Manila Mahogany Manufacturing Corporation v. Court of Appeals a contract or acted as wrongdoers.

If the amount paid by the insurer is

and Zenith Insurance Corporation insufficient to cover the total damage caused, the insured is a preferred
GR. No. L-52756| 12 Oct 1987| J. Padilla creditor of the 3rd party and may recover deficiency claims. In receiving
such however, it must not release the 3rd party of “all” claims because it
CASE SUMMARY: will deprive the insurer of its right to be reimbursed by the 3rd party.
The insurance policy involved in this case is a car insurance. Manila
Mahogany Manufacturing Corporation (Manila Mahogany) insured its
Mercedes Benz 4-door Sedan with Zenith Insurance Corporation (Zenith).
During the coverage period, the Mercedes was bumped and damaged by a
truck of the San Miguel Corporation. The total damage was worth P9,486.

To cover the damage, Zenith paid Mahogany P5000. Zenith was then given
a Release Claim and subrogated to the rights of Mahogany to all its right to
action against San Miguel. When Zenith wrote to Insurance adjusters to
make the claim against San Miguel, the latter refused to pay because a
settlement was already made with Mahogany with San Miguel paying it
P4,500 for the damages. Cash Vouchers and a Release of Claim served as
evidence.

Zenith filed a suit against Mahogany to be reimbursed the P4,500 San

Miguel paid to the latter. The Supreme Court ruled in favor of Zenith
following Art 2207 and Art 1304 of the Civil Code. Although Mahogany
had the right to collect the deficiency of P4,500 from San Miguel, by signing
the Release claim it deprived Zenith of its right to be reimbursed by San
Miguel. Because of this, Mahogany was ordered to reimburse Zenith of its
P5,000.

DOCTRINE:
When an insurer pays the insured an amount to cover damages, it is
subrogated to the rights of the insured against the third parties who violated