Far Eastern Surety & Insurance Company, Inc. v.

Socorro Dancel vda de Misa, Araceli Maria Pinto and

La Mallorca
No. L-24377, 26 October 1968

FACTS:
(1) On Sept 3 1957, Socorro Dancel vda de Misa and Araceli Pinto hired a taxi operated by La Mallorca
in Quezon City and while on their way to the Archbishop’s Palace in Shaw Blvd, they collided with
a gravel and sand truck. As a result, Misa and Pinto were injured and filed a suit for damages
against La Mallorca. La Mallorca denied liability but instituted a third party complaint against Far
Eastern (FESIC) to recoup damages based on its Common Carrier’s Accident Insurance, however,
they also denied liability.

(2) The CFI found favor in Misa and Pinto against La Mallorca and likewise sentenced FESIC to pay La
Mallorca P10k on its 3rd party liability insurance. The CA affirmed the decision of the CFI, hence
this appeal.

ISSUE: Whether or not FESIC was liable as an insurer.

HELD: NO, decision is modified.

RATIO:
(1) The policy insurance limited the recovery of the insured to “all sums including claimants” “costs
and expenses which the Insured shall become legally liable” in the “event of accident caused by
or arising out of the use of the Motor Vehicle”. The SC finds that La Mallorca had indeed insured
its passengers and since such stipulation was not at all illegal, it must bind La Mallorca, enough to
render it liable for the injuries to the passengers thereof, even though it had not been at fault.

(2) While La Mallorca was found to be in estoppel, it does not apply to the insurer, FESIC. It did not
appear that the insurance company authorized or consented to, or even knew of, the
representation made by La Mallorca to its passengers, it follows that the source of the award of
damages against the taxicab was beyond the contemplation of the parties to the contract of the
Accident Insurance and that the insurer may not be held liable for such damages. Thus, decision
of CA is modified.