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G.R. No. 133179
March 27, 2008
DOCTRINE: Proximate Cause (Note: NOT an INSURANCE case!)
FACTS: On November 14, 1983, Lim Sio Wan deposited with petitioner Allied Banking Corporation a money market placement of PhP
1,152,597.35 for a term of 31 days to mature on December 15, 1983. On December 5, 1983, a person claiming to be Lim Sio Wan
called up Cristina So, an officer of Allied, and instructed the latter to pre-terminate Lim Sio Wans money market placement, to issue a
managers check representing the proceeds of the placement, and to give the check to one Deborah Dee Santos who would pick up
the check.
Santos arrived at the bank, which issued Managers Check for PhP 1,158,648.49, representing the proceeds of Lim Sio Wans money
market placement. Said managers check was deposited in the account of Filipinas Cement Corporation at Metropolitan Bank and
Trust Co. with the forged signature of Lim Sio Wan as indorser. Upon the maturity date of the money market placement, Lim Sio Wan
went to Allied to withdraw it. She was then informed that the placement had been pre-terminated upon her instructions. She denied
giving any instructions and receiving the proceeds thereof. She desisted from further complaints when she was assured by the banks
manager that her money would be recovered.
On January 24, 1984, Lim Sio Wan, realizing that the promise that her money would be recovered would not materialize, sent a
demand letter to Allied asking for the payment of the first placement. Allied refused to pay Lim Sio Wan, claiming that the latter had
authorized the pre-termination of the placement and its subsequent release to Santos. Consequently, Lim Sio Wan filed with the RTC a
Complaint dated February 13, 1984 against Allied to recover the proceeds of her first money market placement.
Allied claims that Metrobank is the proximate cause of the loss of Lim Sio Wans money. It points out that Metrobank guaranteed all
prior indorsements inscribed on the managers check, and without Metrobanks guarantee, the present controversy would never have
ISSUE: Is Allied Bank liable along with Metrobank for the conversion of Lim Sio Wans funds?
Yes. Proximate cause is "that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury and without which the result would not have occurred." Thus, there is an
efficient supervening event if the event breaks the sequence leading from the cause to the ultimate result. To determine the
proximate cause of a controversy, the question that needs to be asked is: If the event did not happen, would the injury have resulted?
If the answer is NO, then the event is the proximate cause.
In the instant case, the trial court correctly found Allied negligent in issuing the managers check and in transmitting it to Santos
without even a written authorization. In fact, Allied did not even ask for the certificate evidencing the money market placement or call
up Lim Sio Wan at her residence or office to confirm her instructions. Both actions could have prevented the whole fraudulent
transaction from unfolding. Allieds negligence must be considered as the proximate cause of the resulting loss.
Petition PARTLY GRANTED. CA and RTC Decisions AFFIRMED with MODIFICATION for both Banks to equitably bear the injury in
proportion to their degree of negligence.
G.R. No. L-25845
December 17, 1926
DOCTRINE: Burden of Proof in case of LOSS by EXCEPTED RISKS
FACTS: On May 22, 1924, defendant issued to plaintiff a fire insurance policy in the sum of P13,000 upon the property of the plaintiff
at No. 1 Calle Cisneros, Cavite. With the knowledge of the defendant, the property was also insured in two other companies, one for
P1,200, and the other for P5,000. On July 4, 1924, the property covered by the insurance was completely destroyed by fire for the
total loss to the plaintiff of P38.025.56. According to plaintiff, defendant wrongfully and unjustly refused to pay it.
As a special defense, defendant alleged that "the policy of insurance did not cover any loss or damage occasioned by explosion," and
that the loss was occasioned by an explosion, and was not covered by the policy.
ISSUE: Is the loss an excepted risk, and therefore defendant is not liable?
