FEB 4, 2020- COMMERCIAL LAW

1. Philippine Health Care Providers Inc.., vs. Commissioner, GR no.167330, June 12, 2008
FACTS:
Petitioner Philippine Health Care Providers, Inc. is a domestic corporation engaged in providing
the medical services enumerated below to individuals who enter into health care agreements
with it:
– Preventive medical services such as periodic monitoring of health problems, family planning
counseling, consultation and advices on diet, exercise and other healthy habits, and
immunization;
– Diagnostic medical services such as routine physical examinations, x-rays, urinalysis,
fecalysis, complete blood count, and the like and
– Curative medical services which pertain to the performing of other remedial and therapeutic
processes in the event of an injury or sickness on the part of the enrolled member.
On January 27, 2000, respondent Commissioner of Internal Revenue (CIR) sent petitioner a
formal demand letter and the corresponding assessment notices demanding the payment of
deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the
total amount of P224,702,641.18.

The deficiency [documentary stamp tax (DST)] assessment was imposed on petitioner’s health
care agreement with the members of its health care program pursuant to Section 185 of the
1997 Tax Code

Petitioner protested the assessment in a letter dated February 23, 2000. As respondent did not
act on the protest, petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking
the cancellation of the deficiency VAT and DST assessments.

CTA’s decision: Cancelled the DST assessment. Ordered the payment of VAT deficiency.
CIR appealed the decision to the CA contending that petitioner’s health care agreement was a
contract of insurance subject to DST under Section 185 of the 1997 Tax Code.

CA’s decision: The health care agreement was in the nature of a non-life insurance contract
subject to DST.
SC’s decision on Petition for Review: Denied on the ground that petitioner’s health care
agreement during the pertinent period was in the nature of non-life insurance which is a contract
of indemnity, citing Blue Cross Healthcare, Inc. v. Olivares and Philamcare Health Systems,
Inc. v. CA. It ruled that petitioner’s contention that it is a health maintenance organization (HMO)
and not an insurance company is irrelevant because contracts between companies like
petitioner and the beneficiaries under their plans are treated as insurance contracts. Moreover,
DST is not a tax on the business transacted but an excise on the privilege, opportunity or facility
offered at exchanges for the transaction of the business.
Petitioner filed a motion for reconsideration and supplemental motion for reconsideration.

ISSUES:
1. Whether or not petitioner as an HMO is engaged in an insurance business.
2. Whether or not petitioner is liable for the payment of DST on Health Care Agreement of
HMOS in accordance with Section 185.

Section 185 of the National Internal Revenue Code of 1997 (NIRC of 1997) – Stamp tax on
fidelity bonds and other insurance policies. – On all policies of insurance or bonds or
obligations of the nature of indemnity for loss, damage, or liability made or renewed by
any person, association or company or corporation transacting the business of accident,
fidelity, employer’s liability, plate, glass, steam boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance),
and all bonds, undertakings, or recognizances, conditioned for the performance of the
duties of any office or position, for the doing or not doing of anything therein specified,
and on all obligations guaranteeing the validity or legality of any bond or other
obligations issued by any province, city, municipality, or other public body or
organization, and on all obligations guaranteeing the title to any real estate, or
guaranteeing any mercantile credits, which may be made or renewed by any such
person, company or corporation, there shall be collected a documentary stamp tax of
fifty centavos (P0.50) on each four pesos (P4.00), or fractional part thereof, of the
premium charged.

RULING:
1. No. Health Maintenance Organizations are not engaged in the insurance business. Under RA
7875 (or “The National Health Insurance Act of 1995”), an HMO is an entity that provides, offers
or arranges for coverage of designated health services needed by plan members for a fixed
prepaid premium. To determine whether an HMO is an insurance business or not, one test
– principal object and purpose test – may be applied, that is to determine whether the
assumption of risk and indemnification of loss (which are elements of an insurance business)
are the principal object and purpose of the organization or whether they are merely incidental to
its business. If these are the principal objectives, the business is that of insurance. But if they
are merely incidental and service is the principal purpose, then the business is not insurance.
HMO’s principal object and purpose is service rather than indemnity.
Additionally, petitioner is not supervised by the Insurance Commission but by the Department of
Health.
2. No. Health care agreements are not subject to DST. From the language of Section 185, it is
evident that two requisites must concur before the DST can apply, namely: (1) the document
must be a policy of insurance or an obligation in the nature of indemnity and (2) the maker
should be transacting the business of accident, fidelity, employer’s liability, plate, glass, steam
boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine,
inland, and fire insurance).

NOTES:
 Even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance.
 Distinctions between a minute resolution and a decision
The constitutional requirement under the first paragraph of Section 14, Article VIII of the
Constitution that the facts and the law on which the judgment is based must be
expressed clearly and distinctly applies only to decisions, not to minute resolutions. A
minute resolution is signed only by the clerk of court by authority of the justices, unlike a
decision. It does not require the certification of the Chief Justice. Moreover, unlike
decisions, minute resolutions are not published in the Philippine Reports. Finally, the
proviso of Section 4(3) of Article VIII speaks of a decision. Indeed, as a rule, this Court
lays down doctrines or principles of law which constitute binding precedent in a decision
duly signed by the members of the Court and certified by the Chief Justice.
Related Jurisprudence:
In Blue Cross and Philamcare, the Court pronounced that a health care agreement is in the
nature of non-life insurance, which is primarily a contract of indemnity. However, those cases
did not involve the interpretation of a tax provision. Instead, they dealt with the liability of a
health service provider to a member under the terms of their health care agreement. Such
contracts, as contracts of adhesion, are liberally interpreted in favor of the member and strictly
against the HMO. For this reason, SC’s ruling in Blue Cross and Philamcare are applicable in
the present case.

2. Alpha Insurance and Surety Corporation vs. Castro, GR no.198174, September 2, 2013

Facts: On February 21, 2007, respondent entered into a contract of insurance, Motor Car Policy
No. MAND/CV-00186, with petitioner, involving her motor vehicle, a Toyota Revo DLX DSL. The
contract of insurance obligates the petitioner to pay the respondent the amount of Six Hundred
Thirty Thousand Pesos (P 630,000.00) in case of loss or damage to said vehicle during the
period covered, which is from February 26, 2007 to February 26, 2008. On April 16, 2007, at
about 9:00 a.m., respondent instructed her driver, Jose Joel Salazar Lanuza (Lanuza), to bring
the above-described vehicle to a nearby auto-shop for a tune-up. However, Lanuza no longer
returned the motor vehicle to respondent and despite diligent efforts to locate the same, said
efforts proved futile. Resultantly, respondent promptly reported the incident to the police and
concomitantly notified petitioner of the said loss and demanded payment of the insurance
proceeds in the total sum of P 630,000.00. In a letter dated July 5, 2007, petitioner denied the
insurance claim of respondent, stating among others, thus: Upon verification of the documents
submitted, particularly the Police Report and your Affidavit, which states that the culprit, who
stole the Insured unit, is employed with you. We would like to invite you on the provision of the
Policy under Exceptions to Section-III.

Issue: Whether or not respondent Castor is entitled to the insurance policy for the loss of her
car by her driver.

Held: Yes. It is a basic rule in the interpretation of contracts that the terms of a contract are to
be construed according to the sense and meaning of the terms which the parties thereto have
used. In the case of property insurance policies, the evident intention of the contracting parties,
i.e., the insurer and the assured, determine the import of the various terms and provisions
embodied in the policy. However, when the terms of the insurance policy are ambiguous,
equivocal or uncertain, such that the parties themselves disagree about the meaning of
particular provisions, the policy will be construed by the courts liberally in favor of the assured
and strictly against the insurer.

A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract
contain limitations on liability, courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation.

Theft perpetrated by the driver of the insured is not an exception to the coverage from the
insurance policy, since Section III thereof did not qualify as to who would commit the theft.

Therefore, petitioner cannot exclude the loss of
under paragraph 4 of “Exceptions to Section
damage,” or more specifically, “injury” to the
insured’s service. Paragraph 4 clearly does
happened in the instant case.
respondent’s vehicle under the insurance policy
III,” since the same refers only to “malicious
motor vehicle caused by a person under the
not contemplate “loss of property,” as what
3. Perez vs. Court of Appeals, GR no.112329, January 2000
Facts: Primitivo Perez has been isured with the BF Lifeman Insurance Corporation since 1980
for P20,000. Sometime in 1987, Rodolfo Lalog, an agent of BF, convinced him to apply for
additional insurance coverage of P50, 000. Perez accomplished the application form and
passed the required medical exam. He also paid P2,075 to Lalog for premium.
On Nov. 25, 1987, perez died while riding a banca which capsized during a storm. During this
time his application papers for the additional insurance coverage was still in the office of BF.
Without knowing that Perez died, BF approved Perez’s application and issued the
corresponding policy for P50,000.
Virginia Perez, his wife, claimed the benefits of the insurance policy for her deceased husband
but she was only able to obtain P40,000 under the first insurance policy. BF refused to pay the
proceeds amounting to P150,000 under the additional policy coverage of P50,000 because they
maintain that such policy had not been perfected.
On Sept. 21, 1990, BF filed a complaint against Mrs. Perez seeking recission and declaration of
nullity of the insurance contract in question. Mrs. Perez file a counterclaim for the collection of
P150,000 plus damages.
Issue: Whether or not there was a consummated contract of insurance between Perez and BF.
Held: No. An essential requisite of a valid contract is consent. Consent must be manifested by
the meeting of the offer and acceptance upon the thing and the cause which are to constitute
the contract.
The offer must be certain and the acceptance absolute. When Perez filed the application , it
was subject to the acceptance of BF. The perfection was also further conditioned upon 1)
issuance of the policy; 2) payment of the premium and; 3) the delivery to and acceptance by the
applicant in good health.
The delivery and acceptance by the applicant was a suspensive condition which was not fulfilled
inasmuch as the applicant was already dead at the time the policy was issued. The non-
fulfillment of the condition resulted in the non-perfection of the contract.
An application for insurance is merely an offer which requires the overt act of the insurer for it to
ripen to a contract. Delay in acting on the application does not constitute acceptance even
though the insured has forwarded his first premium with his application. Delay, in this case,
does not constitute gross negligence because the application was granted within the normal
processing time.

WHEREFORE, the decision rendered by the Court of Appeals in CA-G.R. CV No. 35529 is
AFFIRMED insofar as it declared Insurance Policy No. 056300 for P50,000.00 issued by BF
Lifeman Insurance Corporation of no force and effect and hence null and void. No costs.

4. Gaisano vs. Development Insurance and Surety Corporation, GR no.190702, February

27, 2017
Facts:
Petitioner was the registered owner of a 1992 Mitsubishi Montero with plate number GTJ-777
(vehicle), while respondent is a domestic corporation engaged in the insurance business. On
September 27, 1996, respondent issued a comprehensive commercial vehicle policy to
petitioner in the amount of Pl,500,000.00 over the vehicle for a period of one year commencing
on September 27, 1996 up to September 27, 1997. Respondent also issued two other
commercial vehicle policies to petitioner covering two other motor vehicles for the same period.
To collect the premiums and other charges on the policies, respondent's agent, Trans-Pacific
Underwriters Agency (Trans-Pacific), issued a statement of account to petitioner's company,
Noah's Ark
Merchandising (Noah's Ark). Noah's Ark immediately processed the payments and issued a Far
East Bank check dated September 27, 1996 payable to Trans-Pacific on the same day. The
check bearing the amount of Pl40,893.50 represents payment for the three insurance policies,
with P55,620.60 for the premium and other charges over the vehicle. However, nobody from
Trans-Pacific picked up the check that day (September 27) because its president and general
manager, Rolando Herradura, was celebrating his birthday. Trans-Pacific informed Noah's Ark
that its messenger would get the check the next day, September 28. In the evening of
September 27, 1996, while under the official custody of Noah's Ark marketing manager Achilles
Pacquing (Pacquing) as a service company vehicle, the vehicle was stolen in the vicinity of SM
Megamall at Ortigas, Mandaluyong City. Pacquing reported the loss to the Philippine National
Police Traffic Management Command at Camp Crame in Quezon City. Despite search and
retrieval efforts, the vehicle was not recovered. Oblivious of the incident, Trans-Pacific picked up
the check the next day, September 28. It issued an official receipt numbered 124713 dated
September 28, 1996, acknowledging the receipt of P55,620.60 for the premium and other
charges over the vehicle. The check issued to Trans Pacific for Pl40,893.50 was deposited with
Metrobank for encashment on October 1, 1996.
Issue:
Whether there is a binding insurance contract between petitioner and respondent.
Ruling:
The court deny the petition. Insurance is a contract whereby one undertakes for a consideration
to indemnify another against loss, damage or liability arising from an unknown or contingent
event. Just like any other contract, it requires a cause or consideration. The consideration is the
premium, which must be paid at the time and in the way and manner specified in the policy. If
not so paid, the policy will lapse and be forfeited by its own terms. The law, however, limits the
parties' autonomy as to when payment of premium may be made for the contract to take effect.
The general rule in insurance laws is that unless the premium is paid, the insurance policy is not
valid and binding.

Section 77 of the Insurance Code, applicable at the time of the issuance of the policy, provides:
Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy
or contract of insurance issued by an insurance company is valid and binding unless and until
the premium thereof has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.
5. Philam Insurance Company vs. Parc Chateu, GR no.201116, March 4, 2019

FACTS:
Petitioner Philam issued a Fire and Lightning Insurance Policy for P900 million and
Comprehensive General Liability Insurance Policy for P1 Million to respondent Parc Chateau.
Both policies are covering the period from November 30, 2003 to November 30, 2004. The
parties negotiated for a 90-day payment term of the insurance premium, worth P791,427.50
including taxes. This payment term was embodied in a Jumbo Risk Provision, which further
provided that the premium installment payments were due on November 30, 2003, December
30, 2003, and January 30, 2004. The Jumbo Risk Provision also stated that if any of the
scheduled payments are not received in full on or before said dates, the insurance shall be
deemed to have ceased at 4 p.m. of such date, and the policy shall automatically become void
and ineffective.
Parc Association’s board of directors found the terms unacceptable and did not pursue the
transaction. Parc Association verbally informed Philam, through its insurance agent, of the
board’s decision. Since no premiums were paid, Philam made oral and written demands upon
Parc Association, who refused to do so alleging that the insurance agent had been informed of
its decision not to take up the insurance coverage. Philam sent demand letters with statement of
account claiming P363,215.21 unpaid premium based on Short Scale Rate Period. Philam also
cancelled the policies.
On June 3, 2005, Philam filed a complaint against Parc Association and Colet for recovery of
P363,215.21 unpaid premium, plus attorney’s fees and costs of suit.
The case was dismissed by MeTC and such dismissal was affirmed by the RTC. Philam then
elevated the case to the Court of Appeals but the CA likewise rule against Philam stating that it
has no right to recover the unpaid premium based on void and ineffective insurance policies.
In this present petition, Philam avers that this case falls under the fourth exception to the
general rule that that no insurance contract issued by an insurance company is valid and
binding unless and until the premium has been paid. It invokes the ruling in Makati Tuscany
case which provides that if the insurer has granted the insured a credit term for the payment of
the premium, it is an exception to the general rule that premium must first be paid before the
effectivity of an insurance contract. Philam argues that the 90-day payment term is a credit
extension and thus should be considered as an exception to the general rule.
ISSUE: Whether or not the CA erred in ruling that Philam has no right to recover the unpaid
premium based on void and ineffective insurance policies.
RULING:
No, the CA did not err in its ruling.
The CA correctly determined that the Jumbo Risk Provision clearly indicates that failure to pay
in full any of the scheduled installments on or before the due date shall render the insurance
policy void and ineffective as of 4 p.m. of such date.
Parc Association’s failure to pay on the first due date (November 30, 2003), resulted in a void
and ineffective policy as of 4 p.m. of November 30, 2003. Hence, there is no credit extension to
consider as the Jumbo Risk Provision itself expressly cuts off the inception of the insurance
policy in case of default.
6. Manila Bankers Life Insurance Corporation vs. Cresencia Aban, GR no.175666, July 29,
2013
On July 3, 1993, Delia Sotero took out a life insurance policy from Manila Bankers Life
Insurance, designating respondent Cresencia P. Aban, her niece, as her beneficiary.

Petitioner issued the Insurance Policy, with a face value of P100,000.00, in Sotero’s favor on
August 30, 1993, after the requisite medical examination and payment of the insurance
premium.
On April 10, 1996,when the insurance policy had been in force for more than two years and
seven months, Sotero died. Respondent filed a claim for the insurance proceeds on July 9,
1996. Petitioner, however, denied the claim and instead refunded the premiums paid on the
policy claiming that the policy was obtained by fraud, concealment and/or misrepresentation.
Petitioner also filed for rescission.
Respondent filed a Motion to Dismiss claiming that petitioner’s cause of action was barred by
prescription pursuant to Section 48 of the Insurance Code, which provides as follows:
“Whenever a right to rescind a contract of insurance is given to the insurer by any provision of
this chapter, such right must be exercised previous to the commencement of an action on the
contract.
After a policy of life insurance made payable on the death of the insured shall have been in
force during the lifetime of the insured for a period of two years from the date of its issue or of its
last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by
reason of the fraudulent concealment or misrepresentation of the insured or his agent.”

ISSUE:
Whether or not Manila Bankers Life Insurance Corporation can still rescind the
insurance contract
RULING:
No, Manila Bankers Life Insurance Corporation can no longer rescind the insurance
contract.
Allegations of fraud, which are predicated on respondent’s alleged posing as Sotero and forgery
of her signature in the insurance application, are at once belied by the trial and appellate courts’
finding that Sotero herself took out the insurance for herself. “Fraudulent intent on the part of the
insured must be established to entitle the insurer to rescind the contract”. In the absence of
proof of such fraudulent intent, no right to rescind arises.
Moreover, Section 48 of the Insurance Code provides that an insurer is given two years – from
the effectivity of a life insurance contract and while the insured is alive – to discover or prove
that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or when the
insured dies within the period, the insurer must make good on the policy, even though the policy
was obtained by fraud, concealment, or misrepresentation.
Section 48 regulates both the actions of the insurers and prospective takers of life insurance. It
gives insurers enough time to inquire whether the policy was obtained by fraud, concealment, or
misrepresentation; on the other hand, it forewarns scheming individuals that their attempts at
insurance fraud would be timely uncovered – thus deterring them from venturing into such
nefarious enterprise. At the same time, legitimate policy holders are absolutely protected from
unwarranted denial of their claims or delay in the collection of insurance proceeds occasioned
by allegations of fraud, concealment, or misrepresentation by insurers, claims which may no
longer be set up after the two-year period expires as ordained under the law.
In this case, the records show that the insured died after the two-year period, hence, the
petitioner is already barred from proving that the policy is void ab initio by reason of fraudulent
concealment or misrepresentation.

7. Insular Life vs. Heirs of Alvarez, GR no.207526, October 3, 2018

Alvarez applied for and was granted a housing loan by. This loan was secured by a promissory
note, a real estate mortgage over the lot, and a mortgage redemption insurance taken on the life
of Alvarez with UnionBank as beneficiary. Alvarez was among the mortgagors included in the
list of qualified debtors covered by the Group Mortgage Redemption Insurance that UnionBank
had with Insular Life.Alvarez died and subsequently, UnionBank filed with Insular Life a death
claim under Alvarez’s name pursuant to the Group Mortgage Redemption Insurance. Insular
Life denied the claim after determining that Alvarez was not eligible for coverage as he was
supposedly more than 60 years old at the time of his loan’s approval.

With the claim’s denial, the monthly amortizations of the loan stood unpaid. Subsequently, the
lot was foreclosed and sold at a public auction with UnionBank as the highest bidder.

The Heirs of Alvarez filed a complaint for specific performance to demand against Insular Life to
fulfill its obligation as an insurer under the Group Mortgage Redemption Insurance, and for
nullification of foreclosure against UnionBank.

Both Court of Appeals and Regional Trial Court ruled in favor of the Heirs of Alvarez. They
noted that the errors assigned by Insular Life and UnionBank boiled down to the issue of
whether or not Alvarez was guilty of fraudulent misrepresentation as to warrant the rescission of
the Group Mortgage Redemption Insurance obtained by UnionBank on Alvarez’s life. Insular
Life only relied on Alvarez’s Health Statement Form where he wrote “1942” as his birth year.
However, this form alone was insufficient to prove that he fraudulently intended to misrepresent
his age. It noted that aside from the Health Statement Form, Alvarez had to fill out an
application for insurance. This application would have supported the conclusion that he
consistently wrote “1942” in all the documents that he had submitted to UnionBank. However,
the records made no reference to this document.

Issues:
Whether or not The Insular Life Assurance Co., Ltd. is obliged to pay UnionBank the balance of
Alvarez’s loan given the claim that he lied about his age at the time of the approval of his loan;
and
Whether or not UnionBank was correct in proceeding with the foreclosure following Insular Life
Assurance Co., Ltd.’s refusal to pay.
Ruling:
Yes, Insular life is liable to pay UnionBank for its failure to prove intent to defraud on the part of
Alvarez.
Citing Section 27 of the Insurance Code, however, Insular Life asserts that in cases of
rescission due to concealment, i.e., when a party “neglect[s] to communicate that which [he or
she] knows and ought to communicate,” proof of fraudulent intent is not necessary. Section 27
of the Insurance Code reads:

“A concealment whether intentional or unintentional entitles the injured party to rescind a

contract of insurance.”

While Insular Life correctly reads Section 27 as making no distinction between intentional and
unintentional concealment, it erroneously pleads Section 27 as the proper statutory anchor of
this case. The Insurance Code distinguishes representations from concealments. What this
case involves, instead, is an allegedly false representation. Section 44 of the Insurance Code
states, “A representation is to be deemed false when the facts fail to correspond with its
assertions or stipulations.” If indeed Alvarez misdeclared his age such that his assertion fails to
correspond with his factual age, he made a false representation, not a concealment.

In relation to Section 44, Section 45 of the Insurance Code reads:

“If a representation is false in a material point, whether affirmative or promissory, the injured
party is entitled to rescind the contract from the time when the representation becomes false.”

Not being similarly qualified as rescission under Section 27, rescission under Section 45
remains subject to the basic precept of fraud having to be proven by clear and convincing
evidence. Consistent with the requirement of clear and convincing evidence, it was Insular Life’s
burden to establish the merits of its own case.

At bar, Insular Life basically relied on the Health Statement form personally accomplished by
Jose Alvarez wherein he wrote that his birth year was 1942. The Court, however posited that
Alvarez must have accomplished and submitted many other documents when he applied for the
housing loan and executed supporting instruments like the promissory note, real estate
mortgage, and Group Mortgage Redemption Insurance. A design to defraud would have
demanded his consistency. He needed to maintain appearances across all documents.
However, the best that Insular Life could come up with before the Regional Trial Court and the
Court of Appeals was a single document. The Court of Appeals was straightforward, i.e., the
most basic document that Alvarez accomplished in relation to Insular Life must have been an
insurance application form. Strangely, Insular Life failed to adduce even this document — a
piece of evidence that was not only commonsensical, but also one which has always been in its
possession and disposal.

Insular Life had all the opportunity to demonstrate Alvarez’s pattern of consistently indicating
erroneous entries for his age. All it needed to do was to inventory the documents submitted by
Alvarez and note the statements he made concerning his age. This was not a cumbersome
task, yet it failed at it. Its failure to discharge its burden of proving must thwart its plea for relief
from this Court.

2. The foreclosure is null and void.

UnionBank insists that the real estate mortgage is a contract separate and distinct from the
Group Mortgage Redemption Insurance; thus, it should not be affected by the validity or
invalidity of Insular Life’s rescission.
While the mortgagee’s right to proceed with foreclosure is settled, this Court finds the debacle at
the heart of this case to have been borne in large, if not equal measure, by UnionBank’s
oversight. UnionBank contributed to setting in motion a course of events that culminated in the
unjust foreclosure of Alvarez’s mortgaged lot. As such a contributor, its profiting from the
wrongful foreclosure cannot be condoned.
The Regional Trial Court was correct in emphasizing that Alvarez entered into the Group
Mortgage Redemption Insurance entirely upon UnionBank’s prodding. Bank clients are
generally unaware of insurance policies such as a mortgage redemption insurance unless
brought to their knowledge by a bank. The processing of a mortgage redemption insurance was
within UnionBank’s regular course of business. It knew the import of truthfully and carefully
accomplished applications. To facilitate the principal contract of the loan and its accessory
obligations such as the real estate mortgage and the mortgage redemption insurance,
UnionBank completed credit appraisals and background checks. Thus, the Regional Trial Court
was correct in noting that UnionBank had been in possession of materials sufficient to inform
itself of Alvarez’s personal circumstances.
UnionBank approved Alvarez’s loan and real estate mortgage, and endorsed the mortgage
redemption insurance to Insular Life. Fully aware of considerations that could have disqualified
Alvarez, it nevertheless acted as though nothing was irregular. It itself acted as if, and therefore
represented that, Alvarez was qualified. Yet, when confronted with Insular Life’s challenge, it
readily abandoned the stance that it had earlier maintained and capitulated to Insular Life’s
assertion of fraud.
Citing the case of Poole-Blunden v. Union Bank of the Philippines, the Court emphasized that
the high degree of diligence required of banks “equally holds true in their dealing with
mortgaged real properties, and subsequently acquired through foreclosure.” It specifically drew
attention to this requisite high degree of diligence in relation to “[c]redit investigations [which] are
standard practice for banks before approving loans.” Under the circumstances, UnionBank
failed to observe the diligence required from it and hence, the foreclosure must be nullified.
8. BPI vs.Laingo, GR no.205206, March 16, 2016
On 20 July 1999, Rheozel, the son of respondent Laingo, opened a "Platinum 2-in-1 Savings
and Insurance" account with petitioner Bank of the Philippine Islands (BPI) in its Claveria,
Davao
City branch. The Platinum 2-in-1 Savings and Insurance account is a savings account where
depositors are automatically covered by an insurance policy against disability or death issued by
petitioner FGU Insurance Corporation (FGU Insurance). Laingo was named as Beneficiary
On 25 September 2000, Rheozel died due to a vehicular accident. On 27 September 2000,
Laingo instructed the family's personal secretary, Alice to inquire about the savings account of
Rheozel.
Alice went to BPI and talked to Jaime Ibe Rodriguez, BPI's Branch Manager regarding
Laingo's request. Laingo was allowed to withdraw P995,000 from the account of Rheozel.
On 21 January 2003, Rheozel's sister, Rhealyn Laingo-Concepcion found the Personal
Accident Insurance Coverage Certificate No. 043549 issued by FGU Insurance. Rhealyn
immediately
conveyed the information to Laingo.
Laingo sent two letters dated 11 September 2003 and 7 November 2003 to BPI and FGU
Insurance requesting them to process her claim as beneficiary of Rheozel's insurance policy.
On 19
February 2004, FGU Insurance sent a reply-letter to Laingo denying her claim. FGU Insurance
stated that Laingo should have filed the claim within three calendar months from the death of
Rheozel as required under Paragraph 15 of the Personal Accident Certificate of Insurance
which
states:

15. Written notice of claim shall be given to and filed at FGU Insurance
Corporation within three calendar months of death or disability.
On 20 February 2004, Laingo filed a Complaint for Specific Performance with Damages and
Attorney's Fees with the Regional Trial Court of Davao City against BPI and FGU Insurance.
On 21 April 2008, RTC decided the case in favor of respondents. The trial court ruled
that the prescriptive period of 90 days shall commence from the time of death of the insured and
not from the knowledge of the beneficiary.
The Court of Appeals reversed the ruling of the trial court. The Court of Appeals ruled that
Laingo could not be expected to do an obligation which she did not know existed. The appellate
court added that Laingo was not a party to the insurance contract entered into between Rheozel
and petitioners. Thus, she could not be bound by the 90-day stipulation.
Appellee Bank of the Philippine Islands and FGU Insurance Corporation are DIRECTED to PAY
jointly and severally appellant Yolanda Laingo Actual Damages in the amount of P44,438.75
and
Attorney's Fees in the amount of P200,000.00.
Appellee FGU Insurance Corporation is also DIRECTED to PAY appellant the insurance
proceeds of
the Personal Accident Insurance Coverage of Rheozel Laingo with legal interest of six percent
(6%) per
annum reckoned from February 20, 2004 until this Decision becomes final. Thereafter, an
interest of
twelve percent (12%) per annum shall be imposed until fully paid.
ISSUE:
Whether or not Laingo, as named beneficiary who had no knowledge of the existence of the
insurance contract, is bound by the three calendar month deadline for filing a written notice of
claim upon the death of the insured?
HELD: NO
As the main proponent of the 2-in-1 deposit account, BPI tied up with its affiliate, FGU
Insurance, as its partner. Any customer interested to open a deposit account under this 2-in-1
product, after submitting all the required documents to BPI and obtaining BPI's approval, will
automatically be given insurance coverage. Thus, BPI acted as agent of FGU Insurance with
respect
to the insurance feature of its own marketed product.
BPI not only facilitated the processing of the deposit account and the collection of necessary
documents but also the necessary endorsement for the prompt approval of the insurance
coverage
without any other action on Rheozel's part. Rheozel did not interact with FGU Insurance directly
and
every transaction was coursed through BPI.
BPI, as agent of FGU Insurance, had the primary responsibility to ensure that the 2-in-1
account be reasonably carried out with full disclosure to the parties concerned, particularly the
beneficiaries. Thus, it was incumbent upon BPI to give proper notice of the existence of the
insurance coverage and the stipulation in the insurance contract for filing a claim to Laingo, as
Rheozel's beneficiary, upon the latter's death.
Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of the
insurance policy, Laingo had no means to ascertain that she was entitled to the insurance claim.
It
would be unfair for Laingo to shoulder the burden of loss when BPI was remiss in its duty to
properly notify her that she was a beneficiary.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 29 June 2012 and
Resolution
dated 11 December 2012 of the Court of Appeals in CA-G.R. CV No. 01575.

9. Unified Mercants Corporation vs. Country Bankers Insurance, GR no.198588, July 11, 2012

Facts: Petitioner United Merchants Corporation (UMC) is engaged in the business of buying,

selling, and manufacturing Christmas lights. UMC leased a warehouse at 19-B Dagot Street,
San Jose Subdivision, Barrio Manresa, Quezon City, where UMC assembled and stored its
products.  On 6 September 1995, UMCs General Manager Alfredo Tan insured UMCs stocks in
trade of Christmas lights against fire with defendant Country Bankers Insurance Corporation
(CBIC) for P 15,000,000.00. The Fire Insurance Policy No. F-HO/95-576 (Insurance Policy) and
Fire Invoice No. 12959A, valid until 6 September 1996. On 7 May 1996, UMC and CBIC
executed Endorsement F/96-154 and Fire Invoice No. 16583A to form part of the Insurance
Policy. Endorsement F/96-154 provides that UMCs stocks in trade were insured against
additional perils, to wit: typhoon, flood, ext. cover, and full earthquake. The sum insured was
also increased to P50,000,000.00 effective 7 May 1996 to 10 January 1997. On 9 May 1996,
CBIC issued Endorsement F/96-157 where the name of the assured was changed from Alfredo
Tan to UMC. On 3 July 1996, a fire gutted the warehouse rented by UMC. CBIC designated
CRM Adjustment Corporation (CRM) to investigate and evaluate UMCs loss by reason of the
fire. CBICs reinsurer, Central Surety, likewise requested the National Bureau of Investigation
(NBI) to conduct a parallel investigation. On 6 July 1996, UMC, through CRM, submitted to
CBIC its Sworn Statement of Formal Claim, with proofs of its loss.

Issue: Whether or not UMC is entitled to claim from CBIC the full coverage of its fire insurance
policy. 

Held: No. Burden of proof is the duty of any party to present evidence to establish his claim or
defense by the amount of evidence required by law, which is preponderance of evidence in civil
cases. The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the
burden of proof to obtain a favorable judgment. Particularly, in insurance cases, once an insured
makes out a prima facie case in its favor, the burden of evidence shifts to the insurer to
controvert the insureds prima facie case. In the present case, UMC established a prima facie
case against CBIC. CBIC does not dispute that UMCs stocks in trade were insured against fire
under the Insurance Policy and that the warehouse, where UMCs stocks in trade were stored,
was gutted by fire on 3 July 1996, within the duration of the fire insurance. However, since CBIC
alleged an excepted risk, then the burden of evidence shifted to CBIC to prove such exception.  
An insurer who seeks to defeat a claim because of an exception or limitation in the policy has
the burden of establishing that the loss comes within the purview of the exception or limitation. If
loss is proved apparently within a contract of insurance, the burden is upon the insurer to
establish that the loss arose from a cause of loss which is excepted or for which it is not liable,
or from a cause which limits its liability.
In Uy Hu & Co. v. The Prudential Assurance Co., Ltd., the Court held that where a fire insurance
policy provides that if the claim be in any respect fraudulent, or if any false declaration be made
or used in support thereof, or if any fraudulent means or devices are used by the Insured or
anyone acting on his behalf to obtain any benefit under this Policy, and the evidence is
conclusive that the proof of claim which the insured submitted was false and fraudulent both as
to the kind, quality and amount of the goods and their value destroyed by the fire, such a proof
of claim is a bar against the insured from recovering on the policy even for the amount of his
actual loss. 
In the present case, as proof of its loss of stocks in trade amounting to P 50,000,000.00, UMC
submitted its Sworn Statement of Formal Claim together with the following documents: (1)
letters of credit and invoices for raw materials, Christmas lights and cartons purchased; (2)
charges for assembling the Christmas lights; and (3) delivery receipts of the raw materials.
However, the charges for assembling the Christmas lights and delivery receipts could not
support its insurance claim. The Insurance Policy provides that CBIC agreed to insure UMCs
stocks in trade. UMC defined stock in trade as tangible personal property kept for sale or traffic.
Applying UMCs definition, only the letters of credit and invoices for raw materials, Christmas
lights and cartons may be considered. 
It has long been settled that a false and material statement made with an intent to deceive or
defraud voids an insurance policy. 
The most liberal human judgment cannot attribute such difference to mere innocent error in
estimating or counting but to a deliberate intent to demand from insurance companies payment
for indemnity of goods not existing at the time of the fire. This constitutes the so-called
fraudulent claim which, by express agreement between the insurers and the insured, is a
ground for the exemption of insurers from civil liability. 

10. HH Hokero Construction vs. GSIS, GR no. 152334, September 24, 2014

Facts: On April 26, 1988, the GSIS and petitioner entered into a Project Agreement
(Agreement) whereby the latter undertook the development of a GSIS housing project known as
Modesta Village Section B (Project). Petitioner obligated itself to insurethe Project, including all
the improvements, upon the execution of the Agreement under a Contractors’ All Risks (CAR)
Insurance with the GSIS General Insurance Department for an amount equal to its cost or
sound value, which shall not be subject to any automatic annual reduction. Pursuant to its
undertaking, petitioner secured CAR Policy No. 88/085 in the amount of P development, which
was later increased to P 1,000,000.00 for land 10,000,000.00, effective from May 2, 1988 to
May 2, 1989. Petitioner likewise secured CAR Policy No. 88/086 in the amount of P
1,000,000.00 for the construction of twenty (20) housing units, which amount was later
increased to P 17,750,000.00 from May 2, 1988 to June 1, 1989. to cover the construction of
another 355 new units, effective In turn, the GSIS reinsured CAR Policy No. 88/085 with
respondent Pool of Machinery Insurers (Pool). Under both policies, it was provided that: (a)
there must be prior notice of claim for loss, damage or liability within fourteen (14) days from the
occurrence of the loss or damage; (b) all benefits thereunder shall be forfeited if no action is
instituted within twelve(12) months after the rejection of the claim for loss, damage or liability;
and (c) if the sum insured is found to be less than the amount required to be insured, the
amount recoverable shall be reduced tosuch proportion before taking into account the
deductibles stated in the schedule (average clause provision). During the construction, three (3)
typhoons hit the country, namely, Typhoon Biring from June 1 to June 4, 1988, Typhoon
Huaning on July 29, 1988, and Typhoon Saling on October 11, 1989, which caused
considerable damage to the Project. Accordingly, petitioner filed several claims for indemnity
with the GSIS on June 30, 1988, August 25, 1988, and October 18, 1989,  respectively. In a
letter dated April 26, 1990, the GSIS rejected petitioner’s indemnity claims for the damages
wrought by Typhoons Biring and Huaning, finding that no amount is recoverable pursuant to the
average clause provision under the policies. In a letter dated June 21, 1990, the GSIS similarly
rejected petitioner’s indemnity claim for damages wrought by Typhoon Saling on a “no loss”
basis, it appearing from its records that the policies were not renewed before the onset of the
said typhoon.

Issue: Whether or not the petitioner is barred from filing a complaint before the courts based on
the insurance claim.

Held: Yes. Contracts of insurance, like other contracts, are to be construed according to the

sense and meaning of the terms which the parties themselves have used. If such terms are
clear and unambiguous, they must be taken and understood in their plain, ordinary, and popular
sense.

Section 10 of the General Conditions of the subject CAR Policies commonly read:

10. If a claim is in any respect fraudulent, or if any false declaration is made or used in support
thereof, or if any fraudulent means or devices are used by the Insured or anyone acting on his
behalf to obtain any benefit under this Policy, or if a claim is made and rejected and no action or
suit is commenced within twelve months after such rejectionor, in case of arbitration taking
place as provided herein, within twelve months after the Arbitrator or Arbitrators or Umpire have
made their award, all benefit under this Policy shall be forfeited.

In this relation, case law illumines that the prescriptive period for the insured’s action for
indemnity should be reckoned from the “final rejection” of the claim.

As correctly observed by the CA, “final rejection” simply means denial by the insurer of the
claims of the insured and not the rejection or denial by the insurer of the insured’s motion or
request for reconsideration. The rejection referred to should be construed as the rejection in the
first instance, as in the two instances above-discussed.
The right of the insured to the payment of his loss accrues from the happening of the loss.
However, the cause of action in an insurance contract does not accrue until the insured’s claim
is finally rejected by the insurer. This is because before such final rejection there is no real
necessity for bringing suit.

11. Vicente G. Henson vs. UCPB General Insurance, GR no.223134, August 14, 2019
Q: In 1999, National Arts Studio and Color Lab (NASCL) leased the right front portion of the
ground
floor and the entire second floor of a building then owned by Henson and made renovations with
the
building's piping assembly. Meanwhile, Copylandia Office Systems Corp. moved in to the
ground
floor.
On May 9, 2006, a water leak occurred in the building and damaged Copylandia's various
equipment,
causing injury to it. As the said equipment were insured with UCPB General Insurance,
Copylandia
filed a claim and eventually settled on November 2, 2006. This resulted in respondent's
subrogation
to the rights of Copylandia over all claims and demands arising from the said incident. On May
20,
2010, respondent, as subrogee to Copylandia's rights, demanded from NASCL before the RTC,
civil
payment of the aforesaid claim, but to no avail. Thus, it filed a complaint for damages before the
RTC.
Meanwhile, sometime in 2010, petitioner transferred the ownership of the building to Citrinne
Holdings, Inc. (CHI), where he is a stockholder and the President, who was later impleaded in
an
Amended Complaint. CHI argued since respondent's cause of action is based on quasi-delict,
it must be brought within four (4) years from its accrual on May 9, 2006.
RTC ruled in respondent's favor ruling that its cause of action against the party-defendants,
including
petitioner, arose when it paid Copylandia's insurance claim and became subrogated to the
rights and
claims of the latter in connection with the water leak damage incident. Since respondent was
merely
enforcing its right of subrogation, the prescriptive period is ten (10) years based on an obligation
created by law reckoned from the date of Copylandia's indemnification, or on November 2,
2006. As
such, respondent's claim against petitioner has yet to prescribe when it sought to include the
latter as
party-defendant on April 21, 2014. CA affirmed.
Is the respondent’s claim for damages based on quasi-delict, hence, has already prescribed?
A: No. The RTC relied on Vector Shipping Corporation v. American Home Assurance Company,
where the
Court ruled that the insured’s claim against the debtor is premised on the right of subrogration
pursuant to Art. 2207 of the Civil Code and hence, an obligation created by law. Hence, an
insurer
may file an action against the tortfeasor within ten (10) years from the time the insurer
indemnifies
the insured.
However, the Court now abandons the ruling in Vector. Following the principles of subrogation,
the
subrogee-insurer only assumes the rights of the subrogor-insured based on the latter's
original obligation with the debtor. Subrogation's legal effects under Article 2207 of the Civil
Code
are primarily between the subrogee-insurer and the subrogor-insured: by virtue of the former's
payment of indemnity to the latter, it is able to acquire, by operation of law, all rights of the
subrogor-
insured against the debtor. Hence, the rights of a subrogee cannot be superior to the rights
possessed
by a subrogor. The insurer only steps into the shoes of the insured and therefore, for purposes
of
prescription, inherits only the remaining period within which the insured may file an action
against
the wrongdoer.
Be that as it may, it should, however, be clarified that this Court's abandonment of the Vector
doctrine
should be prospective in application for the reason that judicial decisions applying or interpreting
the
laws or the Constitution, until reversed, shall form part of the legal system of the Philippines.
Hence,
the Court set the following guidelines relative to the application of Vector and this Decision vis-
a-vis
the prescriptive period in cases where the insurer is subrogated to the rights of the insured
against the
wrongdoer based on a quasi-delict:
(1) For actions which have already been filed and are currently pending, the rules on
prescription
prevailing at the time the action is filed will apply.
a. If the Vector doctrine was prevailing at that time, the issues of prescription must be
resolved according to the Vector parameters.
b. For cases filed by the subrogee-insurer prior to the applicability of the Vector ruling, the
prescriptive period is four (4) years from the time the tort is committed against the insured
by the wrongdoer.
(2) For actions of such nature that have not yet been filed at the time of the finality of this
Decision:
a. For cases where the tort was committed and the consequent loss/injury against the insured
occurred prior to the finality of this Decision, the subrogee-insurer is given a period not
exceeding four (4) years from the time of the finality of this Decision to file the action
against the wrongdoer; provided, that in all instances, the total period to file such case
shall not exceed ten (10) years from the time the insurer is subrogated to the rights of the
insured.
b. For cases where the tort was committed and the consequent loss/injury against the insured
occurred only upon or after the finality of this Decision, the Vector doctrine would hold
no application. The prescriptive period is four (4) years from the time the tort is committed
against the insured by the wrongdoer.
Pursuant to the guidelines stated above, specifically under guideline 1 (a), the Vector doctrine -
which
was even relied upon by the courts a quo - would then apply. Hence, as the amended complaint
impleading petitioner was filed on April 21, 2014, which is within ten (10) years from the time
respondent indemnified Copylandia for its injury/loss, i.e., on November 2, 2006, the case
cannot be
said to have prescribed under Vector. As such, the Court is constrained to deny the instant
petition

12. FilCon Ready Mixed Inc., vs. UCPB General Insurance, GR no.229877, July 15, 2020
PDF FILE

13. 13. 2100 Customs Brokerage vs. PhilAm Insurance Co., GR no.223377, June 10, 2020
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court
(Rules), assailing the Decision2 dated October 12, 2015 and.the Resolution3 dated March 7,
2016 of the Court of Appeals (CA) in CA-G.R. SP No. 138302 filed by petitioner 2100 Customs
Brokers, Inc. (2100 CBI).

The Antecedents

On February 27, 2001, Ablestik Laboratories (Ablestik) placed two (2) cardboard boxes
containing 63 jars of Ablebond Adhesive on board Japan Airlines (JAL) Flight No. JL 5261 in
Los Angeles, California, United States of America4 covered by Airway Bill No. 131-
660818425 for consignee (TSPIC). After transshipment in Japan, the goods were expected to
arrive in Manila aboard JAL Flight No. JL 745 on March 1, 2001.6 Ablestik issued a handling
instruction7 addressed to its freight forwarding agent, U-Freight America Inc., stating the
following:

SHIPMENTS CONTAINING DRY ICE ARE

PERISHABLE AND MUST DELIVER TO OUR
CUSTOMER WITHIN 72 HOURS. DO NOT DELAY.

xxxx

5. Frozen products must maintain temperatures of -40F.

6. If transit is to be longer than 72 hours[,] total shipment must  be reiced [sic] in transit
or at broker's import destination, depending on flight schedule.

7. Shipment must be stored upon arrival in destination broker's freezer with

temperatures of 32F or colder.8 (Emphasis and italics in the original)

The goods were insured with respondent Philam Insurance Company (Philam; now AIG
PHILIPPINES INSURANCE, INC.) against all risks per Marine Cargo Certificate
08010121549 and Open Policy Number 9595292.10

At 1:30 a.m. on March 1, 2001 (Thursday), the goods arrived at the Ninoy Aquino International
Airport (NAIA) and were subsequently stored at the Paircargo warehouse located in NAIA
Complex, Parañaque City.11

At 2:47 p.m. on March 2, 2001 (Friday), TSPIC notified 2100 CBI that the shipment had
arrived.12 TSPIC allegedly forwarded to 2100 CBI the Packing List from Ablestik indicating "1
Year @-40C or colder/ Dry ice shipment"13 and the Shipment Handling Instructions14 from
Ablestik stating "SHIPMENTS CONTAINING DRY ICE ARE PERISHABLE AND MUST
DELIVER TO OUR CUSTOMER WITHIN 72 HOURS. DO NOT DELAY." It is further stated in
the Shipment Handling Instructions that:

Frozen products must maintain temperatures of-40F.

If transit is to be longer than 72 hours total shipment
must be re-iced in transit or at broker's import
destination, depending on flight schedule.
Shipment must be stored upon arrival in destination
broker's freezer with temperatures of 32F or colder.15

TSPIC also sent an extra copy16 of Airway Bill No. 131-66081842 with "freight collect" stamped
on its face which meant that freight charges must be paid to JAL before it could release the
original copy of Airway Bill No. 131-66081842. This is required to process the discharge of the
shipment from the custody of the Bureau of Customs (BOC).17 TSPIC informed 2100 CBI that
the latter will advance the necessary funds for the freight charges in the amount of P14,672.00.
Since it was already past 3 p.m. on a Friday, the banks were already closed, and there were no
available signatories to sign the checks. The freight charges were only settled on March 5,
2001.18

At around 2:00 a.m. on March 6, 2001 (Tuesday) or five (5) days after the date of arrival of the
shipment in Manila, 2100 CBI delivered the cargo to TSPIC.19 Upon receipt of the goods,
TSPIC's representatives found that the dry ice stuffed inside the boxes have melted due to the
delay in the delivery as shown in the Damage Report20 and photographs taken by the Manila
Adjusters Surveyors Company (MASCO).21

TSPIC filed a claim22 against 2100 CBI for the value of the shipment but the latter refused to
pay. 2100 CBI contended that the delay in the delivery of the goods was due to TSPIC's failure
to give pre-alerts as to the expected arrival thereof and TSPIC's failure to pay the freight
charges on time.23

TSPIC then filed a formal claim for the recovery of the value of the damaged goods against
Philam. After the survey conducted by the MASCO,24 payment in the amount of P391,917.69
was recommended.25 Philam paid the insurance claim of TSPIC. On July 30, 2001, a
subrogation receipt for Claim No. 200140080A was executed certifying that Philam paid the
insurance claim of TSPIC.26

Thereafter, Philam filed a claim for reimbursement against 2100 CBI but its claim was denied.
Hence, Philam filed a complaint for damages docketed as Civil Case No. 78072 in the
Metropolitan Trial Court of Makati City (MeTC).27

In 2100 CBI's Answer with Counterclaim,28 it denied the allegations against it and maintained
that it has no liability to pay consignee TSPIC because it had exercised the diligence and care
required by law in the vigilance and custody over the shipment. 2100 CBI claimed that the
alleged damage, if there is any, did not occur when the shipment was under its custody. 2100
CBI also argued that it was just a mere customs broker or a commercial agent in the transaction
specifically tasked to release the shipment from the BOC only after the receipt of the original
import documents from the consignees or freight forwarder or at least a pre-alert advice about
the arrival of the shipment from the consignee.29 In the letter attached to its Answer with
Counterclaim, 2100 CBI insisted that it received from TSPIC the shipment documents late in the
afternoon of Friday March 2, 2001. Freight payment was advanced by 2100 CBI on March 5,
2001 (Monday) because freight payment is not accepted on Saturdays and Sundays and
TSPIC's funds were not sufficient.30

For its counterclaim, 2100 CBI maintained that because of the unfounded suit, it was exposed to
litigation and was constrained to hire the services of a lawyer in the amount of P50,000.00.31

Ruling of the Metropolitan Trial Court

In a Decision32 dated June 6, 2013, the MeTC ordered 2100 CBI to pay Philam the following:
(1) P391,917.69 as actual damages; (2) P10,000.00 as attorney's fees; and (3) costs of
suit.33 The MeTC held that, as customs broker, 2100 CBI is regarded as a common carrier
because transportation of goods is an integral part of its business. It is mandated by law to
exercise extraordinary diligence in handling TSPIC's shipment.34
The MeTC explained that because of the nature of 2100 CBI's business, it should have devised
ways to prevent the damage to the cargo under its custody and to deliver the same to the
consignee with extraordinary care and diligence. Even if the cargo was not released
immediately by the BOC due to insufficient funds for the freight payment, 2100 CBI knew from
the start that the cargo contained perishable materials and had to be stored in a cool place and
required re-icing beyond 72 hours in transit. The packing list clearly indicated that the items are
"1 Year @ - 40C or colder/ Dry ice shipment."35 For the MeTC, 2100 CBI should have
undertaken precautionary measures to avoid or lessen the cargo's possible deterioration.36

The MeTC noted that in 2100 CBI's DR No. 659556,37 "the defendant [2100 CBI] accepted the
items in good order and condition, noting the carton of frozen adhesive."38 The MeTC
concluded that the goods "went from good order to bad order condition while in the custody of
the defendant 2100 CBI]"39 and that it "failed to adduce evidence that it exerted extraordinary
diligence to prevent the same from occurring.40

In an Order41 dated January 8, 2014, the MeTC denied the Motion for Reconsideration of 2100
CBI.42

Ruling of the Regional Trial Court

In a Decision43 dated May 23, 2014, the Regional Trial Court (RTC) affirmed the ruling of the
MeTC. In sustaining the ruling of the MeTC, the RTC found that the cargo deteriorated while
inside the Paircargo warehouse because of the delay in the release and withdrawal to TSPIC,
as stated in the Certificate of Survey and Material Status Report. The RTC explained that
although the cargo was not released immediately by the BOC due to the insufficient freight
payment, 2100 CBI knew at the outset that the cargo contained perishable material which had
to be stored in cool places and re-iced after 72 hours in transit.44 The RTC found that 2100 CBI
failed to prove that it exerted extraordinary diligence while the cargo was in its custody.

Ruling of the Court of Appeals

In a Decision45 dated October 12, 2015, the CA denied the petition of 2100 CBI and affirmed
the ruling of the RTC ordering 2100 CBI to pay P391,917.69 as actual damages, P10,000.00 as
attorney's fees, and costs of suit.46

In affirming the ruling of the RTC, the CA held that 2100 CBI, as a common carrier, failed to
exercise extraordinary diligence over the goods. The CA observed that 2100 CBI already knew
that the goods cannot be released on March 2, 2001 yet it did not take precautionary measures
to avoid damage to the cargo. It received the Ablestik packing list which stipulated "1 Year @
-40C or colder/ Dry Ice shipment"47 on March 2, 2001. Considering that the transit has
exceeded 72 hours, 2100 CBI should have re-iced the goods to maintain its required
temperature at -40C or colder.48

Moreover, the CA found no merit in 2100 CBI's contention that there was no valid subrogation.
The goods were insured with Philam against all risks pursuant to Marine Cargo Certificate
0801012154 and Open Policy Number 9595292. When the shipment was damaged, TSPIC filed
a claim for recovery of the value against Philam. The CA concluded that since Philam paid the
insurance claim of TSPIC, it is only but proper that Philam be subrogated to the rights of
TSPIC.49

In a Resolution50 dated March 7, 2016, the CA denied the Motion for Reconsideration51 of

2100 CBI.
In the present petition,52 2100 CBI insists that Philam failed to show that it was negligent in
handling the subject goods from the time the BOC released the goods on March 6, 2001 at 2:00
a.m. until they were delivered to TSPIC in good order and condition on March 6, 2001 at 3:44
a.m., or approximately two hours. It would be physically impossible and contrary to logic and
experience for 2100 CBI to implement any control or handling instructions over goods not in its
possession or custody. Even assuming that it is a common carrier, 2100 CBI suggests that it is
excused from liability as it did not cause the delay in the delivery of the goods to TSPIC. The
delay in the release of the goods was due to TSPIC's failure to provide sufficient money for the
freight charges to be paid.53

2100 CBI also alleges that TSPIC failed to give a copy of the handling instruction. The Shipment
Handling Instruction presented was addressed to U-Freight America, Inc., not 2100 CBI.54

In addition, 2100 CBI argues that it was incumbent upon Philam to show that the alleged
damage was within the coverage of the supposed insurance with TSPIC. 2100 CBI posits that
the Marine Cargo Certificate, by itself, does not show the scope of coverage over the subject
goods. The contract of insurance must be presented to prove the extent of its coverage.55 2100
CBI also points out that as the name "Marine Cargo Certificate" implies, it covers goods
transported by sea, and not through air such as the shipment of TSPIC placed onboard JAL
Flight No. JL 5261.56 Even if the Marine Cargo Certificate covers shipment of goods by air, the
Insurance Declaration Report attached to the Marine Cargo Certificate only covers Ablestik's
shipment on JL Flight No. 745 from Narita, Japan. Shipment of goods aboard JL Flight No. 5621
from USA was allegedly not included.57

2100 CBI claims that an insurer who pays the insured for loss or liability not covered by the
policy is not subrogated to rights of the latter.58

In its Comment,59 Philam argues that the present petition only raised questions of fact which,
as a general rule, are not reviewable under Rule 45 of the Rules.60 Philam also claims that
there was a valid subrogation in its favor by virtue of its payment of TSPIC's insurance
claim.61 Philam also insists that 2100 CBI is a common carrier whose liability is governed by
Article 1735 of the Civil Code.62

Issues

The issues to be resolved are:

1. Whether 2100 CBI is a common carrier engaged in the transportation of goods;

2. Whether a Marine Cargo Certificate may include goods transported by air;

3. Whether the insurance policy must be presented to establish the liability of the
common carrier to Philam; and

4. Whether 2100 CBI was negligent in handling the shipment of TSPIC, thus making it
liable for damages.

The Court's Ruling

At the outset, We deem it necessary to emphasize that a petition for review on certiorari under
Rule 45 is limited only to questions of law. As a rule, We do not review factual questions raised
under Rule 45 as it is not Our function to analyze or weigh evidence already considered in the
proceedings below. Nevertheless, this rule is not absolute. In the case of Microsoft Corp. v.
Farajallah,63 the Court declared that a review of the factual findings of the CA is proper in the
following instances:

(1) when the factual findings of the Court of Appeals and the trial court are contradictory;

(2) when the conclusion is a finding grounded entirely on speculation, surmises, or

conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible;

(4) when there is a grave abuse of discretion in the appreciation of facts;

(5) when the Appellate Court, in making its findings, went beyond the issues of the case
and such findings are contrary to the admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension of

facts;

(7) when the Court of Appeals failed to notice certain relevant facts which, if properly
considered, would justify a different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence on
which they are based; and

(10) when the findings of fact of the Court of Appeals are premised on the absence of
evidence but such findings are contradicted by the evidence on record.64 (Emphasis
supplied)

In this case, a careful re-examination of the evidence on record will reveal that the CA failed to
notice certain relevant facts which, if properly considered, would justify a different conclusion.
There is a need to review the factual findings of the lower court to determine when 2100 CBI
acquired possession over the goods, an issue that is crucial in determining the rights and
liabilities of the parties.

2100 CBI, a customs broker,

is a common carrier.

2100 CBI claims that it is not a common earner because it is not engaged in the transportation
or delivery of goods and is primarily engaged in the business of customs brokerage, as reflected
in its Amended Articles of Incorporation.65

To support 2100 CBI's position, it cited Section 6 of RA No. 9280, otherwise known as
"Customs Brokers Act of 2004" the pertinent portion of which states:

Sec. 6. Scope of the Practice of Customs Brokers. - Customs Broker Profession involves
services consisting of consultation, preparation of customs requisite documents for imports and
exports, declaration of customs duties and taxes, preparation, signing, filing, lodging and
processing of import and export entries; representing importers and exporters before any
government agency and private entities in cases related to valuation and classification of
imported articles and rendering of other professional services in matters relating to customs and
tariff laws, its procedures and practices.66

The contention of 2100 CBI is untenable. A careful study of the scope of the practice of customs
brokers reveals that the acts enumerated above clearly pertain to acts incidental and necessary
for the transportation of goods to the consignee. The participation of a customs broker, through
the acts listed above, are essential to an entity engaged in the business of transporting goods. A
customs broker has been regarded as a common carrier because transportation of goods is an
integral part of its business. We have already settled in a number of cases that a customs
broker is a common carrier because it undertakes to deliver goods for a pecuniary
consideration.67

The fact that 2100 CBI is a common carrier is buttressed by the testimony of its own witness,
Ildefonso Magnawa (Magnawa), the Night Operations Manager of 2100 CBI, in the following
exchange:

Q Can you describe what is the procedure of 2100 Customs Brokers, Inc. for shipment
clearances with the Customs?

A Normally, we have to receive the original airway bill copy and then we have to prepare the
import documents which has import entry and other supporting papers like the Bureau of
Customs and then proceed to releasing the cargo from the warehouse and delivery of the cargo
to the consignee.

Q Mr. Witness, during this process of shipment clearance, where is the shipment or the goods
covered by the transaction?

A The cargo is stored at the warehouse.

Q And who has custody of this cargo?

A The cargo is in the custody of the warehouse who was under the control of the Bureau of
Customs.

Q How about the customs broker like 2100 Customs Brokers, Inc, has it having [sic] custody of
this cargo at the time of the shipment clearance?

A The custody of 2100 was that if it was already released from the warehouse. It was during
delivery of the cargo from the warehouse to the consignee. That is the time the cargo is under
their custody.68 (Emphasis supplied)

No matter how minimal or short the period the goods are placed in the custody of 2100 CBI, it
remains settled that the participation of 2100 CBI is indispensable to the delivery of the goods to
TSPIC. For undertaking the transport of the cargo from Paircargo warehouse to TSPIC's
warehouse for a fee, 2100 CBI is considered a common carrier.

A Marine Car so Certificate

may include goods
transported by air.

2100 CBI posits that, as the name "Marine Cargo Certificate" implies, it covers goods
transported by sea, and not through air such as the shipment of TSPIC.69
2100 CBI is mistaken. Simply because the word "marine" was used in Marine Cargo Certificate
does not mean that TSPIC availed the wrong insurance policy for its cargo transported through
airplane.

Section 101(a)(2) of Republic Act No. (R.A). 10607 states: Sec. 101. Marine Insurance includes:

(a) Insurance against loss of or damage to:

xxxx

2) Person or property in connection with or appertaining to a marine, inland marine, transit or

transportation insurance, including liability for loss of or damage arising out of or in connection
with the construction, repair, operation, maintenance or use of the subject matter of such
insurance (but not including life insurance or surety bonds nor insurance against loss by reason
of bodily injury to any person arising out of ownership, maintenance, or use of automobiles); x x
x70 (Emphasis supplied)

Thus, the scope of marine insurance includes inland marine insurance and covers over the land
transportation perils of property shipped by airplanes.71

Presentation of the insurance

policy is necessary.

Marine Cargo Certificate No. 0801012154 certifies that Philam received the premium for Open
Policy Number 9595292 and details the clauses, warranties, and special conditions of the
policy.72

Noticeably, Open Policy Number 9595292 was not presented during trial nor on appeal. From
the start, 2100 CBI had already raised the issue of non-presentation of the insurance policy yet
it was never produced by Philam. The issue was also repeatedly raised on appeal.73

Rule 130, Section 3, of the Rules states:

Sec. 3. Original document must be produced; exceptions. -When the subject of inquiry is the
contents of a document, no evidence shall be admissible other than the original document itself,
except in the following cases:

(a) When the original has been lost or destroyed, or cannot be produced in court, without
bad faith on the part of the offeror;

(b) When the original is in custody or under the control of the party against whom the
evidence is offered, and the  latter fails to produce  it after reasonable notice;

(c) When the original consists of numerous accounts or other  documents which cannot
be examined in court without great loss of time and the fact sought to be established
from them is only the general result of the whole; and

(d) When the original is a public record in the custody of a public officer or is recorded in
a public office.

The original copy of the insurance policy is the best proof of its contents. The contract of
insurance must be presented in evidence to indicate the extent of its coverage.74 At most,
Marine Cargo Certificate No. 080101215475 and the subrogation receipt76 may be used to
establish the relationship between the insurer and the consignee and the amount paid to settle
the claim. The subrogation receipt, by itself, is not sufficient to prove a claim holding an insurer
liable for damage sustained by an insured item.77 These documents are not sufficient to prove
that the damage to the cargo is compensable under the insurance policy chargeable against
2100 CBI.

In addition, Section 7, Rule 8 of the Rules provides:

Sec. 7. Action or defense based on document. - Whenever an action or defense is based upon
a written instrument or document, the substance of such instrument or document shall be set
forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an
exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be
set forth in the pleading.78

As an actionable document, the insurance policy must be presented in order to determine

whether the damage sustained by the cargo of TSPIC is caused by a peril or risk covered by the
policy.

In the absence of proof of the contents of the policy confirming that the damage to the cargo is
covered by the insurance policy chargeable against 2100 CBI, Philam cannot hold 2100 CBI
responsible for the damage to the cargo. Philam's failure to present the original copy, which was
presumably in its possession, or even a copy of it, for unknown reasons, is fatal to its claim
against 2100 CBI as this document is the primary basis for its claim of right to subrogation. Had
a copy of the insurance policy been presented by Philam, it would have clearly delineated the
scope of its coverage. We cannot ignore the possibility that the insurance policy did not cover all
phases of handling the shipment.

2100 CBI is not negligent

in handling the shipment of
TSPIC.

Assuming arguendo that the risk or peril that caused the damage to the cargo is covered by the
insurance policy, We find that 2100 CBI was not negligent in handling the shipment of TSPIC.

It must be pointed out that the arrangement for the payment of the freight charges is on a
"Freight Collect" basis which means that the consignee or receiver of the goods will be
responsible for paying the freight and other charges79 in the total amount of P14,672.00. This is
confirmed by Magnawa in his testimony, the relevant portion of which is reproduced below:

Q What is freight collect means [sic]?

A It is the freight collect of the shipment from origin to Philippines.

Q And who is supposed to pay that?

A TSPIC.

Q And how much freight or how much fund would TSPIC provided [sic] for this cargo?

A The freight is Php 14,672.00 and there is a requirement for importer that they have to post a
fund deposited to the bank that is for the import processing fee for every shipment and it
so happened that it is insufficient.
Q After finding out that there was insufficient fund, what did you do next?

A We informed TSPIC that they are insufficient in fund.

Q What happened after you informed TSPIC of the insufficient fund?

A We kept waiting until they advised us March 5 in the afternoon almost 5:00 o'clock. We
started processing on backdoor procedure.80 (Emphasis supplied)

2100 CBI's customs representative, Elmer Remo (Remo) also corroborated Magnawa's
testimony, as revealed in the following exchange:

Q Mr. Witness, the defendant here mentioned that there were handling instructions forwarded to
the freight forwarders, can you confirm if 2100 Customs Brokers, Inc. received this shipment
handling instructions [sic].

A No, ma'am.

Q For the record, I am showing to the witness Exhibit "H" which was also previously marked as
defendant's Exhibit "8". Mr. Witness, the clearance of these goods and the delivery from the
time it arrived took five (5) days, to what do you attribute the length of period it took for the
goods to be delivered?

A We were informed on March 2 by the consignee TSPIC that they received an adhesive
shipment and it was freight collect, ma'am. Then on Saturday - Sunday, March 3 and 4, the
Japan Airlines do not accept payment on weekends.

Q What time did you received [sic] the notice on Friday, March 2?

A Late it [sic] the afternoon, ma'am.

Q Approximately what time are you referring to?

A Past three (3), ma'am.

Q And why do you consider that late already?

A Because if we were going to advance the freight charges, the banks are already closed and
no one will sign the checks, ma'am.

COURT:

Were you able to pay the freight collect charges on March 5, Monday?

WITNESS:

Yes, Your Honor, March 5.

Q You were able to pay Japan Airlines on March 5?

A Yes, Your Honor, March 5.

Q But the shipment was released to you early morning of March 6?

A Yes ma'am, we paid them on March 5 then nagkaproblema yung import processing fee then
hapon na po nila naayos sa Customs yung payment. That is the only time we continue with the
processing, Your Honor.

Q That is why you received this shipment early morning on March 6.

A Yes, Your Honor.81 [Emphasis supplied]

From the foregoing, it is clear that there is no need to rely on the presumption of the law that a
common carrier is presumed to have been at fault or have acted negligently in case of damaged
goods. This is because the delay in the release of the goods was through no fault of 2100 CBI.
The damage was caused by the late payment of the funds needed for the release of the goods
from the custody of BOC which was originally TSPIC's responsibility. It must be noted that while
waiting for the freight charges to be settled, 2100 CBI did not have custody over the shipment.

The pro-forma stipulation in DR No. 65955682 that TSPIC received the cargo in good order and
condition from 2100 CBI does not disprove the claim of 2100 CBI that the cargo may have been
damaged while it was in the possession of BOC. It is important to note that at the time the cargo
was released to 2100 CBI from BOC and delivered to TSPIC, the cargo remained sealed. Thus,
said pro-forma stipulation did not accurately describe the condition of the cargo at the time
delivery was made to TSPIC and cannot be used as basis for holding 2100 CBI accountable for
the damaged goods.

As aptly pointed out by 2100 CBI in its Reply,83 there is no basis to conclude that it was
apprised of Ablestik's specific handling instructions and could have taken precautionary
measures to avoid damage to the cargo.84 2100 CBI, through the testimony of Remo, denied
receiving handling instructions from TSPIC.85 The respective testimonies of Elmer Dumo
(Dumo), Philam's Senior Claims Examiner and Renato Layug, former Assistant Manager for
Cargo Survey of MASCO confirm that they do not have personal knowledge that the subject
goods were damaged as none of them personally examined the goods nor prepared any of the
documents presented to establish the damage.86 Thus, their testimonies are hearsay and do
not have any probative value.1âшphi1

It is clear that the only handling instruction 2100 CBI received was to "PLS. PUT INTO (sic)
COOL ROOM UPON ARRIVAL," which was stated in Airway Bill No. 131-66081842.87 2100
CBI could not have undertaken precautionary measures nor implement handling instructions
because it did not have possession of the cargo until 2:00 a.m. of March 6, 2001 - when the
goods were released by the BOC. It must be emphasized that, until the freight charges are paid,
JAL cannot release the original copy of Airway Bill No. 131-66081842 and the goods to 2100
CBI. Payment of the freight charges is required to process the release of the goods in the
custody of the BOC. At 2:47 p.m. on March 2, 2001, 2100 CBI only received a duplicate copy of
Airway Bill No. 131-66081842.88 Therefore, without the original copy of the Airway Bill No. 131-
66081842, the goods remained in the possession of the BOC and were not released to 2100
CBI.

Moreover, 2100 CBI may only be expected to implement the handling instructions when the
shipment was in the Paircargo warehouse which was under the control of the BOC. It would be
physically impossible and unreasonable for 2100 CBI to implement any control or handling
instructions over goods not in its custody. Based on the evidence presented, Philam failed to
establish that negligence in the handling of the shipment could be attributed to 2100 CBI from
the time the BOC released the goods to the custody of 2100 CBI at 2:00 a.m. on March 6, 2001
until they were delivered to TSPIC in good order and condition at 3:44 a.m. on March 6, 2001.

Accordingly, as an insurer who pays the insured for loss or liability not proven to be
compensable under the subject policy, Philam is not subrogated to the rights of TSPIC.

WHEREFORE, premises considered, the petition is GRANTED. Civil Case No. 78072 filed
against petitioner 2100 Customs Brokers, Inc. is hereby DISMISSED.

SO ORDERED.

Leonen, (Chairperson) Gesmundo, Zalameda and Gaerlan, JJ., concur

a. Pre- Need Code

1. SEC vs. Judge Lago, GR no. 183639, September 2, 2015