FIRST DIVISION

[G.R. No. 154514. July 28, 2005]

WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER INSURANCE AND
SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION
(BERMUDA) LTD., respondents.
DECISION
QUISUMBING, J.:
This petition for review assails the Decision[1] dated July 30, 2002 of the Court of
Appeals in CA-G.R. SP No. 60144, affirming the Decision[2] dated May 3, 2000 of
the Insurance Commission in I.C. Adm. Case No. RD-277. Both decisions held that
there was no violation of the Insurance Code and the respondents do not need
license as insurer and insurance agent/broker.
The facts are undisputed.
White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity
coverage for its vessels from The Steamship Mutual Underwriting Association
(Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety
Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry
and Acceptance.[3] Pioneer also issued receipts evidencing payments for the
coverage. When White Gold failed to fully pay its accounts, Steamship Mutual
refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of
money to recover the latters unpaid balance. White Gold on the other hand, filed a
complaint before the Insurance Commission claiming that Steamship Mutual
violated Sections 186[4] and 187[5] of the Insurance Code, while Pioneer violated
Sections 299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there was no need
for Steamship Mutual to secure a license because it was not engaged in the
insurance business. It explained that Steamship Mutual was a Protection and
Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as
insurance agent and/or a broker for Steamship Mutual because Steamship Mutual
was not engaged in the insurance business. Moreover, Pioneer was already licensed,
hence, a separate license solely as agent/broker of Steamship Mutual was already
superfluous.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its
decision, the appellate court distinguished between P & I Clubs vis--vis conventional
insurance. The appellate court also held that Pioneer merely acted as a collection
agent of Steamship Mutual.
In this petition, petitioner assigns the following errors allegedly committed by the
appellate court,
FIRST ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT STEAMSHIP IS NOT
DOING BUSINESS IN THE PHILIPPINES ON THE GROUND THAT IT COURSED . . . ITS
TRANSACTIONS THROUGH ITS AGENT AND/OR BROKER HENCE AS AN INSURER IT
NEED NOT SECURE A LICENSE TO ENGAGE IN INSURANCE BUSINESS IN THE
PHILIPPINES.
SECOND ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS BEREFT OF ANY
EVIDENCE THAT RESPONDENT STEAMSHIP IS ENGAGED IN INSURANCE BUSINESS.
THIRD ASSIGNMENT OF ERROR

THE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT PIONEER NEED NOT
SECURE A LICENSE WHEN CONDUCTING ITS AFFAIR AS AN AGENT/BROKER OF
RESPONDENT STEAMSHIP.
FOURTH ASSIGNMENT OF ERROR
THE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF RESPONDENT
PIONEER AND [IN NOT REMOVING] THE OFFICERS AND DIRECTORS OF RESPONDENT
PIONEER.[9]
Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I Club,
engaged in the insurance business in the Philippines? (2) Does Pioneer need a
license as an insurance agent/broker for Steamship Mutual?
The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it
does not have a license to do business in the Philippines although Pioneer is its
resident agent. This relationship is reflected in the certifications issued by the
Insurance Commission.
Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance
business. To buttress its assertion, it cites the definition of a P & I Club in Hyopsung
Maritime Co., Ltd. v. Court of Appeals[10] as an association composed of shipowners
in general who band together for the specific purpose of providing insurance cover
on a mutual basis against liabilities incidental to shipowning that the members incur
in favor of third parties. It stresses that as a P & I Club, Steamship Mutuals primary
purpose is to solicit and provide protection and indemnity coverage and for this
purpose, it has engaged the services of Pioneer to act as its agent.
Respondents contend that although Steamship Mutual is a P & I Club, it is not
engaged in the insurance business in the Philippines. It is merely an association of
vessel owners who have come together to provide mutual protection against
liabilities incidental to shipowning.[11] Respondents aver Hyopsung is inapplicable in
this case because the issue in Hyopsung was the jurisdiction of the court over
Hyopsung.
Is Steamship Mutual engaged in the insurance business?
Section 2(2) of the Insurance Code enumerates what constitutes doing an insurance
business or transacting an insurance business. These are:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or activity of
the surety;
(c) doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning of
this Code;
(d) doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code.
...
The same provision also provides, the fact that no profit is derived from the making
of insurance contracts, agreements or transactions, or that no separate or direct
consideration is received therefor, shall not preclude the existence of an insurance
business.[12]
The test to determine if a contract is an insurance contract or not, depends on the
nature of the promise, the act required to be performed, and the exact nature of the
agreement in the light of the occurrence, contingency, or circumstances under
which the performance becomes requisite. It is not by what it is called.[13]

Basically, an insurance contract is a contract of indemnity. In it, one undertakes for

a consideration to indemnify another against loss, damage or liability arising from
an unknown or contingent event.[14]
In particular, a marine insurance undertakes to indemnify the assured against
marine losses, such as the losses incident to a marine adventure.[15] Section 99[16]
of the Insurance Code enumerates the coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise where the
members are both the insurer and insured. In it, the members all contribute, by a
system of premiums or assessments, to the creation of a fund from which all losses
and liabilities are paid, and where the profits are divided among themselves, in
proportion to their interest.[17] Additionally, mutual insurance associations, or clubs,
provide three types of coverage, namely, protection and indemnity, war risks, and
defense costs.[18]
A P & I Club is a form of insurance against third party liability, where the third
party is anyone other than the P & I Club and the members.[19] By definition then,
Steamship Mutual as a P & I Club is a mutual insurance association engaged in the
marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without
the requisite certificate of authority mandated by Section 187[20] of the Insurance
Code. It maintains a resident agent in the Philippines to solicit insurance and to
collect payments in its behalf. We note that Steamship Mutual even renewed its P &
I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue
doing business here, Steamship Mutual or through its agent Pioneer, must secure a
license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the
insurance business without a license or a certificate of authority from the Insurance
Commission.[21]
Does Pioneer, as agent/broker of Steamship Mutual, need a special license?
Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of
registration[22] issued by the Insurance Commission. It has been licensed to do or
transact insurance business by virtue of the certificate of authority[23] issued by the
same agency. However, a Certification from the Commission states that Pioneer
does not have a separate license to be an agent/broker of Steamship Mutual.[24]
Although Pioneer is already licensed as an insurance company, it needs a separate
license to act as insurance agent for Steamship Mutual. Section 299 of the
Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first
procuring a license so to act from the Commissioner, which must be renewed
annually on the first day of January, or within six months thereafter. . .
Finally, White Gold seeks revocation of Pioneers certificate of authority and removal
of its directors and officers. Regrettably, we are not the forum for these issues.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated July 30, 2002
of the Court of Appeals affirming the Decision dated May 3, 2000 of the Insurance
Commission is hereby REVERSED AND SET ASIDE. The Steamship Mutual
Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and Surety

Corporation are ORDERED to obtain licenses and to secure proper authorizations to

do business as insurer and insurance agent, respectively. The petitioners prayer for
the revocation of Pioneers Certificate of Authority and removal of its directors and
officers, is DENIED. Costs against respondents.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

[1] Rollo, pp. 28-41. Penned by Associate Justice Delilah Vidallon-Magtolis, with

Associate Justices Candido V. Rivera, and Sergio L. Pestao concurring.

[2] CA Rollo, pp. 43-51.
[3] Id. at 103.
[4] SEC. 186. No person, partnership, or association of persons shall transact any
insurance business in the Philippines except as agent of a person or corporation
authorized to do the business of insurance in the Philippines, unless possessed of
the capital and assets required of an insurance corporation doing the same kind of
business in the Philippines and invested in the same manner; nor unless the
Commissioner shall have granted to him or them a certificate to the effect that he
or they have complied with all the provisions of law which an insurance corporation
doing business in the Philippines is required to observe.
Every person, partnership, or association receiving any such certificate of authority
shall be subject to the insurance laws of the Philippines and to the jurisdiction and
supervision of the Commissioner in the same manner as if an insurance corporation
authorized by the laws of the Philippines to engage in the business of insurance
specified in the certificate.
[5] SEC. 187. No Insurance Company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that
purpose from the Commissioner upon application therefor and payment by the
company concerned of the fees hereinafter prescribed.
...
[6] SEC. 299. No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for services
in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first
procuring a license so to act from the Commissioner, . . .
[7] SEC. 300. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself an
application for a policy or contract of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance shall be an insurance agent
within the intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is subject.
[8] SEC. 301. Any person who for any compensation, commission or other thing of
value acts or aids in any manner in soliciting, negotiating or procuring the making of
any insurance contract or in placing risk or taking out insurance, on behalf of an

insured other than himself, shall be an insurance broker within the intent of this
Code, and shall thereby become liable to all the duties, requirements, liabilities and
penalties to which an insurance broker is subject.
[9] Rollo, pp. 144-145.
[10] No. L-77369, 31 August 1988, 165 SCRA 258, 260.
[11] Rollo, p. 176.
[12] THE INSURANCE CODE OF THE PHILIPPINES, Section 2(2).
[13] 43 AM JUR. 2d Insurance Sec. 4 (1982).
[14] RUFUS B. RODRIGUEZ, THE INSURANCE CODE OF THE PHILIPPINES ANNOTATED
4 (4th ed., 1999), citing BUIST M. ANDERSON, VANCE ON INSURANCE 83 (3rd ed.,
1951).
[15] EDUARDO F. HERNANDEZ AND ANTERO A. PEASALES, PHILIPPINE ADMIRALTY
AND MARITIME LAW 612 (1st ed., 1987).
[16] SEC. 99. Marine insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects,
disbursements, profits, moneys, securities, choses in action, evidences of debt,
valuable papers, bottomry, and respondentia interests and all other kinds of
property and interests therein, in respect to, appertaining to or in connection with
any and all risks or perils of navigation, transit or transportation, or while being
assembled, packed, crated, baled, compressed or similarly prepared for shipment or
while awaiting shipment, or during any delays, storage, trasshipment, or reshipment
incident thereto, including war risks, marine builders risks, and all personal property
floater risks.
(b) Person or property in connection with or appertaining to a marine, inland marine,
transit or transportation insurance, including liability for loss of or damage arising
out of or in connection with the construction, repair, operation, maintenance or use
of the subject matter of such insurance (but not including life insurance or surety
bonds nor insurance against loss by reason of bodily injury to any person arising out
of the ownership, maintenance, or use of automobiles).
(c) Precious stones, jewels, jewelry, precious metals, whether in course of
transportation or otherwise.
(d) Bridges, tunnels and other instrumentalities of transportation and
communication (excluding buildings, their furniture and furnishings, fixed contents
and supplies held in storage); piers, wharves, docks and slips, and other aids to
navigation and transportation, including dry docks and marine railways, dams and
appurtenant facilities for the control of waterways.
(2) Marine protection and indemnity insurance, meaning insurance against, or
against legal liability of the insured for loss, damage, or expense incident to
ownership, operation, chartering, maintenance, use, repair, or construction of any
vessel, craft or instrumentality in use in ocean or inland waterways, including
liability of the insured for personal injury, illness or death or for loss of or damage to
the property of another person.
[17] Supra, note 13 at Sec. 65.
[18] HOWARD BENNETT, THE LAW OF MARINE INSURANCE 236 (1996).
[19] Supra, note 15 at 733.
[20] Supra, note 5.
[21] Supra, note 12 at Sec. 187.
[22] CA Rollo, p. 154.
[23] Id. at 153.

[24] Id. at 112. Certification issued by the Insurance Commission which certified that

Pioneer is not a registered broker for any foreign corporation.

Republic of the Philippines

SUPREME COURT
Baguio City
SECOND DIVISION
ETERNAL GARDENS MEMORIAL
PARK CORPORATION,
Petitioner,
Present:

G.R. No. 166245

CARPIO MORALES,
- versus Acting Chairperson,
TINGA,
VELASCO, JR.,
CHICO-NAZARIO, and
BRION, JJ.
THE PHILIPPINE AMERICAN
Promulgated:
LIFE INSURANCE COMPANY,
Respondent. April 9, 2008
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
Central to this Petition for Review on Certiorari under Rule 45 which seeks to
reverse and set aside the November 26, 2004 Decision 1[1] of the Court of Appeals
* Additional member as per February 6, 2008 raffle.
1[1] Rollo, pp. 45-54. Penned by Associate Justice Santiago Javier Ranada and
concurred in by Associate Justices Marina L. Buzon (Chairperson) and Mario L.
Guaria III.

(CA) in CA-G.R. CV No. 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, 1980, respondent Philippine American Life Insurance Company
(Philamlife) entered into an agreement denominated as Creditor Group Life Policy
No. P-19202[2] with petitioner Eternal Gardens Memorial Park Corporation (Eternal).
Under the policy, the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife. The amount of insurance coverage
depended upon the existing balance of the purchased burial lots. The policy was to
be effective for a period of one year, renewable on a yearly basis.
The relevant provisions of the policy are:
ELIGIBILITY.
Any Lot Purchaser of the Assured who is at least 18 but not more than 65
years of age, is indebted to the Assured for the unpaid balance of his loan with the
Assured, and is accepted for Life Insurance coverage by the Company on its
effective date is eligible for insurance under the Policy.
EVIDENCE OF INSURABILITY.
No medical examination shall be required for amounts of insurance up to
P50,000.00. However, a declaration of good health shall be required for all Lot
Purchasers as part of the application. The Company reserves the right to require
further evidence of insurability satisfactory to the Company in respect of the
following:
1.
2.

Any amount of insurance in excess of P50,000.00.

Any lot purchaser who is more than 55 years of age.

LIFE INSURANCE BENEFIT.

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 P100,000.00,
whichever is smaller. Such benefit shall be paid to the Assured if the Lot Purchaser
dies while insured under the Policy.
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company. 3[3]
2[2] Records, pp. 57-62.
3[3] Id. at 58.

Eternal was required under the policy to submit to Philamlife a list of all new
lot purchasers, together with a copy of the application of each purchaser, and the
amounts of the respective unpaid balances of all insured lot purchasers. In relation
to the instant petition, Eternal complied by submitting a letter dated December 29,
1982,4[4] containing a list of insurable balances of its lot buyers for October 1982.
One of those included in the list as new business was a certain John Chuang. His
balance of payments was PhP 100,000. On August 2, 1984, Chuang died.
Eternal sent a letter dated August 20, 19845[5] to Philamlife, which served as an
insurance claim for Chuangs death. Attached to the claim were the following
documents: (1) Chuangs Certificate of Death; (2) Identification Certificate stating
that Chuang is a naturalized Filipino Citizen; (3) Certificate of Claimant; (4)
Certificate of Attending Physician; and (5) Assureds Certificate.
In reply, Philamlife wrote Eternal a letter on November 12, 1984, 6[6] requiring
Eternal to submit the following documents relative to its insurance claim for
Chuangs death: (1) Certificate of Claimant (with form attached); (2) Assureds
Certificate (with form attached); (3) Application for Insurance accomplished and
signed by the insured, Chuang, while still living; and (4) Statement of Account
showing the unpaid balance of Chuang before his death.
Eternal transmitted the required documents through a letter dated November 14,
1984,7[7] which was received by Philamlife on November 15, 1984.
After more than a year, Philamlife had not furnished Eternal with any reply to the
latters insurance claim. This prompted Eternal to demand from Philamlife the
payment of the claim for PhP 100,000 on April 25, 1986. 8[8]
In response to Eternals demand, Philamlife denied Eternals insurance claim in a
letter dated May 20, 1986,9[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
4[4] Id. at 139.
5[5] Id. at 160.
6[6] Id. at 162.
7[7] Id. at 163.
8[8] Id. at 164.
9[9] Id. at 165.

insurable amount of P100,000.00 each. No application for Group Insurance was

submitted in our office prior to his death on August 2, 1984.
In accordance with our Creditors Group Life Policy No. P-1920, under Evidence of
Insurability provision, a declaration of good health shall be required for all Lot
Purchasers as party of the application. 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. Since no application had been
submitted by the Insured/Assured, prior to his death, for our approval but was
submitted instead on November 15, 1984, after his death, Mr. John Uy Chuang was
not covered under the Policy. 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.
With regard to our acceptance of premiums, 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. We will however, return
all the premiums which have been paid in behalf of John Uy Chuang.
Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC)
for a sum of money against Philamlife, docketed as Civil Case No. 14736. The trial
court decided in favor of Eternal, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
Plaintiff ETERNAL, against Defendant PHILAMLIFE, ordering the Defendant
PHILAMLIFE, to pay the sum of P100,000.00, representing the proceeds of the Policy
of John Uy Chuang, plus legal rate of interest, until fully paid; and, to pay the sum of
P10,000.00 as attorneys fees.
SO ORDERED.
The RTC found that Eternal submitted Chuangs application for insurance which he
accomplished before his death, as testified to by Eternals witness and evidenced by
the letter dated December 29, 1982, stating, among others: Encl: Phil-Am Life
Insurance Application Forms & Cert.10[10] It further ruled that due to Philamlifes
inaction from the submission of the requirements of the group insurance on
December 29, 1982 to Chuangs death on August 2, 1984, as well as Philamlifes
acceptance of the premiums during the same period, Philamlife was deemed to
have approved Chuangs application. The RTC said that since the contract is a group
life insurance, once proof of death is submitted, payment must follow.
Philamlife appealed to the CA, which ruled, thus:
WHEREFORE, the decision of the Regional Trial Court of Makati in Civil Case No.
57810 is REVERSED and SET ASIDE, and the complaint is DISMISSED. No costs.

10[10] Rollo, p. 44.

SO ORDERED.11[11]
The CA based its Decision on the factual finding that Chuangs application was not
enclosed in Eternals letter dated December 29, 1982. It further ruled that the nonaccomplishment of the submitted application form violated Section 26 of the
Insurance Code. Thus, the CA concluded, there being no application form, Chuang
was not covered by Philamlifes insurance.
Hence, we have this petition with the following grounds:
The Honorable Court of Appeals has decided a question of substance, not therefore
determined by this Honorable Court, or has decided it in a way not in accord with
law or with the applicable jurisprudence, in holding that:
I.
The application for insurance was not duly submitted to respondent PhilamLife
before the death of John Chuang;
II.

There was no valid insurance coverage; and

III. Reversing and setting aside the Decision of the Regional Trial Court dated May
29, 1996.
The Courts Ruling
As a general rule, this Court is not a trier of facts and will not re-examine factual
issues raised before the CA and first level courts, considering their findings of facts
are conclusive and binding on this Court. However, such rule is subject to
exceptions, as enunciated in Sampayan v. Court of Appeals:
(1) when the findings are grounded entirely on speculation, surmises or conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in
making its findings the [CA] went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the
findings [of the CA] are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence on record; and
(11) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different
conclusion.12[12] (Emphasis supplied.)

11[11] Id. at 54.

12[12] G.R. No. 156360, January 14, 2005, 448 SCRA 220, 228-229.

In the instant case, the factual findings of the RTC were reversed by the CA; thus,
this Court may review them.
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. In Eternals letter dated December 29, 1982, a list of
insurable interests of buyers for October 1982 was attached, including Chuang in
the list of new businesses. Eternal added it was noted at the bottom of said letter
that the corresponding Phil-Am Life Insurance Application Forms & Cert. were
enclosed in the letter that was apparently received by Philamlife on January 15,
1983. Finally, Eternal alleged that it provided a copy of the insurance application
which was signed by Chuang himself and executed before his death.
On the other hand, Philamlife claims that the evidence presented by Eternal
is insufficient, arguing that Eternal must present evidence showing that Philamlife
received a copy of Chuangs insurance application.
The evidence on record supports Eternals position.
The fact of the matter is, the letter dated December 29, 1982, which
Philamlife stamped as received, states that the insurance forms for the attached list
of burial lot buyers were attached to the letter. Such stamp of receipt has the effect
of acknowledging receipt of the letter together with the attachments. Such receipt is
an admission by Philamlife against its own interest. 13[13] The burden of evidence
has shifted to Philamlife, which must prove that the letter did not contain Chuangs
insurance application. However, Philamlife failed to do so; thus, Philamlife is
deemed to have received Chuangs insurance application.
To reiterate, it was Philamlifes bounden duty to make sure that before a transmittal
letter is stamped as received, the contents of the letter are correct and accounted
for.
Philamlifes allegation that Eternals witnesses ran out of credibility and
reliability due to inconsistencies is groundless. The trial court is in the best position
to determine the reliability and credibility of the witnesses, because it has the
opportunity to observe firsthand the witnesses demeanor, conduct, and attitude.
Findings of the trial court on such matters are binding and conclusive on the
appellate court, unless some facts or circumstances of weight and substance have
been overlooked, misapprehended, or misinterpreted, 14[14] that, if considered,
might affect the result of the case.15[15]

13[13] RULES OF COURT, Rule 130, Sec. 26.

14[14] People v. Jaberto, G.R. No. 128147, May 12, 1999, 307 SCRA 93, 102.
15[15] People v. Oliquino, G.R. No. 171314, March 6, 2007, 517 SCRA 579, 588.

An examination of the testimonies of the witnesses mentioned by Philamlife,

however, reveals no overlooked facts of substance and value.
Philamlife primarily claims that Eternal did not even know where the original
insurance application of Chuang was, as shown by the testimony of Edilberto
Mendoza:
Atty. 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.
Atty. 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.
Atty. 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. 16[16]
In other words, the witness admitted not knowing where the original insurance
application was, but believed that the application was transmitted to Philamlife as
an attachment to a transmittal letter.
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, these are
minor inconsistencies that do not affect the credibility of the witnesses. Thus, we
ruled in People v. Paredes that minor inconsistencies are too trivial to affect the
credibility of witnesses, and these may even serve to strengthen their credibility as
these negate any suspicion that the testimonies have been rehearsed. 17[17]
16[16] TSN, September 13, 1990, p. 8.
17[17] G.R. No. 136105, October 23, 2001, 368 SCRA 102, 108.

We reiterated the above ruling in Merencillo v. People:

Minor discrepancies or inconsistencies do not impair the essential integrity of the
prosecutions evidence as a whole or reflect on the witnesses honesty. 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.18[18]
In the present case, the number of copies of the insurance application that
Chuang executed is not at issue, neither is whether the insurance application
presented by Eternal has been falsified. Thus, the inconsistencies pointed out by
Philamlife are minor and do not affect the credibility of Eternals witnesses.
However, the question arises as to whether Philamlife assumed the risk of loss
without approving the application.
This question must be answered in the affirmative.
As earlier stated, Philamlife and Eternal entered into an agreement denominated as
Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is
provided that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.
An examination of the above provision would show ambiguity between its two
sentences. 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.
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. Thus, in Malayan Insurance Corporation v.
Court of Appeals, 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, where the
contract or policy is prepared by the insurer. A contract of insurance, being a
contract of adhesion, par excellence, any ambiguity therein should be
resolved against the insurer; in other words, it should be construed liberally in
favor of the insured and strictly against the insurer. Limitations of liability should be

18[18] G.R. Nos. 142369-70, April 13, 2007, 521 SCRA 31, 43.

regarded with extreme jealousy and must be construed in such a way as to preclude
the insurer from noncompliance with its obligations. 19[19] (Emphasis supplied.)
In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we
reiterated the above ruling, stating that:
When the terms of insurance contract contain limitations on liability, courts should
construe them in such a way as to preclude the insurer from non-compliance with
his obligation. Being a contract of adhesion, the terms of an insurance contract are
to be construed strictly against the party which prepared the contract, the insurer.
By reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the insured, especially to avoid
forfeiture.20[20]
Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920
dated December 10, 1980, must be construed in favor of the insured and in favor of
the effectivity of the insurance contract.
On the other hand, the seemingly conflicting provisions must be harmonized to
mean that upon a partys purchase of a memorial lot on installment from Eternal, an
insurance contract covering the lot purchaser is created and the same is effective,
valid, and binding until terminated by Philamlife by disapproving the insurance
application. The second sentence of Creditor Group Life Policy No. 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. Moreover, the mere inaction of the
insurer on the insurance application must not work to prejudice the insured; it
cannot be interpreted as a termination of the insurance contract. The termination of
the insurance contract by the insurer must be explicit and unambiguous.
As a final note, to characterize the insurer and the insured as contracting parties on
equal footing is inaccurate at best. Insurance contracts are wholly prepared by the
insurer with vast amounts of experience in the industry purposefully used to its
advantage. More often than not, insurance contracts are contracts of adhesion
containing technical terms and conditions of the industry, confusing if at all
understandable to laypersons, that are imposed on those who wish to avail of
insurance. As such, 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. Hence, in order to protect the interest of insurance applicants,
insurance companies must be obligated to act with haste upon insurance
applications, to either deny or approve the same, or otherwise be bound to honor
the application as a valid, binding, and effective insurance contract. 21[21]

19[19] G.R. No. 119599, March 20, 1997, 270 SCRA 242, 254.
20[20] G.R. No. 125678, March 18, 2002, 379 SCRA 356, 366.

WHEREFORE, we GRANT the petition. The November 26, 2004 CA Decision

in CA-G.R. CV No. 57810 is REVERSED and SET ASIDE. The May 29, 1996 Decision
of the Makati City RTC, Branch 138 is MODIFIED. Philamlife is hereby ORDERED:
(1) To pay Eternal the amount of PhP 100,000 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 100,000 from the time of extra-judicial demand by Eternal until Philamlifes
receipt of the May 29, 1996 RTC Decision on June 17, 1996;
(3) To pay Eternal legal interest at the rate of twelve percent (12%) per
annum of PhP 100,000 from June 17, 1996 until full payment of this award; and
(4) To pay Eternal attorneys fees in the amount of PhP 10,000.
No costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
CONCHITA CARPIO MORALES
Acting Chairperson

DANTE O. TINGA
ARTURO D. BRION
Associate Justice Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.
CONCHITA CARPIO MORALES
Acting Chairperson
CERTIFICATION

21[21] R. E. Keeton & A. I. Widiss, INSURANCE LAW A GUIDE TO FUNDAMENTAL

PRINCIPLES, LEGAL DOCTRINES AND COMMERCIAL PRACTICES 77-78.

Pursuant to Section 13, Article VIII of the Constitution, and the Division Acting
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
Today is Wednesday, September 09, 2015

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 150094
August 18, 2004
FEDERAL EXPRESS CORPORATION, petitioner,
vs.
AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY, INC., respondents.
DECISION
PANGANIBAN, J.:
Basic is the requirement that before suing to recover loss of or damage to transported goods, the plaintiff
must give the carrier notice of the loss or damage, within the period prescribed by the Warsaw Convention
and/or the airway bill.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the June 4, 2001
Decision2 and the September 21, 2001 Resolution 3 of the Court of Appeals (CA) in CA-GR CV No. 58208. The
assailed Decision disposed as follows:
"WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit. The appealed
Decision of Branch 149 of the Regional Trial Court of Makati City in Civil Case No. 95-1219, entitled
'American Home Assurance Co. and PHILAM Insurance Co., Inc. v. FEDERAL EXPRESS CORPORATION and/or
CARGOHAUS, INC. (formerly U-WAREHOUSE, INC.),' is hereby AFFIRMED and REITERATED.
"Costs against the [petitioner and Cargohaus, Inc.]." 4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The antecedent facts are summarized by the appellate court as follows:
"On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for brevity) of Nebraska, USA delivered to
Burlington Air Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of
109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company

in Makati City, Metro Manila. The shipment was covered by Burlington Airway Bill No. 11263825 with the
words, 'REFRIGERATE WHEN NOT IN TRANSIT' and 'PERISHABLE' stamp marked on its face. That same day,
Burlington insured the cargoes in the amount of $39,339.00 with American Home Assurance Company
(AHAC). The following day, Burlington turned over the custody of said cargoes to Federal Express which
transported the same to Manila. The first shipment, consisting of 92 cartons arrived in Manila on January 29,
1994 in Flight No. 0071-28NRT and was immediately stored at [Cargohaus Inc.'s] warehouse. While the
second, consisting of 17 cartons, came in two (2) days later, or on January 31, 1994, in Flight No. 007130NRT which was likewise immediately stored at Cargohaus' warehouse. Prior to the arrival of the cargoes,
Federal Express informed GETC Cargo International Corporation, the customs broker hired by the consignee
to facilitate the release of its cargoes from the Bureau of Customs, of the impending arrival of its client's
cargoes.
"On February 10, 1994, DARIO C. DIONEDA ('DIONEDA'), twelve (12) days after the cargoes arrived in
Manila, a non-licensed custom's broker who was assigned by GETC to facilitate the release of the subject
cargoes, found out, while he was about to cause the release of the said cargoes, that the same [were]
stored only in a room with two (2) air conditioners running, to cool the place instead of a refrigerator. When
he asked an employee of Cargohaus why the cargoes were stored in the 'cool room' only, the latter told him
that the cartons where the vaccines were contained specifically indicated therein that it should not be
subjected to hot or cold temperature. Thereafter, DIONEDA, upon instructions from GETC, did not proceed
with the withdrawal of the vaccines and instead, samples of the same were taken and brought to the
Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE for
examination wherein it was discovered that the 'ELISA reading of vaccinates sera are below the positive
reference serum.'
"As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the
shipment and, declaring 'total loss' for the unusable shipment, filed a claim with AHAC through its
representative in the Philippines, the Philam Insurance Co., Inc. ('PHILAM') which recompensed SMITHKLINE
for the whole insured amount of THIRTY NINE THOUSAND THREE HUNDRED THIRTY NINE DOLLARS
($39,339.00). Thereafter, [respondents] filed an action for damages against the [petitioner] imputing
negligence on either or both of them in the handling of the cargo.
"Trial ensued and ultimately concluded on March 18, 1997 with the [petitioner] being held solidarily liable
for the loss as follows:
'WHEREFORE, judgment is hereby rendered in favor of [respondents] and [petitioner and its Co-Defendant
Cargohaus] are directed to pay [respondents], jointly and severally, the following:
1. Actual damages in the amount of the peso equivalent of US$39,339.00 with interest from the time of the
filing of the complaint to the time the same is fully paid.
2. Attorney's fees in the amount of P50,000.00 and
3. Costs of suit.
'SO ORDERED.'
"Aggrieved, [petitioner] appealed to [the CA]." 5
Ruling of the Court of Appeals
The Test Report issued by the United States Department of Agriculture (Animal and Plant Health Inspection
Service) was found by the CA to be inadmissible in evidence. Despite this ruling, the appellate court held
that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to the carrier
in good condition. We quote from the ruling as follows:
"Where the plaintiff introduces evidence which shows prima facie that the goods were delivered to the
carrier in good condition [i.e., the shipping receipts], and that the carrier delivered the goods in a damaged
condition, a presumption is raised that the damage occurred through the fault or negligence of the carrier,
and this casts upon the carrier the burden of showing that the goods were not in good condition when
delivered to the carrier, or that the damage was occasioned by some cause excepting the carrier from
absolute liability. This the [petitioner] failed to discharge. x x x." 6
Found devoid of merit was petitioner's claim that respondents had no personality to sue. This argument was

supposedly not raised in the Answer or during trial.

Hence, this Petition.7
The Issues
In its Memorandum, petitioner raises the following issues for our consideration:
"I.
Are the decision and resolution of the Honorable Court of Appeals proper subject for review by the
Honorable Court under Rule 45 of the 1997 Rules of Civil Procedure?
"II.
Is the conclusion of the Honorable Court of Appeals petitioner's claim that respondents have no
personality to sue because the payment was made by the respondents to Smithkline when the insured
under the policy is Burlington Air Express is devoid of merit correct or not?
"III.
Is the conclusion of the Honorable Court of Appeals that the goods were received in good condition, correct
or not?
"IV.
Are Exhibits 'F' and 'G' hearsay evidence, and therefore, not admissible?
"V.
Is the Honorable Court of Appeals correct in ignoring and disregarding respondents' own admission that
petitioner is not liable? and
"VI.
Is the Honorable Court of Appeals correct in ignoring the Warsaw Convention?" 8
Simply stated, the issues are as follows: (1) Is the Petition proper for review by the Supreme Court? (2) Is
Federal Express liable for damage to or loss of the insured goods?
This Court's Ruling
The Petition has merit.
Preliminary Issue:
Propriety of Review
The correctness of legal conclusions drawn by the Court of Appeals from undisputed facts is a question of
law cognizable by the Supreme Court.9
In the present case, the facts are undisputed. As will be shown shortly, petitioner is questioning the
conclusions drawn from such facts. Hence, this case is a proper subject for review by this Court.
Main Issue:
Liability for Damages
Petitioner contends that respondents have no personality to sue -- thus, no cause of action against it -because the payment made to Smithkline was erroneous.
Pertinent to this issue is the Certificate of Insurance 10 ("Certificate") that both opposing parties cite in
support of their respective positions. They differ only in their interpretation of what their rights are under its
terms. The determination of those rights involves a question of law, not a question of fact. "As distinguished
from a question of law which exists 'when the doubt or difference arises as to what the law is on a certain
state of facts' -- 'there is a question of fact when the doubt or difference arises as to the truth or the
falsehood of alleged facts'; or when the 'query necessarily invites calibration of the whole evidence
considering mainly the credibility of witnesses, existence and relevancy of specific surrounding
circumstance, their relation to each other and to the whole and the probabilities of the situation.'" 11
Proper Payee
The Certificate specifies that loss of or damage to the insured cargo is "payable to order x x x upon
surrender of this Certificate." Such wording conveys the right of collecting on any such damage or loss, as
fully as if the property were covered by a special policy in the name of the holder itself. At the back of the
Certificate appears the signature of the representative of Burlington. This document has thus been duly
indorsed in blank and is deemed a bearer instrument.
Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or of being

indemnified for loss of or damage to the insured shipment, as fully as if the property were covered by a
special policy in the name of the holder. Hence, being the holder of the Certificate and having an insurable
interest in the goods, Smithkline was the proper payee of the insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt 12 in
favor of respondents. The latter were thus authorized "to file claims and begin suit against any such carrier,
vessel, person, corporation or government." Undeniably, the consignee had a legal right to receive the
goods in the same condition it was delivered for transport to petitioner. If that right was violated, the
consignee would have a cause of action against the person responsible therefor.
Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the
insurer's entitlement to subrogation pro tanto -- being of the highest equity -- equips it with a cause of
action in case of a contractual breach or negligence. 13 "Further, the insurer's subrogatory right to sue for
recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld." 14
In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all intents and
purposes, it stands in the place and in substitution of the consignee. A fortiori, both the insurer and the
consignee are bound by the contractual stipulations under the bill of lading. 15
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that
respondents' claim and right of action are already barred. The latter, and even the consignee, never filed
with the carrier any written notice or complaint regarding its claim for damage of or loss to the subject
cargo within the period required by the Warsaw Convention and/or in the airway bill. Indeed, this fact has
never been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
"6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written
notice, sufficiently describing the goods concerned, the approximate date of the damage or loss, and the
details of the claim, is presented by shipper or consignee to an office of Burlington within (14) days from the
date the goods are placed at the disposal of the person entitled to delivery, or in the case of total loss
(including non-delivery) unless presented within (120) days from the date of issue of the [Airway Bill]." 16
Relevantly, petitioner's airway bill states:
"12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within
fourteen (14) days from receipt of the goods;
12.1.2 of other damage to the goods, within fourteen (14) days from the date of receipt of the goods;
12.1.3 delay, within twenty-one (21) days of the date the goods are placed at his disposal; and
12.1.4 of non-delivery of the goods, within one hundred and twenty (120) days from the date of the issue of
the air waybill.
12.2 For the purpose of 12.1 complaint in writing may be made to the carrier whose air waybill was used, or
to the first carrier or to the last carrier or to the carrier who performed the transportation during which the
loss, damage or delay took place."17
Article 26 of the Warsaw Convention, on the other hand, provides:
"ART. 26. (1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be
prima facie evidence that the same have been delivered in good condition and in accordance with the
document of transportation.
(2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the
discovery of the damage, and, at the latest, within 3 days from the date of receipt in the case of baggage
and 7 days from the date of receipt in the case of goods. In case of delay the complaint must be made at
the latest within 14 days from the date on which the baggage or goods have been placed at his disposal.
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in
writing dispatched within the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of

fraud on his part."18

Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually
constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to
the goods.19 The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do
so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement
is a reasonable condition precedent; it does not constitute a limitation of action. 20
The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The
fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged,
and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature
and extent of the injury. "This protects the carrier by affording it an opportunity to make an investigation of
a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent
claims."21
When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of
claim for loss of or damage to goods shipped and the stipulation is not complied with, its enforcement can
be prevented and the liability cannot be imposed on the carrier. To stress, notice is a condition precedent,
and the carrier is not liable if notice is not given in accordance with the stipulation. 22 Failure to comply with
such a stipulation bars recovery for the loss or damage suffered. 23
Being a condition precedent, the notice must precede a suit for enforcement. 24 In the present case, there is
neither an allegation nor a showing of respondents' compliance with this requirement within the prescribed
period. While respondents may have had a cause of action then, they cannot now enforce it for their failure
to comply with the aforesaid condition precedent.
In view of the foregoing, we find no more necessity to pass upon the other issues raised by petitioner.
We note that respondents are not without recourse. Cargohaus, Inc. -- petitioner's co-defendant in
respondents' Complaint below -- has been adjudged by the trial court as liable for, inter alia, "actual
damages in the amount of the peso equivalent of US $39,339." 25 This judgment was affirmed by the Court
of Appeals and is already final and executory. 26
WHEREFORE, the Petition is GRANTED, and the assailed Decision REVERSED insofar as it pertains to
Petitioner Federal Express Corporation. No pronouncement as to costs.
SO ORDERED.
Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on leave.
Footnotes
1
Rollo, pp. 14-33.
2
Id., pp. 35-43. Twelfth Division. Penned by Justice Martin S. Villarama Jr., with the concurrence of Justices
Conrado M. Vasquez Jr. (Division chair) and Alicia L. Santos (member).
3
Id., pp. 45-47.
4
Assailed CA Decision, p. 9; rollo, p. 43.
5
Id., pp. 1-3 & 35-37.
6
Id., pp. 8 & 42.
7
The case was deemed submitted for decision on September 20, 2002, upon this Court's receipt of
respondents' Memorandum, signed by Atty. Mary Joyce M. Sasan. Petitioner's Memorandum, signed by Atty.
Emiliano S. Samson, was received by this Court on August 28, 2002.
8
Petitioner's Memorandum, p. 10; rollo, p. 116. Citations omitted.
9
Pilar Development Corp. v. IAC, 146 SCRA 215, December 12, 1986.
10
Exhibit "D"; records, p. 142.
11
Bernardo v. CA, 216 SCRA 224, December 7, 1992, per Campos Jr., J.
12
Exhibit "N"; records, p 159.
13
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc ., 212 SCRA 194, August 5, 1992 (citing

Fireman's Fund Insurance Company, Inc. v. Jamila & Company, Inc., 70 SCRA 323, April 7, 1976).
14
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra, p. 201, per Regalado, J. (citing
National Development Company v. Court of Appeals, 164 SCRA 593, August 19, 1988).
15
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra.
16
Exhibit "B" of respondent; records, p. 139-A. This airway bill was issued on January 26, 1994.
17
Exhibit "5-a" of Federal Express; records, p. 189-A.
18
51 OG 5091-5092, October 1955.
19
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra.
20
Government of the Philippine Islands v. Inchausti & Co., 24 Phil. 315, February 14, 1913; Triton Insurance
Co. v. Jose, 33 Phil. 194, January 14, 1916.
21
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra, p. 208, per Regalado, J.
22
Id. (citing 14 Am. Jur. 2d, Carriers 97; Roldan v. Lim Ponzo & Co., 37 Phil. 285, December 7, 1917;
Consunji v. Manila Port Service, 110 Phil. 231, November 29, 1960).
23
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra, pp. 208-209.
24
Philippine American General Insurance Co. Inc v. Sweet Lines, Inc., supra.
25
The insured value of the goods lost.
26
Entry of judgment in the Supreme Court was made on March 11, 2003.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
MALAYAN INSURANCE CO.,
INC.,
Petitioner,
- versus RODELIO ALBERTO and
ENRICO ALBERTO REYES,
Respondents.

G.R. No. 194320

Present:
VELASCO, JR., J.,
Chairperson,
PERALTA,
MENDOZA,
REYES,* and
PERLAS-BERNABE, JJ.
Promulgated:
February 1, 2012

** Additional member per Special Order No. 1178 dated January 26, 2012.

x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case

Before Us is a Petition for Review on Certiorari under Rule 45,

seeking to reverse and set aside the July 28, 2010 Decision 22[1] of
the Court of Appeals (CA) and its October 29, 2010 Resolution 23[2]
denying the motion for reconsideration filed by petitioner Malayan
Insurance Co., Inc. (Malayan Insurance). The July 28, 2010 CA
Decision reversed and set aside the Decision 24[3] dated February
2, 2009 of the Regional Trial Court, Branch 51 in Manila.
The Facts

At around 5 oclock in the morning of December 17, 1995, an

accident occurred at the corner of EDSA and Ayala Avenue, Makati
City, involving four (4) vehicles, to wit: (1) a Nissan Bus operated
by Aladdin Transit with plate number NYS 381; (2) an Isuzu Tanker
with plate number PLR 684; (3) a Fuzo Cargo Truck with plate
number PDL 297; and (4) a Mitsubishi Galant with plate number
TLM 732.25[4]
Based on the Police Report issued by the on-the-spot investigator,
Senior Police Officer 1 Alfredo M. Dungga (SPO1 Dungga), the
Isuzu Tanker was in front of the Mitsubishi Galant with the Nissan
22[1] Rollo, pp. 16-26. Penned by Associate Justice Josefina Guevara-Salonga and
concurred in by Associate Justices Mariflor P. Punzalan Castillo and Franchito N.
Diamante.
23[2] Id. at 29-30.
24[3] Id. at 64-70. Penned by Presiding Judge Gregorio B. Clemea, Jr.
25[4] Id. at 17.

Bus on their right side shortly before the vehicular incident. All
three (3) vehicles were at a halt along EDSA facing the south
direction when the Fuzo Cargo Truck simultaneously bumped the
rear portion of the Mitsubishi Galant and the rear left portion of
the Nissan Bus. Due to the strong impact, these two vehicles were
shoved forward and the front left portion of the Mitsubishi Galant
rammed into the rear right portion of the Isuzu Tanker. 26[5]
Previously, particularly on December 15, 1994, Malayan Insurance
issued Car Insurance Policy No. PV-025-00220 in favor of First
Malayan Leasing and Finance Corporation (the assured), insuring
the aforementioned Mitsubishi Galant against third party liability,
own damage and theft, among others. Having insured the vehicle
against such risks, Malayan Insurance claimed in its Complaint
dated October 18, 1999 that it paid the damages sustained by the
assured amounting to PhP 700,000.27[6]
Maintaining that it has been subrogated to the rights and
interests of the assured by operation of law upon its payment to
the latter, Malayan Insurance sent several demand letters to
respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes
(Reyes), the registered owner and the driver, respectively, of the
Fuzo Cargo Truck, requiring them to pay the amount it had paid to
the assured. When respondents refused to settle their liability,
Malayan Insurance was constrained to file a complaint for
damages for gross negligence against respondents. 28[7]
In their Answer, respondents asserted that they cannot be held
liable for the vehicular accident, since its proximate cause was
the reckless driving of the Nissan Bus driver. They alleged that the
speeding bus, coming from the service road of EDSA, maneuvered
its way towards the middle lane without due regard to Reyes right
of way. When the Nissan Bus abruptly stopped, Reyes stepped
26[5] Id. at 17-18
27[6] Id.
28[7] Id. at 18.

hard on the brakes but the braking action could not cope with the
inertia and failed to gain sufficient traction. As a consequence, the
Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which,
in turn, hit the rear end of the vehicle in front of it. The Nissan
Bus, on the other hand, sideswiped the Fuzo Cargo Truck, causing
damage to the latter in the amount of PhP 20,000. Respondents
also controverted the results of the Police Report, asserting that it
was based solely on the biased narration of the Nissan Bus
driver.29[8]
After the termination of the pre-trial proceedings, trial ensued.
Malayan Insurance presented the testimony of its lone witness, a
motor car claim adjuster, who attested that he processed the
insurance claim of the assured and verified the documents
submitted to him. Respondents, on the other hand, failed to
present any evidence.
In its Decision dated February 2, 2009, the trial court, in Civil Case
No. 99-95885, ruled in favor of Malayan Insurance and declared
respondents liable for damages. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff against
defendants jointly and severally to pay plaintiff the following:
1. The amount of P700,000.00 with legal interest from the time of the filing of the
complaint;
2. Attorneys fees of P10,000.00 and;
3. Cost of suit.
SO ORDERED.30[9]

Dissatisfied, respondents filed an appeal with the CA, docketed as

CA-G.R. CV No. 93112. In its Decision dated July 28, 2010, the CA
reversed and set aside the Decision of the trial court and ruled in
favor of respondents, disposing:

29[8] Id. at 18-19.

30[9] Id. at 69-70.

WHEREFORE, the foregoing considered, the instant appeal is hereby GRANTED

and the assailed Decision dated 2 February 2009 REVERSED and SET ASIDE. The
Complaint dated 18 October 1999 is hereby DISMISSED for lack of merit. No costs.
SO ORDERED.31[10]

The CA held that the evidence on record has failed to establish

not only negligence on the part of respondents, but also
compliance with the other requisites and the consequent right of
Malayan Insurance to subrogation.32[11] It noted that the police
report, which has been made part of the records of the trial court,
was not properly identified by the police officer who conducted
the on-the-spot investigation of the subject collision. It, thus, held
that an appellate court, as a reviewing body, cannot rightly
appreciate firsthand the genuineness of an unverified and
unidentified document, much less accord it evidentiary value. 33
[12]
Subsequently, Malayan Insurance filed its Motion for
Reconsideration, arguing that a police report is a prima facie
evidence of the facts stated in it. And inasmuch as they never
questioned the presentation of the report in evidence,
respondents are deemed to have waived their right to question its
authenticity and due execution.34[13]
In its Resolution dated October 29, 2010, the CA denied the
motion for reconsideration. Hence, Malayan Insurance filed the
instant petition.
The Issues

In its Memorandum35[14] dated June 27, 2011, Malayan Insurance

raises the following issues for Our consideration:
31[10] Id. at 25.
32[11] Id. at 22.
33[12] Id. at 24.
34[13] Id. at 88.

I
WHETHER THE CA ERRED IN REFUSING ADMISSIBILITY OF THE POLICE REPORT
SINCE THE POLICE INVESTIGATOR WHO PREPARED THE SAME DID NOT ACTUALLY
TESTIFY IN COURT THEREON.
II
WHETHER THE SUBROGATION OF MALAYAN INSURANCE IS IMPAIRED AND/OR
DEFICIENT.

On the other hand, respondents submit the following issues in its

Memorandum36[15] dated July 7, 2011:
I
WHETHER THE CA IS CORRECT IN DISMISSING THE COMPLAINT FOR FAILURE OF
MALAYAN INSURANCE TO OVERCOME THE BURDEN OF PROOF REQUIRED TO
ESTABLISH THE NEGLIGENCE OF RESPONDENTS.
II
WHETHER THE PIECES OF EVIDENCE PRESENTED BY MALAYAN INSURANCE ARE
SUFFICIENT TO CLAIM FOR THE AMOUNT OF DAMAGES.
III
WHETHER THE SUBROGATION OF MALAYAN INSURANCE HAS PASSED COMPLIANCE
AND REQUISITES AS PROVIDED UNDER PERTINENT LAWS.

Essentially, the issues boil down to the following: (1) the

admissibility of the police report; (2) the sufficiency of the
evidence to support a claim for gross negligence; and (3) the
validity of subrogation in the instant case.
Our Ruling

The petition has merit.

Admissibility of the Police Report
Malayan Insurance contends that, even without the presentation
of the police investigator who prepared the police report, said
35[14] Id. at 99-107.
36[15] Id. at 110-115.

report is still admissible in evidence, especially since respondents

failed to make a timely objection to its presentation in evidence. 37
[16] Respondents counter that since the police report was never
confirmed by the investigating police officer, it cannot be
considered as part of the evidence on record. 38[17]
Indeed, under the rules of evidence, a witness can testify only to
those facts which the witness knows of his or her personal
knowledge, that is, which are derived from the witness own
perception.39[18] Concomitantly, a witness may not testify on
matters which he or she merely learned from others either
because said witness was told or read or heard those matters. 40
[19] Such testimony is considered hearsay and may not be
received as proof of the truth of what the witness has learned.
This is known as the hearsay rule.41[20]
As discussed in D.M. Consunji, Inc. v. CA,42[21] Hearsay is not
limited to oral testimony or statements; the general rule that
excludes hearsay as evidence applies to written, as well as oral
statements.
There are several exceptions to the hearsay rule under the Rules
of Court, among which are entries in official records. 43[22] Section
44, Rule 130 provides:
37[16] Id. at 101.
38[17] Id. at 113.
39[18] RULES OF COURT, Rule 130, Sec. 36.
40[19] D.M. Consunji, Inc. v. CA, G.R. No. 137873, April 20, 2001, 357 SCRA 249,
253-254.
41[20] Id. at 254.
42[21] Id.
43[22] Id.

Entries in official records made in the performance of his duty by a public officer of
the Philippines, or by a person in the performance of a duty specially enjoined by
law are prima facie evidence of the facts therein stated.

In Alvarez v. PICOP Resources,44[23] this Court reiterated the

requisites for the admissibility in evidence, as an exception to the
hearsay rule of entries in official records, thus: (a) that the entry
was made by a public officer or by another person specially
enjoined by law to do so; (b) that it was made by the public officer
in the performance of his or her duties, or by such other person in
the performance of a duty specially enjoined by law; and (c) that
the public officer or other person had sufficient knowledge of the
facts by him or her stated, which must have been acquired by the
public officer or other person personally or through official
information.
Notably, the presentation of the police report itself is admissible
as an exception to the hearsay rule even if the police investigator
who prepared it was not presented in court, as long as the above
requisites could be adequately proved.45[24]
Here, there is no dispute that SPO1 Dungga, the on-the-spot
investigator, prepared the report, and he did so in the
performance of his duty. However, what is not clear is whether
SPO1 Dungga had sufficient personal knowledge of the facts
contained in his report. Thus, the third requisite is lacking.
Respondents failed to make a timely objection to the police
reports presentation in evidence; thus, they are deemed to have
waived their right to do so.46[25] As a result, the police report is
still admissible in evidence.
44[23] G.R. Nos. 162243, 164516 & 171875, December 3, 2009, 606 SCRA 444, 525;
citing Africa v. Caltex, 123 Phil. 272, 277 (1966).
45[24] Id. at 525-526.
46[25] Asian Construction and Development Corporation v. COMFAC Corporation,
G.R. No. 163915, October 16, 2006, 504 SCRA 519, 524.

Sufficiency of Evidence
Malayan Insurance contends that since Reyes, the driver of the
Fuzo Cargo truck, bumped the rear of the Mitsubishi Galant, he is
presumed to be negligent unless proved otherwise. It further
contends that respondents failed to present any evidence to
overturn the presumption of negligence.47[26] Contrarily,
respondents claim that since Malayan Insurance did not present
any witness who shall affirm any negligent act of Reyes in driving
the Fuzo Cargo truck before and after the incident, there is no
evidence which would show negligence on the part of
respondents.48[27]
We agree with Malayan Insurance. Even if We consider the
inadmissibility of the police report in evidence, still, respondents
cannot evade liability by virtue of the res ipsa loquitur doctrine.
The D.M. Consunji, Inc. case is quite elucidating:
Petitioners contention, however, loses relevance in the face of the application of res
ipsa loquitur by the CA. The effect of the doctrine is to warrant a presumption or
inference that the mere fall of the elevator was a result of the person having charge
of the instrumentality was negligent. As a rule of evidence, the doctrine of res ipsa
loquitur is peculiar to the law of negligence which recognizes that prima facie
negligence may be established without direct proof and furnishes a substitute for
specific proof of negligence.
The concept of res ipsa loquitur has been explained in this wise:
While negligence is not ordinarily inferred or presumed, and while the mere
happening of an accident or injury will not generally give rise to an inference or
presumption that it was due to negligence on defendants part, under the doctrine of
res ipsa loquitur, which means, literally, the thing or transaction speaks for itself, or
in one jurisdiction, that the thing or instrumentality speaks for itself, the facts or
circumstances accompanying an injury may be such as to raise a presumption, or at
least permit an inference of negligence on the part of the defendant, or some other
person who is charged with negligence.
47[26] Rollo, p. 105.
48[27] Id. at 113.

x x x where it is shown that the thing or instrumentality which caused the injury
complained of was under the control or management of the defendant, and that the
occurrence resulting in the injury was such as in the ordinary course of things would
not happen if those who had its control or management used proper care, there is
sufficient evidence, or, as sometimes stated, reasonable evidence, in the absence of
explanation by the defendant, that the injury arose from or was caused by the
defendants want of care.
One of the theoretical bases for the doctrine is its necessity, i.e., that necessary
evidence is absent or not available.
The res ipsa loquitur doctrine is based in part upon the theory that the defendant in
charge of the instrumentality which causes the injury either knows the cause of the
accident or has the best opportunity of ascertaining it and that the plaintiff has no
such knowledge, and therefore is compelled to allege negligence in general terms
and to rely upon the proof of the happening of the accident in order to establish
negligence. The inference which the doctrine permits is grounded upon the fact that
the chief evidence of the true cause, whether culpable or innocent, is practically
accessible to the defendant but inaccessible to the injured person.
It has been said that the doctrine of res ipsa loquitur furnishes a bridge by which a
plaintiff, without knowledge of the cause, reaches over to defendant who knows or
should know the cause, for any explanation of care exercised by the defendant in
respect of the matter of which the plaintiff complains. The res ipsa loquitur doctrine,
another court has said, is a rule of necessity, in that it proceeds on the theory that
under the peculiar circumstances in which the doctrine is applicable, it is within the
power of the defendant to show that there was no negligence on his part, and direct
proof of defendants negligence is beyond plaintiffs power. Accordingly, some courts
add to the three prerequisites for the application of the res ipsa loquitur doctrine the
further requirement that for the res ipsa loquitur doctrine to apply, it must appear
that the injured party had no knowledge or means of knowledge as to the cause of
the accident, or that the party to be charged with negligence has superior
knowledge or opportunity for explanation of the accident.
The CA held that all the requisites of res ipsa loquitur are present in the case at bar:
There is no dispute that appellees husband fell down from the 14th floor of a
building to the basement while he was working with appellants construction project,
resulting to his death. The construction site is within the exclusive control and
management of appellant. It has a safety engineer, a project superintendent, a
carpenter leadman and others who are in complete control of the situation therein.
The circumstances of any accident that would occur therein are peculiarly within the
knowledge of the appellant or its employees. On the other hand, the appellee is not
in a position to know what caused the accident. Res ipsa loquitur is a rule of
necessity and it applies where evidence is absent or not readily available, provided
the following requisites are present: (1) the accident was of a kind which does not
ordinarily occur unless someone is negligent; (2) the instrumentality or agency
which caused the injury was under the exclusive control of the person charged with

negligence; and (3) the injury suffered must not have been due to any voluntary
action or contribution on the part of the person injured. x x x.
No worker is going to fall from the 14th floor of a building to the basement while
performing work in a construction site unless someone is negligent[;] thus, the first
requisite for the application of the rule of res ipsa loquitur is present. As explained
earlier, the construction site with all its paraphernalia and human resources that
likely caused the injury is under the exclusive control and management of
appellant[;] thus[,] the second requisite is also present. No contributory negligence
was attributed to the appellees deceased husband[;] thus[,] the last requisite is also
present. All the requisites for the application of the rule of res ipsa loquitur are
present, thus a reasonable presumption or inference of appellants negligence
arises. x x x.
Petitioner does not dispute the existence of the requisites for the application of res
ipsa loquitur, but argues that the presumption or inference that it was negligent did
not arise since it proved that it exercised due care to avoid the accident which befell
respondents husband.
Petitioner apparently misapprehends the procedural effect of the doctrine. As stated
earlier, the defendants negligence is presumed or inferred when the plaintiff
establishes the requisites for the application of res ipsa loquitur. Once the plaintiff
makes out a prima facie case of all the elements, the burden then shifts to
defendant to explain. The presumption or inference may be rebutted or overcome
by other evidence and, under appropriate circumstances a disputable presumption,
such as that of due care or innocence, may outweigh the inference. It is not for the
defendant to explain or prove its defense to prevent the presumption or inference
from arising. Evidence by the defendant of say, due care, comes into play only after
the circumstances for the application of the doctrine has been established. 49[28]

In the case at bar, aside from the statement in the police report,
none of the parties disputes the fact that the Fuzo Cargo Truck hit
the rear end of the Mitsubishi Galant, which, in turn, hit the rear
end of the vehicle in front of it. Respondents, however, point to
the reckless driving of the Nissan Bus driver as the proximate
cause of the collision, which allegation is totally unsupported by
any evidence on record. And assuming that this allegation is,
indeed, true, it is astonishing that respondents never even
bothered to file a cross-claim against the owner or driver of the
Nissan Bus.
What is at once evident from the instant case, however, is the
presence of all the requisites for the application of the rule of res
ipsa loquitur. To reiterate, res ipsa loquitur is a rule of necessity
49[28] Supra note 19, at 257-260; citations omitted.

which applies where evidence is absent or not readily available.

As explained in D.M. Consunji, Inc., it is partly based upon the
theory that the defendant in charge of the instrumentality which
causes the injury either knows the cause of the accident or has
the best opportunity of ascertaining it and that the plaintiff has no
such knowledge, and, therefore, is compelled to allege negligence
in general terms and to rely upon the proof of the happening of
the accident in order to establish negligence.
As mentioned above, the requisites for the application of the res
ipsa loquitur rule are the following: (1) the accident was of a kind
which does not ordinarily occur unless someone is negligent; (2)
the instrumentality or agency which caused the injury was under
the exclusive control of the person charged with negligence; and
(3) the injury suffered must not have been due to any voluntary
action or contribution on the part of the person injured. 50[29]
In the instant case, the Fuzo Cargo Truck would not have had hit
the rear end of the Mitsubishi Galant unless someone is negligent.
Also, the Fuzo Cargo Truck was under the exclusive control of its
driver, Reyes. Even if respondents avert liability by putting the
blame on the Nissan Bus driver, still, this allegation was selfserving and totally unfounded. Finally, no contributory negligence
was attributed to the driver of the Mitsubishi Galant.
Consequently, all the requisites for the application of the doctrine
of res ipsa loquitur are present, thereby creating a reasonable
presumption of negligence on the part of respondents.
It is worth mentioning that just like any other disputable
presumptions or inferences, the presumption of negligence may
be rebutted or overcome by other evidence to the contrary. It is
unfortunate, however, that respondents failed to present any
evidence before the trial court. Thus, the presumption of
negligence remains. Consequently, the CA erred in dismissing the
complaint for Malayan Insurances adverted failure to prove
negligence on the part of respondents.

50[29] Id. at 259.

Validity of Subrogation
Malayan Insurance contends that there was a valid subrogation in
the instant case, as evidenced by the claim check voucher 51[30]
and the Release of Claim and Subrogation Receipt 52[31] presented
by it before the trial court. Respondents, however, claim that the
documents presented by Malayan Insurance do not indicate
certain important details that would show proper subrogation.
As noted by Malayan Insurance, respondents had all the
opportunity, but failed to object to the presentation of its
evidence. Thus, and as We have mentioned earlier, respondents
are deemed to have waived their right to make an objection. As
this Court held in Asian Construction and Development
Corporation v. COMFAC Corporation:
The rule is that failure to object to the offered evidence renders it
admissible, and the court cannot, on its own, disregard such evidence. We
note that ASIAKONSTRUCTs counsel of record before the trial court, Atty. Bernard Dy,
who actively participated in the initial stages of the case stopped attending the
hearings when COMFAC was about to end its presentation. Thus, ASIAKONSTRUCT
could not object to COMFACs offer of evidence nor present evidence in its defense;
ASIAKONSTRUCT was deemed by the trial court to have waived its chance to do so.
Note also that when a party desires the court to reject the evidence
offered, it must so state in the form of a timely objection and it cannot
raise the objection to the evidence for the first time on appeal. Because of
a partys failure to timely object, the evidence becomes part of the
evidence in the case. Thereafter, all the parties are considered bound by
any outcome arising from the offer of evidence properly presented.53[32]
(Emphasis supplied.)

Bearing in mind that the claim check voucher and the Release of
Claim and Subrogation Receipt presented by Malayan Insurance
are already part of the evidence on record, and since it is not
51[30] Rollo, p. 106, Exhibit D.
52[31] Id., Exhibit E.
53[32] Supra note 25.

disputed that the insurance company, indeed, paid PhP 700,000

to the assured, then there is a valid subrogation in the case at
bar. As explained in Keppel Cebu Shipyard, Inc. v. Pioneer
Insurance and Surety Corporation:
Subrogation is the substitution of one person by another with reference to a lawful
claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities. The principle covers
a situation wherein an insurer has paid a loss under an insurance policy is entitled
to all the rights and remedies belonging to the insured against a third party with
respect to any loss covered by the policy. It contemplates full substitution such that
it places the party subrogated in the shoes of the creditor, and he may use all
means that the creditor could employ to enforce payment.
We have held that payment by the insurer to the insured operates as an equitable
assignment to the insurer of all the remedies that the insured may have against the
third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract.
It accrues simply upon payment by the insurance company of the insurance claim.
The doctrine of subrogation has its roots in equity. It is designed to promote and to
accomplish justice; and is the mode that equity adopts to compel the ultimate
payment of a debt by one who, in justice, equity, and good conscience, ought to
pay.54[33]

Considering the above ruling, it is only but proper that Malayan

Insurance be subrogated to the rights of the assured.
WHEREFORE, the petition is hereby GRANTED. The CAs July 28,
2010 Decision and October 29, 2010 Resolution in CA-G.R. CV No.
93112 are hereby REVERSED and SET ASIDE. The Decision
dated February 2, 2009 issued by the trial court in Civil Case No.
99-95885 is hereby REINSTATED.
No pronouncement as to cost.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
54[33] G.R. Nos. 180880-81 & 180896-97, September 25, 2009, 601 SCRA 96, 141142.

DIOSDADO M. PERALTA
Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

BIENVENIDO L. REYES
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and
the Division Chairpersons Attestation, I certify that the
conclusions in the above Decision had been reached in

consultation before the case was assigned to the writer of the

opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

FIRST DIVISION

BLUE CROSS HEALTH CARE,

INC.,
Petitioner,
Present:

G.R. No. 169737

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
-versusCORONA,
AZCUNA and
LEONARDO-DE CASTRO, JJ.
NEOMI* and DANILO OLIVARES,

Respondents.

Promulgated:

February 12, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --------x
DECISION

CORONA, J.:
** The petition spelled the name of respondent as Noemi Olivares but in the
decision of the Court of Appeals, Neomi was used since she signed as such in the
verification and certificate of non-forum shopping attached to her complaint.

This is a petition for review on certiorari 55[1] of a

decision56[2] and resolution57[3] of the Court of Appeals (CA)
dated July 29, 2005 and September 21, 2005, respectively, in CAG.R. SP No. 84163 which affirmed the decision of the Regional
Trial Court (RTC), Makati City, Branch 61 dated February 2, 2004 in
Civil Case No. 03-1153,58[4] which in turn reversed the decision of
the Metropolitan Trial Court (MeTC), Makati City, Branch 66 dated
August 5, 2003 in Civil Case No. 80867.59[5]
Respondent Neomi T. Olivares applied for a health care
program with petitioner Blue Cross Health Care, Inc., a health
maintenance firm. For the period October 16, 2002 to October 15,
2003,60[6] she paid the amount of P11,117. For the same period,
she also availed of the additional service of limitless consultations
for an additional amount of P1,000. She paid these amounts in full
on October 17, 2002. The application was approved on October
22, 2002. In the health care agreement, ailments due to preexisting conditions were excluded from the coverage. 61[7]
On November 30, 2002, or barely 38 days from the
effectivity of her health insurance, respondent Neomi suffered a
stroke and was admitted at the Medical City which was one of the
55[1] Under Rule 45 of the Rules of Court.
56[2] Penned by Associate Justice Japar B. Dimaampao and concurred in by
Associate Justices Martin S. Villarama, Jr. and Edgardo F. Sundiam of the Former
Fifteenth Division of the Court of Appeals; rollo, pp. 17-25.
57[3]Id., pp. 27-28.
58[4]Penned by Judge Romeo F. Barza; id., pp. 38-43.
59[5]Penned by Judge Perpetua Atal-Pao; id., pp. 44-47.
60[6]Id., p. 178.
61[7]Id., p. 39.

hospitals accredited by petitioner. During her confinement, she

underwent several laboratory tests. On December 2, 2002, her
attending physician, Dr. Edmundo Saniel, 62[8] informed her that
she could be discharged from the hospital. She incurred hospital
expenses amounting to P34,217.20. Consequently, she requested
from the representative of petitioner at Medical City a letter of
authorization in order to settle her medical bills. 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. 63
[9]
She was discharged from the hospital on December 3, 2002. On
December 5, 2002, she demanded that petitioner pay her medical
bill. When petitioner still refused, she and her husband,
respondent Danilo Olivares, were constrained to settle the bill. 64
[10] They thereafter filed a complaint for collection of sum of
money against petitioner in the MeTC on January 8, 2003. 65[11] In
its answer dated January 24, 2003, petitioner maintained that it
had not yet denied respondents' claim as it was still awaiting Dr.
Saniel's report.
In a letter to petitioner dated February 14, 2003, Dr. Saniel
stated that:
This is in response to your letter dated February 13, 2003. [Respondent] Neomi T.
Olivares called by phone on January 29, 2003. She stated that she is invoking
patient-physician confidentiality. That she no longer has any relationship with
[petitioner]. And that I should not release any medical information concerning her
neurologic status to anyone without her approval. Hence, the same day I instructed
my secretary to inform your office thru Ms. Bernie regarding [respondent's] wishes.
xxx

62[8]Id., p. 18.
63[9]Id., p. 39.
64[10]Id., p. 109.
65[11]Id., p. 38.

xxx

xxx66[12]

In a decision dated August 5, 2003, the MeTC dismissed the

complaint for lack of cause of action. 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. Saniel who treated
her and conducted the test during her confinement. 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, petitioner cannot be
faulted from suspending payment of her claim, 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.67[13]

On appeal, the RTC, in a decision dated February 2, 2004,

reversed the ruling of the MeTC and ordered petitioner to pay
respondents the following amounts: (1) P34,217.20 representing
the medical bill in Medical City and P1,000 as reimbursement for
consultation fees, with legal interest from the filing of the
complaint until fully paid; (2) P20,000 as moral damages; (3)
P20,000 as exemplary damages; (4) P20,000 as attorney's fees
and (5) costs of suit.68[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. It was not able to discharge
that burden.69[15]
Aggrieved, petitioner filed a petition for review under Rule 42
of the Rules of Court in the CA. In a decision promulgated on July
29, 2005, the CA affirmed the decision of the RTC. It denied
reconsideration in a resolution promulgated on September 21,
2005. Hence this petition which raises the following issues: (1)
66[12]Id., p. 29.
67[13]Id., p. 47.
68[14]Id., p. 43.
69[15]Id., p. 42.

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.
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, whether or not the Member was
aware of such illness or condition. Such conditions also include disabilities existing
prior to reinstatement date in the case of lapse of an Agreement. Notwithstanding,
the following disabilities but not to the exclusion of others are considered preexisting conditions including their complications when occurring during the first year
of a Members coverage:
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
XVI.
XVII.
XVIII.
XIX.
XX.

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 abnormalities
Tuberculosis
Cholecysitis
Gastric or Duodenal ulcer
Hallux valgus
Hypertension and other Cardiovascular diseases
Calculi
Tumors of skin, muscular tissue, bone or any form of blood dyscracias
Diabetes Mellitus
Collagen/Auto-Immune disease

After the Member has been continuously covered for 12 months, this pre-existing
provision shall no longer be applicable except for illnesses specifically excluded by
an endorsement and made part of this Agreement. 70[16]

Under this provision, disabilities which existed before the

commencement of the agreement are excluded from its coverage
if they become manifest within one year from its effectivity.
70[16]Id., p. 114.

Stated otherwise, petitioner is not liable for pre-existing

conditions if they occur within one year from the time the
agreement takes effect.
Petitioner argues that respondents prevented Dr. Saniel from
submitting his report regarding the medical condition of Neomi.
Hence, it contends that the presumption that evidence willfully
suppressed would be adverse if produced should apply in its
favor.71[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. It failed
to prove this.72[18]
We agree with respondents.
In Philamcare Health Systems, Inc. v. CA,73[19] we ruled that a
health care agreement is in the nature of a non-life insurance. 74
[20] It is an established rule in insurance contracts that when
their terms contain limitations on liability, they should be
construed strictly against the insurer. These are contracts of
adhesion the terms of which must be interpreted and enforced
stringently against the insurer which prepared the contract. This
doctrine is equally applicable to health care agreements. 75[21]
Petitioner never presented any evidence to prove that
respondent Neomi's stroke was due to a pre-existing condition. It
merely speculated that Dr. Saniel's report would be adverse to
71[17]Id., p. 195.
72[18]Id., p. 214.
73[19]429 Phil. 82 (2002).
74[20]Id., p. 90.
75[21]Id., pp. 93-94, citations omitted.

Neomi, based on her invocation of the doctor-patient privilege.

This was a disputable presumption at best.
Section 3 (e), Rule 131 of the Rules of Court states:
Sec. 3. Disputable presumptions. The following presumptions are satisfactory if
uncontradicted, but may be contradicted and overcome by other evidence:
xxx xxx xxx
(e)

That evidence willfully suppressed would be adverse if produced.

Suffice it to say that this presumption does not apply if (a) the
evidence is at the disposal of both parties; (b) the suppression
was not willful; (c) it is merely corroborative or cumulative and (d)
the suppression is an exercise of a privilege.76[22] Here,
respondents' refusal to present or allow the presentation of Dr.
Saniel's report was justified. It was privileged communication
between physician and patient.
Furthermore, as already stated, 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.
Accordingly, they should be scrutinized by the courts with
extreme jealousy77[23] and care and with a jaundiced eye.78
[24] Since petitioner had the burden of proving exception to
liability, it should have made its own assessment of whether
respondent Neomi had a pre-existing condition when it failed to
76[22]People v. Andal, 344 Phil. 889, 912 (1997), citing People v. Ducay, G.R. No.
86939, 2 August 1993, 225 SCRA 1 and People v. Navaja, G.R. No. 104044, 30 March
1993, 220 SCRA 624, 633.
77[23]DBP Pool of Accredited Insurance Companies v. Radio Mindanao Network, Inc.,
G.R. No. 147039, 27 January 2006, 480 SCRA 314, 322, citing Malayan Insurance
Corporation v. Court of Appeals, 336 Phil. 977, 989 (1997).
78[24]Western Guaranty Corporation v. Court of Appeals, G.R. No. 91666, 20 July
1990, 187 SCRA 652, 659-660, citing Taurus Taxi Co., Inc. v. The Capital Ins. &
Surety Co., Inc., G.R. No. L-23491, 31 July 1968, 24 SCRA 454 and Eagle Star
Insurance, Ltd. v. Chia Yu, 96 Phil. 696 (1955).

obtain the attending physician's report. It could not just passively

wait for Dr. Saniel's report to bail it out. The mere reliance on a
disputable presumption does not meet the strict standard
required under our jurisprudence.
Next, petitioner argues that it should not be held liable for moral
and exemplary damages, and attorney's fees since it did not act
in bad faith in denying respondent Neomi's claim. It insists that it
waited in good faith for Dr. Saniel's report and that, based on
general medical findings, it had reasonable ground to believe that
her stroke was due to a pre-existing condition, considering it
occurred only 38 days after the coverage took effect. 79[25]
We disagree.
The RTC and CA found that there was a factual basis for the
damages adjudged against petitioner. 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, thereby suffering in the process extreme mental anguish, shock, serious
anxiety and great stress. [They] have shown that because of the refusal of
[petitioner] to issue a letter of authorization and to pay [respondent Neomi's]
hospital bills, [they had] to engage the services of counsel for a fee of P20,000.00.
Finally, the refusal of petitioner to pay respondent Neomi's bills smacks of
bad faith, as its refusal [was] merely based on its own perception that a stroke is a
pre-existing condition. (emphasis supplied)

This is a factual matter binding and conclusive on this Court. 80[26]

We see no reason to disturb these findings.

79[25]Rollo, pp. 196-198.

80[26] PAL, Inc. v. CA, 326 Phil. 824, 835 (1996), citations omitted.

WHEREFORE, the petition is hereby DENIED. The July 29, 2005

decision and September 21, 2005 resolution of the Court of
Appeals in CA-G.R. SP No. 84163 are AFFIRMED.
Treble costs against petitioner.
SO ORDERED.
RENATO C. CORONA

Associate Justice

WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

ADOLFO S. AZCUNA
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I
certify that the conclusions in the above decision had been
reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
AMERICAN HOME INSURANCE
CO. OF NEW YORK,
Petitioner,

- versus

G.R. No.

174926

Present:
CARPIO,* J.,
VELASCO, JR., J.,
Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.

F.F. CRUZ & CO., INC.,

Promulgated:
Respondent.
August 10, 2011
x-----------------------------------------------------------------------------------------x

** Designated as an additional member in lieu of Associate Justice Roberto A. Abad,

per Special Order No. 1059 dated August 1, 2011.
**** Designated as an additional member in lieu of Associate Justice Jose Catral
Mendoza, per Special Order No. 1056 dated July 27, 2011.
****** Designated as an additional member, per Special Order No. 1028 dated June
21, 2011.

DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court filed by American Home Insurance Co. of New York
(American Home) assailing the Court of Appeals (CA) Decision 81[1]
dated September 29, 2005 and Resolution82[2] dated September
25, 2006 in CA-G.R. CV No. 73960. The assailed Decision affirmed
the Decision83[3] of the Regional Trial Court (RTC) of Makati,
Branch 137 in Civil Case No. 93-2585, while the assailed
Resolution denied American Homes motion for reconsideration.
The case stemmed from the following facts:
In June 1990, the Philippine Ports Authority (PPA) conducted
a bidding of a project for the dredging of the entrance channel
and harbor basin of the Cebu International Port in Cebu City. The
PPA awarded the contract to the winning bidder, F.F. Cruz & Co.,
Inc. (FF Cruz). Pursuant to their earlier agreement, FF Cruz and
Genaro Reyes Construction, Inc. (hereafter referred to as G.
Reyes) executed a Sub-Contract Agreement84[4] whereby the
latter agreed to undertake the performance of 50% of the
dredging projects estimated volume of 600,000 cubic meters. The
sub-contract was subject to the following terms and conditions:
xxxx

81[1]Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Amelita
G. Tolentino and Danilo B. Pine, concurring; rollo, pp. 51-68.
82[2] Penned by Asociate Justice Amelita G. Tolentino, with Associate Justices Portia
Alio-Hormachuelos and Lucas P. Bersamin (now a member of this Court), concurring;
rollo, pp. 71-72.
83[3] Penned by Judge Santiago Javier Ranada; CA rollo, pp. 101-118.
84[4] Rollo, pp. 181-183.

5. That the SUB-CONTRACTOR shall file immediately upon its receipt of NOTICE TO
PROCEED, a PERFORMANCE BOND (callable anytime on demand) from a duly
accredited surety company equivalent to 10% of the SUBCONTRACTS TOTAL COST;
6. That the SUB-CONTRACTOR agrees to start to work on the PROJECT within thirty
(30) calendar days or as directed by the PPA, from the date of NOTICE TO PROCEED
for the PROJECT, and obligates itself to finish the work within the contract time
stipulated in the contract entered into by the CONTRACTOR and PPA;
x x x x85[5]

FF Cruz gave G. Reyes an advance payment of P2.2 million

guaranteed by a surety bond for the same amount issued by
American Home. The surety bond was issued to guarantee
payment of the advance payment made by FF Cruz to G. Reyes
for the dredging project in the event that the latter fail to comply
with the terms and conditions of the sub-contract. 86[6]
As a security for the issuance of the bond, Genaro Reyes, as
president of G. Reyes, and his wife Lydia Reyes, executed an
Indemnity Agreement where they agreed to jointly and severally
indemnify American Home and keep the latter harmless against
all damages, losses, costs, stamps, taxes, penalties, charges and
expenses of whatever kind and nature which it may sustain or
incur as a consequence of having become a surety, or any
extension, renewal, substitution or alteration made thereof. 87[7]
They likewise undertook to pay, reimburse and make good to
American Home all sums which the latter shall pay on account of
the bond.88[8] It was also agreed upon that their liability attaches
as soon as demand is received by American Home from FF Cruz,
or as soon as it becomes liable to make payment under the terms
of the surety bond.
85[5] Id. at 133.
86[6] Id. at 64.
87[7] CA rollo, p. 103.
88[8] Rollo, p. 161.

In a letter dated March 6, 1991, FF Cruz informed G. Reyes

that the former mobilized its dredger and started operation on
March 3, 1991. In the same letter, FF Cruz requested G. Reyes to
mobilize its equipment on or before March 20, 1991. 89[9]
On October 21, 1991, G. Reyes complained to the PPA about
the great deal of silt and waste materials that had accumulated in
the area which adversely affected its work accomplishment. In
December 1991, G. Reyes informed FF Cruz that the equipment
used for the project had been encountering difficulties because of
siltation problems. G. Reyes finally admitted that continuing the
project was no longer a wise investment and called on FF Cruz to
take over the project. FF Cruz thus took over the unfinished
project.90[10]
Consequently, FF Cruz demanded from American Home the
payment of P2.2 million representing the amount of the bond.
American Home, in turn, informed G. Reyes of FF Cruzs demand.
As the claim left unheeded, FF Cruz made a final demand on
American Home on July 10, 1993. G. Reyes likewise ignored
American Homes demand to fulfill its obligation set forth in the
Indemnity Agreement it executed in favor of the latter.
On July 29, 1993, American Home filed a Complaint for Sum
of Money91[11] against G. Reyes, Genaro G. Reyes and Lydia A.
Reyes for the payment of P2,200,000.00 corresponding to the
amount of the bond, plus attorneys fees and litigation expenses. 92
[12] In its complaint, American Home sought the enforcement of
the Indemnity Agreement undertaken by G. Reyes in conjunction
with FF Cruzs demand for the payment of the amount of the
surety bond.
89[9] CA rollo, p. 103.
90[10] Id. at 103-104.
91[11] Rollo, pp. 159-168.
92[12] Id. at 167.

G. Reyes et al., in turn, filed an Answer with Counterclaim

and Third-Party Complaint93[13] against FF Cruz. G. Reyes denied
liability to American Home on the ground that G. Reyes did not fail
to comply with its obligation to FF Cruz. It explained that its (G.
Reyes) liability would arise only in case of its failure to comply
with the terms and conditions of the sub-contract. It insisted that
it was FF Cruz who was guilty of breach of its obligations. In its
Third-Party Complaint against FF Cruz, G. Reyes argued that the
siltation problems caused by the former resulted in the reduction
of G. Reyes project accomplishment and failure to finish the
project. It also claimed that FF Cruz still has an unpaid balance of
more than P5 million as it recognized only the accomplishment of
57,284.44 cubic meters instead of 184,210 cubic meters claimed
by G. Reyes.
In answer to the third-party complaint of G. Reyes, FF Cruz
denied that it caused the siltation problems and argued that the
former abandoned the project because it was incapable of
performing its obligations. It also explained that it had no unpaid
obligation to G. Reyes as it paid its accomplishment based on the
report of the PPA.94[14]
FF Cruz thereafter filed a Fourth-Party Complaint against
American Home calling on the surety bond it provided in favor of
G. Reyes.95[15]
During the pre-trial, the parties agreed to limit the issues, to
wit:
1) Is the fourth-party defendant AMERICAN HOME free from liability on the claim of
fourth-party plaintiff FF Cruz as set forth in the fourth-party complaint because:
a) The provision in American Surety Bond No. 304-67535575 that the same is
callable anytime on demand is null and void?
93[13] Id. at 169-180.
94[14] CA rollo, p. 105.
95[15] Id.

b) Assuming that it is not, is fourth-party defendant AMERICAN HOME free from

liability because Genaro G. Reyes Construction, Inc. had fulfilled all its obligations
under the sub-contract it had with fourth-party plaintiff?
2) Is AMERICAN HOME free from liability relative to the fourth-party plaintiff claim
as set forth in the complaint because the damages suffered by fourth-party plaintiff
arose from force majeure?
3) If [fourth-party] defendant AMERICAN HOME is liable on the surety bond, what
is the amount and nature of the damages that should be awarded to fourth-party
plaintiff?96[16]

After the presentation of the parties respective evidence, the RTC

rendered a Decision,97[17] the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering plaintiff American Home
Insurance Company of New York and third-party plaintiff Genaro G. Reyes
Construction, Incorporated, jointly and severally, to pay third-party defendant F.F.
Cruz and Company the amount of P2,200,000.00 representing the full amount of the
surety bond.
The third-party complaint of third-party plaintiff Genaro G. Reyes Construction,
Incorporated, against third-party defendant F.F. Cruz and Company, and the
counterclaim for attorneys fees of third-party plaintiff Genaro G. Reyes Construction,
Incorporated, against plaintiff American Home Insurance Company of New York, are
both dismissed, for lack of sufficient merit.
On the counterclaim of third-party defendant F.F. Cruz and Company, judgment is
hereby rendered ordering third-party plaintiff Genaro G. Reyes Construction,
Incorporated, to pay said third-party defendant the following amounts:
1. P310,150.21 representing the overpayment received by third-party plaintiff
Genaro G. Reyes Construction, Incorporated, from third-party defendant F.F. Cruz
and Company, with 6% interest per annum from the filing of the third-party
complaint on 8 April 1994 until full payment;
2. 10% of the above amount as attorneys fees; and
3. costs of suit.
On the complaint of plaintiff American Home Insurance Company of New York
against defendants and third-party plaintiff Genaro G. Reyes Construction,
Incorporated, Genaro G. Reyes and Lydia A. Reyes, judgment is hereby rendered
ordering defendants and third-party plaintiffs Genaro G. Reyes Construction,
Incorporated, Genaro G. Reyes and Lydia A. Reyes, jointly and severally, to pay
plaintiff American Home Insurance Company of New York the amount of
96[16] Id.
97[17] Supra note 3.

P2,200,000.00, representing the full amount of the indemnity agreement, plus 10%
thereof as attorneys fees and costs of suit.
SO ORDERED.98[18]

American Home and G. Reyes et al. appealed to the CA. On

September 29, 2005, the appellate court rendered the assailed
decision dismissing their appeal and, consequently, affirming the
RTC decision. The CA sustained the findings of the RTC that G.
Reyes indeed failed to fulfill its obligation to dredge 300,000 cubic
meters as it only finished dredging 57,000 cubic meters. The
court opined that there was no proof to show that the
abandonment of the project by G. Reyes was caused by heavy
siltation. Considering that such failure to finish the project
constitutes a violation of G. Reyes agreement with FF Cruz,
American Home was held liable under the bond it issued to G.
Reyes.99[19] G. Reyes and American Homes motions for
reconsideration were denied on September 25, 2006.
Aggrieved, G. Reyes assailed the CA decision and resolution
before this Court in a petition for review on certiorari, 100[20] but
the same was denied by the Court in a Minute Resolution 101[21]
dated March 5, 2007.

98[18] CA rollo, pp. 117-118.

99[19] Rollo, pp. 61-67.
100[20] The petition was entitled Genaro G. Reyes Construction, Inc. et al. v.
American Home Insurance Co. of New York and docketed as G.R. No. 174913.

101[21] The resolution reads:x x x x

Considering the allegations, issues and arguments adduced in the petition for review on
certiorari assailing the Decision dated 29 September 2005 of the Court of Appeals in CA-G.R.
CV No. 73960, the Court resolves to DENY the petition for failure to sufficiently show that the
Court of Appeals had committed any reversible error in the questioned judgment to warrant the
exercise of this Courts discretionary appellate jurisdiction, and for raising essentially factual

In this petition under consideration, American Home likewise

assails the same decision and resolution with the following
assigned errors:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN CONSIDERING THE
BOND ISSUED BY PETITIONER TO BE A PERFORMANCE BOND CONTRARY TO THE
EXPRESS TERMS OF THE BOND ITSELF THAT IT WAS TO GUARANTEE PAYMENT FOR
THE 15% ADVANCE PAYMENT MADE BY RESPONDENT TO GENARO G. REYES
CONSTRUCTION CORPORATION.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT DISCHARGING
PETITIONER FROM ITS OBLIGATIONS UNDER THE BOND DUE TO THE ABANDONMENT
OF THE PROJECT BY GENARO G. REYES CONSTRUCTION CORPORATION AND THE
TAKE-OVER BY RESPONDENT WITHOUT PETITIONERS PRIOR NOTICE AND CONSENT.
III.
ASSUMING, WITHOUT ADMITTING, THAT PETITIONER IS LIABLE UNDER THE BOND,
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ADJUDGING PETITIONER
LIABLE FOR THE ENTIRE OR FACE VALUE OF THE BOND IN THE AMOUNT OF P2.2
MILLION CONSIDERING THAT THE BOND WAS NOT A PERFORMANCE BOND TO
GUARANTEE THE COMPLETION OF THE PROJECT BUT MERELY TO GUARANTEE THE
PAYMENT OF THE ADVANCES MADE BY RESPONDENT TO GENARO G. REYES
CONSTRUCTION.102[22]

American Home faults the CA in considering the surety bond as a

performance bond. It insists that the bond guaranteed only the
payment of the 15% advance payment made by FF Cruz to G.
Reyes amounting to P2.2 million and not the performance of the
latters obligations nor the completion of the dredging operations.
It also avers that making it (American Home) liable under the
bond because of G. Reyes abandonment of the project is
tantamount to enlarging its liability. American Home also claims
that it was not informed that G. Reyes already abandoned the
project and that FF Cruz took over to complete the same. This,
according to American Home, is a material alteration of the terms
of the surety bond which thus discharged it of liability on the
surety agreement.
The petition is without merit.
102[22] Rollo, pp. 28-29.

The only issue for resolution is whether or not American Home is

liable to FF Cruz for P2.2 million representing the face value of the
surety bond it issued to G. Reyes.
We rule in the affirmative.
It is well to note that G. Reyes petition in G.R. No. 174913 has
been denied by the Court. Hence, the same CA decision and
resolution assailed in this present petition have become final and
executory as to G. Reyes, Genaro Reyes and Lydia A. Reyes and,
in that respect, it shall not be disturbed by the Court.
Consequently, their liability to American Home pursuant to the
Indemnity Agreement has been settled with finality. They are,
therefore, bound to pay American Home P2,200,000.00
representing the full amount of the Indemnity Agreement, plus
10% thereof as attorneys fees and costs of suit. Their liability to
FF Cruz has also been resolved with finality.
The Court also notes that the issues raised by American Home in
this petition were not raised during the trial of the case before the
RTC. It must be recalled that the case below was commenced by
American Home for the collection of sum of money against G.
Reyes pursuant to the Indemnity Agreement executed by the
latter. The issue on American Homes liability to FF Cruz was
squarely raised only in the fourth-party complaint filed by the
latter against the former.
Settled is the rule that points of law, theories, issues, and
arguments not adequately brought to the attention of the trial
court need not be, and ordinarily will not be, considered by a
reviewing court. They cannot be raised for the first time on
appeal. To allow this would be offensive to the basic rules of fair
play, justice and due process.103[23] In order, however, to remove
103[23] Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd.,
G.R. Nos. 158820-21, June 5, 2009, 588 SCRA 410, 420.

doubt on its liability to FF Cruz, we will discuss the merits of

American Homes arguments.
It is undisputed that FF Cruz gave G. Reyes P2.2 million as
advance payment. As a security thereof, G. Reyes posted a surety
bond issued by American Home in favor of FF Cruz, the pertinent
portion of which reads:
To guarantee payment for the 15% advance payment made by the obligee [FF Cruz]
to the herein principal [G. Reyes] for the Dredging of Entrance Channel and Harbor
Basin of Cebu International Port Project in the event of the principals failure to
comply with the terms and conditions of the Sub-Contract Agreement dated June 11,
1990, copy of which is hereto attached and made an integral part hereof; it being
expressly understood that the liability of the surety under this bond shall in no case
exceed the amount of PESOS TWO MILLION TWO HUNDRED THOUSAND ONLY
(P2,200,000.00), Phil. Cy.104[24]

It is clear from the foregoing that indeed, the surety bond was
issued to guarantee the payment of the 15% advance payment of
P2.2 million made by FF Cruz to G. Reyes. The bond was not
issued to guarantee the completion of the project. However, the
above provision shows that in order for American Homes liability
to attach, two conditions must be fulfilled: first, that the advance
payment made by FF Cruz to G. Reyes remains unpaid; and
second, G. Reyes fails to comply with any of the terms and
conditions set forth in the sub-contract.
There may be a dispute as to the amount of liability as will
be discussed later, but it has been adequately established that FF
Cruz was not yet reimbursed of the advance payment it made.
The fulfillment of the first condition is, therefore, settled.
In the sub-contract agreement, G. Reyes agreed to finish the work
within the time stipulated in the contract between FF Cruz and the
PPA. Admittedly, not only did G. Reyes fail to finish the work on
time, it did not altogether complete the project. If failure to finish
the work on time is violation of the sub-contract agreement, with
more reason that abandonment of the work is covered by the
stipulation. As held by the CA:
104[24] Rollo, p. 64.

By G. REYES own claim, it dredged only 184,000 cubic meters. There thus is no
dispute that G. REYES failed to dredge the 300,000 cubic meters as agreed in the
contract. But even if [w]e are to assume that G. REYES indeed dredged 184,210
cubic meters, this would still be short of the 300,000 cubic meters it bound itself
under the contract.
In the middle of the project, G REYES unilaterally abandoned its dredging work and
its obligations under the Sub-Contract Agreement. Without a doubt, G. REYES failed
to fulfill its contractual obligation. x x x105[25]

The appellate court did not also sustain G. Reyes explanation that
the abandonment of the project was due to force majeure. We
quote with approval the CA ratiocination in this wise:
The proffered reason that the abandonment was due to force majeure fails to
convince this Court. G. REYES excuse that it was forced to abandon the dredging
work due to heavy siltation is not supported by facts on record. There is no evidence
of the alleged heavy siltation. On the contrary, after G REYES abandoned its
dredging work and FF CRUZ took over the dredging, FF CRUZ was still able to finish
the dredging work on time. There is thus no basis for G REYES justification of force
majeure. Such was a lame excuse for the abandonment of the project. 106[26]

With the violation of the sub-contract, which means fulfillment of

the second condition, the liability to pay the advance payment
arose.
The payment of the P2.2 million advanced by FF Cruz is the
principal liability of G. Reyes. However, with the issuance of the
surety bond, a contract of suretyship was entered into making
American Home equally liable.
A contract of suretyship is an agreement whereby a party called
the surety, guarantees the performance by another party, called
the principal or obligor, of an obligation or undertaking in favor of
another party called the obligee. By its very nature, under the
laws regulating suretyship, the liability of the surety is joint and
several but is limited to the amount of the bond, and its terms are
determined strictly by the terms of the contract of suretyship in
105[25] Id. at 63-64.
106[26] Id. at 65.

relation to the principal contract between the obligor and the

obligee.107[27]
The surety is considered in law as possessed of the identity of the
debtor in relation to whatever is adjudged touching upon the
obligation of the latter. Their liabilities are so interwoven as to be
inseparable. Although the contract of suretyship is, in essence,
secondary only to a valid principal obligation, the suretys liability
to the creditor is direct, primary, and absolute; he becomes liable
for the debt and duty of another although he possesses no direct
or personal interest over the obligations nor does he receive any
benefit therefrom.108[28]
As to the amount of American Homes liability, the RTC found that
G. Reyes did not pay back the full amount of P2.2 million advance
payment. American Home, however, claims (for the first time)
that G. Reyes actually reimbursed P598,880.52 to FF Cruz. As
plaintiff in its complaint and defendant in FF Cruzs fourth-party
complaint, American Home was duty-bound to prove that it was
entitled to its claim against G. Reyes under the Indemnity
Agreement and that it was not liable to FF Cruz under the surety
bond. Yet, American Home chose not to present its evidence to
substantiate its claim and defense. For lack of evidence to show
the fact of payment, we find no reason to disturb the findings of
the trial court as affirmed by the appellate court that P2.2 million
is due FF Cruz.
Factual findings of the trial court, particularly when affirmed by
the CA, are generally binding on the Court. 109[29] We have
repeatedly held that we are not a trier of facts. We generally rely
upon, and are bound by, the conclusions on factual matters made
107[27] Stronghold Insurance Company, Incorporated v. Tokyo Construction
Company, Ltd., supra note 23, at 421-422.
108[28] Id. at 422-423.
109[29] Raquel-Santos v. Court of Appeals, G.R. Nos. 174986, 175071 and 181415,
July 7, 2009, 592 SCRA 169, 195.

by the lower courts, which are better equipped and have better
opportunity to assess the evidence first-hand, including the
testimony of the witnesses.110[30]
The Courts jurisdiction over a petition for review on certiorari is
limited to reviewing only errors of law, not of facts, unless the
factual findings complained of are devoid of support from the
evidence on record or the assailed judgment is based on a
misapprehension of facts.111[31]
With the foregoing disquisition, we need not discuss the other
issues raised by American Home.
WHEREFORE, premises considered, the petition is DENIED. The
Court of Appeals Decision dated September 29, 2005 and
Resolution dated September 25, 2006 in CA-G.R. CV No. 73960,
are AFFIRMED.
SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:
ANTONIO T. CARPIO
Associate Justice

110[30] Stronghold Insurance Company, Incorporated v. Tokyo Construction

Company, Ltd., supra note 23, at 420-421.
111[31] Raquel-Santos v. Court of Appeals, supra note 29, at 195-196.

PRESBITERO J. VELASCO, JR. ARTURO D. BRION

Associate Justice Associate Justice
Chairperson

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and
the Division Chairpersons Attestation, I certify that the

conclusions in the above Decision had been reached in

consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

FIRST DIVISION
[G.R. No. 125678. March 18, 2002]
PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT OF APPEALS and JULITA
TRINOS, respondents.
DECISION
YNARES-SANTIAGO, J.:

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage
with petitioner Philamcare Health Systems, Inc. In the standard application form, he answered no
to the following question:
Have you or any of your family members ever consulted or been treated for high blood pressure,
heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details).i[1]
The application was approved for a period of one year from March 1, 1988 to March 1, 1989.
Accordingly, he was issued Health Care Agreement No. P010194. Under the agreement,
respondents husband was entitled to avail of hospitalization benefits, whether ordinary or
emergency, listed therein. He was also entitled to avail of out-patient benefits such as annual
physical examinations, preventive health care and other out-patient services.
Upon the termination of the agreement, the same was extended for another year from March 1,
1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per disability.ii[2]

During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila
Medical Center (MMC) for one month beginning March 9, 1990. While her husband was in the
hospital, respondent tried to claim the benefits under the health care agreement. However,
petitioner denied her claim saying that the Health Care Agreement was void. According to
petitioner, there was a concealment regarding Ernanis medical history. Doctors at the MMC
allegedly discovered at the time of Ernanis confinement that he was hypertensive, diabetic and
asthmatic, contrary to his answer in the application form. Thus, respondent paid the
hospitalization expenses herself, amounting to about P76,000.00.
After her husband was discharged from the MMC, he was attended by a physical therapist at
home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties,
however, respondent brought her husband home again. In the morning of April 13, 1990, Ernani
had fever and was feeling very weak. Respondent was constrained to bring him back to the
Chinese General Hospital where he died on the same day.
On July 24, 1990, respondent instituted with the Regional Trial Court of Manila, Branch 44, an
action for damages against petitioner and its president, Dr. Benito Reverente, which was
docketed as Civil Case No. 90-53795. She asked for reimbursement of her expenses plus moral
damages and attorneys fees. After trial, the lower court ruled against petitioners, viz:
WHEREFORE, in view of the forgoing, the Court renders judgment in favor of the plaintiff
Julita Trinos, ordering:
1.Defendants to pay and reimburse the medical and hospital coverage of the late Ernani Trinos in
the amount of P76,000.00 plus interest, until the amount is fully paid to plaintiff who paid the
same;
2.

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

3.

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

4.

Defendants to pay attorneys fees of P20,000.00, plus costs of suit.

SO ORDERED.iii[3]
On appeal, the Court of Appeals affirmed the decision of the trial court but deleted all awards for
damages and absolved petitioner Reverente.iv[4] Petitioners motion for reconsideration was
denied.v[5] Hence, petitioner brought the instant petition for review, raising the primary argument
that a health care agreement is not an insurance contract; hence the incontestability clause under
the Insurance Codevi[6] does not apply.
Petitioner argues that the agreement grants living benefits, such as medical check-ups and
hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of
the agreement until its expiration one-year thereafter. Petitioner also points out that only medical
and hospitalization benefits are given under the agreement without any indemnification, unlike in
an insurance contract where the insured is indemnified for his loss. Moreover, since Health Care

Agreements are only for a period of one year, as compared to insurance contracts which last
longer,vii[7] petitioner argues that the incontestability clause does not apply, as the same requires
an effectivity period of at least two years. Petitioner further argues that it is not an insurance
company, which is governed by the Insurance Commission, but a Health Maintenance
Organization under the authority of the Department of Health.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage or liability arising from
an unknown or contingent event. An insurance contract exists where the following elements
concur:
1.The insured has an insurable interest;
2.

The insured is subject to a risk of loss by the happening of the designated peril;

3.

The insurer assumes the risk;

4.
Such assumption of risk is part of a general scheme to distribute actual losses among a
large group of persons bearing a similar risk; and
5.

In consideration of the insurers promise, the insured pays a premium.viii[8]

Section 3 of the Insurance Code states that any contingent or unknown event, whether past or
future, which may damnify a person having an insurable interest against him, may be insured
against. Every person has an insurable interest in the life and health of himself. Section 10
provides:
Every person has an insurable interest in the life and health:
(1)of himself, of his spouse and of his children;
(2)

of any person on whom he depends wholly or in part for education or support, or

in whom he has a pecuniary interest;

(3)

of any person under a legal obligation to him for the payment of money,
respecting property or service, of which death or illness might delay or prevent
the performance; and

(4)

of any person upon whose life any estate or interest vested in him depends.

In the case at bar, the insurable interest of respondents husband in obtaining the health care
agreement was his own health. The health care agreement was in the nature of non-life insurance,
which is primarily a contract of indemnity.ix[9] Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated contingent, the health care
provider must pay for the same to the extent agreed upon under the contract.

Petitioner argues that respondents husband concealed a material fact in his application. It appears
that in the application for health coverage, petitioners required respondents husband to sign an
express authorization for any person, organization or entity that has any record or knowledge of
his health to furnish any and all information relative to any hospitalization, consultation,
treatment or any other medical advice or examination.x[10] Specifically, the Health Care
Agreement signed by respondents husband states:
We hereby declare and agree that all statement and answers contained herein and in any
addendum annexed to this application are full, complete and true and bind all parties in interest
under the Agreement herein applied for, that there shall be no contract of health care coverage
unless and until an Agreement is issued on this application and the full Membership Fee
according to the mode of payment applied for is actually paid during the lifetime and good health
of proposed Members; that no information acquired by any Representative of PhilamCare shall
be binding upon PhilamCare unless set out in writing in the application; that any physician is, by
these presents, expressly authorized to disclose or give testimony at anytime relative to any
information acquired by him in his professional capacity upon any question affecting the
eligibility for health care coverage of the Proposed Members and that the acceptance of any
Agreement issued on this application shall be a ratification of any correction in or addition to this
application as stated in the space for Home Office Endorsement.xi[11] (Underscoring ours)
In addition to the above condition, petitioner additionally required the applicant for authorization
to inquire about the applicants medical history, thus:
I hereby authorize any person, organization, or entity that has any record or knowledge of my
health and/or that of __________ to give to the PhilamCare Health Systems, Inc. any and all
information relative to any hospitalization, consultation, treatment or any other medical advice or
examination. This authorization is in connection with the application for health care coverage
only. A photographic copy of this authorization shall be as valid as the original.xii[12]
(Underscoring ours)
Petitioner cannot rely on the stipulation regarding Invalidation of agreement which reads:
Failure to disclose or misrepresentation of any material information by the member in the
application or medical examination, whether intentional or unintentional, shall automatically
invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to
return of all Membership Fees paid. An undisclosed or misrepresented information is deemed
material if its revelation would have resulted in the declination of the applicant by Philamcare or
the assessment of a higher Membership Fee for the benefit or benefits applied for.xiii[13]
The answer assailed by petitioner was in response to the question relating to the medical history
of the applicant. This largely depends on opinion rather than fact, especially coming from
respondents husband who was not a medical doctor. Where matters of opinion or judgment are
called for, answers made in good faith and without intent to deceive will not avoid a policy even
though they are untrue.xiv[14] Thus,

(A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of

the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the
risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the
statement is material to the risk, if the statement is obviously of the foregoing character, since in
such case the insurer is not justified in relying upon such statement, but is obligated to make
further inquiry. There is a clear distinction between such a case and one in which the insured is
fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he
then knows, to be actually untrue, or the impossibility of which is shown by the facts within his
knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual
fraud.xv[15] (Underscoring ours)
The fraudulent intent on the part of the insured must be established to warrant rescission of the
insurance contract.xvi[16] Concealment as a defense for the health care provider or insurer to
avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the provider or insurer. In any case, with or without the authority
to investigate, petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer the same to the extent agreed
upon. In the end, the liability of the health care provider attaches once the member is hospitalized
for the disease or injury covered by the agreement or whenever he avails of the covered benefits
which he has prepaid.
Under Section 27 of the Insurance Code, a concealment entitles the injured party to rescind a
contract of insurance. The right to rescind should be exercised previous to the commencement of
an action on the contract.xvii[17] In this case, no rescission was made. Besides, the cancellation of
health care agreements as in insurance policies require the concurrence of the following
conditions:
1.Prior notice of cancellation to insured;
2.
Notice must be based on the occurrence after effective date of the policy of one or more
of the grounds mentioned;
3.

Must be in writing, mailed or delivered to the insured at the address shown in the policy;

4.
Must state the grounds relied upon provided in Section 64 of the Insurance Code and
upon request of insured, to furnish facts on which cancellation is based.xviii[18]
None of the above pre-conditions was fulfilled in this case. When the terms of insurance contract
contain limitations on liability, courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation.xix[19] Being a contract of adhesion, the terms of
an insurance contract are to be construed strictly against the party which prepared the contract
the insurer.xx[20] By reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer
and liberally in favor of the insured, especially to avoid forfeiture.xxi[21] This is equally
applicable to Health Care Agreements. The phraseology used in medical or hospital service
contracts, such as the one at bar, must be liberally construed in favor of the subscriber, and if

doubtful or reasonably susceptible of two interpretations the construction conferring coverage is

to be adopted, and exclusionary clauses of doubtful import should be strictly construed against
the provider.xxii[22]
Anent the incontestability of the membership of respondents husband, we quote with approval
the following findings of the trial court:
(U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc.
had twelve months from the date of issuance of the Agreement within which to contest the
membership of the patient if he had previous ailment of asthma, and six months from the
issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having
expired, the defense of concealment or misrepresentation no longer lie.xxiii[23]
Finally, petitioner alleges that respondent was not the legal wife of the deceased member
considering that at the time of their marriage, the deceased was previously married to another
woman who was still alive. The health care agreement is in the nature of a contract of indemnity.
Hence, payment should be made to the party who incurred the expenses. It is not controverted
that respondent paid all the hospital and medical expenses. She is therefore entitled to
reimbursement. The records adequately prove the expenses incurred by respondent for the
deceaseds hospitalization, medication and the professional fees of the attending physicians.xxiv[24]
WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed decision of the
Court of Appeals dated December 14, 1995 is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Kapunan, JJ., concur.

i[1] Record, p. 28.

ii[2] Exhibit 4, Record, p. 156.
iii[3] Dated November 16, 1993; penned by Judge Lolita Gal-lang; Rollo, pp. 134-135.
iv[4] Dated December 14, 1995, penned by Associate Justice Fidel P. Purisima, concurred
in by Associate Justices Fermin A. Martin, Jr. and Conchita Carpio Morales; Rollo, p. 45.
v[5] Resolution dated July 23, 1996; Rollo, p. 48.
vi[6] Section 48 of P.D. No. 1460 otherwise known as the Insurance Code.
vii[7] Petition, pp. 13-14; Rollo, pp. 22-23.
viii[8] See Vance pp. 1-2 cited in Agbayani, Commercial Laws of the Philippines, vol. 2,
1986 ed. p. 6.
ix[9] Cha v. Court of Appeals, 270 SCRA 690, 694 (1997).
x[10] Record, p. 28.
xi[11] Ibid.
xii[12] Ibid.
xiii[13] Ibid., p. 13.
xiv[14] Bryant v. Modern Woodmen of America, 86 Neb 372, 125 NW 621.
xv[15] Herrick v. Union Mut. Fire Ins. Co., 48 Me 558; Bryant v. Modern Woodmen of
America, supra; Boutelle v. Westchester Fire Ins. Co., 51 Vt 4 cited in 43 Am Jur 2d 1016.
xvi[16] Great Pacific Life v. Court of Appeals, 316 SCRA 677 [1999], citing Ng Gan Zee v.
Asian Crusader Life Assurance Corp., 122 SCRA 461 [1983].
xvii[17] Section 48, Insurance Code.
xviii[18] Malayan Insurance v. Cruz Arnaldo, 154 SCRA 672 [1987].

xix[19] Heirs of Ildefonso Cosculluela, Sr. v. Rico General Insurance Corporation, 179
SCRA 511 [1989].
xx[20] Landicho v. GSIS, 44 SCRA 7 [1972]; Western Guaranty Company v. Court of
Appeals, 187 SCRA 652 [1990].
xxi[21] 44 C.J.S. pp. 1166-1175; 29 Am. Jur. 180. See also Aetna Insurance Co. v. Rhodes,
170 F2d 111; Insurance Co. v. Norton, 96 U.S. 234, 24 L ed 689; Pfeiffer v. Missouri State
Life Ins. Co., 174 Ark 783, 297 SW 847.
xxii[22] See Myers v. Kitsap Physicians Service, 78 Wash 2d 286, 474 P2d 109, 66 ALR3d
1196; Hunt v. Hospital Service Plan, 81 ALR 2d 919 cited in 43 Am Jur 2d 289.
xxiii[23] Record, p. 257.
xxiv[24] Exhibit B, Exhibits D to D-7; Record, pp. 88-97.