MISAMIS LUMBER CORPORATION v CAPITAL INSURANCE and SURETY CO., INC.

GR L-21380 May 20, 1966

Reyes, JBL

FACTS:Misamis Lumber Corporation, under its former name, Lanao Timber Mills, insured a Ford Falcon motor
car for the amount of P14,000 with Capital Insurance & Surety Co., Inc. Under par. 3 of the policy, the Company
has the option to pay in cash the amount of loss or damage or may repair, reinstate or replace the motor vehicle
or any part therof. It also provides, under par. 4, that the Insured (Misamis Lumber) may authorize the repair of
the vehicle necessitated on damage, to which the Company shall be liable, provided that the estimated cost of
repairs should not exceed P150.00.

On 25 November 1961, the insured car passed over a water hole which caused the crankcase and flywheel
housing of the car to be broken when it hit a hollow block lying alongside the waterhole. Repairs on the car had
already been made when Misamis Lumber forwarded the report to Capital Insurance. The latter refused to pay
the total cost. The municipal court rendered judgment in favor of Misamis Lumber ordering Capital Insurance to
pay for the total repair cost. Capital Insurance admits liability of in the amount of P150.00, but not for any excess
thereof.

ISSUE: Whether Capital Insurance is liable in excess of the stipulated repair limit?

RULING: The Court held that the literal meaning of the stipulation must control, it being the actual contract,
expressly and plainly provided for in the policy. It will be observed that the policy drew out not only the limits of
the insurer's liability but also mechanics that the insured had to follow to be entitled to full indemnity. The option
to undertake repairs is accorded to the insurer. However, it was deprived of the option and was only notified after
the repairs were done. As a consequence, par. 4 of the policy applies, which limits the Company's liability to
P150.00.
JEWEL VILLACORTA v THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY
GR L-54171 October 28, 1980
Teehankee

FACTS: Complainant was the owner of a Colt Lancer insured with the respondent company. Under the policy,
the complainant is entitled for the following: (1) P35,000.00 – Own Damage; (2) P30,000.00 – Theft; and (3)
P30,000.00 – Third Party Liability.

The said car was brought to the Sunday Machine Works, Inc. for general check-up. While it was in the custody of
the latter, it was allegedly taken by 6 persons and was driven out to Montalban, Rizal in which it figured an
accident. As a result, the driver and a passenger died, the remaining four sustained physical injuries, and the car
suffered extensive damage. Complainant filed a claim for total loss to which the Empire Insurance denied.

The Insurance Commission, dismissed Villacorta's complaint, sustaining Empire Insurance's contention that the
accident did not fall within the provisions of the policy. It also upheld Empire Insurance's contention that the
“Authorized Driver Clause”, which limits the use of the insured vehicle to 2 persons only: the insured or any
person on his permission, was violated. The Commission also upheld that the car was not 'taken' as meant
under Article 308 of the RPC, since the intention of the taking was not established, and that the taking was only
temporary which is not covered by the policy.

ISSUE: Was the Insurace Company correct in denying the claim for total loss?

RULING: The Court held that the dismissal of the Commission of the complaint was contrary to the evidence
and law.

The court held that the construction of the “authorized driver clause” was too restrictive and contrary to the
established principle that insurance contracts, being contracts of adhesion, obviously calls for greater strictness
and vigilance on the part of the courts of justice on the view of protecting the weaker party from abuse and
imposition, and prevent their becoming traps for the unwary. A car owner entrusts his car to an established car
service and repair shop necessarily entrusts his car key to the shop owner and employees who are presumed to
have the insured's permission to drive the car for legitimate purposes of checking or road-testing the car. The
mere happenstance that the employee(s) of the shop owner diverts the use of the car to his own illicit or
unauthorized purpose in violation of the trust reposed in the shop by the insured car owner does not mean that
the "authorized driver" clause has been violated such as to bar recovery, provided that such employee is duly
qualified to drive under a valid driver's license.

The court also held, where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be
they employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban
without the owner's consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in
Article 308 of the Revised Penal Code. The Court rejects respondent commission's premise that there must be
an intent on the part of the taker of the car "permanently to deprive the insured of his car" and that since the
taking here was for a "joy ride" and "merely temporary in nature," a "temporary taking is held not a taking insured
against." Assuming, despite the totally inadequate evidence, that the taking was "temporary" and for a "joy ride",
the Court sustains as the better view that which holds that when a person, either with the object of going to a
certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to
another, without the consent of its owner, he is guilty of theft because by taking possession of the personal
property belonging to another and using it, his intent to gain is evident since he derives therefrom utility,
satisfaction, enjoyment and pleasure.

The insurer must therefore indemnify the petitioner-owner for the total loss of the insured car in the sum of
P35,000.00 under the theft clause of the policy, subject to the filing of such claim for reimbursement or payment
as it may have as subrogee against the Sunday Machine Works, Inc.