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THIRD DIVISION

[G.R. No. 112360. July 18, 2000]
RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS and
TRANSWORLD KNITTING MILLS, INC., respondents.
D E C I S I O N
PURISIMA, J.:
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, 1993 Decision[1] and October
22, 1993 Resolution[2] of the Court of Appeals[3] in CA-G.R. CV NO. 28779,
which modified the Ruling[4] of the Regional Trial Court of Pasig, Branch 161,
in Civil Case No. 46106.
The antecedent facts that matter are as follows:
On March 13, 1980, Rizal Surety & Insurance Company (Rizal Insurance) issued
Fire Insurance Policy No. 45727 in favor of Transworld Knitting Mills, Inc.
(Transworld), initially for One Million (P1,000,000.00) Pesos and eventually
increased to One Million Five Hundred Thousand (P1,500,000.00) Pesos, covering
the period from August 14, 1980 to March 13, 1981.
Pertinent portions of subject policy on the buildings insured, and location
thereof, read:
"On stocks of finished and/or unfinished products, raw materials and supplies
of every kind and description, the properties of the Insureds and/or held by
them in trust, 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, BARRIO
UGONG, PASIG, METRO MANILA, PHILIPPINES, BLOCK NO. 601.
xxx...............xxx...............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, garment and lingerie
factory, transistor-stereo assembly plant, offices, warehouse and caretaker's
quarters.
'Bounds in front partly by one-storey concrete building under galvanized iron
roof occupied as canteen and guardhouse, partly by building of two and partly
one storey constructed of concrete below, timber above undergalvanized iron
roof occupied as garage and quarters and partly by open space and/or tracking/
packing, beyond which is the aforementioned Magdalo Street; on its right and
left by driveway, thence open spaces, and at the rear by open spaces.'"[5]
The same pieces of property insured with the petitioner were also insured with
New India Assurance Company, Ltd., (New India).
On January 12, 1981, fire broke out in the compound of Transworld, razing the
middle portion of its four-span building and partly gutting the left and right
sections thereof. A two-storey building (behind said four-span building) where
fun and amusement machines and spare parts were stored, was also destroyed by
the fire.
Transworld filed its insurance claims with Rizal Surety & Insurance Company
and New India Assurance Company but to no avail.
On May 26, 1982, private respondent brought against the said insurance
companies an action for collection of sum of money and damages, docketed as
Civil Case No. 46106 before Branch 161 of the then Court of First Instance of
Rizal; praying for judgment ordering Rizal Insurance and New India to pay the
amount of P2,747, 867.00 plus legal interest, P400,000.00 as attorney's fees,
exemplary damages, expenses of litigation of P50,000.00 and costs of suit.[6]

Petitioner Rizal Insurance countered that its fire insurance policy sued upon
covered only the contents of the four-span building, which was partly burned,
and not the damage caused by the fire on the two-storey annex building.[7]
On January 4, 1990, the trial court rendered its decision; disposing as
follows:
"ACCORDINGLY, judgment is hereby rendered as follows:
(1)Dismissing the case as against The New India Assurance Co., Ltd.;
(2) Ordering defendant Rizal Surety And Insurance Company to pay Transwrold
(sic) Knitting Mills, Inc. the amount of P826, 500.00 representing the actual
value of the losses suffered by it; and
(3) Cost against defendant Rizal Surety and Insurance Company.
SO ORDERED."[8]
Both the petitioner, Rizal Insurance Company, and private respondent,
Transworld Knitting Mills, Inc., went to the Court of Appeals, which came out
with its decision of July 15, 1993 under attack, the decretal portion of which
reads:
"WHEREFORE, and upon all the foregoing, the decision of the court below is
MODIFIED in that defendant New India Assurance Company has and is hereby
required to pay plaintiff-appellant the amount of P1,818,604.19 while the
other Rizal Surety has to pay the plaintiff-appellant P470,328.67, based on
the actual losses sustained by plaintiff Transworld in the fire, totalling
P2,790,376.00 as against the amounts of fire insurance coverages respectively
extended by New India in the amount of P5,800,000.00 and Rizal Surety and
Insurance Company in the amount of P1,500,000.00.
No costs.
SO ORDERED."[9]
On August 20, 1993, 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 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.
On February 2, 1994, the Court denied the appeal with finality in G.R. No. L111118 (New India Assurance Company Ltd. vs. Court of Appeals).
Petitioner Rizal Insurance and private respondent Transworld, interposed a
Motion for Reconsideration before the Court of Appeals, and on October 22,
1993, the Court of Appeals reconsidered its decision of July 15, 1993, as
regards the imposition of interest, ruling thus:
"WHEREFORE, the Decision of July 15, 1993 is amended but only insofar as the
imposition of legal interest is concerned, that, on the assessment against New
India Assurance Company on the amount of P1,818,604.19 and that against Rizal
Surety & Insurance Company on the amount of P470,328.67, from May 26, 1982
when the complaint was filed until payment is made. The rest of the said
decision is retained in all other respects.
SO ORDERED."[10]
Undaunted, petitioner Rizal Surety & Insurance Company found its way to this
Court via the present Petition, contending that:
I.....SAID DECISION (ANNEX A) ERRED IN ASSUMING THAT THE ANNEX BUILDING WHERE
THE BULK OF THE BURNED PROPERTIES WERE STORED, WAS INCLUDED IN THE COVERAGE OF
THE INSURANCE POLICY ISSUED BY RIZAL SURETY TO TRANSWORLD.

II.....SAID DECISION AND RESOLUTION (ANNEXES A AND B) ERRED IN NOT CONSIDERING
THE PICTURES (EXHS. 3 TO 7-C-RIZAL SURETY), TAKEN IMMEDIATELY AFTER THE FIRE,
WHICH CLEARLY SHOW THAT THE PREMISES OCCUPIED BY TRANSWORLD, WHERE THE INSURED
PROPERTIES WERE LOCATED, SUSTAINED PARTIAL DAMAGE ONLY.
III. 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, AND IN NOT ORDERING TRANSWORLD TO PAY TO RIZAL SURETY MORAL AND
PUNITIVE DAMAGES (ART. 2205, CIVIL CODE), PLUS ATTORNEY'S FEES AND EXPENSES OF
LITIGATION (ART. 2208 PARS. 4 and 11, CIVIL CODE).[11]
The Petition is not impressed with merit.
It is petitioner's submission that the fire insurance policy litigated upon
protected only the contents of the main building (four-span),[12] and did not
include those stored in the two-storey annex building. On the other hand, 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, the
goods and items stored therein were covered by the same fire insurance policy.
Resolution of the issues posited here hinges on the proper interpretation of
the stipulation in subject fire insurance policy regarding its coverage, which
reads:
"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"
Therefrom, 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. As opined by the trial court of origin, 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, to wit:
"First, said properties must be contained and/or stored in the areas occupied
by Transworld and second, 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, garment and lingerie
factory, transistor-stereo assembly plant, offices, ware house and caretaker's
quarter.'
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, and the same carry even more weight when the Court of Appeals has
affirmed the findings of fact arrived at by the lower court.[15]
In the case under consideration, 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 four-span building described in the policy and
consequently, the machines and spare parts stored therein were covered by the
fire insurance in dispute. The letter-report of the Manila Adjusters and
Surveyor's Company, which petitioner itself cited and invoked, describes the
"annex" building as follows:
"Two-storey building constructed of partly timber and partly concrete hollow
blocks under g.i. 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."[16]
Verily, the two-storey building involved, a permanent structure which adjoins
and intercommunicates with the "first right span of the lofty storey
building",[17] formed part thereof, and meets the requisites for
compensability under the fire insurance policy sued upon.
So also, considering that the two-storey building aforementioned was already
existing when subject fire insurance policy contract was entered into on

January 12, 1981, having been constructed sometime in 1978,[18] petitioner
should have specifically excluded the said two-storey building from the
coverage of the fire insurance if minded to exclude the same but if did not,
and instead, went on to provide that such fire insurance policy covers the
products, raw materials and supplies stored within the premises of respondent
Transworld which was an integral part of the four-span building occupied by
Transworld, knowing fully well the existence of such building adjoining and
intercommunicating with the right section of the four-span building.
After a careful study, the Court does not find any basis for disturbing what
the lower courts found and arrived at.
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. Article 1377 of the New Civil Code provides:
"Art.1377. The interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity"
Conformably, it stands to reason that the doubt should be resolved against the
petitioner, Rizal Surety Insurance Company, whose lawyer or managers drafted
the fire insurance policy contract under scrutiny. Citing the aforecited
provision of law in point, the Court in Landicho vs. Government Service
Insurance System,[19] ruled:
"This is particularly true as regards insurance policies, in respect of which
it is settled that the 'terms in an insurance policy, which are ambiguous,
equivocal, or uncertain x x x are to be construed strictly and most strongly
against the insurer, and liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the insured, especially where
forfeiture is involved' (29 Am. Jur., 181), 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, and acting exclusively
in the interest of, the insurance company.' (44 C.J.S., p. 1174).""[20]
Equally relevant is the following disquisition of the Court in Fieldmen's
Insurance Company, Inc. vs. Vda. De Songco,[21] to wit:
"'This rigid application of the rule on ambiguities has become necessary in
view of current business practices. The courts cannot ignore that nowadays
monopolies, cartels and concentration of capital, endowed with overwhelming
economic power, manage to impose upon parties dealing with them cunningly
prepared 'agreements' that the weaker party may not change one whit, 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), in contrast to these entered into by parties
bargaining on an equal footing, 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, and prevent their
becoming traps for the unwary (New Civil Code, Article 24; Sent. of Supreme
Court of Spain, 13 Dec. 1934, 27 February 1942.)'"[22]
The issue of whether or not Transworld has an insurable interest in the fun
and amusement machines and spare parts, which entitles it to be indemnified
for the loss thereof, had been settled in G.R. No. L-111118, entitled New
India Assurance Company, Ltd., vs. Court of Appeals, where the appeal of New
India from the decision of the Court of Appeals under review, was denied with
finality by this Court on February 2, 1994.
The rule on conclusiveness of judgment, which obtains under the premises,
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. "xxx
the judgment in the prior action operates as estoppel only as to those matters
in issue or points controverted, upon the determination of which the finding
or judgment was rendered. In fine, the previous judgment is conclusive in the

Ineluctably. . resolved that issue in his Decision and held the 'Don Carlos' to have been negligent rather than the 'Yotai Maru' and. No. So also.R.. the Court.R.67. vs. 61320-R. the question of which vessel had been negligent in the collision between the two (2) vessels. and the Resolution. of the Court of Appeals in CA-G. that Decision was affirmed by this Court in G. The Reyes Decision thus became final and executory approximately two (2) years before the Sison Decision.B. CV NO. L. the same can no longer be relitigated and passed upon in the present case.R. the Decision. had long been settled by this Court and could no longer be relitigated in C. or so negligent as to have proximately caused the collision between them. J. WHEREFORE. in a Resolution. No.). had been adjudicated. L-48839 in a Resolution dated 6 December 1987. 61206-R. SO ORDERED.R. 1994. dated October 22. 28779 are AFFIRMED in toto.A. 1993. J. Rizal Surety Insurance Company. Ratiocinating further.second case."[25] The controversy at bar is on all fours with the aforecited case. 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.A. and so finds. Reyes. The Court of Appeals fell into clear and reversible error when it disregarded the Decision of this Court affirming the Reyes Decision. the petitioner. was promulgated.[24] held that the issue of negligence of the shipping line. directly and expressly raised. which is assailed in the case at bar. 1993. and that of this Court.R.. No pronouncement as to costs. which issue had already been passed upon in a case filed by one of the insurers.R. and compensability for the loss of subject fun and amusement machines and spare parts. only as those matters actually and directly controverted and determined and not as to matters merely involved therein. Court of Appeals. the Court opined: "In the case at bar. liable for the destruction and loss of the insured buildings and articles of the private respondent. 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. and by this Court in G. Inc. it being the total loss and damage suffered by Transworld for which petitioner Rizal Insurance is liable. No.. the issue of which vessel ('Don Carlos' or 'Yotai Maru') had been negligent. Rizal Surety Insurance Company.[26] All things studiedly considered and viewed in proper perspective. CV NO.-G. that the Court of Appeals erred not in holding the petitioner. dated February 2. the Court is of the irresistible conclusion. dated July 15. L-111118. controverted and litigated in C. Private respondent Go Thong was certainly bound by the ruling or judgment of Reyes. 28779.328. the Court of Appeals correctly adjudged petitioner liable for the amount of P470. as already noted. No."[23] Applying the abovecited pronouncement. and should be indemnified for the loss of the same. in Smith Bell and Company (Phils.B. Considering that private respondent's insurable interest in. settled and sustained by the Court of Appeals in CA-G. was an issue that was actually.-G. L. Applying the rule of conclusiveness of judgment.

