MALAYAN INSURANCE CO., INC., V. THE HON. COURT OF APPEALS, MARTIN C.

VALLEJOS, SIO
CHOY, SAN LEON RICE MILL, INC. AND PANGASINAN TRANSPORTATION CO., INC.,
RESPONDENTS.

G.R. NO. L-36413

SEPTEMBER 26, 1988

FACTS:

Malayan Insurance Co., Inc. issued a private car comprehensive policy covering a jeep in favor of Sio
Choy. The insurance coverage was for own damage not to exceed P600.00 and third-party liability in the
amount of P20,000.00. During the effectivity of the insurance policy, the insured jeep, while being driven by
Campollo, an employee of San Leon Rice Mill, Inc., collided with a passenger bus (PATRANCO) causing
damage to the insured vehicle and injuries to Campollo, and Martin Vallejos, who was riding in the ill-fated
jeep.

Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the PANTRANCO.
Sio Choy filed a separate answer with a cross-claim against Malayan Insurance wherein he alleged that he
had actually paid Vallejos P5,000.00 for hospitalization and other expenses. He prayed that he be
reimbursed by the insurance company. Malayan Insurance filed a third-party complaint against the San
Leon Rice Mill, Inc. Malayan Insurance alleged that San Leonen was the employer of Campollo who was
performing his duties and within the scope of Art. 2180, it should be liable for the acts of its employees. The
Insurance Company prayed for reimbursement for whatever amount it paid to Vallejos.

The trial court ruled that Sio Choy, Malayan Insurance Co., Inc. and San Leon Rice Mill, Inc. are jointly and
severally liable. With respect to Malayan Insurance, its liability will be up to only P20,000.00.

On appeal, the CA affirmed the judgment of the trial court that Sio Choy, the San Leon Rice Mill, Inc. and
the Malayan Insurance Co., Inc. are jointly and severally liable for the damages awarded to Vallejos. It
ruled, however, that the San Leon Rice Mill, Inc. has no obligation to indemnify or reimburse Malayan
Insurance for whatever amount it has been ordered to pay on its policy, since San Leon Rice Mill, Inc. is not
a privy to the contract of insurance between Sio Choy and the insurance company.

ISSUES:

1. Whether or not Sio Choy, Malayan Insurance and San Leon Rice Mill, Inc. are solidarily liable to
Vallejos; and
2. Whether or not Malayan Insurance is entitled to be reimbursed by San Leon Rice Mill, Inc.

HELD:

As to the first issue, Sio Choy and San Leon Rice Mill, Inc. are the only solidarily liable to Vallejos. Under
Article 2184 of the Civil Code, in motor vehicle mishaps, the owner is solidarily liable with his driver, if the
former, who was in the vehicle, could have, by the use of due diligence, prevented the misfortune it is
disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating
traffic regulations at least twice within the next preceding two months. Here, Sio Choy is liable to Vallejos
as owner of the ill-fated jeep.

Since San Leon Rice Mill, Inc. is the employer of the driver of the jeep at the time of the motor vehicle
mishap, it is liable to Vallejos under Article 2180 of the Civil Code which states that the obligation imposed
by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for
whom one is responsible.

Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to Vallejos. The
law states that the responsibility of two or more persons who are liable for a quasi-delict is solidarily.

While it is true that where the insurance contract provides for indemnity against liability to third persons,
such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity
contracts against third party liability does not mean that the insurer can be held solidarily liable with the
insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the
insured is based on tort.

As to the second issue, Malayan Insurance is entitled to be reimbursed by San Leon Rice Mill, Inc.
Subrogation is a normal incident of indemnity insurance. Upon payment of the loss, the insurer is entitled to
be subrogated pro tanto to any right of action which the insured may have against the third person whose
negligence or wrongful act caused the loss.

It follows, therefore, that Malayan Insurance, upon paying Vallejos the amount of not exceeding
P20,000.00, shall become the subrogee of the insured, Sio Choy; as such, it is subrogated to whatever
rights the latter has against San Leon Rice Mill, Inc.