June 29, 1963 SIMEON DEL ROSARIO, plaintiff-appellee, vs THE EQUITABLE INSURANCE AND CASUALTY CO.

,
INC., defendant-appellant. [PAREDES, J.:]
On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal Accident Policy
No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein plaintiff-appellee, binding itself
to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death of the insured. The pertinent provisions of
the Policy, recite:
Part I. Indemnity For Death
If the insured sustains any bodily injury which is effected solely through violent, external, visible and
accidental means, and which shall result, independently of all other causes and within sixty (60) days
from the occurrence thereof, in the Death of the Insured, the Company shall pay the amount set
opposite such injury:
Section 1. Injury sustained other than those specified
below unless excepted hereinafter. . . . . . . . P1,000.00
Section 2. Injury sustained by the wrecking or
disablement of a railroad passenger car or street
railway car in or on which the Insured is travelling as a
farepaying passenger. . . . . . . . P1,500.00
Section 3. Injury sustained by the burning of a church,
theatre, public library or municipal administration
building while the Insured is therein at the
commencement of the fire. . . . . . . . P2,000.00
Section 4. Injury sustained by the wrecking or
disablement of a regular passenger elevator car in
which the Insured is being conveyed as a passenger
(Elevator in mines excluded) P2,500.00
Section 5. Injury sustained by a stroke of lightning or by
a cyclone. . . . . . . . P3,000.00
xxx xxx xxx
Part VI. Exceptions
This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability, Hospital fees,
or Loss of Time, caused to the insured:
. . . (h) By drowning except as a consequence of the wrecking or disablement in the Philippine waters of
a passenger steam or motor vessel in which the Insured is travelling as a farepaying passenger; . . . .
A rider to the Policy contained the following:
IV. DROWNING
It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy is hereby
waived by the company, and to form a part of the provision covered by the policy.
On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the motor launch
"ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios Jayme, were forced to jump
off said launch on account of fire which broke out on said vessel, resulting in the death of drowning, of the
insured and beneficiary in the waters of Jolo. 1äwphï1.ñët
On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for payment with
defendant company, and on September 13, 1957, defendant company paid to him (plaintiff) the sum of
P1,000.00, pursuant to Section 1 of Part I of the policy. The receipt signed by plaintiff reads —
 RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO., INC., the sum of PESOS — ONE
THOUSAND (P1,000.00) Philippine Currency, being settlement in full for all claims and demands
against said Company as a result of an accident which occurred on February 26, 1957, insured
under out ACCIDENT Policy No. 7136, causing the death of the Assured.
In view of the foregoing, this policy is hereby surrendered and CANCELLED.
LOSS COMPUTATION
Amount of Insurance P1,000.00
__________
vvvvv
On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company acknowledging
receipt by his client (plaintiff herein), of the P1,000.00, but informing said company that said amount was not
the correct one. Atty. Francisco claimed —
The amount payable under the policy, I believe should be P1,500.00 under the provision of Section 2,
part 1 of the policy, based on the rule of pari materia as the death of the insured occurred under the
circumstances similar to that provided under the aforecited section.
Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner, who
rendered an opinion that the liability of the company was only P1,000.00, pursuant to Section 1, Part I of the
Provisions of the policy (Exh. F, or 3). Because of the above opinion, defendant insurance company refused to
pay more than P1,000.00. In the meantime, Atty. Vicente Francisco, in a subsequent letter to the insurance
company, asked for P3,000.00 which the Company refused, to pay. Hence, a complaint for the recovery of the
balance of P2,000.00 more was instituted with the Court of First Instance of Rizal (Pasay City, Branch VII),
praying for it further sum of P10,000.00 as attorney's fees, expenses of litigation and costs.
Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is set forth in
the complaint had already been released, plaintiff having received the full amount due as appearing in policy
and as per opinion of the Insurance Commissioner. An opposition to the motion to dismiss, was presented by
plaintiff, and other pleadings were subsequently file by the parties. On December 28, 1957, the trial court
deferred action on the motion to dismiss until termination of the trial of the case, it appearing that the ground
thereof was not indubitable. In the Answer to the complaint, defendant company practically admitted all the
allegations therein, denying only those which stated that under the policy its liability was P3,000.00.
On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent portions of which read
—
xxx xxx xxx
Since the contemporaneous and subsequent acts of the parties show that it was not their intention that
the payment of P1,000.00 to the plaintiff and the signing of the loss receipt exhibit "1" would be
considered as releasing the defendant completely from its liability on the policy in question, said
intention of the parties should prevail over the contents of the loss receipt "1" (Articles 1370 and 1371,
New Civil Code).
". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to P3,000.00 as
indemnity for the death of the insured. The insured died of drowning. Death by drowning is covered by
the policy the pertinent provisions of which reads as follows:
xxx xxx xxx
"Part I of the policy fixes specific amounts as indemnities in case of death resulting from "bodily
injury which is effected solely thru violence, external, visible and accidental means" but, Part I of
the Policy is not applicable in case of death by drowning because death by drowning is not one
resulting from "bodily injury which is affected solely thru violent, external, visible and accidental
means" as "Bodily Injury" means a cut, a bruise, or a wound and drowning is death due to
suffocation and not to any cut, bruise or wound."
xxx xxx xxx
 Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for recovery apart
from the bodily injury because death by bodily injury is covered by Part I of the policy while death by
drowning is covered by Part VI thereof. But while the policy mentions specific amounts that may be
recovered for death for bodily injury, yet, there is not specific amount mentioned in the policy for death
thru drowning although the latter is, under Part VI of the policy, a ground for recovery thereunder. Since
the defendant has bound itself to pay P1000.00 to P3,000.00 as indemnity for the death of the insured
but the policy does not positively state any definite amount that may be recovered in case of death by
drowning, there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in
favor of the insured and strictly against the insurer so as to allow greater indemnity.
xxx xxx xxx
. . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the amount of
P1,000.00 to the plaintiff so that there still remains a balance of P2,000.00 of the amount to which
plaintiff is entitled to recover under the policy Exhibit "A".
The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation. However,
since it is evident that the defendant had not acted in bad faith in refusing to pay plaintiff's claim, the
Court cannot award plaintiff's claim for attorney's fees and expenses of litigation.
IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision dated July 21,
1958 and hereby renders judgment, ordering the defendant to pay plaintiff the sum of Two Thousand
(P2,000.00) Pesos and to pay the costs.
The above judgment was appealed to the Court of Appeals on three (3) counts. Said Court, in a Resolution
dated September 29, 1959, elevated the case to this Court, stating that the genuine issue is purely legal in
nature.
All the parties agree that indemnity has to be paid. The conflict centers on how much should the indemnity be.
We believe that under the proven facts and circumstances, the findings and conclusions of the trial court, are
well taken, for they are supported by the generally accepted principles or rulings on insurance, which enunciate
that where there is an ambiguity with respect to the terms and conditions of the policy, the same will be
resolved against the one responsible thereof. It should be recalled in this connection, that generally, the
insured, has little, if any, participation in the preparation of the policy, together with the drafting of its terms
and Conditions. The interpretation of obscure stipulations in a contract should not favor the party who cause
the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance company.
. . . . And so it has been generally held that the "terms in an insurance policy, which are ambiguous,
equivocal or uncertain . . . are to be construed strictly against, the insurer, and liberally in favor of the
insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where
a forfeiture is involved," (29 Am. Jur. 181) and the reason for this rule is that the "insured usually has no
voice in the selection or arrangement of the words employed and that the language of the contract is
selected with great care and deliberation by expert and legal advisers employed by, and acting
exclusively in the interest of, the insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al.,
G.R. No. L-8151, Dec. 16, 1955.
. . . . Where two interpretations, equally fair, of languages used in an insurance policy may be made, that
which allows the greater indemnity will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82, 37
So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).
At any event, the policy under consideration, covers death or disability by accidental means, and the appellant
insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the insured.
In view of the conclusions reached, it would seem unnecessary to discuss the other issues raised in the appeal.
The judgment appealed from is hereby affirmed. Without costs.

July 31, 1968 TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET AL., plaintiffs-appellees, vs. THE CAPITAL
INSURANCE & SURETY CO., INC., defendant-appellant. [FERNANDO, J.:]
The principal legal question in this appeal from a lower court decision, ordering defendant-appellant The Capital
Insurance & Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi Co., Inc. as well as plaintiffs-appellees,
widow and children of the deceased Alfredo Monje, who, in his lifetime, was employed as a taxi driver of such
plaintiff-appellee, "the sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint
until fully paid," with P500.00 as attorney's fees and the costs of the suit, is whether or not a provision in the
insurance contract that defendant-appellant will indemnify any authorized driver provided that [he] is not
entitled to any indemnity under any other policy, it being shown that the deceased was paid his workman's
compensation from another insurance policy, should defeat such a right to recover under the insurance
contract subject of this suit. The lower court answered in the negative. Its holding cannot be successfully
impugned.
The appealed decision stated at the outset that the motion for judgment on the pleadings filed by the plaintiffs
was granted, the defendant having no objection and the issue presented being capable of resolution without
the need of presenting any evidence. Then the decision continues: "Alfredo Monje, according to the complaint,
was employed as taxi driver by the plaintiff Taurus Taxi Co., Inc. On December 6, 1962, the taxi he was driving
collided with a Transport Taxicab at the intersection of Old Sta. Mesa and V. Mapa Streets, Manila, resulting in
his death. At the time of the accident, there was subsisting and in force Commercial Vehicle Comprehensive
Policy No. 101, 737 ... issued by the defendant to the Taurus Taxi Co., Inc. The amount for which each
passenger, including the driver, is insured is P5,000.00. After the issuance of policy No. 101, 737, the defendant
issued the Taurus Taxi Co., Inc. Indorsement No. 1 which forms part of the policy ... " 1 Reference was then made
to plaintiff-appellee Felicitas Monje being the widow of the taxi driver, the other plaintiffs-appellees with the
exception of the Taurus Taxi Co., Inc., being the children of the couple. After which it was noted that plaintiff
Taurus Taxi Co., Inc. made representations "for the payment of the insurance benefit corresponding to her and
her children since it was issued in its name, benefit corresponding to her and her children, ... but despite
demands ... the defendant refused and still refuses to pay them." 2
On the above facts, the liability apparently clear, the defenses interposed by defendant insurance company
being in the opinion of the lower court without merit, the aforesaid judgment was rendered. This being a direct
appeal, to us on questions of law, the facts as found by the lower court cannot be controverted.
Defendant-appellant Capital Insurance & Surety Co. Inc. alleged as the first error of the lower court its failure to
hold "that in view of the fact that the deceased Alfredo Monje was entitled to indemnity under another
insurance policy issued by Ed. A. Keller Co., Ltd., the heirs of the said deceased are not entitled to indemnity
under the insurance policy issued by appellant for the reason that the latter policy contains a stipulation that
"the company will indemnify any authorized driver provided that such authorized driver is not entitled to
indemnity under any other policy." " 3 In the discussion of the above error, defendant-appellant stated the
following: "The facts show that at the time of his death, the deceased Alfredo Monje, as authorized driver and
employee of plaintiff Taurus Taxi Co., Inc., was entitled to indemnity under another insurance policy, then
subsisting, which was Policy No. 50PH-1605 issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi Co., Inc. As a
matter of fact, the indemnity to which the deceased Alfredo Monje was entitled under the said Policy No. 50PH-
1605 was paid by Ed. A. Keller Co., Ltd. to the heirs of Alfredo Monje on December 28, 1962, as evidenced by
the records of W.C.C. Case No. A88637 entitled "Felicitas V. Monje, et al. vs. Taurus Taxi Co., Inc.", Regional
Office No. 4, Department of Labor, Manila ... " 4
The above defense, based on a fact which was not disputed, was raised and rightfully rejected by the lower
court. From its own version, defendant-appellant would seek to escape liability on the plea that the workman's
compensation to which the deceased driver was rightfully entitled was settled by the employer through a policy
issued by another insurance firm. What was paid therefore was not indemnity but compensation.
Since what is prohibited by the insurance policy in question is that any "authorized driver of plaintiff Taurus Taxi
Co., Inc." should not be "entitled to any indemnity under any policy", it would appear indisputable that the
obligation of defendant-appellant under the policy had not in any wise been extinguished. It is too well-settled
to need the citation of authorities that what the law requires enters into and forms part of every contract. The
Workmen's Compensation Act, explicitly requires that an employee suffering any injury or death arising out of
or in the course of employment be compensated. The fulfillment of such statutory obligation cannot be the
basis for evading the clear, explicit and mandatory terms of a policy.
In the same way as was held in Benguet Consolidated, Inc. v. Social Security System 5 that sickness benefits under
the Social Security Act may be recovered simultaneously with disability benefits under the Workmen's
Compensation Act, the previous payment made of the compensation under such legislation is no obstacle by
virtue of a clause like that invoked by defendant-appellant to the payment of indemnity under the insurance
policy.
Assuming however that there is a doubt concerning the liability of defendant-appellant insurance firm,
nonetheless, it should be resolved against its pretense and in favor of the insured. It was the holding in Eagle
Star Insurance, Ltd. v. Chia Yu 6 that courts are to regard "with extreme jealousy" limitations of liability found in
insurance policies and to construe them in such a way as to preclude the insurer from non-compliance with his
obligation. In other words, to quote a noted authority on the subject, "a contract of insurance couched in
language chosen by the insurer is, if open to the construction contended for by the insured, to be construed
most strongly, or strictly, against the insurer and liberally in favor of the contention of the insured, which means
in accordance with the rule contra proferentem."7 Enough has been said therefore to dispose of the first
assigned error.
The point is made in the second alleged error that the lower court ought to have held "that by joining the heirs
of Alfredo Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc. committed a breach of policy condition and
thus forfeited whatever benefits, if any, to which it might be entitled under appellant's policy." 8 The basis for
such an allegation is one of the conditions set forth in the policy. Thus: " "5. No admission, offer, promise or
payment shall be made by or on behalf of the insured without the written consent of the Company which shall
be entitled if it so desires to take over and conduct in his name the defense or settlement of any claim or to
prosecute in his name for its own benefit any claim for indemnity or damages or otherwise and shall have full
discretion in the conduct of any proceedings and in the settlement of any claim and the Insured shall give all
such information and assistance as the Company may require ... " 9
Such a plea is even less persuasive. It is understandable then why the lower court refused to be swayed by it.
The plaintiff Taurus Taxi Co., inc. had to join the suit on behalf of the real beneficiaries, the heirs of the
deceased driver, who are the other plaintiffs as it was a party to the policy.
Moreover, as noted in the decision appealed from: "The institution of the action cannot possibly be construed
as an admission, offer, promise, or payment by the company, for it merely seeks to enforce, by court action, the
only legal remedy available to it, its rights under the contract of insurance to which it is a party. To consider,
furthermore, the commencement of an action by the insured, alone or with others, as a breach of the policy,
resulting in forfeiture of the benefits thereunder, to place in the hands of the insurer the power to nullify at will
the whole contract of insurance by the simple expedient of refusing to make payment and compelling the
insured to bring a suit to enforce the policy." 10
To so construe the policy to yield a contrary result is to put a premium on technicality. If such a defense is not
frowned upon and rejected, the time will come when the confidence on the part of the public in the good faith
of insurance firms would be minimized, if not altogether lost. Such a deplorable consequence ought to be
avoided and a construction of any stipulation that would be fraught with such a risk repudiated. What the lower
court did then cannot be characterized as error.
The third error assigned, namely, that the lower court should have considered the filing of the complaint
against defendant-appellant as unjust and unwarranted, is, in the light of the above, clearly without merit.
WHEREFORE, the appealed decision of the lower court ordering defendant-appellant "to pay the plaintiffs the
sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint until fully paid, P500.00
as attorney's fees," 11 with costs is affirmed. Costs against defendant-appellant.

G.R. No. L-54171 October 28, 1980 JEWEL VILLACORTA, assisted by her husband, GUERRERO
VILLACORTA, petitioner, vs. THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY, respondents.
[TEEHANKEE, Acting C.J.:]
The Court sets aside respondent Insurance Commission's dismissal of petitioner's complaint and holds that
where the insured's car is wrongfully taken without the insured's consent from the car service and repair shop
to whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride, in the
course of which it was totally smashed in an accident), respondent insurer is liable and must pay insured for the
total loss of the insured vehicle under the theft clause of the policy.
The undisputed facts of the case as found in the appealed decision of April 14, 1980 of respondent insurance
commission are as follows:
Complainant [petitioner] was the owner of a Colt Lancer, Model 1976, insured with respondent
company under Private Car Policy No. MBI/PC-0704 for P35,000.00 — Own Damage; P30,000.00
— Theft; and P30,000.00 — Third Party Liability, effective May 16, 1977 to May 16, 1978. On
May 9, 1978, the vehicle was brought to the Sunday Machine Works, Inc., for general check-up
and repairs. On May 11, 1978, while it was in the custody of the Sunday Machine Works, the car
was allegedly taken by six (6) persons and driven out to Montalban, Rizal. While travelling along
Mabini St., Sitio Palyasan, Barrio Burgos, going North at Montalban, Rizal, the car figured in an
accident, hitting and bumping a gravel and sand truck parked at the right side of the road going
south. As a consequence, the gravel and sand truck veered to the right side of the pavement
going south and the car veered to the right side of the pavement going north. The driver, Benito
Mabasa, and one of the passengers died and the other four sustained physical injuries. The car,
as well, suffered extensive damage. Complainant, thereafter, filed a claim for total loss with the
respondent company but claim was denied. Hence, complainant, was compelled to institute the
present action.
The comprehensive motor car insurance policy for P35,000.00 issued by respondent Empire Insurance
Company admittedly undertook to indemnify the petitioner-insured against loss or damage to the car (a) by
accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or
consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or burglary,
housebreaking or theft; and (c) by malicious act.
Respondent insurance commission, however, dismissed petitioner's complaint for recovery of the total loss of
the vehicle against private respondent, sustaining respondent insurer's contention that the accident did not fall
within the provisions of the policy either for the Own Damage or Theft coverage, invoking the policy provision
on "Authorized Driver" clause.1
Respondent commission upheld private respondent's contention on the "Authorized Driver" clause in this wise:
"It must be observed that under the above-quoted provisions, the policy limits the use of the insured vehicle to
two (2) persons only, namely: the insured himself or any person on his (insured's) permission. Under the second
category, it is to be noted that the words "any person' is qualified by the phrase
... on the insured's order or with his permission.' It is therefore clear that if the person driving is
other than the insured, he must have been duly authorized by the insured, to drive the vehicle to
make the insurance company liable for the driver's negligence. Complainant admitted that she
did not know the person who drove her vehicle at the time of the accident, much less consented
to the use of the same (par. 5 of the complaint). Her husband likewise admitted that he neither
knew this driver Benito Mabasa (Exhibit '4'). With these declarations of complainant and her
husband, we hold that the person who drove the vehicle, in the person of Benito Mabasa, is not
an authorized driver of the complainant. Apparently, this is a violation of the 'Authorized Driver'
clause of the policy.
Respondent commission likewise upheld private respondent's assertion that the car was not stolen and
therefore not covered by the Theft clause, ruling that "The element of 'taking' in Article 308 of the Revised
Penal Code means that the act of depriving another of the possession and dominion of a movable thing is
coupled ... with the intention. at the time of the 'taking', of withholding it with the character of permanency
(People vs. Galang, 7 Appt. Ct. Rep. 13). In other words, there must have been shown a felonious intent upon
the part of the taker of the car, and the intent must be an intent permanently to deprive the insured of his car,"
and that "Such was not the case in this instance. The fact that the car was taken by one of the residents of the
Sunday Machine Works, and the withholding of the same, for a joy ride should not be construed to mean
'taking' under Art. 308 of the Revised Penal Code. If at all there was a 'taking', the same was merely temporary
in nature. A temporary taking is held not a taking insured against (48 A LR 2d., page 15)."
The Court finds respondent commission's dismissal of the complaint to be contrary to the evidence and the law.
First, respondent commission's ruling that the person who drove the vehicle in the person of Benito Mabasa,
who, according to its finding, was one of the residents of the Sunday Machine Works, Inc. to whom the car had
been entrusted for general check-up and repairs was not an "authorized driver" of petitioner-complainant is too
restrictive and contrary to the established principle that insurance contracts, being contracts of adhesion where
the only participation of the other party is the signing of his signature or his "adhesion" thereto, "obviously call
for greater strictness and vigilance on the part of courts of justice with a view of protecting the weaker party
from abuse and imposition, and prevent their becoming traps for the unwary.2
The main purpose of the "authorized driver" clause, as may be seen from its text, supra, is that a person other
than the insured owner, who drives the car on the insured's order, such as his regular driver, or with his
permission, such as a friend or member of the family or the employees of a car service or repair shop must be
duly licensed drivers and have no disqualification to drive a motor vehicle.
A car owner who 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 situation is no different from the regular or family driver, who instead of carrying out the owner's order to
fetch the children from school takes out his girl friend instead for a joy ride and instead wrecks the car. There is
no question of his being an "authorized driver" which allows recovery of the loss although his trip was for a
personal or illicit purpose without the owner's authorization.
Secondly, and independently of the foregoing (since when a car is unlawfully taken, it is the theft clause, not the
"authorized driver" clause, that applies), 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, viz. "Who are liable for theft. — Theft is
committed by any person who, with intent to gain but without violence against or intimidation of persons nor
force upon things, shall take personal property of another without the latter's consent," for purposes of
recovering the loss under the policy in question.
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."
The evidence does not warrant respondent commission's findings that it was a mere "joy ride". From the very
investigator's report cited in its comment, 3 the police found from the waist of the car driver Benito Mabasa
Bartolome who smashed the car and was found dead right after the incident "one cal. 45 Colt. and one apple
type grenade," hardly the materials one would bring along on a "joy ride". Then, again, it is equally evident that
the taking proved to be quite permanent rather than temporary, for the car was totally smashed in the fatal
accident and was never returned in serviceable and useful condition to petitioner-owner.
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. Justice Ramon C. Aquino cites in his work Groizard who holds that the use
of a thing constitutes gain and Cuello Calon who calls it "hurt de uso. " 4
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.
ACCORDINGLY, the appealed decision is set aside and judgment is hereby rendered sentencing private
respondent to pay petitioner the sum of P35,000.00 with legal interest from the filing of the complaint until full
payment is made and to pay the costs of suit.

[G.R. No. L-28772. September 21, 1983.] ASSOCIATION OF BAPTISTS FOR WORLD EVANGELISM, INC., Plaintiff, v.
FIELDMEN’S INSURANCE CO., INC., Defendant-Appellant. [MELENCIO-HERRERA, J.:]

This case for "Indemnity for Damages and Attorney’s Fees" was elevated to this Tribunal by the then Court of
Appeals on a question of law.
The Stipulation of Facts submitted by the parties before the Court of First Instance of Davao, Branch I, in Case
No. 3789, reads as follows:

"COMES the parties in the above entitled case, through their respective counsels and to this Honorable Court
respectfully submit the following stipulations of facts:chanrob1es virtual 1aw library
‘1. That plaintiff is a religious corporation duly organized and registered under the laws of the Philippines, while
defendant is also a domestic corporation duly organized and existing under the laws of the Philippines;
‘2. That plaintiff, having an insurable interest in a Chevrolet Carry-all, 1955 Model, with Motor No.
032433272555 and Plate No. E-73317 covered by Registration Certificate No. 288141 Rizal, issued by the Davao
Motor Vehicles Office Agency No. 20 and owned by Reverend Clinton Bonnel, insured said vehicle with the
defendant under Fieldmen’s Insurance Co., Inc. Private Car Comprehensive Policy No. 22 Jl 1107, attached
hereto as Annex ‘A’ to ‘A-2’ against loss or damage up to the amount of P5,000.00;
‘3. That in the latter part of 1961, through plaintiff’s representative, Dr. Antonio Lim, the aforementioned
Chevrolet Carry-all was placed at the Jones Monument Mobilgas Service Station at Davao City, under the care of
said station’s operator, Rene Te so that said carry-all could be displayed as being for sale, with the
understanding that the latter or any of his station boys would receive a 2% commission should they sell said
vehicle.
‘4. That on the night of January 18, 1962, Romeo Catiben one of the boys at the aforementioned Jones
Monument Service Station and a nephew of the wife of Rene Te who is residing with them, took the
aforementioned chevrolet carry-all for a joy ride to Toril, Davao City, without the prior permission, authority or
consent of either the plaintiff or its representative Dr. Antonio Lim, or of Rene Te, and on its way back to Davao
City, said vehicle, due to some mechanical defect accidentally bumped an electric post causing actual damages
valued at P5,518.61.
‘5. That the issue before the Honorable Court is whether or not for the damage to the abovementioned
Chevrolet Carry-all to be compensable under the aforementioned Fieldmen’s Private Car Comprehensive Policy
No. 22 JL 11107, there must be a prior criminal conviction of Romeo Catiben for theft.

WHEREFORE, it is respectfully prayed that this Honorable Court render judgment on the facts and issues above
stipulated after the parties shall have submitted their respective memoranda."cralaw virtua1aw library

The Trial Court rendered judgment based on the facts stipulated and ordered defendant insurance company to
pay plaintiff association the amount of P5,000.00 as indemnity for the damage sustained by the vehicle,
P2,000.00 for attorney’s fees, and costs. Dissatisfied, the insurance company interposed an appeal to the
Appellate Court, docketed as CA-G.R. No. 33543-R, which as above stated, elevated it to this
instance.chanrobles.com:cralaw:red
We affirm. The Comprehensive Policy issued by the insurance company includes loss of or damage to the motor
vehicle by "burglary . . . or theft." It is settled that the act of Catiben in taking the vehicle for a joy ride to Toril,
Davao City, constitutes theft within the meaning of the insurance policy and that recovery for damage to the
car is not barred by the illegal use of the car by one of the station boys.

". . . 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, viz.’(W)ho are liable for theft. — Theft is committed by any person
who, with intent to gain but without violence against or intimidation of persons nor force upon things, shall
take personal property of another without the latter’s consent,’ for purposes of recovering the loss under the
policy in question."cralaw virtua1aw library

". . . 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. Justice Ramon C. Aquino cites in his work Groizard who holds that the use
of a thing constitutes gain and Cuello Calon who calls it ‘hurto de uso.’ 1

There need be no prior conviction for the crime of theft to make an insurer liable under the theft clause of the
policy. Upon the facts stipulated by the parties it is admitted that Catiben had taken the vehicle for a joy ride
and while the same was in his possession he bumped it against an electric post resulting in damages. That act is
theft within a policy of insurance. In a civil action for recovery on an automobile insurance, the question
whether a person using a certain automobile at the time of the accident stole it or not is to be determined by a
fair preponderance of evidence and not by the rule of criminal law requiring proof of guilt beyond reasonable
doubt. 2 Besides, there is no provision in the policy requiring prior criminal conviction for
theft.chanroblesvirtualawlibrary

ACCORDINGLY, finding no error in the judgment appealed from, the same is hereby affirmed.

G.R. No. 138941 October 8, 2001 AMERICAN HOME ASSURANCE COMPANY, petitioner, vs. TANTUCO
ENTERPRISES, INC., respondent. [PUNO, J.:]
Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CA-G.R. CV No.
52221 promulgated on January 14, 1999, which affirmed in toto the Decision of the Regional Trial Court, Branch
53, Lucena City in Civil Case No. 92-51 dated October 16, 1995.
Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry. It owns two oil
mills. Both are located at factory compound at Iyam, Lucena City. It appears that respondent commenced its
business operations with only one oil mill. In 1988, it started operating its second oil mill. The latter came to be
commonly referred to as the new oil mill.
The two oil mills were separately covered by fire insurance policies issued by petitioner American Home
Assurance Co., Philippine Branch.1 The first oil mill was insured for three million pesos (P3,000,000.00) under
Policy No. 306-7432324-3 for the period March 1, 1991 to 1992.2 The new oil mill was insured for six million
pesos (P6,000,000.00) under Policy No. 306-7432321-9 for the same term.3 Official receipts indicating payment
for the full amount of the premium were issued by the petitioner's agent.4
A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill.
Respondent immediately notified the petitioner of the incident. The latter then sent its appraisers who
inspected the burned premises and the properties destroyed. Thereafter, in a letter dated October 15, 1991,
petitioner rejected respondent's claim for the insurance proceeds on the ground that no policy was issued by it
covering the burned oil mill. It stated that the description of the insured establishment referred to another
building thus: "Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage
to your oil mill under Building No. 5, whilst the affected oil mill was under Building No. 14. "5
A complaint for specific performance and damages was consequently instituted by the respondent with the
RTC, Branch 53 of Lucena City. On October 16, 1995, after trial, the lower court rendered a Decision finding the
petitioner liable on the insurance policy thus:
"WHEREFORE, judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff:
(a) P4,406,536.40 representing damages for loss by fire of its insured property with interest at the legal
rate;
(b) P80,000.00 for litigation expenses;
(c) P300,000.00 for and as attorney's fees; and
(d) Pay the costs.
SO ORDERED."6
Petitioner assailed this judgment before the Court of Appeals. The appellate court upheld the same in a
Decision promulgated on January 14, 1999, the pertinent portion of which states:
"WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit and the trial court's Decision
dated October 16, 1995 is hereby AFFIRMED in toto.
SO ORDERED."7
Petitioner moved for reconsideration. The motion, however, was denied for lack of merit in a Resolution
promulgated on June 10, 1999.
Hence, the present course of action, where petitioner ascribes to the appellate court the following errors:
"(1) The Court of Appeals erred in its conclusion that the issue of non-payment of the premium was
beyond its jurisdiction because it was raised for the first time on appeal."8
"(2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of
the policy."9
"(3) With due respect, the conclusion of the Court of Appeals giving no regard to the parole evidence
rule and the principle of estoppel is erroneous."10
The petition is devoid of merit.
The primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil
mill is not covered by any insurance policy. According to it, the oil mill insured is specifically described in the
policy by its boundaries in the following manner:
"Front: by a driveway thence at 18 meters distance by Bldg. No. 2.
Right: by an open space thence by Bldg. No. 4.
Left: Adjoining thence an imperfect wall by Bldg. No. 4.
Rear: by an open space thence at 8 meters distance."
However, it argues that this specific boundary description clearly pertains, not to the burned oil mill, but to the
other mill. In other words, the oil mill gutted by fire was not the one described by the specific boundaries in the
contested policy.
What exacerbates respondent's predicament, petitioner posits, is that it did not have the supposed wrong
description or mistake corrected. Despite the fact that the policy in question was issued way back in 1988, or
about three years before the fire, and despite the "Important Notice" in the policy that "Please read and
examine the policy and if incorrect, return it immediately for alteration," respondent apparently did not call
petitioner's attention with respect to the misdescription.
By way of conclusion, petitioner argues that respondent is "barred by the parole evidence rule from presenting
evidence (other than the policy in question) of its self-serving intention (sic) that it intended really to insure the
burned oil mill," just as it is "barred by estoppel from claiming that the description of the insured oil mill in the
policy was wrong, because it retained the policy without having the same corrected before the fire by an
endorsement in accordance with its Condition No. 28."
These contentions can not pass judicial muster.
In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in
giving effect to the insurance.11 In view of the custom of insurance agents to examine buildings before writing
policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely,
the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly
intended to insure, however inaccurate the description may be.12
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the
parties manifestly intended to insure was the new oil mill. This is obvious from the categorical statement
embodied in the policy, extending its protection:
"On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of
copra, copra cake and copra mills whilst contained in the new oil mill building, situate (sic) at UNNO.
ALONG NATIONAL HIGH WAY, BO. IYAM, LUCENA CITY UNBLOCKED.''13 (emphasis supplied.)
If the parties really intended to protect the first oil mill, then there is no need to specify it as new.
Indeed, it would be absurd to assume that respondent would protect its first oil mill for different amounts and
leave uncovered its second one. As mentioned earlier, the first oil mill is already covered under Policy No. 306-
7432324-4 issued by the petitioner. It is unthinkable for respondent to obtain the other policy from the very
same company. The latter ought to know that a second agreement over that same realty results in its over
insurance.
The imperfection in the description of the insured oil mill's boundaries can be attributed to a misunderstanding
between the petitioner's general agent, Mr. Alfredo Borja, and its policy issuing clerk, who made the error of
copying the boundaries of the first oil mill when typing the policy to be issued for the new one. As testified to by
Mr. Borja:
"Atty. G. Camaligan:
Q: What did you do when you received the report?
A: I told them as will be shown by the map the intention really of Mr. Edison Tantuco is to cover the
new oil mill that is why when I presented the existing policy of the old policy, the policy issuing clerk just
merely (sic) copied the wording from the old policy and what she typed is that the description of the
boundaries from the old policy was copied but she inserted covering the new oil mill and to me at that
time the important thing is that it covered the new oil mill because it is just within one compound and
there are only two oil mill[s] and so just enough, I had the policy prepared. In fact, two policies were
prepared having the same date one for the old one and the other for the new oil mill and exactly the
same policy period, sir."14(emphasis supplied)
It is thus clear that the source of the discrepancy happened during the preparation of the written contract.
These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole
evidence rule. Under the Rules of Court, a party may present evidence to modify, explain or add to the terms of
the written agreement if he puts in issue in his pleading, among others, its failure to express the true intent and
agreement of the parties thereto.15 Here, the contractual intention of the parties cannot be understood from a
mere reading of the instrument. Thus, while the contract explicitly stipulated that it was for the insurance of the
new oil mill, the boundary description written on the policy concededly pertains to the first oil mill. This
irreconcilable difference can only be clarified by admitting evidence aliunde, which will explain the imperfection
and clarify the intent of the parties.
Anent petitioner's argument that the respondent is barred by estoppel from claiming that the description of the
insured oil mill in the policy was wrong, we find that the same proceeds from a wrong assumption. Evidence on
record reveals that respondent's operating manager, Mr. Edison Tantuco, notified Mr. Borja (the petitioner's
agent with whom respondent negotiated for the contract) about the inaccurate description in the policy.
However, Mr. Borja assured Mr. Tantuco that the use of the adjective new will distinguish the insured property.
The assurance convinced respondent, despite the impreciseness in the specification of the boundaries, the
insurance will cover the new oil mill. This can be seen from the testimony on cross of Mr. Tantuco:
"ATTY. SALONGA:
 Q: You mentioned, sir, that at least in so far as Exhibit A is concern you have read what the policy
contents. (sic)
Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the boundaries of
the property insured by the insurance policy Exhibit A, will you tell us as the manager of the company
whether the boundaries stated in Exhibit A-2 are the boundaries of the old (sic) mill that was burned or
not.
A: It was not, I called up Mr. Borja regarding this matter and he told me that what is important is the
word new oil mill. Mr. Borja said, as a matter of fact, you can never insured (sic) one property with two
(2) policies, you will only do that if you will make to increase the amount and it is by indorsement not by
another policy, sir.,16
We again stress that the object of the court in construing a contract is to ascertain the intent of the parties to
the contract and to enforce the agreement which the parties have entered into. In determining what the
parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the
parts of the contract, keeping in mind always, however, the prime rule that in the event of doubt, this doubt is
to be resolved against the insurer. In determining the intent of the parties to the contract, the courts will
consider the purpose and object of the contract.17
In a further attempt to avoid liability, petitioner claims that respondent forfeited the renewal policy for its
failure to pay the full amount of the premium and breach of the Fire Extinguishing Appliances Warranty.
The amount of the premium stated on the face of the policy was P89,770.20. From the admission of
respondent's own witness, Mr. Borja, which the petitioner cited, the former only paid it P75,147.00, leaving a
difference of P14,623.20. The deficiency, petitioner argues, suffices to invalidate the policy, in accordance with
Section 77 of the Insurance Code.18
The Court of Appeals refused to consider this contention of the petitioner. It held that this issue was raised for
the first time on appeal, hence, beyond its jurisdiction to resolve, pursuant to Rule 46, Section 18 of the Rules of
Court.19
Petitioner, however, contests this finding of the appellate court. It insists that the issue was raised in paragraph
24 of its Answer, viz.:
"24. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal
premium should be paid on or before renewal date."
Petitioner adds that the issue was the subject of the cross-examination of Mr. Borja, who acknowledged that
the paid amount was lacking by P14,623.20 by reason of a discount or rebate, which rebate under Sec. 361 of
the Insurance Code is illegal.
The argument fails to impress. It is true that the asseverations petitioner made in paragraph 24 of its Answer
ostensibly spoke of the policy's condition for payment of the renewal premium on time and respondent's non-
compliance with it. Yet, it did not contain any specific and definite allegation that respondent did not pay the
premium, or that it did not pay the full amount, or that it did not pay the amount on time.
Likewise, when the issues to be resolved in the trial court were formulated at the pre-trial proceedings, the
question of the supposed inadequate payment was never raised. Most significant to point, petitioner fatally
neglected to present, during the whole course of the trial, any witness to testify that respondent indeed failed
to pay the full amount of the premium. The thrust of the cross-examination of Mr. Borja, on the other hand,
was not for the purpose of proving this fact. Though it briefly touched on the alleged deficiency, such was made
in the course of discussing a discount or rebate, which the agent apparently gave the respondent. Certainly, the
whole tenor of Mr. Borja's testimony, both during direct and cross examinations, implicitly assumed a valid and
subsisting insurance policy. It must be remembered that he was called to the stand basically to demonstrate
that an existing policy issued by the petitioner covers the burned building.
Finally, petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances
Warranty. The said warranty provides:
"WARRANTED that during the currency of this Policy, Fire Extinguishing Appliances as mentioned below shall be
maintained in efficient working order on the premises to which insurance applies:
 - PORTABLE EXTINGUISHERS
- INTERNAL HYDRANTS
- EXTERNAL HYDRANTS
- FIRE PUMP
- 24-HOUR SECURITY SERVICES
BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any
loss which may occur."20
Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein.
The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as
warranted. This fact was admitted by the oil mill's expeller operator, Gerardo Zarsuela.
Again, the argument lacks merit. We agree with the appellate court's conclusion that the aforementioned
warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein.
Additionally, we find that neither did it require that the appliances are restricted to those mentioned in the
warranty. In other words, what the warranty mandates is that respondent should maintain in efficient working
condition within the premises of the insured property, fire fighting equipments such as, but not limited to,
those identified in the list, which will serve as the oil mill's first line of defense in case any part of it bursts into
flame.
To be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be
found the following devices: numerous portable fire extinguishers, two fire hoses,21 fire hydrant,22 and an
emergency fire engine.23 All of these equipments were in efficient working order when the fire occurred.
It ought to be remembered that not only are warranties strictly construed against the insurer, but they should,
likewise, by themselves be reasonably interpreted.24 That reasonableness is to be ascertained in light of the
factual conditions prevailing in each case. Here, we find that there is no more need for an internal hydrant
considering that inside the burned building were: (1) numerous portable fire extinguishers, (2) an emergency
fire engine, and (3) a fire hose which has a connection to one of the external hydrants.
IN VIEW WHEREOF, finding no reversible error in the impugned Decision, the instant petition is hereby
DISMISSED.
G.R. No. L-21380 May 20, 1966 MISAMIS LUMBER CORPORATION, plaintiff and appellee, vs. CAPITAL
INSURANCE and SURETY CO., INC., defendant and appellant. [REYES, J.B.L., J.:]
Plaintiff-appellee Misamis Lumber Corporation, under its former name, Lanao Timber Mills, Inc., insured its Ford
Falcon motor car for the amount of P14,000 with the defendant-appellant, Capital Insurance & Surety
Company, Inc. The pertinent provisions of the policy provided, as follows:
1. The Company will subject to the Limits of Liability indemnify the Insured against loss or damage to the
Motor Vehicle and its accessories and spare parts whilst thereon.
2. (a) by accidental collision or overturning or collision or overturning consequent when mechanical
breakdown or consequent upon wear and tear.
xxx xxx xxx
3. At its option, the Company may pay in cash the amount of the loss or damage or may repair, reinstate
or replace the Motor Vehicle or any part thereof or its accessories or spare parts. The liability of the
Company shall not exceed the value of the parts lost or damaged and the reasonable cost of fitting such
parts or the value of the Motor Vehicle at the time of the loss or damage whichever is the loss. The
Insured's estimate of value stated in the schedule shall be the maximum amount payable by the
Company in respect of any claim for loss or damage.1äwphï1.ñët
xxx xxx xxx
4. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for which the
Company may be liable under this policy provided that:
(a) the estimated cost of such repair does not exceed the authorized Repair Limit.
(b) a detailed estimate of the cost is forwarded to the Company without delay.
and providing also that the authorized repair limit is P150.00.
At around eleven o'clock in the evening of 25 November 1961, and while the above-mentioned insurance policy
was in force, the insured car, while traveling along in Aurora Boulevard in front of the Pepsi-Cola plant in
Quezon City, passed over a water hole which the driver did not see because an oncoming car did not dim its
light. The crankcase and flywheel housing of the car broke when it hit a hollow block lying alongside the water
hole. At the instance of the plaintiff-appellee, the car was towed and repaired by Morosi Motors at its shop at
1906 Taft Avenue Extension at a total cost of P302.27.
On 29 November 1961, when the repairs on the car had already been made, the plaintiff-appellee made a
report of the accident to the defendant-appellant Capital Insurance & Surety Company.
Since the defendant-appellant refused to pay for the total cost of to wage and repairs, suit was filed in the
municipal court originally.
The case before Us is now a direct appeal on a point of law from the judgment of the Court of First Instance of
Manila finding for the plaintiff and against the defendant-insurer in its Civil Case No. 51757. Per our resolution
on 13 February 1964, it was resolved to proceed with the case without the appellee's brief, which was filed late.
The defendant-appellant admits liability in the amount of P150, but not for any excess thereof.
The lower court did not exonerate the said appellant for the excess because, according to it, the company's
absolution would render the insurance contract one-sided and that the said insurer had not shown that the cost
of repairs in the sum of P302.27 is unreasonable, excessive or padded, nor had it shown that it could have
undertaken the repairs itself at less expense.
The above reasoning is beside the point, because the insurance policy stipulated in paragraph 4 that if the
insured authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to P150.00. The
literal meaning of this stipulation must control, it being the actual contract, expressly and plainly provided for in
the policy (Art. 1370, Civil Code; Young vs. Midland Textile Ins. Co., 30 Phil. 617; Ty vs. First Nat. Surety & Assur.
Co., Inc., L-16138-45, 29 April 1961).
The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of the policy is clear and
specific and leaves no room for interpretation. The interpretation given is even unjustified because it opposes
what was specifically stipulated. Thus, it will be observed that the policy drew out not only the limits of the
insurer's liability but also the mechanics that the insured had to follow to be entitled to full indemnity of repairs.
The option to undertake the repairs is accorded to the insurance company per paragraph 2. The said company
was deprived of the option because the insured took it upon itself to have the repairs made, and only notified
the insurer when the repairs were done. As a consequence, paragraph 4, which limits the company's liability to
P150.00, applies.
The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in itself does not
justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law
between the contracting parties.
Finally, to require the insurer to prove that the cost of the repairs ordered by the insured is unreasonable, as
the appealed decision does, when the insurer was not given an opportunity to inspect and assess the damage
before the repairs were made, strikes Us as contrary to elementary justice and equity.
For the foregoing reasons, the appealed decision is hereby modified by ordering the defendant-appellant
Capital Insurance & Surety Company, Inc. to pay not more than P150.00 to the plaintiff-appellee Misamis
Lumber Corporation. Each party shall bear its own costs and attorney's fees.

G.R. No. L-27932 October 30, 1972 UNION MANUFACTURING CO., INC. and the REPUBLIC BANK, plaintiffs,
REPUBLIC BANK, plaintiff-appellant, vs. PHILIPPINE GUARANTY CO., INC., defendant-appellee. [FERNANDO, J.:]

In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the lower
court and now appellee, was able to avoid liability upon proof that there was a violation of a warranty. There
was no denial thereof from the insured, Union Manufacturing Co., Inc. With such a legally crippling blow, the
effort of the Republic Bank, the main plaintiff and now the sole appellant, to recover on such policy as
mortgagee, by virtue of the cover note in the insurance policy providing that it is entitled to the payment of loss
or damages as its interest may appear, was in vain. The defect being legally incurable, its appeal is likewise
futile. We affirm.
As noted in the decision, the following facts are not disputed: "(1) That on January 12, 1962, the Union
Manufacturing Co., Inc. obtained certain loans, overdrafts and other credit accommodations from the Republic
Bank in the total sum of P415,000.00 with interest at 9% per annum from said date and to secure the payment
thereof, said Union Manufacturing Co., Inc. executed a real and chattel mortgages on certain properties, which
are more particularly described and listed at the back of the mortgage contract ...; (2) That as additional
condition of the mortgage contract, the Union Manufacturing Co., Inc. undertook to secure insurance coverage
over the mortgaged properties for the same amount of P415,000.00 distributed as follows: (a) Buildings,
P30,000.00; (b) Machineries, P300,000.00; and (c) Merchandise Inventory, P85,000.00, giving a total of
P415,000.00; (3) That as Union Manufacturing Co., Inc. failed to secure insurance coverage on the mortgaged
properties since January 12, 1962, despite the fact that Cua Tok, its general manager, was reminded of said
requirement, the Republic Bank procured from the defendant, Philippine Guaranty Co., Inc. an insurance
coverage on loss against fire for P500,000.00 over the properties of the Union Manufacturing Co., Inc., as
described in defendant's 'Cover Note' dated September 25, 1962, with the annotation that loss or damage, if
any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the
printed conditions of said defendant's Fire Insurance Policy Form; (4) That on September 27, 1962, Fire
Insurance Policy No. 43170 ... was issued for the sum of P500,000.00 in favor of the assured, Union
Manufacturing Co., Inc., for which the corresponding premium in the sum of P8,328.12, which was reduced to
P6,688.12, was paid by the Republic Bank to the defendant, Philippine Guaranty Co., Inc. ...; (5) That upon the
expiration of said fire policy on September 25, 1963, the same was renewed by the Republic Bank upon
payment of the corresponding premium in the same amount of P6,663.52 on September 26, 1963; (6) That in
the corresponding voucher ..., it appears that although said renewal premium was paid by the Republic Bank,
such payment was for the account of Union Manufacturing Co., Inc. and that the cash voucher for the payment
of the first premium was paid also by the Republic Bank but for the account Union Manufacturing Co., Inc.; (7)
That sometime on September 6, 1964, a fire occurred in the premises of the Union Manufacturing Co., Inc.; (8)
That on October 6, 1964, the Union Manufacturing Co., Inc. filed its fire claim with the defendant Philippine
Guaranty Co., Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant in its
letter dated November 27, 1964 ..., on the following grounds: 'a. Policy Condition No. 3 and/or the 'Other
Insurance Clause' of the policy violated because you did not give notice to us the other insurance which you had
taken from New India for P80,000.00, Sincere Insurance for P25,000.00 and Manila Insurance for P200,000.00
with the result that these insurances, of which we became aware of only after the fire, were not endorsed on
our policy; and (b) Policy Condition No. 11 was not complied with because you have failed to give to our
representatives the required documents and other proofs with respect to your claim and matters touching on
our liability, if any, and the amount of such liability'; (9) That as of September, 1962, when the defendant
Philippine Guaranty Co., issued Fire Insurance Policy No. 43170 ... in the sum of P500,000.00 to cover the
properties of the Union Manufacturing Co., Inc., the same properties were already covered by Fire Policy No.
1533 of the Sincere Insurance Company for P25,000.00 for the period from October 7, 1961 to October 7,
1962 ...; and by insurance policies Nos. F-2314 ... and F-2590 ... of the Oceanic Insurance Agency for the total
sum of P300,000.00 and for periods respectively, from January 27, 1962 to January 27, 1963, and from June 1,
1962 to June 1, 1963; and (10) That when said defendant's Fire Insurance Policy No. 43170 was already in full
force and effect, the Union Manufacturing Co., Inc. without the consent of the defendant, Philippine Guaranty
Co., Inc., obtained other insurance policies totalling P305,000.00 over the same properties prior to the fire, to
wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd., for P80,000.00 for the period from May 27, 1964 to
May 27, 1965 ...; (2) Fire Policy No. 3702 of the Sincere Insurance Company for P25,000.00 for the period from
October 7, 1963 to October 7, 1964 ...; and (3) Fire Policy No. 6161 of Manila Insurance Co. for P200,000.00 for
the period from May 15, 1964 to May 15, 1965 ... ."1 There is in the cover note2 and in the fire insurance
policy3 the following warranty: "[Co- Insurance Declared]: Nil."4
Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may appear subject
to the terms and conditions, clauses and warranties" of the policy was expressed in the appealed decision thus:
"However, inasmuch as the Union Manufacturing Co., Inc. has violated the condition of the policy to the effect
that it did not reveal the existence of other insurance policies over the same properties, as required by the
warranty appearing on the face of the policy issued by the defendant and that on the other hand said Union
Manufacturing Co., Inc. represented that there were no other insurance policies at the time of the issuance of
said defendant's policy, and it appearing furthermore that while the policy of the defendant was in full force
and effect the Union Manufacturing Co., Inc. secured other fire insurance policies without the written consent
of the defendant endorsed on the policy, the conclusion is inevitable that both the Republic Bank and Union
Manufacturing Co., Inc. cannot recover from the same policy of the defendant because the same is null and
void."5 The tone of confidence apparent in the above excerpts from the lower court decision is understandable.
The conclusion reached by the lower court finds support in authoritative precedents. It is far from easy,
therefore, for appellant Republic Bank to impute to such a decision a failure to abide by the law. Hence, as
noted at the outset, the appeal cannot prosper. An affirmance is indicated.
It is to Santa Ana v. Commercial Union Assurance Co.,6 a 1930 decision, that one turns to for the first explicit
formulation as to the controlling principle. As was made clear in the opinion of this Court, penned by Justice
Villa-Real: "Without deciding whether notice of other insurance upon the same property must be given in
writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether
oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in
the fire insurance policy, the policy is null and void."7 The next year, in Ang Giok Chip v. Springfield Fire & Marine
Ins. Co.,8 the conformity of the insured to the terms of the policy, implied from the failure to express any
disagreement with what is provided for, was stressed in these words of the ponente, Justice Malcolm: "It is
admitted that the policy before us was accepted by the plaintiff. The receipt of this policy by the insured
without objection binds both the acceptor and the insured to the terms thereof. The insured may not
thereafter be heard to say that he did not read the policy or know its terms, since it is his duty to read his policy
and it will be assumed that he did so." 9 As far back as 1915, in Young v. Midland Textile Insurance
Company, 10 it was categorically set forth that as a condition precedent to the right of recovery, there must be
compliance on the part of the insured with the terms of the policy. As stated in the opinion of the Court
through Justice Johnson: "If the insured has violated or failed to perform the conditions of the contract, and
such a violation or want of performance has not been waived by the insurer, then the insured cannot recover.
Courts are not permitted to make contracts for the parties. The function and duty of the courts consist simply in
enforcing and carrying out the contracts actually made. While it is true, as a general rule, that contracts of
insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to
be construed according to the sense and meaning of the terms which the parties themselves have used. If such
terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular
sense." 11 More specifically, there was a reiteration of this Santa Ana ruling in a decision by the then Justice,
later Chief Justice, Bengzon, in General Insurance & Surety Corp. v. Ng Hua. 12 Thus: "The annotation then, must
be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles
the insurer to rescind. (Sec. 69, Insurance Act) Such misrepresentation is fatal in the light of our views in Santa
Ana v. Commercial Union Assurance Company, Ltd. ... . The materiality of non-disclosure of other insurance
policies is not open to doubt." 13As a matter of fact, in a 1966 decision, Misamis Lumber Corp. v. Capital Ins. &
Surety Co., Inc., 14 Justice J.B.L. Reyes, for this Court, made manifest anew its adherence to such a principle in
the face of an assertion that thereby a highly unfavorable provision for the insured would be accorded
recognition. This is the language used: "The insurance contract may be rather onerous ('one sided', as the lower
court put it), but that in itself does not justify the abrogation of its express terms, terms which the insured
accepted or adhered to and which is the law between the contracting parties." 15
There is no escaping the conclusion then that the lower court could not have disposed of this case in a way
other than it did. Had it acted otherwise, it clearly would have disregarded pronouncements of this Court, the
compelling force of which cannot be denied. There is, to repeat, no justification for a reversal.
WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No costs.
April 29, 1961 DIOSDADO C. TY vs.
G.R. No. L-16138 - FIRST NATIONAL SURETY & ASSURANCE CO., INC.,
G.R. No. L-16139 - ASSOCIATED INSURANCE & SURETY CO., INC.,
G.R. No. L-16140 - UNITED INSURANCE CO., INC.,
G.R. No. L-16141 - PHILIPPINE SURETY & INSURANCE CO., INC.,
G.R. No. L-16142 - RELIANCE SURETY & INSURANCE CO., INC.,
G.R. No. L-16143 - FAR EASTERN SURETY & INSURANCE CO., INC.,
G.R. No. L-16144-45 - CAPITAL INSURANCE & SURETY CO., INC.,
[LABRADOR, J.:]
Appeal from a judgment of the Court of First Instance of Manila, Hon. Gregorio S. Narvasa, presiding, dismissing
the actions filed in the above-entitled cases.
The facts found by the trial court, which are not disputed in this appeal, are as follows:
At different times within a period of two months prior to December 24, 1953, the plaintiff herein
Diosdado C. Ty, employed as operator mechanic foreman in the Broadway Cotton Factory, in Grace
Park, Caloocan, Rizal, at a monthly salary of P185.00, insured himself in 18 local insurance companies,
among which being the eight above named defendants, which issued to him personal accident policies,
upon payment of the premium of P8.12 for each policy. Plaintiff's beneficiary was his employer,
Broadway Cotton Factory, which paid the insurance premiums.
On December 24, 1953, a fire broke out which totally destroyed the Broadway Cotton Factory. Fighting
his way out of the factory, plaintiff was injured on the left hand by a heavy object. He was brought to the
Manila Central University hospital, and after receiving first aid there, he went to the National Orthopedic
Hospital for treatment of his injuries which were as follows:
1. Fracture, simple, proximal phalanx index finger, left;
2. Fracture, compound, comminuted, proximal phalanx, middle finger, left and 2nd phalanx, simple;
3. Fracture, compound, comminute phalanx, 4th finger, left;
4. Fracture, simple, middle phalanx, middle finger, left;
5. Lacerated wound, sutured, volar aspect, small finger, left;
6. Fracture, simple, chip, head, 1st phalanx, 5th digit, left. He underwent medical treatment in the
Orthopedic Hospital from December 26, 1953 to February 8, 1954. The above-described physical injuries
have caused temporary total disability of plaintiff's left hand. Plaintiff filed the corresponding notice of
accident and notice of claim with all of the abovenamed defendants to recover indemnity under Part II
of the policy, which is similarly worded in all of the policies, and which reads pertinently as follows:
INDEMNITY FOR TOTAL OR PARTIAL DISABILITY
If the Insured sustains any Bodily Injury which is effected solely through violent, external, visible and
accidental means, and which shall not prove fatal but shall result, independently of all other causes and
within sixty (60) days from the occurrence thereof, in Total or Partial Disability of the Insured, the
Company shall pay, subject to the exceptions as provided for hereinafter, the amount set opposite such
injury:
PARTIAL DISABILITY
LOSS OF:
xxx xxx xxx
Either hand ............................................................................ P650.00
xxx xxx xxx
... The loss of a hand shall mean the loss by amputation through the bones of the wrist....
Defendants rejected plaintiff's claim for indemnity for the reason that there being no severance of
amputation of the left hand, the disability suffered by him was not covered by his policy. Hence, plaintiff
sued the defendants in the Municipal Court of this City, and from the decision of said Court dismissing
 his complaints, plaintiff appealed to this Court. (Decision of the Court of First Instance of Manila, pp.
223-226, Records).
In view of its finding, the court absolved the defendants from the complaints. Hence this appeal.
The main contention of appellant in these cases is that in order that he may recover on the insurance policies
issued him for the loss of his left hand, it is not necessary that there should be an amputation thereof, but that
it is sufficient if the injuries prevent him from performing his work or labor necessary in the pursuance of his
occupation or business. Authorities are cited to the effect that "total disability" in relation to one's occupation
means that the condition of the insurance is such that common prudence requires him to desist from
transacting his business or renders him incapable of working. (46 C.J.S., 970). It is also argued that obscure
words or stipulations should be interpreted against the person who caused the obscurity, and the ones which
caused the obscurity in the cases at bar are the defendant insurance companies.
While we sympathize with the plaintiff or his employer, for whose benefit the policies were issued, we can not
go beyond the clear and express conditions of the insurance policies, all of which define partial disability as loss
of either hand by amputation through the bones of the wrist." There was no such amputation in the case at bar.
All that was found by the trial court, which is not disputed on appeal, was that the physical injuries "caused
temporary total disability of plaintiff's left hand." Note that the disability of plaintiff's hand was merely
temporary, having been caused by fracture of the index, the middle and the fourth fingers of the left hand.
We might add that the agreement contained in the insurance policies is the law between the parties. As the
terms of the policies are clear, express and specific that only amputation of the left hand should be considered
as a loss thereof, an interpretation that would include the mere fracture or other temporary disability not
covered by the policies would certainly be unwarranted.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the plaintiff-appellant.

G.R. No. L-15862 July 31, 1961 PAULO ANG and SALLY C. ANG, plaintiffs-appellees, vs. FULTON FIRE INSURANCE
CO., ET AL., defendants. FULTON FIRE INSURANCE CO., defendant-appellant. [LABRADOR, J.:]
The present action was instituted by the spouses Paulo Ang and Sally C. Ang against the Fulton Fire Insurance
Company and the Paramount Surety and Insurance Company, Inc. to recover from them the face value of a fire
insurance policy issued in plaintiffs' favor covering a store owned and operated by them in Laoag, Ilocos Norte.
From a judgment of the court ordering the defendant Fulton Fire Insurance Co. to pay the plaintiffs the sum of
P10,000.00, with interest, and an additional sum of P2,000.00 as attorney's fees, and costs, the defendants
have appealed directly to this Court.
On September 9, 1953, defendant Fulton Fire Insurance Company issued a policy No. F-4730340, in favor of P.
& S Department Store (Sally C. Ang) over stocks of general merchandise, consisting principally of dry goods,
contained in a building occupied by the plaintiffs at Laoag, Ilocos Norte. The premium is P500.00 annually. The
insurance was issued for one year, but the same was renewed for another year on September 31, 1954. On
December 17, 1954, the store containing the goods insured was destroyed by fire. On December 30, following,
plaintiffs executed the first claim form. The claim together with all the necessary papers relating thereto, were
forwarded to he Manila Adjustment Company, the defendants' adjusters and received by the latter on Jane 8,
1955. On January 12, 1955, the Manila Adjustment Company accepted receipt of the claim and requested the
submission of the books of accounts of the insured for the year 1953-1954 and a clearance from the Philippine
Constabulary and the police. On April 6, 1956, the Fulton Fire Insurance Company wrote the plaintiffs that their
claim was denied. This denial of the claim was received by the plaintiffs on April 19, 1956. On January 13, 1955,
plaintiff Paulo Ang and ten others were charged for arson in Criminal Case No. 1429 in the Justice of the Peace
Court of Laoag, Ilocos Norte. The case was remanded for trial to the Court of First Instance of Ilocos Norte and
there docketed as Criminal Case No. 2017. The said court in a decision dated December 9, 1957, acquitted
plaintiff Paulo Ang of the crime of arson.
The present action was instituted on May 5, 1958. The action was originally instituted against both the Fulton
Fire Insurance Company and the Paramount Surety and Insurance Company, Inc., but on June 16, 1958, upon
motion of the Paramount Surety, the latter was dropped from the complaint.
On May 26, 1958, the defendant Fulton Fire Insurance Company filed an answer to the complaint, admitting the
existence of the contract of insurance, its renewal and the loss by fire of the department store and the
merchandise contained therein, but denying that the loss by the fire was accidental, alleging that it was
occasioned by the willful act of the plaintiff Paulo Ang himself. It claims that under paragraph 13 of the policy, if
the loss or damage is occasioned by the willful act of the insured, or if the claim is made and rejected but no
action is commenced within 12 months after such rejection, all benefits under the policy would be forfeited, and
that since the claim of the plaintiffs was denied and plaintiffs received notice of denial on April 18, 1956, and
they brought the action only on May 5, 1958, all the benefits under the policy have been forfeited.
On February 12, 1959, plaintiffs filed a reply to the above answer of the Fulton Fire Insurance, alleging that on
May 11, 1956, plaintiffs had instituted Civil Case No. 2949 in the Court of First Instance of Manila, to assert the
claim; that this case was dismissed without prejudice on September 3, 1957 and that deducting the period
within which said action was pending, the present action was still within the 12 month period from April 12,
1956. The court below held that the bringing of the action in the Court of First Instance of Manila on May 11,
1956, tolled the running of the 12 month period within which the action must be filed. Said the court on this
point:
True, indeed, plaintiffs committed a procedural mistake in first suing the agent instead of its principal,
the herein defendant, as correctly pointed out by counsel for the defendant, for 'Un agente residente de
una compania de seguros extranjera que comercia en las Islas Filipinos no es responsable como
mandante ni como mandatario, en virtud de contratas de seguro expendidos a nombre de la compania',
(Macias & Co. vs. Warner, Barnes & Co., 43 Phil. 161). But the mistake being merely procedural, and the
defendant not having been misled by the error, 'There is nothing sacred about process or pleadings,
their forms or contents. Their sole purpose is to facilitate the application of justice to the rival claims of
contending parties. They were created not to hinder and delay, but to facilitate and promote the
administration of justice (Alonso vs. Villamor, 16 Phil 578.)
The complaint, Exh. 'C', was dismissed by the Court without prejudice (Exh. 'H-1') on September 3, 1957,
and motion for reconsideration dated September 21, 1957. The instant complaint was filed on May 8,
1958. The Rules of Court (See 132 thereof) is applicable in the computation of time. Now, as correctly
pointed out by the plaintiffs' counsel, by simple mathematical computation, the present action was filed
leas thin nine (9) months after the notice of rejection received by plaintiffs on April 19, 1956, because
the filing of the original complaint stopped the running of the period." (Decision, pp. 42-43, R.O.A.)
In view of the reasons thus above quoted, the court rendered decision in favor of the plaintiffs.
On the appeal before this Court, defendant-appellant argues that the court below erred in holding that the
filing of the previous suit tolled or suspended the running of the prescriptive period.
The clause subject of the issue is paragraph 13 of the policy, which reads as follows:
13. If the claim be in any respect fraudulent, or if any false declaration is made or used in support
thereof, or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to
obtain any benefit under this Policy, or, if the loss or damage be occasioned by the willful act or with
connivance of the Insured, or, if the claim be made and rejected and an action or suit be not
commenced within twelve months after such rejection or (in case of arbitration place in pursuance of
the 18th condition of this Policy) within twelve months after the arbitrator or arbitrators or umpire shall
have made their award, all benefits under this Policy shall be forfeited. (Emphasis supplied). (Decision. p.
10, R.O.A.).
The appellant cites in support of its contention the cases of E. Macias & Co. vs. Warner, Barnes & Co., Ltd., 43
Phil 155; E. Macias & Co. vs. China Fire Insurance Co., 46 Phil. 345 and Castillo etc. vs. Metropolitan Insurance
Co., 47 O.G. (September, 1951).
In answer to appellant's contention, counsel for appellees contend that the action of the plaintiffs against the
defendant had not yet prescribed at the time of the bringing of the action, because the period of prescription
was interrupted by the filing of the first action against the Paramount Surety & Insurance Co., in accordance
with Article 1155 of the Civil Code. Counsel further argues that the basis of prescription of an action is the
abandonment by a person of his right of action or claim, so that any act of said person tending to show his
intention not to abandon his right of action or claim, as the filing of the previous action in the case at bar,
interrupts the period of prescription. Furthermore, counsel argues, the dismissal of the previous action is
without prejudice, which means that plaintiffs have the right to file another complaint against the principal.
The basic error committed by the trial court is its view that the filing of the action against the agent of the
defendant company was "merely a procedural mistake of no significance or consequence, which may be
overlooked." The condition contained in the insurance policy that claims must be presented within one year
after rejection is not merely a procedural requirement. The condition is an important matter, essential to a
prompt settlement of claims against insurance companies, as it demands that insurance suits be brought by the
insured while the evidence as to the origin and cause of destruction have not yet disappeared. It is in the nature
of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the purpose of
which is to terminate all liabilities in case the action is not filed by the insured within the period stipulated.
The bringing of the action against the Paramount Surety & Insurance Company, the agent of the defendant
Company cannot have any legal effect except that of notifying the agent of the claim. Beyond such notification,
the filing of the action can serve no other purpose. There is no law giving any effect to such action upon the
principal. Besides, there is no condition in the policy that the action must be filed against the agent, and this
Court can not by interpretation, extend the clear scope of the agreement beyond what is agreed upon by the
parties.
The case of E. Macias & Co. vs. China Fire Insurance Co. has settled the issue presented by the appellees in the
case at bar definitely against their claim. In that case, We declared that the contractual station in an insurance
policy prevails over the statutory limitation, as well as over the exceptions to the statutory limitations that the
contract necessarily supersedes the statute (of limitations) and the limitation is in all phases governed by the
former. (E. Macias & Co. vs. China Fire Insurance & Co., 46 Phil. pp. 345-353). As stated in said case and in
accordance with the decision of the Supreme Court of the United States in Riddlesbarger vs. Hartford Fire
Insurance Co. (7 Wall., 386), the rights of the parties flow from the contract of insurance, hence they are not
bound by the statute of limitations nor by exemptions thereto. In the words of our own law, their contract is
the law between the parties, and their agreement that an action on a claim denied by the insurer must be
brought within one year from the denial, governs, not the rules on the prescription of actions.
The judgment appealed from is hereby set aside and the case dismissed, with costs against the plaintiffs-
appellees.

G.R. No. 78860 May 28, 1990 PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HONORABLE COURT OF
APPEALS and MILAGROS CAYAS, respondents. [FERNAN, C.J.:]
This is a petition for review on certiorari of the decision of the Court of Appeals 1 affirming in toto the decision
of the Regional Trial Court of Cavite, Branch XVI, 2the dispositive portion of which states:
IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant Perla Compania
de Seguros, Inc. to pay plaintiff Milagros Cayas the sum of P50,000.00 under its maximum
liability as provided for in the insurance policy; and the sum of P5,000.00 as reasonable
attorney's fee with costs against said defendant.
SO ORDERED. 3
Private respondent Milagros Cayas was the registered owner of a Mazda bus with serial No. TA3H4 P-000445
and plate No. PUB-4G-593. 4 Said passenger vehicle was insured with Perla Compania de Seguros, Inc. (PCSI)
under policy No. LTO/60CC04241 issued on February 3, 1978. 5
On December 17, 1978, the bus figured in an accident in Naic, Cavite injuring several of its passengers. One of
them, 19-year old Edgardo Perea, sued Milagros Cayas for damages in the Court of First Instance of Cavite,
Branch 6 docketed as Civil Case No. NC-794; while three others, namely: Rosario del Carmen, Ricardo Magsarili
and Charlie Antolin, agreed to a settlement of P4,000.00 each with Milagros Cayas.
At the pre-trial of Civil Case No. NC-794, Milagros Cayas failed to appear and hence, she was declared as in
default. After trial, the court rendered a decision 7 in favor of Perea with its dispositive portion reading thus:
 WHEREFORE, under our present imperatives, judgment is hereby rendered in favor of the
plaintiffs and against the defendant Milagros Cayas who is hereby ordered to compensate the
plaintiff' Edgar Perea with damages in the sum of Ten Thousand (Pl0,000.00) Pesos for the
medical predicament he found himself as damaging consequences of defendant Milagros Cayas
complete lack of diligence of a good father of a family' when she secured the driving services of
one Oscar Figueroa on December, 17, 1978; the sum of Ten Thousand (P10,000.00) Pesos for
exemplary damages; the sum of Five Thousand (P5,000.00) Pesos for moral damages; the sum of
Seven Thousand (P7,000.00) Pesos for Attorney's fees, under the imperatives of the monetary
power of the peso today;
With costs against the defendant.
SO ORDERED.
When the decision in Civil Case No. NC-794 was about to be executed against her, Milagros Cayas filed a
complaint against PCSI in the Office of the Insurance Commissioner praying that PCSI be ordered to pay
P40,000.00 for all the claims against her arising from the vehicular accident plus legal and other
expenses. 8 Realizing her procedural mistake, she later withdrew said complaint. 9
Consequently, on November 11, 1981, Milagros Cayas filed a complaint for a sum of money and damages
against PCSI in the Court of First Instance of Cavite (Civil Case No. N-4161). She alleged therein that to satisfy
the judgment in Civil Case No. NC-794, her house and lot were levied upon and sold at public auction for
P38,200; 10that to avoid numerous suits and the "detention" of the insured vehicle, she paid P4,000 to each of
the following injured passengers: Rosario del Carmen, Ricardo Magsarili and Charlie Antolin; that she could not
have suffered said financial setback had the counsel for PCSI, who also represented her, appeared at the trial of
Civil Case No. NC-794 and attended to the claims of the three other victims; that she sought reimbursement of
said amounts from the defendant, which notwithstanding the fact that her claim was within its contractual
liability under the insurance policy, refused to make such re-imbursement; that she suffered moral damages as
a consequence of such refusal, and that she was constrained to secure the services of counsel to protect her
rights. She prayed that judgment be rendered directing PCSI to pay her P50,000 for compensation of the injured
victims, such sum as the court might approximate as damages, and P6,000 as attorney's fees.
In view of Milagros Cayas' failure to prosecute the case, the court motu propio ordered its dismissal without
prejudice. 11 Alleging that she had not received a copy of the answer to the complaint, and that "out of
sportsmanship", she did not file a motion to hold PCSI in default, Milagros Cayas moved for the reconsideration
of the dismissal order. Said motion for reconsideration was acted upon favorably by the court in its order of
March 31, 1982.
About two months later, Milagros Cayas filed a motion to declare PCSI in default for its failure to file an answer.
The motion was granted and plaintiff was allowed to adduce evidence ex-parte. On July 13, 1982, the court
rendered judgment by default ordering PCSI to pay Milagros Cayas P50,000 as compensation for the injured
passengers, P5,000 as moral damages and P5,000 as attorney's fees.
Said decision was set aside after the PCSI filed a motion therefor. Trial of the case ensued. In due course, the
court promulgated a decision in Civil Case No. N-4161, the dispositive portion of which was quoted earlier,
finding that:
In disavowing its obligation to plaintiff under the insurance policy, defendant advanced the
proposition that before it can be made to pay, the liability must first be determined in an
appropriate court action. And so plaintiffs liability was determined in that case filed against her
by Perea in the Naic CFI. Still, despite this determination of liability, defendant sought escape
from its obligation by positing the theory that plaintiff Milagros Cayas lost the Naic case due to
her negligence because of which, efforts exerted by defendant's lawyers in protecting Cayas'
rights proved futile and rendered nugatory. Blame was laid entirely on plaintiff by defendant for
losing the Naic case. Defendant labored under the impression that had Cayas cooperated fully
with defendant's lawyers, the latter could have won the suit and thus relieved of any obligation
to Perea Defendant's posture is stretching the factual circumstances of the Naic case too far. But
 even accepting defendant's postulate, it cannot be said, nor was it shown positively and
convincingly, that if the Naic case had proceeded on trial on the merits, a decision favorable to
Milagros Cayas could have been obtained. Nor was it definitely established that if the pre-trial
was undertaken in that case, defendant's lawyers could have mitigated the claim for damages by
Perea against Cayas. 12
The court, however, held that inasmuch as Milagros Cayas failed to establish that she underwant moral
suffering and mental anguish to justify her prayer for damages, there should be no such award. But, there being
proof that she was compelled to engage the services of counsel to protect her rights under the insurance policy,
the court allowed attorney's fees in the amount of P5,000.
PCSI appealed to the Court of Appeals, which, in its decision of May 8, 1987 affirmed in toto the lower court's
decision. Its motion for reconsideration having been denied by said appellate court, PCSI filed the instant
petition charging the Court of Appeals with having erred in affirming in toto the decision of the lower court.
At the outset, we hold as factual and therefore undeserving of this Court's attention, petitioner's assertions that
private respondent lost Civil Case No. NC-794 because of her negligence and that there is no proof that the
decision in said case has been executed. Said contentions, having been raised and threshed out in the Court of
Appeals and rejected by it, may no longer be addressed to this Court.
Petitioner's other contentions are primarily concerned with the extent of its liability to private respondent
under the insurance policy. This, we consider to be the only issue in this case.
Petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the
amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other
three (3) injured passengers Rosario del Carmen, Ricardo Magsarili and Charlie Antolin in the amount of
P4,000.00 each or a total of P12,000.00.
There is merit in petitioner's assertions.
The insurance policy involved explicitly limits petitioner's liability to P12,000.00 per person and to P50,000.00
per accident. 13 Pertinent provisions of the policy also state:
SECTION I-Liability to the Public
xxx xxx xxx
3. The Limit of Liability stated in Schedule A as applicable (a) to THIRD PARTY is
the limit of the Company's liability for all damages arising out of death, bodily
injury and damage to property combined so sustained as the result of any one
accident; (b) "per person" for PASSENGER liability is the limit of the Company's
liability for all damages arising out of death or bodily injury sustained by one
person as the result of any one accident: (c) "per accident" for PASSENGER liability
is, subject to the above provisions respecting per person, the total limit of the
Company's liability for all such damages arising out of death or bodily injury
sustained by two or more persons as the result of any one accident.
Conditions Applicable to All Sections
xxx xxx xxx
5. No admission, offer, promise or payment shall be made by or on behalf of the
insured without the written consent of the Company which shall be entitled, if it
so desires, to take over and conduct in his (sic) name the defense or settlement of
any claim, or to prosecute in his (sic) name for its own benefit any claim for
indemnity or damages or otherwise, and shall have full discretion in the conduct
of any proceedings in the settlement of any claim, and the insured shall give all
such information and assistance as the Company may require. If the Company
shall make any payment in settlement of any claim, and such payment includes
any amount not covered by this Policy, the Insured shall repay the Company the
amount not so covered.
We have ruled in Stokes vs. Malayan Insurance Co., Inc., 14 that the terms of the contract constitute the
measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of
recovery from the insurer.
In the case at bar, the insurance policy clearly and categorically placed petitioner's liability for all damages
arising out of death or bodily injury sustained by one person as a result of any one accident at P12,000.00. Said
amount complied with the minimum fixed by the law then prevailing, Section 377 of Presidential Decree No.
612 (which was retained by P.D. No. 1460, the Insurance Code of 1978), which provided that the liability of land
transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use of their
vehicles shall not be less than P12,000. In other words, under the law, the minimum liability is P12,000 per
passenger. Petitioner's liability under the insurance contract not being less than P12,000.00, and therefore not
contrary to law, morals, good customs, public order or public policy, said stipulation must be upheld as
effective, valid and binding as between the parties. 15
In like manner, we rule as valid and binding upon private respondent the condition above-quoted requiring her
to secure the written permission of petitioner before effecting any payment in settlement of any claim against
her. There is nothing unreasonable, arbitrary or objectionable in this stipulation as would warrant its
nullification. The same was obviously designed to safeguard the insurer's interest against collusion between the
insured and the claimants.
In her cross-examination before the trial court, Milagros Cayas admitted, thus:
Atty. Yabut:
q With respect to the other injured passengers of your bus wherein you made payments
you did not secure the consent of defendant (herein petitioner) Perla Compania de
Seguros when you made those payments?
a I informed them about that
q But they did not give you the written authority that you were supposed to pay those
claims?
a No, sir . l6
It being specifically required that petitioner's written consent be first secured before any payment in settlement
of any claim could be made, private respondent is precluded from seeking reimbursement of the payments
made to del Carmen, Magsarili and Antolin in view of her failure to comply with the condition contained in the
insurance policy.
Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds
application in the present case. 17 Thus, it was error on the part of the trial and appellate courts to have
disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance
policy. In Phil. American General Insurance Co., Inc vs. Mutuc, 18 we ruled that contracts which are the private
laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their
terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are
obligatory, no matter what form they may be, whenever the essential requisites for their validity are present.
Moreover, we stated in Pacific Oxygen & Acetylene Co. vs. Central Bank," 19 that the first and fundamental duty
of the courts is the application of the law according to its express terms, interpretation being called for only
when such literal application is impossible.
We observe that although Milagros Cayas was able to prove a total loss of only P44,000.00, petitioner was
made liable for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is
patent error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly
ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason
of an accident. 20
Finally, we find no reason to disturb the award of attorney's fees.
WHEREFORE, the decision of the Court of Appeals is hereby modified in that petitioner shall pay Milagros Cayas
the amount of Twelve Thousand Pesos (P12,000. 00) plus legal interest from the promulgation of the decision
of the lower court until it is fully paid and attorney's fees in the amount of P5,000.00. No pronouncement as to
costs.
G.R. No. 183526 VIOLETA R. LALICAN, Petitioner, vs THE INSULAR LIFE ASSURANCE COMPANY LIMITED, AS
REPRESENTED BY THE PRESIDENT VICENTE R. AVILON, Respondent. August 25, 2009 [CHICO-NAZARIO, J.:]

Challenged in this Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court are the
Decision[2] dated 30 August 2007 and the Orders dated 10 April 2008[3] and 3 July 2008[4] of the Regional Trial
Court (RTC) of Gapan City, Branch 34, in Civil Case No. 2177. In its assailed Decision, the RTC dismissed the claim
for death benefits filed by petitioner Violeta R. Lalican (Violeta) against respondent Insular Life Assurance
Company Limited (Insular Life); while in its questioned Orders dated 10 April 2008 and 3 July 2008, respectively,
the RTC declared the finality of the aforesaid Decision and denied petitioners Notice of Appeal.
The factual and procedural antecedents of the case, as culled from the records, are as follows:
Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio).
During his lifetime, Eulogio applied for an insurance policy with Insular Life. On 24 April 1997, Insular Life,
through Josephine Malaluan (Malaluan), its agent in Gapan City, issued in favor of Eulogio Policy No.
9011992,[5] which contained a 20-Year Endowment Variable Income Package Flexi Plan
worth P500,000.00,[6] with two riders valued at P500,000.00 each.[7] Thus, the value of the policy amounted
to P1,500,000.00. Violeta was named as the primary beneficiary.
Under the terms of Policy No. 9011992, Eulogio was to pay the premiums on a quarterly basis in the
amount of P8,062.00, payable every 24 April, 24 July, 24 October and 24 January of each year, until the end of
the 20-year period of the policy. According to the Policy Contract, there was a grace period of 31 days for the
payment of each premium subsequent to the first. If any premium was not paid on or before the due date, the
policy would be in default, and if the premium remained unpaid until the end of the grace period, the policy
would automatically lapse and become void.[8]
Eulogio paid the premiums due on 24 July 1997 and 24 October 1997. However, he failed to pay the
premium due on 24 January 1998, even after the lapse of the grace period of 31 days.Policy No. 9011992,
therefore, lapsed and became void.
Eulogio submitted to the Cabanatuan District Office of Insular Life, through Malaluan, on 26 May 1998,
an Application for Reinstatement[9] of Policy No. 9011992, together with the amount of P8,062.00 to pay for the
premium due on 24 January 1998. In a letter[10] dated 17 July 1998, Insular Life notified Eulogio that his
Application for Reinstatement could not be fully processed because, although he already deposited P8,062.00 as
payment for the 24 January 1998 premium, he left unpaid the overdue interest thereon amounting
to P322.48. Thus, Insular Life instructed Eulogio to pay the amount of interest and to file another application for
reinstatement. Eulogio was likewise advised by Malaluan to pay the premiums that subsequently became due
on 24 April 1998 and 24 July 1998, plus interest.
On 17 September 1998, Eulogio went to Malaluans house and submitted a second Application for
Reinstatement[11] of Policy No. 9011992, including the amount of P17,500.00, representing payments for the
overdue interest on the premium for 24 January 1998, and the premiums which became due on 24 April
1998 and 24 July 1998. As Malaluan was away on a business errand, her husband received Eulogios second
Application for Reinstatement and issued a receipt for the amount Eulogio deposited.
A while later, on the same day, 17 September 1998, Eulogio died of cardio-respiratory arrest secondary
to electrocution.
Without knowing of Eulogios death, Malaluan forwarded to the Insular Life Regional Office in the City
of San Fernando, on 18 September 1998, Eulogios second Application for Reinstatement of Policy No. 9011992
and P17,500.00 deposit. However, Insular Life no longer acted upon Eulogios second Application for
Reinstatement, as the former was informed on 21 September 1998 that Eulogio had already passed away.
On 28 September 1998, Violeta filed with Insular Life a claim for payment of the full proceeds of Policy
No. 9011992.
 In a letter[12] dated 14 January 1999, Insular Life informed Violeta that her claim could not be granted
since, at the time of Eulogios death, Policy No. 9011992 had already lapsed, and Eulogio failed to reinstate the
same. According to the Application for Reinstatement, the policy would only be considered reinstated upon
approval of the application by Insular Life during the applicants lifetime and good health, and whatever amount
the applicant paid in connection thereto was considered to be a deposit only until approval of said
application. Enclosed with the 14 January 1999 letter of Insular Life to Violeta was DBP Check No.
0000309734, for the amount of P25,417.00, drawn in Violetas favor, representing the full refund of the payments
made by Eulogio on Policy No. 9011992.
On 12 February 1998, Violeta requested a reconsideration of the disallowance of her claim. In a
letter[13] dated 10 March 1999, Insular Life stated that it could not find any reason to reconsider its decision
rejecting Violetas claim. Insular Life again tendered to Violeta the above-mentioned check in the amount
of P25,417.00.
Violeta returned the letter dated 10 March 1999 and the check enclosed therein to the Cabanatuan
District Office of Insular Life. Violetas counsel subsequently sent a letter[14] dated 8 July 1999 to Insular Life,
demanding payment of the full proceeds of Policy No. 9011992. On 11 August 1999, Insular Life responded to the
said demand letter by agreeing to conduct a re-evaluation of Violetas claim.
Without waiting for the result of the re-evaluation by Insular Life, Violeta filed with the RTC, on 11 October
1999, a Complaint for Death Claim Benefit,[15] which was docketed as Civil Case No. 2177. Violeta alleged that
Insular Life engaged in unfair claim settlement practice and deliberately failed to act with reasonable promptness
on her insurance claim. Violeta prayed that Insular Life be ordered to pay her death claim benefits on Policy No.
9011992, in the amount of P1,500,000.00, plus interests, attorneys fees, and cost of suit.
Insular Life filed with the RTC an Answer with Counterclaim,[16] asserting that Violetas Complaint had no
legal or factual bases. Insular Life maintained that Policy No. 9011992, on which Violeta sought to recover, was
rendered void by the non-payment of the 24 January 1998 premium and non-compliance with the requirements
for the reinstatement of the same. By way of counterclaim, Insular Life prayed that Violeta be ordered to pay
attorneys fees and expenses of litigation incurred by the former.
Violeta, in her Reply and Answer to Counterclaim, asserted that the requirements for the reinstatement
of Policy No. 9011992 had been complied with and the defenses put up by Insular Life were purely invented and
illusory
After trial, the RTC rendered, on 30 August 2007, a Decision in favor of Insular Life.
The RTC found that Policy No. 9011992 had indeed lapsed and Eulogio needed to have the same
reinstated:
[The] arguments [of Insular Life] are not without basis. When the premiums for April 24 and July
24, 1998 were not paid by [Eulogio] even after the lapse of the 31-day grace period, his insurance
policy necessarily lapsed. This is clear from the terms and conditions of the contract between
[Insular Life] and [Eulogio] which are written in [the] Policy provisions of Policy No. 9011992 x x
x.[17]
The RTC, taking into account the clear provisions of the Policy Contract between Eulogio and Insular Life
and the Application for Reinstatement Eulogio subsequently signed and submitted to Insular Life, held that
Eulogio was not able to fully comply with the requirements for the reinstatement of Policy No. 9011992:
The well-settled rule is that a contract has the force of law between the parties. In the instant case,
the terms of the insurance contract between [Eulogio] and [Insular Life] were spelled out in the
policy provisions of Insurance Policy No. 9011992. There is likewise no dispute that said insurance
contract is by nature a contract of adhesion[,] which is defined as one in which one of the
contracting parties imposes a ready-made form of contract which the other party may accept or
reject but cannot modify. (Polotan, Sr. vs. CA, 296 SCRA 247).

xxxx
The New Lexicon Websters Dictionary defines ambiguity as the quality of having more than one
meaning and an idea, statement or expression capable of being understood in more than one
sense. In Nacu vs. Court of Appeals, 231 SCRA 237 (1994), the Supreme Court stated that[:]
Any ambiguity in a contract, whose terms are susceptible of different
interpretations as a result thereby, must be read and construed against the party
who drafted it on the assumption that it could have been avoided by the exercise
of a little care.
In the instant case, the dispute arises from the afore-quoted provisions written on the face of the
second application for reinstatement. Examining the said provisions, the court finds the same clearly
written in terms that are simple enough to admit of only one interpretation. They are clearly not
ambiguous, equivocal or uncertain that would need further construction. The same are written on
the very face of the application just above the space where [Eulogio] signed his name. It is
inconceivable that he signed it without reading and understanding its import.
Similarly, the provisions of the policy provisions (sic) earlier mentioned are written in simple and
clear laymans language, rendering it free from any ambiguity that would require a legal
interpretation or construction.Thus, the court believes that [Eulogio] was well aware that when
he filed the said application for reinstatement, his lapsed policy was not automatically reinstated
and that its approval was subject to certain conditions.Nowhere in the policy or in the application
for reinstatement was it ever mentioned that the payment of premiums would have the effect of an
automatic and immediate renewal of the lapsed policy.Instead, what was clearly stated in the
application for reinstatement is that pending approval thereof, the premiums paid would be treated
as a deposit only and shall not bind the company until this application is finally approved during
my/our lifetime and good health[.]
Again, the court finds nothing in the aforesaid provisions that would even suggest an ambiguity
either in the words used or in the manner they were written. [Violeta] did not present any proof
that [Eulogio] was not conversant with the English language. Hence, his having personally signed
the application for reinstatement[,] which consisted only of one page, could only mean that he
has read its contents and that he understood them. x x x
Therefore, consistent with the above Supreme Court ruling and finding no ambiguity both in the
policy provisions of Policy No. 9011992 and in the application for reinstatement subject of this
case, the court finds no merit in [Violetas] contention that the policy provision stating that [the
lapsed policy of Eulogio] should be reinstated during his lifetime is ambiguous and should be
construed in his favor. It is true that [Eulogio] submitted his application for reinstatement,
together with his premium and interest payments, to [Insular Life] through its agent Josephine
Malaluan in the morning of September 17, 1998. Unfortunately, he died in the afternoon of that
same day. It was only on the following day, September 18, 1998 that Ms. Malaluan brought the
said document to [the regional office of Insular Life] in San Fernando, Pampanga for approval. As
correctly pointed out by [Insular Life] there was no more application to approve because the
applicant was already dead and no insurance company would issue an insurance policy to a dead
person.[18](Emphases ours.)

The RTC, in the end, explained that:

While the court truly empathizes with the [Violeta] for the loss of her husband, it cannot express
the same by interpreting the insurance agreement in her favor where there is no need for such
interpretation. It is conceded that [Eulogios] payment of overdue premiums and interest was
received by [Insular Life] through its agent Ms. Malaluan. It is also true that [the] application for
reinstatement was filed by [Eulogio] a day before his death. However, there is nothing that would
justify a conclusion that such receipt amounted to an automatic reinstatement of the policy that has
already lapsed. The evidence suggests clearly that no such automatic renewal was contemplated in
 the contract between [Eulogio] and [Insular Life]. Neither was it shown that Ms. Malaluan was the
officer authorized to approve the application for reinstatement and that her receipt of the
documents submitted by [Eulogio] amounted to its approval.[19] (Emphasis ours.)
The fallo of the RTC Decision thus reads: WHEREFORE, all the foregoing premises considered and
finding that [Violeta] has failed to establish by preponderance of evidence her cause of action
against the defendant, let this case be, as it is hereby DISMISSED.[20]

On 14 September 2007, Violeta filed a Motion for Reconsideration[21] of the afore-mentioned RTC
Decision. Insular Life opposed[22] the said motion, averring that the arguments raised therein were merely a
rehash of the issues already considered and addressed by the RTC. In an Order[23] dated 8 November 2007, the
RTC denied Violetas Motion for Reconsideration, finding no cogent and compelling reason to disturb its earlier
findings. Per the Registry Return Receipt on record, the 8 November 2007 Order of the RTC was received by
Violeta on 3 December 2007.
In the interim, on 22 November 2007, Violeta filed with the RTC a Reply[24] to the Motion for Reconsideration,
wherein she reiterated the prayer in her Motion for Reconsideration for the setting aside of the Decision dated 30
August 2007. Despite already receiving on 3 December 2007, a copy of the RTC Order dated 8 November 2007,
which denied her Motion for Reconsideration, Violeta still filed with the RTC, on 26 February 2008, a Reply
Extended Discussion elaborating on the arguments she had previously made in her Motion for Reconsideration
and Reply.
On 10 April 2008, the RTC issued an Order,[25] declaring that the Decision dated 30 August 2007 in Civil Case No.
2177 had already attained finality in view of Violetas failure to file the appropriate notice of appeal within the
reglementary period. Thus, any further discussions on the issues raised by Violeta in her Reply and Reply Extended
Discussion would be moot and academic.
Violeta filed with the RTC, on 20 May 2008, a Notice of Appeal with Motion,[26] praying that the Order dated 10
April 2008 be set aside and that she be allowed to file an appeal with the Court of Appeals.
In an Order[27] dated 3 July 2008, the RTC denied Violetas Notice of Appeal with Motion given that the Decision
dated 30 August 2007 had long since attained finality.
Violeta directly elevated her case to this Court via the instant Petition for Review on Certiorari, raising the
following issues for consideration:
1. Whether or not the Decision of the court a quo dated August 30, 2007, can still be
reviewed despite having allegedly attained finality and despite the fact that the mode of
appeal that has been availed of by Violeta is erroneous?
2. Whether or not the Regional Trial Court in its original jurisdiction has decided the case
on a question of law not in accord with law and applicable decisions of the Supreme Court?
Violeta insists that her former counsel committed an honest mistake in filing a Reply, instead of a Notice of Appeal
of the RTC Decision dated 30 August 2007; and in the computation of the reglementary period for appealing the
said judgment. Violeta claims that her former counsel suffered from poor health, which rapidly deteriorated from
the first week of July 2008 until the latters death just shortly after the filing of the instant Petition on 8 August
2008. In light of these circumstances, Violeta entreats this Court to admit and give due course to her appeal even
if the same was filed out of time.
Violeta further posits that the Court should address the question of law arising in this case involving the
interpretation of the second sentence of Section 19 of the Insurance Code, which provides: Section. 19. x x
x [I]nterest in the life or health of a person insured must exist when the insurance takes effect, but need not exist
thereafter or when the loss occurs.
On the basis thereof, Violeta argues that Eulogio still had insurable interest in his own life when he
reinstated Policy No. 9011992 just before he passed away on 17 September 1998. The RTC should have
construed the provisions of the Policy Contract and Application for Reinstatement in favor of the insured Eulogio
and against the insurer Insular Life, and considered the special circumstances of the case, to rule that Eulogio had
complied with the requisites for the reinstatement of Policy No. 9011992 prior to his death, and that Violeta is
entitled to claim the proceeds of said policy as the primary beneficiary thereof.
The Petition lacks merit.
At the outset, the Court notes that the elevation of the case to us via the instant Petition for Review
on Certiorari is not justified. Rule 41, Section 1 of the Rules of Court,[28] provides that no appeal may be taken
from an order disallowing or dismissing an appeal. In such a case, the aggrieved party may file a Petition
for Certiorari under Rule 65 of the Rules of Court.[29]
Furthermore, the RTC Decision dated 30 August 2007, assailed in this Petition, had long become final and
executory. Violeta filed a Motion for Reconsideration thereof, but the RTC denied the same in an Order dated 8
November 2007. The records of the case reveal that Violeta received a copy of the 8 November 2007 Order on 3
December 2007. Thus, Violeta had 15 days[30] from said date of receipt, or until 18 December 2007, to file a Notice
of Appeal. Violeta filed a Notice of Appeal only on 20 May 2008, more than five months after receipt of the RTC
Order dated 8 November 2007 denying her Motion for Reconsideration.
Violetas claim that her former counsels failure to file the proper remedy within the reglementary period
was an honest mistake, attributable to the latters deteriorating health, is unpersuasive.
Violeta merely made a general averment of her former counsels poor health, lacking relevant details and
supporting evidence. By Violetas own admission, her former counsels health rapidly deteriorated only by the first
week of July 2008. The events pertinent to Violetas Notice of Appeal took place months before July 2008, i.e., a
copy of the RTC Order dated 8 November 2007, denying Violetas Motion for Reconsideration of the Decision
dated 30 August 2007, was received on 3 December 2007; and Violetas Notice of Appeal was filed on 20 May
2008. There is utter lack of proof to show that Violetas former counsel was already suffering from ill health during
these times; or that the illness of Violetas former counsel would have affected his judgment and competence as
a lawyer.
Moreover, the failure of her former counsel to file a Notice of Appeal within the reglementary period
binds Violeta, which failure the latter cannot now disown on the basis of her bare allegation and self-serving
pronouncement that the former was ill. A client is bound by his counsels mistakes and negligence.[31]
The Court, therefore, finds no reversible error on the part of the RTC in denying Violetas Notice of Appeal
for being filed beyond the reglementary period. Without an appeal having been timely filed, the RTC Decision
dated 30 August 2007 in Civil Case No. 2177 already became final and executory.
A judgment becomes "final and executory" by operation of law. Finality becomes a fact when the
reglementary period to appeal lapses and no appeal is perfected within such period. As a consequence, no court
(not even this Court) can exercise appellate jurisdiction to review a case or modify a decision that has become
final.[32] When a final judgment is executory, it becomes immutable and unalterable. It may no longer be modified
in any respect either by the court, which rendered it or even by this Court. The doctrine is founded on
considerations of public policy and sound practice that, at the risk of occasional errors, judgments must become
final at some definite point in time.[33]
The only recognized exceptions to the doctrine of immutability and unalterability are the correction of
clerical errors, the so-called nunc pro tunc entries, which cause no prejudice to any party, and void
judgments.[34] The instant case does not fall under any of these exceptions.
Even if the Court ignores the procedural lapses committed herein, and proceeds to resolve the substantive
issues raised, the Petition must still fail.
Violeta makes it appear that her present Petition involves a question of law, particularly, whether Eulogio
had an existing insurable interest in his own life until the day of his death.
An insurable interest is one of the most basic and essential requirements in an insurance contract. In
general, an insurable interest is that interest which a person is deemed to have in the subject matter insured,
where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or
advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its
destruction, termination, or injury by the happening of the event insured against.[35] The existence of an insurable
interest gives a person the legal right to insure the subject matter of the policy of insurance.[36] Section 10 of the
Insurance Code indeed provides that every person has an insurable interest in his own life.[37] Section 19 of the
same code also states that an interest in the life or health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss occurs.[38]
Upon more extensive study of the Petition, it becomes evident that the matter of insurable interest is
entirely irrelevant in the case at bar. It is actually beyond question that while Eulogio was still alive, he had an
insurable interest in his own life, which he did insure under Policy No. 9011992. The real point of contention
herein is whether Eulogio was able to reinstate the lapsed insurance policy on his life before his death on 17
September 1998.
The Court rules in the negative.
Before proceeding, the Court must correct the erroneous declaration of the RTC in its 30 August
2007 Decision that Policy No. 9011992 lapsed because of Eulogios non-payment of the premiums which became
due on 24 April 1998 and 24 July 1998. Policy No. 9011992 had lapsed and become void earlier, on 24 February
1998, upon the expiration of the 31-day grace period for payment of the premium, which fell due on 24 January
1998, without any payment having been made.
That Policy No. 9011992 had already lapsed is a fact beyond dispute. Eulogios filing of his first Application
for Reinstatement with Insular Life, through Malaluan, on 26 May 1998, constitutes an admission that Policy
No. 9011992 had lapsed by then. Insular Life did not act on Eulogios first Application for Reinstatement, since the
amount Eulogio simultaneously deposited was sufficient to cover only the P8,062.00 overdue premium for 24
January 1998, but not the P322.48 overdue interests thereon. On 17 September 1998, Eulogio submitted a
second Application for Reinstatement to Insular Life, again through Malaluan, depositing at the same
time P17,500.00, to cover payment for the overdue interest on the premium for 24 January 1998, and the
premiums that had also become due on 24 April 1998 and 24 July 1998. On the very same day, Eulogio passed
away.
To reinstate a policy means to restore the same to premium-paying status after it has been permitted to
lapse.[39] Both the Policy Contract and the Application for Reinstatement provide for specific conditions for the
reinstatement of a lapsed policy.
The Policy Contract between Eulogio and Insular Life identified the following conditions for reinstatement
should the policy lapse:
10. REINSTATEMENT
You may reinstate this policy at any time within three years after it lapsed if the following
conditions are met: (1) the policy has not been surrendered for its cash value or the period of
extension as a term insurance has not expired; (2) evidence of insurability satisfactory to [Insular
Life] is furnished; (3) overdue premiums are paid with compound interest at a rate not exceeding
that which would have been applicable to said premium and indebtedness in the policy years prior
to reinstatement; and (4) indebtedness which existed at the time of lapsation is paid or renewed.[40]
Additional conditions for reinstatement of a lapsed policy were stated in the Application for Reinstatement
which Eulogio signed and submitted, to wit:
I/We agree that said Policy shall not be considered reinstated until this application is approved by
the Company during my/our lifetime and good health and until all other Company requirements for
the reinstatement of said Policy are fully satisfied.
I/We further agree that any payment made or to be made in connection with this application shall
be considered as deposit only and shall not bind the Company until this application is finally
approved by the Company during my/our lifetime and good health. If this application is disapproved,
I/We also agree to accept the refund of all payments made in connection herewith, without
interest, and to surrender the receipts for such payment.[41] (Emphases ours.)
In the instant case, Eulogios death rendered impossible full compliance with the conditions for reinstatement of
Policy No. 9011992. True, Eulogio, before his death, managed to file his Application for Reinstatement and
deposit the amount for payment of his overdue premiums and interests thereon with Malaluan; but Policy
No. 9011992 could only be considered reinstated after the Application for Reinstatement had been processed
and approved by Insular Life during Eulogios lifetime and good health.
Relevant herein is the following pronouncement of the Court in Andres v. The Crown Life Insurance
Company,[42] citing McGuire v. The Manufacturer's Life Insurance Co.[43]:
The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon
written application does not give the insured absolute right to such reinstatement by the mere
filing of an application. The insurer has the right to deny the reinstatement if it is not satisfied as to
the insurability of the insured and if the latter does not pay all overdue premium and all other
indebtedness to the insurer. After the death of the insured the insurance Company cannot be
compelled to entertain an application for reinstatement of the policy because the conditions
precedent to reinstatement can no longer be determined and satisfied. (Emphases ours.)
It does not matter that when he died, Eulogios Application for Reinstatement and deposits for the overdue
premiums and interests were already with Malaluan. Insular Life, through the Policy Contract, expressly
limits the power or authority of its insurance agents, thus:
Our agents have no authority to make or modify this contract, to extend the time limit for payment of
premiums, to waive any lapsation, forfeiture or any of our rights or requirements, such powers being
limited to our president, vice-president or persons authorized by the Board of Trustees and only in
writing.[44] (Emphasis ours.)
Malaluan did not have the authority to approve Eulogios Application for Reinstatement. Malaluan
still had to turn over to Insular Life Eulogios Application for Reinstatement and accompanying deposits,
for processing and approval by the latter.
The Court agrees with the RTC that the conditions for reinstatement under the Policy Contract and
Application for Reinstatement were written in clear and simple language, which could not admit of any meaning
or interpretation other than those that they so obviously embody. A construction in favor of the insured is not
called for, as there is no ambiguity in the said provisions in the first place. The words thereof are clear,
unequivocal, and simple enough so as to preclude any mistake in the appreciation of the same.
Violeta did not adduce any evidence that Eulogio might have failed to fully understand the import and
meaning of the provisions of his Policy Contract and/or Application for Reinstatement, both of which he
voluntarily signed. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be
construed liberally in favor of the insured and strictly as against the insurer company, yet, contracts of insurance,
like other contracts, are to be construed according to the sense and meaning of the terms, which the parties
themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their
plain, ordinary and popular sense.[45]
Eulogios death, just hours after filing his Application for Reinstatement and depositing his payment for
overdue premiums and interests with Malaluan, does not constitute a special circumstance that can persuade
this Court to already consider Policy No. 9011992 reinstated. Said circumstance cannot override the clear and
express provisions of the Policy Contract and Application for Reinstatement, and operate to remove the
prerogative of Insular Life thereunder to approve or disapprove the Application for Reinstatement. Even though
the Court commiserates with Violeta, as the tragic and fateful turn of events leaves her practically empty-handed,
the Court cannot arbitrarily burden Insular Life with the payment of proceeds on a lapsed insurance policy. Justice
and fairness must equally apply to all parties to a case. Courts are not permitted to make contracts for the parties.
The function and duty of the courts consist simply in enforcing and carrying out the contracts actually made.[46]
Policy No. 9011992 remained lapsed and void, not having been reinstated in accordance with the Policy
Contract and Application for Reinstatement before Eulogios death. Violeta, therefore, cannot claim any death
benefits from Insular Life on the basis of Policy No. 9011992; but she is entitled to receive the full refund of the
payments made by Eulogio thereon.

WHEREFORE, premises considered, the Court DENIES the instant Petition for Review on Certiorari under
Rule 45 of the Rules of Court. The Court AFFIRMS the Orders dated 10 April 2008 and 3 July 2008 of the RTC of
Gapan City, Branch 34, in Civil Case No. 2177, denying petitioner Violeta R. Lalicans Notice of Appeal, on the
ground that the Decision dated 30 August 2007subject thereof, was already final and executory. No costs.

G.R. No. 41702 September 4, 1935 FORTUNATA LUCERO VIUDA DE SINDAYEN, plaintiff-appellant, vs. THE
INSULAR LIFE ASSURANCE CO., LTD., defendant-appellee. [BUTTE, J.:]
This if, an appeal from a judgment of the Court of First Instance of Manila in an action brought by the plaintiff-
appellant as beneficiary to recover P1,000 upon a life insurance policy issued by the defendant on the life of her
deceased husband, Arturo Sindayen.
The essential facts upon which this case turns are not in dispute and may be stated as follows:
Arturo Sindayen, up to the time of his death on January 19, 1933, was employed as a linotype operator in the
Bureau of Printing at Manila and had been such for eleven years prior thereto. He and his wife went to
Camiling, Tarlac, to spend the Christmas vacation with his aunt, Felicidad Estrada. While there he made a
written application on December 26, 1932, to the defendant Insular Life Assurance Co., Ltd., through its agent,
Cristobal Mendoza, for a policy of insurance on his life in the sum of P1,000 and he paid to the agent P15 cash
as part of the first premium. It was agreed with the agent that the policy, when and if issued, should be
delivered to his aunt. Felicidad Estrada, with whom Sindayen left the sum of P26.06 to complete the payment of
the first annual premium of P40.06. On January 1, 1933, Sindayen, who was then twenty-nine years of age, was
examined by the company's doctor who made a favorable report, to the company. On January 2, 1933,
Sindayen returned to Manila and resumed his work a linotype operator in the Bureau of Printing. On January
11, 1933, The company accepted the risk and issued policy No. 47710 dated back to December 1, 1932, and
mailed the same to its agent, Cristobal Mendoza, in Camiling, Tarlac, for delivery to the insured. On January 11,
1933, Sindayen was at work in the Bureau of Printing. On January 12, he complained of a severe headache and
remained at home. On January 15, he called a physician who found that he was suffering from acute nephritis
and uremia. His illness did not yield to treatment and on January 19, 1933, he died.
The policy which the company issued and mailed in Manila on January 11, 1933, was received by its agent in
Camiling, Tarlac, on January 16, 1933. On January 18, 1933, the agent, in accordance with his agreement with
the insured, delivered the policy to Felicidad Estrada upon her payment of the balance of the first year's annual
premium. The agent asked Felicidad Estrada if her nephew was in good health and she replied that she believed
so because she had no information that he was sick and he thereupon delivered to her the policy.
On January 20, 1933, the agent learned of the death of Arturo Sindayen and called on Felicidad Estrada and
asked her to return the policy. He testified: "pedia a ella que me devolviera a poliza para traerla a Manila para
esperar la de decision de la compañia" (t. s. n. p. 19). But he did not return or offer to return the premium paid.
Felicidad Estrada on his aforesaid statement gave him the policy.
On February 4, 1933, under circumstances which it is not necessary to relate here, the company obtained from
the beneficiary, the widow of Arturo Sindayen, her signature to a legal document entitled "ACCORD,
SATISFACTION AND RELEASE" whereby in consideration of the sum of P40.06 paid to her by a check of the
company, she "assigns, releases and forever discharges said Isular Life Assurance Co., Ltd., its successors and
assigns, of all claims, obligation in or indebtedness which she, as such beneficiary ever had or now has,
hereafter ca, shall, or may have, for, upon, or by reason of said policy of life insurance numbered 47710 upon
the life of said Arturo Sindayen, the latter now deceased, or arising therefrom or connected therewith in any
manner", which appears in the record as Exhibit A, attached to the deposition of the notary who executed th
fraudulent acknowledgment to Exhibit A. The said check for P40.06 was never cashed but returned to the
company and appears in the record of this case as Exhibit D. Thereupon this action was brought to enforce
payment of the policy.
By the terms of the policy, an annual premium of P40.06 is due on the first day of December of each year, the
first premium already paid by the insured covering the period from December 1, 1932. It is to December 1,
1933. It is to be noted that the policy was not issued and the company assumed no actual risk prior to January
11, 1933.
The policy contains the following paragraph:
 THE CONTRACT. This Policy and the application herefor constitute the entire contract between the
parties hereto. All statements made by the Insured shall, in the absence of fraud, be deemed
representations and not warranties, and no such statement shall void the Policy unless it is contained in
the written application, a copy of which is attached to this Policy. Only the President, or the Manager,
acting jointly with the Secretary or Assistant Secretary (and then only in writing signed by them) have
power in behalf of the Company to issue permits, or to modify this or any contract, or to extend the
time for making any premium payment, and the Company shall t bound by any promise or
representation heretofore hereafter given by any person other than the above-named officials, and by
them only in writing and signed conjointly as stated.".
The application which the insured signed in Camiling, Tarlac, on December 26, 1932, contained among others
the following provisions:
2. That if this application is accepted and a policy issued in my favor, I bind myself to accept the same
and to pay at least the first year's premium thereon in the City of Manila.
3. That the said policy shall not take effect until the first premium has been paid and the policy has been
delivered to and accepted by me, while I am in good health.
4. That the agent taking this application has no authority to make, modify or discharge contracts, or to
waive any of the Company's right or requirements.".
The insurance company does not set up any defense of fraud, misconduct or omission of duty of the insured or
his agent, Felicidad Estrada or of the beneficiary. In its answer it pleads the "ACCORD, SATISFACTION AND
RELEASE" (Exhibit A) signed by the widow of Arturo Sindayen, the plaintiff-appellant. With respect to Exhibit A,
it suffices to say that this release is so inequitable, not to say fraudulent, that we are pleased to note that
counsel for the defendant company, on page 51 of their brief, state: "si resultara que la poliza aqui en cuestion
es valida la apelada seria la primera en no dar validez alguno al documento Exhibit A aunque la apelante hubiera
afirmado que lo otorgo con conocimiento de causa."
It is suggested in appellee's brief that fhere was no delivery of the policy in this case because the policy was not
delivered to and accepted by the insured in person. Delivery to the insured in person is not necessary. Delivery
may be made by mail or to a duly constituted agent. Appellee cites no authorities to support its proposition and
none need be cited to refute it.
We come now to the main defense of the company in this case, namely, that the said policy never took effect
because of paragraph 3 of the application above quoted, for at the time of its delivery by the agent as aforesaid
the insured was not in good health. We have not heretofore been called upon to interpret and apply this clause
in life insurance application, but identical or substantially identical clauses have been construed and applied in a
number of cases in the United States and the decisions thereon are far from uniform or harmonious. We do not
find it practicable to attempt to determine where the weight of the authority lies and propose to resolve this
case on its own facts.
There is one line of cases which holds that the stipulation contained in paragraph 3 is in the nature of a
condition precedent, that is to say, that there can be no valid delivery to the insured unless he is in good health
at the time; that this condition precedent goes to the very essence of the contract and cannot be waived by the
agent making delivery of the policy, (Rathbun is. New York Life Insurance Co., 30 Idaho, 34; 165 Pac., 997;
American Bankers Insurance Co. vs. Thomas, 53 Okla., 11; 154 Pac., 44; Gordon vs. Prudential Insurance Co.,
231 Pa., 404; Reliance Life Insurance Co. vs. Hightower, 148 Ga., 843; 98 S.E., 469.)
On the other hand, a number of American decisions hold that an agent to whom a life insurance policy similar
to the one here involved was sent with instructions to deliver it to the insured has authority to bind the
company by making such delivery, although the insured was not in good health at the time of delivery, on the
theory that the delivery of the policy being the final act to the consummation of the contract, the condition as
to the insurer's good health was waived by the company. (Kansas City Life Insurance Co. vs. Ridout, 147 Ark.,
563; 228 S.W., 55; Metropolitan Life Insurance Co. vs. Willis, 37 Ind. App., 48; 76 N.E., 560; Grier vs. Mutual Life
Insurance Co. of New York, 132 N.C., 543; 44 S.E., 38; Bell vs. Missouri State Life Insurance Co., 166 Mo. App.,
390; 149 S.W., 33.)
A number of these cases go to the of holding that the delivery of the policy by the agent to the insured
consummates the contract even though the agent knew that the insured was not in good health at the time,
the theory being that his knowledge is the company's knowledge and his delivery of the policy is the company's
delivery; that when the delivery is made notwithstanding this knowledge of the defect, the company is deemed
to have waived the defect. Although that appears to be the prevailing view in the American decisions (14 R.C.L.,
900) and leads to the same conclusion, namely, that the act of delivery of the policy in the absence of fraud or
other ground for recission consummates the insurance, we are inclined to the view that it is more consonant
with the well known practice of life insurance companies and the evidence in the present case to rest our
decision on the proposition that Mendoza was authorized by the company to make the delivery of the policy
when he received the payment of the first premium and he was satisfied that the insured was in good health.
As was well said in the case of MeLaurin vs. Mutual Life Insurance Co. (115 S.C., 59; 104 S.E., 327):
So much comes from the necessity of the case; the president, the vice-president, and the secretary
cannot solicit, or collect, or deliver; they must commit that to others, and along with it the discretions
we have adverted to. . . . The power in the local agent to withhold the policy involves the power to
deliver it; there is no escape from that conclusion.
But the appellant says, even though the local agent should have concluded that the applicant was in
good health, yet, if the fact be the contrary, then the policy never operated. The parties intended to
make a contract, and that involved the doing of everything necessary to carry it into operation, to wit,
the acceptance of the applicant as a person in good health. They never intended to leave open that one
essential element of the contract, when the parties dealth fairly one with the other. It is plain, therefore,
that upon the facts it is not necessarily a case of waiver or of estoppel, but a case where the local
agents, in the exercise of the powers lodged in them, accepted the premium and delivered the policy.
That act binds their principal, the defendant.
Mendoza was duly licensed by the Insurance Commissioner to act as the agent of the defendant insurance
company. The well known custom of the insurance business and the evidence in this case prove that Mendoza
was not regarded by the company as a mere conduit or automaton for the performance of the physical act of
placing the policy in the hands of the insured. If Mendoza were only an automaton then the legally effective
delivery of the policy and the consummation of the contract occurred when the company expressed its will to
release the policy by mailing it to its agent, namely, on January 11, 1933. In such a case the agent would
perform a purely ministerial act and have no discretion. He could do nothing but make unconditional delivery.
The legal result would be the same as if the company had mailed the policy on January 11, 1933, to the insured
directly using the post-office as its conduit for delivery. On January 11, 1933, the insured was in good health
performing his regular duties in the Bureau of Printing.
But we are not inclined to take such a restrictive view of the agent's authority because the evidence in the
record shows that Mendoza had the authority, given him by the company, to withhold the delivery of the policy
to the insured "until the first premium has been paid and the policy has been delivered to and accepted by me
(the insured) while I am in good health". Whether that condition had been met or not plainly calls for the
exercise of discretion. Granted that Mendoza's decision that the condition had been met by the insured and
that it was proper to make a delivery of the policy to him is just as binding on the company as if the decision
had been made by its board of directors. Granted that Mendoza made a mistake of judgement because he
acted on insufficient evidence as to the state of health of the insured. But it is not charged that the mistake was
induced by any misconduct or omission of duty of the insured.
It is the interest not only the applicant but of all insurance companies as well that there should be some act
which gives the applicant the definite assurance that the contract has been consummated. This sense of
security and of peace of mind that one's defendants are provided for without risk either of loss or of litigation is
the bedrock of life insurance. A cloud will be thrown over the entire insurance business if the condition of
health of the the insured at the time of delivery of the policy may be required into years afterwards with the
view to avoiding the policy on the ground that it never took effect because of an alleged lack of good health, at
the time of delivery. Suppose in the present instance that Sindayen had recovered his health, but was killed in
an automobile accident six months after the delivery of the policy; and that when called on to pay the loss, the
company learns of Sindayen's grave illness on January 18, 1933, and alleges that the policy had never taken
effect. It is difficult to imagine that the insurance company would take such a position in the face of the
common belief of the insuring public that when the policy is delivered, in the absence of fraud or other grounds
for rescission, the contract of insurance is consummated. The insured rests and acts on that faith. So does the
insurance company, for that matter, for from the date of delivery of the policy it appropriates to its own use the
premium paid by the insured. When the policy is issued and delivered, in the absence of fraud or other grounds
for rescission, it is plainly not within the intention of the parties that there should be any questions held in
abeyance or reserved for future determination that leave the very existence of the contract in suspense and
doubt. If this were not so, the entire business world which deals so voluminously in insurance would be affected
by this uncertainly. Policies that have been delivered to the insured are constantly being assigned for credit and
other purposes. Although such policies are not negotiable instruments and are subject to defenses for fraud, it
would be a most serious handicap to business if the very existence of the contract remains in doubt even
though the policy has been issued and delivered with all the formalities required by the law. It is therefore in
the public interest, for the public is profoundly and generally interested in life insurance, as well as in the
interest of the insurance companies themselves by giving certainly and security to their policies, that we are
constrained to hold, as we, do, that the delivery of the policy to the insured by an agent of the company who is
authorized to make delivery or without delivery is the final act which binds the company (and the insured as
well) in the absence of fraud or other legal ground for rescission. The fact that the agent to whom it has
entrusted this duty (and corporation can only act through agents) is derelict or negligent or even dishonest in
the performance of the duty which has been entrusted to him would create a liability of the agent to the
company but does not resolve the company's obligation based upon the authorized acts of the agent toward a
third party who was not in collusion with the agent.
Paragraph 4 of the application to the effect "that the agent taking this application has no authority to make,
modify or discharge contracts or to waive any of the company's rights or requirements" is not in point.
Mendoza neither waived nor pretended to waive any right or requirement of the company. In fact, his inquiry
as to the state of health of the insured discloses that he was endeavoring to assure himself that this
requirement of the company had been satisfied. In doing so, he acted within the authority conferred on him by
his agency and his acts within that authority bind the company. The company therefore having decided that all
the conditions precedent to the taking effect of the policy had been complied with and having accepted the
premium and delivered the policy thereafter to the insured, the company is now estopped to assert that it
never intended that the policy should take effect. (Cf. Northwestern Life Association vs. Findley, 29 Tex. Civ.
App., 494; 68 S.W, 695; McLaurin vs. Mutual Life Insurance Co., 115 S.C., 59; 104 S.E., 327; 14 Aal. Jur., par. 12,
pages 425-427.)
In view of the premises, we hold that the defendant company assumed the risk covered by policy No. 47710 on
the life of Arturo Sindayen on January 18, 1933, the date when the policy was delivered to the insured. The
judgment appealed from is therefore reversed with directions to enter judgment against the appellee in the
sum of P1,000 together with interest at the legal rate from and after May 4, 1933, with costs in both instances
against the appellee.