[7] On November 30. She incurred hospital expenses amounting to P34. Consequently.. Branch 66 dated August 5... She paid these amounts in full on October 17.[5] Respondent Neomi T.....117. in CA-G. Saniel stated that: This is in response to your letter dated February 13. 2002. But petitioner refused to issue the letter and suspended payment pending the submission of a certification from her attending physician that the stroke she suffered was not caused by a pre-existing condition.[10] They thereafter filed a complaint for collection of sum of money against petitioner in the MeTC on January 8. she demanded that petitioner pay her medical bill. petitioner maintained that it had not yet denied respondents' claim as it was still awaiting Dr.. 2002.... Branch 61 dated February 2.: This is a petition for review on certiorari[1] of a decision[2] and resolution[3] of the Court of Appeals (CA) dated July 29. Dr.[11] In its answer dated January 24.... 169737 INC. Olivares applied for a health care program with petitioner Blue Cross Health Care. respondent Danilo Olivares... AZCUNA and LEONARDO-DE CASTRO..FIRST DIVISION BLUE CROSS HEALTH CARE.000. 2003. Edmundo Saniel. Saniel's report.217.. J.. In a letter to petitioner dated February 14.. When petitioner still refused. Inc. or barely 38 days from the effectivity of her health insurance. 2008 x. 2003 in Civil Case No. 2003. SP No. 84163 which affirmed the decision of the Regional Trial Court (RTC). . 2004 in Civil Case No. And that I should not release any medical information concerning her neurologic status to anyone without her approval. 2002. 2002 to October 15. In the health care agreement... 2003.[9] She was discharged from the hospital on December 3... She stated that she is invoking patient-physician confidentiality.... NEOMI* and DANILO OLIVARES... Makati City.. ailments due to pre-existing conditions were excluded from the coverage. were constrained to settle the bill.. Chairperson. her attending physician.. Respondents... Promulgated: February 12.[6] she paid the amount of P11.J. 2005. 2002. Makati City.v e r s u s . For the period October 16. On December 5. On December 2.20.. Olivares called by phone on January 29... Present: PUNO. During her confinement.. G. Petitioner. Dr.. 80867. 03-1153.CORONA.... C. .. she and her husband.. [Respondent] Neomi T.. 2003.R.. respondent Neomi suffered a stroke and was admitted at the Medical City which was one of the hospitals accredited by petitioner. The application was approved on October 22. she underwent several laboratory tests.x D E C I S I O N CORONA.. No.. 2005 and September 21. she requested from the representative of petitioner at Medical City a letter of authorization in order to settle her medical bills. respectively. 2003.. JJ. That she no longer has any relationship with [petitioner].... a health maintenance firm. she also availed of the additional service of limitless consultations for an additional amount of P1. 2002.[8] informed her that she could be discharged from the hospital. 2002. SANDOVAL-GUTIERREZ. For the same period.[4] which in turn reversed the decision of the Metropolitan Trial Court (MeTC). 2003.R.

V. IX. the following disabilities but not to the exclusion of others are considered pre-existing conditions including their complications when occurring during the first year of a Members coverage: I. Tumor of Internal Organs Hemorrhoids/Anal Fistula Diseased tonsils and sinus conditions requiring surgery Cataract/Glaucoma Pathological Abnormalities of nasal septum or turbinates Goiter and other thyroid disorders Hernia/Benign prostatic hypertrophy Endometriosis Asthma/Chronic Obstructive Lung disease Epilepsy Scholiosis/Herniated disc and other Spinal column Tuberculosis Cholecysitis Gastric or Duodenal ulcer Hallux valgus Hypertension and other Cardiovascular diseases Calculi . The health care agreement defined a pre-existing condition as: x x x a disability which existed before the commencement date of membership whose natural history can be clinically determined. with legal interest from the filing of the complaint until fully paid. whether or not the Member was aware of such illness or condition.20 representing the medical bill in Medical City and P1. XIV. XVI. (3) P20. Such conditions also include disabilities existing prior to reinstatement date in the case of lapse of an Agreement. It was not able to discharge that burden. 2003. XV.000 as reimbursement for consultation fees. the CA affirmed the decision of the RTC. xxx xxx xxx[12] In a decision dated August 5. II. (2) P20. petitioner filed a petition for review under Rule 42 of the Rules of Court in the CA. VII.[13] On appeal. the RTC. VIII. reversed the ruling of the MeTC and ordered petitioner to pay respondents the following amounts: (1) P34. 2004. It held: xxx the best person to determine whether or not the stroke she suffered was not caused by pre-existing conditions is her attending physician Dr.000 as attorney's fees and (5) costs of suit. XVII. XIII. for until and unless it can be shown from the findings made by her attending physician that the stroke she suffered was not due to pre-existing conditions could she demand entitlement to the benefits of her policy. III.[14] The RTC held that it was the burden of petitioner to prove that the stroke of respondent Neomi was excluded from the coverage of the health care program for being caused by a pre-existing condition. IV. Bernie regarding [respondent's] wishes. the same day I instructed my secretary to inform your office thru Ms. the MeTC dismissed the complaint for lack of cause of action. xxx But since the evidence on record reveals that it was no less than [respondent Neomi] herself who prevented her attending physician from issuing the required certification. in a decision dated February 2. abnormalities XII.000 as moral damages. (4) P20. Hence this petition which raises the following issues: (1) whether petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing condition and therefore was excluded from the coverage of the health care agreement and (2) whether it was liable for moral and exemplary damages and attorney's fees. 2005. It denied reconsideration in a resolution promulgated on September 21.Hence. In a decision promulgated on July 29. Notwithstanding.[15] Aggrieved.000 as exemplary damages. Saniel who treated her and conducted the test during her confinement. petitioner cannot be faulted from suspending payment of her claim. X. XI.217. VI. 2005.

Saniel's report was justified. dyscracias XIX. respondents' refusal to present or allow the presentation of Dr. Furthermore. XX. this preexisting provision shall no longer be applicable except for illnesses specifically excluded by an endorsement and made part of this Agreement. It insists that it waited in good faith for . It merely speculated that Dr. Stated otherwise. Hence. It could not just passively wait for Dr. These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. as already stated. It was privileged communication between physician and patient.[22] Here. muscular tissue. Saniel from submitting his report regarding the medical condition of Neomi. limitations of liability on the part of the insurer or health care provider must be construed in such a way as to preclude it from evading its obligations. bone or any form of blood Diabetes Mellitus Collagen/Auto-Immune disease After the Member has been continuously covered for 12 months.[21] Petitioner never presented any evidence to prove that respondent Neomi's stroke was due to a pre-existing condition.[19] we ruled that a health care agreement is in the nature of a non-life insurance. Petitioner argues that respondents prevented Dr. Tumors of skin. petitioner argues that it should not be held liable for moral and exemplary damages. they should be scrutinized by the courts with extreme jealousy[23] and care and with a jaundiced eye. and attorney's fees since it did not act in bad faith in denying respondent Neomi's claim. Section 3 (e). disabilities which existed before the commencement of the agreement are excluded from its coverage if they become manifest within one year from its effectivity.[20] It is an established rule in insurance contracts that when their terms contain limitations on liability. Saniel's report would be adverse to Neomi. 3. Accordingly. This was a disputable presumption at best. It failed to prove this. v. but may be contradicted and overcome by other evidence: xxx xxx xxx (e) That evidence willfully suppressed would be adverse if produced. Rule 131 of the Rules of Court states: Sec.[17] Respondents counter that the burden was on petitioner to prove that Neomi's stroke was excluded from the coverage of their agreement because it was due to a pre-existing condition. based on her invocation of the doctor-patient privilege. Suffice it to say that this presumption does not apply if (a) the evidence is at the disposal of both parties. Next. In Philamcare Health Systems.XVIII. Saniel's report to bail it out. CA. Inc. petitioner is not liable for pre-existing conditions if they occur within one year from the time the agreement takes effect.[16] Under this provision.[24] Since petitioner had the burden of proving exception to liability. they should be construed strictly against the insurer. it should have made its own assessment of whether respondent Neomi had a pre-existing condition when it failed to obtain the attending physician's report. ― The following presumptions are satisfactory if uncontradicted. it contends that the presumption that evidence willfully suppressed would be adverse if produced should apply in its favor. This doctrine is equally applicable to health care agreements. (c) it is merely corroborative or cumulative and (d) the suppression is an exercise of a privilege. Disputable presumptions. (b) the suppression was not willful.[18] We agree with respondents. The mere reliance on a disputable presumption does not meet the strict standard required under our jurisprudence.

R. SP No. . considering it occurred only 38 days after the coverage took effect. it had reasonable ground to believe that her stroke was due to a pre-existing condition. [They] have shown that because of the refusal of [petitioner] to issue a letter of authorization and to pay [respondent Neomi's] hospital bills. 2005 decision and September 21. the petition is hereby DENIED. serious anxiety and great stress. SO ORDERED. 2005 resolution of the Court of Appeals in CA-G. based on general medical findings. as its refusal [was] merely based on its own perception that a stroke is a pre-existing condition. 84163 are AFFIRMED. They found that it was guilty of bad faith in denying a claim based merely on its own perception that there was a pre-existing condition: [Respondents] have sufficiently shown that [they] were forced to engage in a dispute with [petitioner] over a legitimate claim while [respondent Neomi was] still experiencing the effects of a stroke and forced to pay for her medical bills during and after her hospitalization despite being covered by [petitioners] health care program.[25] We disagree.[26] We see no reason to disturb these findings. shock. Saniel's report and that. Finally. (emphasis supplied) This is a factual matter binding and conclusive on this Court.Dr.000.00. [they had] to engage the services of counsel for a fee of P20. thereby suffering in the process extreme mental anguish. The RTC and CA found that there was a factual basis for the damages adjudged against petitioner. Treble costs against petitioner. The July 29. the refusal of petitioner to pay respondent Neomi's bills smacks of bad faith. WHEREFORE.

J. Metro Manila on June 29. respondents. a duplicate original copy of which is hereto attached as Exhibit "C".Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.000. A copy of the complaint is hereto attached as Exhibit "D". 2. Metro Manila. from its Pasay Branch to its Head Office at 8737 Paseo de Roxas.R. a duplicate original copy of which is hereto attached as Exhibit "B". 1982. JR. After joinder of issues. Reynaldo Aquino and John Doe. The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its head office in Makati. INC. 5..00 under the policy issued by Fortune. A copy of the said information is hereto attached as Exhibit "E. while in the process of transferring cash in the sum of P725. (hereinafter Fortune) of a complaint for recovery of the sum of P725.00 under the custody of its teller.D. Inc. Makati. petitioner. vs. 1995 FORTUNE INSURANCE AND SURETY CO. The Fiscal of Pasay City then filed an information charging the aforesaid persons with the said crime before Branch 112 of the Regional Trial Court of Pasay City. by private respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner Fortune Insurance and Surety Co. COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES. No. The petitioner contends otherwise. with violation of P. 115278 May 23. The Security Guard Atiga was assigned by Unicorn Security Services. The robbery took place while the armored car was traveling along Taft Avenue in Pasay City. the duplicate original of which is hereto attached as Exhibit "A". . An armored car of the plaintiff.. The case was docketed as Civil Case No. Maribeth Alampay." The case is still being tried as of this date. The said armored car was driven by Benjamin Magalong Y de Vera. 1817 and assigned to Branch 146 thereof. was robbed of the said cash. the parties asked the trial court to render judgment based on the following stipulation of facts: 1. Security. The plaintiff was insured by the defendants and an insurance policy was issued. 3. the driver Magalong and guard Atiga were charged. 6.: The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is liable under the Money.000. This case began with the filing with the Regional Trial Court (RTC) of Makati. with the plaintiff by virtue of a contract of Security Service executed on October 25. 4. After an investigation conducted by the Pasay police authorities. 1983.. 1987. 532 (AntiHighway Robbery Law) before the Fiscal of Pasay City. Driver Magalong was assigned by PRC Management Systems with the plaintiff by virtue of an Agreement executed on August 7.. DAVIDE. Inc. escorted by Security Guard Saturnino Atiga Y Rosete. and Payroll Robbery policy it issued to the private respondent or whether recovery thereunder is precluded under the general exceptions clause thereof. Both the trial court and the Court of Appeals held that there should be recovery. together with Edelmer Bantigue Y Eulalio.

beyond perhaps entitling plaintiff to request are replacement for such driver guard. 1 On 26 April 1990. their services as armored car driver and as security guard having been merely offered by PRC Management and by Unicorn Security and which latter firms assigned them to plaintiff. until fully paid. which alone wields the power to dismiss them. 0207 (as mitigated by the P40. employee.00 special clause deduction and by the recovered sum of P145. attached hereto as Exhibit "A.000. All other claims and counterclaims are accordingly dismissed forthwith. and (c) orders defendant to pay costs of suit. The plaintiff opposes the contention of the defendant and contends that Atiga and Magalong are not its "officer. "General Exceptions" Section (b). . . Magalong and Atiga are assigned to plaintiff in fulfillment of agreements to provide driving services and property protection as such — in a context which does not impress the Court as translating into plaintiff's power to control the conduct of any assigned driver or security guard. It Said: The Court is satisfied that plaintiff may not be said to have selected and engaged Magalong and Atiga. . .000. . The wages and salaries of both Magalong and Atiga are presumably paid by their respective firms.000. respectively.7. the trial court rendered its decision in favor of Producers.000. but the latter refused to pay as the loss is excluded from the coverage of the insurance policy. director. The finding is accordingly compelled that neither Magalong nor Atiga were plaintiff's "employees" in avoidance of defendant's liability under the policy. trustee or authorized representative . They were merely an assigned armored car driver and security guard. SO ORDERED.00 as and for attorney's fees. and (a) orders defendant to pay plaintiff the net amount of P540.00 cash being transferred along a specified money route.00). fraudulent or criminal act of the insured or any officer.00 as liability under Policy No. premises considered. particularly the general exceptions therein embodied. partner. 2 The trial court ruled that Magalong and Atiga were not employees or representatives of Producers. Demands were made by the plaintiff upon the defendant to pay the amount of the loss of P725. at the time of the robbery. 3 . . which is marked as Exhibit "A-1. The dispositive portion thereof reads as follows: WHEREFORE.000. for the June 29. 1987 money transfer from plaintiff's Pasay Branch to its Makati Head Office. (b) orders defendant to pay plaintiff the sum of P30. . trustee or authorized representative of the Insured whether acting alone or in conjunction with others. ." specifically under page 1 thereof." and which reads as follows: GENERAL EXCEPTIONS The company shall not be liable under this policy in report of xxx xxx xxx (b) any loss caused by any dishonest. Neither is the Court prepared to accept the proposition that driver Magalong and guard Atiga were the "authorized representatives" of plaintiff. the Court finds for plaintiff and against defendant. 8.00. and hence plaintiff's then designated "messenger" adverted to in the policy. Quite plainly — it was teller Maribeth Alampay who had "custody" of the P725. employee.000. with interest thereon at the legal rate.

vs. the provisions in the contracts of Producers with PRC Management System for Magalong and with Unicorn Security Services for Atiga which state that Producers is not their employer and that it is absolved from any liability as an employer. 32946. 6 It asserts that the power of control over Magalong and Atiga was vested in and exercised by Producers. like other contracts. vs. The language used by defendant-appellant in the above quoted stipulation is plain. — There is "labor-only" contracting where the person supplying workers to an employer does not have substantial . Contractor or subcontractor." Thus. Sun Insurance Office. Fortune filed this petition for review on certiorari. it affirmed in toto the appealed decision. If such terms are clear and unambiguous. 5 On 20 June 1994. It alleges that the trial court and the Court of Appeals erred in holding it liable under the insurance policy because the loss falls within the general exceptions clause considering that driver Magalong and security guard Atiga were Producers' authorized representatives or employees in the transfer of the money and payroll from its branch office in Pasay City to its head office in Makati. Contracts of insurance. if there was in reality an employer-employee relationship between Producers. The Labor Code is a special law specifically dealing with/and specifically designed to protect labor and therefore its definition as to employer-employee relationships insofar as the application/enforcement of said Code is concerned must necessarily be inapplicable to an insurance contract which defendantappellant itself had formulated. they must be taken and understood in their plain. No other interpretation is necessary. and Magalong and Atiga. (3) the presence or absence of a power to dismiss. The word "employee" must be taken to mean in the ordinary sense. nevertheless. on the one hand. when Producers commissioned a guard and a driver to transfer its funds from one branch to another.Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G. it cannot be the subject of agreement. on the other. Ltd. would not obliterate the relationship. 195 SCRA 193). Had it intended to apply the Labor Code in defining what the word "employee" refers to. the right-of-control test has been held to be the decisive factor. are to be construed according to the sense and meaning of the terms which the parties themselves have used. 211 SCRA 554). Fortune points out that an employer-employee relationship depends upon four standards: (1) the manner of selection and engagement of the putative employee. Fortune further insists that PRC Management System and Unicorn Security Services are but "labor-only" contractors under Article 106 of the Labor Code which provides: Art. they were. Assuming that they could not be considered authorized representatives. they effectively and necessarily became its authorized representatives in the care and custody of the money. 207 SCRA 669. According to Fortune. employees of Producers.R. Court of Appeals. In its decision 4 promulgated on 3 May 1994. The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were neither employees nor authorized representatives of Producers and ratiocinated as follows: A policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurance company (New Life Enterprises vs. 676. 106. (2) the mode of payment of wages. CV No. Court of Appeals. 8 and C) except only to ask for their replacements from the contractors. Ltd. ordinary and simple. ordinary and popular sense (New Life Enterprises Case. and (4) the presence and absence of a power to control the putative employee's conduct. Court of Appeals. it must/should have so stated expressly in the insurance policy. supra. It asserts that the existence of an employer-employee relationship "is determined by law and being such. Sun Insurance Office. p. Of the four. Said driver and security guard cannot be considered as employees of plaintiffappellee bank because it has no power to hire or to dismiss said driver and security guard under the contracts (Exhs.

employer's liability insurance. equipment. Section 174 of the Insurance Code provides: Sec." 10 Persons frequently excluded under such provisions are those in the insured's service . and (4) the power to control the employee's conduct.00 per driver to PRC Management Systems and not to Magalong. governed by the general provisions applicable to all types of insurance. "the opportunity to defraud the insurer — the moral hazard — is so great that insurers have found it necessary to fill up their policies with countless restrictions. It includes. Since under Producers' contract with PRC Management Systems it is the latter which assigned Magalong as the driver of Producers' armored car and was responsible for his faithful discharge of his duties and responsibilities. motor vehicle liability insurance. the rights and obligations of the parties must be determined by the terms of their contract. Fortune thus contends that Magalong and Atiga were employees of Producers. plate glass insurance. Producers contends that Magalong and Atiga were not its employees since it had nothing to do with their selection and engagement. 174. many designed to reduce this hazard. NLRC 7 that a finding that a contractor is a "labor-only" contractor is equivalent to a finding that there is an employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor. (3) the power of dismissal. Producers relies on the provision of its contract with Unicorn Security Services which provides that the guards of the latter "are in no sense employees of the CLIENT. Producers argued that the rule in International Timber Corp. In such cases. excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of insurance such as fire or marine. the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Clave. public liability insurance. therefore. (emphases supplied) Except with respect to compulsory motor vehicle liability insurance. is not applicable to all cases but only when it becomes necessary to prevent any violation or circumvention of the Labor Code. the following elements are generally considered. robbery. Casualty insurance is insurance covering loss or liability arising from accident or mishap. Producers further asseverates that what should be applied is the rule in American President Lines vs. 9 It has been aptly observed that in burglary. among others. but is not limited to. These contracts are. vs. taking into consideration its purpose and always in accordance with the general principles of insurance law. and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. personal accident and health insurance as written by non-life insurance companies.capital or investment in the form of tools. their dismissal. On the other hand. it is clear that Magalong was not Producers' employee. Outside of these. It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is a form of casualty insurance. Seldom does the insurer assume the risk of all losses due to the hazards insured against. As to Atiga. and since Producers paid the monthly compensation of P1. a social legislation whose provisions may set aside contracts entered into by parties in order to give protection to the working man." There is merit in this petition. following the ruling in International Timber Corp. and the control of their conduct. machineries. and theft insurance. the Insurance Code contains no other provisions applicable to casualty insurance or to robbery insurance in particular.400. 8 to wit: In determining the existence of employer-employee relationship. work premises. (2) the payment of wages. burglary and theft insurance. namely: (1) the selection and engagement of the employee. the payment of their wages. and other substantially similar kinds of insurance.

Whether they are is. and compensation. there is a paucity of evidence as to whether the contracts between . the complaint for violation of P. a question of fact. is again quoted: GENERAL EXCEPTIONS The company shall not be liable under this policy in respect of xxx xxx xxx (b) any loss caused by any dishonest. it is not the employer of Magalong. indeed. "labor-only" contracts. for easy reference. 13 The terms "service" and "employment" are generally associated with the idea of selection. insists that by the express terms thereof. director.D. it was its intention to exclude and exempt from protection and coverage losses arising from dishonest. as to preclude the insurer from non-compliance with its obligation. 11 The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. the terms specifying the excluded classes are to be given their meaning as understood in common speech. thus any ambiguity therein should be resolved against the insurer. it may now be asked whether Magalong and Atiga qualify as employees or authorized representatives of Producers under paragraph (b) of the general exceptions clause of the policy which. 12 In such cases. 21 or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as employees of the party employing them and not of the party who supplied them to the employer. No. 18 An insurance contract is a contract of indemnity upon the terms and conditions specified therein. control. . fraudulent or criminal act of the insured or any officer. in fact.and employment. . trustee or authorized representative of the Insured whether acting alone or in conjunction with others. or criminal acts of persons granted or having unrestricted access to Producers' money or payroll." It is clear to us that insofar as Fortune is concerned. 16 Limitations of liability should be regarded with extreme jealousy and must be construed in such a way. it may. Producers. 20 In the absence of statutory prohibition to the contrary. 532. 14 A contract of insurance is a contract of adhesion. employee. insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy." it must have had in mind any person who qualifies as such as generally and universally understood. and the information therefor filed by the City Fiscal of Pasay City. 22 Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security Services are "labor-only" contracts. (emphases supplied) There is marked disagreement between the parties on the correct meaning of the terms "employee" and "authorized representatives. fraudulent. Since the parties opted to submit the case for judgment on the basis of their stipulation of facts which are strictly limited to the insurance policy. be that it is because the contracts are. partner. . 17 It goes without saying then that if the terms of the contract are clear and unambiguous. 19 It is settled that the terms of the policy constitute the measure of the insurer's liability. When it used then the term "employee. 15 or it should be construed liberally in favor of the insured and strictly against the insurer. With the foregoing principles in mind. in the light of the criteria provided for in Article 106 of the Labor Code. Notwithstanding such express assumption of PRC Management Systems and Unicorn Security Services that the drivers and the security guards each shall supply to Producers are not the latter's employees. or jurisprudentially established in the light of the four standards in the determination of the employer-employee relationship. however. there is no room for construction and such terms cannot be enlarged or diminished by judicial construction. the contracts with PRC Management Systems and Unicorn Security Services.

Howsoever viewed. as an agent. Magalong to drive the armored vehicle which would carry the money. and his two other companions. and is interchangeable with "agent. one who represents others or another in a special capacity. A "representative" is defined as one who represents or stands in the place of another. and Atiga to provide the needed security for the money. The complaint in Civil Case No.R. and PRC Management Systems and Unicorn Security Services were truly independent contractors. SO ORDERED. in respect of the transfer of Producer's money from its Pasay City branch to its head office in Makati. for these particular tasks. In short. Fortune is exempt from liability under the general exceptions clause of the insurance policy. But even granting for the sake of argument that these contracts were not "labor-only" contracts. No pronouncement as to costs. . the three acted as agents of Producers.Producers and PRC Management Systems and Unicorn Security Services are "laboronly" contracts." 23 In view of the foregoing. 1817 are REVERSED and SET ASIDE. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court of Makati in Civil Case No. WHEREFORE . with Alampay to be responsible for its custody in transit. we are satisfied that Magalong and Atiga were. Producers entrusted the three with the specific duty to safely transfer the money to its head office. the vehicle. the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G. CV No. its "authorized representatives" who served as such with its teller Maribeth Alampay. 1817 is DISMISSED.

and affirmed by the appellate court are as follows: [P]laintiff is the owner of the Plaza Resort situated at Agoo. INC. respondent.00 and paid P42.00. Petitioner assails the appellate court decision[1] which dismissed its two appeals and affirmed the judgment of the trial court. 1990 to March 14.600. vs. (Item 5 only) (Exhs. 1989 (Exhs.SECOND DIVISION [G. 1985-86. that defendant issued Policy No. etc.500.800.00 -0.000.on the furniture. H) which carried the entry under Endorsement/Warranties at Time of Issue. 1990 under Policy No.00 .000.P41.other buildings include as follows: a) Tilter House. PHILIPPINE CHARTER INSURANCE CORPORATION. May 16.. Exhibits E and F-1 was deleted and the entry under Endorsements/Warranties at the time of issue read that plaintiff renewed its policy with AHAC (AIU) for the period of March 14. 6-B-1) in the amount of P10.00 for a total premium of . J. Item 5 in those policies referred to the two (2) swimming pools only (Exhs. 3 and 4 respectively). D E C I S I O N PUNO. 1. C-1.P55. 206-4182383-0 covering the period March 14. E and F-1).700. D. D-1. 1991 for P10. thus.000.14 (Exhs. C.700. Petitioner avers that. 156167.000.600. 1989 to March 14.000. La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC-AIU). lines air-con and operating equipment that plaintiff agreed to insure with defendant the properties covered by AHAC (AIU) Policy No. C-1.540% P100. 1988 to March 14. computed as follows: Item -P7.691. D-1. 1986-1987. E and F. that subsequently AHAC(AIU) issued in plaintiffs favor Policy No.: Before the Court is the petition for certiorari under Rule 45 of the Revised Rules of Court by petitioner GULF RESORTS. D-1.00.. INC. 206-4568061-9 (Exh. earthquake shock endt.658.00 for furniture. which read Endorsement to Include Earthquake Shock (Exh.R. fixtures. G also G-1) and in said policy the earthquake endorsement clause as indicated in Exhibits C-1. 2005] GULF RESORTS. 2. 1. the risk of loss from earthquake shock was extended only to plaintiffs two swimming pools. also Exhs. No.00 . H) provided that the policy wording and rates in said policy be copied in the policy to be issued by defendant. and 1987-88 (Exhs.100% 116. 6-A and 6-B) as premium thereof. In the first four insurance policies issued by AHAC-AIU from 1984-85. and E and two (2) swimming pools only (Exhs. 2-B. Insurance Policy No.551% b) Power House. 31944 to plaintiff covering the period of March 14.551% c) House Shed. petitioner.000. 393. 31944 covers all damages to the properties within its resort caused by earthquake.00.0. 206-4568061-9 (Exh.P19.392%. Respondent contends that the rider limits its liability for loss to the two swimming pools of petitioner. For review are the warring interpretations of petitioner and respondent on the scope of the insurance companys liability for earthquake damage to petitioners properties. 1-B. 3-B and F-2).on the two swimming pools. The facts as established by the court a quo. against respondent PHILIPPINE CHARTER INSURANCE CORPORATION.on the Clubhouse only @ . only (against the peril of earthquake shock only) @ 0.490%.0. pursuant to its earthquake shock endorsement rider.00. contained in the building above-mentioned@ .

G and H) and in Policy No. Tax 409. issued by AHAC (Exhs.842. representing losses sustained by the insured properties.P37.[2] After the earthquake. C and 1-B. which is the policy in question. including the two swimming pools in its Agoo Playa Resort were damaged. C.420.10 F.00 by way of attorneys fees and expenses of litigation. that in all the six insurance policies (Exhs.061.000. E.[11] . that on July 16. through its VicePresident A.00 ES Doc.030. that is P393. 2-B and 3-B-1 and 3-B-2.) The sum of P428.) The sum of P500.000.P45. 31944 issued by defendant. 31944 (Exh.R. 31944 for damages on its properties. respondent.[8] Petitioner and respondent failed to arrive at a settlement. respondent denied petitioners claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort. On August 23.00.92 (Exh. F. that in Exhibit 7-C the word included above the underlined portion was deleted. 1990.S. requested petitioner to submit various documents in support of its claim.[9] Thus. 31944 issued by defendant. defendants Policy No. that the above break-down of premiums shows that plaintiff paid only P393. that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. 1990. Bayne Adjusters and Surveyors. the following: Rate-Various Premium . with interest thereon. that in the computation of the premium.068. G-2 and 5-C-1..05 TOTAL 45.779. de Leon stated that except for the swimming pools.89 Prem. E.T.) The sum of P5.00 (Exhs. by way of exemplary damages. 6-D and 7-C). Inc.00 as premium against earthquake shock (ES).[4] rendered a preliminary report[5] finding extensive damage caused by the earthquake to the clubhouse and to the two swimming pools. Bayne Adjusters and Surveyors.60 F/L 2.159. all affected items have no coverage for earthquake shocks. C.[3] On July 30.) Costs. F-02 and 4-A-1. then assigned the investigation of the claim to an independent claims adjuster. 1991. Mr. Inc.[6] On August 11.00 per month. 4.427. 2. de Leon. petitioner advised respondent that it would be making a claim under its Insurance Policy No. 1990. Stamps 3. F.00.76 EC 393. 4-B. on January 24. I). as computed under par. contained on the righthand upper portion of page 7 thereof.159. 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy No. 3-A. G and H). representing continuing losses sustained by plaintiff on account of defendants refusal to pay the claims. 5. petitioner filed its formal demand[7] for settlement of the damage to all its properties in the Agoo Playa Resort. the shock endorsement provide(sic): In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees.92. 6-C-1. 3. petitioner filed a complaint[10] with the regional trial court of Pasig praying for the payment of the following: 1. Respondent instructed petitioner to file a formal claim. 1990. D.) The sum of P500. through its adjuster. I). the premium against the peril of earthquake shock is the same. 2-D. notwithstanding what is stated in the printed conditions of this policy due to the contrary. D. 29 of the policy (Annex B) until fully paid. 1D. 5-A. On August 7.52 Typhoon 1. 776.

