts. Hilario Gercio. it would be most difficult. No. is the plaintiff. The other defendant. Accordingly. and that since she was adjudged in default. On September 4. Its purpose is to compel the defendant Sun Life Assurance Co. that the complaint prays for affirmative relief against the insurance company.

. therefore. Justice Bradley. the survivor. we do so with the purpose of having the Philippine Law of Insurance conform as nearly as possible to the modern Law of Insurance as found in the United States proper. and alimony was decreed and paid to the wife. in the first place. As to the effect produced by the divorce. the Civil Code. it is held that a life insurance policy of a husband made payable to the wife as beneficiary.. 52 Am. xxx xxx xxx The other point. The first of these decisions. . In adopting these rules. 238. as well as to an ordinary life insurance policy. a civil law jurisdiction. has acquired a vested and irrevocable interest in the policy. It will be proper. we would. Ann. .S. to ascertain what is an insurable interest. are void. in order to take a policy out of the category of mere wager. that a person who procures a policy upon his own life. There. . they were divorced. It must follow. she has a subsisting interest in the policy. This action was brought by Francisca. a subsequent divorce does not destroy her rights under the policy. cash surrender value. the Philippine Divorce Law. But precisely what interest is necessary. then husband and wife. It would seem. where the jurists have disagreed as to the classification of the insurance contract. in part said: This was an action on a policy of the court. has been the subject of much discussion. as against public policy. unless the policy itself. with but slight dissent in the courts of this country. or the charter of the insurance company. payable to the survivor on the death of either. 2710. that if a policy is taken out upon a husband's life the wife is named as beneficiary therein. it is said that our Insurance Act is mostly taken from the statute of California. [N. . the insured cannot make such change. or 1914. 29 Phil. to know the stand taken by the Supreme Court of that State. They both subsequently married again. A man cannot take out insurance on the life of a total stranger. . in point of time. it declined to consider the proceeds of the insurance policy as a donation or gift. on the joint lives of George F. Mr.A. policies in which the insured party has no interest in its loss or destruction. although he pays the premiums himself. merely provides in section 9 that the decree of divorce shall dissolve the community property as soon as such decree becomes final. 457). and keeps the policy in his exclusive possession. In January. and is simply the object of another's bounty. 1027. Booth ([1895]). or 1922.S. To that end. there should also be taken into account two decisions coming from the Supreme Court of the United States. because there insurance is considered as strictly an indemnity.R. inasmuch as article 1334 prohibits all donations between spouses during marriage. there is likewise no provision either permitting or prohibiting the insured to change the beneficiary.and vice versa. St. . We must perforce conclude that whether the case be considered as of 1910.. that is. that this court was right when in the case of Del Val vs. 50 La. As carrying great weight. In policy. it will be found that in this Law. 534). Still. and whether the case be considered in the light of the Code of Commerce.) On the further supposition that the Insurance Act applies. which he may keep alive for his own benefit by paying the premiums or assessments if the person who effected the insurance fails or refuses to do so. Unlike the statutes of a few jurisdictions. although he has parted with nothing. If the husband wishes to retain to himself the control and ownership of the policy he may so provide in the policy.]. has no power to change the beneficiary. Del Val ([1915]). 1871. in which we find the following: . delivering the opinion of the court. 1868. The Civil Code has no provisions which relate directly and specifically to lifeinsurance contracts or to the destination of life-insurance proceeds. in February. 94 U. (Re Succession of Leone Desforges [1914]. So when a policy of life insurance is taken out by the husband in which the wife is named as beneficiary. saying "the contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. To begin with. but have agreed in their conclusions as will hereafter see. after which. It is generally agreed that mere wager policies. there is no provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the husband to be changed after a divorce. an interest of some sort in the insured life must exist. These are some of the pertinent principles of the Law of Insurance. Lambert vs Penn Mutual Life Insurance Company of Philadelphia and L'Hote & Co. [1898].. But in life insurance the loss can seldom be measured by pecuniary values. But if the policy contains no provision authorizing a change of beneficiary without the beneficiary's consent. even at the expense of clogging the decision with unnecessary citation of authority. 110 Cal. And this applies to a policy to which there are attached the incidents of a loan value. 52 L. in part said: July 25. or the Insurance Act. is entitled to more serious consideration. an automatic extension by premiums paid. we have gathered the rules which follow from the best considered American authorities. To reinforce them... In marine and fire insurance the difficulty is not so great. therefore. It should prove of interest. Rep. and Francisca Schaefer. Schaefer died. . Act No. George F. A California decision oft cited in the Cyclopedias is Yore vs. 1870. Accordingly. The beneficiary has an absolute vested interest in the policy from the date of its issuance and delivery. so provides. 81). nor on that of one who is not so connected with him as to make the continuance of the life a matter of some real interest to him. is Connecticut Mutual Life Insurance Company vs Schaefer ([1877]). . in the absence of a statute to the contrary. the deficiencies in the law will have to be supplemented by the general principles prevailing on the subject. therefore. and there was never any issue of the marriage. It seems to be the settled doctrine. relating to the alleged cessation of insurable interest by reason of the divorce of the parties. 689. is the separate property of the beneficiary and beyond the control of the husband. bring to notice certain decisions which seem to us to have controlling influence. payable to a designated beneficiary. The wife has an insurable interest in the life of her husband. and to an endowment policy. although we have very little difficulty in disposing of it." Some satisfaction is gathered from the perplexities of the Louisiana Supreme Court.

the policy was payable to the personal representatives of the insured. originally valid.]. by deed or by will. 202 Pa. In the Minnesota case cited. An action was brought by Wallace to compel Mrs. or the children as a class will take the proceeds. If for any reason.. . his wife. of which she could not be deprived without her consent. all the beneficiaries. she will take nothing under the policy. nor both together had power to destroy the vested interest of the children in the policy. be sustained as a joint insurance. payment was to be made to his wife if she survive him. The opinion there delivered also invokes added interest when it is noted that it was written by Mr. Re Succession of Leonce Desforges. on their joint lives. But however that may be. 24 South. Therein. announced: In so far as the law of Louisiana is concerned. A jurisdiction which found itself in somewhat the same situation as the Philippines. 478). The divorce was granted. Justice Elliott said: As soon as the policy was issued Mrs. and Mrs. We do not hesitate to say. 52 L. but. a woman in the life of her husband. the latter. and that there is no power in the person procuring the insurance. for the benefit of the survivor or survivors.. Wallace to relinquish her interest in the insurance policy. 3 L. is not avoided by the cessation of the insurable interest. 221 Fed. or his executors. by any act of his. means those who in law are the owners of the policy. which was created for them by the contract when the policy was issued. If the wife die before the insured. 796). .) Some question has arisen as to the power of the insured to destroy the vested interest of the beneficiary in the policy. That point is well covered in the case of Entwistle vs.. if a divorce was granted to Mrs. the author of a text on insurance. all the beneficiaries are living. Co. which belong to the beneficiaries to whom they are payable.. 27. 134). To quote: . in other words. Foster. or to the question whether the cessation of interest avoids a policy good at its inception. Hume ([1888]. a guardian would have no special difficulty in reasonable protecting the interest of his wards.S. the moment it is issued. 689. ([1915]). if the insured die within such period. then the children take nothing under the policy. The interest of the children of the insured. in our opinion.. without reference to any other interest. The provision that the policy may be converted into cash at the option of the holder does not change the relative rights of the parties. nor the wife. No right to change the beneficiary was reserved. prudence required the conversion of the policy into cash. It is indeed the general rule that a policy. St. . not only the wife. [N. has not as yet happened. (Lambert vs Penn Mutual Life Ins.) (See in same connection a leading decision of the Louisiana Supreme Court. if he lived. Wallace agreed to relinquish all claim to any property arising out of the relation of husband and wife. of which she cannot be deprived without her consent. and are entitled to the rights and benefits which may accrue under it. within the twenty years. . the parties signed a contract by which Wallace agreed that. . Mr. that a policy taken out in good faith and valid at its inception. while they are living. The old tontines were based substantially on this principle. announced the following doctrines: We think it cannot be doubted that in the instance of contracts of insurance with a wife or children. 141). 1027. 128 U. as used in this connection. to himself at the end of twenty years.R. the court might award her certain specified property as alimony. Wallace. and their validity has never been called in question.]. to the person or persons named in it as the beneficiary or beneficiaries. xxx xxx xxx The policy in question might. and nothing has occurred by which the rights of the parties are in any way changed. During the pendency of divorce proceedings. as in this case. is Louisiana. If Wallace died before the death of his wife. or by their assignee. except under the terms of the contract with the insurance company. [1914]. the beneficiary has a vested right in the policy. vested in them at the same time that the interest of the wife became vested in her. of which she cannot be deprived without her consent. Indeed it may be said generally that any reasonable expectation of pecuniary benefit or advantage from the continued life of another creates an insurable interest in such life. later a member of this court.R. or two or more persons. it is manifest that the option can only be exercised by those having the full legal interest in the policy. They are all payees. 16.A. and together constitute the assured. with the proviso that. District Judge. Chief Justice Fuller. We agree entirely with the suggestion that "holder" or "holders". Neither the husband. In re Dreuil & Co. one Wallace effected a "twenty-year endowment" policy of insurance on his life. upon their insurable interest in the life of the husband or father. nor has he any interest therein of which he can avail himself. [N.S. . 97 Minn. administrators. . We see no reason to discriminate between the wife and the children. and the creditor in the life of his debtor. it may also be considered settled that where a policy is of the semitontine variety. ([1906]. And there is no doubt that a man may effect an insurance on his own life for the benefit of a relative or fried. to transfer to any other person the interest of the person named. Ann. by the children of the insured. Justice Elliott.A. Mr. . The interest of the wife was wholly contingent upon her surviving her husband. and she could convey no greater interest in the policy than she herself had. payable in the event of his death within twenty years to Emma G. under the policy. 50 La.S. unless such be the necessary effect of the provisions of the policy itself. however. does not cease to be so by the cessation of the assured party's interest in the life insured. because of having to reconcile the civil law with the more modern principles of insurance. Travelers Insurance Company ([1902]. can exercise no power of disposition over the same without their consent. subject to be divested only by her death. If the insured should die before the wife. the lapse of . It was held that the wife has a vested interest in the policy. Both interests were contingent. or both. Wallace.In our judgment of life policy.It is well settled that a man has an insurable interest in his own life and in that of his wife and children. The contingency which will determine whether the wife.. Her interest in the policy was her individual property. and the money to become due under it. in the present case. nor upon his death have his personal representatives or his creditors any interest in the proceeds of such contracts.. In a case coming before the Federal Courts. the facts were that an endowment insurance policy provided for payment of the amount thereof at the expiration of twenty years to the insured. The case most nearly on all fours with the one at bar is that of Wallace vs Mutual Benefit Life Insurance Co. as the organ of the court. . or assigns. Wallace acquired a vested interest therein. belong. Another controlling decision of the United States Supreme Court is that of the Central National Bank of Washington City vs.

we are irresistibly led to the conclusion that the question at issue must be answered in the negative. 612. 33 Am. Lloyd vs. 466). L.. during the life of the beneficiary. J. 137 Ill.R. Eq.S.. So ordered. 97 Tex.A. In my judgment. McKee vs.. She could keep the policy alive by paying the premiums. vol. is payable to the surviving beneficiary named. 130).. naming her. We are unable to see how the plaintiff's interest in the policy was primary or superior to that of the husband. and many other things may occur. 50 Wis.C. The rights of a beneficiary in an ordinary life insurance policy become vested upon the issuance of the policy. 79. payable upon his death to his wife. 1649 et seq. Avanceña. J. The Law of Insurance.. 385. 370). The plaintiff and the other parties who are claiming an interest in said policy should wait until there is something due them under the same. but they were entirely separate and distinct. thereby rendering the contract of insurance of non effect.].R. Ins. The fact that she was his wife at the time the policy was issued may have been. L. Begley vs. [N. Conn. 77. Rep. Overhiser ([1900].. 197 Mo. 14).. App. C. or by the failure of the insured to pay the premiums. and for many reasons such persons may never have a right to receive anything when the policy does become due and payable.R.. L.. 122 Tenn. be defeated only as provided by the terms of the policy. as follows: The benefit accruing from a policy of life insurance upon the life of a married man. JJ. Snyder vs. [N. 96). New York Life Insurance Co. contingent or otherwise. 245 Fed.A.. It was held. 1376 et seq. New York Life Ins. 2. 183 Iowa. Street. He had no interest in her property in this policy. after the divorce as before. St. Berwald ([1903]. ([1894]. that the judgment of the lower court should be revoked.A. I agree with the majority of the court. On the admitted facts and the authorities supporting the nearly universally accepted principles of insurance. 278). Johns. Griffith vs. . pp. Romualdez. Villamor.. The judgment appealed from will be reversed and the complaint ordered dismissed as to the appellant.. concurs in the result.A.. He could deprive her of her interest absolutely in but one way. Co.. App. 62 Ohio St. ([1906]. 50 L.S.L. with which compare Foster vs.. took no part. 162). Phoenix Ins. Separate Opinions JOHNSON.. 248. which would render it non effective.].. pp.. Condon vs. the reason why she was named as beneficiary in the event of his death. Smith and Smith ([1889]. Co.. Co. Ins. Co. 14 R. is impossible. 35 Tex. but it was free from the control of her husband.A. Somewhat the same question came before the Supreme Court of Kansas in the leading case of Filley vs. 608.. Union Central Life Ins. by living more than twenty years. of Hartford ([1902]). New York L.]. ([1859]. the question presented by the plaintiff is purely an academic one. Green ([1912]. vs. ([1918]. Supreme Ruler of Fraternal Mystic Circle ([1909]. and can thereafter. 513. without special pronouncement as to the costs in either instance. 627. Royal Union Mut. Hatch ([1904].. 101 Cal. 209). 220. Ostrand. Gile ([1880]. 95 Md. the following corroborative authority could also be taken into account: Joyce. . 8 L. 63 Ohio St. [1915 D]. Washington Life Insurance Co.. Rep.R. although she may have years thereafter secured a divorce from her husband.A. 394 et seq. 603) and Hatch vs. In my judgment. pp. Ins.J. Preston vs. It remains her separate property. if they ever become due and payable. Co. . 40 Am. vs.. St. .. If space permitted. 383. the one from the other. Co. and Villa-Real. the action is premature and should have been dismissed. For the courts to declare now who are the persons entitled to receive the amounts due.R. 373). The premiums may not be paid.. Dunham ([1878].S. vs. 46 Conn. Phoenix Mut. but for a different reason. Civ. . concurring in the result. Blum vs. 49 L.. Ins. Both interests were contingent. 737). Rep. Illinois Life Insurance Company ([1914]). L. 45 N. . 75 Am. 129). Her interest was free from any claim on the part of the insured or his creditors. [N. Miller ([1907]). Supreme Council American Legion of Honor vs. 923. Mut. and he was thereafter again married to one who sustained the relation of wife to him at the time of his death. It was contingent upon these events. 28 Mo. But her property interest in the policy after it was issued did not in any reasonable sense arise out of the marriage relation. 37 Corpus Juris. second edition. 552). 45 L.J. ([1917]. and undoubtedly was. 91 Kansas. before the policy becomes due. .R. if the insured did not do so.time. 81 Am. The wife's interest was not affected by the decree of court which dissolved the marriage contract between the parties. Green vs.. 658). for the reason that nothing may ever become payable under the contract of insurance. 147 Ky.. Co. The purpose of the petition is to have declared the rights of certain persons in an insurance policy which is not yet due and payable. Buxer ([1900]. following consideration extending to two motions for rehearing.. 39 L. 101). Overhiser vs. It may never become due and payable. 111). concur. Rep.

From this judgment. Inc. 1930. thru its local agent E. That on March 18. as amended. That the plaintiff. is to be found section 4 which provides that. United States currency. That trial court erred in holding that section 4 of the Income Tax Law (Act No. The Income Tax Law for the Philippines is Act No. That the said A. It is certain that the proceeds of life insurance policies are exempt. it merely represented an indemnity.148. JUAN POSADAS. INC. 4. 5. qualified and acting Collector of Internal Revenue of the Philippine Islands. . Canada. assessed. the insured. It is divided into four chapters: Chapter I On Individuals. aggregating P104. J. having its principal office at No. The trial court erred in reading into the law certain exceptions and distinctions not warranted by its clear and unequivocal provisions. P. There shall be levied. That the plaintiff is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippine Islands. vs. who had had more than thirty-five (35) years of experience in the manufacture of cigars in the Philippine Islands. But at least. 34774 September 21. defendant-appellee.. That the plaintiff charged as expenses of its business all the said premiums and deducted the same from its gross incomes as reported in its annual income tax returns.88. the plaintiff received all the proceeds of the said life insurance policy. the plaintiff appealed. provides the exemptions under the law. and that defendant overruled said protest on July 9. In chapter I On Individuals. 6. in order to protect itself against the loss that it might suffer by reason of the death of its manager. Elser. 1. MALCOLM. . 2833) is not applicable to the present case.74 as income tax on the proceeds of the insurance policy mentioned in the preceding paragraph.. and that the defendant is the duly appointed. The trial court erred in refusing to hold that the proceeds of the life insurance policy in question is not taxable income." Section 10. 2833.EN BANC G. of Toronto. with costs against the plaintiff.. Gibbs and McDonough and Roman Ozaeta for appellant... Thereupon. an insurance policy on the life of the said A. procured from the Manufacturers Life Insurance Co.. That over the protest of the plaintiff. and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation . 1930. Attorney-General Jaranilla for appellee. for the loss suffered by it thru the death of its manager. Velhagen for the sum of $50. 3.. 8. a decision was handed down which absolved the defendant from the complaint. provides that. Collector of Internal Revenue. Chapter III General Administrative Provisions.R. collected. plaintiff-appellant. and Chapter IV General Provisions. . which tax the plaintiff paid under instant protest on July 2. the defendant Collector of Internal Revenue assessed and levied the sum of P3. El Oriente. 732 Calle Evangelista.957. The parties submitted the case to the Court of First Instance of Manila for decision upon the following agreed statement of facts: 2. which claimed exemption under section 4 of the Income Tax Law. together with the interests and the dividends accruing thereon.. Velhagen in the year 1929. Velhagen. it may be said that the law is indefinite in phraseology and does not permit us unequivocally to hold that the proceeds of life insurance policies received by corporations constitute income which is taxable. Fabrica de Tabacos. Manila. Under the view we take of the case. and whose death would be a serious loss to the plaintiff. That upon the death of said A..E.. A. That during the time the life insurance policy hereinbefore referred to was in force and effect plaintiff paid from its funds all the insurance premiums due thereon. designated itself as the sole beneficiary of said policy on the life of its said manager. had no interest or participation in the proceeds of said life insurance policy. 1. are taxable as income under the Philippine Income Tax Law. "The following incomes shall be exempt from the provisions of this law: (a) The proceeds of life insurance policies paid to beneficiaries upon the death of the insured . No. which deductions were allowed by the defendant upon a showing made by the plaintiff that such premiums were legitimate expenses of its (plaintiff's) business. 1931 EL ORIENTE FABRICA DE TABACOS. as amended. and in absolving the defendant from the complaint. 2. and its counsel now allege that: The issue in this case is whether the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death. Velhagen. the insured. It is not so certain that the proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are likewise exempt. it is sufficient for our purposes to direct attention to the anomalous and vague condition of the law. 4. plaintiff. Chapter II On Corporations. but neither here nor in any other section is reference made to the provisions of section 4 in Chapter I.: 7.I. The trial court erred in assuming that the proceeds of the life insurance policy in question represented a net profit to the plaintiff when.000. 3. as a matter of fact. in Chapter II On Corporations. 1925." Section 11 in the same chapter. a tax of three per centum upon such income .

.74.. in which certain doubtful subjects were clarified. — a contract of indemnity. without deciding. in exempting individual beneficiaries. the Congress of the United States enacted its Income Tax Law of 1919. took out the insurance on the life of its manager. The Income Tax Law of 1916 extended to the Philippine Legislature. Merchants' Loan & Trust Co. Villamor. therefore. Avanceña. the clause is inserted "exempt from the provisions of this law. the purport of the stipulated facts. we think that.S. and considering the lack of express legislative intention to tax the proceeds of life insurance policies paid to corporate beneficiaries. It is true that the Income Tax Law. 195. 207. . specific reference was made to the exemptions in favor of individuals. when not only in the part of the law concerning individuals were exemptions provided for beneficiaries. To quote the exact words in the cited case of Chief Justice Taft delivering the opinion of the court: It is earnestly pressed upon us that proceeds of life insurance paid on the death of the insured are in fact capital. which involved facts quite similar to those before us. It is a substitution of money value for something permanently lost. Romualdez.957. what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager. Villa-Real. It is enough to sustain our construction of the act to say that proceeds of a life insurance policy paid on the death of the insured are not usually classed as income. Smietanka. in view of the popular conception of the life insurance as resulting in a single addition of a total sum to the resources of the beneficiary. Central Nat. the assignments of error Nos. Eisner vs.. vs. . We are not required to meet this question. It will be recalled that El Oriente. JJ. a ship." we deem it reasonable to hold the proceeds of the life insurance policy in question as representing an indemnity and not taxable income. it thereby realized a net profit in this amount.. to protect itself against the loss it might suffer by reason of the death of its manager.148. it was made clear. Hume. 1 and 2 are not well taken. such a purpose on its part should be express. Ostrand. We do not think the decision of the higher court in this case is necessarily controlling on account of the divergences noted in the federal statute and the local statute. ( [1924]. 189. . and validly tax it as such... . Assuming. or a life. The foregoing pronouncement will result in the judgment being reversed and in another judgment being rendered in favor of the plaintiff and against the defendant for the sum of P3. as it certainly is not here. speaks of the proceeds of life insurance policies as income. 189). Fabrica de Tabacos. 265 U. 255 U. we would turn to the third assignment of error. So ordered. 128 U. 509. We do not believe that this fact signifies that when the plaintiff received P104. without costs in either instance. Considering. when it came to enact Act No. The benefit to be gained by death has no periodicity. Street. and cannot be taxed as income under the Sixteenth Amendment. thereby making the same applicable to corporations. In reality. 518. Bank vs. and Imperial. particularly when in the exemption in favor of individual beneficiaries in the chapter on this subject.S. without necessarily having to decide. therefore.The situation will be better elucidated by a brief reference to laws on the same subject in the United States. C. and not in a periodical return. Inc. but this is a very slight indication of legislative intention. 2833. either in a house. Supplee-Biddle Hardware Co. Subsequently. Life insurance in such a case is like that of fire and marine insurance. but also in the part concerning corporations. concur.. Macomber.J. 252 U. This was authoritatively pointed out and decided by the United States Supreme Court in the case of United States vs. as to the point before us.S. considering the uncertainty of Philippine law. but we find in the decision certain language of a general nature which appears to furnish the clue to the correct disposition of the instant appeal. who had had more than thirty-five years' experience in the manufacture of cigars in the Philippines.S.88 from the insurance on the life of its manager. Thus. Conceding. to copy the American statute. that Congress could call the proceeds of such indemnity income.

and ordering the plaintiff to deliver said amount to them. therefore.5055. Concepcion. Baes for defendant Elsie Hicban. ET AL. another common law wife of Roman A. if he chooses. and Batangas Transportation Company. (Supra.. children of the deceased Roman A. we agree. Jr. Roman A. Enrique Al. the court rendered a decision. invoking the following pronouncements of this Court in the case of Del Val vs. No. This article reads: "An heir by force of law surviving with others of the same character to a succession must bring into the hereditary estate the property or securities he may bring into the hereditary estate the property or securities he may have been received from the deceased during the life of the same." It is claimed by the attorney for the plaintiffs that the section just quoted in subordinated to the provisions of the civil code as found in article 10035.. named beneficiaries by the deceased.R. 534: With the finding of the trial court that the proceeds of the life-insurance policy belongs exclusively to the defendant as his individual and separate property. in order to compute it in fixing the legal portions and in the amount of the division. intervened in their own rights. L-6114 October 30. PARAS.. that in case of a widower. the amount in question belonged exclusively to the beneficiaries. ET AL. Concepcion. FURTHER. legal wife of Roman A. From this decision only the defendants Juanita Golpeo and her minor children and the intervenors Marcelino and Josefina Concepcion have appealed to this court. vs. Marcelino and Josefina Concepcion. Juanita Golpeo and her minor children. Erfe and Hilario Mutuc for appellants. by way of dowry. The Civil Code has no provisions which relate directly and specifically to life-insurance contract or to the destination of life-insurance proceeds. That subject is regulate exclusively by the Code of Commerce which provides for the terms of the contract.00. and her children. as dependents and/or beneficiaries. JUANITA GOLPEO. and not of the heirs of the person whose life was insured. Capistrano. 1954 SOUTHERN LUZON EMPLOYEES' ASSOCIATION. Juan A. especially article 819. Concepcion. and BE IT RESOLVED: That such person so named by the member will be sole persons to be recognized by the Association regarding claims for condolence contributions. Southern Luzon Employees' Association is composed of laborers and employees of Laguna tayabas Bus Co. as such. The association adopted on September 17. is the doctrine in America.) It is argued for the appellants. The plaintiff association was accordingly constrained to institute in the Court of First Instance of Laguna the present action for interpleading against the three conflicting claimants as defendants. defendants. defendants-appellees. put down his common-law wife as his beneficiary and/or children had with her as the case may be.. Concepcion was a member until his death on December 13. that the Insurance Law is not applicable because the plaintiff is a mutual benefit association as defined in section 1628 of the Revised Administrative Code. if he has any. declaring the defendants Aquilina Maloles and her children the sole beneficiaries of the sum of P2. AQUILINO MALOLES . This article provides that "gifts made to children which are not betterments shall be considered as part of their legal portion. however. ELSIE HICBAN. Roman M.. The contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. Concepcion. Concepcion. defendants-appellants. 1950. the association was able to collect voluntary contributions from its members amounting to P2. pp. and one of its purposes is mutual aid of its members and their defendants in case of death. The decision is based mainly on the theory that the contract between the plaintiff and the deceased Roman A. also name his common-law wife." We cannot agree with these contention. which reads: "The amounts which the underwriter must deliver to the person insured. Concepcion. Golfeo. After the death of Roman A. ET AL. (1) Juanita Golpeo." Counsel also claims that the proceed of the insurance policy were donation or gift made by the father during his lifetime to the defendant and that. MARCELINO CONCEPCION. ET AL. plaintiff. he may put down his legitimate children with the first marriage who are below 21 years of age.EN BANC G. BE IT RESOLVED. In the form required by the association to be accomplished by its members. and (3) Elsie Hicban. C. 540-541. Concepcion and Robin M. with reference to the death benefit. Concepcion partook of the nature of an insurance and that. single. Brion for appellees. After hearing. its ultimate destination is determined by those provisions of the Civil Code which relate to donations. This argument evidently ignore the fact that the trial court has no considered the plaintiff as a regular insurance company but merely ruled that the death . That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured. Estela M.J. We believe that the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce. or for any good consideration. intervenors-appellants. Rolando M.: The plaintiff. Manuel Alvero and Elden B. Del Val. and her child. 1949 the following resolution: RESOLVED: That a family record card of each member be printed wherein the members will put down his dependents and/or beneficiaries. Roman A. the relations of the parties and the destination of the proceeds of the policy. Pio O. gift. Three sets of claimants presented themselves. aligning themselves with the defendants. Concepcion with Juanita Golpeo. that a member may. 29 Phil. in fulfillment of the contract. Concepcion listed as his beneficiaries Aquilina Maloles... shall be the property creditors of any kind whatsoever of the person who effected the insurance in favor of the formers. and may at the same time.505. namely. Jose E. and that such proceeds are the separate and individual property of the beneficiary.

concur. and the resolution of September 17. In this connection it is noteworthy that the estate of the deceased Roman A.. JJ.) The other contention advanced rather exhaustively by counsel for appellants. according to article 739 of the new Civil Code. concur in the result.. according to said article.L.. Concepcion was not entirely left without anything legally due it since it is an admitted fact that the sum of P2. had acquiesced in the illicit relations between her husband and appellee Aquilina Maloles. As a matter of a fact the new Civil Code recognized certain successional rights of illegitimate children. concur. "providing for any method of accident or life insurance among its members out of dues or assessments collected from the membership. Specifically.. Moreover. are void for the being contrary to law. appellant argument would certainly not apply to the children of Aquilina likewise named beneficiaries by the deceased Roman A. and the citations in support there of are either negative or rendered inapplicable by the decisive considerations already stated. Separate Opinions REYES.B. JJ. A. and hence its provisions cannot be made to apply retroactively. therefore. the appealed decision is affirmed. among others. concurring: I concur in the result for the reason that the contract here involved was perfected before the new Civil Code took effect. J." The comparison made in the appealed decision is. J. Appellant also contend that the stipulation between the plaintiff and the deceased Roman A. Concepcion. cannot be named a beneficiary." it is alleged that the defendant-appellee Aquilina Maloles. every assuming that the insurance law is applicable... Jugo and Bautista Angelo. Without considering the intimation in the brief for the defendant appellees that appellant Juanita Golpeo. . 1949. Concepcion and Montemayor.500 was paid by Laguna Tayabas Bus Co.. well taken. Wherefore.benefit in question is analogous to an insurance. (Article 287. Padilla and Reyes." Inasmuch as. employer of the deceased to the appellants under the Workmen's Compensation Act. JJ. and it is so ordered without costs. section 1628 of the Revised Administrative Code defines a mutual benefit association as one. the appellants cite article 2012 of the new Civil Code providing that "Any person who is forbidden from receiving any donation under article 739 cannot be named beneficiary of a life insurance policy and by the person who cannot make any donation to him. by her silence and actions. Concepcion regarding the specification of the latter's beneficiaries. moral or public policy. Bengzon. a donation is valid when made "between persons who are guilty or adultery or concubinage at the time of the donation.

00. children of the deceased Roman A. and ordering the plaintiff to deliver said amount to them. (1) Juanita Golpeo. and may at the same time. and her children. the relations of the parties and the destination of the proceeds of the policy. Capistrano.: The plaintiff.505. and her child. intervened in their own rights. the association was able to collect voluntary contributions from its members amounting to P2. 1949 the following resolution: RESOLVED: That a family record card of each member be printed wherein the members will put down his dependents and/or beneficiaries. that a member may. he may put down his legitimate children with the first marriage who are below 21 years of age. declaring the defendants Aquilina Maloles and her children the sole beneficiaries of the sum of P2. and that such proceeds are the separate and individual property of the beneficiary. Three sets of claimants presented themselves. Concepcion.J.. pp. with reference to the death benefit. Roman M.. invoking the following pronouncements of this Court in the case of Del Val vs.. Erfe and Hilario Mutuc for appellants. single. We believe that the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce. its ultimate destination is determined by those provisions of the Civil Code which relate to donations. Concepcion.5055. 1954 SOUTHERN LUZON EMPLOYEES' ASSOCIATION. Concepcion with Juanita Golpeo.EN BANC G. 540-541. (Supra. defendants. That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured... That subject is regulate exclusively by the Code of Commerce which provides for the terms of the contract. C. and (3) Elsie Hicban. ELSIE HICBAN. After the death of Roman A. Jose E. MARCELINO CONCEPCION. Concepcion. as such. Juan A. we agree. as dependents and/or beneficiaries. L-6114 October 30. Enrique Al. gift. Roman A. Concepcion. Roman A." It is claimed by the attorney for the plaintiffs that the section just quoted in subordinated to the provisions of the civil code as found in article 10035. Rolando M. or for any good consideration. No. Concepcion. intervenors-appellants. ET AL." We cannot agree with these contention. From this decision only the defendants Juanita Golpeo and her minor children and the intervenors Marcelino and Josefina Concepcion have appealed to this court. however. The plaintiff association was accordingly constrained to institute in the Court of First Instance of Laguna the present action for interpleading against the three conflicting claimants as defendants. ET AL. AQUILINO MALOLES . if he chooses. put down his common-law wife as his beneficiary and/or children had with her as the case may be. that the Insurance Law is not applicable because the plaintiff is a mutual benefit association as defined in section 1628 of the Revised Administrative Code. plaintiff. Jr. and one of its purposes is mutual aid of its members and their defendants in case of death. The contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. ET AL. Juanita Golpeo and her minor children. is the doctrine in America. and BE IT RESOLVED: That such person so named by the member will be sole persons to be recognized by the Association regarding claims for condolence contributions. namely. Estela M. After hearing. Baes for defendant Elsie Hicban. defendants-appellees. 29 Phil. In the form required by the association to be accomplished by its members. aligning themselves with the defendants. legal wife of Roman A. also name his common-law wife. Concepcion partook of the nature of an insurance and that. named beneficiaries by the deceased. Golfeo. FURTHER. the court rendered a decision. Pio O. and Batangas Transportation Company. This article provides that "gifts made to children which are not betterments shall be considered as part of their legal portion. Del Val. ET AL. This article reads: "An heir by force of law surviving with others of the same character to a succession must bring into the hereditary estate the property or securities he may bring into the hereditary estate the property or securities he may have been received from the deceased during the life of the same. PARAS. Brion for appellees. This argument evidently ignore the fact that the trial court has no considered the plaintiff as a regular insurance company but merely ruled that the death . that in case of a widower. 1950.) It is argued for the appellants. the amount in question belonged exclusively to the beneficiaries. vs. therefore. Concepcion and Robin M. JUANITA GOLPEO. especially article 819. another common law wife of Roman A. BE IT RESOLVED. in order to compute it in fixing the legal portions and in the amount of the division. Marcelino and Josefina Concepcion. which reads: "The amounts which the underwriter must deliver to the person insured. 534: With the finding of the trial court that the proceeds of the life-insurance policy belongs exclusively to the defendant as his individual and separate property. Concepcion was a member until his death on December 13. The decision is based mainly on the theory that the contract between the plaintiff and the deceased Roman A.R. shall be the property creditors of any kind whatsoever of the person who effected the insurance in favor of the formers. Concepcion listed as his beneficiaries Aquilina Maloles. Manuel Alvero and Elden B." Counsel also claims that the proceed of the insurance policy were donation or gift made by the father during his lifetime to the defendant and that. Concepcion.. by way of dowry. The Civil Code has no provisions which relate directly and specifically to life-insurance contract or to the destination of life-insurance proceeds. The association adopted on September 17. and not of the heirs of the person whose life was insured. in fulfillment of the contract. defendants-appellants. Southern Luzon Employees' Association is composed of laborers and employees of Laguna tayabas Bus Co.. if he has any.

according to article 739 of the new Civil Code. Concepcion and Montemayor. cannot be named a beneficiary.L. concur.500 was paid by Laguna Tayabas Bus Co." The comparison made in the appealed decision is. among others.) The other contention advanced rather exhaustively by counsel for appellants. Padilla and Reyes." Inasmuch as. Bengzon. appellant argument would certainly not apply to the children of Aquilina likewise named beneficiaries by the deceased Roman A. JJ. As a matter of a fact the new Civil Code recognized certain successional rights of illegitimate children. according to said article. Wherefore. 1949. . concur. Jugo and Bautista Angelo.. Concepcion was not entirely left without anything legally due it since it is an admitted fact that the sum of P2. by her silence and actions. a donation is valid when made "between persons who are guilty or adultery or concubinage at the time of the donation. and it is so ordered without costs. and the citations in support there of are either negative or rendered inapplicable by the decisive considerations already stated. Concepcion. Without considering the intimation in the brief for the defendant appellees that appellant Juanita Golpeo. J. concurring: I concur in the result for the reason that the contract here involved was perfected before the new Civil Code took effect. employer of the deceased to the appellants under the Workmen's Compensation Act.benefit in question is analogous to an insurance. and the resolution of September 17. moral or public policy. "providing for any method of accident or life insurance among its members out of dues or assessments collected from the membership. section 1628 of the Revised Administrative Code defines a mutual benefit association as one. the appealed decision is affirmed. had acquiesced in the illicit relations between her husband and appellee Aquilina Maloles. JJ. every assuming that the insurance law is applicable.. well taken. Separate Opinions REYES." it is alleged that the defendant-appellee Aquilina Maloles. are void for the being contrary to law..B. J. therefore.. Moreover. the appellants cite article 2012 of the new Civil Code providing that "Any person who is forbidden from receiving any donation under article 739 cannot be named beneficiary of a life insurance policy and by the person who cannot make any donation to him... Appellant also contend that the stipulation between the plaintiff and the deceased Roman A. (Article 287. Concepcion regarding the specification of the latter's beneficiaries.. concur in the result. JJ. Specifically. A. In this connection it is noteworthy that the estate of the deceased Roman A. and hence its provisions cannot be made to apply retroactively.

Upon the insured's death..) The beneficiary. and not of the heirs of the person whose life was insured.. which conflict was squarely submitted in the intestate proceedings of Esperanza J. Under the policies.EN BANC G. Villanueva survived the insurance period. claimantappellant. as the insured Esperanza J." (Couch. Mariano J. first. 2. Villanueva on the other. After the death of Bartolome Villanueva in 1940. (It is not here pretended and much less proven. Esperanza J. 29 Phil. during the continuance of this policy. and. Villanueva. whether he has an insurable interest or not. Rodrigo J. 953. in case of his death before that date. Upon the other hand. Villanueva. the proceeds are payable exclusively to her estate unless she had before her death otherwise assigned the matured policies. Nonato for claimant and appellant. . father of the insured. the insurer obligated itself to pay the insurance proceeds (1) to the insured if the latter lived on the dates of maturity or (2) to the beneficiary if the insured died during the continuance of the policies. Villanueva pending in the Court of First Instance of Iloilo. immediately upon receipt of due proof of the prior death of the insured.. The interest of the insured in the proceeds of the insurance depends upon his survival of the expiration of endowment period. or to the beneficiary Bartolome Villanueva. if alive. MARIANO J. with right on the part of the insured to change the beneficiary. VILLANUEVA. Feria. collecting the insurance proceeds. PARAS. without. In both policies (with corresponding variation in amount and date of maturity) the insurer agreed "to pay two thousand pesos.) "Under endowment of tontine policies payable to the insured at the expiration of a certain period. Villanueva. L-2227 August 31. the insured and the beneficiary take contingent interests. one for two thousand pesos and maturing on April 1. and that "a policy of insurance upon life or health mat pass by transfer. There is nothing there in the Insurance Law (Act No. 2427. Adverse claims for said proceeds were presented by the estate of Esperanza J. Villanueva. because the Del Val doctrine was made upon the authority of the provisions of the Code of Commerce relating to insurance (particularly section 428) which had been expressly repealed by the present Insurance Act No. if living". administrator.: The West Coast Life Insurance Company issued two policies of insurance on the life of Esperanza J.R. 1023. and the benefit of the policy will only inure to such beneficiary in case the assured dies before the end of the period designated in the policy. to any person. sec. On the contrary. Villanueva and on which the appealed order in the case at bar is based. notwithstanding a beneficiary is designated in the policy. The lower court committed no error. Bengzon. and the other for three thousand pesos and maturing on March 31. and it is so ordered with costs against the appellant. however. 1948 Intestate estate of the late Esperanza J. The first contingency of course excludes the second. Mariano J. JJ.). therefore. for she died only on October 15. in San Francisco. section 1277. Padilla. of La Paz. since it tallies with the following typical American authorities: "If a policy of insurance provides that the proceeds shall be payable to the assured. Esperanza J. if he lives to a certain date. 1943. the latter was duly substituted as beneficiary under the policies by Mariano J. Villanueva. Counsel for the beneficiary invokes the decision in Del Val vs. 2427) that militates against the construction placed by the lower court on the disputed condition appearing in the two policies now under advisement. 1943. 1944. secondly. if living. To sustain the beneficiary's claim would be altogether eliminate from the policies the condition that the insurer "agrees to pay . Our pronouncement is not novel. and March 31." This citation is clearly not controlling. PABLO ORO. Vol. 1947. vs. The appealed order is. or succession. Briones. Del Val. on the 1st day of April 1943. to the exclusion of the beneficiary. within the period. p. said law provides that "an insurance upon life may be made payable on the death of the death of the person. 540. and. that there was such assignment. in which it was held that "the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured. and vice versa. . Villanueva. to the insured hereunder. and that such proceeds are the separate and individual property of the beneficiary. will. Villanueva was living on April 1. 343. to the insured hereunder." (29 Am. No. if the insured survives the endowment period. pp. Cyclopedia of Insurance Law. California. hereby affirmed. J. and Tuason. a brother of the insured. Perfecto. 952. the latter has interposed the present appeal. contingently on the continuance or cessation of life" (section 165). holding the estate of the insured is entitled to the insurance proceeds. 534. then they shall be payable to the beneficiary designated. Nicolas P. at the home office of the Company. Philippine Islands. because it does not appear therein that the insurance contract contained the stipulation appearing in the policies issued on the life of Esperanza J. the interest of the beneficiary is a contingent one. or on his surviving a specified period. Pablo. but providing for the payment of a stated sum to a designated beneficiary in case of the insured death during the period mentioned. could be entitled to said proceeds only in default of the first contingency. the beneficiary will take. Jur. as against the personal representative or the assignee of the insured. concur. From an order. Villanueva on the one hand and by Mariano J. the benefits are payable to him or to his assignee. 1943. or otherwise. . dated February 26. In other words. and such person may recover upon it whatever the insured might have recovered" (section 166). Harder for administrator and appellee.

he diminishes the amount which the beneficiary may recover and this he cannot do without the beneficiary's consent. Also on the same date. the alleged acquiescence of the six (6) children beneficiaries of the policy (the beneficiary-wife predeceased the insured) cannot be considered an effective ratification to the change of the beneficiaries from irrevocable to revocable. thus allowing the private respondent to adduce evidence. Needless to say. thus. it is worth noting that the Beneficiary Designation Indorsement in the policy which forms part of Policy Number 0794461 in the name of Rodolfo Cailles Dimayuga states that the designation of the beneficiaries is irrevocable (Annex "A" of Petition in Sp. vs. Under date February 22. The insured may not even add another beneficiary because by doing so. on March 10. Hence. Redfern and the International Assurance Co. the applicable law in the instant case is the Insurance Act.SECOND DIVISION G. private respondent procured an ordinary life insurance policy from the petitioner company and designated his wife and children as irrevocable beneficiaries of said policy. L-54216 July 19. DIMAYUGA. can do nothing to divest the beneficiary of his rights without his consent. not to mention the law then applicable. No. was in error in issuing the questioned Orders. II WHETHER OR NOT THE IRREVOCABLE BENEFICIARIES HEREIN.: Challenged before Us in this petition for review on certiorari are the Orders of the respondent Judge dated March 19. Neither could they act through their father insured since their interests are quite divergent from one another. and no right or privilege under the Policy may be exercised.. and RODOLFO C. 71). inasmuch as the designation of the primary/contingent beneficiary/beneficiaries in this Policy has been made without reserving the right to change said beneficiary/ beneficiaries. 53. Indubitable is the fact that all the six (6) children named as beneficiaries were minors at the time. the policy having been procured in 1968. Ltd. to wit: It is hereby understood and agreed that. notwithstanding the provisions of this policy to the contrary. Petitioner promptly filed a Motion for Reconsideration but the same was denied in an Order June 10. Similarly. it is only with the consent of all the beneficiaries that any change or amendment in the policy concerning the irrevocable beneficiaries may be legally and validly effected.. presiding Judge of the then Court of First Instance of Rizal. He cannot assign his policy. Sun Life Ins. this petition raising the following issues for resolution: I WHETHER OR NOT THE DESIGNATION OF THE IRREVOCABLE BENEFICIARIES COULD BE CHANGED OR AMENDED WITHOUT THE CONSENT OF ALL THE IRREVOCABLE BENEFICIARIES. nor even take its cash surrender value without the consent of the beneficiary.R. No. 2427 as amended. the beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy (Gercio v. 1980 private respondent filed a petition which was docketed as Civil Case No. 72 Phil. otherwise known as Act No. 1980 granting the prayer in the petition in Sp. petitioner. respectively. Proc. Pasig Branch XXI.** for which reason. When the petition was called for hearing on March 19. ONE OF WHOM IS ALREADY DECEASED WHILE THE OTHERS ARE ALL MINORS. they could not validly give their consent. the respondent Judge. PINEDA in his capacity as Judge of the Court of First Instance of Rizal. 1980. 9210 and denying petitioner's Motion for Reconsideration. Both the law and the policy do not provide for any other exception. Go v. readingThe insured . the consequence of which was the issuance of the questioned Order granting the petition. 1960. 1968. or agreement made with the Company to any change in or amendment to the Policy. No. (Petitioner's Memorandum. Annex "C" of the Petition for Review on Certiorari). 1980 filed an Urgent Motion to Reset Hearing. J. HONORABLE GREGORIO G. Proc. of Canada. respondents. petitioner filed its Comment and/or Opposition to Petition. 1989 THE PHILIPPINE AMERICAN INSURANCE COMPANY. based on the aforequoted provision of the contract. We are of the opinion that his Honor. 48 Phil. The undisputed facts are as follows: On January 15. such designation may not be surrendered to the Company. 9210. denied petitioner's Urgent Motion. Neither can the insured's creditors seize the policy or any right thereunder. In point is an excerpt from the Notes and Cases on Insurance Law by Campos and Campos. p. Pineda. In this regard. abrogating the contention of the private respondent that said designation can be amended if the Court finds a just. 72. Inevitably therefore. reasonable ground to do so. Under the said law... without the consent of the said beneficiary/beneficiaries. 1980 and June 10. the respondent Judge Gregorio G. 1980. Rollo) Be it noted that the foregoing is a fact which the private respondent did not bother to disprove. . PARAS. COULD VALIDLY GIVE CONSENT TO THE CHANGE OR AMENDMENT IN THE DESIGNATION OF THE IRREVOCABLE BENEFICIARIES. 9210 of the then Court of First Instance of Rizal to amend the designation of the beneficiaries in his life policy from irrevocable to revocable. Co. released or assigned. Petitioner.

orders.. Mutuc. leaving no reason for Us to deny sanction thereto. good morals. 146 SCRA 385. the parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract.. 22 SCRA 675. this court has consistently issued pronouncements upholding the validity and effectivity of contracts. in gratuitously providing for such contingency. Inc. premises considered. Undeniably. Petrophil Corporation. 61 SCRA 22. American General Insurance Co. customs. this Court ruled that: . morals. vs. etc. We cannot help but conclude that the lower court acted in excess of its authority when it issued the Order dated March 19.. Finally.) In the recent case of Francisco Herrera vs.Therefore. public policy or public order the validity of the contract must be sustained. for contracts are obligatory.. contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations. United States Lines. good customs. good morals. terms. whenever the essential requisites for their validity are present (Phoenix Assurance Co. and as long as such agreements are not contrary to law. Phil. WHEREFORE. clauses. contains the indispensable elements for its validity and does not in any way violate the law. no matter in what form they may be. and conditions as they may want to include. Ergo. public policy or public order. The lower court. the questioned Orders of the respondent Judge are hereby nullified and set aside. they shall have the force of law between them. the contract in the case at bar. made a new contract for them. SO ORDERED. for otherwise. Where there is nothing in the contract which is contrary to law. Of equal importance is the well-settled rule that the contract between the parties is the law binding on both of them and for so many times. good customs. if their terms are clear and leave no room for doubt as to the intention of the contracting parties. 1980 amending the designation of the beneficiaries from "irrevocable" to "revocable" over the disapprobation of the petitioner insurance company. vs. Ltd. the fact that the contract of insurance does not contain a contingency when the change in the designation of beneficiaries could be validly effected means that it was never within the contemplation of the parties. . a proceeding which we cannot tolerate. it is settled that the parties may establish such stipulations. Likewise. the vested rights of the irrevocable beneficiaries would be rendered inconsequential.

And Article 739 of the same Code prescribes: ART.ñët On February 25. Lopez. . in force at the time Petronilo Davac's death on April 5. SEC. each of the respondents (Candelaria Davac and Lourdes Tuplano) filed their claims for death benefit with the SSS. The facts of the case as found by the Social Security Commission.. Article 2012 of the New Civil Code provides: ART. He died on April 5. Section 13. 1957.S. Francisco and N. and the second. Caminetti vs. who bore him a child. Upon the covered employee's death or total and permanent disability under such conditions as the Commission may define. in case of his death. this Court. 1966 SOCIAL SECURITY SYSTEM. Bravo for respondent-appellant. Alafriz. respondent-appellant. the processing thereof was held in abeyance. 2012. the same qualifications and disqualifications should be applied. J. Office of the Solicitor General Arturo A. xxx xxx xxx Without deciding whether the naming of a beneficiary of the benefits accruing from membership in the Social Security System is a donation.. As to the first point. 739. the courts can do nothing but apply its clear and explicit provisions (Velasco vs. . Quiason and E. before becoming eligible for retirement and if either such death or disability is not compensable under the Workmen's Compensation Act. (L-15798. The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation. Inc. with whom he had a minor daughter Elizabeth Davac. J.: This is an appeal from the resolution of the Social Security Commission declaring respondent Candelaria Davac as the person entitled to receive the death benefits payable for the death of Petronilo Davac. (emphasis supplied. BARRERA. whereupon the SSS filed this petition praying that respondents be required to interpose and litigate between themselves their conflicting claims over the death benefits in question.R.. U. therefore. said: It may be true that the purpose of the coverage under the Social Security System is protection of the employee as well as of his family.. In the case of Tecson vs. because (1) it contravenes the provisions of the Civil Code. Romeo Davac. No. the beneficiary "as recorded" by the employee's employer is the one entitled to the death benefits. that the deceased contracted two marriages. Duran for petitioner-appellee. 08-007137. 1792. with Candelaria Davac on January 18. construing said Section 13.. 13. for the purpose of the instant case.D. or that it creates a situation analogous to the relation of an insured and the beneficiary under a life insurance policy. vs. appellant argues that a beneficiary under the Social Security System partakes of the nature of a beneficiary in life insurance policy and. 1961). No.1 . But appellant contends that the designation herein made in the person of the second and. 1949. 1959. L-21642 July 30. he or.. thereupon. When the provision of a law are clear and explicit. ET AL. Solicitor Camilo D. his beneficiaries. respondents. the first.) Under this provision. . respondent Lourdes Tuplano brought to us the present appeal. he was assigned SS I. Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation to him according to said article. Republic Act No. December 28. As such member. T.EN BANC G. to state that the disqualification mentioned in Article 739 is not applicable to herein appellee Candelaria Davac because she was not guilty of concubinage. 442). 1946. provides: 1.1äwphï1. LOURDES Tuplano.. Not satisfied with the said resolution. as recorded by his employer shall be entitled to the following benefit: . 270. with claimant Lourdes Tuplano on August 29. therefore. briefly are: The late Petronilo Davac. Social Security System. the Social Security Commission issued the resolution referred to above. as amended by Republic Act No. CANDELARIA D. DAVAC. became a member of the Social Security System (SSS for short) on September 1. thereof. The only question to be determined herein is whether or not the Social Security Commission acted correctly in declaring respondent Candelaria Davac as the person entitled to receive the death benefits in question. 1963. ed. but this purpose or intention of the law cannot be enforced to the extent of contradicting the very provisions of said law as contained in Section 13. he designated respondent Candelaria Davac as his beneficiary and indicated his relationship to her as that of "wife". 470. 1 Phil. 61 L.S. 1957. it is enough. there being no proof that she had knowledge of the previous marriage of her husband Petronilo. Ma. petitioner-appellee. 242 U. It appears from their respective claims and the documents submitted in support thereof. and (2) it deprives the lawful wife of her share in the conjugal property as well as of her own and her child's legitime in the inheritance. a former employee of Lianga Bay Logging Co. bigamous wife is null and void. G. Due to their conflicting claims. 1161. 1959 and. In SSS form E-1 (Member's Record) which he accomplished and filed with the SSS on November 21.

(Rep. it appears that the benefit receivable under the Act is in the nature of a special privilege or an arrangement secured by the law.) In short.. Act 1161. it is not the heirs of the employee who are entitled to receive the benefits (unless they are the designated beneficiaries themselves).. Thus. however. and lien. They are disbursed from a public special fund created by Congress in pursuance to the declared policy of the Republic "to develop. with costs against the appellant. the benefits are specifically declared not transferable. provides: SEC.5 Additionally. if the money is payable to the estate of a deceased member.Regarding the second point raised by appellant. as follows: SEC. 15. Then. And we have already held that the Social Security Act is not a law of succession. . not the probate or regular court that determines the person or persons to whom it is payable. His contribution to the fund.3 the employer's contribution (equivalent to 3-½ per cent of the monthly compensation of the covered employee). — The benefits prescribed in this Act shall not be diminished and to guarantee said benefits the Government of the Republic of the Philippines accepts general responsibility for the solvency of the System.6 and exempted from tax legal processes. From the foregoing provisions. It is only when there is no designated beneficiaries or when the designation is void."2 The sources of this special fund are the covered employee's contribution (equal to 2-½ per cent of the employee's monthly compensation). So ordered. amending Rep.8 that the benefits under the Social Security Act are not intended by the lawmaking body to form part of the estate of the covered members may be gathered from the subsequent amendment made to Section 15 thereof. sickness. Act 2658. and no power of attorney or other document executed by those entitled thereto in favor of any agent. but by rules and regulations promulgated by the Commission. pursuant to the policy of the State to provide social security to the workingmen. 21. that the laws of succession are applicable. Section 21 of the Social Security Act.9 Wherefore.7 Furthermore. constitutes only an insignificant portion thereof. The amounts that may thus be received cannot be considered as property earned by the member during his lifetime. establish gradually and perfect a social security system which .4 and the Government contribution which consists in yearly appropriation of public funds to assure the maintenance of an adequate working balance of the funds of the System. the resolution of the Social Security Commission appealed from is hereby affirmed. in the settlement of claims thereunder the procedure to be observed is governed not by the general provisions of law. old age and death. — The system shall pay the benefits provided for in this Act to such persons as may be entitled thereto in accordance with the provisions of this Act. the benefits accruing from membership in the Social Security System do not form part of the properties of the conjugal partnership of the covered member. shall provide protection against the hazards of disability. if there is a named beneficiary and the designation is not invalid (as it is not so in this case). as amended by Republic Act 1792. it may be noted. Government Guarantee. Such benefits are not transferable. if no beneficiary has been designated or the designation there of is void. Non-transferability of benefit. in view of the foregoing considerations. That in the case of death benefits. it is the Commission. attorney. said benefits shall be paid to the legal heirs in accordance with the laws of succession. or any other individual for the collection thereof in their behalf shall be recognized except when they are physically and legally unable to collect personally such benefits: Provided.