In the absence of proof, NO. The real cause of the fire is more or less a matter of conjecture, upon which there is
little, if any, evidence. There is no evidence as to whether the fire was started before or after the explosion. Neither is there any
competent testimony as to the cause of the explosion. The fire may have started from any one of a number of reasons. But in the
final analysis, the fact remains that there was a fire, and that the plaintiffs property was destroyed. It is true that it may be that the
explosion was the primary cause of the fire, but that is only a matter of conjecture, and upon that point, the burden of proof was upon
the defendant.
Section 6 of the policy excludes only the damages which are the direct result of the explosion itself, and that it does not except
damages which occurred from the fire occuring after the explosion, even though the explosion may have been the primary cause of
the fire. But assuming, without deciding, that if it be a fact that the fire resulted from an explosion that fact, if proven, would be a
complete defense, the burden of the proof of that fact is upon the defendant, and upon that point, there is a failure of proof. There is
no competent evidence as to whether the explosion caused the fire or the fire caused the explosion.
The defendant having issued its policy which was in legal force and effect at the time of the fire, it is bound by its terms and
conditions, and the property having been destroyed, the burden of proof was upon the defendant to show that it was exempt from
liability under the terms and conditions of the policy, and upon that point, there is a failure of proof.
Judgment of lower court AFFIRMED.
G.R. No. L-28607
February 21, 1929
FACTS: Plaintiff sued defendant for the purpose of recovering the sum of P117,800.60, with interest, by reason of a loss alleged to
have been sustained by the plaintiff, on August 21, 1924, from a fire, it being alleged that said loss was covered by policy for the sum
of P200,000, issued by the defendant company to the plaintiff. For answer, the defendant, Phoenix Insurance Co., admitted the
insurance of the policy of insurance but, by way of special defense, alleged, among other things, that the fire in question had been
set by the plaintiff, or with its connivance, and that the plaintiff had submitted under oath to the defendant a fraudulent claim of loss,
in contravention of the express terms of the policy.

With respect to the insurance upon this stock at the time of the fire, the following facts appear: In the month of June preceeding the
fire, nine policies aggregating P160,000 were taken out by Prats in the name of Hanna, Bejar & Co. on merchandise stored at 95 Plaza
Gardenia. At the time these policies were taken out the valuation of the goods then in said store could not have been more than
P68,753. Total insurance of P410,000 were on the contents of the store at 95 Plaza Gardenia. At the time, according to Prats himself,
the evaluation of the merchandise then in the place was not in excess of P230,000. Furthermore, Prats, about this time, caused the
first nine policies which had been taken out in the name of Hanna, Bejar & Co. to be indorsed to Prats & Co., thereby making this firm
the sole insured firm with respect to this stock of merchandise. This fact was offered in evidence by the defendant, as tending to
reveal a scheme by which, if a destructive fire should occur, the plaintiff would be able to mislead the defendant as to the quantity of
goods stored in the bodega. This item of proof, though circumstantial in its nature, was undoubtedly competent and should have been
admitted by the trial court.
ISSUE: Is the policy avoided by fraud on part of the plaintiff?
Yes. The proof submitted by the defendant tends to show that obscure manipulations were used by the plaintiff in
the storing of merchandise at 95 Plaza Gardenia and in the removal of part of the contents of the bodega before the fire. If
overinsurance and the assemblage of goods at inflated values in the bodega at 95 Plaza Gardenia, together with the surreptitious
abstraction of goods therefrom by the insured, have suggested a possible intention on the part of its manager to realize improperly
on its insurance policies, this inference is, in our opinion, but beyond reach of reasonable doubt by facts relative to the destruction of
the place. After the fire that a special investigation was made by the police department with the result that Deputy Chief Lorenzo
came to the conclusion that the fire had originated from an intentional act. Reflection upon the proof before the court engenders in us
the same belief and conducts us to the further conclusion that Prats & Co. was not alien to the deed.
Decision AFFIRMED.
G.R. No. L-35848, G.R. No. L-35849, and G.R. No. L-35850
November 22, 1932
On March 2, 1929, a fire broke out in plaintiff's establishment, as a result of which the insured articles therein found
were destroyed by the fire, within the period marked in the policies the plaintiff presented to the insurance companies an inventory of
the insured furniture which was destroyed by the fire, the value of which, before or at the time of the fire, amounted to P52,061.99.