by virtue of the contract of insurance. THE TRIAL COURT ERRED IN DETERMINING PLAINTIFF-APPELLANTS RIGHT TO RECOVER UNDER DEFENDANT-APPELLEES POLICY (NO. defendant must. premises considered. 31944. From the above observations the Court finds that only the two (2) swimming pools had earthquake shock coverage and were heavily damaged by the earthquake which struck on July 16.00. the lower court after trial ruled in favor of the respondent.00 against the peril of earthquake shock. E. From this fact the Court must consequently agree with the position of defendant that the endorsement rider (Exhibit 7-C) means that only the two swimming pools were insured against earthquake shock. C. F and G). To the mind of [the] Court. the Court does not agree that the action filed by plaintiff is baseless and highly speculative since such action is a lawful exercise of the plaintiffs right to come to Court in the honest belief that their Complaint is meritorious. WITH INTEREST COMPUTED AT 24% PER ANNUM ON CLAIMS ON PROCEEDS OF POLICY. where the language used in an insurance contract or application is such as to create ambiguity the same should be resolved against the party responsible therefor. there is no basis for the grant of the other damages prayed for by plaintiff. Plaintiff correctly points out that a policy of insurance is a contract of adhesion hence. i.000. with interest at 6% per annum from the date of the filing of the Complaint until defendants obligation to plaintiff is fully paid. 1990. viz: The above schedule clearly shows that plaintiff paid only a premium of P393.. of defendant for damages is likewise denied. B.[13] Petitioners Motion for Reconsideration was denied.00) representing damage to the two (2) swimming pools. the insurance company which prepared the contract.e. THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT CAN ONLY RECOVER FOR THE DAMAGE TO ITS TWO SWIMMING POOLS UNDER ITS FIRE POLICY NO.[12] On February 21. Because it is the finding of the Court as stated in the immediately preceding paragraph that defendant is liable only for the damage caused to the two (2) swimming pools and that defendant has made known to plaintiff its willingness and readiness to settle said liability. pay plaintiff said amount. D. the language used in the policy in litigation is clear and unambiguous hence there is no need for interpretation or construction but only application of the provisions therein. EXH I) BY LIMITING ITSELF TO A CONSIDERATION OF THE SAID POLICY ISOLATED FROM THE CIRCUMSTANCES SURROUNDING ITS ISSUANCE AND THE ACTUATIONS OF THE PARTIES AFTER THE EARTHQUAKE OF JULY 16. Defendant having admitted that the damage to the swimming pools was appraised by defendants adjuster at P386. Thus. defendant is ordered to pay plaintiffs the sum of THREE HUNDRED EIGHTY SIX THOUSAND PESOS (P386.Respondent filed its Answer with Special and Affirmative Defenses with Compulsory Counterclaims. WHEREFORE. The prayer. 1990. 1990. CONSIDERING ITS PROVISIONS. petitioner filed an appeal with the Court of Appeals based on the following assigned errors:[14] A. 31944. . THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF-APPELLANT IS ENTITLED TO THE DAMAGES CLAIMED. 1994. THE CIRCUMSTANCES SURROUNDING THE ISSUANCE OF SAID POLICY AND THE ACTUATIONS OF THE PARTIES SUBSEQUENT TO THE EARTHQUAKE OF JULY 16. therefore.000. As to the counterclaims of defendant. the same premium it paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC(AIU) (Exhibits C. No pronouncement as to costs.

holding that the plaintiffappellants action is not baseless and highly speculative.00..On the other hand. in view of all the foregoing. it is unbelievable for respondent to claim that it only made an inadvertent omission when it deleted the said qualification. Extended Coverage Endt. the unqualified and unrestricted nature of the earthquake shock endorsement is confirmed in the body of the insurance policy itself. WHETHER THE COURT OF APPEALS CORRECTLY HELD THAT UNDER RESPONDENTS INSURANCE POLICY NO. 31944. Lianga Bay and Community Multi-Purpose Coop.R. ARE INSURED AGAINST THE RISK OF EARTHQUAKE SHOCK. No costs.000.. which the plaintiff-appellant had with AHAC (AIU) and upon which the subject insurance contract with Philippine Charter Insurance Corporation is said to have been based and copied (Exh. respondent filed a partial appeal. Thus. G.. covered an extended earthquake shock insurance on all the insured properties. 136914. B. G and H). ATTORNEYS FEES AND EXPENSES OF LITIGATION. v. the appellate court affirmed the decision of the trial court and ruled. No. It used the words any property insured by this policy. which states that it is [s]ubject to: Other Insurance Clause. it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such award (Country Bankers Insurance Corp. that the policys earthquake shock endorsement clearly covers all of the properties insured and not only the swimming pools. We are not convinced that the last two (2) insurance contracts (Exhs. Inc. Second. that the qualification referring to the two swimming pools had already been deleted in the earthquake shock endorsement.. WHETHER THE COURT OF APPEALS CORRECTLY DENIED PETITIONERS PRAYER FOR DAMAGES WITH INTEREST THEREON AT THE RATE CLAIMED. if such discretion is well-exercised. July 18. WHEREFORE. Petitioner contends: First. Coming to the defendant-appellants prayer for an attorneys fees. FEA Warranty & Annual Payment Agreement On Long Term Policies. Moreover. x x x We also find that the Court a quo was correct in not granting the plaintiffappellants prayer for the imposition of interest 24% on the insurance claim and 6% on loss of income allegedly amounting to P4. it then cannot be said that it was in default and therefore liable for interest. We find that the Court a quo did not err in granting the same. . thus: However. 115838. after carefully perusing the documentary evidence of both parties. CA. After review. 2002).[17] Third. and it should be interpreted as all inclusive. assailing the lower courts failure to award it attorneys fees and damages on its compulsory counterclaim. Typhoon Endorsement. long-standing is the rule that the award thereof is subject to the sound discretion of the court. it will not be disturbed on appeal (Castro et al. Earthquake Shock Endt.R. January 25. being the award thereof an exception rather than a rule. et al. ONLY THE TWO (2) SWIMMING POOLS. both appeals are hereby DISMISSED and judgment of the Trial Court hereby AFFIRMED in toto. Since the defendant-appellant has expressed its willingness to pay the damage caused on the two (2) swimming pools. G. Therefore. I).[15] Petitioner filed the present petition raising the following issues:[16] A. RATHER THAN ALL THE PROPERTIES COVERED THEREUNDER. Fourth.280. 2002). v. as the Court a quo and this Court correctly found it to be liable only. No..

After the July 16. Eighth. 1990 earthquake. J. From 1988 until 1990. It should not be used to limit the respondents liability for earthquake shock to the two swimming pools only. there is no basis for the appellate court to hold that the additional premium was not paid under the extended coverage. Thus. Second. petitioners payment of additional premium in the amount of P393. Baranda III. On the other hand. the parties contemporaneous and subsequent acts show that they intended to extend earthquake shock coverage to all insured properties. When it secured an insurance policy from respondent. The amount was the same amount paid by petitioner for earthquake shock coverage on the two swimming pools from 1990-1991. categorically stated that its previous policy. Although the first five policies contained the said qualification in their riders title. the qualification of the endorsement limiting the earthquake shock endorsement should be interpreted as a caveat on the standard fire insurance policy. any ambiguity in the earthquake shock endorsement should be resolved in favor of petitioner and against respondent.. Any ambiguity in the policy can be easily resolved by looking at the other . Eleventh.Fifth. likewise requested petitioner to submit the necessary documents for its building claims and other repair costs. nor did it broaden the scope of the endorsement whose descriptive title was merely enumerated. Bayne Adjusters and Surveyors. The premium for the earthquake shock coverage was already included in the premium paid for the policy. and there is no need for calibration of the evidence in order to establish the facts upon which this petition is based. Ninth. because the rider is the more deliberate expression of the agreement of the contracting parties. Inc. Petitioner admitted that from 1984 to 1988. the provisions in its policy were practically identical to its earlier policies. the deletion of the phrase pertaining to the limitation of the earthquake shock endorsement to the two swimming pools in the policy schedule did not expand the earthquake shock coverage to all of petitioners properties. that the earthquake shock endorsement rider should be given precedence over the wording of the insurance policy.00 shows that the policy only covered earthquake shock damage on the two swimming pools. AHAC-AIU. under the doctrine of equitable estoppel. AHAC-AIU. Respondents insurance adjuster. none of the previous policies issued by AHAC-AIU from 1983 to 1990 explicitly extended coverage against earthquake shock to petitioners insured properties other than on the two swimming pools. respondent made the following counter arguments:[18] First. No additional premium was paid to warrant coverage of the other properties in the resort. it cannot deny that the insurance policy it issued to petitioner covered all of the properties within the resort. respondent copied its policy from the AHAC-AIU policy provided by petitioner. stated that such deletion was a mere inadvertence. such as to remove the two swimming pools from the coverage for the risk of fire. Tenth. that it is proper for it to avail of a petition for review by certiorari under Rule 45 of the Revised Rules of Court as its remedy. in the last two policies. It was respondent which caused the ambiguity when it made the policy in issue. Third. limits were placed on the endorsements/warranties enumerated at the time of issue. As per its agreement with petitioner. Quijano. through Mr. respondent assured petitioner that it was covered for earthquake shock. Sixth. that in their previous insurance policies. this qualification in the title was deleted. in a letter[19] by its representative Manuel C. This inadvertence did not make the policy incomplete. which covered all the resorts properties for earthquake shock damage and respondent agreed. from which respondents policy was copied. Seventh. and there was no increase in the premium paid. petitioner told respondent that it wanted an exact replica of its latest insurance policy from American Home Assurance Company (AHAC-AIU). covered only earthquake shock for the two swimming pools. only the two swimming pools were insured against earthquake shock.

It did not object to any deficiency nor did it institute any action to reform the policy. Respondents only deviation from the agreement was when it modified the provisions regarding the replacement cost endorsement. petitioner alleged that in its policies from 1984 through 1988. only the two swimming pools were specified as included. In Insurance Policy No. the words of the policy reflect the parties clear intention to limit earthquake shock coverage to the two swimming pools.00 0. First. Respondent complied with this requirement. attorneys fees and litigation expenses. Sixth. in order for the earthquake shock endorsement to be effective. No other premium was paid for earthquake shock coverage on the other properties. AMOUNT RATES PREMIUM x x x 3 393. Since respondent was willing and able to pay for the damage caused on the two swimming pools. Fourth.000.000. the use of the qualifier ANY instead of ALL to describe the property covered was done deliberately to enable the parties to specify the properties included for earthquake coverage. and therefore. Fifth. where only the two swimming pools were noted as covered for earthquake shock damage. respondent did not do any act or give any assurance to petitioner as would estop it from maintaining that only the two swimming pools were covered for earthquake shock. in the designation of location of risk. We hold that the petition is devoid of merit. specially the enumeration of the items insured.provisions. However.00[22] Third. petitioner did not inform respondent of its requirement that all of its properties must be included in the earthquake shock coverage.100%-E/S 393. Before petitioner accepted the policy. petitioner only paid P393.00 as premium for coverage of the swimming pools against earthquake shock. the phrase Item 5 P393. it had the opportunity to read its conditions. In addition. In all of its seven insurance policies. Policy Condition No.00 on the two swimming pools only (against the peril of earthquake shock only) meant that only the swimming pools were insured for earthquake damage. Seventh.[21] it was stated that: PREMIUM RECAPITULATION ITEM NOS.000. the riders of the old policy and the policy in issue are identical. With regard to the issue under litigation. under the breakdown for premium payments. The policy binds the petitioner. it is not liable for interest. Petitioner anchors its claims on AHAC-AIUs inadvertent deletion of the phrase Item 5 Only after the descriptive name or title of the Earthquake Shock Endorsement. four key items are important in the resolution of the case at bar. the only difference being the designation of the two swimming pools as Item 3. in its Complaint. there is no basis for petitioner to claim damages. Eighth.00 On the two (2) swimming pools only (against the peril of earthquake shock only)[20] Second. it cannot be considered to be in default. 31944. The adjusters letter notifying petitioner to present certain documents for its building claims and repair costs was given to petitioner before the adjuster knew the full coverage of its policy. 6 stated: . The same phrase is used in toto in the policies from 1989 to 1990. Petitioners own evidence shows that it only required respondent to follow the exact provisions of its previous policy from AHAC-AIU. premiums must be paid for all the properties covered. viz: ITEM 3 393.

the rider attached to the policy. titled Extended Coverage Endorsement (To Include the Perils of Explosion. Thus. and 5. This insurance does not cover any loss or damage occasioned by or through or in consequence. namely:-(a) Earthquake. damage or liability arising from an unknown or contingent event. taken and interpreted together. . Earthquake Endorsement In consideration of the payment by the Insured to the Company of the sum of P. the policy extended earthquake shock coverage to all of the insured properties. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk. . . . Provided always that all the conditions of this Policy shall apply (except in so far as they may be hereby expressly varied) and that any reference therein to loss or damage by fire should be deemed to apply also to loss or damage occasioned by or through or in consequence of Earthquake. . In consideration of the insurer's promise. Certain stipulations cannot be segregated and then made to control. The insurer assumes the risk. neither do particular words or phrases necessarily determine its character. . The insured is subject to a risk of loss by the happening of the designated peril. indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. that this insurance covers loss or damage (including loss or damage by fire) to any of the property insured by this Policy occasioned by or through or in consequence of Earthquake. Aircraft. All the provisions and riders. no qualifications were placed on the scope of the earthquake shock coverage. The policy cannot be construed piecemeal.[26] (Emphasis ours) . volcanic eruption or other convulsion of nature. The insured has an insurable interest. notwithstanding what is stated in the printed conditions of this Policy to the contrary. 2. directly or indirectly of any of the following occurrences. . viz: ANNUAL PAYMENT AGREEMENT ON LONG TERM POLICIES THE INSURED UNDER THIS POLICY HAVING ESTABLISHED AGGREGATE SUMS INSURED IN EXCESS OF FIVE MILLION PESOS. . . .[25] All its parts are reflective of the true intent of the parties. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other provisions. 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. . stated. 4.6. Thus. Vehicle and Smoke). A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend earthquake shock coverage only to the two swimming pools. IN CONSIDERATION OF A DISCOUNT OF 5% OR 7 % OF THE NET PREMIUM x x x POLICY HEREBY UNDERTAKES TO CONTINUE THE INSURANCE UNDER THE ABOVE NAMED x x x AND TO PAY THE PREMIUM. It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other.[24] Petitioner contends that pursuant to this rider. . the insured pays a premium. . . an insurance contract exists where the following elements concur: 1. [23] Fourth. . additional premium the Company agrees. . 3.

is that correct? A. they are separate entity. Q. CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. 1988 up to March 14. sir.[28] In the subject policy. . 1984 to March 4. specifically shown in the warranty. sir. and marine insurance. Q. As borne out by petitioners witnesses: CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. 12-13 Q. No. Q. November 25.000. Yes. sir. In the procurement of the insurance police (sic) from March 14. Mantohac. the premium payable becomes a debt as soon as the risk attaches. Q. Q. 1989. We did not make any written instruction. And they are independent of your company insofar as operations are concerned? A. Yes. yes. This is consistent with the history of petitioners previous insurance policies from AHAC-AIU.[27] In fire.An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. no premium payments were made with regard to earthquake shock coverage. although we made an oral instruction to that effect of extending the coverage on (sic) the other properties of the company. 23-26 Q. 1988 to March 14. No. there is a provision here that it was only for item 5. And that instruction. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. 1991 pp. Did you also do this through your insurance agency? A. according to you. sir. For the period from March 14. 1985 the coverage on earthquake shock was limited to the two swimming pools only? A. sir. Q. was very important because in April 1987 there was an earthquake tremor in La Union? A. sir. did you give written instruction to Forte Insurance Agency advising it that the earthquake shock coverage must extend to all properties of Agoo Playa Resort in La Union? A. Yes. 1991 pp. casualty. November 25. And you wanted to protect all your properties against similar tremors in the [future]. The final action is still with us although they can recommend what insurance to take. did you personally arrange for the procurement of this policy? A. Yes. They are our insurance agency. Now Mr. 1989. If you are referring to Forte Insurance Agency. Q. except on the two swimming pools. will it be correct to state also that insofar as your insurance policy during the period from March 4. Yes. It is limited to the two swimming pools. sir. Yes. Yes. Q. sir. But insofar as the procurement of the insurance policy is concerned they are of course subject to your instruction. sir. Is Forte Insurance Agency a department or division of your company? A. More specifically Item 5 states the amount of P393.00 corresponding to the two swimming pools only? A. is that not correct? A.

Typhoon Endorsement. Q. FEA Warranty & Annual Payment Agreement on Long Term Policies[29] to the insurance policy as proof of the intent of the parties to extend the coverage for earthquake shock. Now. Did you have occasion to review of (sic) these six (6) policies issued by your company [in favor] of Agoo Playa Resort? WITNESS: Yes[. wach (sic) of these six (6) policies marked in evidence as Exhibits C to H respectively carries an earthquake shock endorsement[?] My question to you is. Mejia: Yes. I examined the policy and seeing that the warranty on the earthquake shock endorsement has no more limitation referring to the two swimming pools only.Q. after this policy was delivered to you did you bother to check the provisions with respect to your instructions that all properties must be covered again by earthquake shock endorsement? A. We also hold that no significance can be placed on the deletion of the qualification limiting the coverage to the two swimming pools. ATTY. F. sir. Q. this phrase is merely an enumeration of the descriptive titles of the riders. Witness: A. As explained by the testimony of Juan Baranda III. G and H? A. August 11. 9-12 Atty. MEJIA: What is your basis for stating that the coverage against earthquake shock as provided for in each of the six (6) policies extend to the two (2) swimming pools only? . on the basis on (sic) the wordings indicated in Exhibits C to H respectively what was the extent of the coverage [against] the peril of earthquake shock as provided for in each of the six (6) policies? x x x WITNESS: The extent of the coverage is only up to the two (2) swimming pools. sir. clauses. paragraph 2 of the Insurance Code. Now. Earthquake Shock Endorsement. D. as required under Section 50.] I remember having gone over these policies at one point of time. warranties or endorsements to which the policy is subject. Is that for each of the six (6) policies namely: Exhibits C. Yes. underwriter for AHAC-AIU: DIRECT EXAMINATION OF JUAN BARANDA III[30] TSN. E. Extended Coverage Endorsement. sir. Are you referring to the insurance policy issued by American Home Assurance Company marked Exhibit G? Atty. However. Mejia: We respectfully manifest that the same exhibits C to H inclusive have been previously marked by counsel for defendant as Exhibit[s] 1-6 inclusive. The earthquake shock endorsement cannot stand alone. I was contented already that the previous limitation pertaining to the two swimming pools was already removed. 1992 pp. Petitioner also cited and relies on the attachment of the phrase Subject to: Other Insurance Clause.

they are normally affected by earthquake but not by fire. there is no increase in the amount of the premium. I must say that the coverage was not broaden (sic) to include the other items. Mantohac testified and he alleged that only Exhibits C. the premium rates? WITNESS: They are the same in the sence (sic). Based on it. August 11. 23-25 Q. your Honor. ANDRES: . ATTY. I assure you that this one covers the two swimming pools with respect to earthquake shock endorsement. 1992 pp. in the enumeration Earthquake Shock Endorsement. DIRECT EXAMINATION OF JUAN BARANDA III TSN. foundations. if we are going to look at the premium there has been no change with respect to the rates. your Honor. 4-6 ATTY. what can you say about that testimony of plaintiffs witness? WITNESS: As I have mentioned earlier. We are not only going to consider the two (2) swimming pools of the other as stated in the policy. CROSS-EXAMINATION OF JUAN BARANDA III TSN. September 7. in the Clauses and Warranties: Item 5 only (Earthquake Shock Endorsement).WITNESS: Because it says here in the policies. As I see. For building we covered it for full earthquake coverage which includes earthquake shock COURT: As far as earthquake shock endorsement you do not have a specific coverage for other things other than swimming pool? You are covering building? They are covered by a general insurance? WITNESS: Earthquake shock coverage could not stand alone. 1992 pp. Everytime (sic) there is a renewal if the intention of the insurer was to include the earthquake shock. If you are going to do some computation based on the rates you will arrive at the same premiums. COURT: They are the same. Plaintiffs witness. MEJIA: Witness referring to Exhibit C-1. sir. sir. in the amount of the coverage. earthquake shock cannot stand alone without the other half of it. the thing that comes to my mind is either insuring a swimming pool. D. E and F inclusive [remained] its coverage against earthquake shock to two (2) swimming pools only but that Exhibits G and H respectively entend the coverage against earthquake shock to all the properties indicated in the respective schedules attached to said policies. Mr. WITNESS: We do not normally cover earthquake shock endorsement on stand alone basis. I think there is a substantial increase in the premium. For swimming pools we do cover earthquake shock. If we are covering building or another we can issue earthquake shock solely but that the moment I see this.

Q. Being a company underwriter. premium rates and so on. it was inadvertent because of the previous policies that we have issued with no specific attachments. Respondent only insured the properties as intended by the petitioner. 12-14 Atty. You are referring to Exhibit H of course? A. ATTY. viz: CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. He assured me that with regards to the insurance premium rates that they will be charging will be limited to this one. 206-4568061-9. the deletion of that particular phrase is inadvertent. ANDRES: Will you not also agree with me that these exhibits. 4-5 Q. sir. is it not? x x x ATTY. Q. sir. I (sic) can even be lesser. I told him that the insurance that they will have to get will have the same provisions as this American Home Insurance Policy No. So. Yes. all the provisions here will be the same except that of the premium rates? A. sir. Mejia: . 1992 pp. Just to be clear about this particular answer of yours Mr. It was inadvertent. Yes. January 14. 1992 pp. the phrase Item no. we do not cover. 5 only meaning to (sic) the two (2) swimming pools was deleted from the policies issued by AIU. January 14.Would you as a matter of practice [insure] swimming pools for fire insurance? WITNESS: No. The Court also rejects petitioners contention that respondents contemporaneous and subsequent acts to the issuance of the insurance policy falsely gave the petitioner assurance that the coverage of the earthquake shock endorsement included all its properties in the resort. Omlas (sic) to copy from Exhibit H for purposes of procuring the policy from Philippine Charter Insurance Corporation? A. CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. Witness. Yes. Q. sir. what exactly did you tell Atty. sir. to Exhibit H. we dont. That is why the phrase earthquake shock to the two (2) swimming pools only was placed. . Petitioners own witness testified to this agreement. Exhibits G and H which you have pointed to during your direct-examination. is it not? A. ANDRES: As an insurance executive will you not attach any significance to the deletion of the qualifying phrase for the policies? WITNESS: My answer to that would be.

00 on the two (2) swimming pools only against the peril of earthquake shock which I understood before that this provision will have to be placed here because this particular provision under the peril of earthquake shock only is requested because this is an insurance policy and therefore cannot be insured against fire. de Leon your basis. Do you recall the circumstances that led to your discussion regarding the extent of coverage of the policy issued by Philippine Charter Insurance Corporation? A. for stating that except for the swimming pools all affected items have no coverage for earthquake shock? x x x A. I did not discover any difference inasmuch (sic) as I was assured already that the policy wordings and rates were copied from the insurance policy I sent them but it was only when this case erupted that we discovered some discrepancies.000. Umlas (sic). may we know from you Engr. I got a photocopy of the insurance coverage policy and it was indicated under Item 3 specifically that the coverage is only for earthquake shock. Inc. I remember that when I returned to the office after the inspection. Q.] Mr. Then. 22-26 Q. petitioner puts much stress on the letter of respondents independent claims adjuster. I based my statement on my findings. sir. when I examined the summary of premium payment only Item 3 which refers to the swimming pools have a computation for premium payment for earthquake shock and all the other items have no computation for payment of premiums. With regard to the wordings I did not notice any difference because it was exactly the same P393. And at that time did you notice any discrepancy or difference between the policy wordings as well as scope of coverage of Exhibits I and H respectively? A. No. 1993 pp. sir. But as testified to by the representative of Bayne Adjusters and Surveyors.Q. respondent never meant to lead petitioner to believe that the endorsement for earthquake shock covered properties other than the two swimming pools. Petitioner cannot rely on the general rule that insurance contracts are . Umlas were not proved. so this has to be placed. that you made a comparison of the provisions and scope of coverage of Exhibits I and H sometime in the third week of March. there is no ambiguity in the terms of the contract and its riders. viz: DIRECT EXAMINATION OF ALBERTO DE LEON (Bayne Adjusters and Surveyors. about that time. With respect to the items declared for insurance coverage did you notice any discrepancy at any time between those indicated in Exhibit I and those indicated in Exhibit H respectively? A. and secondly. Will it be correct to state[. Umlas categorically denied having given such assurances. 1990 or thereabout? A. Bayne Adjusters and Surveyors. In sum. I remember I had a talk with Atty. Finally. January 26. then enclosed in parenthesis (against the peril[s] of earthquake shock only). because upon my examination of the policy I found out that under Item 3 it was specific on the wordings that on the two swimming pools only. x x x Q. Inc. The verbal assurances allegedly given by respondents representative Atty. Atty.. Yes. Now. Inc. and I relayed to him what I had found out in the policy and he confirmed to me indeed only Item 3 which were the two swimming pools have coverage for earthquake shock.) TSN. Witness. if any. Q.

Q. . Consequently.. Witness to ensure that the provisions which you wanted in the American Home Insurance policy are to be incorporated in the PCIC policy? A. No costs. we have called on lower courts to remain careful in scrutinizing the factual circumstances behind each case to determine the efficacy of the claims of contending parties. viz: DIRECT EXAMINATION OF LEOPOLDO MANTOHAC[36] TSN. prepares the stipulations in the contract. in compliance with the condition set by the petitioner. I told him that I will agree to that renewal of this policy under Philippine Charter Insurance Corporation as long as it will follow the same or exact provisions of the previous insurance policy we had with American Home Assurance Corporation. a direct participant in securing the insurance policy of petitioner. When I examined the policy of the Philippine Charter Insurance Corporation I specifically told him that the policy and wordings shall be copied from the AIU Policy No. We cannot apply the general rule on contracts of adhesion to the case at bar. we cannot apply the "fine print" or "contract of adhesion" rule in this case as the parties intent to limit the coverage of the policy to the two swimming pools only is not ambiguous. but the principal provisions of the policy remained essentially similar to AHAC-AIUs policy. et al. the parties do not bargain on equal footing.[37] IN VIEW WHEREOF. the courts have held that in these type of contracts. SO ORDERED. Leopoldo Mantohac. these contracts are viewed as traps for the weaker party whom the courts of justice must protect. usually a corporation. is reflective of petitioners knowledge. 31944. sir. What steps did you take? A. specifically in the replacement cost endorsement. The testimony of Mr. Yes. the weaker party's participation being reduced to the alternative to take it or leave it.contracts of adhesion which should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it.[32] Consequently. In Development Bank of the Philippines v. It is true that there was variance in some terms. National Merchandising Corporation. Did you indicate to Atty. who were acute businessmen of experience. or construed liberally in favor of the insured. Petitioner cannot claim it did not know the provisions of the policy. From the inception of the policy. the judgment of the Court of Appeals is affirmed. September 23. Omlas (sic) what kind of policy you would want for those facilities in Agoo Playa? A.[33] The case law will show that this Court will only rule out blind adherence to terms where facts and circumstances will show that they are basically onesided.[35] the parties. 206-4568061-9.[31] A contract of adhesion is one wherein a party. petitioner had required the respondent to copy verbatim the provisions and terms of its latest insurance policy from AHACAIU. Respondent. 20-21 Q. sir. 206-4568061-9 in drafting its Insurance Policy No. Through the years. Did you take any step Mr. Thus. any ambiguity therein is resolved against the insurer. Yes.[34] Thus. 1991 pp. copied AIU Policy No. Q. were presumed to have assented to the assailed documents with full knowledge. The petition for certiorari is dismissed. while the other party merely affixes his signature or his "adhesion" thereto.

* and BRION. the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy. Present: CARPIO MORALES.00. JR. Petitioner. Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age. VELASCO.R. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. is indebted to the Assured for the unpaid balance of his loan with the Assured. P-1920[2] with petitioner Eternal Gardens Memorial Park Corporation (Eternal). a declaration of good health shall be required for all Lot Purchasers as part of the application. April 9. Any amount of insurance in excess of P50. renewable on a yearly basis. TINGA. 166245 PARK CORPORATION.Acting Chairperson. Any lot purchaser who is more than 55 years of age. . . respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. THE PHILIPPINE AMERICAN Promulgated: LIFE INSURANCE COMPANY..versus . Respondent.000. CV No. The relevant provisions of the policy are: ELIGIBILITY.: The Case Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26. 2. 2008 x----------------------------------------------------------------------------------------x D E C I S I O N VELASCO. 2004 Decision[1] of the Court of Appeals (CA) in CA-G.Republic of the Philippines SUPREME COURT Baguio City SECOND DIVISION ETERNAL GARDENS MEMORIAL G. CHICO-NAZARIO.000. The policy was to be effective for a period of one year. No medical examination shall be required for amounts of insurance up to P50. However. Under the policy.. 1980.00. J. No. JJ.R. EVIDENCE OF INSURABILITY. 57810 is the query: May the inaction of the insurer on the insurance application be considered as approval of the application? The Facts On December 10. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following: 1. JR.

there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. (2) Assureds Certificate (with form attached). We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was therefore aware of these pertinent provisions. (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen. Chuang died. whichever is smaller. Mr. The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. and (5) Assureds Certificate. (4) Certificate of Attending Physician. With regard to our acceptance of premiums.000 on April 25. 1984. . This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100. 1984. a declaration of good health shall be required for all Lot Purchasers as party of the application. 1984[5] to Philamlife. 1986.[9] a portion of which reads: The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100. (3) Application for Insurance accomplished and signed by the insured.LIFE INSURANCE BENEFIT. However. Eternal transmitted the required documents through a letter dated November 14. P-1920.[3] Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers. We will however. Philamlife denied Eternals insurance claim in a letter dated May 20. His balance of payments was PhP 100.[8] In response to Eternals demand. and the amounts of the respective unpaid balances of all insured lot purchasers. 1986. Eternal complied by submitting a letter dated December 29. 1982. EFFECTIVE DATE OF BENEFIT. On August 2. In reply. 1984. Philamlife had not furnished Eternal with any reply to the latters insurance claim. these do not connote our approval per se of the insurance coverage but are held by us in trust for the payor until the prerequisites for insurance coverage shall have been met. return all the premiums which have been paid in behalf of John Uy Chuang. (3) Certificate of Claimant. which served as an insurance claim for Chuangs death.[4] containing a list of insurable balances of its lot buyers for October 1982. 1984.00. Philamlife wrote Eternal a letter on November 12. In accordance with our Creditors Group Life Policy No.000. Eternal sent a letter dated August 20. under Evidence of Insurability provision. while still living.000.000. No application for Group Insurance was submitted in our office prior to his death on August 2. John Uy Chuang was not covered under the Policy. prior to his death. We cite further the provision on Effective Date of Coverage under the policy which states that there shall be no insurance if the application is not approved by the Company. together with a copy of the application of each purchaser. One of those included in the list as new business was a certain John Chuang. 1984.00 each. In relation to the instant petition. and (4) Statement of Account showing the unpaid balance of Chuang before his death. Chuang. Attached to the claim were the following documents: (1) Chuangs Certificate of Death. Since no application had been submitted by the Insured/Assured. 1984. for our approval but was submitted instead on November 15. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy.[6] requiring Eternal to submit the following documents relative to its insurance claim for Chuangs death: (1) Certificate of Claimant (with form attached). After more than a year. after his death.[7] which was received by Philamlife on November 15.

premises considered. there being no application form. the CA concluded. Thus. absurd or impossible. payment must follow. The RTC found that Eternal submitted Chuangs application for insurance which he accomplished before his death. No costs. as well as Philamlifes acceptance of the premiums during the same period. to pay the sum of P100. judgment is hereby rendered in favor of Plaintiff ETERNAL. Chuang was not covered by Philamlifes insurance. surmises or conjectures. against Defendant PHILAMLIFE. 1982. SO ORDERED. as enunciated in Sampayan v. representing the proceeds of the Policy of John Uy Chuang. 57810 is REVERSED and SET ASIDE. (2) when the inference made is manifestly mistaken. the dispositive portion of which reads: WHEREFORE. However. and III. The Courts Ruling As a general rule. 1982.00 as attorneys fees. and the complaint is DISMISSED.Consequently. among others: Encl: Phil-Am Life Insurance Application Forms & Cert. (5) when the findings of facts are conflicting. or has decided it in a way not in accord with law or with the applicable jurisprudence. The RTC said that since the contract is a group life insurance. once proof of death is submitted. (6) when in making its findings the [CA] went beyond the issues of the case.00. docketed as Civil Case No. (7) when the findings [of the CA] are contrary to the trial court. Court of Appeals: (1) when the findings are grounded entirely on speculation. It further ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance Code. thus: WHEREFORE. as testified to by Eternals witness and evidenced by the letter dated December 29.000. II. considering their findings of facts are conclusive and binding on this Court. Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife. or its findings are contrary to the admissions of both the appellant and the appellee. The application for insurance was not duly submitted to respondent PhilamLife before the death of John Chuang. until fully paid. (8) when the findings are conclusions without citation of specific evidence on which they are based. this Court is not a trier of facts and will not re-examine factual issues raised before the CA and first level courts.[11] The CA based its Decision on the factual finding that Chuangs application was not enclosed in Eternals letter dated December 29. and. There was no valid insurance coverage. 1982 to Chuangs death on August 2. Reversing and setting aside the Decision of the Regional Trial Court dated May 29. 1996. Philamlife appealed to the CA. plus legal rate of interest. stating. we have this petition with the following grounds: The Honorable Court of Appeals has decided a question of substance. in holding that: I. Hence. 1984. Philamlife was deemed to have approved Chuangs application.[10] It further ruled that due to Philamlifes inaction from the submission of the requirements of the group insurance on December 29. (3) when there is grave abuse of discretion. (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed . 14736. The trial court decided in favor of Eternal. to pay the sum of P10. the decision of the Regional Trial Court of Makati in Civil Case No. such rule is subject to exceptions. which ruled.000. (4) when the judgment is based on a misapprehension of facts. ordering the Defendant PHILAMLIFE. not therefore determined by this Honorable Court. SO ORDERED.

including Chuang in the list of new businesses. if properly considered. if considered. were enclosed in the letter that was apparently received by Philamlife on January 15. or misinterpreted. states that the insurance forms for the attached list of burial lot buyers were attached to the letter. However. Arevalo: Q Where is the original of the application form which is required in case of new coverage? [Mendoza:] A It is [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the marketing department of Eternal Gardens.[14] that. and attitude. because it has the opportunity to observe firsthand the witnesses demeanor. 1982. conduct. Eternal alleged that it provided a copy of the insurance application which was signed by Chuang himself and executed before his death. this Court may review them. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. which Philamlife stamped as received. misapprehended. a list of insurable interests of buyers for October 1982 was attached. On the other hand.) In the instant case.[12] (Emphasis supplied. arguing that Eternal must present evidence showing that Philamlife received a copy of Chuangs insurance application. Philamlife failed to do so. the contents of the letter are correct and accounted for. 1983. would justify a different conclusion.by the respondent. .[15] An examination of the testimonies of the witnesses mentioned by Philamlife. To reiterate. the factual findings of the RTC were reversed by the CA. The trial court is in the best position to determine the reliability and credibility of the witnesses. the letter dated December 29. unless some facts or circumstances of weight and substance have been overlooked. Eternal added it was noted at the bottom of said letter that the corresponding Phil-Am Life Insurance Application Forms & Cert. reveals no overlooked facts of substance and value. Findings of the trial court on such matters are binding and conclusive on the appellate court. Philamlife is deemed to have received Chuangs insurance application. Philamlife primarily claims that Eternal did not even know where the original insurance application of Chuang was. Philamlife claims that the evidence presented by Eternal is insufficient. it was Philamlifes bounden duty to make sure that before a transmittal letter is stamped as received. which must prove that the letter did not contain Chuangs insurance application. thus. In Eternals letter dated December 29. Eternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance application of Chuang before his death. The evidence on record supports Eternals position. 1982. Such receipt is an admission by Philamlife against its own interest. however. which. The fact of the matter is. and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties. Philamlifes allegation that Eternals witnesses ran out of credibility and reliability due to inconsistencies is groundless. thus. might affect the result of the case. (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.[13] The burden of evidence has shifted to Philamlife. as shown by the testimony of Edilberto Mendoza: Atty. Finally.

this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured. 1980. Thus. An examination of the above provision would show ambiguity between its two sentences.[17] We reiterated the above ruling in Merencillo v. the witness admitted not knowing where the original insurance application was. Miranda: We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not [ask] for the number of copy. there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. Arevalo: Q Where is the original? [Mendoza:] A As far as I remember I do not know where the original but when I submitted with that payment together with the new clients all the originals I see to it before I sign the transmittal letter the originals are attached therein. People: Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecutions evidence as a whole or reflect on the witnesses honesty. Atty. Thus. However.[16] In other words. but believed that the application was transmitted to Philamlife as an attachment to a transmittal letter. these are minor inconsistencies that do not affect the credibility of the witnesses.Atty. in Malayan Insurance Corporation v. Thus. This question must be answered in the affirmative. In the policy. Paredes that minor inconsistencies are too trivial to affect the credibility of witnesses. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective. the number of copies of the insurance application that Chuang executed is not at issue. we ruled in People v. However. and these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed. P-1920 dated December 10. Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. Court of Appeals. neither is whether the insurance application presented by Eternal has been falsified. As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form. the question arises as to whether Philamlife assumed the risk of loss without approving the application.[18] In the present case. it is provided that: EFFECTIVE DATE OF BENEFIT. As earlier stated. The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and substantially coincide with each other so as to make a consistent and coherent whole. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latters interest. the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternals witnesses. .

000 representing the proceeds of the Life Insurance Policy of Chuang. (2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100. (3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100. .000. SO ORDERED. Being a contract of adhesion. in Creditor Group Life Policy No. to either deny or approve the same. Court of Appeals. in other words. 1980. The May 29. The second sentence of Creditor Group Life Policy No. The November 26. must be construed in favor of the insured and in favor of the effectivity of the insurance contract. 2004 CA Decision in CA-G. especially to avoid forfeiture. Branch 138 is MODIFIED. being a contract of adhesion. insurance companies must be obligated to act with haste upon insurance applications. and binding until terminated by Philamlife by disapproving the insurance application. P1920 dated December 10. Philamlife is hereby ORDERED: (1) To pay Eternal the amount of PhP 100. or otherwise be bound to honor the application as a valid. the vague contractual provision. any ambiguity therein should be resolved against the insurer. the mere inaction of the insurer on the insurance application must not work to prejudice the insured. Inc. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage. and (4) To pay Eternal attorneys fees in the amount of PhP 10. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. binding. the insurer. Moreover. the seemingly conflicting provisions must be harmonized to mean that upon a partys purchase of a memorial lot on installment from Eternal. to characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. A contract of insurance. stating that: When the terms of insurance contract contain limitations on liability. CV No.) In the more recent case of Philamcare Health Systems.[21] WHEREFORE.R. confusing if at all understandable to laypersons. 1996 Decision of the Makati City RTC. we GRANT the petition.000 from June 17. the terms of an insurance contract are to be construed strictly against the party which prepared the contract. As a final note. 1996 RTC Decision on June 17. As such. it should be construed liberally in favor of the insured and strictly against the insurer. par excellence.[19] (Emphasis supplied. insurance contracts are contracts of adhesion containing technical terms and conditions of the industry. 57810 is REVERSED and SET ASIDE. valid. and effective insurance contract. insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. an insurance contract covering the lot purchaser is created and the same is effective.where the contract or policy is prepared by the insurer. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.000 from the time of extra-judicial demand by Eternal until Philamlifes receipt of the May 29. we reiterated the above ruling. Hence. v. it cannot be interpreted as a termination of the insurance contract. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. No costs. 1996 until full payment of this award. On the other hand. in order to protect the interest of insurance applicants. More often than not. 1996. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation.[20] Clearly. that are imposed on those who wish to avail of insurance.

2006 Resolution3 denying the petitioner’s Motion for Reconsideration. Aban (Aban). as she was illiterate. regardless of fraud.6 On April 10. Sotero was sickly since 1990.00. by requiring them to thoroughly investigate those they insure within two years from effectivity of the policy and while the insured is still alive. D E C I S I O N DEL CASTILLO.10 For the above reasons.11 On April 24. 97-867 and assigned to Branch 134 of the Makati Regional Trial Court. Petitioner conducted an investigation into the claim. petitioner denied respondent’s claim on April 16. indiscriminately soliciting and accepting insurance business from any Tom. CV No.000. 1997 and refunded the premiums paid on the policy. 1996. petitioner filed a civil case for rescission and/or annulment of the policy. and x x x designated herself as the beneficiary. 3. 747411 (the policy). 2. 1993 application for insurance. Sotero did not sign the July 3. with a face value of P100. J. concealment and/or misrepresentation under the Insurance Code.4 Factual Antecedents On July 3. Respondent filed a claim for the insurance proceeds on July 9. which was docketed as Civil Case No. Respondent was the one who filed the insurance application. 1993.R. designating respondent Cresencia P. Assailed in this Petition for Review on Certiorari1 are the September 28. If they do not. 62286 and its November 9. Petitioner. The law assumes that they will do just that and not sit on their laurels.8 and came out with the following findings: 1. 1997.5 as her beneficiary. Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy No. CRESENCIA P. they will be obligated to honor claims on the policies they issue. Sotero died. 1996. Sotero did not personally apply for insurance coverage.7 when the insurance policy had been in force for more than two years and seven months. Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance Corporation (Bankers Life). her niece. The main thesis of the Complaint was that the policy was obtained by fraud. 2013 MANILA BANKERS LIFE INSURANCE CORPORATION.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 2005 Decision2 of the Court of Appeals' (CA) in CA-G. 4. .: The ultimate aim of Section 48 of the Insurance Code is to compel insurers to solicit business from or provide insurance coverage only to legitimate and bona fide clients. in Sotero’s favor on August 30. Dick and Harry. No. after the requisite medical examination and payment of the insurance premium. Petitioner issued Insurance Policy No. ABAN.12 which thus renders it voidable under Article 139013 of the Civil Code. vs. 747411.9 and 5. 1993. Respondent.R. 175666 July 29. concealment or misrepresentation.

the CA held that petitioner may no longer prove that the subject policy was void ab initio or rescindible by reason of fraudulent concealment or misrepresentation after the lapse of more than two years from its issuance. Civil Case No. whether fraud. petitioner’s investigator testified in court. such right must be exercised previous to the commencement of an action on the contract. Sotero could legally take out insurance on her own life and validly designate – as she did – respondent as the beneficiary. 2005. Dindo Aban. thus: WHEREFORE. within the first two years of the policy. 1998. but in another Order19 dated October 20.Respondent filed a Motion to Dismiss14 claiming that petitioner’s cause of action was barred by prescription pursuant to Section 48 of the Insurance Code. the trial court issued an Order17 granting respondent’s Motion to Dismiss. Applying Section 48 to petitioner’s case. Petitioner moved for reconsideration. the CA issued the assailed Decision.22 Hence.20 The CA thus sustained the trial court. 1997. the present Petition. which provides as follows: Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter. was the one who procured the insurance. the trial court found that Sotero.21 but the CA denied the same in its November 9. 97-867.16 Ruling of the Regional Trial Court On December 9. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement. petitioner is now barred from contesting the same or seeking a rescission or annulment thereof. and not respondent. SO ORDERED. arguing that the trial court erred in applying Section 48 and declaring that prescription has set in.R. the instant appeal is DISMISSED for lack of merit. 62286. since the policy had been in force for more than two years.18 In dismissing the case. It held further that under Section 48. ABAN’s Motion to Dismiss is hereby granted. If it failed to do so within the statutory two-year period. thus. then the insured must be protected and allowed to claim upon the policy. 97-867 is hereby dismissed. Petitioner moved for reconsideration. petitioner had only two years from the effectivity of the policy to question the same.15 and that it was the respondent who paid the annual premiums on the policy. concealment or misrepresentation was present when the insurance coverage was obtained. 2006 Resolution. . It ratiocinated that petitioner was equipped with ample means to determine. defendant CRESENCIA P. which contained the following decretal portion: WHEREFORE. Petitioner interposed an appeal with the CA. Ruling of the Court of Appeals On September 28. CV No. the trial court stood its ground. Petitioner questioned the dismissal of Civil Case No. During the proceedings on the Motion to Dismiss. stating among others that the insurance underwriter who solicited the insurance is a cousin of respondent’s husband. the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. docketed as CA-G. It contended that since it was respondent – and not Sotero – who obtained the insurance. SO ORDERED. the policy issued was rendered void ab initio for want of insurable interest. in the light of all the foregoing.

and could validly designate anyone as her beneficiary. While petitioner insists that its independent investigation on the claim reveals that it was respondent. on the other hand. posing as Sotero. This finding of fact binds the Court. as it appeared that Sotero did not actually apply for insurance coverage. Respondent submits that the CA’s findings of fact leading to such conclusion should be respected. as such. and the Court is loath to disturb this. Our Ruling The Court denies the Petition. It adds that respondent. designating respondent as her beneficiary. Sotero had insurable interest in her own life.Issues Petitioner raises the following issues for resolution: I WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE ORDER OF THE TRIAL COURT DISMISSING THE COMPLAINT ON THE GROUND OF PRESCRIPTION IN CONTRAVENTION (OF) PERTINENT LAWS AND APPLICABLE JURISPRUDENCE. II WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE APPLICATION OF THE INCONTESTABILITY PROVISION IN THE INSURANCE CODE BY THE TRIAL COURT. as it had claimed originally that the policy was merely voidable. . petitioner insists that respondent’s claim was spurious. who was merely Sotero’s niece. and that respondent was an impostor. who obtained the insurance. The Court will not depart from the trial and appellate courts’ finding that it was Sotero who obtained the insurance for herself. Under Section 10 of the Insurance Code. Both courts are in accord in this respect. Petitioner adds that Insurance Policy No. sickly. the action for the declaration of its nullity or inexistence does not prescribe.23 Petitioner’s Arguments In praying that the CA Decision be reversed and that the case be remanded to the trial court for the conduct of further proceedings. essentially argues in her Comment26 that the CA is correct in applying Section 48. petitioner argues in its Petition and Reply24 that Section 48 cannot apply to a case where the beneficiary under the insurance contract posed as the insured and obtained the policy under fraudulent circumstances. had no insurable interest in the life of her aunt. and had no visible source of income to pay for the insurance premiums. III WHETHER THE COURT OF APPEALS ERRED IN DENYING PETITIONER’S MOTION FOR RECONSIDERATION. 747411 was void ab initio and could not have given rise to rights and obligations. She adds that petitioner’s new allegation in its Petition that the policy is void ab initio merits no attention. posing as Sotero and fraudulently obtaining insurance in the latter’s name without her knowledge and consent. respondent echoes the CA’s pronouncement that since it was Sotero who obtained the insurance. was unlettered. this claim is no longer feasible in the wake of the courts’ finding that it was Sotero who obtained the insurance for herself.25 Respondent’s Arguments Respondent. On the issue of insurable interest. Relying on the results of the investigation that it conducted after the claim for the insurance proceeds was filed. having failed to raise the same below. insurable interest was present.

for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general. no right to rescind arises. even though the policy was obtained by fraud. the insurer must make good on the policy. Section 48 prevents a situation where the insurer knowingly continues to accept annual premium payments on life insurance. concealment. For nearly three years. Life insurance policies that pass the statutory two-year period are essentially treated as legitimate and beyond question. Section 48 serves a noble purpose. the results and conclusions arrived at during the investigation conducted unilaterally by petitioner after the claim was filed may simply be dismissed as self-serving and may not form the basis of a cause of action given the existence and application of Section 48. Section 48 regulates both the actions of the insurers and prospective takers of life insurance. or misrepresentation. petitioner collected the premiums and devoted the same to its own profit. concealment. or when the insured dies within the period. After the two-year period lapses. The Court therefore agrees fully with the appellate court’s pronouncement that – the "incontestability clause" is a provision in law that after a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from . the self-regulating feature of Section 48 lies in the fact that both the insurer and the insured are given the assurance that any dishonest scheme to obtain life insurance would be exposed. It gives insurers enough time to inquire whether the policy was obtained by fraud. Moreover. Under the provision. as will be discussed at length below. as it regulates the actions of both the insurer and the insured. legitimate policy holders are absolutely protected from unwarranted denial of their claims or delay in the collection of insurance proceeds occasioned by allegations of fraud. and the individuals who wield them are made secure by the thought that they will be paid promptly upon claim."27 In the absence of proof of such fraudulent intent. This is not to say that insurance fraud must be rewarded. only to later on deny a claim on the policy on specious claims of fraudulent concealment and misrepresentation. 747411 which would have timely exposed the supposed flaws and irregularities attending it as it now professes. and attempts at unduly denying a claim would be struck down. In this manner. on the other hand. It cannot now deny the claim when it is called to account. Section 48 contributes to the stability of the insurance industry. are at once belied by the trial and appellate courts’ finding that Sotero herself took out the insurance for herself. "Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. petitioner appears to have turned a blind eye and opted instead to continue collecting the premiums on the policy. which are predicated on respondent’s alleged posing as Sotero and forgery of her signature in the insurance application. instead of conducting at the first instance an investigation into the circumstances surrounding the issuance of Insurance Policy No. or misrepresentation by insurers. such as what obtains in the instant case. an insurer is given two years – from the effectivity of a life insurance contract and while the insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.With the above crucial finding of fact – that it was Sotero who obtained the insurance for herself – petitioner’s case is severely weakened. but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized. Thus. Thus. Allegations of fraud. concealment. it forewarns scheming individuals that their attempts at insurance fraud would be timely uncovered – thus deterring them from venturing into such nefarious enterprise. or misrepresentation. if not totally disproved. Section 48 must be applied to it with full force and effect. claims which may no longer be set up after the two-year period expires as ordained under the law. At the same time.

The insurance policy was thus in force for a period of 3 years. no matter how patent or well-founded. that is. 1993. then petitioner would have discovered the scheme earlier if it had in earnest conducted an investigation into the circumstances surrounding the Sotero policy. The key phrase in the second paragraph of Section 48 is "for a period of two years. the insured died on April 10.28 Petitioner claims that its insurance agent. The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured’s lifetime. 1996. Instead. the defenses of concealment or misrepresentation. then they have only themselves to blame. the beneficiary is given the stability to recover under the policy when the insured dies. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. naturally it was unable to detect the scheme. But because it did not and it investigated the Sotero account only after a claim was filed thereon more than two years later. If they could not properly screen their agents or salesmen before taking them in to market their products. Considering that the insured died after the two-year period. Well-settled is the rule that it is the plaintiff-appellant’s burden to show that the factual findings of the trial court are not based on substantial evidence or that its conclusions are contrary to applicable law and jurisprudence. the policy was issued on August 30. the insurer cannot prove that the policy is void ab initio or is rescindible by reason of fraudulent concealment or misrepresentation of the insured or his agent. who solicited the Sotero account." As borne by the records. and thus insinuates that both connived to commit insurance fraud. happens to be the cousin of respondent’s husband. At least two (2) years from the issuance of the policy or its last reinstatement. will no longer lie. After two years. 7 months. barred from proving that the policy is void ab initio by reason of the insured’s fraudulent concealment or misrepresentation or want of insurable interest on the part of the beneficiary. The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period of only two (2) years from the issuance of the policy or its last reinstatement. and not after claims for insurance proceeds are filed with them. from the date of the last reinstatement. For its negligence and inaction. only to raise the issue of fraudulent concealment or misrepresentation when the insured dies in order to defeat the right of the beneficiary to recover under the policy. 1997. The plaintiff-appellant failed to discharge that burden. insurers . and 24 days. Otherwise said. its case precisely provides the strong argument for requiring insurers to diligently conduct investigations on each policy they issue within the two-year period mandated under Section 48. the Court cannot sympathize with its plight. the plaintiff-appellant is. The provision also makes clear when the two-year period should commence in case the policy should lapse and is reinstated. therefore. Besides. If this were truly the case. or if they do not thoroughly investigate the insurance contracts they enter into with their clients.the date of its issue or of its last reinstatement. It is not fair for the insurer to collect the premiums as long as the insured is still alive. and the claim was denied on April 16. then they should cease doing business. The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation within a period of two (2) years. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. herein defendant-appellee. if insurers cannot vouch for the integrity and honesty of their insurance agents/salesmen and the insurance policies they issue.

.R. The business of insurance is a highly regulated commercial activity in the country.29 and is imbued with public interest. CV No. Insurers may not be allowed to delay the payment of claims by filing frivolous cases in court. In the meantime. 2006 Resolution of the Court of Appeals in CA-G.cannot be allowed to collect premiums on insurance policies. SO ORDERED. they benefit from collecting the interest and/or returns on both the premiums previously paid by the insured and the insurance proceeds which should otherwise go to their beneficiaries. 62286 are AFFIRMED. hoping that the inevitable may be put off for years – or even decades – by the pendency of these unnecessary court cases. the Petition is DENIED. generating profits and returns therefrom for their own benefit. and thereafter conveniently deny insurance claims by questioning the authority or integrity of their own agents or the insurance policies they issued to their premium-paying clients. This is exactly one of the schemes which Section 48 aims to prevent. 2005 Decision and the November 9.30 "An insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the former’s interest. use these amounts collected and invest the same through the years."31 WHEREFORE. The assailed September 28.

ID. 76399. . JURISDICTION THEREOF LIMITED TO REVIEW OF ERRORS OF LAW. (5) when the findings of fact are conflicting. Fernando (4 SCRA 138 [1962]). OF THE PHILIPPINES. GENERALLY. 1993. Court of Appeals 168 SCRA 1 [1988]). Inc." . and (6) when the Court of Appeals in making its findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee (Ronquillo v. magistrates. Court of Appeals. NO LONGER ALLOWED. 185 SCRA 741 [1991]). Petitioner. declaring that beginning one month from the promulgation of the resolution on May 30. Court of Appeals. conclusive upon this Court except in the following cases: (1) when the conclusion is a finding grounded entirely on speculation. MOTION FOR RECONSIDERATION. — Considering that . therefore. v. ID. 1993. Bello v. in a petition for review on certiorari under Rule 45. v. surmises or conjectures. 75605. Respondents. Sabino Padilla.. and Joe v. Inc. for Fidelity & Surety. Respondents. the rule shall be strictly enforced that no motion for extension of time to file a motion for new trial or reconsideration shall be filed . COURT OF APPEALS and FIDELITY & SURETY CO. — As early as 1944. Jr. Its terms and conditions constitute the measure of the insurer’s liability and compliance therewith is a condition precedent to the insured’s right to recovery from the insurer (Oriental Assurance Corporation v. REMEDIAL LAW. RAFAEL VERENDIA and THE COURT OF APPEALS. (4) when the judgment is premised on a misapprehension of facts. Co. CASE AT BAR. B. ID. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it (Western Guaranty Corporation v. the issue of the veracity or falsity of the lease contract could have been better resolved by the appellate court for. Buenaventura 74 Phil.] FIDELITY & SURETY CO. January 22. To the same effect were the rulings in Gibbs v. The above cases notwithstanding and because the Rules of Court do not expressly prohibit the filing of a motion for extension of time to file a motion for reconsideration in regard to a final order or judgment. 195 SCRA 433 [1991]). an insurance contract is the law between the parties (Pacific Banking Corporation v. . 200 SCRA 459 [1991]. INSURANCE CONTRACT. CFI of Manila (80 Phil.. SUPREME COURT. As it is also a contract of adhesion. OF THE PHILIPPINES. 160 [1948]). mistaken. SHOULD BE CONSTRUED IN FAVOR OF THE INSURED. 212. 187 SCRA 652 [1980]). the jurisdiction of this Court is limited to the review of errors of law..R. — Verging on the factual. v. this Court through Justice Ozaeta already pronounced the doctrine that the pendency of a motion for extension of time to perfect an appeal does not suspend the running of the period sought to be extended (Garcia v. including those in the Court of Appeals.THIRD DIVISION [G.L. Japson (142 SCRA 208 [1986]). INC. 3.R. held sharply divided opinions on whether the period for appealing which also includes the period for moving to reconsider may be extended. or impossible. (3) when there is grave abuse of discretion in the appreciation of facts. BENEFITS THEREUNDER SHALL BE FORFEITED IF ANY FALSE DECLARATIONS BE MADE IN SUPPORT OF THE CLAIM. (2) when the inference made is manifestly absurd. 611 [1944]). Court of Appeals. . CIVIL LAW." (at p. King (20 SCRA 1120 [1967]).] RAFAEL (REX) VERENDIA. citing Perla Compania de Sequros. Padilla for Petitioner. SYLLABUS 1. The matter was not definitely settled until this Court issued its Resolution in Habaluyas Enterprises. Petitioner. EXTENSION OF TIME FOR FILING THEREOF. No. v. [G. EXCEPTIONS. 4. No. The appellate court’s findings of fact are.) 2. January 22. LAW BETWEEN THE PARTIES. Court of Appeals. — Basically a contract of indemnity.. 1986 —.

It might be that there had been efforts to settle Verendia’s claims. the terms of the policy should be strictly construed against the insured. 173 SCRA 228 [1989]). no representative of Fidelity had signed it. Rizal in the amount of P385." Verendia. legal interest thereon.000. 1980 and June 23. averred that the policy was avoided by reason of over-insurance. The complaint was later amended to include Monte de Piedad as an "unwilling defendant" (p. Verendia reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith (Velasco v. . Designated as beneficiary was the Monte de Piedad & Savings Bank.00 under Policy No.77. ID. 1980 to a certain Roberto Garcia. that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25. Thus. In sustaining the defenses set up by Fidelity.00 under Policy No. PDB-80-1913 expiring on May 12.. 1983. Answering the complaint. the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced.000. The Country Bankers Insurance for P56. Fidelity bound itself to a "mutual agreement" to settle Verendia’s claims in consideration of the amount of P142. Fidelity was accordingly informed of the loss and despite demands. 1981. While the said receipt appears to have been a filled-up form of Fidelity. but surely.00. On May 24. that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent. or if any false declaration be made or used in support thereof. the trial court ruled that Paragraph 3 of the policy was also violated by Verendia in that the insured failed to inform Fidelity of his other insurance coverages with Country Bankers Insurance and Development Insurance. to interpret Fidelity’s presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties. the trial court rendered a decision. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract. by presenting a false lease contract. D E C I S I O N MELO. Record).: The two consolidated cases involved herein stemmed from the issuance by Fidelity and Surety Insurance Company of the Philippines (Fidelity for short) of its Fire Insurance Policy No. ID. — There is no reason to conclude that by submitting the subrogation receipt as evidence in court.. Verendia failed to live by the terms of the policy. praying for payment of P385. NOT AN INDICATION OF PRESENCE OF MUTUAL AGREEMENT TO SETTLE CLAIM OF INSURED. when actually it was a Marcelo Garcia who was the lessee. namely. Verendia also insured the same building with two other companies. 1981 covering Rafael (Rex) Verendia’s residential building located at Tulip Drive. F48867 expiring on June 30. Beverly Hills. J.00. per Judge Rodolfo A. 1981. thus prompting Verendia to file a complaint with the then Court of First Instance of Quezon City. 16. 5. Antipolo. he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking Corporation v. F-18876 effective between June 23. Worse yet. 1980.Verendia used a false lease contract to support his claim under Fire Insurance Policy No. plus attorney’s fees and litigation expenses. While the three fire insurance policies were in force. Ortiz. or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy. F-18876.000. the insured property was completely destroyed by fire on the early morning of December 28. Fidelity. specifically Section 13 thereof which is expressed in terms that are clear and unambiguous. among other things. Court of Appeals.685.000. and The Development Insurance for P400. supra). ruling in favor of Fidelity. SUBROGATION RECEIPTS. refused payment under its policy. Apostol.

16. (CA-G. The motion to expunge was denied on June 17. 75605 was initiated. and Ejercito (P). but instead of directly filing a motion for reconsideration within 15 days therefrom. or more specifically on October 21. v. No. . of course. 1986 (p. but Fidelity had in the meantime filed its motion for reconsideration on April 24. Rollo of G. 14. for indeed. 1986. Buenaventura 74 Phil. King (20 SCRA 1120 [1967]). Rollo of G. 76399) and thereafter given due course. the Intermediate Appellate Court has personnel receiving pleadings even on Saturdays." (at p. The above cases notwithstanding and because the Rules of Court do not expressly prohibit the filing of a motion for extension of time to file a motion for reconsideration in regard to a final order or judgment. 1986 (p. The motion for extension was not filed on April 19.R. held sharply divided opinions on whether the period for appealing which also includes the period for moving to reconsider may be extended. No. the motion for extension was filed and granted before June 30. 27. The matter was not definitely settled until this Court issued its Resolution in Habaluyas Enterprises. Zosa. this Court through Justice Ozaeta already pronounced the doctrine that the pendency of a motion for extension of time to perfect an appeal does not suspend the running of the period sought to be extended (Garcia v. 1986. JJ. were consolidated (p. declaring that beginning one month from the promulgation of the resolution on May 30. ibid. Rollo of G. the rule shall be strictly enforced that no motion for extension of time to file a motion for new trial or reconsideration shall be filed . 32-33. Japson (142 SCRA 208 [1986]). the appellate court denied Fidelity’s motion for reconsideration and account thereof. 54.). 76399). . No.R. CV No. 1986. inquiry must be made into the issue of whether Fidelity could have legally asked for an extension of the 15-day reglementary period for appealing or for moving for reconsideration. 76399. the petition herein docketed as G. Verendia filed a motion to expunge from the record Fidelity’s motion for reconsideration on the ground that the motion for extension was filed out of time because the 15th day from receipt of the decision which fell on a Saturday was ignored by Fidelity.chanrobles virtual lawlibrary As early as 1944. 75605). CFI of Manila (80 Phil. and Joe v. Stated otherwise before anything else. No. Bartolome. 212. the appellate court reversed for the following reasons: (a) there was no misrepresentation concerning the lease for the contract was signed by Marcelo Garcia in the name of Roberto Garcia. The two petitions.Verendia appealed to the then Intermediate Appellate Court and in a decision promulgated on March 31.) In the instant case. 1986 which was the 15th day after receipt of the decision because said 15th day was a Saturday and of course. Before we can even begin to look into the merits of the main case which is the petition for review on certiorari. 15. Fidelity filed on March 31. . magistrates. 160 [1948]). Fernando (4 SCRA 138 [1962]). Coquia. 1986. The motion for extension was granted by the appellate court on April 30. although. ibid. or whether the same is beyond further judicial scrutiny. so Verendia contended.R. the following day was a Sunday (p. Verendia’s motion to expunge the motion . 1986 (p. Inc. ibid. Fidelity received a copy of the appellate court’s decision on April 4. To the same effect were the rulings in Gibbs v. 1986.R. Fidelity filed on April 21. No. including those in the Court of Appeals. and (b) Paragraph 3 of the policy contract requiring Verendia to give notice to Fidelity of other contracts of insurance was waived by Fidelity as shown by its conduct in attempting to settle the claim of Verendia (pp.) and after a motion for reconsideration was similarly brushed aside on July 22. we must first determine whether the decision of the appellate court may still be reviewed. No.R..). 1986. the petition for review on certiorari now docketed as G. 30.). .). Subsequently. 611 [1944]). 1986 — ". ibid. 02895.R. inter-related as they are. 1986 (p. Bello v. a motion for extension of 3 days within which to file a motion for reconsideration.

to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee". on the strength of these facts. When the rented residential building was razed to the ground on December 28. However. p. allowed such a ruse.500) when in fact. Verendia. an insurance contract is the law between the parties (Pacific Banking Corporation v. who had been paying the rentals all the while. Fidelity’s conclusions on these proven facts appear. insured the same property with two other insurance companies for a total coverage of around P900. the building appeared to have "no occupant" and that Mr. These pieces of evidence belie Verendia’s uncorroborated testimony that Marcelo Garcia whom he considered as the real lessee. however. Eleuterio M. (3) when there is grave abuse of discretion in the appreciation of facts. was entered into between him and one Robert Garcia. 195 SCRA 433 [1991]). 1982. conclusive upon this Court except in the following cases: (1) when the conclusion is a finding grounded entirely on speculation. the adjuster submitted a report dated December 4. the issues Fidelity raises therein are: (a) whether or not the contract of lease submitted by Verendia to support his claim on the fire insurance policy constitutes a false declaration which would forfeit his benefits under Section 13 of the policy and (b) whether or not. a couple of days after the effectivity of the insurance policy. No. It was only on October 9. according to the investigation report prepared by Pat. surmises or conjectures. 76399. 1986. 1 Verging on the factual. Fidelity had in effect agreed to settle Verendia’s claim in the amount stated in said receipt. "E"). 1981 that an adjuster was able to locate him. Reduced to bare essentials.000. Buenviaje of the Antipolo police. "1"). was occupying the building when it was burned (TSN. "2"). therefore.R. this Court shall review the evidence on record. Ironically. it appears that Robert Garcia (or Roberto Garcia) was still within the premises. failed to explain why Marcelo had to sign his cousin’s name when he in fact was paying for the rent and why he (Verendia) himself.chanrobles virtual lawlibrary Robert Garcia disappeared after the fire. Robert Garcia then executed an affidavit before the National Intelligence and Security Authority (NISA) to the effect that he was not the lessee of Verendia’s house and that his signature on the contract of lease was a complete forgery. 1980 (Exh. The appellate court’s findings of fact are. July 27. and (6) when the Court of Appeals in making its findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee (Ronquillo v. the filing of the motion for extension came before its formal proscription under Habaluyas. Court of Appeals. In view of the conflicting findings of the trial court and the appellate court on important issues in these consolidated cases and it appearing that the appellate court judgment is based on a misapprehension of facts.00. 1980. Verendia admitted that it was not Robert Garcia who signed the lease contract. mistaken.for reconsideration was not finally disposed until July 22. or after the dictum in Habaluyas had taken effect. married to Helen Cawinian. (2) when the inference made is manifestly absurd. or impossible. the Provincial Assessor of Rizal had assessed the property’s fair market value to be only P40. therefore.300. therefore. and created a dead-end for the adjuster by the disappearance of Robert Garcia. the lessor. on June 25. inflated the value of the property by the alleged monthly rental of P6. the jurisdiction of this Court is limited to the review of errors of law. 1981 recommending the denial of Verendia’s claim (Exh. Basically a contract of indemnity. the issue of the veracity or falsity of the lease contract could have been better resolved by the appellate court for. in a petition for review on certiorari under Rule 45. (5) when the findings of fact are conflicting. Thus. 10). in submitting the subrogation receipt in evidence. it was signed by Marcelo Garcia cousin of Robert. Seemingly. Court of Appeals 168 SCRA 1 [1988]). According to Verendia. (4) when the judgment is premised on a misapprehension of facts. Roberto Garcia was "renting on the otherside (sic) portion of said compound" (Exh. during the trial. The contract of lease upon which Verendia relies to support his claim for insurance benefits. for which reason we now turn our attention to G. Its terms and conditions constitute the measure of the insurer’s .

Verendia reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith (Velasco v. Court of Appeals.liability and compliance therewith is a condition precedent to the insured’s right to recovery from the insurer (Oriental Assurance Corporation v. that Verendia had not received the amount stated therein. 76399 is GRANTED and the decision of the then Intermediate Appellate Court under review is REVERSED and SET ASIDE and that of the trial court is hereby REINSTATED and UPHELD. Court of Appeals. citing Perla Compania de Sequros. or if any false declaration be made or used in support thereof. SO ORDERED. Considering. Apostol. Jr. 173 SCRA 228 [1989]).R. 187 SCRA 652 [1980]).00 stated in the policy. No. It must have likewise realized the futility of assigning it as an error because on the first page of the policy the following is typewritten: "Other insurances allowed." Verendia. Verendia failed to live by the terms of the policy. No. supra). or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy. It is even incomplete as the blank spaces for a witness and his address are not filled up. by presenting a false lease contract. however. 185 SCRA 741 [1991]).685. Davide. to interpret Fidelity’s presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties. WHEREFORE. Bidin. Fidelity appears to have agreed with the appellate court that it had waived Verendia’s failure to abide by policy condition No. 76399. no representative of Fidelity had signed it. Court of Appeals. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract. 75605 is DISMISSED. Thus. 200 SCRA 459 [1991]. However. The petition in G. Fidelity bound itself to a "mutual agreement" to settle Verendia’s claims in consideration of the amount of P142.R. Jr. specifically Section 13 thereof which is expressed in terms that are clear and unambiguous.. concur.77.R. Endnotes: 1. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it (Western Guaranty Corporation v. is proven by the fact that Verendia himself filed the complaint for the full amount of P385. but surely. No." . the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy No. that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent.chanrobles lawlibrary : rednad There is also no reason to conclude that by submitting the subrogation receipt as evidence in court. the terms of the policy should be strictly construed against the insured. 3 on disclosure of other insurance policies by its failure to assign it as an error in the petition in G. Worse yet. Inc. and Romero. While the said receipt appears to have been a filled-up form of Fidelity. More significantly. Court of Appeals. he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking Corporation v. Gutierrez. As it is also a contract of adhesion. JJ.000. F-18876.. It might be that there had been efforts to settle Verendia’s claims. the amounts to be declared in the event of loss or when required. the same receipt states that Verendia had received the aforesaid amount. the petition in G. v. the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced.