INSURANCE – PART A – MARCH 20, 2020
Cases
G.R. No. 119599 March 20, 1997
MALAYAN INSURANCE CORPORATION, petitioner, 
vs.
THE HON. COURT OF APPEALS and TKC MARKETING
CORPORATION, respondents.
ROMERO, J.:
Assailed in this petition for review on certiorari is the decision
of the Court of Appeals in CA-G. R. No. 43023 1 which
affirmed, with slight modification, the decision of the Regional
Trial Court of Cebu, Branch 15.
Private respondent TKC Marketing Corp. was the
owner/consignee of some 3,189.171 metric tons of soya
bean meal which was loaded on board the ship MV Al
Kaziemah on or about September 8, 1989 for carriage from
the port of Rio del Grande, Brazil, to the port of Manila. Said
cargo was insured against the risk of loss by petitioner
Malayan Insurance Corporation for which it issued two (2)
Marine Cargo policy Nos. M/LP 97800305 amounting to
P18,986,902.45 and M/LP 97800306 amounting to
P1,195,005.45, both dated September 1989.
While the vessel was docked in Durban, South Africa on
September 11, 1989 enroute to Manila, the civil authorities
arrested and detained it because of a lawsuit on a question
of ownership and possession. As a result, private respondent
notified petitioner on October 4, 1989 of the arrest of the
vessel and made a formal claim for the amount of
US$916,886.66, representing the dollar equivalent on the
policies, for non-delivery of the cargo. Private respondent
likewise sought the assistance of petitioner on what to do
with the cargo.
Petitioner replied that the arrest of the vessel by civil
authority was not a peril covered by the policies. Private
respondent, accordingly, advised petitioner that it might
tranship the cargo and requested an extension of the
insurance coverage until actual transhipment, which
extension was approved upon payment of additional
premium. The insurance coverage was extended under the
same terms and conditions embodied in the original policies
while in the process of making arrangements for the
transhipment of the cargo from Durban to Manila, covering
the period October 4 - December 19, 1989.
1
However, on December 11, 1989, the cargo was sold in 12 of the Institute Cargo Clause and the consequent
Durban, South Africa, for US$154.40 per metric ton or a total adoption or institution of the Institute War Clauses (Cargo),
of P10,304,231.75 due to its perishable nature which could the arrest and seizure by judicial processes which were
no longer stand a voyage of twenty days to Manila and excluded under the former policy became one of the covered
another twenty days for the discharge thereof. On January 5, risks.
1990, private respondent forthwith reduced its claim to
US$448,806.09 (or its peso equivalent of P9,879,928.89 at
The appellate court added that the failure to deliver the
the exchange rate of P22.0138 per $1.00) representing
consigned goods in the port of destination is a loss
private respondent's loss after the proceeds of the sale were
compensable, not only under the Institute War Clause but
deducted from the original claim of $916,886.66 or
also under the Theft, Pilferage, and Non-delivery Clause
P20,184,159.55.
(TNPD) of the insurance policies, as read in relation to
Section 130 of the Insurance Code and as held in Williams
Petitioner maintained its position that the arrest of the vessel v. Cole. 2
by civil authorities on a question of ownership was an
excepted risk under the marine insurance policies. This
Furthermore, the appellate court contended that since the
prompted private respondent to file a complaint for damages
vessel was prevented at an intermediate port from
praying that aside from its claim, it be reimbursed the amount
completing the voyage due to its seizure by civil authorities,
of P128,770.88 as legal expenses and the interest it paid for
a peril insured against, the liability of petitioner continued
the loan it obtained to finance the shipment totalling
until the goods could have been transhipped. But due to the
P942,269.30. In addition, private respondent asked for moral
perishable nature of the goods, it had to be promptly sold to
damages amounting to P200,000.00, exemplary damages
minimize loss. Accordingly, the sale of the goods being
amounting to P200,000.00 and attorney's fees equivalent to
reasonable and justified, it should not operate to discharge
30% of what will be awarded by the court.
petitioner from its contractual liability.
The lower court decided in favor of private respondent and
Hence this petition, claiming that the Court of Appeals erred:
required petitioner to pay, aside from the insurance claim,
consequential and liquidated damages amounting to
P1,024,233.88, exemplary damages amounting to 1. In ruling that the arrest of the vessel was a risk covered
P100,000.00, reimbursement in the amount equivalent to under the subject insurance policies.
10% of whatever is recovered as attorney's fees as well as
the costs of the suit. On private respondent's motion for
2. In ruling that there was constructive total loss over the
reconsideration, petitioner was also required to further pay
cargo.
interest at the rate of 12% per annum on all amounts due
and owing to the private respondent by virtue of the lower
court decision counted from the inception of this case until 3. In ruling that petitioner was in bad faith in declining private
the same is paid. respondent's claim.
On appeal, the Court of Appeals affirmed the decision of the 4. In giving undue reliance to the doctrine that insurance
lower court stating that with the deletion of Clause 12 of the policies are strictly construed against the insurer.
policies issued to private respondent, the same became
automatically covered under subsection 1.1 of Section 1 of
In assigning the first error, petitioner submits the following:
the Institute War Clauses. The arrests, restraints or
(a) an arrest by civil authority is not compensable since the
detainments contemplated in the former clause were those
term "arrest" refers to "political or executive acts" and does
effected by political or executive acts. Losses occasioned by
not include a loss caused by riot or by ordinary judicial
riot or ordinary judicial processes were not covered therein.
process as in this case; (b) the deletion of the Free from
In other words, arrest, restraint or detainment within the
capture or Seizure Clause would leave the assured covered
meaning of Clause 12 (or F.C. & S. Clause) rules out
solely for the perils specified by the wording of the policy
detention by ordinary legal processes. Hence, arrests by civil
itself; (c) the rationale for the exclusion of an arrest pursuant
authorities, such as what happened in the instant case, is an
excepted risk under Clause 12 of the Institute Cargo Clause to judicial authorities is to eliminate collusion between
or the F.C. & S. Clause. However, with the deletion of Clause unscrupulous assured and civil authorities.
INSURANCE – PART A – MARCH 20, 2020
Cases
As to the second assigned error, petitioner submits that any
loss which private respondent may have incurred was in the
nature and form of unrecovered acquisition value brought
about by a voluntary sacrifice sale and not by arrest,
detention or seizure of the ship.
As to the third issue, petitioner alleges that its act of rejecting
the claim was a result of its honest belief that the arrest of
the vessel was not a compensable risk under the policies
issued. In fact, petitioner supported private respondent by
accommodating the latter's request for an extension of the
insurance coverage, notwithstanding that it was then under
no legal obligation to do so.
Private respondent, on the other hand, argued that when it
appealed its case to the Court of Appeals, petitioner did not
raise as an issue the award of exemplary damages. It cannot
now, for the first time, raise the same before this Court.
Likewise, petitioner cannot submit for the first time on appeal
its argument that it was wrong for the Court of Appeals to
have ruled the way it did based on facts that would need
inquiry into the evidence. Even if inquiry into the facts were
possible, such was not necessary because the coverage as
ruled upon by the Court of Appeals is evident from the very
terms of the policies.
It also argued that petitioner, being the sole author of the
policies, "arrests" should be strictly interpreted against it
because the rule is that any ambiguity is to be taken contra
proferentum. Risk policies should be construed reasonably
and in a manner as to make effective the intentions and
expectations of the parties. It added that the policies clearly
stipulate that they cover the risks of non-delivery of an entire
package and that it was petitioner itself that invited and
granted the extensions and collected premiums thereon.
The resolution of this controversy hinges on the
interpretation of the "Perils" clause of the subject policies in
relation to the excluded risks or warranty specifically stated
therein.
By way of a historical background, marine insurance
developed as an all-risk coverage, using the phrase "perils of
the sea" to encompass the wide and varied range of risks
that were covered.3 The subject policies contain the "Perils"
clause which is a standard form in any marine insurance
policy. Said clause reads:
Touching the adventures which the said
MALAYAN INSURANCE CO., are
2
content to bear, and to take upon them
in this voyage; they are of the Seas;
Men-of-War, Fire, Enemies, Pirates,
Rovers, Thieves, Jettisons, Letters of
Mart and Counter Mart, Suprisals,
Takings of the Sea, Arrests, Restraints
and Detainments of all Kings, Princess
and Peoples, of what Nation, Condition,
or quality soever, Barratry of the Master
and Mariners, and of all other Perils,
Losses, and Misfortunes, that have
come to hurt, detriment, or damage of
the said goods and merchandise or any
part thereof . AND in case of any loss or
misfortune it shall be lawful to the
ASSURED, their factors, servants and
assigns, to sue, labour, and travel for, in
and about the defence, safeguards, and
recovery of the said goods and
merchandises, and ship, & c., or any
part thereof, without prejudice to this
INSURANCE; to the charges whereof
the said COMPANY, will contribute
according to the rate and quantity of the
sum herein INSURED. AND it is
expressly declared and agreed that no
acts of the Insurer or Insured in
recovering, saving, or preserving the
Property insured shall be considered as
a Waiver, or Acceptance
Abandonment. And it is agreed by the
said COMPANY, that this writing or
Policy of INSURANCE shall be of as
much Force and Effect as the surest
Writing or policy of INSURANCE made
in LONDON. And so the said MALAYAN
INSURANCE COMPANY., INC., are
contented, and do hereby promise and
bind themselves, their Heirs, Executors,
Goods and Chattel, to the ASSURED,
his or their Executors, Administrators, or
Assigns, for the true Performance of the
Premises; confessing themselves paid
the Consideration due unto them for this
INSURANCE at and after the rate
arranged. (Emphasis supplied)
The exception or limitation to the "Perils" clause and the "All
other perils" clause in the subject policies is specifically
referred to as Clause 12 called the "Free from Capture &
Seizure Clause" or the F.C. & S. Clause which reads, thus:
Warranted free of capture, seizure,
arrest, restraint or detainment, and the
consequences thereof or of any attempt
thereat; also from the consequences of
hostilities and warlike operations,
whether there be a declaration of war or
not; but this warranty shall not exclude
collision, contact with any fixed or
floating object (other than a mine or
torpedo), stranding, heavy weather or
fire unless caused directly (and
independently of the nature of the
voyage or service which the vessel
concerned or, in the case of a collision,
any other vessel involved therein is
performing) by a hostile act by or against
a belligerent power and for the purpose
of this warranty "power" includes any
authorities maintaining naval, military or
air forces in association with power.
Further warranted free from the
consequences of civil war, revolution,
insurrection, or civil strike arising
therefrom or piracy.
Should Clause 12 be deleted, the
relevant current institute war clauses
of shall be deemed to form part of this
insurance. (Emphasis supplied)
However, the F. C. & S. Clause was deleted from the
policies. Consequently, the Institute War Clauses (Cargo)
was deemed incorporated which, in subsection 1.1 of
Section 1, provides:
1. This insurance covers:
1.1 The risks excluded from the
standard form of English Marine Policy
by the clause warranted free of capture,
seizure, arrest, restraint or detainment,
and the consequences thereof of
hostilities or warlike operations, whether
there be a declaration of war or not; but
this warranty shall not exclude collision,
contact with any fixed or floating object
(other than a mine or torpedo),
stranding, heavy weather or fire unless
caused directly (and independently of
INSURANCE – PART A – MARCH 20, 2020
Cases
the nature on voyage or service which
the vessel concerned or, in the case of a
collision any other vessel involved
therein is performing) by a hostile act by
or against a belligerent power; and for
the purpose of this warranty "power"
includes any authority maintaining naval,
military or air forces in association with a
power. Further warranted free from the
consequences of civil war, revolution,
rebellion, insurrection, or civil strike
arising therefrom, or piracy.
According to petitioner, the automatic incorporation of
subsection 1.1 of section 1 of the Institute War Clauses
(Cargo), among others, means that any "capture, arrest,
detention, etc." pertained exclusively to warlike operations if
this Court strictly construes the heading of the said clauses.
However, it also claims that the parties intended to include
arrests, etc. even if it were not the result of hostilities or
warlike operations. It further claims that on the strength of
jurisprudence on the matter, the term "arrests" would only
cover those arising from political or executive acts,
concluding that whether private respondent's claim is
anchored on subsection 1.1 of Section 1 of the Institute War
Clauses (Cargo) or the F.C. & S. Clause, the arrest of the
vessel by judicial authorities is an excluded risk.4
This Court cannot agree with petitioner's assertions,
particularly when it alleges that in the "Perils" Clause, it
assumed the risk of arrest caused solely by executive or
political acts of the government of the seizing state and
thereby excludes "arrests" caused by ordinary legal
processes, such as in the instant case.
With the incorporation of subsection 1.1 of Section 1 of the
Institute War Clauses, however, this Court agrees with the
Court of Appeals and the private respondent that "arrest"
caused by ordinary judicial process is deemed included
among the covered risks. This interpretation becomes
inevitable when subsection 1.1 of Section 1 of the Institute
War Clauses provided that "this insurance covers the risks
excluded from the Standard Form of English Marine Policy
by the clause "Warranted free of capture, seizure, arrest, etc.
. . ." or the F.C. & S. Clause. Jurisprudentially, "arrests"
caused by ordinary judicial process is also a risk excluded
from the Standard Form of English Marine Policy by the F.C.
& S. Clause.
Petitioner cannot adopt the argument that the "arrest"
caused by ordinary judicial process is not included in the
3
covered risk simply because the F.C. & S. Clause under the
Institute War Clauses can only be operative in case of
hostilities or warlike operations on account of its heading
"Institute War Clauses." This Court agrees with the Court of
Appeals when it held that ". . . . Although the F.C. & S.
Clause may have originally been inserted in marine policies
to protect against risks of war, (see generally G. Gilmore &
C. Black, The Law of Admiralty Section 2-9, at 71-73 [2d Ed.
1975]), its interpretation in recent years to include seizure or
detention by civil authorities seems consistent with the
general purposes of the clause, . . . ." 5 In fact, petitioner
itself averred that subsection 1.1 of Section 1 of the Institute
War Clauses included "arrest" even if it were not a result of
hostilities or warlike operations. 6 In this regard, since what
was also excluded in the deleted F.C. & S. Clause was
"arrest" occasioned by ordinary judicial process, logically,
such "arrest" would now become a covered risk under
subsection 1.1 of Section 1 of the Institute War Clauses,
regardless of whether or not said "arrest" by civil authorities
occurred in a state of war.
Petitioner itself seems to be confused about the application
of the F.C. & S. Clause as well as that of subsection 1.1 of
Section 1 of the Institute War Clauses (Cargo). It stated that
"the F.C. & S. Clause was "originally incorporated in
insurance policies to eliminate the risks of warlike
operations". It also averred that the F.C. & S. Clause applies
even if there be no war or warlike operations . . . ." 7 In the
same vein, it contended that subsection 1.1 of Section 1 of
the Institute War Clauses (Cargo) "pertained exclusively to
warlike operations" and yet it also stated that "the deletion of
the F.C. & S. Clause and the consequent incorporation of
subsection 1.1 of Section 1 of the Institute War Clauses
(Cargo) was to include "arrest, etc. even if were not a result
of hostilities or warlike operations. 8
This Court cannot help the impression that petitioner is
overly straining its interpretation of the provisions of the
policy in order to avoid being liable for private respondent's
claim.
This Court finds it pointless for petitioner to maintain its
position that it only insures risks of "arrest" occasioned by
executive or political acts of government which is interpreted
as not referring to those caused by ordinary legal processes
as contained in the "Perils" Clause; deletes the F.C. & S.
Clause which excludes risks of arrest occasioned by
executive or political acts of the government and naturally,
also those caused by ordinary legal processes; and,
thereafter incorporates subsection 1.1 of Section 1 of the
Institute War Clauses which now includes in the coverage
risks of arrest due to executive or political acts of a
government but then still excludes "arrests" occasioned by
ordinary legal processes when subsection 1.1 of Section 1 of
said Clauses should also have included "arrests" previously
excluded from the coverage of the F.C. & S. Clause.
It has been held that a strained interpretation which is
unnatural and forced, as to lead to an absurd conclusion or
to render the policy nonsensical, should, by all means, be
avoided. 9 Likewise, it must be borne in mind that such
contracts are invariably prepared by the companies and must
be accepted by the insured in the form in which they are
written. 10 Any construction of a marine policy rendering it
void should be avoided. 11 Such policies will, therefore, be
construed strictly against the company in order to avoid a
forfeiture, unless no other result is possible from the
language used. 12
If a marine insurance company desires to limit or restrict the
operation of the general provisions of its contract by special
proviso, exception, or exemption, it should express such
limitation in clear and unmistakable language. 13Obviously,
the deletion of the F.C. & S. Clause and the consequent
incorporation of subsection 1.1 of Section 1 of the Institute
War Clauses (Cargo) gave rise to ambiguity. If the risk of
arrest occasioned by ordinary judicial process was expressly
indicated as an exception in the subject policies, there would
have been no controversy with respect to the interpretation
of the subject clauses.
Be that as it may, exceptions to the general coverage are
construed most strongly against the company. 14 Even an
express exception in a policy is to be construed against the
underwriters by whom the policy is framed, and for whose
benefit the exception is introduced. 15
An insurance contract should be so interpreted as to carry
out the purpose for which the parties entered into the
contract which is, to insure against risks of loss or damage to
the goods. Such interpretation should result from the natural
and reasonable meaning of language in the policy. 16 Where
restrictive provisions are open to two interpretations, that
which is most favorable to the insured is adopted. 17
Indemnity and liability insurance policies are construed in
accordance with the general rule of resolving any ambiguity
therein in favor of the insured, where the contract or policy is
prepared by the insurer. 18 A contract of insurance, being a
contract of adhesion, par excellence, any ambiguity therein
should be resolved against the insurer; in other words, it
INSURANCE – PART A – MARCH 20, 2020
Cases
should be construed liberally in favor of the insured and petitioner until paid as provided in the settlement of claim exception to the application of the policy.
strictly against the insurer. Limitations of liability should be provision of the policy; and ordering petitioner to pay private
regarded with extreme jealousy and must be construed in respondent certain amounts for marine surveyor’s fee, (2) As adverted to in the Petition for Review, private
such a way as to preclude the insurer from noncompliance attorney’s fees and costs of the suit. respondent has admitted that the questioned shipment is not
with its obligations. 19 covered by a "square provision of the contract," but private
Respondent in its comment on the petition, contends respondent claims implied coverage from the phrase "perils
that:chanrob1es virtual 1aw library of the sea" mentioned in the opening sentence of the policy.
In view of the foregoing, this Court sees no need to discuss
the other issues presented.
1. Coverage of private respondent’s loss under the insurance (3) The insistence of private respondent that rusting is a peril
policy issued by petitioner is unmistakable. of the sea is erroneous.
WHEREFORE, the petition for review is DENIED and the
decision of the Court of Appeals is AFFIRMED. 2. Alleged contractual limitations contained in insurance (4) Private respondent inaccurately invokes the rule of strict
policies are regarded with extreme caution by courts and are construction against insurer under the guise of construction
to be strictly construed against the insurer; obscure phrases in order to impart a non-existing ambiguity or doubt into the
SO ORDERED. and exceptions should not be allowed to defeat the very policy so as to resolve it against the insurer.
purpose for which the policy was procured.
[G.R. No. 76145. June 30, 1987.] (5) Private respondent while impliedly admitting that a loss
3. Rust is not an inherent vice of the seamless steel pipes occasioned by an inherent defect or vice in the insured
CATHAY INSURANCE CO., Petitioner, v. HON. COURT without interference of external factors. article is not within the terms of the policy, erroneously insists
OF APPEALS, and REMINGTON INDUSTRIAL SALES that rusting is not an inherent vice or in the nature of steel
CORPORATION, Respondents. 4. No matter how petitioner might want it otherwise, the 15- pipes.
day clause of the policy had been foreclosed in the pre-trial
DECISION order and it was not even raised in petitioner’s answer to (6) Rusting is not a risk insured against, since a risk to be
private respondent’s complaint. insured against should be a casualty or some casualty,
PARAS, J.: something which could not be foreseen as one of the
5. The decision was correct in not holding that the heavy necessary incidents of adventure.
This petition seeks the review of the decision of the Court of rusting of the seamless steel pipes did not occur during the
Appeals 1 in CA-G.R. CV No. 06559 affirming the decision of voyage of 7 days from July 1 to July 7, 1981. (7) A fact capable of unquestionable demonstration or of
the Regional Trial Court (RTC), 2 National Capital Region public knowledge needs no evidence. This fact of
(NCR) Manila, Branch 38 and the Resolution of the said 6. The alleged lack of supposed bad order survey from the unquestionable demonstration or of public knowledge is that
appellate court denying petitioner’s motion for arrastre capitalized on by petitioner was more than clarified heavy rusting of steel or iron pipes cannot occur within a
reconsideration. by no less than 2 witnesses. period of a seven (7) day voyage. Besides, petitioner had
introduced the clear cargo receipts or tally sheets indicating
Originally, this was a complaint filed by private respondent 7. The placing of notation "rusty" in the way bills is not only that there was no damage on the steel pipes during the
corporation against petitioner (then defendant) company private respondent’s right but a natural and spontaneous voyage.
seeking collection of the sum of P868,339.15 representing reaction of whoever received the seamless steel pipes in a
private respondent’s losses and damages incurred in a rusty condition at private respondent’s bodega. (8) The evidence of private respondent betrays the fact that
shipment of seamless steel pipes under an insurance the account of P868,339.15 awarded by the respondent
contract in favor of the said private respondent as the 8. The Court of Appeals did not engage in any guesswork or Court is founded on speculation, surmises or conjectures
insured, consignee or importer of aforesaid merchandise speculation in concluding a loss allowance of 30% in the and the amount of less has not been proven by competent,
while in transit from Japan to the Philippines on board vessel amount of P868,339.15. satisfactory and clear evidence.
SS "Eastern Mariner." The total value of the shipment was
P2,894,463.83 at the prevailing rate of P7.95 to a dollar in 9. The rate of 34% per annum double the ceiling prescribed We find no merit in this petition.
June and July 1984, when the shipment was made. by the Monetary Board is the rate of interest fixed by the
Insurance Policy itself and the Insurance Code. There is no question that the rusting of steel pipes in the
The trial court decided in favor of private respondent course of a voyage is a "peril of the sea" in view of the toll on
corporation by ordering petitioner to pay it the sum of The petitioner however maintains that:chanrob1es virtual the cargo of wind, water, and salt conditions. At any rate if
P866,339.15 as its recoverable insured loss equivalent to 1aw library the insurer cannot be held accountable therefor, We would
30% of the value of the seamless steel pipes; ordering fail to observe a cardinal rule in the interpretation of
petitioner to pay private respondent interest on the aforecited (1) Private respondent does not dispute the fact that, contracts, namely, that any ambiguity therein should be
amount at the rate of 34% or double the ceiling prescribed by contrary to the finding of the respondent Court (that petitioner construed against the maker/issuer/drafter thereof, namely,
the Monetary Board per annum from February 3, 1982 or 90 has failed "to present any evidence of any viable exception the insurer. Besides the precise purpose of insuring cargo
days from private respondent’s submission of proof of loss to to the application of the policy") there is in fact an express during a voyage would be rendered fruitless. Be it noted that
4
INSURANCE – PART A – MARCH 20, 2020
Cases
any attack of the 15-day clause in the policy was foreclosed
right in the pre-trial conference.
Finally, it is a cardinal rule that save for certain exceptions,
findings of facts of the appellate tribunal are binding on Us.
Not one of said exceptions can apply to this case.
WHEREFORE, this petition is hereby DENIED, and the
assailed decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
G.R. No. 84507 March 15, 1990
CHOA TIEK SENG, doing business under the name and
style of SENG'S COMMERCIAL
ENTERPRISES, petitioner,  P33,117.63 as damages plus attorney's fees and expenses
vs.
HON. COURT OF APPEALS, FILIPINO MERCHANTS'
INSURANCE COMPANY, INC., BEN LINES CONTAINER,
LTD. AND E. RAZON, INC., respondents.
GANCAYCO, J.:
This is an appeal from a decision of the Court of Appeals
dated February 18, 1988 in CA-G.R. CV No. 09627 which
affirmed the decision of the Regional Trial Court (RTC) of
Manila which in turn dismissed the complaint.1
On November 4, 1976 petitioner imported some lactose
crystals from Holland. The importation involved fifteen (15)
metric tons packed in 600 6-ply paper bags with polythelene
inner bags, each bag at 25 kilos net. The goods were loaded
at the port at Rotterdam in sea vans on board the vessel "MS
Benalder' as the mother vessel, and thereafter aboard the
feeder vessel "Wesser Broker V-25" of respondent Ben Lines
Container, Ltd. (Ben Lines for short). The goods were
insured by the respondent Filipino Merchants' Insurance Co.,
Inc. (insurance company for short) for the sum of
P98,882.35, the equivalent of US$8,765.00 plus 50% mark-
up or US$13,147.50, against all risks under the terms of the
insurance cargo policy. Upon arrival at the port of Manila, the
cargo was discharged into the custody of the arrastre
operator respondent E. Razon, Inc. (broker for short), prior to
the delivery to petitioner through his broker. Of the 600 bags
delivered to petitioner, 403 were in bad order. The surveys
showed that the bad order bags suffered spillage and loss
later valued at P33,117.63.
5
Petitioner filed a claim for said loss dated February 16, 1977
against respondent insurance company in the amount of
P33,117.63 as the insured value of the loss.
Respondent insurance company rejected the claim alleging
that assuming that spillage took place while the goods were
in transit, petitioner and his agent failed to avert or minimize
the loss by failing to recover spillage from the sea van, thus
violating the terms of the insurance policy sued upon; and
that assuming that the spillage did not occur while the cargo
was in transit, the said 400 bags were loaded in bad order,
and that in any case, the van did not carry any evidence of
spillage.
Hence, petitioner filed the complaint dated August 2, 1977 in
the Regional Trial Court of Manila against respondent
insurance company seeking payment of the sum of
of litigation. In its answer, respondent insurance company
denied all the material allegations of the complaint and
raised several special defenses as well as a compulsory
counterclaim. On February 24, 1978, respondent insurance
company filed a third-party complaint against respondents
Ben Lines and broker. Respondent broker filed its answer to
the third-party complaint denying liability and arguing, among
others, that the petitioner has no valid cause of action
against it. Similarly, Ben Lines filed its answer denying any
liability and a special defense arguing that respondent
insurance company was not the proper party in interest and
has no connection whatsoever with Ben Lines Containers,
Ltd. and that the third-party complaint has prescribed under
the applicable provisions of the Carriage of Goods by Sea
Act.
On November 6, 1979, respondent Ben Lines filed a motion
for preliminary hearing on the affirmative defense of
prescription. In an order dated February 28, 1980, the trial
court deferred resolution of the aforesaid motion after trial on
the ground that the defense of prescription did not appear to
be indubitable.
After the pre-trial conference and trial on the merits, on
March 31, 1986, the court a quo rendered a judgment
dismissing the complaint, the counterclaim and the third-
party complaint with costs against the petitioner.
Hence, the appeal to the Court of Appeals by petitioner
which, in due course, as aforestated, affirmed the judgment
of the trial court.
A motion for reconsideration of said judgment was denied by
the appellate court in a resolution dated August 1, 1988.
Petitioner now filed this petition for review on certiorari in this
Court predicated on the following grounds:
I
RESPONDENT COURT ERRED IN HOLDING THAT THE
INSURED SHIPMENTDID NOT SUSTAIN ANY
DAMAGE/LOSS DESPITE ADMISSION THEREOF ON THE
PART OF RESPONDENT INSURANCE COMPANY AND
THE FINDING OF THE LATTER'S SURVEYORS.
II
RESPONDENT COURT ERRED IN HOLDING THAT AN
"ALL RISKS" COVERAGE COVERS ONLY LOSSES
OCCASIONED BY OR RESULTING FROM "EXTRA AND
FORTUITOUS EVENTS" DESPITE THE CLEAR AND
UNEQUIVOCAL DEFINITION OF THE TERM MADE AND
CONTAINED IN THE POLICY SUED UPON.
III
THE HOLDING OF RESPONDENT COURT THAT AN "ALL
RISKS" COVERAGE COVERS LOSSES OCCASIONED BY
AND RESULTING FROM "EXTRA AND FORTUITOUS
EVENTS" CONTRADICTS THE RULING OF THE SAME
COURT IN ANOTHER CASE WHERE THE DEFINITION OF
THE TERM "ALL RISKS"/ STATED IN THE POLICY WAS
MADE TO CONTROL HENCE THE NEED FOR REVIEW. 2
The petition is impressed with merit.
The appellate court, in arriving at the conclusion that there
was no damage suffered by the cargo at the time of the
devanning thereof, held as follows:
Appellant argued that the cargo in
question sustained damages while still in
the possession of the carrying vessel,
because as his appointed surveyor
reported, Worldwide Marine Survey
Corporation, at the time of devanning at
the pier, 403 bags were already in bad
order and condition. Appellant found
INSURANCE – PART A – MARCH 20, 2020
Cases
support to this contention on the basis of
the survey report of Worldwide Marine
Survey Corporation of the Philippines
and of the Adjustment Corporation of the
Philippines which were identified by his
sole witness, Jose See. It must be
pointed out, however, that witness Jose
See was incompetent to identify the two
survey reports because he was not
actually present during the actual
devanning of the cargo, which fact was
admitted by him, hence, he failed to
prove the authenticity of the aforesaid
survey reports.
On the other hand, the evidence
submitted by the appellee would
conclusively establish the fact that there
was no damage suffered by the subject
cargo at the time of the devanning
thereof. The cargo, upon discharge from
the vessel, was delivered to the custody
of the arrastre operator (E. Razon)
under clean tally sheet (Exh. 6-FMIC).
Moreover, the container van containing
the cargo was found with both its seal
and lock intact. Article IV, paragraph 4 of
the Management Contract (Exh. 5)
signed between the Bureau of Customs
and the Arrastre Operator provides:
4. Tally Sheets for Cargo Vans or Containers — The
contractor shall give a clean tally sheet for cargo vans
received by it in good order and condition with locks, and
seals intact.
The same cargo was in turn delivered
into the possession of the appellant by
the arrastre operator at the pier in good
order and condition as shown by the
clean gate passes (Exhs. 2 and 3) and
the delivery permit (Exh. 4). The clean
gate passes were issued by appellee
arrastre operator covering the shipment
in question, with the conformity of the
appellant's representative. The clean
gate passes provide in part:  representative of the shipping agent to
. . . issuance of this Gate Pass constitutes delivery to and
receipt by consignee of the goods as described above, in
good order and condition, unless an accompanying B.O.
6
(Bad Order) Certificate duly issued and noted on the face of well as a representative of the vessel
this Gate Pass appears.  "Wesser Broker" and a representative of
the arrastre operator attended the
devanning of the shipment and the said
These clean gate passes are
shipboard surveyor certified that 403
undoubtedly important and vital pieces
bags were in bad order condition with
of evidence. They are noted in the
estimated spillage as follows:
dorsal side of another important piece of
document which is the permit to deliver
(Exh. 4) issued by the Bureau of 65 P/bags each of 20%
Customs to effect delivery of the cargo 78 P/bags each of 35%
to the consignee. The significance and 79 P/bags each of 45%
value of these documents is that they 87 P/bags each of 65%
bind the shipping company and the 94 P/bags each of 75%
arrastre operator whenever a cargo (Exh. F-1)
sustains damage while in their
respective custody. It is worthy of note
Defendant and third-party plaintiff-
that there was no turn over survey
appellee's protective surveyor
executed between the vessel and the
determined the exact spillage from the
arrastre operator, indicating any damage
bad order bags as found by the
to the cargo upon discharge from the
shipboard surveyor at the consignee's
custody of the vessel. There was no bad
warehouse by weighing the bad order
order certificate issued by the appellee
bags. Said protective surveyor found
arrastre operator, indicating likewise that
after weighing the 403 bags in bad order
there was no damage to the cargo while
condition that an aggregate of 5,173
in its custody.
kilos were missing therefrom (Exh. F). 4
It is surprising to the point that one could
The assertion of the appellate court that the authenticity of
not believe that if indeed there was
the survey reports of the Worldwide Marine Cargo Survey
really damage affecting the 403 bags out
Corporation and the Adjustment Corporation of the
of the 600, with an alleged estimated
Philippines were not established as Jose See who identified
spillage of 240%, this purportedly big
the same was incompetent as he was not actually present
quantity of spillage was never recovered
during the actual devanning of the cargo is not well taken.
which could have been easily done
considering that the shipment was in a
container van which was found to be In the first place it was respondent insurance company which
sealed and intact. 3 undertook the protective survey aforestated relating to the
goods from the time of discharge up to the time of delivery
thereof to the consignee's warehouse, so that it is bound by
However, in the same decision of the appellate court, the
the report of its surveyor which is the Adjustment Corporation
following evidence of the petitioner on this aspect was
of the Philippines. 5 The Worldwide Marine Cargo Survey
summarized as follows:
Corporation of the Philippines was the vessel's surveyor. The
survey report of the said Adjustment Corporation of the
The 600 bags which the original carrier Philippines reads as follows:
received in apparent good order
condition and certified to by the vessel's
During the turn-over of the contents
agent to be weighing 15,300 kg. gross,
delivery from the cargo sea van by the
were unloaded from the transhipment
vessel "Wesser Broker" stuffed in one
consignee's representative/ Broker
container and turned over to the arrastre
(Saint Rose Forwarders), 403 bags were
operator, third party defendant-appellee
bursted and/or torn, opened on one end
E. Razon, Inc. A shipboard surveyor, the
contents partly spilled. The same were
Worldwide Marine Cargo Surveyor, as
INSURANCE – PART A – MARCH 20, 2020
Cases
inspected by the vessel's surveyor damaged condition as indicated in the every specie of damage done to the ship
(Worldwide Marine & Cargo Survey survey report of the vessel or goods at sea by the violent action of
Corporation), findings as follows: surveyor. . . . 8 the winds or waves. They do not
embrace all loses happening on the sea.
A peril whose only connection with the
One (1) Container No. 2987789 This admission even standing alone is sufficient proof of loss
sea is that it arises aboard ship is not
Property locked and secured with Seal No. 18880. or damage to the cargo.
necessarily a peril of the sea; the peril
must be of the sea and not merely one
FOUND: The appellate court observed that the cargo was discharged accruing on the sea (The Phil. Insurance
from the vessel and delivered to the custody of the broker Law, by Guevarra, 4th ed., 1961, p.
under the clean tally sheet, that the container van containing 143). In Wilson, Sons and
197-Paper Bags (6-Ply each with One inner Plastic Lining
the cargo was found with both its seal and lock intact; and Co. vs. Owners of Cargo per the
Machine Stitched with cotton Twine on Both ends.
that the cargo was delivered to the possession of the Xantho (1887) A.C. 503, 508, it was
Containing Lactose Crystal 25 mesh Sep 061-09-03 in good
petitioner by the broker in good order and condition as held:
order.
shown by the clean gate passes and delivery permit.
There must, in order to make the insurer liable be "some
403-Bags, 6-ply torn and/or opened on one end, contents
The clean tally sheet referred to by the appellate court casualty," something which could not be foreseen as one of
partly spilled, estimated spillages as follows:
covers the van container and not the cargo stuffed the necessary incidents of the adventure. The purpose of the
therein. 9The appellate court clearly stated that the clean tally policy is to secure an indemnity against accidents which may
65 P/bags each of 20% sheet issued by the broker covers the cargo vans received happen, not against events which must happen.
78 P/bags each of 35% by it in good order and condition with lock and seal intact.
79 P/bags each of 45% Said tally sheet is no evidence of the condition of the cargo
Moreover, the cargo in question was
87 P/bags each of 65% therein contained. Even the witness of the respondent
insured in an "against all risk policy."
94 P/bags each of 75% insurance company, Sergio Icasiano, stated that the clean
Insurance "against all risk" has a
(emphasis supplied) 6 gate passes do not reflect the actual condition of the cargo
technical meaning in marine insurance.
when released by the broker as it was not physically
Under an "all risk" marine policy, there
examined by the broker. 10
The authenticity of the said survey report need not be must be a general rule be
established in evidence as it is binding on respondent a fortuitous event in order to impose
insurance company who caused said protective survey. There is no question, therefore, that there were 403 bags in liability on the insurer; losses
damaged condition delivered and received by petitioner. occasioned by ordinary circumstances
or wear and tear are not covered, thus,
Secondly, contrary to the findings of the appellate court that while an "all risk" marine policy purports
petitioner's witness Jose See was not present at the time of Nevertheless, on the assumption that the cargo suffered to cover losses from casualties at sea, it
the actual devanning of the cargo, what the record shows is damages, the appellate court ruled: does not cover losses occasioned by the
that he was present when the cargo was unloaded and ordinary circumstances of a voyage, but
received in the warehouse of the consignee. He saw 403 only those resulting from extra and
Even assuming that the cargo indeed
bags to be in bad order. Present then was the surveyor, fortuitous events.
sustained damage, still the appellant
Adjustment Corporation of the Philippines, who surveyed the
cannot hold the appellee insurance
cargo by segregating the bad order cargo from the good
company liable on the insurance policy.
order and determined the amount of loss. 7 Thus, said It has been held that damage to a cargo
In the case at bar, appellant failed to
witness was indeed competent to identify the survey report by high seas and other weather is not
prove that the alleged damage was due
aforestated. covered by an "all risk" marine policy,
to risks connected with navigation. A since it is not fortuitous, particularly
distinction should be made between where the bad weather occurs at a place
Thirdly, in its letter dated May 26, 1977 to petitioner, "perils of the sea" which render the where it could be expected at the time in
respondent insurance company admitted in no uncertain insurer liable on account of the loss question. (44 Am. Jur. 2d. 216) In Go
terms, the damages as indicated in the survey report in this and/or damage brought about thereof Tiaoco y Hermanas vs. Union Insurance
manner: and "perils of the ship" which do not Society of Canto, 40 Phil. 40, it was
render the insurer liable for any loss or held:
damage. Perils of the sea or perils of
We do not question the fact that out of navigation embrace all kinds of marine
the 600 bags shipment 403 bags In the present case, the entrance of the sea water into the
casualties, such as shipwreck,
appeared to be in bad order or in ship's hold through the defective pipe already described was
foundering, stranding, collision and
7
INSURANCE – PART A – MARCH 20, 2020
Cases
not due to any accident which happened during the voyage,
but to the failure of the ship's owner properly to repair a
defect of the existence of which he was apprised. The loss
was therefore more analogous to that which directly results
from simple unseaworthiness than to that whose results,
from perils of the sea. 11
The Court disagrees.
In Gloren Inc. vs. Filipinas Cia. de Seguros, 12 it was held
that an all risk insurance policy insures against all causes of
conceivable loss or damage, except as otherwise excluded
in the policy or due to fraud or intentional misconduct on the
part of the insured. It covers all losses during the voyage
whether arising from a marine peril or not, including pilferage
losses during the war.
In the present case, the "all risks" clause of the policy sued
upon reads as follows:
5. This insurance is against all risks of
loss or damage to the subject matter
insured but shall in no case be deemed
to extend to cover loss, damage, or
expense proximately caused by delay or
inherent vice or nature of the subject
matter insured. Claims recoverable
hereunder shall be payable irrespective
of percentage. 13
The terms of the policy are so clear and require no
interpretation. The insurance policy covers all loss or
damage to the cargo except those caused by delay or
inherent vice or nature of the cargo insured. It is the duty of
the respondent insurance company to establish that said loss
or damage falls within the exceptions provided for by law,
otherwise it is liable therefor.
An "all risks" provision of a marine policy creates a special
type of insurance which extends coverage to risks not
usually contemplated and avoids putting upon the insured
the burden of establishing that the loss was due to peril
falling within the policy's coverage. The insurer can avoid
coverage upon demonstrating that a specific provision
expressly excludes the loss from coverage. 14
In this case, the damage caused to the cargo has not been
attributed to any of the exceptions provided for nor is there
8
any pretension to this effect. Thus, the liability of respondent
insurance company is clear.
WHEREFORE, the decision appealed from is hereby
REVERSED AND SET ASIDE and another judgment is
hereby rendered ordering the respondent Filipinas
Merchants Insurance Company, Inc. to pay the sum of
P33,117.63 as damages to petitioner with legal interest from
the filing of the complaint, plus attorney's fees and expenses
of litigation in the amount of P10,000.00 as well as the costs
of the suit.
SO ORDERED.
G.R. No. 85141 November 28, 1989
FILIPINO MERCHANTS INSURANCE CO., INC., petitioner,  evidence presented that in December
vs.
COURT OF APPEALS and CHOA TIEK
SENG, respondents.
REGALADO, J.:
This is a review of the decision of the Court of Appeals,
promulgated on July 19,1988, the dispositive part of which
reads:
WHEREFORE, the judgment appealed
from is affirmed insofar as it orders
defendant Filipino Merchants Insurance
Company to pay the plaintiff the sum of
P51,568.62 with interest at legal rate
from the date of filing of the complaint,
and is modified with respect to the third
party complaint in that (1) third party
defendant E. Razon, Inc. is ordered to
reimburse third party plaintiff the sum of
P25,471.80 with legal interest from the
date of payment until the date of
reimbursement, and (2) the third-party
complaint against third party defendant
Compagnie Maritime Des Chargeurs
Reunis is dismissed. 1
The facts as found by the trial court and adopted by the
Court of Appeals are as follows:
This is an action brought by the
consignee of the shipment of fishmeal
loaded on board the vessel SS
Bougainville and unloaded at the Port of
Manila on or about December 11, 1976
and seeks to recover from the defendant
insurance company the amount of
P51,568.62 representing damages to
said shipment which has been insured
by the defendant insurance company
under Policy No. M-2678. The defendant
brought a third party complaint against
third party defendants Compagnie
Maritime Des Chargeurs Reunis and/or
E. Razon, Inc. seeking judgment against
the third (sic) defendants in case
Judgment is rendered against the third
party plaintiff. It appears from the
1976, plaintiff insured said shipment with
defendant insurance company under
said cargo Policy No. M-2678 for the
sum of P267,653.59 for the goods
described as 600 metric tons of fishmeal
in new gunny bags of 90 kilos each from
Bangkok, Thailand to Manila against all
risks under warehouse to warehouse
terms. Actually, what was imported was
59.940 metric tons not 600 tons at
$395.42 a ton CNF Manila. The fishmeal
in 666 new gunny bags were unloaded
from the ship on December 11, 1976 at
Manila unto the arrastre contractor E.
Razon, Inc. and defendant's surveyor
ascertained and certified that in such
discharge 105 bags were in bad order
condition as jointly surveyed by the
ship's agent and the arrastre contractor.
The condition of the bad order was
reflected in the turn over survey report of
Bad Order cargoes Nos. 120320 to
120322, as Exhibit C-4 consisting of
three (3) pages which are also Exhibits
4, 5 and 6- Razon. The cargo was also
surveyed by the arrastre contractor
before delivery of the cargo to the
consignee and the condition of the cargo
on such delivery was reflected in E.
Razon's Bad Order Certificate No.
14859, 14863 and 14869 covering a
total of 227 bags in bad order condition.
Defendant's surveyor has conducted a
final and detailed survey of the cargo in
INSURANCE – PART A – MARCH 20, 2020
Cases
the warehouse for which he prepared a
survey report Exhibit F with the findings
on the extent of shortage or loss on the
bad order bags totalling 227 bags
amounting to 12,148 kilos, Exhibit F-1.
Based on said computation the plaintiff
made a formal claim against the
defendant Filipino Merchants Insurance
Company for P51,568.62 (Exhibit C) the
computation of which claim is contained
therein. A formal claim statement was
also presented by the plaintiff against
the vessel dated December 21, 1976,
Exhibit B, but the defendant Filipino
Merchants Insurance Company refused
to pay the claim. Consequently, the
plaintiff brought an action against said
defendant as adverted to above and
defendant presented a third party
complaint against the vessel and the
arrastre contractor. 2
The court below, after trial on the merits, rendered judgment
in favor of private respondent, the decretal portion whereof
reads:
WHEREFORE, on the main complaint,
judgment is hereby rendered in favor of
the plaintiff and against the defendant
Filipino Merchant's (sic) Insurance Co.,
ordering the defendants to pay the
plaintiff the following amount:
The sum of P51,568.62 with interest at
legal rate from the date of the filing of
the complaint;
On the third party complaint, the third
party defendant Compagnie Maritime
Des Chargeurs Reunis and third party
defendant E. Razon, Inc. are ordered to
pay to the third party plaintiff jointly and
severally reimbursement of the amounts
paid by the third party plaintiff with legal
interest from the date of such payment
until the date of such reimbursement.  in question was due to a fortuitous event precludes his right
Without pronouncement as to costs.3
9
On appeal, the respondent court affirmed the decision of the
lower court insofar as the award on the complaint is
concerned and modified the same with regard to the
adjudication of the third-party complaint. A motion for
reconsideration of the aforesaid decision was denied, hence
this petition with the following assignment of errors:
1. The Court of Appeals erred in its
interpretation and application of the "all
risks" clause of the marine insurance
policy when it held the petitioner liable to
the private respondent for the partial
loss of the cargo, notwithstanding the
clear absence of proof of some
fortuitous event, casualty, or accidental
cause to which the loss is attributable,
thereby contradicting the very
precedents cited by it in its decision as
well as a prior decision of the same
Division of the said court (then
composed of Justices Cacdac, Castro-
Bartolome, and Pronove);
2. The Court of Appeals erred in not
holding that the private respondent had
no insurable interest in the subject
cargo, hence, the marine insurance
policy taken out by private respondent is
null and void;
3. The Court of Appeals erred in not
holding that the private respondent was
guilty of fraud in not disclosing the fact, it
being bound out of utmost good faith to
do so, that it had no insurable interest in
the subject cargo, which bars its
recovery on the policy. 4
On the first assignment of error, petitioner contends that an
"all risks" marine policy has a technical meaning in insurance
in that before a claim can be compensable it is essential that
there must be "some fortuity, " "casualty" or "accidental
cause" to which the alleged loss is attributable and the failure
of herein private respondent, upon whom lay the burden, to
adduce evidence showing that the alleged loss to the cargo
to recover from the insurance policy. We find said contention
untenable.
The "all risks clause" of the Institute Cargo Clauses read as
follows:
5. This insurance is against all risks of
loss or damage to the subject-matter
insured but shall in no case be deemed
to extend to cover loss, damage, or
expense proximately caused by delay or
inherent vice or nature of the subject-
matter insured. Claims recoverable
hereunder shall be payable irrespective
of percentage. 5
An "all risks policy" should be read literally as meaning all
risks whatsoever and covering all losses by an accidental
cause of any kind. The terms "accident" and "accidental", as
used in insurance contracts, have not acquired any technical
meaning. They are construed by the courts in their ordinary
and common acceptance. Thus, the terms have been taken
to mean that which happens by chance or fortuitously,
without intention and design, and which is unexpected,
unusual and unforeseen. An accident is an event that takes
place without one's foresight or expectation; an event that
proceeds from an unknown cause, or is an unusual effect of
a known cause and, therefore, not expected. 6
The very nature of the term "all risks" must be given a broad
and comprehensive meaning as covering any loss other than
a willful and fraudulent act of the insured. 7 This is pursuant
to the very purpose of an "all risks" insurance to give
protection to the insured in those cases where difficulties of
logical explanation or some mystery surround the loss or
damage to property. 8 An "all asks" policy has been evolved
to grant greater protection than that afforded by the "perils
clause," in order to assure that no loss can happen through
the incidence of a cause neither insured against nor creating
liability in the ship; it is written against all losses, that is,
attributable to external causes. 9
The term "all risks" cannot be given a strained technical
meaning, the language of the clause under the Institute
Cargo Clauses being unequivocal and clear, to the effect that
it extends to all damages/losses suffered by the insured
cargo except (a) loss or damage or expense proximately
caused by delay, and (b) loss or damage or expense
proximately caused by the inherent vice or nature of the
subject matter insured.
Generally, the burden of proof is upon the insured to show
that a loss arose from a covered peril, but under an "all risks"
INSURANCE – PART A – MARCH 20, 2020
Cases
policy the burden is not on the insured to prove the precise
cause of loss or damage for which it seeks compensation.
The insured under an "all risks insurance policy" has the
initial burden of proving that the cargo was in good condition
when the policy attached and that the cargo was damaged
when unloaded from the vessel; thereafter, the burden then
shifts to the insurer to show the exception to the
coverage. 10 As we held in Paris-Manila Perfumery Co. vs.
Phoenix Assurance Co., Ltd.  11 the basic rule is that the
insurance company has the burden of proving that the loss is
caused by the risk excepted and for want of such proof, the
company is liable.
Coverage under an "all risks" provision of a marine insurance
policy creates a special type of insurance which extends
coverage to risks not usually contemplated and avoids
putting upon the insured the burden of establishing that the
loss was due to the peril falling within the policy's coverage;
the insurer can avoid coverage upon demonstrating that a
specific provision expressly excludes the loss from
coverage. 12 A marine insurance policy providing that the
insurance was to be "against all risks" must be construed as
creating a special insurance and extending to other risks
than are usually contemplated, and covers all losses except
such as arise from the fraud of the insured. 13 The burden of
the insured, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated.
Thereafter, the burden is shifted to the insurer to prove that
the loss was due to excepted perils. To impose on the
insured the burden of proving the precise cause of the loss
or damage would be inconsistent with the broad protective
purpose of "all risks" insurance.
In the present case, there being no showing that the loss
was caused by any of the excepted perils, the insurer is
liable under the policy. As aptly stated by the respondent
Court of Appeals, upon due consideration of the authorities
and jurisprudence it discussed —
... it is believed that in the absence of
any showing that the losses/damages
were caused by an excepted peril, i.e.
delay or the inherent vice or nature of
the subject matter insured, and there is
no such showing, the lower court did not
err in holding that the loss was covered
by the policy.
There is no evidence presented to show
that the condition of the gunny bags in
which the fishmeal was packed was
10
such that they could not hold their
contents in the course of the necessary
transit, much less any evidence that the
bags of cargo had burst as the result of
the weakness of the bags themselves.
Had there been such a showing that
spillage would have been a certainty,
there may have been good reason to
plead that there was no risk covered by
the policy (See Berk vs. Style [1956]
cited in Marine Insurance Claims, Ibid, p.
125). Under an 'all risks' policy, it was
sufficient to show that there was
damage occasioned by some accidental
cause of any kind, and there is no
necessity to point to any particular
cause. 14
Contracts of insurance are contracts of indemnity upon the
terms and conditions specified in the policy. The agreement
has the force of law between the parties. The terms of the
policy constitute the measure of the insurer's liability. If such
terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular sense.15
Anent the issue of insurable interest, we uphold the ruling of
the respondent court that private respondent, as consignee
of the goods in transit under an invoice containing the terms
under "C & F Manila," has insurable interest in said goods.
Section 13 of the Insurance Code defines insurable interest
in property 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. In principle, anyone has an
insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction whether he
has or has not any title in, or lien upon or possession of the
property y. 16 Insurable interest in property may consist in (a)
an existing interest; (b) an inchoate interest founded on an
existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises. 17
Herein private respondent, as vendee/consignee of the
goods in transit has such existing interest therein as may be
the subject of a valid contract of insurance. His interest over
the goods is based on the perfected contract of sale. 18The
perfected contract of sale between him and the shipper of
the goods operates to vest in him an equitable title even
before delivery or before be performed the conditions of the
sale. 19 The contract of shipment, whether under F.O.B.,
C.I.F., or C. & F. as in this case, is immaterial in the
determination of whether the vendee has an insurable
interest or not in the goods in transit. The perfected contract
of sale even without delivery vests in the vendee an
equitable title, an existing interest over the goods sufficient to
be the subject of insurance.
Further, Article 1523 of the Civil Code provides that where, in
pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer or not, for,
the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, the exceptions to said rule
not obtaining in the present case. The Court has heretofore
ruled that the delivery of the goods on board the carrying
vessels partake of the nature of actual delivery since, from
that time, the foreign buyers assumed the risks of loss of the
goods and paid the insurance premium covering them. 20
C & F contracts are shipment contracts. The term means that
the price fixed includes in a lump sum the cost of the goods
and freight to the named destination. 21 It simply means that
the seller must pay the costs and freight necessary to bring
the goods to the named destination but the risk of loss or
damage to the goods is transferred from the seller to the
buyer when the goods pass the ship's rail in the port of
shipment. 22
Moreover, the issue of lack of insurable interest was not
among the defenses averred in petitioners answer. It was
neither an issue agreed upon by the parties at the pre-trial
conference nor was it raised during the trial in the court
below. It is a settled rule that an issue which has not been
raised in the court a quo cannot be raised for the first time on
appeal as it would be offensive to the basic rules of fair play,
justice and due process. 23 This is but a permuted
restatement of the long settled rule that when a party
deliberately adopts a certain theory, and the case is tried and
decided upon that theory in the court below, he will not be
permitted to change his theory on appeal because, to permit
him to do so, would be unfair to the adverse party. 24
If despite the fundamental doctrines just stated, we
nevertheless decided to indite a disquisition on the issue of
insurable interest raised by petitioner, it was to put at rest all
doubts on the matter under the facts in this case and also to
dispose of petitioner's third assignment of error which
consequently needs no further discussion.
INSURANCE – PART A – MARCH 20, 2020
Cases
WHEREFORE, the instant petition is DENIED and the
assailed decision of the respondent Court of Appeals is
AFFIRMED in toto.
SO ORDERED.
G.R. No. 124050 June 19, 1997
MAYER STEEL PIPE CORPORATION and HONGKONG
GOVERNMENT SUPPLIES DEPARTMENT, petitioners,  damage is a factory defect.
vs.
COURT OF APPEALS, SOUTH SEA SURETY AND
INSURANCE CO., INC. and the CHARTER INSURANCE
CORPORATION, respondents.
PUNO, J.:
This is a petition for review on certiorari to annul and set
aside the Decision of respondent Court of Appeals dated
December 14, 1995 1 and its Resolution dated February 22,
1996 2 in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe
Corporation and Hongkong Government Supplies
Department v. South Sea Surety Insurance Co., Inc. and The
Charter Insurance Corporation. 3
In 1983, petitioner Hongkong Government Supplies
Department (Hongkong) contracted petitioner Mayer Steel
Pipe Corporation (Mayer) to manufacture and supply various
steel pipes and fittings. From August to October, 1983,
Mayer shipped the pipes and fittings to Hongkong as
evidenced by Invoice Nos. MSPC-1014, MSPC-1015,
MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022. 4
Prior to the shipping, petitioner Mayer insured the pipes and
fittings against all risks with private respondents South Sea
Surety and Insurance Co., Inc. (South Sea) and Charter
Insurance Corp. (Charter). The pipes and fittings covered by
Invoice Nos. MSPC-1014, 1015 and 1025 with a total
amount of US$212,772.09 were insured with respondent
South Sea, while those covered by Invoice Nos. 1020, 1017
and 1022 with a total amount of US$149,470.00 were
insured with respondent Charter.
Petitioners Mayer and Hongkong jointly appointed Industrial
Inspection (International) Inc. as third-party inspector to
examine whether the pipes and fittings are manufactured in
accordance with the specifications in the contract. Industrial
Inspection certified all the pipes and fittings to be in good
order condition before they were loaded in the vessel.
11
Nonetheless, when the goods reached Hongkong, it was
discovered that a substantial portion thereof was damaged.
Petitioners filed a claim against private respondents for
indemnity under the insurance contract. Respondent Charter
paid petitioner Hongkong the amount of HK$64,904.75.
Petitioners demanded payment of the balance of
HK$299,345.30 representing the cost of repair of the
damaged pipes. Private respondents refused to pay because
the insurance surveyor's report allegedly showed that the
On April 17, 1986, petitioners filed an action against private
respondents to recover the sum of HK$299,345.30. For their
defense, private respondents averred that they have no
obligation to pay the amount claimed by petitioners because
the damage to the goods is due to factory defects which are
not covered by the insurance policies.
The trial court ruled in favor of petitioners. It found that the
damage to the goods is not due to manufacturing defects. It
also noted that the insurance contracts executed by
petitioner Mayer and private respondents are "all risks"
policies which insure against all causes of conceivable loss
or damage. The only exceptions are those excluded in the
policy, or those sustained due to fraud or intentional
misconduct on the part of the insured. The dispositive portion
of the decision states:
WHEREFORE, judgment is hereby
rendered ordering the defendants jointly
and severally, to pay the plaintiffs the
following:
1. the sum equivalent in Philippine
currency of HK$299,345.30, with legal
rate of interest as of the filing of the
complaint;
2. P100,000.00 as and for attorney's
fees; and
3. costs of suit.
SO ORDERED. 5
Private respondents elevated the case to respondent Court
of Appeals.
Respondent court affirmed the finding of the trial court that
the damage is not due to factory defect and that it was
covered by the "all risks" insurance policies issued by private
respondents to petitioner Mayer. However, it set aside the
decision of the trial court and dismissed the complaint on the
ground of prescription. It held that the action is barred under
Section 3(6) of the Carriage of Goods by Sea Act since it
was filed only on April 17, 1986, more than two years from
the time the goods were unloaded from the vessel. Section
3(6) of the Carriage of Goods by Sea Act provides that "the
carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods
should have been delivered." Respondent court ruled that
this provision applies not only to the carrier but also to the
insurer, citing Filipino Merchants Insurance
Co., Inc. v. Alejandro. 6
Hence this petition with the following assignments of error:
1. The respondent Court of Appeals
erred in holding that petitioners' cause of
action had already prescribed on the
mistaken application of the Carriage of
Goods by Sea Act and the doctrine of
Filipino Merchants Co., Inc. v. Alejandro
(145 SCRA 42); and
2. The respondent Court of Appeals
committed an error in dismissing the
complaint. 7
The petition is impressed with merit. Respondent court erred
in applying Section 3(6) of the Carriage of Goods by Sea Act.
Section 3(6) of the Carriage of Goods by Sea Act states that
the carrier and the ship shall be discharged from all liability
for loss or damage to the goods if no suit is filed within one
year after delivery of the goods or the date when they should
have been delivered. Under this provision, only the carrier's
liability is extinguished if no suit is brought within one year.
But the liability of the insurer is not extinguished because the
insurer's liability is based not on the contract of carriage but
on the contract of insurance. A close reading of the law
reveals that the Carriage of Goods by Sea Act governs the
relationship between the carrier on the one hand and the
shipper, the consignee and/or the insurer on the other hand.
It defines the obligations of the carrier under the contract of
carriage. It does not, however, affect the relationship
INSURANCE – PART A – MARCH 20, 2020
Cases
between the shipper and the insurer. The latter case is
governed by the Insurance Code.
Our ruling in Filipino Merchants Insurance
Co., Inc. v. Alejandro 8 and the other cases 9 cited therein
does not support respondent court's view that the insurer's
liability prescribes after one year if no action for indemnity is
filed against the carrier or the insurer. In that case, the
shipper filed a complaint against the insurer for recovery of a
sum of money as indemnity for the loss and damage
sustained by the insured goods. The insurer, in turn, filed a
third-party complaint against the carrier for reimbursement of
the amount it paid to the shipper. The insurer filed the third-
party complaint on January 9, 1978, more than one year
after delivery of the goods on December 17, 1977. The court
held that the insurer was already barred from filing a claim
against the carrier because under the Carriage of Goods by
Sea Act, the suit against the carrier must be filed within one
year after delivery of the goods or the date when the goods
should have been delivered. The court said that "the
coverage of the Act includes the insurer of the goods." 10
The Filipino Merchants case is different from the case at bar.
In Filipino Merchants, it was the insurer which filed a claim
against the carrier for reimbursement of the amount it paid to
the shipper. In the case at bar, it was the shipper which filed
a claim against the insurer. The basis of the shipper's claim
is the "all risks" insurance policies issued by private
respondents to petitioner Mayer.
The ruling in Filipino Merchants should apply only to suits
against the carrier filed either by the shipper, the consignee
or the insurer. When the court said in Filipino Merchants that
Section 3(6) of the Carriage of Goods by Sea Act applies to
the insurer, it meant that the insurer, like the shipper, may no
longer file a claim against the carrier beyond the one-year
period provided in the law. But it does not mean that the
shipper may no longer file a claim against the insurer
because the basis of the insurer's liability is the insurance
contract. An insurance contract is a contract whereby one
party, for a consideration known as the premium, agrees to
indemnify another for loss or damage which he may suffer
from a specified peril. 11 An "all risks" insurance policy covers
all kinds of loss other than those due to willful and fraudulent
act of the insured. 12 Thus, when private respondents issued
the "all risks" policies to petitioner Mayer, they bound
themselves to indemnify the latter in case of loss or damage
to the goods insured. Such obligation prescribes in ten years,
in accordance with Article 1144 of the New Civil Code. 13
12
IN VIEW WHEREOF, the petition is GRANTED. The
Decision of respondent Court of Appeals dated December
14, 1995 and its Resolution dated February 22, 1996 are
hereby SET ASIDE and the Decision of the Regional Trial
Court is hereby REINSTATED. No costs.
SO ORDERED.
[G.R. No. L-2038. March 4, 1950.]
LUIS DEL CASTILLO, in his capacity as administrator of
intestate estate of the deceased Andres Grimalt y
Pastor, Plaintiff-Appellant, v. METROPOLITAN
INSURANCE COMPANY, Defendant-Appellee.  Castillo as administrator of the estate of the deceased
Prudencio de Guzman for Appellant. 
Claro M. Recto for Appellee.  the deceased Andres Grimalt y Pastor, was the owner of
SYLLABUS
1. INSURANCE; LIABILITIES ASSUMED BY INSURE;
EXTRAORDINARY RISK DUE TO UNUSUAL CAUSES. —
Insurance companies, generally are willing to assume only
ordinary risks or looses that may happen under ordinary
conditions or in times of peace. Insurance companies are
entitled to protect themselves and maintain their stability in
the interest of the people whom they insure and accordingly
they should avoid assuming extraordinary risks due to
unusual and peculiarly destructive causes which are
disproportionate to the amount of premiums paid. It is for this
reason that extraordinary causes of loss for which no
augmented premium has been paid are excluded from the
coverage of the policies issued by the defendant company.  follows:jgc:chanrobles.com.ph
2. ID.; ID.; DAMAGES CAUSED BY FIRE DUE TO WAR OR
INVASION. — When the property insured was destroyed by
fire, the conditions in Manila were entirely abnormal on
account of the war. Peace and order were beyond control for
they were characterized by panic and confusion and
accompanied by unchecked looting, uncontrolled mobs, and
outbreaks of fire. Two-thirds of the population and two thirds
of the police force of the city had evacuated to the provinces,
many houses were left without vigilance and were subject of
general looting, and fire, in several instances, was the
consequence because only a handful of policemen and
Manila’s firemen were left. Calls for assistance received no
response from the fire department, so much so that the fire
which destroyed the insured’s property was the effect of
abnormal conditions caused by war, of which the insurer is
not liable.  military naval or usurped power, martial law or state of siege,
3. ID.; LIMITATIONS OF ACTION, STIPULATION IN THE
POLICY AS TO. — Failure of the ensured to bring the proper
action under the conditions and within the time stipulated in
the policy, bars him from proceeding against the insurer. 
DECISION
MORAN, C.J. :
This is an appeal taken from a decision of the Court of First
Instance of Manila absolving the defendant Metropolitan
Insurance Company from the complaint filed by Luis del
Andres Grimalt y Pastor. 
According to the stipulation of facts submitted by the parties,
"Panaderia la Magdalena" situated between O’Donnel and
Misericordia Streets in the City of Manila which was insured
against fire and lightning and covered by Policies Nos.
21489, 21105 and 21106 issued by the Metropolitan
Insurance Company which were in full force and effect at the
time said property was partially destroyed by fire. Said
policies have their face value of P15,000, P30,000, and
P40,000 respectively and were worded identically there
having been paid by the insured to the defendant company
as premiums the amounts of P300 for Policy No. 21489,
P600 for Policy No. 21105 and P800 for Policy No. 21106 for
the period comprised between September 23, 1941, and
September 23, 1942. 
Paragraph 6 of each of these policies is as
"This insurance does not cover any loss or damage which
either in origin or extent is directly or indirectly, proximately
or remotely, occasioned by or contributed to by any of the
following occurrences, or which, either in origin or extent
directly or indirectly, proximately or remotely, arises out of or
in connection with any of such occurrences,
namely:jgc:chanrobles.com.ph
"(1) Earthquake, volcanic eruption, typhoon, hurricane,
tornado, cyclone, or other convulsion of nature or
atmospheric disturbance. 
"(2) War, invasion, act of foreign enemy, hostilities or war-like
operations (whether war be declared or not), mutiny, riot, civil
commotion, insurrection, rebellion, revolution, conspiracy,
INSURANCE – PART A – MARCH 20, 2020
Cases
or any of the events or causes which determine the
proclamation or maintenance of martial law or state of siege.  (See Aetna Ins. Co. v. Boom, 95 U. S., 117; 24 Law. ed.,
"Any loss or damage happening during the existence of
abnormal conditions (whether physical or otherwise), directly
or indirectly, proximately or remotely, occasioned by or
contributed to by or arising out of or in connection with any of
the said occurrences shall be deemed to be loss or damage
which is not covered by this insurance, except to the extent
that the Insured shall prove that such loss or damage
happened independently of the existence of such abnormal
conditions.  facts submitted by the parties, it is stated that in the City of
"In any action, suit or other proceeding, where the Company
alleges that by reason of the provisions of this condition any
loss or damage is not covered by this insurance, the burden
of proving that such loss or damage is covered shall be upon
the Insured."cralaw virtua1aw library
Early in the afternoon of January 2, 1942, a fire broke out in
a grocery store owned by Yu Dian Chiang, then being looted,
and caught and destroyed two doors of the "Panaderia la
Magdalena" building, thus causing a damage in the amount
of P62,000.  Since 2/3 of the population and 2/3 of the police force of the
The main issue here is whether or not the defendant,
Metropolitan Insurance Company, is liable for the damage
thus caused to the bakery above mentioned.  robbery were rampant in the city because only a handful of
As above indicated, one of the conditions stipulated in the
policies is that any loss or damage caused by war or
invasion or "any loss or damage happening during the
existence of abnormal conditions (whether physical or
otherwise) directly or indirectly, proximately or remotely,
occasioned by or contributed to by or arising out of or in
connection with any of the said occurrences shall be deemed
to be loss or damage which is not covered by this insurance"
and that "where the company alleges that by reason of the
provisions of this condition any loss or damage is not
covered by this insurance, the burden of proving that such
loss or damage is covered shall be upon the Insured."cralaw
virtua1aw library
Insurance companies, generally, are willing to assume only
ordinary risks or losses that may happen under ordinary
conditions or in times of peace. Insurance companies are
entitled to protect themselves and maintain their stability in
the interest of the people whom they insure and accordingly
they should avoid assuming extraordinary risks due to
unusual and peculiarly destructive causes which are
disproportionate to the amount of premium paid. It is for this
reason that extraordinary causes of loss for which no
augmented premium has been paid are excluded from the
13
coverage of the policies issued by the defendant company.
395, 398; cited with approval in Woogmaster v. Liverpool &
London Globe Ins. Co., 45 N.E. [2d], 394, 396; Am. Mfg.
Corp. v. Nat. Union Fire Insurance Co., 14 So. [2d], 430,
438; Holmes v. Employer’s Liability Ass. Corp. Ltd. of
London, Eng., 43 N.E. [2d], 746, 753.) 
On January 2, 1942, when the bakery owned by plaintiff was
destroyed partially by fire, the conditions in Manila were
entirely abnormal on account of the war. In the stipulation of
Manila from December 29, 1941 up to January 3, 1942, due
undoubtedly to the evacuation of the Philippine and U. S.
Army and to the imminence of Japanese invasion, the
conditions of peace and order were totally abnormal and
beyond control for they were characterized by panic and
confusion and accompanied by unchecked looting,
uncontrolled mobs, and outbreaks of fire. From December 8,
1941 to January 4, 1942 there had been at least 50 fires in
Manila and on January 2, 1942 there had been at least 8
fires in the city. And on January 6, a fire gutted the building
opposite and directly in front of the bakery owned by plaintiff.
city had evacuated to the provinces, many houses were left
without vigilance and were the subject of general looting, and
fire, in several instances, was the consequence. Looting and
policemen were left and they were generally ignored by the
mob of looters. Fires breaking out in houses being looted
were beyond control because a great portion of Manila’s
firemen had also evacuated to the provinces or failed to
report for duty in fear of imminent danger and calls for
assistance received no response from the fire department.  company signified by endorsement upon the
The fire which destroyed partially the bakery in question,
came from a grocery that was being looted. Such fire was
the effect of abnormal conditions caused by war.  (a) If the trade or manufacture carried on be
There is another reason why plaintiff’s action should be
dismissed. In paragraph thirteen (13) of the policies it is
stipulated that "if the claim is made and rejected and an
action or suit be not commenced within twelve (12) months
after such rejection . . . all benefit under this Policy shall be
forfeited." According to the stipulation of facts, plaintiff’s
claim was rejected on February 1942, and yet the complaint
in this case was filed on May 22, 1946. The action, therefore,
is barred by the limitation agreed upon by the parties.  in accordance with the provisions of article 8 of the policies
Judgment is affirmed with costs against Appellant.  aforesaid date of December 28, 1941;" (20 that under article
G.R. No. L-1559             January 31, 1950
FILIPINAS COMPAÑIA DE SEGUROS, petitioner, 
vs.
TAN CHUACO, respondent.
PADILLA, J.:
This is a petition for a writ of certiorari to review a judgment
of the Court of Appeals.
The petitioners is a domestic insurance corporation licensed
to engage in the insurance business in the Philippines. The
respondent is the owner of a building located in the
municipality of Lucena, province of Tayabas, insured for
P20,000 and P10,000 in two policies issued by the petitioner.
On 5 January 1942, during the term of the policies just
referred to, the building insured was burned completely
destroyed. Notice and proof of loss had been duly made, but
as the petitioner refused to pay, an action was brought to
recover on the policies. After trial, judgment was rendered
against the petitioner for the date of the filing of the
complaint. The Court of Appeals affirmed the judgment.
Now, the petitioner raises in these proceedings three
questions (1) that, under article 8 which provides:
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
policy, by or on behalf of the Company.
altered, or if the nature of the occupation of or
other circumstances affecting the building insured
or containing the insured property be changed in
such a way as to increase the risk of loss damage
by fire.
"the sealing of respondent's property by Japanese forces on
December 28, 1941 changed the nature of the occupation
thereof in a manner which increased the risk of loss, and that
above quoted, the insurance ceased to attach as of the
6 of the insurance policies issued "the inferential finding that
the fire of January 5, 1942 was of accidental origin, without
more, could not make respondent's loss compensable,
INSURANCE – PART A – MARCH 20, 2020
Cases
considering that the contract of the parties specifically
required respondent to prove that loss happened
independently of the abnormal conditions before he could
recover. In other words, that a consuming fire was accidental
is not proof of the fact that such fire was not the remote or
indirect result of, or contributed to, by the abnormal
condition;" and (3) that, under article 13 of the insurance
policies which provides:
All benefits under this policy shall be forfeited:
(a) If the claim be in any respect fraudulent;
(b) If any false declaration be made or used in
support thereof;
(c) If any fraudulent means or devices are used by
the Insured or anyone acting on his behalf to
obtain any belief under this policy;
(d) If the loss or damage be occasioned by the
wilful act, or with the connivance of the Insured;
(e) If the insured or anyone acting on his behalf
shall hinder or obstruct the Company in doing any
of the acts referred to in Article 1;
(f) If the claim be made and rejected and an action
or suit be not commenced within twelve months
after such rejection, or (in case of an Arbitration
taking place in pursuance of Article 18 of this
Policy) within twelve months after the Arbitrator or
Arbitrators or Umpire shall have made their award,
the respondent cannot recover, because he had made
fraudulent declaration in his claim submitted to the petitioner
denying that there had been a previous fire in premises in
which the insured was interested, whereas at the trial he
admitted that there had been a previous fire in which he was
an interested party.
As to the first question, the Court of Appeals held:
As to the claim of the appellant that risk of fire or
loss was increased by the sealing of the building
by the Japanese Forces, the evidence of record
discloses the following: The Japanese Army
14
entered Lucena at 5:30 a.m., on December 27,
1941. At that time appellee's building was closed.
On December 28, according to the testimony of
the principal witness for the defendant, all the
stores along Quezon Avenue, including the stores
in building of the appellee, were sealed by the
Japanese Army, except those which were open (t.
s. n., p. 50). Japanese soldiers asked what were
contained in the stores, and upon being informed,
they ordered the placing of posters prohibiting the
taking away of materials from the said stores
under penalty of death. (Id.). There were no
disorders during this period of time, that is,
between the entry of the Japanese Army and the
burning of the building. Looting was rampant until
the end of December, but thereafter and up to the
date of the burning of the building, only sporadic
looting occurred in far away places. The Japanese
soldiers patrolled the streets and dispersed people
seen in groups. They also arrested and tied and
punished people caught looting or stealing.
The appellant and the amici curiae contend that
the risk of fire or loss, which the building was
exposed by the sealing thereof, was considerably
increased, and that the policies thereupon ceased
to attach; that the situation of the building
containing war materials, which it became the
bounden duty of all loyal forces, whether the
regular USAFFE or the guerrilla elements to
destroy; that said sealing converted it into a
veritable arsenal of war material, thereby
increasing the risk and hazard to which it was
exposed. In passing upon this defense, the trial
court ruled that the stipulation between the parties
that no encounter of troops occurred in Lucena
before or after its occupation, and that the forces
of one and the other side were localized around
the fortifications of Bataan and Corregidor, had the
effect of bringing the said municipality beyond the
zone of war operations at the time in question, for
which reason no increase resulted in the risk or
hazard to which the building insured was subjected
to. Incidentally, if found that the stores in the
building insured were sealed, not because they
belonged to enemy nationals, but because they
were abandoned by the owners and precautionary
measures had to be adopted to prevent their being
looted.
We find that the finding of the trial court as to the
cause of the sealing of the building is fully justified
by the evidence of record. If the Japanese forces
only sealed those buildings which were closed,
and not those which were open (t. s. n., p. 50), it is
evident that their reason for the sealing was
because they were closed, and they desired to
prevent looting by the sealing.
As regards the supposed increase in the risk, we
may state that there were only three possible
sources of danger to which the building insured
could have been exposed before it was burned on
January 5, 1942, namely, by action of USAFFE,
guerrilla, or civilian saboteurs. This is a well known
fact and the parties have stipulated that at the
beginning of the year 1942 the theater of
operations between the Japanese Army and the
USAFFE forces was shifted to the fortification
around Bataan and Corregidor. There could not
have been any danger from the USAFFE forces,
because they had withdrawn from Manila and
surrounding provinces to Bataan. Neither was
there any risk from guerilla units began to organize
only after the fall of Bataan in April, 1942. As to
saboteurs, whether civilians or military, it is of
common knowledge that buildings or communities
are destroyed by fire upon the approach of the
enemy. No such acts of sabotage were
perpetrated in Lucena or in the province of
Tayabas. There was no danger from saboteurs
among the civilian after the Japanese forces
occupied Lucena on December 27, 1941, because
there is absolutely no evidence of the possible
existence of such elements, for, according to the
evidence of the record, except for looting, there
was peace and quiet in the municipality of Lucena
upon the coming of the Japanese forces.
Again we fail to understand how sealing alone can
increase the risk or hazard to which a building is
exposed. Whether sealed or not, if the contents of
the building are war materials, of value or use to
the contending forces, they would be subject to
confiscation or commandeering. Besides, the
sealing was an act of the enemy over which the
plaintiff-appellee had no influence or control. We,
therefore, hold that the policies did not cease to
attach by reason thereof.
For the foregoing reasons, this court declares that,
while the trial court committed an error in holding
that defendant-appellant has waived article 8 of
INSURANCE – PART A – MARCH 20, 2020
Cases
the policies, the said error is immaterial, as its The court takes judicial notice of the fact that on The above error, however, has not been in any
ruling that no increase in risk was occasioned by January 2, 1942, the commanding general of the manner prejudicial to the interests of defendant-
the sealing is correct. Japanese forces of occupation enjoined all public appellant, inasmuch as the court proceeded in the
and municipal officials to continue in their decision of the case on the theory that the plaintiff
respective offices. In Lucena, however, this order had the burden of proof, and actually succeeded in
As regards the second question, the Court of Appeals made
was evidently not carried out or followed. Instead, proving that fire occurred from causes
the following pronouncement:
a commission of citizen was created upon the independent of the abnormal conditions, although
written petition of some of them dated January 11, the reason that it gives why the plaintiff has such
We find that the trial court did not find that the 1942 (Exhibit 10). A government was thereafter an obligation is because he has made a negative
conditions in Lucena at the time of the loss were organized or authorized by the army of occupation, allegation in his pleading to the effect that the fire
abnormal. In reaching this conclusion it held that and it legally and actually superseded the had no relation with the war, invasion, civil
Lucena ceased to be the theater of war operations government in existence before the occupation, commotion, etc. . . . (Emphasis supplied.)
upon its occupation; that the conflict became but which had ceased to function even before the
localized around Bataan and Corregidor; and that advent of the Japanese Army.
The next question to decide is: Did the fire occur
for these reasons invasion was consummated on
independently of the abnormal conditions? The
December 27, 1941, in so far as Lucena is
As to the essential public services, the evidence evidence submitted by plaintiff shows that a few
concerned. It further seems to have held the view
shows that there was no police department and days before the fire there was peace and order in
that the term "abnormal conditions" used in the
that the Japanese soldiers guarded the streets and Lucena; that the Japanese soldiers were the ones
policy means actual warfare, or actual rioting or
kept peace and order. The fire department by who preserved peace and order, patrolling the
disturbance, or conditions short thereof. This
January 5 had not yet been organized and there streets and posting sentries at strategic points; that
interpretation is believed to be unjustifiably strict.
was no equipment, except the hose. Curfew was people behave well, although they used to retire to
We understand that it is not, it can not be, actual
maintained for many days after the entry of the the barrios to pass the nights; that looting was
fighting itself. It should be a situation, a condition
Japanese soldiers in the town and it continued already building was closed and the stores located
of things deviating from the normal or "abnormal"
even after the date of the fire on January 5. The therein were also closed and sealed; and that the
means "not conformed to rule or systems;
electrical service that furnished light in the town Japanese soldiers and the people all helped in
deviating from type; anomalous; irregular."
had been suspended and it was not resumed until putting out the fire.
(Webster's International Dictionary.)
February 3.
On the other hand, the testimonies of the
The evidence of record shows that the Japanese
The above conditions and circumstances witnesses for the defendant-appellant show that
forces entered Lucena on December 27, 1941,
conclusively prove, to our mind, that conditions in the fire originated in the kitchen of Perrera's
early in the morning. At the time of the entry many,
Lucena on and before January 5, 1942, the date panciteria, which was located in a building beside
if not most, of the people had evacuated to barrios
when the fire occurred, were abnormal. Abnormal plaintiff-appellee's building; that Perrera's building
or out of the way places in order not to be in the
conditions do not necessarily imply disorders, was closed and its owner had evacuated on
way of the Japanese forces or near them, and by
fighting, looting, etc. The existence of a regularly December 26; that he left in charge of the place
January 5, 1942, only about one-half of the
organized government with its police, health, and his encargada, Crisanta Malubay, to take charge
population had returned to town. We can imagine
fire departments is a sign of normalcy in a of the house; that in the morning of January 5 she
the feeling of fear or uneasiness that pervaded the
community. The absence thereof is a sign of was in the panciteria and saw that everything was
people, who were new to the ways of war and to
abnormal conditions. These are clearly reflected in order therein, the chairs and utensils intact; that
the army of occupation and its idiosyncrasies. The
also in the conduct of the people, in the closing of in front of the Tan Chuaco building there were
timid stayed away from the town; the bold resorted
their homes, their absence from the town, the fact Japanese trucks and bicycles parked, but that the
to looting stores and even the homes. These
that they retired to barrios at night for rest, etc. building was not occupied by them; and
conditions were general throughout the islands,
This is not strange as the army of occupation was the encargada and her husband entered the place
and this court takes judicial notice thereof.
new to the people and it had quaint and peculiar through a window to get their clothing as the door
rules, and soldiers were fierce, cruel and to the place was locked; that Perrera's panciteria
In Lucena the stores that were closed were sealed. unadapted to the ways of the people who had lived was separated from the Tan Chuaco building by a
There were actually no disorders, but looting was under a free and democratic atmosphere. We, narrow alley, so narrow that the alley; and that on
rampant till the end of the year and sporadic therefore, agreed with the appellant and amici the upper floor Perrera's was separated from the
thereafter for a few days. Japanese soldiers curiae that the trial court erred in not finding that alley by galvanized iron sheets, and on the lower
patrolled the streets and dispersed persons seen fire occurred during the existence of abnormal by wooden gratings only.
in groups. They kept guard day and night. Passes conditions directly caused by war and invasion.
were issued to residents until about January 10,
1942.
15
INSURANCE – PART A – MARCH 20, 2020
Cases
One witness for the defendant, Pedro Asi, testified
that upon seeing the fire he saw two individuals
running away from the scene, seemingly fearful,
and that he followed them on consciously. Another
witness, the husband of the caretaker of Perrera's
place, also testified that the sacks of rice that used
to be inside Perrera's place were no longer there
in the afternoon of the first; but this supposed fact
was denied by his wife, who said that there was no
rice lost or scattered on the floor of the kitchen.
This witness also stated that the lock of the door
facing one of the streets was forced open.
The trial court found that the fire which caused the
loss of the building had no direct or indirect
relation, either proximately or remotely, with the
abnormal conditions alleged by the defendant, and
held that it was, therefore, the result of causes
independent of said abnormal conditions. (Record
on Appeal, p. 39). A careful consideration of the
facts and circumstances shown at the
trial discloses, to our mind, no reason for
disturbing the above finding of fact. The fire
originated from the kitchen of the panciteria at
about 1:30 in the afternoon. In the morning, the
caretaker (encargada) of the panciteria was in the
kitchen with her husband and did not notice
anything peculiar or extraordinary therein. It is not
disclosed whether they stayed there till noon.
There were then many Japanese soldiers
patrolling, and the people were quiet and peaceful,
either through timidity or fear of the Japanese. The
fire could not have possibly been of an incendiary
origin, as the house was closed when the fire
started and the things that the encargada saw in
the morning in the kitchen were still there when the
fire was discovered. (Emphasis supplied.)
If the fire started from the kitchen, it must have
been purely an ordinary and accidental fire. We
cannot give any importance to the fact that Pedro
Asi saw two people running away from him when
On the third question, the Court of Appeals held:
he first saw the fire, as he was going to the fire,
because by that time the fire was already big and
the two whom he saw running could not have
possibly been the authors. Besides, it is usual for
people to see persons running on these occasions
for varied reason. Neither can we give credence to
the alleged looting of the rice indicated by
witnesses Proceso Pineda, because this statement
of his was denied by his wife, the real encargada,
who says she was the only one who the only one
16
who went into the panciteria on the afternoon of
the fire. Even if the looting of the rice had taken
place, it can not be assumed therefrom that the
looter set fire to the building. (Emphasis supplied.)
It is, furthermore, useful to note that the building
known as Perrera's place was very close to
plaintiff-appellee's building, only about more than a
meter away, and on the lower floor it had a
wooden grating that separated it from the insured
building. With this fact in mind, it is difficult to
believe that the presence of a fire department
would have been of much help. Indeed, defendant-
appellant's counsel themselves admit that the fire
could have occurred even if a fire department was
in existence. The risk caused by the proximity of
the building to the contiguous building is not a new
one, and must have already have already been
considered at the time of issuing the policy.
Our conclusion from all the above considerations
is that the evidence of record, whether furnished
by the plaintiff or by the defendant, disclosed
that the fire in question was purely an ordinary and
accidental one, unrelated to war, invasion civil
commotion, or to the abnormal conditions arising
therefrom. It could have occurred just as well in
times of peace and under normal conditions, as it
actually occurred under abnormal conditions. In
the language of the policy and as concluded by the
trial court, it occurred independently of war,
invasion, civil commotion, or of the abnormal
conditions produced thereby. Resuming what we
have stated above we declare that, while we agree
with the appellant that the trial court should have
proceeded by first finding whether conditions were
or were not normal and that if committed an error
in holding that the fire occurred independently of
the abnormal conditions is not incorrect.
(Emphasis supplied.)
As to the third assignment of error, the record
disclosed that the plaintiff-appellee had a previous
building on the land on which the insured building
was built, which has also been destroyed by fire
from neighboring buildings. On the basis of this
fact, it is claimed on defendant-appellant's behalf
that the plaintiff-appellee should be considered as
having forfeited all benefits under the policies, in
accordance with artist 13 thereof. Three objections
are raised against this claim, namely, that it had
not been raised in defendant-appellant's answer;
that it has been waived and appellant is estopped
from asserting it now, especially for the first time
on this appeal; and that the misstatement is
immaterial and not fraudulent.
The first objection is procedural, but it is a valid on
because plaintiff-appellee was not aware of this
defense and has no opportunity to introduce
evidence to counteract it. The second is also well
founded, as the defendant-appellant by its letter
rejecting the claim disclaimed liability only under
Article 6, thus making plaintiff-appellee believe that
the defense was on article 6 alone (32 C. J. p.
1354). We also sustain the third objection, as the
previous fire that appellee failed to mention in
answering the questions appearing in the claims
application is certainly immaterial and irrelevant, in
so far as the fire in question is concerned (32 C. J.
p. 1271).
The findings of the Court of Appeals (1) sealing of, and the
placing of posters on, the building by the Japanese Forces
did not increase the hazard or risk to which the building was
exposed and, therefore, the insurance did not cease to
attach under article 8 of the policies; and (2) that the fire
which destroyed the building "was purely an ordinary and
accidental one, unrelated to war, invasion, civil commotion,
or to the abnormal conditions arising therefrom," are binding
and conclusive upon this court.1 It has not been shown that
the findings of fact made by the court of Appeals are
arbitrary, whimsical, manifestly mistaken illogical, or absurd,
so as to warrant this Court to step in the exercise of its
supervisory power.2 And as to the defense based on article
13, the same is not set up in the special defenses, unlike the
one under article 8 which is set up in the 4th and 5th special
defense. This Court cannot determine whether the defense
under article 13 is included in that of article 11 pleaded in the
6th special defense because the policies are not before it.
It is strenuously contended that the sealing of, and the
placing of posters on, the building insured increased the risk,
because the latter " concerns itself with probabilities and
possibilities from the prospective point of view," and "cannot
be retrospective, for insurance contracts are never
consummated after the known happening of the event." The
contention as to the increase in the risk due to a change in
the condition of the building insured was overruled by the
Court of Appeals, and in so doing it took into consideration
INSURANCE – PART A – MARCH 20, 2020
Cases
the fact the building insured was sealed and that posters
were placed thereon by the Japanese forces. As already
stated, that conclusion cannot be reviewed.
The Court of Appeals set out at length the evidence
submitted by the parties and from such evidence it
concluded that the loss was occasioned by a cause
independent of, and "unrelated to war, invasion, civil
commotion, or to the abnormal conditions arising therefrom,"
or the existence of abnormal conditions prevailing in Lucena.
counsel for the petitioner contend that such conclusion is
inferred from the fact that the fire "was purely an ordinary
and accidental one." The contention is not well taken,
because the Court of Appeals found that the fire was
"unrelated to war, invasion, civil commotion, or to the
abnormal conditions arising therefrom." In Royal Insurance
Co. vs. Ruperto Martin, 192 U. s., 149; S. C. Rep. ed., 149-
13-67; 48 Law. ed., 385-391, the Supreme Court of the
United States held:
We come now to the merits of the case; our
attention being first directed to the questions
arising under that clause of the policy providing
that it shall not cover "loss or damage by fire
happening during the existence of any invasion,
foreign enemy, rebellion, insurrection, riot, civil
commotion, military or usurped power, or martial
law within the country or locality in which the
property insured is situated, . . . .
As the words of the policy are those of the
company, they should be taken most strongly
against it, and the interpretation should be adopted
which is most favorable to the insured, if such
interpretation be not inconsistent with the words
used. First Nat. Bank vs. Hartford F. Ins. co. 95
U.S. 673, 678, 679, 24 L. ed., 563, 565; Liverpool
& L. & G. Ins. Co. vs. Kearney, 180 U.S. 132, 136,
45 L. ed., 460, 462, 21 Sup. Ct. Rp. 326; Texas &
P.R. Co. vs. Reiss, 183 U.S. 621, 626, 46 l. ed.,
358, 360, 22 Sup. ct. Rep. 253. In this view the
above words should be held to mean that the
policy covered loss by fire occurring during the
existence of (if not occasioned by nor connected
with) any invasion, foreign enemy, rebellion,
insurrection, riot civil commotion, military or
usurped power, or martial law, in the general
locality where the property insured was
situated . . . Now, whether there was any
substantial connection between the fire and
military or other disturbance of the kind specified
17
existing in the locality where the property was
situated was a question of act, and it was properly
left to the jury. . . .
. . . It is to be taken that the jury found, upon the
whole evidence, that the loss was occasioned by
causes independent of the existence of any
invasion, foreign enemy, rebellion, insurrection,
riot, civil commotion, military or usurped power or
martial law. the facts under this issue having been
fairly submitted to the jury, its findings cannot be
disturbed.
The petition for a writ of certiorari is dismissed, with costs
against the petitioner.
G.R. No. 115278 May 23, 1995
FORTUNE INSURANCE AND SURETY CO.,
INC., petitioner, 
vs.
COURT OF APPEALS and PRODUCERS BANK OF THE
PHILIPPINES, respondents.
DAVIDE, JR., J.:
The fundamental legal issue raised in this petition for review
on certiorari is whether the petitioner is liable under the
Money, Security, and Payroll Robbery policy it issued to the
private respondent or whether recovery thereunder is
precluded under the general exceptions clause thereof. Both
the trial court and the Court of Appeals held that there should
be recovery. The petitioner contends otherwise.
This case began with the filing with the Regional Trial Court
(RTC) of Makati, Metro Manila, by private respondent
Producers Bank of the Philippines (hereinafter Producers)
against petitioner Fortune Insurance and Surety Co., Inc.
(hereinafter Fortune) of a complaint for recovery of the sum
of P725,000.00 under the policy issued by Fortune. The sum
was allegedly lost during a robbery of Producer's armored
vehicle while it was in transit to transfer the money from its
Pasay City Branch to its head office in Makati. The case was
docketed as Civil Case No. 1817 and assigned to Branch
146 thereof.
After joinder of issues, the parties asked the trial court to
render judgment based on the following stipulation of facts:
1. The plaintiff was insured by the defendants and an
insurance policy was issued, the duplicate original of which is
hereto attached as Exhibit "A";
2. An armored car of the plaintiff, while in the process of
transferring cash in the sum of P725,000.00 under the
custody of its teller, Maribeth Alampay, from its Pasay
Branch to its Head Office at 8737 Paseo de Roxas, Makati,
Metro Manila on June 29, 1987, was robbed of the said cash.
The robbery took place while the armored car was traveling
along Taft Avenue in Pasay City;
3. The said armored car was driven by Benjamin Magalong Y
de Vera, escorted by Security Guard Saturnino Atiga Y
Rosete. Driver Magalong was assigned by PRC
Management Systems with the plaintiff by virtue of an
Agreement executed on August 7, 1983, a duplicate original
copy of which is hereto attached as Exhibit "B";
4. The Security Guard Atiga was assigned by Unicorn
Security Services, Inc. with the plaintiff by virtue of a contract
of Security Service executed on October 25, 1982, a
duplicate original copy of which is hereto attached as Exhibit
"C";
5. After an investigation conducted by the Pasay police
authorities, the driver Magalong and guard Atiga were
charged, together with Edelmer Bantigue Y Eulalio,
Reynaldo Aquino and John Doe, with violation of P.D. 532
(Anti-Highway Robbery Law) before the Fiscal of Pasay City.
A copy of the complaint is hereto attached as Exhibit "D";
6. The Fiscal of Pasay City then filed an information charging
the aforesaid persons with the said crime before Branch 112
of the Regional Trial Court of Pasay City. A copy of the said
information is hereto attached as Exhibit "E." The case is still
being tried as of this date;
7. Demands were made by the plaintiff upon the defendant to
pay the amount of the loss of P725,000.00, but the latter
refused to pay as the loss is excluded from the coverage of
the insurance policy, attached hereto as Exhibit "A,"
specifically under page 1 thereof, "General Exceptions"
Section (b), which is marked as Exhibit "A-1," and which
reads as follows:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
INSURANCE – PART A – MARCH 20, 2020
Cases
x x x           x x x          assigned them to plaintiff. The wages Insurance Office, Ltd. vs. Court of
xxx and salaries of both Magalong and Atiga Appeals, 211 SCRA 554). Contracts of
are presumably paid by their respective insurance, like other contracts, are to be
firms, which alone wields the power to construed according to the sense and
(b) any loss caused by any dishonest, fraudulent or criminal
dismiss them. Magalong and Atiga are meaning of the terms which the parties
act of the insured or any officer, employee, partner,
assigned to plaintiff in fulfillment of themselves have used. If such terms are
director, trustee or authorized representative of the Insured
agreements to provide driving services clear and unambiguous, they must be
whether acting alone or in conjunction with others. . . .
and property protection as such — in a taken and understood in their plain,
context which does not impress the ordinary and popular sense (New Life
8. The plaintiff opposes the contention of the defendant and Court as translating into plaintiff's power Enterprises Case, supra, p. 676; Sun
contends that Atiga and Magalong are not its "officer, to control the conduct of any assigned Insurance Office, Ltd. vs. Court of
employee, . . . trustee or authorized representative . . . at the driver or security guard, beyond perhaps Appeals, 195 SCRA 193).
time of the robbery.1 entitling plaintiff to request are
replacement for such driver guard. The
The language used by defendant-
finding is accordingly compelled that
On 26 April 1990, the trial court rendered its decision in favor appellant in the above quoted stipulation
neither Magalong nor Atiga were
of Producers. The dispositive portion thereof reads as is plain, ordinary and simple. No other
plaintiff's "employees" in avoidance of
follows: interpretation is necessary. The word
defendant's liability under the policy,
"employee" must be taken to mean in
particularly the general exceptions
the ordinary sense.
WHEREFORE, premises considered, therein embodied.
the Court finds for plaintiff and against
defendant, and The Labor Code is a special law
Neither is the Court prepared to accept
specifically dealing with/and specifically
the proposition that driver Magalong and
designed to protect labor and therefore
(a) orders defendant to pay plaintiff the net amount of guard Atiga were the "authorized
its definition as to employer-employee
P540,000.00 as liability under Policy No. 0207 (as mitigated representatives" of plaintiff. They were
relationships insofar as the
by the P40,000.00 special clause deduction and by the merely an assigned armored car driver
application/enforcement of said Code is
recovered sum of P145,000.00), with interest thereon at the and security guard, respectively, for the
concerned must necessarily be
legal rate, until fully paid; June 29, 1987 money transfer from
inapplicable to an insurance contract
plaintiff's Pasay Branch to its Makati
which defendant-appellant itself had
Head Office. Quite plainly — it was teller
(b) orders defendant to pay plaintiff the sum of P30,000.00 formulated. Had it intended to apply the
Maribeth Alampay who had "custody" of
as and for attorney's fees; and Labor Code in defining what the word
the P725,000.00 cash being transferred
"employee" refers to, it must/should
along a specified money route, and
have so stated expressly in the
(c) orders defendant to pay costs of suit. hence plaintiff's then designated
insurance policy.
"messenger" adverted to in the policy. 3
All other claims and counterclaims are Said driver and security guard cannot be
accordingly dismissed forthwith. Fortune appealed this decision to the Court of Appeals which
considered as employees of plaintiff-
docketed the case as CA-G.R. CV No. 32946. In its
appellee bank because it has no power
decision 4 promulgated on 3 May 1994, it affirmed in toto the
SO ORDERED. 2 to hire or to dismiss said driver and
appealed decision.
security guard under the contracts
(Exhs. 8 and C) except only to ask for
The trial court ruled that Magalong and Atiga were not The Court of Appeals agreed with the conclusion of the trial their replacements from the contractors.5
employees or representatives of Producers. It Said: court that Magalong and Atiga were neither employees nor
authorized representatives of Producers and ratiocinated as
On 20 June 1994, Fortune filed this petition for review
The Court is satisfied that plaintiff may follows:
on certiorari. It alleges that the trial court and the Court of
not be said to have selected and Appeals erred in holding it liable under the insurance policy
engaged Magalong and Atiga, their A policy or contract of insurance is to be because the loss falls within the general exceptions clause
services as armored car driver and as construed liberally in favor of the insured considering that driver Magalong and security guard Atiga
security guard having been merely and strictly against the insurance were Producers' authorized representatives or employees in
offered by PRC Management and by company (New Life Enterprises vs. the transfer of the money and payroll from its branch office in
Unicorn Security and which latter firms Court of Appeals, 207 SCRA 669; Sun Pasay City to its head office in Makati.
18
INSURANCE – PART A – MARCH 20, 2020
Cases
According to Fortune, when Producers commissioned a
guard and a driver to transfer its funds from one branch to
another, they effectively and necessarily became its
authorized representatives in the care and custody of the
money. Assuming that they could not be considered
authorized representatives, they were, nevertheless,
employees of Producers. It asserts that the existence of an
employer-employee relationship "is determined by law and
being such, it cannot be the subject of agreement." Thus, if
there was in reality an employer-employee relationship
between Producers, on the one hand, and Magalong and
Atiga, on the other, the provisions in the contracts of
Producers with PRC Management System for Magalong and
with Unicorn Security Services for Atiga which state that
Producers is not their employer and that it is absolved from
any liability as an employer, would not obliterate the
relationship.
Fortune points out that an employer-employee relationship
depends upon four standards: (1) the manner of selection
and engagement of the putative employee; (2) the mode of
payment of wages; (3) the presence or absence of a power
to dismiss; and (4) the presence and absence of a power to
control the putative employee's conduct. Of the four, the
right-of-control test has been held to be the decisive
factor. 6 It asserts that the power of control over Magalong
and Atiga was vested in and exercised by Producers.
Fortune further insists that PRC Management System and
Unicorn Security Services are but "labor-only" contractors
under Article 106 of the Labor Code which provides:
Art. 106. Contractor or subcontractor. —
There is "labor-only" contracting where
the person supplying workers to an
employer does not have substantial
capital or investment in the form of tools,
equipment, machineries, work premises,
among others, and the workers recruited
and placed by such persons are
performing activities which are directly
related to the principal business of such
employer. In such cases, the person or
intermediary shall be considered merely
as an agent of the employer who shall
be responsible to the workers in the
same manner and extent as if the latter
were directly employed by him.
Fortune thus contends that Magalong and Atiga were
employees of Producers, following the ruling in International
Timber Corp. vs. NLRC 7 that a finding that a contractor is a
19
"labor-only" contractor is equivalent to a finding that there is
an employer-employee relationship between the owner of the
project and the employees of the "labor-only" contractor.
On the other hand, Producers contends that Magalong and
Atiga were not its employees since it had nothing to do with
their selection and engagement, the payment of their wages,
their dismissal, and the control of their conduct. Producers
argued that the rule in International Timber Corp. is not
applicable to all cases but only when it becomes necessary
to prevent any violation or circumvention of the Labor Code,
a social legislation whose provisions may set aside contracts
entered into by parties in order to give protection to the
working man.
Producers further asseverates that what should be applied is
the rule in American President Lines vs. Clave, 8 to wit:
In determining the existence of
employer-employee relationship, the
following elements are generally
considered, namely: (1) the selection
and engagement of the employee; (2)
the payment of wages; (3) the power of
dismissal; and (4) the power to control
the employee's conduct.
Since under Producers' contract with PRC Management
Systems it is the latter which assigned Magalong as the
driver of Producers' armored car and was responsible for his
faithful discharge of his duties and responsibilities, and since
Producers paid the monthly compensation of P1,400.00 per
driver to PRC Management Systems and not to Magalong, it
is clear that Magalong was not Producers' employee. As to
Atiga, Producers relies on the provision of its contract with
Unicorn Security Services which provides that the guards of
the latter "are in no sense employees of the CLIENT."
There is merit in this petition.
It should be noted that the insurance policy entered into by
the parties is a theft or robbery insurance policy which is a
form of casualty insurance. Section 174 of the Insurance
Code provides:
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 insurance
such as fire or marine. It includes, but is
not limited to, employer's liability
insurance, public 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.
(emphases supplied)
Except with respect to compulsory motor vehicle liability
insurance, the Insurance Code contains no other provisions
applicable to casualty insurance or to robbery insurance in
particular. These contracts are, therefore, governed by the
general provisions applicable to all types of insurance.
Outside of these, the rights and obligations of the parties
must be determined by the terms of their contract, taking into
consideration its purpose and always in accordance with the
general principles of insurance law. 9
It has been aptly observed that in burglary, robbery, and theft
insurance, "the opportunity to defraud the insurer — the
moral hazard — is so great that insurers have found it
necessary to fill up their policies with countless restrictions,
many designed to reduce this hazard. Seldom does the
insurer assume the risk of all losses due to the hazards
insured against." 10 Persons frequently excluded under such
provisions are those in the insured's service and
employment. 11 The purpose of the exception is to guard
against liability should the theft be committed by one having
unrestricted access to the property. 12 In such cases, the
terms specifying the excluded classes are to be given their
meaning as understood in common speech. 13 The terms
"service" and "employment" are generally associated with
the idea of selection, control, and compensation. 14
A contract of insurance is a contract of adhesion, thus any
ambiguity therein should be resolved against the
insurer, 15 or it should be construed liberally in favor of the
insured and strictly against the insurer. 16 Limitations of
liability should be regarded with extreme jealousy and must
be construed 
in such a way, as to preclude the insurer from non-
compliance with its obligation. 17 It goes without saying then
that if the terms of the contract are clear and unambiguous,
there is no room for construction and such terms cannot be
enlarged or diminished by judicial construction. 18
INSURANCE – PART A – MARCH 20, 2020
Cases
An insurance contract is a contract of indemnity upon the
terms and conditions specified therein. 19 It is settled that the
terms of the policy constitute the measure of the insurer's
liability. 20 In the absence of statutory prohibition to the
contrary, insurance companies have the same rights as
individuals to limit their liability and to impose whatever
conditions they deem best upon their obligations not
inconsistent with public policy.
With the foregoing principles in mind, it may now be asked
whether Magalong and Atiga qualify as employees or
authorized representatives of Producers under paragraph (b)
of the general exceptions clause of the policy which, for easy
reference, is again quoted:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect
of
x x x           x x x          x x x
(b) any loss caused by any dishonest, fraudulent or criminal
act of the insured or any officer, employee, partner,
director, trustee or authorized representative of the Insured
whether acting alone or in conjunction with others. . . .
(emphases supplied)
There is marked disagreement between the parties on the
correct meaning of the terms "employee" and "authorized
representatives."
It is clear to us that insofar as Fortune is concerned, it was its
intention to exclude and exempt from protection and
coverage losses arising from dishonest, fraudulent, or
criminal acts of persons granted or having unrestricted
access to Producers' money or payroll. When it used then
the term "employee," it must have had in mind any person
who qualifies as such as generally and universally
understood, or jurisprudentially established in the light of the
four standards in the determination of the employer-
employee relationship, 21 or as statutorily declared even in a
limited sense as in the case of Article 106 of the Labor Code
which considers the employees under a "labor-only" contract
as employees of the party employing them and not of the
party who supplied them to the employer. 22
20
Fortune claims that Producers' contracts with PRC Regional Trial Court of Makati in Civil Case No. 1817 are
Management Systems and Unicorn Security Services are REVERSED and SET ASIDE. The complaint in Civil Case
"labor-only" contracts. No. 1817 is DISMISSED.
Producers, however, insists that by the express No pronouncement as to costs.
terms thereof, it is not the employer of Magalong.
Notwithstanding such express assumption of PRC
SO ORDERED.
Management Systems and Unicorn Security
Services that the drivers and the security guards
each shall supply to Producers are not the latter's [G.R. No. L-16666. April 10, 1922. ]
employees, it may, in fact, be that it is because the
contracts are, indeed, "labor-only" contracts. ROMULO MACHETTI, Plaintiff-Appellee, v. HOSPICIO DE
Whether they are is, in the light of the criteria SAN JOSE, defendant and appellee, and FIDELITY &
provided for in Article 106 of the Labor Code, a SURETY COMPANY OF THE PHILIPPINE
question of fact. Since the parties opted to submit ISLANDS, Defendant-Appellant. 
the case for judgment on the basis of their
stipulation of facts which are strictly limited to the Ross & Lawrence and Wolfson, Wolfson & Schwarzkopf
insurance policy, the contracts with PRC for Appellant. 
Management Systems and Unicorn Security
Services, the complaint for violation of P.D. No. Gabriel La O for appellee Hospicio de San Jose. 
532, and the information therefor filed by the City
Fiscal of Pasay City, there is a paucity of evidence No appearance for the other appellee. 
as to whether the contracts between Producers
and PRC Management Systems and Unicorn SYLLABUS
Security Services are "labor-only" contracts.
1. CONTRACT OF GUARANTY. — Machetti, by contract in
writing, agreed to erect a building for the Hospicio de San
But even granting for the sake of argument that these
Jose. The defendant Surety Company made the following
contracts were not "labor-only" contracts, and PRC
endorsement in the English language upon the contract: "For
Management Systems and Unicorn Security Services were
truly independent contractors, we are satisfied that Magalong value received we hereby guarantee compliance with the
and Atiga were, in respect of the transfer of Producer's terms and conditions as outlined in the above contract."
money from its Pasay City branch to its head office in Makati, Held: That the terms of the endorsement must be given the
its "authorized representatives" who served as such with its signification which ordinarily attaches to them in the
teller Maribeth Alampay. Howsoever viewed, Producers language in which the endorsement was written and that the
entrusted the three with the specific duty to safely transfer obligation of the Surety Company was one of guaranty and
the money to its head office, with Alampay to be responsible not of suretyship or fianza solidaria. 
for its custody in transit; Magalong to drive the armored
vehicle which would carry the money; and Atiga to provide 2. DISTINCTION BETWEEN GUARANTOR AND SURETY.
the needed security for the money, the vehicle, and his two — A guarantor is the insurer of the solvency of the debtor; a
other companions. In short, for these particular tasks, the surety is an insurer of the debt. A guarantor binds himself to
three acted as agents of Producers. A "representative" is pay if the principal is unable to pay; a surety undertakes to
defined as one who represents or stands in the place of pay if the principal does not pay. 
another; one who represents others or another in a special
capacity, as an agent, and is interchangeable with "agent." 23 3. LIABILITY OF GUARANTOR; INSOLVENCY OF
PRINCIPAL. — A guarantor cannot be compelled to pay until
it is shown that the principal is unable to pay and such
In view of the foregoing, Fortune is exempt from liability inability is not sufficiently shown by the mere fact that he has
under the general exceptions clause of the insurance policy. been declared insolvent under the present Insolvency Law in
which the extent of the insolvent’s inability to pay is not
WHEREFORE , the instant petition is hereby GRANTED. determined until the final liquidation of his estate. 
The decision of the Court of Appeals in CA-G.R. CV No.
32946 dated 3 May 1994 as well as that of Branch 146 of the DECISION
INSURANCE – PART A – MARCH 20, 2020
Cases
OSTRAND, J. :
It appears from the evidence that on July 17, 1916, one
Romulo Machetti, by a written agreement, undertook to
construct a building on Calle Rosario in the city of Manila for
the Hospicio de San Jose, the contract price being P64,000.
One of the conditions of the agreement was that the
contractor should obtain the "guarantee" of the Fidelity and
Surety Company of the Philippine Islands to the amount of
P12,800 and the following endorsement in the English
language appears upon the contract:jgc:chanrobles.com.ph
"MANILA, July 15, 1916.  plaintiff’s guarantor, is the defendant, Machetti having been
"For value received we hereby guarantee compliance with
the terms and conditions as outlined in the above contract.  We think the court below erred in proceeding with the case
"FIDELITY & SURETY COMPANY OF THE PHILIPPINE
ISLANDS.  a future debt of unknown amount and even regarding the
(Sgd.) "OTTO VORSTER,
"Vice-President,"  THE COURT OF APPEALS, (Fourteenth Division) and
Machetti constructed the building under the supervision of
architects representing the Hospicio de San Jose and, as the
work progressed, payments were made to him from time to
time upon the recommendation of the architects, until the
entire contract price, with the exception of the sum of
P4,978.08, was paid. Subsequently it was found that the
work had not been carried out in accordance with the
specifications which formed part of the contract and that the
workmanship was not of the standard required, and the
Hospicio de San Jose therefore refused to pay the balance
of the contract price. Machetti thereupon brought this action,
the complaint being filed May 28, 1917. On January 28,
1918, the Hospicio de San Jose answered the complaint and
presented a counterclaim for damages for the partial
noncompliance with the terms of the agreement above
mentioned, in the total sum of P71,350. After issue was thus
joined, Machetti, on petition of his creditors, was, on
February 27,1918, declared insolvent and on March 4, 1918,
an order was entered suspending the proceeding in the
present case in accordance with section 60 of the Insolvency
Law, Act No. 1956.  principal cannot pay. The one is the insurer of the debt, the
The Hospicio de San Jose on January 29, 1919, filed a
motion asking that the Fidelity and Surety Company be made
cross-defendant to the exclusion of Machetti and that the
proceedings be continued as to said company, but still
21
remain suspended as to Machetti. This motion was granted
and on February 7, 1920, the Hospicio filed a complaint
against the Fidelity and Surety Company asking for a
judgment for P12,800 against the company upon its
guaranty. After trial, the Court of First Instance rendered
judgment against the Fidelity and Surety Company for
P12,800 in accordance with the complaint. The case is now
before this court upon appeal by the Fidelity and Surety
Company from said judgment.  established by the mere fact that he has been declared
As will be seen, the original action in which Machetti was the
plaintiff and the Hospicio de San Jose defendant, has been
converted into an action in which the Hospicio de San Jose
is plaintiff and the Fidelity and Surety Company, the original
practically eliminated from the case.  cross-complainant, the Hospicio de San Jose, may have
against the guarantor while the proceedings were suspended
as to the principal. The guaranty in the present case was for
guaranty as an ordinary fianza under the Civil Code, the
surety cannot be held responsible until the debt is liquidated.
(Civil Code, art. 1825.) 
But in this instance the guarantor’s case is even stronger
than that of an ordinary surety. The contract of guaranty is
written in the English language and the terms employed must
of course be given the signification which ordinarily attaches
to them in that language. In English the term "guarantor"
implies an undertaking of guaranty, as distinguished from
suretyship. It is very true that notwithstanding the use of the
words "guarantee" or "guaranty" circumstances may be
shown which convert the contract into one of suretyship but
such circumstances do not exist in the present case: on the
contrary it appears affirmatively that the contract is the
guarantor’s separate undertaking in which the principal does
not join, that it rests on a separate consideration moving from
the principal and that although it is written in continuation of
the contract for the construction of the building, it is a
collateral under taking separate and distinct from the latter.
All of these circumstances are distinguishing features of
contracts of guaranty.  sum of money, filed on May 13, 1988 by respondent,
Now, while a surety undertakes to pay if the principal does
not pay, the guarantor only binds himself to pay if the
other an insurer of the solvency of the debtor. (Saint v.
Wheeler & Wilson Mfg. Co., 95 Ala., 362; Campbell v.
Sherman, 151 Pa. St., 70; Castellvi de Higgins and Higgins
v. Sellner, 41, Phil., 142; U.S. v. Varadero de la Quinta, 40
Phil., 48.) This latter liability is what the Fidelity and Surety
Company assumed in the present case. The undertaking is
perhaps not exactly that of a fianza under the Civil Code, but
it is a perfectly valid contract and must be given the legal
effect it ordinarily carries. The Fidelity and Surety Company
having bound itself to pay only in the event its principal,
Machetti, cannot pay it follows that it cannot be compelled to
pay until it is shown that Machetti is unable to pay. Such
inability may be proven by the return of a writ of execution
unsatisfied or by other means, but is not sufficiently
insolvent in insolvency proceedings under our statutes, in
which the extent of the insolvent’s inability to pay is not
determined until the final liquidation of his estate. 
The judgment appealed from is therefore reversed without
costs and without prejudice to such right of action as the
after exhausting its remedy against the plaintiff Machetti. So
ordered. 
G.R. No. 107062 February 21, 1994
PHILIPPINE PRYCE ASSURANCE
CORPORATION, petitioner, 
vs.
GEGROCO, INC., respondents.
NOCON, J.:
Two purely technical, yet mandatory, rules of procedure
frustrated petitioner's bid to get a favorable decision from the
Regional Trial Court and then again in the Court of
Appeals. 1 These are non-appearance during the pre-trial
despite due notice, and non-payment of docket fees upon
filing of its third-party complaint. Just how strict should these
rules be applied is a crucial issue in this present dispute.
Petitioner, Interworld Assurance Corporation (the company
now carries the corporate name Philippine Pryce Assurance
Corporation), was the butt of the complaint for collection of
Gegroco, Inc. before the Makati Regional Trial Court, Branch
138. The complaint alleged that petitioner issued two surety
bonds (No. 0029, dated July 24, 1987 and No. 0037, dated
October 7, 1987) in behalf of its principal Sagum General
Merchandise for FIVE HUNDRED THOUSAND
(P500,000.00) PESOS and ONE MILLION (1,000,000.00)
PESOS, respectively.
INSURANCE – PART A – MARCH 20, 2020
Cases
On June 16, 1988, summons, together with the copy of the
complaint, was served on petitioner. Within the reglementary
period, two successive motions were filed by petitioner
praying for a total of thirty (30) days extention within which to
file a responsible pleading.
In its Answer, dated July 29, 1988, but filed only on August 4,
1988, petitioner admitted having executed the said bonds,
but denied liability because allegedly 1) the checks which
were to pay for the premiums bounced and were dishonored
hence there is no contract to speak of between petitioner and
its supposed principal; and 2) that the bonds were merely to
guarantee payment of its principal's obligation, thus,
excussion is necessary. After the issues had been joined, the
case was set for pre-trial conference on September 29,
1988. the petitioner received its notice on September 9,
1988, while the notice addressed to its counsel was returned
to the trial court with the notation "Return to Sender,
Unclaimed." 2
On the scheduled date for pre-trial conference, only the
counsel for petitioner appeared while both the representative
of respondent and its counsel were present. The counsel for
petitioner manifested that he was unable to contract the
Vice-President for operations of petitioner, although his client
intended to file a third party complaint against its principal.
Hence, the pre-trial was re-set to October 14, 1988. 3
On October 14, 1988, petitioner filed a "Motion with Leave to
Admit Third-Party Complaint" with the Third-Party Complaint
attached. On this same day, in the presence of the
representative for both petitioner and respondent and their
counsel, the pre-trial conference was re-set to December 1,
1988. Meanwhile on November 29, 1988, the court admitted
the Third Party Complaint and ordered service of summons
on third party defendants. 4
On scheduled conference in December, petitioner and its
counsel did not appear notwithstanding their notice in open
court. 5 The pre-trial was nevertheless re-set to February 1,
1989. However, when the case was called for pre-trial
conference on February 1, 1989, petitioner was again nor
presented by its officer or its counsel, despite being duly
notified. Hence, upon motion of respondent, petitioner was
considered as in default and respondent was allowed to
present evidence ex-parte, which was calendared on
February 24, 1989. 6 Petitioner received a copy of the Order
of Default and a copy of the Order setting the reception of
respondent's evidence ex-parte, both dated February 1,
1989, on February 16, 1989. 7
22
On March 6, 1989, a decision was rendered by the trial court,
the dispositive portion reads:
WHEREFORE, judgment is hereby
rendered in favor of the plaintiff and
against the defendant Interworld
Assurance Corporation to pay the
amount of P1,500,000.00 representing
the principal of the amount due, plus
legal interest thereon from April 7, 1988,
until date of payment; and P20,000.00
as and for attorney's fees. 8
Petitioner's "Motion for Reconsideration and New Trial" dated
April 17, 1989, having been denied it elevated its case to the
Court of Appeals which however, affirmed the decision of the
trial court as well as the latter's order denying petitioner's
motion for reconsideration.
Before us, petitioner assigns as errors the following:
I. The respondent Court of Appeals
gravely erred in declaring that the case
was already ripe for pre-trial conference
when the trial court set it for the holding
thereof.
II. The respondent Court of Appeals
gravely erred in affirming the decision of
the trial court by relying on the ruling laid
down by this Honorable Court in the
case of Manchester Development
Corporation v. Court of Appeals, 149
SCRA 562, and disregarding the
doctrine laid down in the case of Sun
Insurance Office, Ltd. (SIOL) v.
Asuncion, 170 SCRA 274.
III. The respondent Court of Appeals
gravely erred in declaring that it would
be useless and a waste of time to
remand the case for further proceedings
as defendant-appellant has no
meritorious defense.
We do not find any reversible error in the conclusion reached
by the court a quo.
Relying on Section 1, Rule 20 of the Rules of court, petitioner
argues that since the last pleading, which was supposed to
be the third-party defendant's answer has not been filed, the
case is not yet ripe for pre-trial. This argument must fail on
three points. First, the trial court asserted, and we agree, that
no answer to the third party complaint is forthcoming as
petitioner never initiated the service of summons on the third
party defendant. The court further said:
. . . Defendant's claim that it was not
aware of the Order admitting the third-
party complaint is preposterous. Sec. 8,
Rule 13 of the Rules, provides:
Completeness of service — . . . Service by registered mail is
complete upon actual receipt by the addressee, but if he fails
to claim his mail from the post office within five (5) days from
the date of first notice of the postmaster, service shall take
effect at the expiration of such time. 9
Moreover, we observed that all copies of notices and orders
issued by the court for petitioner's counsel were returned
with the notation "Return to Sender, Unclaimed." Yet when
he chose to, he would appear in court despite supposed lack
of notice.
Second, in the regular course of events, the third-party
defendant's answer would have been regarded as the last
pleading referred to in Sec. 1, Rule 20. However, petitioner
cannot just disregard the court's order to be present during
the pre-trial and give a flimsy excuse, such as that the
answer has yet to be filed.
The pre-trial is mandatory in any action, the main objective
being to simplify, abbreviate and expedite trial, if not to fully
dispense with it. Hence, consistent with its mandatory
character the Rules oblige not only the lawyers but the
parties as well to appear for this purpose before the
Court 10 and when a party fails to appear at a pre-trial
conference he may be non-suited or considered as in
default. 11
Records show that even at the very start, petitioner could
have been declared as in default since it was not properly
presented during the first scheduled pre-trial on September
29, 1988. Nothing in the record is attached which would
show that petitioner's counsel had a special authority to act
in behalf of his client other than as its lawyer.
INSURANCE – PART A – MARCH 20, 2020
Cases
We have said that in those instances where a party may not
himself be present at the pre-trial, and another person
substitutes for him, or his lawyer undertakes to appear not
only as an attorney but in substitution of the client's person, it
is imperative for that representative or the lawyer to have
"special authority" to enter into agreements which otherwise
only the client has the capacity to make. 12
Third, the court of Appeals properly considered the third-
party complaint as a mere scrap of paper due to petitioner's
failure to pay the requisite docket fees. Said the court a quo:
A third-party complaint is one of the
pleadings for which Clerks of court of
Regional Trial Courts are mandated to
collect docket fees pursuant to Section
5, Rule 141 of the Rules of Court. The
record is bereft of any showing tha(t) the
appellant paid the corresponding docket
fees on its third-party complaint. Unless
and until the corresponding docket fees
are paid, the trial court would not acquire
jurisdiction over the third-party complaint
(Manchester Development Corporation
Thus, we laid down the rules as follows:
vs. Court of Appeals, 149 SCRA 562).
The third-party complaint was thus
reduced to a mere scrap of paper not
worthy of the trial court's attention.
Hence, the trial court can and correctly
set the case for pre-trial on the basis of
the complaint, the answer and the
answer to the counterclaim.13
It is really irrelevant in the instant case whether the ruling in
Sun Insurance Office, Ltd. (SIOL) v. Asuncion 14 or that in
Manchester Development Corp. v. C.A. 15 was applied. Sun
Insurance and Manchester are mere reiteration of old
jurisprudential pronouncements on the effect of non-payment
of docket fees. 16 In previous cases, we have consistently
ruled that the court cannot acquire jurisdiction over the
subject matter of a case, unless the docket fees are paid.
Moreover, the principle laid down in Manchester could have
very well been applied in Sun Insurance. We then said:
The principle in Manchester [Manchester
Development Corp. v. C.A., 149 SCRA
562 (1987)] could very well be applied in
the present case. The pattern and the
intent to defraud the government of the
23
docket fee due it is obvious not only in
the filing of the original complaint but
also in the filing of the second amended
complaint.
xxx xxx xxx
In the present case, a more liberal
interpretation of the rules is called for
considering that, unlike Manchester,
private respondent demonstrated his
willingness to abide by the rules by
paying the additional docket fees as
required. The promulgation of the
decision in Manchester must have had
that sobering influence on private
respondent who thus paid the additional
docket fee as ordered by the respondent
court. It triggered his change of stance
by manifesting his willingness to pay
such additional docket fees as may be
ordered. 17
1. It is not simply the filing of the
complaint or appropriate initiatory
pleading, but the payment of the
prescribed docket fee, that vests a trial
court with jurisdiction over the subject-
matter or nature of the action. Where the
filing of the initiatory pleading is not
accompanied by payment of the docket
fee, the court may allow payment of the
fee within a reasonable time, but in no
case beyond the applicable prescriptive
or reglamentary period.
2. The same rule applies to permissive
counterclaims, third-party claims and
similar pleadings, which shall not be
considered filed until and unless the
filing fee prescribed therefor is paid. The
court may also allow payment of said fee
within a prescriptive or reglementary
period.
3. Where the trial court acquires
jurisdiction over a claim by the filing of
the appropriate pleading and payment of
the prescribed filing fee, but
subsequently, the judgment awards a
claim nor specified in the pleading, or if
specified the same has not been left for
determination by the court, the additional
filing fee therefor shall constitute a lien
on the judgment. It shall be the
responsibility of the clerk of court or his
duly authorized deputy to enforce said
lien and assess and collect the
additional 
fee. 18
It should be remembered that both in Manchester and Sun
Insurance plaintiffs therein paid docket fees upon filing of
their respective pleadings, although the amount tendered
were found to be insufficient considering the amounts of the
reliefs sought in their complaints. In the present case,
petitioner did not and never attempted to pay the requisite
docket fee. Neither is there any showing that petitioner even
manifested to be given time to pay the requisite docket fee,
as in fact it was not present during the scheduled pre-trial on
December 1, 1988 and then again on February 1, 1989.
Perforce, it is as if the third-party complaint was never filed.
Finally, there is reason to believe that partitioner does not
really have a good defense. Petitioner hinges its defense on
two arguments, namely: a) that the checks issued by its
principal which were supposed to pay for the premiums,
bounced, hence there is no contract of surety to speak of;
and 2) that as early as 1986 and covering the time of the
Surety Bond, Interworld Assurance Company (now Phil.
Pryce) was not yet authorized by the insurance Commission
to issue such bonds.
The Insurance Code states that:
Sec. 177. The surety is entitled to
payment of the premium as soon as the
contract of suretyship or bond is
perfected and delivered to the obligor.
No contract of suretyship or bonding
shall be valid and binding unless and
until the premium therefor has been
paid, except where the obligee has
accepted the bond, in which case the
bond becomes valid and
enforceable irrespective of whether or
not the premium has been paid by the
obligor to the surety. . . . (emphasis
added)
INSURANCE – PART A – MARCH 20, 2020
Cases
The above provision outrightly negates petitioner's first
defense. In a desperate attempt to escape liability, petitioner
further asserts that the above provision is not applicable
because the respondent allegedly had not accepted the
surety bond, hence could not have delivered the goods to
Sagum Enterprises. This statement clearly intends to muddle
the facts as found by the trial court and which are on record.
In the first place, petitioner, in its answer, admitted to have
issued the bonds subject matter of the original
action. 19Secondly, the testimony of Mr. Leonardo T.
Guzman, witness for the respondent, reveals the following:
Q. What are the conditions and terms of sales you extended
to Sagum General Merchandise?
A. First, we required him to submit to us Surety Bond to
guaranty payment of the spare parts to be purchased. Then
we sell to them on 90 days credit. Also, we required them to
issue post-dated checks.
Q. Did Sagum General merchandise comply with your surety
bond requirement?
A. Yes. They submitted to us and which we have accepted
two surety bonds.
Q Will you please present to us the aforesaid surety bonds?
A. Interworld Assurance Corp. Surety Bond No. 0029 for
P500,000 dated July 24, 1987 and Interworld Assurance
Corp. Surety Bond No. 0037 for P1,000.000 dated October
7, 1987. 20
Likewise attached to the record are exhibits C to C-
18 21 consisting of delivery invoices addressed to Sagum
General Merchandise proving that parts were purchased,
delivered and received.
On the other hand, petitioner's defense that it did not have
authority to issue a Surety Bond when it did is an admission
of fraud committed against respondent. No person can claim
benefit from the wrong he himself committed. A
representation made is rendered conclusive upon the person
making it and cannot be denied or disproved as against the
person relying thereon. 22
24
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals dismissing the petition before them and
affirming the decision of the trial court and its order denying
petitioner's Motion for Reconsideration are hereby
AFFIRMED. The present petition is DISMISSED for lack of
merit.
SO ORDERED.
G.R. No. L-17312           November 29, 1965
ARTURO R. TANCO, JR., plaintiff-appellee,  In rendering judgment for plaintiff the trial court adverted to
vs.
THE PHILIPPINE GUARANTY COMPANY, defendant-
appellant.  enactment or regulation in that behalf from driving such
MAKALINTAL, J.:
Plaintiff's automobile, while being driven at the southern
approach of the Jones bridge by his brother Manuel Tanco
on September 1, 1959, figured in a collision with a pick-up
delivery van, as a result of which both vehicles were
damaged. Plaintiff paid for repairs the total sum of P2,536.99
and then filed his claim with defendant company under a car
insurance policy issued by the latter. The claim was rejected,
whereupon suit was commenced in the Municipal Court of
Manila, whence it was elevated on appeal to the Court of
First Instance of Manila, which gave judgment for plaintiff in
the amount stated, plus interest at 8% and P500.00 as
attorney's fees. Appeal was taken by defendant directly to
this Court, there being no dispute as to the facts.
The policy sued upon covers, up to a certain limit, loss or
damage to the insured vehicle as well as damage to property
of third persons as a consequence of or incident to the
operation of said vehicle. There is an exception clause,
however, which provides that "the company shall not be
liable in respect of any accident, loss, damage or liability
caused, sustained or incurred ... whilst (the insured vehicle)
is ... being driven by or is for the purpose of being driven by
him in the charge of any person other than an Authorized
Driver." The policy defined the term "Authorized Driver" to be
the insured himself and "(b) any person driving on the
Insured's order or with his permission, provided that the
person driving is permitted in accordance with the licensing
or other laws or regulations to drive the Motor Vehicle or has
been permitted and is not disqualified by order of a court of
law or by reason of any enactment or regulation in that
behalf from driving such Motor Vehicle."
At the time of the collision plaintiff's brother who was at the
wheel, did not have a valid license, the one he had obtained
for the year 1958 not having been renewed on or before the
last working day of February 1959, as required by section 31
of the Motor Vehicle Law, Act No. 3992. That section states
that any license not so renewed "shall become delinquent
and invalid," and section 21 states that "except as otherwise
specifically provided in this Act no person shall operate any
motor vehicle on the public highways without having
procured a license for the current year, nor while such
license is delinquent, invalid, suspended or revoked."
the absence of evidence that Manuel Tanco had been
"disqualified by order of a court of law or by reason of any
motor vehicle," and ruled that if there is any ambiguity in the
definition of the term "authorized driver" in the policy the
ambiguity should be construed in favor of plaintiff, since the
policy had been prepared in its entirety by defendant. The
trial court's advertence is true as a matter of fact; and its
ruling is correct as a matter of law. But neither one nor the
other is relevant in this case. Appellant does not rely on the
portion of the proviso in the policy quoted by the court but on
that which states that "the person driving is permitted in
accordance with the licensing or other laws." And as to this
there is no ambiguity whatsoever, because the Motor Vehicle
Law expressly prohibits any person from operating a motor
vehicle on the highways without a license for the current year
or while such license is delinquent or invalid. That Manuel
Tanco renewed his license on September 8,1959, one week
after the accident did not cure the delinquency or revalidate
the license which had already expired.
We are not aware that the question presented here has been
decided by this Court in any previous case. Indeed all the
authorities cited by the parties consist of decisions Courts
United States. We note, however, that those relied upon by
appellee are not in point by reason of material differences in
the facts or issues presented. In Messersmith vs. American
Fidelity Co., 187 App. Div. 35, 175 N.Y. Supp. 169;
and Fireman's Fund Insurance Co. vs. Haley, 129 Miss. 525,
90 So. 635, the question was whether the insured could
recover on an automobile policy for damage sustained in a
collision which occurred while the vehicle was being driven in
violation of law — in the first case by an infant at the instance
of the insured, and in the second by the insured himself
beyond the statutory speed limit. In neither case was there a
provision in the policy expressly excluding liability by reason
of the particular violation involved. We have no reason to
disagree with the pronouncement of the court in the second
case, after citing the first, that "if such a defense (that the
INSURANCE – PART A – MARCH 20, 2020
Cases
vehicle was being driven in violation of law) were permissible
automobile insurance would be practically valueless."
In MacMahon vs. Pearlman, 13 N.E. 154-156, a
Massachusetts case, the defense of the insurer was also the
violation of law by the insured, namely, that she was driving
without a license; but as stated in the decision, "the casualty
company does not urge that the unlawful conduct is
forbidden in express terms, (but) that because of public
policy it ought not to be compelled to pay damages." The
court, citing Messersmith v. American Fidelity Co., supra,
similarly allowed recovery, saying that to restrict such
insurance to cases where there has been no violation of
criminal law or ordinance would reduce indemnity to a
shadow.
In the case before Us now appellant's defense does not rest
on the general proposition that if a law is violated at the time
of the accident which causes the damage or injury there can
be no recovery, but rather on a specific provision in the
policy that appellant shall not be liable if the accident occurs
while the vehicle is being driven by any person other than an
authorized driver and that an authorized driver, if not the
insured himself, is one who is acting on his order or with his
permission, provided he is permitted to drive under the
licensing laws.
The cases cited by appellant are apropos. In Crahan v.
Automobile Underwriters, Inc., et al., 176 A. (Pa.) 817, a
clause in the policy excluding loss while the motor vehicle "is
being operated by any person prohibited by law from driving
an automobile" was held to be free from doubt or ambiguity,
reasonable in its terms and in furtherance of the policy of the
law prohibiting unlicensed drivers to operate motor vehicles.
In Zabonick v. Ralston, et al., 261 N.W. (Mich.) 316, the
insured was driving with an expired license, in violation of
law (Act No. 91 of the Public Acts of 1931), when the
accident occurred. Under a provision in the policy that the
insurer "shall not be liable while the automobile is
operated ... by any person prohibited by law from driving,"
the insurance company was absolved, the Supreme Court of
Michigan saying: "To require a person to secure an
operator's license and meet certain requirements before
driving an automobile is a regulation for the protection of life
and property, the wisdom of which can scarcely be
questioned. The Legislature has also provided that every
three years such licenses expire and may be renewed under
certain conditions. If one fails to comply with the regulation,
the statute says, he or she shall not drive a motor vehicle
upon the highway. Under the terms of the contract, while
under such statutory prohibition, plaintiff could not recover
25
under his policy. To permit such recovery, notwithstanding
the lack of a driver's license, would tend to undermine the
protection afforded the public by virtue of Act No. 91."
The exclusion clause in the contract invoked by appellant is
clear. It does not refer to violations of law in general, which
indeed would tend to render automobile insurance practically
a sham, but to a specific situation where a person other than
the insured himself, even upon his order or with his
permission, drives the motor vehicle without a license or with
one that has already expired. No principle of law or of public
policy militates against the validity of such a provision.
The judgment appealed from is reversed, with costs.
G.R. No. L-9146             January 27, 1959
TERESA VDA. DE FERNANDEZ, ET AL., plaintiffs-
appellants,  1954 in accordance with the provision of the policy which
vs.
THE NATIONAL LIFE INSURANCE COMPANY OF THE
PHILIPPINES, defendant-appellee.
ENDENCIA, J.:
Appeal from a decision of the Court of First Instance of
Manila applying the Ballantyne scale of values upon the
proceeds of life insurance taken and maturing during the
Japanese occupation but claimed after liberation.
It is undisputed that on July 15, 1944, the National Life
Insurance Company of the Philippines insured the life of
Juan D. Fernandez for the sum of P10,000 under Policy No.
16346 upon payment by the latter of the amount of P444 for
the period from July 15, 1944, to July 14, 1945, the
beneficiaries thereof being his mother Teresa Duat Vda. de
Fernandez and his sisters Maria Teresa Fernandez and
Manuel Fernandez. The insured died on November 2, 1944,
at Muntinglupa, Rizal, while the policy was in force.
After a lapse of more than seven years, or on August 1st,
1952, Atty. Alberto L. de la Torre, in representation of the
beneficiaries, wrote the company advising it that and insured
had died in 1944, and claimed the proceeds of the policy. On
August 21, 1952, the company answered Atty. De la Torre
stating that inasmuch as the status of the policies issued
during the Japanese occupation was still pending
consideration before the courts, it would like to know whether
the beneficiaries represented by him were willing to compute
the value of their claim under the Ballantyne scale of values.
There was no reply to this inquiry, but on July 9, 1954, the
beneficiaries presented instead proofs of death of the
insured and at the same time filed Statement Exhibit G
claiming the amount of P10,000. On July 21, 1954, the
company advised the beneficiaries that inasmuch as the
policy matured upon the death of the insured on November
2, 1944, the proceeds should be computed in accordance
with the Ballantyne scale, which amount only to P500. In
view of this, the beneficiaries commenced suit on August 6,
1954, but the lower court sustained the stand of the company
and dismissed the complaint, awarding however to plaintiffs
the sum of P500 in Philippine currency, without interest;
hence the appeal.
Appellants vigorously maintain that the obligation of the
company to pay the proceeds of the insurance accrued not
upon the death of the insured on November 2, 1944, but only
upon receipt and approval by the company, at its Home
Office, of proof of death of the insured, which was on July 9,
reads — 
National Life Insurance Company of the Philippine
hereby agrees to pay at its Home Office, Manila,
Ten Thousand Pesos to Juan D. Fernandez
(hereinafter called the insured) on the 15th day of
July, 1964, if the Insured is living and this Policy is
in force, or upon receipt and approved at its Office
of due proofs of the title of the claimant and of the
prior death of the Insured while this Policy is in
force to Teresa Duat Vda. De Fernandez, Maria T.
and Manuela Fernandez, mother and sisters
respectively of the Insured (Hereinafter called the
Beneficiary) subject to the right of the Insured to
change the beneficiary as stated on the second
page of this Policy.
The above stipulation is apparently based on Sec. 91-A of
the Insurance Law which provides as follows:
The proceeds of a life insurance policy shall be
paid immediately upon maturity of the policy,
unless such proceeds are made payable in
installments or a as an annuity, in which case the
installments or annuities shall be paid as they
become due: Provided, however, That in case of a
policy maturing by the death of the insured, the
proceeds thereof shall be paid within sixty days
after presentation of the claim and filing of the
proof of the death of the insured. Refused to pay
INSURANCE – PART A – MARCH 20, 2020
Cases
the claim within the time prescribed herein will
entitle the beneficiary to collect interest on the
proceeds of the policy for the duration of the delay
at the rate of six per centum per annum, unless
such failure or refusal to pay is based on the
ground that the claim is fraudulent . . . .
Butterssed on the foregoing provision of law and the
aforequoted stipulation as well as on the allegation that the
filing of proof of death by the beneficiaries is a condition
precedent of the demandability of the obligation of the
insurer to pay the proceeds, appellants claim that they
should be paid P10,000 in Philippine currency and not under
the Ballantyne scale of values.
We find appellants' contention untenable. In life insurance,
the policy matures either upon the expiration of the term set
forth therein in which case its proceeds are immediately
payable to the insured himself, or upon his death occuring at
any time prior to the expiration of such stipulated term, in
which case, the proceeds are payable to his beneficiaries
within sixty days after their filing of proof of death (Sec. 91-A
Insurance Law). In the case at bar, the policy matured upon
the death of the insured on November 2, 1944, and the
obligation of the insurer to pay arose as of that date. The
sixty-day period fixed by law within which to pay the
proceeds after presentation of proof of death is merely
procedural in nature, evidently to determine the exact
amount to be paid and the interest thereon to which the
beneficiaries may be entitled to collect in case of
unwarranted refusal of the company to pay, and also to
enable the insurer to verify or check on the fact of death
which it may even validly waive. It is the happening of the
suspensive condition of death that renders a life policy
matured and not the filing of proof of death which, as a
above stated, is merely procedural, for even if such proof
were presented but if turns out later that the insured is alive,
such filing does not give maturity to the policy. The insured
having died on November 2, 1944, during the Japanese
occupation, the proceeds of his policy should be adjusted
accordingly, for
The rule is already settled that where a debtor
could have paid his obligation at any time during
the Japanese occupation, payment after liberation
must be adjusted in accordance with the
Ballantyne schedule (De Asis vs. Agdamag, 90
Phil., 249; Ang Lam vs. Peregrina, 92 Phil., 506;
Wilson vs. Berkenkotter, 92 Phil., 918; 49 Off. Gaz.
No. 4 1401; Samson vs. Andal de Aguila, 94 Phil.,
402). (Valero vs. Sycip, L-1119. May 23, 1958.)
26
Appellants vehemently invoke our ruling in the case
of Salvacion B. Londres vs. The National Life Insurance
Company of the Philippines, 94 Phil., 627 wherein, although
the policy matured during the Japanese occupation, we
allowed the proceeds to be paid in the present legal tender.
That case, however, is not applicable to the present. In that
case the insured, Jose Londes, and his two sons were
massacred by Japanese soldiers on February 7, 1945, while
the battle for the liberation of Manila was still raging and
downtown offices, including that of the appelle, were closed
for the duration. Thus we declared:
It may therefore be said that the policy became
due when the city of Manila was still under the
yoke of the enemy and became payable only after
liberation which took place on March 10, 1945,
when President Osmeña issued Proclamation No.
6 following the restoration of the civil government
by General Douglas MacArthur. And we say that
the policy became payable only after liberation
even if it matured sometime before, because
before that eventuality the insurance company,
appellant herein, was not yet in a position to pay
the value of the policy for the simple reason that it
has not yet reopened. . . .
In the present case the Home Office of the appellee was
open for business until the last days of January, 1945, and
had business transactions not only with the bank but also
with its customers before its closure, and as a matter of fact
had been making payments of claims as they were
presented. The policy in question having matured on
November 2, 1944, same could have been processed and
paid before the company closed its Home Office in January,
1945. Appellants argue that they could not have presented
their claim and proof of death during the Japanese
occupation even if they wanted to because they knew that
the deceased was insured only after liberation when the
policy was handed to them by Mr. Pablo P. Gabriel, a
business partner of the deceased. The delay in the
presentation of proof of death does not make any difference,
for it does not alter the date of maturity of the policy nor the
ability of the company to pay the proceeds of the insurance
during the Japanese occupation. Moreover, it is through no
fault of the company that such delay was incurred. At any
rate, irrespective of whether there was delay or not in the
filing of proof of death, the hard fact remains that the policy
matured and was payable during the Japanese occupation,
and under the doctrine in the Valero vs. Sycip case, supra,
payment should be adjusted in accordance with the
Ballantyne scale of values.
Finding no error in the decision appealed from, and there
being no question raised as to the adjusted amount of P500
under the Ballantyne schedule, judgment affirmed, with
costs.
G.R. No. L-5921             March 29, 1954
SALVACION B. LONDRES, plaintiff-appellee, 
vs.
THE NATIONAL LIFE INSURANCE COMPANY OF THE
PHILIPPINES, defendant-appellant.
BAUTISTA ANGELO, J.:
This is an appeal from a decision of the Court of First
Instance of Manila ordering defendant to pay to plaintiff the
sum of P3,000, Philippine currency, plus legal interest
thereon from the time of the filing of the complaint until its full
payment.
On April 14, 1943, the National Life Insurance Company of
the Philippines issued a policy on the life of Jose C. Londres
whereby it undertook to pay its beneficiary upon his death
the sum of P3,000. All the premiums due under the policy
were actually paid on their dates of maturity and the policy
was in force when the insured died on February 7, 1945.
Salvacion V. Londres, as beneficiary, demanded from the
company the payment of the proceeds of the policy, and her
demand having been refused, she instituted the present
action against the company in the Court of First Instance of
Manila.
Defendant and its answer denied, for lack of sufficient proof,
the allegation that the insured died on February 7, 1945, and
set up the following special defenses: (a) that plaintiff's claim
is covered by the Moratorium Law; (b) that the policy having
been issued during the Japanese occupation, it is presumed
that its face value should be paid in Japanese currency,
there being no provision in the policy from which can be
inferred that the parties contemplated payment in any other
currency; (c) that the money paid by the insured as
premiums, together with the money received from other
policy-holders, was all deposited by the defendant in the
Philippine National Bank and said deposit was declared
without value by Executive Order No. 49 of the President of
the Philippines; and (d) that the policy having been issued
under abnormal circumstances, it should be considered in
the light of equity which does not permit anyone to enrich
himself at the expense of another. Defendant, however, as a
proof of good faith, offered to pay the value of the policy in
INSURANCE – PART A – MARCH 20, 2020
Cases
accordance with the Ballantyne scale of values, or the sum
of P2,400, Philippine currency.
On April 15, 1952, plaintiff filed a motion for summary
judgment supported by an affidavit which contains a
restatement of the allegations of the complaint attaching
thereto in support of the motion certain annexes and
affidavits which are intended to substantiate and prove said
allegations. Defendant, answering this motion, stated that
while it joins the plaintiff in her petition for summary
judgment, it does so only in so far as its defense of
moratorium is concerned, but not as regards the merits of the
case because its answer raises questions of fact which
should be established, not by mere affidavits, but by
evidence duly presented in court. And on May 15, 1952, the
court rendered decision not only on the question of
moratorium but on the merits of the case, apparently
disregarding the issue raised by defendant as regards the
necessity of presenting evidence on the facts controverted
by it in its answer. From this decision, the defendant has
appealed.
One of the errors assigned by appellants refers to the fact
that the lower court rendered judgment on the merits by
virtue merely of the motion for summary judgment filed by
appellee without giving an opportunity to appellant to present
evidence on the facts which, it alleges, its answer and
special defenses are predicated. Appellant contends that the
facts raised by its special defenses are "triable issues of
facts" which cannot be the subject of summary judgment
unless established by sufficient evidence, and that those
facts are material to sustain its point of view that it can only
be made to pay under the policy an indemnity in the amount
of P2,400.
When appellee filed a motion for summary judgment upon
her claim she attached thereto in support of the motion
certain annexes and affidavits which were intended to
substantiate and prove her allegations. Appellant failed not
only to interpose opposing affidavits but announced to the
court that it was joining the appellee in her petition for
summary judgment although it evinced its desire to present
evidence with regard to the questions of facts raised in its
special defenses. And acting on said motion, the lower court,
after considering the pleadings and affidavits submitted in
support of the motion for summary judgment, found that
there was no substantial triable issue of facts and concluded
that the appellee was entitled to a judgment as a matter of
law. We find this to be in substantial compliance with the
rules (sections 1 and 2, Rule 36).
27
The material averments of the claim as regards the
execution of the policy, the payment of the premiums, and
the death of the insured, are not disputed. The only issues of
fact which served as basis for the opposition to the summary
judgment are those raised in the special defenses contained
in the answer. But these facts are not material for a decision
on the merits, as correctly stated by the lower court, for even
if they are taken for granted the result would not materially
change the findings as to the question affecting the main
claim. We hold therefore that the lower court did not err in
rendering a summary judgment on the merits of the case.
The issue of moratorium, which was decided against the
stand taken by appellant, and which is also raised as one of
the errors, has now moot in view of the ruling in the case
of Rutter vs. Esteban, 93 Phil., 68, wherein the Moratorium
Law as declared invalid and unconstitutional.
The main question to be determined refers to the amount to
be paid by appellant under the policy by way of indemnity to
the insured. Stated in another way, the question to be
determined is whether the amount of P3,000 which appellant
bound itself to pay to the insured under the policy upon his
death should be paid in accordance with the present
currency or should be adjusted under the Ballantyne scale of
values. The answer to the question would depend upon the
interpretation to be placed on the facts surrounding the death
of the insured.
It appears that the deceased took up the policy under
consideration on April 15, 1943 for the sum of P3,000. All the
premiums due under the policy were actually paid on their
dates of maturity and the policy was in force when the
insured died on February 7, 1945. On said date, the battle of
the liberation of the City of Manila was still raging. While the
northern part may have been liberated, not so the southern
part, as shown from the very affidavits submitted by appellee
wherein it was stated that on the aforesaid date, the insured,
Jose Londres, and his two sons were taken by the Japanese
soldiers from their house at Singalong Street and were
massacred by their captors. It may therefore be said that the
policy became due when the City of Manila was still under
the yoke of the enemy and became payable only after
liberation which took place on March 10, 1945 when
President Osmeña issued Proclamation No. 6 following the
restoration of the civil government by General Douglas Mac
Arthur. And we say that the policy became payable only after
liberation even if it matured sometime before, because
before that eventuality the insurance company, appellant
herein, was not yet in a position to pay the value of the policy
for the simple reason that it had not yet reopened. This much
the court can take judicial notice of, for during those days of
liberation, while the people were rejoicing because of the
happy event, the banks, the insurance companies, and for
that matter other commercial and business firms, were still
feeling the adverse effects of the sudden fall of values and
were uncertain and apprehensive as to the manner the
readjustment would be made by the new Government. It is
for this reason that the beneficiary, after realizing the truth
about the death of her husband, and after gathering
evidence to substantiate his death, had difficulty in effecting
the collection of her claim from the insurance company
because at that time it had not yet reopened for business
purposes. Although the record does not disclose the exact
date on which the insurance company reopened for this
purpose, this Court can take judicial notice that it only did so
after liberation. At that time the legal tender was already the
present currency.
However, it is an undisputed fact that the beneficiary
submitted to the company formally her claim and demanded
payment thereof on May 16, 1949, attaching thereto
sufficient proof of the death of the insured, which claim
however the company did not entertain, not because the
proof submitted was not sufficient in contemplation of law,
but because the policy was executed during the occupation
and the determination of its value has not yet been passed
upon by the Government. And following the provisions of our
Insurance Law to the effect that in case of maturity by death,
the conclusion is inescapable that from the point of view of
the insurance company, the proceeds of the policy became
payable only upon the expiration of that period. (Insurance
Law, Section 91-A). In this sense, this case may be likened
to those already decided by this Court wherein we said in
substance that, where the parties have agreed that the
payment of the obligation will be made in the currency that
would prevail by the end of the stipulated period, and this
takes place after liberation, the obligation shall be paid in
accordance with the currency then prevailing, or Philippine
currency. (Roño vs. Gomez, 83 Phil., 890, 46 Off. Gaz., Sup.
111, 339; Gomez vs. Tabia, 84 Phi;., 269, 47, Off. Gaz.,
641.) We are, therefore, persuaded to conclude, on the
strength of these authorities, that the present claim should be
paid in accordance with the present legal tender, or the
Philippine currency.
With regard to the sufficiency of the proof presented by
appellee as to the death of the insured, we find that the same
has been sufficiently established in view of the death
certificate issued by the Civil Register of Manila on April 15,
1952, which was attached to the motion for summary
judgment. This certificate strengthens the proof submitted by
appellee on May 16, 1949 and as such it can serve as basis
INSURANCE – PART A – MARCH 20, 2020
Cases
for the determination of the interest that the company should
pay under the policy as required by law. (Insurance Law,
Section 91-A). However, the lower court, contrary to the
claim of appellant, only required said appellant to pay legal
interest from the filing of the complaint until the payment of
the judgment.

As final plea, appellant invokes equity in its favor in view of

the nullification of the deposits made by it with the Philippine
National Bank of all fiat money received from its
policyholders, which money was declared without value by
Executive Order No. 49 of the President of the Philippines.
Appellant claims that, considering the unexpected
circumstances that developed, the indemnity to be paid by it
should be suffered by it under Article 307 of the Code of
Commerce which provides: "When the deposits are of cash,
with a specification of the coins constituting them, . . . the
increase or reduction which their value may suffer shall be
for the account of the depositor." Moreover, appellant, by
entering into an insurance contract, cannot claim, if it suffers
loss, that the beneficiary cannot enrich herself at its expense.
This is a risk attendant to any wagering contract. 1 One who
gambles and loses cannot be heard to complain of his loss.
To appellant, we can only repeat the following admonition:

"The parties herein gambled and speculated on the date of

the termination of the war and the liberation of the
Philippines by the Americans. This can be gleaned from the
stipulation about redemption, particularly that portion to the
effect that redemption could be effected not before the
expiration of one year from June 24, 1944. This kind of
agreement is permitted by law. We find nothing immoral or
unlawful in it." (Gomez vs. Tabia, supra.)

Wherefore, the decision appealed from is affirmed, with costs

against appellant.

28