1.) Keppel Cebu Shipyard, Inc. vs.

Pioneer Insurance and Surety Corporation,

601 SCRA 96, September 25, 2009

G.R. Nos. 180880-81 | September 25, 2009 | Nachura, J.

In marine insurance, a constructive total loss occurs under any of the conditions set forth in Section 139
of the Insurance Code, which provides: “a person insured by a contract of marine insurance may abandon the
thing insured, or any particular portion hereof separately valued by the policy, or otherwise separately insured,
and recover for a total loss thereof, when the cause of the loss is a peril insured against: (a) If more than three-
fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is
injured to such an extent as to reduce its value more than three-fourths.

FACTS:

KCSI and WG&A executed a Shiprepair Agreement wherein KCSI would renovate and reconstruct WG&A’s
M/V Superferry 3 using its dry docking facilities pursuant to its restrictive safety and security rules and
regulations. Prior to the execution of the Shiprepair Agreement, Superferry 3 was already insured by WG&A with
Pioneer. In the course of its repair, M/V Superferry 3 was gutted by fire. Claiming that the extent of the damage
was pervasive, WG&A declared the vessels damage as a total constructive loss and, hence, filed
an insurance claim with Pioneer. Pioneer paid the insurance claim of WG&A in turn, executed a Loss and
Subrogation Receipt in favor of Pioneer. Pioneer claimed for reimbursement armed by the receipt but KSCI did
not hid to such demand.

Pioneer asseverates that there existed a total constructive loss so that it had to pay WG&A the full amount
of the insurance coverage and, by operation of law, it was entitled to be subrogated to the rights of WG&A to
claim the amount of the loss. KCSI counters that a total constructive loss was not adequately proven by Pioneer,
and that there is no proof of payment of the insurance proceeds.

ISSUE: Whether or not there was total constructive loss

RULING:

Yes, there was total constructive loss.

In marine insurance, a constructive total loss occurs under any of the conditions set forth in Section 139 of the
Insurance Code, which provides: “a person insured by a contract of marine insurance may abandon the thing
insured, or any particular portion hereof separately valued by the policy, or otherwise separately insured, and
recover for a total loss thereof, when the cause of the loss is a peril insured against:

(a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it
from the peril;

(b) If it is injured to such an extent as to reduce its value more than three-fourths; x x x.

2.) ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs.

THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent.
G.R. No. 166245 April 9, 2008
FACTS: On December 10, 1980, respondent Philippine American Life Insurance Company entered into an
agreement denominated as Creditor Group Life Policy No. P-1920 with petitioner Eternal Gardens Memorial Park
Corporation. Under the policy, the clients of Eternal Gardens who purchased burial lots from it on installment
basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of
the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis.
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a
copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot
purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated December 29, 1982,
containing a list of insurable balances of its lot buyers for October 1982, such list included John Chuang. His
balance of payments was PhP 100,000. On August 2, 1984, Chuang died. Philamlife had not furnished Eternal
with any reply on its insurance claim so the latter demanded its claim from the former. In response to Eternal’s
demand, Philamlife denied Eternal’s insurance claim holding that since the application was submitted only on
November 15, 1984, after his death, Mr. John Uy Chuang was not covered under the Policy since his application
was not approved. Moreover, the acceptance of the premiums is only in trust for and not a sign of approval.
RTC ruled in favor of Eternal Gardens, and said decision was reversed by the CA.

ISSUE: Whether or not Philam's inaction or non-approval meant the perfection of the insurance contract.

HELD: The mere inaction of the insurer on the insurance application must not work to prejudice the insured
and it cannot be interpreted as a termination of the insurance contract. The seemingly conflicting provisions
must be harmonized to mean that upon a party’s purchase

of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and
the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application.
The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature
of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction
of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as
a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit
and unambiguous.

3.) Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue

G.R. 167330 (September 18, 2009)

Corona, J.:

Facts: On January 27, 2000, the respondent CIR sent petitioner assessment of deficiency taxes, both Value-
Added Tax (VAT) and documentary stamp tax (DST) in the total amount of P224,702,641.18 for taxable years
1996 and 1997.
Petitioner protested such assessment in a letter, but the respondent did not act on the protest which led the
petitioner to file a petition in the Court of Tax Appeals (CTA) seeking the cancellation of said assessments. CTA
partially granted the petition wherein the petitioner is ordered to pay the deficiency VAT and set aside the DST
deficiency tax.
Respondent appealed in Court of Appeals (CA) with regard to the cancellation of DST assessment. CA granted
the petition. The Court affirmed CA’s decision. Hence, petitioner filed a motion for reconsideration.
Issue: Whether or not the petitioner is liable to pay the DST on its health care agreement pursuant to Sec.185
of the National Internal Revenue Code of 1997
Held: Petition granted. Petitioner is not contemplated to be included in “or other branch insurance” covered by
Section 185 of NIRC because it is a Health Maintenance Organization (HMO) and not an insurance company.
HMOs primary purpose is rendering service to its member by lowering prices and reducing the cost rather than
the risk of medical health. On the other hand, insurance businesses undertakes for a consideration to indemnify
its clients against loss, damage or liability arising from unknown or contingent event. The term “indemnify” therein
presuppose that a liability or claim has already been incurred. In HMOs, there is no indemnity precisely because
the member merely avails of medical services to be paid or already paid in advance at a pre-agreed price under
the agreements.
Moreover, HMOs play an important role in society as partners of the State in achieving its constitutional mandate
of providing citizens with affordable health services.
Also, the DST assessment of the petitioner for the years 1996 and 1997 became moot and academic since it
availed tax amnesty under RA 9480 on December 10, 2007. Thus, petitioner is entitled to immunity from payment
of taxes for taxable year 2005 and prior years.

4.) The Insular Life Assurance Company, Ltd., vs. Carponia Ebrado
GR. No. L- 44059
October 28, 1977
DOCTRINE:
General rules of civil law should be applied to resolve any void in the Insurance Law, as
pronounced in Article 2011 of the NCC.
A contract of insurance is personal in character.
FACTS:
Buenaventura Cristor Ebrado was married to Pascuala Ebrado. During his lifetime, he was living
with his common-law wife, Carponia Ebrado, although he was not legally separated from his legal wife.
Buenaventura was issued by The Insular Life Assurance Co., Ltd., Policy No. 009929 on a whole-life plan for
PhP 5,8882.00 with a rider for Accidental Death Benefits for the same amount.
Buenaventura designated Carponia Ebrado as the revocable beneficiary in his policy. Buenaventura died as a
result of an accident when he was hit by a falling branch of a tree. As the insurance policy was still in force,
The Insular Life Assurance Co., Ltd stands liable to pay the coverage. Carponia Ebrado, his common-law wife,
filed with the insurer a claim for the proceeds of the policy as the designated beneficiary therein. Pascuala Vda.
de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to
the insurance proceeds, not the common-law wife.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd,
commenced an action for Interpleader before the CFI of Rizal.
ISSUE: Can a common-law wife of a man who was not legally separated from his legal wife be a beneficiary of
his life insurance plan?
HELD/RULING
No.
The Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as amended) does
not contain any specific provision grossly resolutory to the question at hand. Section 50 of the Insurance Act,
which provides that “(t)he insurance shall be applied exclusively to the proper interest of the person in whose
name it is made,” cannot be interpreted that it includes the beneficiary because a contract of insurance is
personal in character. The general rules of civil law should be applied to resolve this void in the Insurance Law.
Article 2011 of the New Civil Code states: “The contract of insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code.”
Article 2012 of the same Code states that, “any person who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation
to him.” Therefore, common-law spouses are barred from receiving donations from each other.
Article 739 provides:
“The following donations shall be void: Those made between persons who were guilty of adultery or
concubinage at the time of the donation;
Those made between persons found guilty of the same criminal offense, in consideration thereof;
Those made to a public officer or his wife, descendants or ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor
or donee; and the guilt of the donee may be proved by preponderance of evidence in the same action.”
In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned.
Both are founded upon the same consideration: liberality. As a consequence, the proscription in Art. 739 of the
New Civil Code should equally operate in life insurance contracts.
In the case at bar, the requisite proof of common-law relationship between the insured and the beneficiary has
been supplied by the stipulations between the parties in the pre-trial conference. It was agreed an stipulated
that the deceased insured Buenaventura Ebrado was married to
Pascuala Ebrado and that, during the lifetime of the deceased insured, he was living with his common-law wife,
Carponia Ebrado. Based on the foregoing, Carponia Ebrado is hereby declared disqualified to be the
beneficiary of the late Buenaventura Ebrado in his life insurance policy. The proceeds of the policy are hereby
held payable to the estate of the deceased insured.

5.) Insurance Case Digest: Heirs Of Loreto C. Maramag V Maramag (2009)

FACTS:
 Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag
 Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and
his concubine Eva de Guzman Maramag, also suspected in the killing of Loreto and his
illegitimate children are claiming for his insurance.
 Vicenta alleges that Eva is disqualified from claiming
 RTC: Granted - civil code does NOT apply
 CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period
ISSUE: W/N Eva can claim even though prohibited under the civil code against donation

HELD: YES. Petition is DENIED.

 Any person who is forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy of the person who cannot make any donation to him
 If a concubine is made the beneficiary, it is believed that the insurance contract will still
remain valid, but the indemnity must go to the legal heirs and not to the concubine, for
evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary.
 SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made unless otherwise specified in the
policy.
 GR: only persons entitled to claim the insurance proceeds are either the insured, if still alive;
or the beneficiary, if the insured is already deceased, upon the maturation of the policy.
 EX: situation where the insurance contract was intended to benefit third persons who are not
parties to the same in the form of favorable stipulations or indemnity. In such a case, third
parties may directly sue and claim from the insurer
 It is only in cases where the insured has not designated any beneficiary, or when the
designated beneficiary is disqualified by law to receive the proceeds, that the insurance
policy proceeds shall redound to the benefit of the estate of the insured

6.) GAISANO CAGAYAN v. INSURANCE CO. OF NORTH AMERICA

GR No. 147839
June 08, 2006

FACTS

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. While Levi Strauss (Phils.) Inc.
(LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co. IMC and LSPI
separately obtained from respondent Insurance Company of North America (ICNA) fire insurance policies for
their book debt endorsements related to their ready-made clothing materials which have been sold or delivered
to various customers and dealers of the Insured anywhere in the Philippines which are unpaid45 days after the
time of the loss.

Petitioner Gaisano Cagayan, Inc. is a customer and dealer of IMC and LSPI products. It owns the Gaisano
Superstore Complex which was consumed by fire in 1991. Included in the items destroyed in the fire were stocks
of ready-made clothing materials sold and delivered by IMC and LSPI.

Respondent filed a complaint for damages against Gaisano Cagayan, Inc. alleging that IMC and LSPI filed their
claims under their respective fire insurance policies which it paid, thus it was subrogated to their rights. Petitioner
averred it not be held liable because the items were destroyed due to fortuitous event or force majeure. The
RTC ruled that IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss (res
perit domino). The CA ruled otherwise and ordered petitioner to pay respondent Php 2,119,205.60 and Php
535,613.00 the amount paid by the latter to IMC and LSPI, respectively.

ISSUE

WON respondent may claim against petitioner for the insured debt.

HELD

Yes, but the order to pay Php 535,613 is deleted for lack of factual basis.

The insurance policy is clear that the subject of the insurance is the book debts and not goods sold and delivered
to the customers and dealers of the insured.

Under Art. 1504 of the Civil code, unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery has been made or not; except where delivery of the
goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the
ownership in the goods has been retained by the seller merely to secure performance by the buyer of
his obligations under the contract, the goods are at the buyer's risk from the time of such delivery.

IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment
of the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the
basis for consideration of who bears the risk of loss, in property insurance, one's interest is not determined by
concept of title, but whether insured has substantial economic interest in the property.

Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in
property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the expectancy arises.

Anyone who derives a benefit from its existence or would suffer loss from its destruction has an insurable interest
in the said property.

The rationale that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event
only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation
holding him liable even in case of fortuitous event. It does not apply when the obligation is pecuniary in nature.

Re: deletion of Php 535,613.00

The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and
IMC as the insured, but also the amount paid to settle the insurance claim

Art. 2207 of the Civil Code states that if the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract.

However, LSPI failed to offer any subrogation receipt as evidence. Failure to substantiate the claim of
subrogation is fatal to petitioner's case for recovery of the amount of P535,613.00.

7.) Insurance Case Digest: Rizal Commercial Banking Corporation V. CA (1998)

G.R.Nos. 128833 April 20, 1998

Lessons Applicable: Assignee (Insurance)

FACTS:

 RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons, Inc. GOYU’s
applied again and through Binondo Branch key officer's Uy’s and Lao’s recommendation,
RCBC’s executive committee increased its credit facility to P50M to P90M and finally to
P117M.
 As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in favor of
RCBC.
 GOYU obtained in its name 10 insurance policy on the mortgaged properties from Malayan
Insurance Company, Inc. (MICO). In February 1992, he was issued 8 insurance policies in
favor of RCBC.
 April 27, 1992: One of GOYU’s factory buildings was burned so he claimed against MICO for
the loss who denied contending that the insurance policies were either attached pursuant to
writs of attachments/garnishments or that creditors are claiming to have a better right
 GOYU filed a complaint for specific performance and damages at the RTC
 RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons that MICO denied
GOYU’s claims
 RTC: Confirmed GOYU’s other creditors (Urban Bank, Alfredo Sebastian, and Philippine Trust
Company) obtained their writs of attachment covering an aggregate amount
of P14,938,080.23 and ordered that 10 insurance policies be deposited with the court minus
the said amount so MICO deposited P50,505,594.60.
 Another Garnishment of P8,696,838.75 was handed down
 RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC its loan
 CA: Modified by increasing the damages in favor of GOYU
 In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C.
Sebastian (the creditor) and GOYU (the debtor), where the subject insurance policies were
attached in favor of Sebastian
 RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded that
the endorsements favoring RCBC as defective.

ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the
mortgagor, in case of the occurrence of loss

HELD: YES.
 mortgagor and a mortgagee have separate and distinct insurable interests in the same
mortgaged property, such that each one of them may insure the same property for his own
sole benefit
 although it appears that GOYU obtained the subject insurance policies naming itself as the
sole payee, the intentions of the parties as shown by their contemporaneous acts, must be
given due consideration in order to better serve the interest of justice and equity
 8 endorsement documents were prepared by Alchester in favor of RCBC
 MICO, a sister company of RCBC
 GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.
 GOYU is at the very least estopped from assailing their operative effects.
 The two courts below erred in failing to see that the promissory notes which they ruled
should be excluded for bearing dates which are after that of the fire, are mere renewals of
previous ones
 RCBC has the right to claim the insurance proceeds, in substitution of the property lost in the fire. Having
assigned its rights, GOYU lost its standing as the beneficiary of the said insurance policies
 insurance company to be held liable for unreasonably delaying and withholding payment of insurance proceeds, the
delay must be wanton, oppressive, or malevolent - not shown
 Sebastian’s right as attaching creditor must yield to the preferential rights of RCBC over the Malayan insurance
policies as first mortgagee.

8.) Geagonia v CA G.R. No. 114427 February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year
policy and covered thestock trading of dry goods. The policy noted the requirement that "3. The insured shall
give notice to the Company of any insurance or insurances already effected, or which may subsequently be
effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances
be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the
Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited,
provided however, that this condition shall not apply when the total insurance or insurances in force at the time
of the loss or damage is not more than P200,000.00." The petitioners’ stocks were destroyed by fire. He then
filed a claim which was subsequently denied because the petitioner’s stocks were covered by two other fire
insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's denial was the
petitioner's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against the private
respondent in the Insurance Commission for the recovery of P100,000.00 under fire insurance policy and
damages. He claimed that he knew the existence of the other two policies. But, he said that he had no knowledge
of the provision in the private respondent's policy requiring him to inform it of the prior policies and this
requirement was not mentioned to him by the private respondent's agent. The Insurance Commission found
that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance
policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing
him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks.
The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00
with interest and attorney’s fees. CA reversed the decision of the Insurance Commission because it found that
the petitioner knew of the existence of the two other policies issued by the PFIC.

Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and
thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:

1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of
18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary
before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission
made ante litem motam. It was, indeed, incredible that he did not know about the prior policies since these
policies were not new or original.

2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance
policies should be construed most strictly against those for whose benefits they are inserted, and most favorably
toward those against whom they are intended to operate. With these principles in mind, Condition 3 of the
subject policy is not totally free from ambiguity and must be meticulously analyzed. Such analysis leads us to
conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be
to the extent exceeding P200,000.00 of the total policies obtained. Furthermore, by stating within Condition 3
itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed
P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding
P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the
incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the
perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total
amount that exceeds the property's value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in
which a fire would be profitable to the insured.

G.R. No. 102253 June 2, 1995

9.) SOUTH SEA SURETY AND INSURANCE COMPANY, INC. vs. HON. COURT OF APPEALS and VALENZUELA HARDWOOD
AND INDUSTRIAL SUPPLY, INC.

FACTS: Plaintiff [Valenzuela Hardwood and Industrial Supply, Inc.] entered into an agreement with the defendant Seven
Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs
numbering 940 at the port of Maconacon, Isabela for shipment to Manila. Plaintiff insured the logs, against loss and/or,
damage with defendant South Sea Surety and Insurance Co., Inc. and the latter issued its Marine Cargo Insurance Policy.

On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio
Chua. The said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs.
On 30 January 1984, a check for P5,625.00 to cover payment of the premium and documentary stamps due on the policy
was tendered to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the
insurance policy it issued as of the date of inception for non-payment of the premium due in accordance with Section 77
of the Insurance Code.

The trial court rendered judgment in favor of plaintiff Hardwood. The Court of Appeals affirmed the judgment of
the court a quo only against the insurance corporation.

ISSUE: Whether there was payment of the premiums making petitioner liable.

HELD: YES. The payment of the premium is a condition precedent to, and essential for, the efficaciousness of the contract.
The only two statutorily provided exceptions are (a) in case the insurance coverage relates to life or industrial life (health)
insurance when a grace period applies and (b) when the insurer makes a written acknowledgment of the receipt of
premium, this acknowledgment being declared by law to be then conclusive evidence of the premium payment.

At the time the vessel sank on 25 January 1984 resulting in the loss of the insured logs, the insured had already
delivered to Victorio Chua the check in payment of premium. But, as Victorio Chua testified, it was only in the morning of
30 January 1984 or 5 days after the vessel sank when his messenger tendered the check to defendant South Sea Surety
and Insurance Co., Inc.

Mr. Chua testified that the marine cargo insurance policy for the plaintiff's logs was delivered to him on 21 January
1984 at his office to be delivered to the plaintiff. When the appellant South Sea Surety and Insurance Co., Inc. delivered
to Mr. Chua the marine cargo insurance policy for the plaintiffs logs, he is deemed to have been authorized by the South
Sea Surety and Insurance Co., Inc. to receive the premium which is due on its behalf.

When therefore the insured logs were lost, the insured had already paid the premium to an agent of the South
Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds under the policy it issued
to the insured.

G.R. No. 95546 November 6, 1992

10.) MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS, AMERICAN
HOME ASSURANCE CO., represented by American International Underwriters (Phils.), Inc., respondent.

FACTS:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by American
International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation
(TUSCANY) Insurance Policy No. AH-CPP-9210452 on the latter's building and premises, for a period beginning 1
March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The premium was paid on
installments on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November 1982, all of which were accepted by
private respondent.
Successive renewals of the policies were made in the same manner. On 1984, the policy was again renewed and
petitioner made two installment payments, both accepted by private respondent, the first on 6 February 1984 for
P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to pay the balance of
the premium.

Private respondent filed an action to recover the unpaid balance of P314,103.05 for Insurance Policy. Petitioner
explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its
favor. Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It
then pleaded a counterclaim for P152,000.00 for the premiums already paid for 1984-85, and in its answer with
amended counterclaim, sought the refund of P924,206.10 representing the premium payments for 1982-85.
DECISION OF LOWER COURTS:
(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due

ISSUE:
Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance,
in view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended, which provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies.

RULING:
No, the contract remains valid even if the premiums were paid on installments. Certainly, basic principles of equity
and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on
installments, and later deny liability on the lame excuse that the premiums were not prepared in full.
At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily
accepted.
Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the
insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any
period, however brief or momentary. The obligation to pay premiums when due is ordinarily as indivisible
obligation to pay the entire premium.

11.) Insurance Case Digest: American Home Assurance Co. V. Chua (1999)

G.R. No. 130421 June 28, 1999

Lessons Applicable: Acknowledgement receipt (Insurance)

Laws Applicable: Section 29, Section 66,Section 75, Section 77,Section 78, Section 306 of the
Insurance Code

FACTS:

 April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of his business, Moonlight
Enterprises with American Home Assurance Companyby issuing a check of P2,983.50 to its agent James
Uy who delivered the Renewal Certificate to him.
 April 6, 1990: Moonlight Enterprises was completely razed by fire with an est. loss of P4,000,000 to
P5,000,000
 April 10, 1990: An official receipt was issued and subsequently, a policy was issued covering March 25 1990
to March 25 1991
 Antonio Chua filed an insurance claim with American Home and 4 other co-insurers (Pioneer
Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc. and Filipino
Merchants Insurance Co)
 American Home refused alleging the no premium was paid
 RTC: favored Antonio Chua for paying by way of check a day before the fire occurred
 CA: Affirmed
ISSUE:
1. W/N there was a valid payment of premium considering that the check was cashed after the
occurrence of the fire since the renewal certificate issued containing the acknowledgement
receipt
2. W/N Chua violated the policy by his submission of fraudulent documents and non-disclosure
of the other existing insurance contracts or “other insurance clause"

HELD:petition is partly GRANTED modified by deleting the awards of P200,000 for loss of profit,
P200,000 as moral damages and P100,000 as exemplary damages, and reducing the award of
attorney’s fees from P50,000 to P10,000

1. YES.

 Section 77 of the Insurance Code

 An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been paid, except in the case of life or an
industrial life policy whenever the grace period provision applies
 Section 66 of the Insurance Code - not applicable since not termination but renewal
 renewal certificate issued contained the acknowledgment that premium had been paid
 Section 306 of the Insurance Code provides that any insurance company which delivers a policy or contract of
insurance to an insurance agent or insurance broker shall be deemed to have authorized such agent or broker to
receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its
issuance or delivery or which becomes due thereon
 best evidence of such authority is the fact that petitioner accepted the check and issued the official receipt for the
payment. It is, as well, bound by its agent’s acknowledgment of receipt of payment
 Section 78 of the Insurance Code
 An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its
payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until
the premium is actually paid.
 This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77
2. NO.

 purpose for the “other insurance clause” is to prevent an increase in the moral hazard
 failure to disclose was not intentional and fraudulent
 Section 75
 A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise
the breach of an immaterial provision does not avoid the policy.
 American Home is estopped because its loss adjusters had previous knowledge of the co-
insurers
 The loss adjuster, being an employee of petitioner, is deemed a representative of the latter whose awareness of the
other insurance contracts binds petitioner
 no legal and factual basis for the award of P200,000 for loss of profit
 no such fraud or bad faith = no moral damages
 grant of attorney’s fees as part of damages is the exception rather than the rule
 award attorney’s fees where it deems just and equitable that it be so granted
 reduced to P10,000
 12.) MALAYAN INSURANCE vs PHILIPPINE FIRST INSURANCE

FACTS

 Wyeth contracted a contract of carriage with Republic, a common carrier for the transport of its goods and
product.
 Wyeth insured the goods with Philippine First , while Republic insured the same goods with Malayan insurance
 During transit, certain goods were lost due to hijacking of 10 armed men.
 Philippine first paid the proceeds to Wyeth, subrogating the rights of wyeth to Philippine first which filed a claim
against Republic and Malayan as a 3rd party defendant.
 Republic and Malayan refused the claim of Philippine first. Malayan contended that there was double insurance
and that the first insurer, Philippine First, should bear all the loss.

ISSUE

 W/N Malayan is liable? - YES

 W/N there is double insurance? - NO
 W/N Malayan is solidarily liable with Republic? - NO

HELD

 Malayan is liable because of the insurance contract it executed with Republic for the idemnity for the loss. The
cause of the loss not within the purview of an excepted peril, having been determined in the lower courts is
conclusive upon the SC making Malayan liable for the idemnity.
 There is double insurance when:

1] The person insured is the same

2] 2 or more insurers insuring separately
3] There is identity of subject matter
4] There is identity of interest insured
5] There is identity of the risk or peril insured against

In the case at bar though the 2 insurance policy, one by Philippine first and one by Malayan were issued over the
same subject matter covering the same peril, it was issued to 2 different persons and to 2 different interest.

 Philippine first insured wyeth over its own goods

 Malayan insured republic over the latters insurable interest over the safety of the goods which could
become the basis for liability in case of loss or damage.

Malayan is not solidarily liable with Republic because they have different sources from which their liability arose.
Republic arose due to a contract of carriage, while Malayan is that of contract. Solidarity exist only by express stipulation
of the parties or those provided by law, none of which is applicable in the present case.

13.) Insurance Case Digest: Pacific Timber V. CA (1982)

G.R. No. L-38613 February 25, 1982

Lessons Applicable: Rules on cover notes (if premium CANNOT yet be computed) (Insurance)
Laws Applicable: Section 84 of the Insurance Code

FACTS:

 March 19, l963: Pacific Timber secured temporary insurance from Workmen's Insurance Company,
Inc. for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be
shipped from the Diapitan Bay, Quezon Province to Tokyo, Japan.
 Workmen's issued Cover Note insuring the cargo "Subject to the Terms and Conditions of the Workmen's
Insurance Company, Inc."
 April 2, 1963: regular marine cargo policies were issued for a total of 1,195.498 bd. ft. Due
to the bad weather some of the logs were lost during loading operations. 45 pieces of logs
were salvaged, but 30 pieces were lost. Pacific informed Workmen's who refused stating that
the logs covered in the 2 marine policies were received in good order at the point of
destination and that the cover note was null and void upon the issuance of the Marine
Policies
 CFI: cover note is valid
 CA: reversed
ISSUE: W/N the cover note is valid despite the absence of premium payment upon it

HELD: YES. CA set aside. CFI reinstated

 it was not necessary to ask for payment of the premium on the Cover Note , for the loss insured against
having already occurred, the more practical procedure is simply to deduct the premium from
the amount due on the Cover Note
 Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note
would have already arisen even before payment of premium
 cover note as a "binder"
 supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption
is that a credit was intended and policy is valid
 it sent its adjuster to investigate and assess the loss to determine if petitioner was guilty of delay in communicating the
loss but there was none
 Section 84
 Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to
take objection promptly and specifically upon that ground

14.) COMMISSIONER OF INTERNAL REVENUE v. LINCOLN PHILIPPINE LIFE INSURANCE COMPANY,

INC. (now JARDINE-CMA LIFE INSURANCE COMPANY, INC.) and THE COURT OF APPEALS. G.R. No.
119176. March 19, 2002. 379 SCRA 423.

FACTS:

Respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) is a
domestic corporation engaged in life insurance business. Respondents issued a special kind of life insurance
policy known as the Junior Estate Builder Policy, in which there is a clause providing for an automatic increase
in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of
issuing a new policy.

CIR then issued deficiency documentary stamps tax assessment corresponding to the amount of automatic
increase of the sum assured on the policy issued by respondent.

Respondent filed a petition with the CTA which was held in their favor. The CIR appealed with the CA affirming
the decision of the CTA.
ISSUE: Whether a new insurance policy is distinct from the main policy making it liable for additional taxes.

RULING:

YES.

The subject insurance policy at the time it was issued contained an automatic increase clause. Although the clause
was to take effect on a later date, it was written into the policy at the time of its issuance.

Section 173 of the NIRC provides that the payment of documentary stamp taxes is done at the time the act is
done. Section 183 of the NIRC provides that the tax base for the computation of documentary stamp taxes on
life insurance policies is the amount fixed in policy.

Here, although the automatic increase in the amount of life insurance coverage was to take effect later on, the
amount of the increase was already definite at the time of the issuance of the policy. Thus, the amount insured
by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase
clause because it was already determinable at the time the transaction was entered into and formed part of the
policy.

The additional insurance was an obligation subject to a suspensive obligation, but still a part of the insurance
sold to which respondent was liable for the payment of the documentary stamp tax. The deficiency of
documentary stamp tax imposed on respondent is not on the amount of the original insurance coverage, but on
the increase of the amount insured upon the effectivity of the Junior Estate Builder Policy.

15.) Ng Gan Zee v. Asian Crusader Life - Imperfection in the Application Form

122 SCRA 61

Facts:

> In 1962, Kwon Nam applied for a 20yr endowment insurance on his life with his wife, Ng Gan Zee as the
beneficiary.

> He stated in his application that he was operated on for tumor of the stomach associated with ulcer.

> In 1963, Kwong died of cancer of the liver with metastasis. Asian refused to pay on the ground of alse
information.

> It was found that prior to his application, Kwong was diagnosed to have peptic ulcers, and that during the
operation what was removed from Kwong’s body was actually a portion of the stomach and not tumor.

Issue:

Whether or not the contract may be rescinded on the ground of the imperfection in the application form.

Held:

NO.

Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer. His statement
therefore was made in good faith. Asian should have made an inquiry as to the illness and operation of Kwong
when it appeared on the face of the application that a question appeared to be imperfectly answered. Asian’s
failure to inquire constituted a waiver of the imperfection in the answer.

Ng v Asian Crusader G.R. No. L-30685 May 30, 1983

Facts:
Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000.00, with his wife,
appellee Ng Gan Zee as beneficiary. On the same date, Asian Crusader, upon receipt of the
required premium from the insured, approved the application and issued the corresponding policy. Kwong Nam
died of cancer of the liver with metastasis. All premiums had been paid at the time of his death.
Ng Gan Zee presented a claim for payment of the face value of the policy. On the same date, she submitted the
required proof of death of the insured. Appellant denied the claim on the ground that the answers given by the
insured to the questions in his application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner. The latter, after conducting an
investigation, wrote the appellant that he had found no material concealment on the part of the insured and that,
therefore, appellee should be paid the full face value of the policy. The company refused to settle its obligation.
Appellant alleged that the insured was guilty of misrepresentation when he answered "No" to the following
question appearing in the application for life insurance-
Has any life insurance company ever refused your application for insurance or for reinstatement of a lapsed
policy or offered you a policy different from that applied for? If, so, name company and date.
The lower court ruled against the company on lack of evidence.
Appellant further maintains that when the insured was examined in connection with his application for life
insurance, he gave the appellant's medical examiner false and misleading information as to his ailment and
previous operation. The company contended that he was operated on for peptic ulcer 2 years before the policy
was applied for and that he never disclosed such an operation.

Issue: WON Asian Crusader was deceived into entering the contract or in accepting the risk at the rate
of premium agreedupon because of insured's representation?

Held: No. Petition dismissed.

Ratio:
Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the other, in good faith, all facts within his
knowledge which are material to the contract, and which the other has not the means of ascertaining, and as to
which he makes no warranty.
"Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith,
and fair dealing requires that he should communicate it to the assurer, but he designedly and intentionally
withholds the same."
It has also been held "that the concealment must, in the absence of inquiries, be not only material, but fraudulent,
or the fact must have been intentionally withheld."
Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. And
as correctlyobserved by the lower court, "misrepresentation as a defense of the insurer to avoid liability is an
'affirmative' defense. The duty to establish such a defense by satisfactory and convincing evidence rests upon
the defendant. The evidence before the Court does not clearly and satisfactorily establish that defense."
It bears emphasis that Kwong Nam had informed the appellant's medical examiner of the tumor. His statement
that said tumor was "associated with ulcer of the stomach" should be construed as an expression made in good
faith of his belief as to the nature of his ailment and operation.
While the information communicated was imperfect, the same was sufficient to have induced appellant to make
further inquiries about the ailment and operation of the insured.
Section 32 of Insurance Law:
Section 32. The right to information of material facts maybe waived either by the terms of insurance or by neglect
to make inquiries as to such facts where they are distinctly implied in other facts of which information is
communicated.
Where a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a
policy without any further inquiry, they waive the imperfection of the answer and render the omission to answer
more fully immaterial.
The company or its medical examiner did not make any further inquiries on such matters from the hospital before
acting on the application for insurance. The fact of the matter is that the defendant was too eager to accept the
application and receive the insured's premium. It would be inequitable now to allow the defendant to avoid liability
under the circumstances."

16.) Vda. De Canilang v. CA - Concealment

223 SCRA 443 (1993)

Facts:

> Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang
consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis."

> On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with Grepalife
naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the face value of
P19,700.

> On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic anemia." The wife as
beneficiary, filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed
material information from it.

> Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending that as far as
she knows her husband was not suffering from any disorder and that he died of kidney disorder.

> Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no
intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health
condition of the applicant by the issuance of the policy despite the lack of answers to "some of the pertinent
questions" in the insurance application. CA reversed.

Issue:

Whether or not Grepalife is liable.

Held:

SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B. Claudio
who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under the relevant
provisions of the Insurance Code, the information concealed must be information which the concealing party
knew and "ought to [have] communicate[d]," that is to say, information which was "material to the contract.

The information which Canilang failed to disclose was material to the ability of Grepalife to estimate the
probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the
diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be
reasonably assumed that Grepalife would have made further inquiries and would have probably refused to
issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage.

The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of
Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process,
except through proof of external acts or failure to act from which inferences as to his subjective belief may be
reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality
relates rather to the "probable and reasonable influence of the facts" upon the party to whom the
communication should have been made, in assessing the risk involved in making or omitting to make further
inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts"
concealed must, of course, be determined objectively, by the judge ultimately.

SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the concealment by
issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in
the insurance application. Such failure precisely constituted concealment on the part of Canilang. Petitioner's
argument, if accepted, would obviously erase Section 27 from the Insurance Code of 1978.

17.) Tan v. CA - Rescission of the contract of insurance

174 SCRA 403

Facts:

> Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973.

> On Aprl 26, 1975, Tan died of hepatoma. His beneficiaries then filed a claim with Philamlife for the
proceeds of the insurance.
> Philamlife wrote the beneficiaries in Sep. 1975 denying their claim and rescinding the contract on the ground
of misrepresentation. The beneficiaries contend that Philamlife can no longer rescind the contract on the
ground of misrepresentation as rescission must allegedly be done “during the lifetime of the insured” within two
years and prior to the commencement of the action following the wording of Sec. 48, par. 2.

Issue:

Whether or not Philamlife can rescind the contract.

Held:

YES.

The phrase “during the lifetime” found in Sec. 48 simply means that the policy is no longer in force after the
insured has died. The key phrase in the second paragraph is “for a period of two years”.

What is a simpler illustration of the ruling in Tan v. CA?

The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last
reinstatement. So if for example the policy was issued/reinstated on Jan 1, 2000, the insurer can still exercise
his right to rescind up to Jan. 1, 2003 or two years from the date of issue/reinstatement, REGARDLESS of
whether the insured died before or after Jan. 1, 2003.

G.R. No. 186983 February 22, 2012

18.) MA. LOURDES S. FLORENDO, Petitioner,

vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE, Respondents.

FACTS:

Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans, Inc. (Philam
Plans) Manuel signed the application and left to Perla the task of supplying the information needed in the
application. Respondent Ma. Celeste Abcede, Perla’s daughter, signed the application as sales counselor.
Philam Plans issued Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife, as
beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later, Manuel died of blood poisoning.
Subsequently, Lourdes filed a claim with Philam Plans for the payment of the benefits under her husband’s plan
but Philam Plans declined her claim prompting her to file the present action against the pension plan company
before the Regional Trial Court (RTC) of Quezon City and ruled in favor of Ma. Lourdes. However, the Court of
Appeals then reversed the RTC decision. Hence this appeal.

ISSUE:

Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under the insurance plan
despite consideration that her husband Manuel concealed the true condition of his health.

RULING:

The Supreme Court answers this to the negative and the AFFIRMED in its entirety the decision of the Court of
Appeals.
The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It states:

VIII. INCONTESTABILITY

After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons any
claim for insurance under this Agreement, except for the reason that installment has not been paid (lapsed), or
that you are not insurable at the time you bought this pension program by reason of age. If this Agreement lapses
but is reinstated afterwards, the one (1) year contestability period shall start again on the date of approval of
your request for reinstatement.

The above incontestability clause precludes the insurer from disowning liability under the policy it issued on
the ground of concealment or misrepresentation regarding the health of the insured after a year of its issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability
period has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to
the benefits of her husband’s pension plan.

19.) LOADMASTERS CUSTOMS SERVICES, INC., vs. GLODEL BROKERAGE CORPORATION and R&B
INSURANCE CORPORATION, / G.R. No. 179446 / January 10, 2011

FACTS:

The case is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the
August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 82822.
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to
insure the shipment of 132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the
cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila.
They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier
and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for
the use of its delivery trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan
and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed
drivers and accompanied by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan, only
five (5) reached the destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed
to deliver its cargo.
Later on, the said truck, was recovered but without the copper cathodes. Because of this
incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount ofP1,903,335.39.
After the investigation, R&B Insurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before
the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of the amount it had paid
to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the
consignee to recover from the party/parties who may be held legally liable for the loss."
On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages for the loss of
the subject cargo and dismissing Loadmasters’ counterclaim for damages and attorney’s fees against R&B
Insurance.
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel, whatever
liability the latter owes to appellant R&B Insurance Corporation as insurance indemnity must likewise be the
amount it shall be paid by appellee Loadmasters. Hence, Loadmasters filed the present petition for review on
certiorari.

ISSUE:
Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the
subject cargo.
RULING:
The petition is PARTIALLY GRANTED. Judgment is rendered declaring petitioner Loadmasters Customs
Services, Inc. and respondent Glodel Brokerage Corporation jointly and severally liable to respondent
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations
engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for
compensation, offering their services to the public. Loadmasters is a common carrier because it is engaged in
the business of transporting goods by land, through its trucking service. It is a common carrier as distinguished
from a private carrier wherein the carriage is generally undertaken by special agreement and it does not hold
itself out to carry goods for the general public. Glodel is also considered a common carrier within the context of
Article 1732. For as stated and well provided in the case of Schmitz Transport & Brokerage Corporation v.
Transport Venture, Inc., a customs broker is also regarded as a common carrier, the transportation of goods
being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that extreme measure of care and caution which persons of
unusual prudence and circumspection observe for securing and preserving their own property or rights. With
respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of
extraordinary diligence lasts from the time the goods are unconditionally placed in the possession of, and
received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to receive them.
The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance
for the loss of the subject cargo. Loadmasters’ claim that it was never privy to the contract entered into by
Glodel with the consignee Columbia or R&B Insurance as subrogee, is not a valid defense.
For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck
driver and helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by its employees who acted within the scope of their
assigned task of delivering the goods safely to the warehouse.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated
destination. Glodel should, therefore, be held liable with Loadmasters. Its defense of force majeure is
unavailing.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable
grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is applied only in the absence
of, and never against, statutory law or judicial rules of procedure." The Court cannot be a lawyer and take the
cudgels for a party who has been at fault or negligent.

20.) ABOITIZ SHIPPING CORPORATION v. INSURANCE COMPANY OF NORTH AMERICA

FACTS:
On June 20, 1993 MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) procured an "all-risk" marine insurance policy from ICNA UK Limited of London for
wooden work tools and workbenches purchased by consignee Science Teaching Improvement
Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City. On July 26, 1993, the cargo was received by
Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz
Transport System. August 1, 1993 the container van was loaded on board MV Super Concarrier I. August
3, 1993 the shipment arrived in Cebu City, as per Stripping Report, the checker noted that the crates
were slightly broken or cracked at the bottom. On August 11, 1993 the cargo was withdrawn by the
representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don
Bosco Technical High School, Punta Princesa, Cebu City. August 13, 199, Mayo B. Perez, Head of Aboiti
received a call from the receiver Mr. Bernhard Willig that the cargo sustained water damage so he
checked the other cargo but they were dry. In a letter dated August 15, 1993, Willig informed Aboitiz
that the damage was caused by water entering through the broken bottom parts of the crate.
Consignee filed a claim against ICNA. CAC reported to ICNA that the shipment was placed outside
the warehouse when it was delivered on July 26, 1993 and it was only on July 31, 1993 when the
shipment was stuffed inside another container van for shipment to Cebu. Weather report shows that
the heavy rains on July 28 and 29, 1993 caused the damages. Aboitiz refused to settle the claim.
ICNA paid the amount of P280,176.92 to consignee and a subrogation receipt was duly signed by
Willig. ICNA then advised Aboitiz of the receipt signed in its favor but received no reply so it filed for
collection at the RTC.
RTC ruled against ICNA on the ground that the subrogation Form is self-serving and has no
probative value since Wellig was not presented to the witness stand. CA reversed the RTC ruling on the
ground that the right of subrogation accrues simply upon payment by the insurance company of the
insurance claim even assuming that it is an unlicensed foreign corporation

ISSUE: WON ICNA can claim under the right of subrogation

HELD: YES.
Only when that foreign corporation is "transacting" or "doing business" in the country will a license
be necessary before it can institute suits. It may, however, bring suits on isolated business
transactions, which is not prohibited under Philippine law
The policy benefits any subsequent assignee, or holder, including the consignee, who may file
claims on behalf of the assured.
Insurance Code. Sec. 57. A policy may be so framed that it will inure to the benefit of
whomsoever, during the continuance of the risk, may become the owner of the interest insured.
Civil Code. Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

This right of subrogation, however, has its limitations.

First, both the insurer and the consignee are bound by the contractual stipulations under the bill
of lading.
Second, the insurer can be subrogated only to the rights as the insured may have against the
wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the
wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.
 Article 366. Within twenty-four hours following the receipt of the merchandise, the claim against
the carrier for damages or average which may be found therein upon opening the packages, may
be made, provided that the indications of the damage or average which give rise to the claim
cannot be ascertained from the outside part of such packages, in which case the claim shall be
admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
The call was made 2 days from delivery, a reasonable period considering that the goods could
not have corroded instantly overnight such that it could only have sustained the damage during
transit.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed extraordinary diligence as
required in Article 1733.
The shipment delivered to the consignee sustained water damage. SC agree with the findings of
the CA that petitioner failed to overturn this presumption