Three actions were instituted in the Court of First Instance of Manila on March 25, 1929, to recover the full amount of three fire
insurance police aggregating P20,000.
The defendants interposed a general denial and as special defenses alleged in substance (1) that the fire in question was of
intentional origin; and (2) that the claims of loss presented by the plaintiff were false and fraudulent. After the trial, the lower court
found that the claims presented by the plaintiff were notoriously fraudulent, and, accordingly, sustained defendant's second special
defense and dismissed the complaint in each of the three cases, with costs against the plaintiff.
ISSUE: Should the special defense of non-recovery on the policy due to wilful acts of the insured be sustained?
Yes. It appears from the record that at the time of the fire the plaintiff was heavily indebted to the Manila Finance &
Discount Corporation, to the Bank of the Philippine Islands, and to Attorney Alfonso E. Mendoza. This thus led to the conclusion that
defendants' first special defense is well founded that the fire in question was of intentional origin and was caused with the
connivance of the plaintiff. Neither the interest of the justice nor public policy would be promoted by an omission of the courts to
expose and condemn incendiarism once the same is established by competent evidence. It would tend to encourage rather than
suppress that great public menace if the courts do not expose the crime to public condemnation when the evidence in a case like the
present shows that it has really been committed.
Condition 12 of each of the insurance policies sued upon provides that "if the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or anyone acting on his
behalf to obtain any benefit under this policy; or, if the loss or damage be occasioned by the wilful act, or with the connivance of the
Insured, all benefit under this policy shall be forfeited."
Judgment appealed from AFFIRMED.
G.R. No. 137775 and G.R. No. 140704
March 31, 2005
FACTS: Anco Enterprises Company, a partnership between Ang Gui and Co To, owned the M/T ANCO tugboat and the D/B Lucio barge
which were operated as common carriers. On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu,
on board the D/B Lucio, for towage by M/T ANCO, certain cargoes. The D/B Lucio was towed by the M/T ANCO all the way from
Mandaue City to San Jose, Antique. When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979,
the clouds over the area were dark and the waves were already big. SMCs District Sales Supervisor, Fernando Macabuag, requested
ANCOs representative to transfer the barge to a safer place because the vessel might not be able to withstand the big waves.
ANCOs representative did not heed the request because he was confident that the barge could withstand the waves. At about ten to
eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barges rope attached to
the wharf was cut off by the big waves. At around midnight, the barge run aground and was broken and the cargoes of beer in the
barge were swept away.
As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO. ANCO, in
turn, impleaded insurer of cargo FGU. According to ANCO, the loss of said cargoes occurred as a result of risks insured against in the
insurance policy and during the existence and lifetime of said insurance policy. FGU alleged that the Third-Party Plaintiff ANCO and
Plaintiff SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the
cargoes insured to prevent its loss and/or destruction.
ISSUE: Is the insurer absolved by the (gross, not ordinary) negligence of the carrier?
Yes. One of the purposes for taking out insurance is to protect the insured against the consequences of his own
negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his
agents constitute no defense on the part of the insurer. This rule however presupposes that the loss has occurred due to causes which
could not have been prevented by the insured, despite the exercise of due diligence.
The question now is whether there is a certain degree of negligence on the part of the insured or his agents that will deprive him the
right to recover under the insurance contract. We say there is. However, to what extent such negligence must go in order to
exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case. When evidence show that
the insureds negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated. The
ordinary negligence of the insured and his agents has long been held as a part of the risk which the insurer takes upon himself, and

the existence of which, where it is the proximate cause of the loss, does not absolve the insurer from liability. But willful exposure,
gross negligence, negligence amounting to misconduct, etc., have often been held to release the insurer from such liability.
In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crewmembers of both the
D/B Lucio and the M/T ANCO were blatantly negligent. Such blatant negligence being the proximate cause of the loss of the
cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the instant case, concludes that the blatant negligence of ANCOs
employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance