MALAYAN INSURANCE CO., V. PAP CO., LTD.
(PHIL)
FACTS: On May 13, 1996, Malayan issued Fire Insurance Policy No. F-
00227-000073 to PAP Co., Ltd. (PAP Co.) for the latter’s machineries and
equipment located at Sanyo Precision Phils. Bldg., Phase III, Lot 4, Block
15, PEZA, Rosario, Cavite (Sanyo Building). The insurance, which was for
15M and effective for a period of one (1) year, was procured by PAP Co. for
Rizal Commercial Banking Corporation (RCBC), the mortgagee of the
insured machineries and equipment. After the passage of almost a year but
prior to the expiration of the insurance coverage, PAP Co. renewed the
policy on an "as is" basis. Pursuant thereto, a renewal policy, Fire Insurance
Policy No. F-00227-000079, was issued by Malayan to PAP Co. for the
period May 13, 1997 to May 13, 1998.
On October 12, 1997 and during the subsistence of the renewal policy, the
insured machineries and equipment were totally lost by fire. Hence, PAP Co.
filed a fire insurance claim with Malayan in the amount insured. In a letter,
dated December 15, 1997, Malayan denied the claim upon the ground that,
at the time of the loss, the insured machineries and equipment were
transferred by PAP Co. to a location different from that indicated in the
policy. Specifically, that the insured machineries were transferred in
September 1996 from the Sanyo Building to the Pace Pacific Bldg., PEZA,
Rosario, Cavite (Pace Pacific). Contesting the denial, PAP Co. argued that
Malayan cannot avoid liability as it was informed of the transfer by RCBC,
the party duty-bound to relay such information. However, Malayan reiterated
its denial of PAP Co.’s claim. Distraught, PAP Co. filed the complaint below
against Malayan.
RTC: Malayan to pay PAP
CA: Affirmed RTC
ISSUE: WON PAP committed concealment, misrepresentation and breach
of an affirmative warranty under the renewal policy when it transferred the
location of the insured properties without informing it. – YES, Petition
granted. Malayan not liable to PAP.
HELD: The policy forbade the removal of the insured properties unless
sanctioned by Malayan
Condition No. 9(c) of the renewal policy provides:
9. Under any of the following circumstances the insurance ceases to attach
as regards the property affected unless the insured, before the occurrence
of any loss or damage, obtains the sanction of the company signified by
endorsement upon the policy, by or on behalf of the Company:
(c) If property insured be removed to any building or place other than in that
which is herein stated to be insured.
Evidently, by the clear and express condition in the renewal policy, the
removal of the insured property to any building or place required the consent
of Malayan. Any transfer effected by the insured, without the insurer’s
consent, would free the latter from any liability.
The records are bereft of any convincing and concrete evidence that
Malayan was notified of the transfer of the insured properties from the Sanyo
factory to the Pace factory. The Court has combed the records and found
nothing that would show that Malayan was duly notified of the transfer of the
insured properties. What PAP did to prove that Malayan was notified was to
show that it relayed the fact of transfer to RCBC, the entity which made the
referral and the named beneficiary in the policy. Malayan and RCBC might
have been sister companies, but such fact did not make one an agent of the
other. The fact that RCBC referred PAP to Malayan did not clothe it with
authority to represent and bind the said insurance company. After the
referral, PAP dealt directly with Malayan.
The respondent overlooked the fact that during the November 9, 2006
hearing,13 its counsel stipulated in open court that it was Malayan’s
authorized insurance agent, Rodolfo Talusan, who procured the original
policy from Malayan, not RCBC. This was the reason why Talusan’s
testimony was dispensed with. Moreover, in the previous hearing held on
November 17, 2005,14 PAP’s hostile witness, Alexander Barrera,
Administrative Assistant of Malayan, testified that he was the one who
procured Malayan’s renewal policy, not RCBC, and that RCBC merely
referred fire insurance clients to Malayan. He stressed, however, that no
written referral agreement exists between RCBC and Malayan. He also
denied that PAP notified Malayan about the transfer before the renewal
policy was issued. He added that PAP, through Maricar Jardiniano
(Jardiniano), informed him that the fire insurance would be renewed on an
"as is basis." Granting that any notice to RCBC was binding on Malayan,
PAP’s claim that it notified RCBC and Malayan was not indubitably
established. At best, PAP could only come up with the hearsay testimony of
its principal witness, Branch Manager Katsumi Yoneda.
With regards to the exposure of the risk under the old location, this was
occupied as factory of automotive/computer parts by the assured, and
factory of zinc & aluminum die cast, plastic gear for copy machine by Sanyo
Precision Phils., Inc. with a rate of 0.449% under 6.1.2 A. But under Pace
Pacific Mfg. Corporation this was occupied as factory that repacks silicone
sealant to plastic cylinders with a rate of 0.657% under 6.1.2 A. Hence, there
was an increase in the hazard as indicated by the increase in rate.
The Court agrees with Malayan that the transfer to the Pace Factory
exposed the properties to a hazardous environment and negatively affected
the fire rating stated in the renewal policy. Malayan is entitled to rescind the
insurance contract. Considering that the original policy was renewed on an
"as is basis," it follows that the renewal policy carried with it the same
stipulations and limitations. The terms and conditions in the renewal policy
provided, among others, that the location of the risk insured against is at the
Sanyo factory in PEZA. The subject insured properties, however, were
totally burned at the Pace Factory. Although it was also located in PEZA,
Pace Factory was not the location stipulated in the renewal policy. There
being an unconsented removal, the transfer was at PAP’s own risk. The
Court agrees with the report of Cunningham Toplis Philippines, Inc., an
international loss adjuster which investigated the fire incident at the Pace
Factory, which opined that "[g]iven that the location of risk covered under
the policy is not the location affected, the policy will, therefore, not respond
to this loss/claim."
PAP clearly committed concealment, misrepresentation and a breach of a
material warranty. Section 26 of the Insurance Code provides:
Section 26. A neglect to communicate that which a party knows and ought to communicate, is
called a concealment.
Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a
contract of insurance."
Moreover, under Section 168 of the Insurance Code, the insurer is entitled to rescind the
insurance contract in case of an alteration in the use or condition of the thing insured. Section
168 of the Insurance Code provides, as follows:
Section 68. An alteration in the use or condition of a thing insured from that to which it is limited
by the policy made without the consent of the insurer, by means within the control of the insured,
and increasing the risks, entitles an insurer to rescind a contract of fire insurance.
Accordingly, an insurer can exercise its right to rescind an insurance contract when the following
conditions are present, to wit:
1) the policy limits the use or condition of the thing insured;
2) there is an alteration in said use or condition;
3) the alteration is without the consent of the insurer;
4) the alteration is made by means within the insured’s control; and
5) the alteration increases the risk of loss.
In the case at bench, all these circumstances are present. It was clearly
established that the renewal policy stipulated that the insured properties
were located at the Sanyo factory; that PAP removed the properties without
the consent of Malayan; and that the alteration of the location increased the
risk of loss.
PHIL-NIPPON KYOEI, CORP V. GUDELOSAO & TANCONTIAN
FACTS: Petitioner, a domestic shipping corporation, purchased a "Ro-Ro"
passenger/cargo vessel "MV Mahlia" in Japan in February 2003.6 For the
vessel's one month conduction voyage from Japan to the Philippines,
petitioner, as local principal, and Top Ever Marine Management Maritime
Co., Ltd. (TMCL), as foreign principal, hired Edwin C. Gudelosao, Virgilio A.
Tancontian, and six other crewmembers. They were hired through the local
manning agency of TMCL, Top Ever Marine Management Philippine
Corporation (TEMMPC). TEMMPC, through their president and general
manager, Capt. Oscar Orbeta (Capt. Orbeta), and the eight crewmembers
signed separate contracts of employment. Petitioner secured a Marine
Insurance Policy from SSSICI over the vessel for P10,800,000.00 against
loss, damage, and third party liability or expense, arising from the
occurrence of the perils of the sea for the voyage of the vessel from
Onomichi, Japan to Batangas, Philippines. This Marine Insurance Policy
included Personal Accident Policies for the eight crewmembers for
P3,240,000.00 each in case of accidental death or injury.
On February 24, 2003, while still within Japanese waters, the vessel sank
due to extreme bad weather condition. Only Chief Engineer Nilo Macasling
survived the incident while the rest of the crewmembers, including
Gudelosao and Tancontian, perished. Respondents, as heirs and
beneficiaries of Gudelosao and Tancontian, filed separate complaints for
death benefits and other damages against petitioner, TEMMPC, Capt.
Orbeta, TMCL, and SSSICI, with the Arbitration Branch of the NLRC
LA: solidary liability among petitioner, TEMMPC, TMCL and Capt. Orbeta.
The LA also found SSSICI liable to the respondents for the proceeds of the
Personal Accident Policies and attorney's fees. The LA, however, ruled that
the liability of petitioner shall be deemed extinguished only upon SSSICI's
payment of the insurance proceeds.
NLRC: Absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any
liability based on the limited liability rule. It, however, affirmed SSSICI's
liability after finding that the Personal Accident Policies answer for the death
benefit claims under the Philippine Overseas Employment Administration
Standard Employment Contract (POEASEC). Respondents filed a Partial
Motion for Reconsideration which the NLRC denied in a Resolution dated
May 5, 2006.
CA: NLRC erred when it ruled that the obligation of petitioner, TEMMPC and
TMCL for the payment of death benefits under the POEA-SEC was ipso
facto transferred to SSSICI upon the death of the seafarers. TEMMPC and
TMCL cannot raise the defense of the total loss of the ship because its
liability under POEA-SEC is separate and distinct from the liability of the
shipowner. To disregard the contract, which has the force of law between
the parties, would defeat the purpose of the Labor Code and the rules and
regulations issued by the Department of Labor and Employment (DOLE) in
setting the minimum terms and conditions of employment for the protection
of Filipino seamen. The CA noted that the benefits being claimed are not
dependent upon whether there is total loss of the vessel, because the liability
attaches even if the vessel did not sink. Thus, it was error for the NLRC to
absolve TEMMPC and TMCL on the basis of the limited liability rule.
Significantly though, the CA ruled that petitioner is not liable under the
POEA-SEC, but by virtue of its being a shipowner. Thus, petitioner is liable
for the injuries to passengers even without a determination of its fault or
negligence. It is for this reason that petitioner obtained insurance from
SSSICI - to protect itself against the consequences of a total loss of the
vessel caused by the perils of the sea. Consequently, SSSICI's liability as
petitioner's insurer directly arose from the contract of insurance against
liability. The CA then ordered that petitioner's liability will only be
extinguished upon payment by SSSICI of the insurance proceeds. Petitioner
filed a Motion for Reconsideration dated November 5, 2007 but this was
denied by the CA in its Resolution26 dated January 11, 2008. On the other
hand, since SSSICI did not file a motion for reconsideration of the CA
Decision, the CA issued a Partial Entry of Judgment27 stating that the
decision became final and executory as to SSSICI on October 27, 2007.
ISSUE: WON the petitioner’s liability is extinguished upon payment of
indemnity the insurer to the employees. – NOT TOTALLY EXTINGUISHED;
Petition Partly GRANTED. The death benefits are limited to the amount
granted under the Release of All Rights and Full Satisfaction of Claim dated
December 14, 2007 executed between respondents and Top Ever Marine
Management Company Ltd., Top Ever Marine Management Philippine
Corporation, and Captain Oscar Orbeta
HELD:
DOCTRINE OF LIMITED LIABILITY IS NOT APPLICABLE TO CLAIMS UNDER POEA-SEC.
– 1st ISSUE NOT AS IMPORTANT
The limited liability rule is not absolute and is without exceptions. It does not apply in cases: (1)
where the injury or death to a passenger is due either to the fault of the shipowner, or to the
concurring negligence of the shipowner and the captain; (2) where the vessel is insured; and
(3) in workmen's compensation claims.
The provisions of the Code of Commerce invoked by appellant have no room in the application
of the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of,
the condition of laborers and employees. It is not the liability for the damage or loss of the cargo
or injury to, or death of, a passenger by or through the misconduct of the captain or master of
the ship; nor the liability for the loss of the ship as a result of collision; nor the responsibility for
wages of the crew, but a liability created by a statute to compensate employees and laborers
in cases of injury received by or inflicted upon them, while engaged in the performance of their
work or employment, or the heirs and dependents of such laborers and employees in the event
of death caused by their employment.
The liability of the shipowner or agent under the POEA-SEC has likewise nothing to do with the
provisions of the Code of Commerce regarding maritime commerce. The death benefits granted
under the POEA-SEC is not due to the death of a passenger by or through the misconduct of
the captain or master of the ship; nor is it the liability for the loss of the ship as result of collision;
nor the liability for wages of the crew. It is a liability created by contract between the seafarers
and their employers, but secured through the State's intervention as a matter of constitutional
and statutory duty to protect Filipino overseas workers and to secure for them the best terms
and conditions possible, in order to compensate the seafarers' heirs and dependents in the
event of death while engaged in the performance of their work or employment.
Thus, the claim for death benefits under the POEA-SEC is the same species as the workmen's
compensation claims under the Labor Code – both of which belong to a different realm from
that of Maritime Law. Therefore, the limited liability rule does not apply to petitioner's liability
under the POEA-SEC.
NEVERTHELESS, THE RELEASE AND QUITCLAIM BENEFIT PETITIONER AS A
SOLIDARY DEBTOR. – 2ND ISSUE NOT SUPER IMPORTANT
All the same, the Release and Quitclaim executed between TEMMPC, TMCL and Capt. Oscar
Orbeta, and respondents redounded to the benefit of petitioner as a solidary debtor.
Petitioner is solidarily liable with TEMMPC and TMCL for the death benefits under the POEA-
SEC. The basis of the solidary liability of the principal with the local manning agent is found in
the second paragraph of Section 10 of the Migrant Workers and Overseas Filipino Act of
1995,55 which, in part, provides: "[t]he liability of the principal/employer and the
recruitment/placement agency for any and all claims under this section shall be joint and
several." This provision, is in tum, implemented by Section 1 (e)(8), Rule 2, Part II of the POEA
Rules and Regulations Governing the Recruitment and Employment of Seafarers, which
requires the undertaking of the manning agency to "[a]ssume joint and solidary liability with the
employer for all claims and liabilities which may arise in connection with the implementation of
the employment contract [and POEA-SEC]."
SSSICI 'S LIABILITY AS INSURER UNDER THE PERSONAL ACCIDENT
POLICIES IS DIRECT.
The CA erred in ruling that "upon payment of [the insurance] proceeds to
said widows by respondent SOUTH SEA SURETY & INSURANCE CO.,
INC., respondent PHIL-NIPPON CORPORATION's liability to all the
complainants is deemed extinguished."
This ruling makes petitioner's liability conditional upon SSSICI's payment of
the insurance proceeds. In doing so, the CA determined that the Personal
Accident Policies are casualty insurance, specifically one of liability
insurance. The CA determined that petitioner, as insured, procured from
SSSICI the Personal Accident Policies in order to protect itself from the
consequences of the total loss of the vessel caused by the perils of the sea.
The CA found that the liabilities insured against are all monetary claims,
excluding the benefits under the POEA-SEC, of respondents in connection
with the sinking of the vessel.
We rule that while the Personal Accident Policies are casualty insurance,
they do not answer for petitioner's liabilities arising from the sinking of the
vessel. It is an indemnity insurance procured by petitioner for the benefit of
the seafarers. As a result, petitioner is not directly liable to pay under the
policies because it is merely the policyholder of the Personal Accident
Policies.
Section 176 (formerly Sec. 174) of The Insurance Code defines casualty
insurance as follows:
SEC. 174. Casualty insurance is insurance covering loss or liability
arising from accident or mishap, excluding certain types of loss which
by law or custom are considered as falling exclusively within the scope
of other types of insurance such as fire or marine. It includes, but is
not limited to, employer's liability insurance, motor vehicle liability
insurance, plate glass insurance, burglary and theft insurance,
personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of
insurance.
Based on Section 176, casualty insurance may cover liability or loss arising
from accident or mishap.1âwphi1 In a liability insurance, the insurer
assumes the obligation to pay third party in whose favor the liability of the
insured arises. On the other hand, personal accident insurance refers to
insurance against death or injury by accident or accidental means. In an
accidental death policy, the accident causing the death is the thing insured
against.
Notably, the parties did not submit the Personal Accident Policies with the
NLRC or the CA. However, based on the pleadings submitted by the parties,
SSSICI admitted that the crewmembers of MV Mahlia are insured for the
amount of P3,240,000.00, payable upon the accidental death of the
crewmembers. It further admitted that the insured risk is the loss of life or
bodily injury brought about by the violent external event or accidental means.
Based on the foregoing, the insurer itself admits that what is being insured
against is not the liability of the shipowner for death or injuries to passengers
but the death of the seafarers arising from accident.
The liability of SSSICI to the beneficiaries is direct under the insurance
contract. Under the contract, petitioner is the policyholder, with SSSICI as
the insurer, the crewmembers as the cestui que vie or the person whose life
is being insured with another as beneficiary of the proceeds, and the latter's
heirs as beneficiaries of the policies. Upon petitioner's payment of the
premiums intended as additional compensation to the crewmembers,
SSSICI as insurer undertook to indemnify the crewmembers' beneficiaries
from an unknown or contingent event. Thus, when the CA conditioned the
extinguishment of petitioner's liability on SSSICI's payment of the Personal
Accident Policies' proceeds, it made a finding that petitioner is subsidiarily
liable for the face value of the policies. To reiterate, however, there is no
basis for such finding; there is no obligation on the part of petitioner to pay
the insurance proceeds because petitioner is, in fact, the obligee or
policyholder in the Personal Accident Policies. Since petitioner is not the
party liable for the value of the insurance proceeds, it follows that the limited
liability rule does not apply as well.
Petitioner's claim that the limited liability rule and its corresponding exception
(i.e., where the vessel is insured) apply here is irrelevant because petitioner
was not found liable under tort or quasi-delict. Moreover, the insurance
proceeds contemplated under the exception in the case of a lost vessel are
the insurance over the vessel and pending freightage for the particular
voyage. It is not the insurance in favor of the seafarers, the proceeds of
which are intended for their beneficiaries. Thus, if ever petitioner is liable for
the value of the insurance proceeds under tort or quasi-delict, it would be
from the Marine Insurance Policy over the vessel and not from the Personal
Accident Policies over the seafarers.
Petitioner's claim that the limited liability rule and its corresponding
exception (i.e., where the vessel is insured) apply here is irrelevant
because petitioner was not found liable under tort or quasi-delict.
Moreover, the insurance proceeds contemplated under the exception
in the case of a lost vessel are the insurance over the vessel and
pending freightage for the particular voyage.76 It is not the insurance
in favor of the seafarers, the proceeds of which are intended for their
beneficiaries. Thus, if ever petitioner is liable for the value of the
insurance proceeds under tort or quasi-delict, it would be from the
Marine Insurance Policy over the vessel and not from the Personal
Accident Policies over the seafarers.
FGU INSURANCE V. ROXAS
FACTS: The Spouses Roxas entered into a Contract of Building
Construction with Rosendo P. Dominguez, Jr. (Dominguez) and Philtrust
Bank to complete the construction of their housing project known as "Vista
Del Mar Executive Houses." The project was located at Cabcaben,
Mariveles, Bataan and was estimated to cost P1,200,000.00.
From the terms of the Contract, Philtrust Bank would finance the cost of
materials and supplies to the extent of P900,000.00, while Dominguez would
undertake the construction works for P300,000.00.
It was also stipulated that Philtrust Bank may only release the funds for
materials upon Dominguez's request and with the Spouses Roxas'
conformity. Invoices covering materials previously purchased should also be
submitted to Philtrust Bank before any subsequent releases of funds were
made.
The P300,000.00 cost of labor would be shouldered by the Spouses Roxas,
but the Contract stated that:
[W]hether or not the [Spouses Roxas] could provide/supply the funds to
finance the labor costs as aforesaid, the Contractor binds himself to finish
and complete the construction of the project within the stipulated period of
One Hundred Fifty (150) working days [from April 25, 1979].
Finally, it was provided that in case of Dominguez's non-compliance of the
terms and conditions of the Contract, he would pay Philtrust Bank and/or the
Spouses Roxas liquidated damages of P1,000.00 per day until he has
complied with his obligation.
On May 24, 1979, the Spouses Roxas and Dominguez entered into another
Agreement, which provided for the terms of payment of the P300,000.00
"cost of labor, supervision and engineering services" as follows:
1. first cash payment of P30,000.00 — 45 working days from April 25,
1979, the start of the work on the project;
2. second cash payment of P30,000.00 — 30 working days from the
first cash payment;
3. third cash payment of P30,000.00 — 30 working days from the
second cash payment; and
 4. last and final payment of P210,000.00 in the form of real properties,
consisting of a 3,000-square-meter parcel of land in Mariveles,
Bataan under Transfer Certificate of Title (TCT) Nos. 71591 and
77270 to 77273, and a 2,000-square-meter parcel of land in Limay,
Bataan upon completion and acceptance of the project.
It was also stipulated that an interest of 14% per annum would be paid by
the Spouses Roxas in the event of non-payment of the amounts due to
Dominguez.
Also on May 24, 1979, pursuant to the Contract of Building Construction,
Dominguez secured a performance bond (Surety Bond), with face amount
of P450,000.00, from FGU. FGU and Dominguez bound themselves to
jointly and severally pay Floro Roxas (Floro) and Philtrust Bank the agreed
amount in the event of Dominguez's non-performance of his obligation under
the Contract.
Dominguez averred that on September 20, 1979, he requested an upward
adjustment of the contract price from the Spouses Roxas due to the rising
costs of materials and supplies. But the Spouses Roxas did not heed his
request.
He added that the Spouses Roxas also failed to make the three (3)
payments of P30,000.00 each as agreed upon. Thus, he formally demanded
that they pay the amounts due plus the stipulated interest of 14% per annum,
with a warning that he would stop further work and withdraw his workers
unless payment was received on or before October 31, 1979. 20
On November 9, 1979, Dominguez sent another demand letter to the
Spouses Roxas, this time, for the payment of P73,136.75, 21 which they
allegedly borrowed from the funds allotted for the project for their personal
use and benefit. The Spouses Roxas were required to pay the amount within
seven (7) days from receipt of the letter. However, they refused to pay.
Dominguez also asked Philtrust Bank to release the remaining balance of
P24,000.00 but to no avail.
Dominguez led a Complaint against the Spouses Roxas and Philtrust Bank
before Court of First Instance of Manila. In addition to the amounts claimed,
he also sought the following: the annulment of the "Whereas Clause"
providing for the completion of the construction project within 150 working
days; the rescission/annulment of the Contract of Building Construction
dated May 22, 1979 and the Agreement dated May 24, 1979; and the
declaration of the FGU Surety Bond as unenforceable.
In its Answer with Compulsory Counterclaim dated June 30, 1980,25
Philtrust Bank claimed that it did not release the P24,000.00 because
Dominguez failed to submit an accounting of the previous releases made.
Philtrust Bank added that Dominguez failed to complete even 60% of the
project despite its release of P876,000.00. As such, it asked Dominguez to
pay P1,000.00 per day of delay as liquidated damages until fulfillment of his
obligation. Lastly, Philtrust Bank averred that it sent several demand letters
to FGU to pay P450,000.00 for non-performance of its principal, but the latter
refused to pay. Hence, Philtrust Bank sought to implead FGU for non-
payment of P450,000.00 under its Surety Bond. 28
The Spouses Roxas "prayed for the reimbursement of the amount of
P422,000.00 unjustifiably released by [Philtrust Bank]" and damages of
P48,000.00 monthly beginning October 1979, representing unearned
rentals from the non- completion of the project.
RTC: found that the Spouses Roxas breached their obligation to Dominguez
under the Contract of Building Construction and the May 24, 1979
Agreement. Likewise, it ruled that Dominguez's non-completion of the
project within the stipulated period was justified because of the rising prices
of materials and labor. Finally, it held that Dominguez was made to accept
the construction contract due to the deceit and misrepresentation of the
Spouses Roxas and Philtrust Bank.
CA: modified.
The Court of Appeals also reversed the Regional Trial Court decision to
cancel the Surety Bond. It held that FGU, as surety under FGUIC Bond No.
G(23) 5994 dates May 24, 1979, was obligated to pay the Spouses Roxas
and Philtrust Bank the amount of P450,000.00 for Dominguez's non-
completion of the construction project within the stipulated period.
ISSUE: whether or not the Court of Appeals erred in holding FGU Insurance
Corporation liable for the full amount of P450,000.00 of its Surety Bond
rather than the cost overrun on account of Rosendo P. Dominguez, Jr.'s non-
completion of the project.
HELD: Under Section 175 of Presidential Decree No. 612 or the Insurance
Code, a contract of suretyship is defined as an agreement where "a party
called the surety guarantees the performance by another party called the
principal or obligor of an obligation or undertaking in favor of a third party
called the obligee."
A performance bond is a kind of suretyship agreement. It is "designed to
afford the project owner security that the contractor, will faithfully comply with
the requirements of the contract and make good [on the] damages sustained
by the project owner in case of the contractor's failure to so perform."
I.A
Liability under a surety bond is "limited to the amount of the bond" and is
determined strictly in accordance with the particular terms and conditions
set out in this bond. It is, thus, necessary to look into the actual terms of the
performance bond.
FGUIC Bond No. G (23) 5954 states:
That we, ROSENDO P. DOMINGUEZ, JR. as PRINCIPAL, and THE FGU
INSURANCE CORPORATION . . . as SURETY, are held and firmly bound
unto the FLORO ROXAS AND PHILIPPINE TRUST COMPANY, as the
OBLIGEE, in the sum of FOUR HUNDRED FIFTY THOUSAND PESOS
ONLY (P450,000.00), Philippine Currency, for the payment of which well
and truly to be made, we bind ourselves . . . jointly and severally firmly by
these presents.
THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS:
WHEREAS, the above bounden Principal . . . entered into a
contact/agreement with the said OBLIGEE to fully and faithfully perform and
fulfill all the undertakings, covenants, terms, conditions and agreement
stipulated in said contract, for the supply of necessary labor, materials,
supervision and other engineering service related for the completion and
ready for occupancy of the proposed Vista Del Mar-Executive Houses at
Cabcaben, Mariveles, Bataan;
NOW, THEREFORE, if the PRINCIPAL shall well and truly perform and ful
ll all the undertakings, covenants, terms, conditions, and agreements
stipulated in said contract/agreement, then this obligation shall be null and
void; otherwise, it shall remain in full force and effect. 71
The FGU Surety Bond is conditioned upon the full and faithful performance
by Dominguez of his obligations under the Contract of Building Construction.
Under the terms of this bond, FGU guaranteed to pay the amount of
P450,000.00 should Dominguez be unable to faithfully comply with the
contract for the completion of the Spouses Roxas' housing project. FGU's
obligation to pay is solidary with Dominguez and is realized once the latter
fails to perform his obligation under the Contract of Building Construction.
FGU's contention that the P450,000.00 face amount simply indicates its
maximum potential liability and that it should only be liable for actual
damages or the cost overrun as a result of the non-completion of the project
is untenable. The terms of the bond were clear; hence, the literal meaning
of its stipulation should control.
The specific condition in the FGU Surety Bond did not clearly state the
limitation of FGU's liability. From the terms of this bond, FGU guaranteed to
pay the amount of P450,000.00 in the event of Dominguez's breach of his
contractual undertaking. Hence, FGU was bound to pay the stipulated
indemnity upon proof of Dominguez's default without the necessity of proof
on the measure of damages caused by the breach. A stipulation not contrary
to law, morals, or public order is binding upon the obligor.
If FGU's intention was to limit its liability to the cost overrun or additional cost
to the Spouses Roxas to complete the project up to the extent of
P450,000.00, then it should have included in the Surety Bond specific words
indicating this intention. Its failure to do so must be construed against it.
It was undisputed that Dominguez failed to nish the construction work within
the agreed time frame, triggering FGU's liability under the Surety Bond.
Dominguez's breach of the Contract of Building Construction gave the
Spouses Roxas and/or Philtrust Bank the immediate right to pursue FGU on
the surety bond. Thus, FGU is duty- bound to perform what it has guaranteed
— to pay P450,000.00 upon notice of Dominguez's default.
This Court disagrees with FGU's contention that it should only be liable to
the Spouses Roxas for one-half (1/2) of the face amount of the Surety Bond.
Under the Surety Bond, FGU guaranteed Dominguez's ful lment of the
undertakings, terms, and conditions stipulated in the Contract of Building
Construction. A copy of the contract was attached to and made a part of the
Surety Bond. 76
FGU's undertaking under the Surety Bond was that of a surety to the
obligation of Dominguez, who is the principal under the construction
contract. This bond expressly incorporated the Contract of Building
Construction. Hence, in enforcing this bond, its provisions must be read
together with the Contract of Building Construction.
Jurisprudence refers to this rule as the "complementary-contracts-
construed- together" doctrine, which mandates that the stipulations, terms,
and conditions of both the principal and accessory contracts must be
construed together in order to arrive at the true intention of the parties. 77
This doctrine is consistent with Article 1374 of the Civil Code, which states:
Article 1374. The various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which may result from
all of them taken jointly.
While FGU's Surety Bond indicates "Floro Roxas and Philippine Trust
Company" as obligees, the Contract of Building Construction clearly refers
to Philtrust Bank and the Spouses Roxas as solidary creditors of
Dominguez, as can be gleaned from the following provisions:
6. In the event the Contractor fails to comply with its obligation under any of
the aforementioned premises and the herein terms and conditions of this
Contract, the Contractor shall pay to the Bank and/or Owners the sum of
One Thousand Pesos (P1,000.00), Philippine Currency, daily, as liquidated
damages, until it shall have complied with its obligation;
7. To insure and guarantee the faithful performance of its obligation under
this Contract, the Contractor binds himself to post and le a Performance
Bond of P450,000.00 and a Contractor's All Risk Bond of P1,200,000.00 in
favor of the Bank and/or Owners to be issued by a reputable
insurance/surety rm approved by the Bank[.] 78 (Emphasis supplied)
Consequently, FGU is bound to pay the Spouses Roxas and Philtrust Bank
as solidary creditors and not joint creditors.
CAPITAL INSURANCE & SURETY CO V. DEL MONTE MOTOR WORKS
FACTS: On March 3, 1997, the respondent sued Vilfran Liner, Inc., Hilaria
F. Villegas and Maura F. Villegas in the Regional Trial Court in Quezon City
(RTC) to recover the unpaid billings related to the fabrication and
construction of 35 passenger bus bodies. It applied for the issuance of a writ
of preliminary attachment. Branch 221 of the RTC issued the writ of
preliminary attachment, which the sheriff served on the defendants, resulting
in the levy of 10 buses and three parcels of land belonging to the defendants.
The sheriff also sent notices of garnishment of the defendants' funds in the
Quezon ;City branches of BPI Family Bank, China Bank, Asia Trust Bank,
City Trust Bank, and Bank of the Philippine Island. The levy and garnishment
prompted defendant Maura F. Villegas to file an Extremely Urgent Motion to
Discharge Upon Filing of a Counterbond, attaching thereto CISCO Bond No.
0001 1-00005/JCL dated June 10, 1997 and its supporting documents
purportedly issued by the petitioner. On July 2, 1997, the RTC approved the
counterbond and discharged the writ of preliminary attachment.
On January 15, 2002, the RTC rendered its decision in favor of the
respondent, holding and disposing:
Premises considered, this Court hereby renders judgment in favor of the
plaintiff ordering the defendants Vilfran Liner, Inc., Hilaria F. Villegas and
Maura Villegas jointly and solidarily liable to pay plaintiff.
On August 15, 2002, the sheriff also served a notice of garnishment against
the security deposit of the petitioner in the Insurance Commission.
On September 11, 2002, the respondent moved to direct the release by the
depositary banks of funds subject to the notice of garnishment from the
accounts of the petitioner, and to transfer or release the amount of
P14,864,219.37 from the petitioner's security deposit in the Insurance
Commission. On September 26, 12002, the petitioner opposed the
respondent's motion.
On October 2, 2002, the petitioner, through its Very Urgent Motion to Stay
Auction Sale of Levied Personal Properties, sought the stay of the auction
sale until the RTC resolved the issue of validity or enforceability of CISCO
BOND No. JCL(3)00005.
On December 27, 2002, the sheriff served a copy of the assailed resolution
on the then Insurance Commissioner Edgardo T. Malinis, with the request
for him to release the security deposit. However, Insurance Commissioner
Malinis turned down the request to release, citing Section 203 of
the Insurance Code, which expressly provided that the security deposit was
exempt from execution.
Meanwhile, on January 21, 2003, the petitioner filed a Motion for
Reconsideration against the December 18, 2002 resolution, but the RTC
denied the motion on January 30, 2003.
Thus, the petitioner assailed the resolution of December 18, 2002 and the
order of January 30, 2003 by petition for certiorari in the CA.
Decision of the CA
On September 15, 2003, the CA dismissed the petitioner's petition
for certiorari, explaining:
Per records of the Office of the Insurance Commission, petitioner CISCO is
a duly accredited insurance and bonding company. Hence, a counterbond
issued by it constitutes a valid and binding contract between petitioner
CISCO and the court. As such, the counterbond it issued xxx is valid. No
evidence was presented by petitioner CISCO to dispute its validity. Its
contention that Pio Ancheta and Carlito Alub, petitioner CISCO'S Vice
President for Surety and Asst. Branch Manager, respectively, of the Manila
Service Office were not authorized to sign the counterbond does not hold
water.
Further, petitioner CISCO avers that the subject CISCO Bond No.
00005/JCL(3), is among those missing; from its custody. Granting without
admitting that this is true, it is incumbent upon petitioner CISCO to inform
the court of such loss. Sad to say, petitioner CISCO failed to do so.
ISSUE:
1. Whether or not the Court of Appeals erred in ruling that the
counterbond filed in the trial court was a valid and subsisting
obligation of the petitioner
2. Whether or not the Court of Appeals erred in ruling that the
securities deposited by the petitioner insurance company may be
the subject of levy in contravention of Section 203 of the Insurance
code
HELD:
I. Validity of the petitioner's counterbond
The petitioner cannot evade liability under the counterbond by hiding behind
its own internal rules. Although a prospective applicant seeking insurance
coverage is expected to exercise prudence and diligence in selecting the
insurance provider, such responsibility does not require the prospective
applicant to know and be aware of the insurer's internal rules, policies and
procedure adopted for the conduct of its business. Considering that the
petitioner has been a duly accredited bonding company, the officers who
signed the bonds were presumed to be acting within the scope of their
authority in behalf of the company, and the courts were not expected to verify
the limits of the authority of the signatories of the bonds submitted in the
regular course of judicial business, in the same manner that the applicants
for the bonds were not expected to know the limits of the authority of the
signatories. To insist otherwise is absurd. It is reasonable to hold here,
therefore, that as between the petitioner and the respondent, the one who
employed and gave character to the third person as its agent should be the
one to bear the loss. That party was the petitioner.
The petitioner's contention that there was no evidence to show that the
premiums for the counterbond were paid has no merit. To start with, the
petitioner did not present any evidence to back up the contention. The bare
allegation of non-payment had no weight, for mere allegation,
unsubstantiated by evidence, did not equate to proof.27 In any event, both
the RTC and the CA found that the counterbond was approved and signed
by both Ancheta and Alub, whose signatures were genuine. If the premiums
were not paid, such officers of the petitioner would not have approved the
counterbond in the first place.
An insurer or bonding company like the petitioner that seeks to defeat a
claim on the ground that the counterbond was invalidly issued has the
burden of proving such defense. However, the petitioner did not discharge
the burden herein. No less than the officers charged with the responsibility
of making sure that all forms and records of the petitioner were audited
admitted that the missing counterbond was in fact a valid pre-approved form
of the Insurance Commission, so that the absence or lack of the signature
of the president did not render the bond invalid. Moreover, Laxa knew that
as a matter of long practice both Ancheta and Alub normally signed and
approved the counterbonds, regardless1 of the amounts thereof. She further
knew of no rule that limited the authority of Ancheta and Alub to issue and
sign counterbonds only up to P5,000,000.00.
II. The security deposit was immune from levy or execution
The simplistic interpretation of Section 203 of the Insurance Code by the CA
ostensibly ran counter to the intention of the statute and the Court's
pronouncement on the matter. We cannot uphold the CA's interpretation,
therefore, because the holders or beneficiaries of the policies of an insolvent
company would thereby likely end up becoming unpaid claimants. Besides,
denying the exemption would potentially pave the way for a single claimant,
like the respondent, to short-circuit the procedure normally undertaken in
adjudicating the claims against an insolvent company under the rules on
concurrence and preference of credits in order to ensure that none could
obtain an advantage or preference over another by virtue of an attachment
or execution.
What right, if any, did the respondent have in the petitioner's security
deposit?
According to Republic v. Del Monte Motors, Inc., the right to claim against
the security deposit is dependent on the solvency of the insurance company,
and is subject to all other obligations of the insurance company arising from
its insurance contracts. Accordingly, the respondent's interest in the security
deposit could only be inchoate or a mere expectancy, and thus had no
attribute as property.
Was the Insurance Commissioner's refusal to release the security deposit
despite the garnishment on execution legally justified?
The Insurance Commissioner's refusal to release was legally justified. Under
Section 191 and Section 203 of the Insurance Code, the Insurance
Commissioner had the specific legal duty to hold the security deposits for
the benefit of all policy holders. In this regard, Republic v. Del Monte Motors,
Inc.33 has also been clear, viz.:
The Insurance Code has vested the Office of the Insurance Commission
with both regulatory and adjudicatory authority over insurance matters.
Undeniably, the insurance commissioner has been given a wide latitude of
discretion to regulate the insurance industry so as to protect the insuring
public. The law specifically confers custody over the securities upon the
commissioner, with whom these investments are required to be deposited.
An implied trust is created by the law for the benefit of all claimants under
subsisting insurance contracts issued by the insurance company.
As the officer vested with custody of the security deposit, the insurance
commissioner is in the best position to determine if and when it may be
released without prejudicing the rights of other policy holders. Before
allowing the withdrawal or the release of the deposit, the commissioner must
be satisfied that the conditions contemplated by the law are met and all
policy holders protected, (bold Emphasis supplied)
Under the circumstances, the: Insurance Commissioner properly refused the
request to release issued by the sheriff under the notice of garnishment, and
was not guilty of contempt of court for disobedience to the assailed order of
December 18, 2002 of the RTC.
WHEREFORE, the Court PARTIALLY GRANTS the petition for review
on certiorari; REVERSES the decision of the Court of Appeals in so far as it
allowed the withdrawal of P11,835,375.50 from petitioner Capital Insurance
& Surety Company's security deposit in the Insurance Commission to
comply with the notice of garnishment served on August 16,
2002; AFFIRMS the decision promulgated on September 15, 2003 in all
other respects; and MAKES NO PRONOUNCEMENT on costs of suit.

COMMUNICATION AND INFORMATION SYSTEMS CORPORATION VS.
MARK SENSING AUSTRALIA PTY
FACTS: Communication and Information Systems Corporation (CISC) and
Mark Sensing Australia Pty. Ltd. (MSAPL) entered into a Memorandum of
Agreement (MOA) whereby MSAPL appointed CISC as "the exclusive
AGENT of [MSAPL] to PCSO during the [lifetime] of the recently concluded
MOA entered into between [MSAPL], PCSO and other parties." The recent
agreement referred to in the MOA is the thermal paper and bet slip supply
contract between the PCSO, MSAPL, and three other suppliers, namely
Lamco Paper, Consolidated Paper and Trojan Computer Forms. As
consideration for CISC's services, MSAPL agreed to pay CISC a
commission of 24.5% of future gross sales to PCSO, exclusive of duties and
taxes, for six years.
After initially complying with its obligation under the MOA, MSAPL stopped
remitting commissions to CISC during the second quarter of 2004. As a
result, CISC filed a complaint before the RTC for specific performance
against MSAPL, MSPI, Atty. Ofelia Cajigal, and PCSO. CISC prayed that
private respondents be ordered to comply with its obligations under the
MOA. It also asked the RTC to issue a writ of preliminary mandatory
injunction and/or writ of attachment.
RTC granted CISC's application for issuance of a writ of preliminary
attachment, stating that "the non-payment of the agreed commission
constitutes fraud on the part of the defendant MSAPL in their performance
of their obligation to the plaintiff." The RTC found that MSAPL is a foreign
corporation based in Australia, and its Philippine subsidiary, MSPI, has no
other asset except for its collectibles from PCSO. Thus, the RTC concluded
that CISC may be left without any security if ever MSAPL is found liable. But
the RTC limited the attachment to P4,861,312.00, which is the amount
stated in the complaint, instead of the amount sought to be attached by
CISC, i.e., P113,197,309.10.The RTC explained that it "will have to await
the Supreme Court judgment over the issue of whether [it] has jurisdiction
on the amounts in the excess of the amount prayed for by the plaintiff in their
complaint" since MSAPL appealed the adverse judgment in CA-G.R. SP No.
96620 to us. We later denied MSAPL's petition for review assailing the CA
Decision
CISC posted a bond in the amount of P113,197,309.10 through Plaridel
Surety and Insurance Company in favor of MSAPL then MSAPL filed a
motion to determine the sufficiency of the bond because of questions
regarding the financial capacity of Plaridel. But before the RTC could act on
this motion, MSAPL, apparently getting hold of Plaridel's latest financial
statements, moved to recall and set aside the approval of the attachment
bond on the ground that Plaridel had no capacity to underwrite the bond
pursuant to Section 215 of the old Insurance Code because its net worth
was only P214,820,566.00 and could therefore only underwrite up to
P42,964,113.20. RTC denied MSAPL's motion, finding that although Plaridel
cannot underwrite the bond by itself, the amount covered by the attachment
bond "was likewise re¬insured to sixteen other insurance companies."
However, "for the best interest of both parties," the RTC ordered Plaridel to
submit proof that the amount of P95,819,770.91 was reinsured. Plaridel
submitted its compliance attaching therein the reinsurance contracts.
MSAPL, MSPI and Atty. Ofelia Cajigal filed a petition for certiorari . CA held
that the RTC exceeded its authority when it "ordered the issuance of the writ
[of preliminary attachment] despite a dearth of evidence to clearly establish
[CISC's] entitlement thereto, let alone the latter's failure to comply with all
requirements therefor." Noting that the posting of the attachment bond is a
jurisdictional requirement, the CA concluded that since Plaridel's capacity
for single risk coverage is limited to 20% of its net worth, or P57,866,599.80,
the RTC "should have set aside the second writ outright for non-compliance
with Sections 3 and 4 of Rule 57." Hence this petition,
ISSUE: Whether courts may approve an attachment bond which has been
reinsured as to the excess of the issuer's statutory retention limit?
RULING: NO, Section 215 of the old Insurance Code, the law in force at the
time Plaridel issued the attachment bond, limits the amount of risk that
insurance companies can retain to a maximum of 20% of its net worth.
However, in computing the retention limit, risks that have been ceded to
authorized reinsurers are ipso jure deducted. In mathematical terms, the
amount of retained risk is computed by deducting ceded/reinsured risk from
insurable risk. If the resulting amount is below 20% of the insurer's net worth,
then the retention limit is not breached. In this case, both the RTC and CA
determined that, based on Plaridel's financial statement that was attached
to its certificate of authority issued by the Insurance Commission, its net
worth is P289,332,999.00. Plaridel's retention limit is therefore
P57,866,599.80, which is below the Pl13,197,309.10 face value of the
attachment bond. However, it only retained an insurable risk of
P17,377,938.19 because the remaining amount of P98,819,770.91 was
ceded to 16 other insurance companies. Thus, the risk retained by Plaridel
is actually P40 Million below its maximum retention limit. Therefore, the
approval of the attachment bond by the RTC was in order.
In cancelling Plaridel's insurance bond, the CA also found that because the
reinsurance contracts were issued in favor of Plaridel, and not MSAPL,
these failed to comply with the requirement of Section 4, Rule 57 of the Rules
of Court requiring the bond to be executed to the adverse party. This led
the CA to conclude that "the bond has been improperly and insufficiently
posted." We reverse the CA and so hold that the reinsurance contracts were
correctly issued in favor of Plaridel. A contract of reinsurance is one by which
an insurer (the "direct insurer" or "cedant") procures a third person (the
"reinsurer") to insure him against loss or liability by reason of such original
insurance. It is a separate and distinct arrangement from the original
contract of insurance, whose contracted risk is insured in the reinsurance
agreement. The reinsurer's contractual relationship is with the direct insurer,
not the original insured, and the latter has no interest in and is generally not
privy to the contract of reinsurance. Put simply, reinsurance is the "insurance
of an insurance." By its nature, reinsurance contracts are issued in favor of
the direct insurer because the subject of such contracts is the direct insurer's
risk-in this case, Plaridel's contingent liability to MSAPL and not the risk
assumed under the original policy. The requirement under Section 4, Rule
57 of the Rules of Court that the applicant's bond be executed to the adverse
party necessarily pertains only to the attachment bond itself and not to any
underlying reinsurance contract. With or without reinsurance, the obligation
of the surety to the party against whom the writ of attachment is issued
remains the same.
MALAYAN INSURANCE VS. LIN
FACTS: On January 4, 2010, Emma Lin filed a Complaint for Collection of
Sum of Money with Damages against Malayan Insurance, Yvonne
Yuchengco, Atty. Emmanuel Villanueva, Sonny Rubin, Engr. Francisco
Mondelo, Michael Angelo Requijo (collectively, the petitioners), and RCBC.
Lin alleged that she obtained various loans from RCBC secured by six
clustered warehouses located at Plaridel, Bulacan; that the five warehouses
were insured with Malayan against fire for P56 million while the remaining
warehouse was insured for P2 million; that on February 24, 2008, the five
warehouses were gutted by fire; that on April 8, 2008 the Bureau of Fire
Protection (BFP) issued a Fire Clearance Certification to her after having
determined that the cause of fire was accidental; that despite the foregoing,
her demand for payment of her insurance claim was denied since the
forensic investigators hired by Malayan claimed that the cause of the fire
was arson and not accidental; that she sought assistance from the Insurance
Commission (IC) which, after a meeting among the parties and a conduct of
reinvestigation into the cause/s of the fire, recommended that Malayan pay
Lin's insurance claim and/or accord great weight to the BFP's findings; that
in defiance thereof, Malayan still denied or refused to pay her insurance
claim; and that for these reasons, Malayan's corporate officers should also
be held liable for acquiescing to Malayan's unjustified refusal to pay her
insurance claim.
As against RCBC, Lin averred that notwithstanding the loss of the
mortgaged properties, the bank refused to go after Malayan and instead
insisted that she herself must pay the loans to RCBC, otherwise, foreclosure
proceedings would ensue; and that to add insult to injury, RCBC has been
compounding the interest on her loans, despite RCBC's failure or refusal to
go after Malayan.
Lin thus prayed in Civil Case No. 10-122738 that judgment be rendered
ordering petitioners to pay her insurance claim plus interest on the amounts
due or owing her; that her loans and mortgage to RCBC be deemed
extinguished as of February 2008; that RCBC be enjoined from foreclosing
the mortgage on the properties put up as collaterals; and that petitioners be
ordered to pay her P1,217,928.88 in the concept of filing fees, costs of suit,
P1 million as exemplary damages, and P500,000.00 as attorney's fees.
Months later, Lin filed before the IC an administrative case against Malayan,
represented this time by Yvonne.
In this administrative case, Lin claimed that since it had been conclusively
found that the cause of the fire was "accidental," the only issue left to be
resolved is whether Malayan should be held liable for unfair claim settlement
practice under Section 241 in relation to Section 247 of the Insurance Code
due to its unjustified refusal to settle her claim; and that in consequence of
the foregoing failings, Malayan's license to operate as a non-life insurance
company should be revoked or suspended, until such time that it fully
complies with the IC Resolution ordering it to accord more weight to the
BFP's findings.
On August 17, 2010, Malayan filed a motion to dismiss Civil Case No. 10-
122738 based on forum shopping.
RTC denied the Motion to Dismiss. CA, as did the RTC, found that Lin did
not commit forum shopping chiefly for the reason that the issues raised and
the reliefs prayed for in the civil case were essentially different from those in
the administrative case, hence Lin had no duty at all to inform the RTC about
the institution or pendency of the administrative case. Petitioners moved for
reconsideration of CA's Decision, but this motion was denied by the CA.
ISSUE: Whether or not respondent Lin committed forum-shopping when she
filed the civil and administrative cases
HELD: No, she did not. A civil case before the trial court involving recovery
of payment of the insured’s insurance claim plus damages, can proceed
simultaneously with an administrative case before the Insurance
Commission: the issues to be resolved, the quantum of evidence and the
procedure to be followed, and the reliefs to be adjudged by these two bodies
are different.
The provisions of the Insurance Code, as amended, clearly indicate that the
Office of the IC is an administrative agency vested with regulatory power as
well as with adjudicatory authority. Among the several regulatory or non-
quasi-judicial duties of the Insurance Commissioner under the Insurance
Code is the authority to issue, or refuse issuance of, a Certificate of Authority
to a person or entity desirous of engaging in insurance business in the
Philippines, and to revoke or suspend such Certificate of Authority upon a
finding of the existence of statutory grounds for such revocation or
suspension. The grounds for revocation or suspension of an insurer's
Certificate of Authority are set out in Section 241 and in Section 247 of the
Insurance Code as amended. The general regulatory authority of the
Insurance Commissioner is described in Section 414 of the Insurance Code,
as amended, in the following terms:
'Section 414. The Insurance Commissioner shall have the duty to see that
all laws relating to insurance, insurance companies and other insurance
matters, mutual benefit associations, and trusts for charitable uses are
faithfully executed and to perform the duties imposed upon him by this Code,
and shall, notwithstanding any existing laws to the contrary, have sole and
exclusive authority to regulate the issuance and sale of variable contracts
as defined in section two hundred thirty-two and to provide for the licensing
of persons selling such contracts, and to issue such reasonable rules and
regulations governing the same.
The Commissioner may issue such rulings, instructions, circulars, orders[,]
and decisions as he may deem necessary to secure the enforcement of the
provisions of this Code, subject to the approval of the Secretary of Finance
[DOF Secretary]. Except as otherwise specified, decisions made by the
Commissioner shall be appealable to the [DOF Secretary].'
The adjudicatory authority of the Insurance Commissioner is generally
described in Section 416 of the Insurance Code, as amended, which reads
as follows:
'Sec. 416. The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which an insurer may
be answerable under any kind of policy or contract of insurance, or for which
such insurer may be liable under a contract of suretyship, or for which a
reinsurer may be sued under any contract or reinsurance it may have
entered into, or for which a mutual benefit association may be held liable
under the membership certificates it has issued to its members, where the
amount of any such loss, damage or liability, excluding interests, cost and
attorney's fees, being claimed or sued upon any kind of insurance, bond,
reinsurance contract, or membership certificate does not exceed in any
single claim one hundred thousand pesos. HTcADC
The authority to adjudicate granted to the Commissioner under this section
shall be concurrent with that of the civil courts, but the filing of a complaint
with the Commissioner shall preclude the civil courts from taking cognizance
of a suit involving the same subject matter.'
Continuing, Section 416 (as amended by Batas Pambansa (B.P.) Blg. 874)
also specifies the authority to which appeal may be taken from a final order
or decision of the Commissioner given in the exercise of his adjudicatory or
quasi-judicial power:

'Any decision, order or ruling rendered by the Commissioner after a hearing

shall have the force and effect of a judgment. Any party may appeal from a
final order, ruling or decision of the Commissioner by filing with the
Commissioner within thirty days from receipt of copy of such order, ruling or
decision a notice of appeal to the Intermediate Appellate Court (now the
Court of Appeals) in the manner provided for in the Rules of Court for
appeals from the Regional Trial Court to the Intermediate Appellate Court
(now the Court of Appeals)

It may be noted that under Section 9 (3) of B.P. Blg. 129, appeals from a
final decision of the Insurance Commissioner rendered in the exercise of his
adjudicatory authority now fall within the exclusive appellate jurisdiction of
the Court of Appeals.

Petitioner's causes of action in Civil Case No. Q-95-23135 are predicated

on the insurers' refusal to pay her fire insurance claims despite notice, proofs
of losses and other supporting documents. Thus, petitioner prays in her
complaint that the insurers be ordered to pay the full-insured value of the
losses, as embodied in their respective policies. Petitioner also sought
payment of interests and damages in her favor caused by the alleged delay
and refusal of the insurers to pay her claims. The principal issue then that
must be resolved by the trial court is whether or not petitioner is entitled to
the payment of her insurance claims and damages. The matter of whether
or not there is unreasonable delay or denial of the claims is merely an
incident to be resolved by the trial court, necessary to ascertain petitioner's
right to claim damages, as prescribed by Section 244 of the Insurance Code.

On the other hand, the core, if not the sole bone of contention in Adm. Case
No. RD-156, is the issue of whether or not there was unreasonable delay or
denial of the claims of petitioner, and if in the affirmative, whether or not that
would justify the suspension or revocation of the insurers' licenses.

All told, we find that the CA did not err in holding that the petitioners utterly
failed to prove that the RTC exhibited grave abuse of discretion, amounting
to lack or excess of jurisdiction, which would justify the issuance of the
extraordinary writ of certiorari. 39