9. JAIME T.

GAISANO, Petitioner, v. DEVELOPMENT INSURANCE AND SURETY

CORPORATION, Respondent. FEBRUARY 27, 2017

FACTS OF THE CASE: 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 P1,
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
P140,893.50 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 P140,893.50 was
deposited with Metrobank for encashment on October 1, 1996.

On October 1, 1996, Pacquing informed petitioner of the vehicle's loss. Thereafter,

petitioner reported the loss and filed a claim with respondent for the insurance proceeds
of P1,500,000.00. After investigation, respondent denied petitioner's claim on the ground
that there was no insurance contract.Petitioner, through counsel, sent a final demand on
July 7, 1997. Respondent, however, refused to pay the insurance proceeds or return the
premium paid on the vehicle. On October 9, 1997, petitioner filed a complaint for
collection of sum of money and damages with the RTC where it sought to collect the
insurance proceeds from respondent. In its Answer, respondent asserted that the non-
payment of the premium rendered the policy ineffective. The premium was received by
the respondent only on October 2, 1996, and there was no known loss covered by the
policy to which the payment could be applied.

In its Decision dated September 24, 2003, the RTC ruled in favor of petitioner. It
considered the premium paid as of September 27, even if the check was received only
on September 28 because (1) respondent's agent, Trans-Pacific, acknowledged
payment of the premium on that date, September 27, and (2) the check that petitioner
issued was honored by respondent in acknowledgment of the authority of the agent to
receive it. Instead of returning the premium, respondent sent a checklist of requirements
to petitioner and assigned an underwriter to investigate the claim. The RTC ruled that it
would be unjust and inequitable not to allow a recovery on the policy while allowing
respondent to retain the premium paid. Thus, petitioner was awarded an indemnity of
P1,500,000.00 and attorney's fees of P50,000.00. After respondent's motion for
reconsideration was denied, it filed a Notice of Appeal. Records were forwarded to the
CA. The CA granted respondent's appeal. The CA upheld respondent's position that an
insurance contract becomes valid and binding only after the premium is paid pursuant to
Section 77 of the Insurance Code (Presidential Decree No. 612, as amended by
Republic Act No. 10607). It found that the premium was not yet paid at the time of the
loss on September 27, but only a day after or on September 28, 1996, when the check
was picked up by Trans-Pacific. It also found that none of the exceptions to Section 77
obtains in this case. Nevertheless, the CA ordered respondent to return the premium it
received in the amount of P55,620.60, with interest at the rate of 6% per annum from
the date of the denial of the claim on October 9, 1996 until payment.

Hence petitioner filed this petition. He argues that there was a valid and binding
insurance contract between him and respondent. He submits that it comes within the
exceptions to the rule in Section 77 of the Insurance Code that no contract of insurance
becomes binding unless and until the premium thereof has been paid. The prohibitive
tenor of Section 77 does not apply because the parties stipulated for the payment of
premiums. The parties intended the contract of insurance to be immediately effective
upon issuance, despite non-payment of the premium, because respondent trusted
petitioner. He adds that respondent waived its right to a pre-payment in full of the terms
of the policy, and is in estoppel.

Petitioner also argues that assuming he is not entitled to recover insurance proceeds,
but only to the return of the premiums paid, then he should be able to recover the full
amount of P140,893.50, and not merely P55,620.60. The insurance policy covered
three vehicles yet respondent's intention was merely to disregard the contract for only
the lost vehicle. According to petitioner, the principle of mutuality of contracts is violated,
at his expense, if respondent is allowed to be excused from performance on the
insurance contract only for one vehicle, but not as to the two others, just because no
loss is suffered as to the two. To allow this "would be to place exclusively in the hands
of one of the contracting parties the right to decide whether the contract should stand or
not. For failure of respondent to tile its comment to the petition, we declared respondent
to have waived its right to file a comment in our June 15, 2011 Resolution.

ISSUE: WHETHER THERE IS A BINDING INSURANCE CONTRACT BETWEEN

PETITIONER AND RESPONDENT.
DECISION: 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. In Tibay v. Court of
Appeals, we emphasized the importance of this rule. We explained that in an insurance
contract, both the insured and insurer undertake risks. On one hand, there is the
insured, a member of a group exposed to a particular peril, who contributes premiums
under the risk of receiving nothing in return in case the contingency does not happen;
on the other, there is the insurer, who undertakes to pay the entire sum agreed upon in
case the contingency happens. This risk-distributing mechanism operates under a
system where, by prompt payment of the premiums, the insurer is able to meet its legal
obligation to maintain a legal reserve fund needed to meet its contingent obligations to
the public. The premium, therefore, is the elixir vitae or source of life of the insurance
business. In the desire to safeguard the interest of the assured, it must not be ignored
that the contract of insurance is primarily a risk-distributing device, a mechanism by
which all members of a group exposed to a particular risk contribute premiums to an
insurer. From these contributory funds are paid whatever losses occur due to exposure
to the peril insured against. Each party therefore takes a risk: the insurer that of being
compelled upon the happening of the contingency to pay the entire sum agreed upon
and the insured that of parting with the amount required as premium. Without receiving
anything therefor in case the contingency does not happen. To ensure payment tor
these losses, the law mandates all insurance companies to maintain a legal reserve
fund in favor of those claiming under their policies. It should be understood that the
integrity of this fund cannot be secured and maintained if by judicial fiat partial offerings
of premiums were to be construed as a legal nexus between the applicant and the
insurer despite an express agreement to the contrary. For what could prevent the
insurance applicant from deliberately or willfully holding back full premium payment and
wait for the risk insured against to transpire and then conveniently pass on the balance
of the premium to be deducted from the proceeds of the insurance? And so it must be.
For it cannot be disputed that premium is the elixir vitae of the insurance business
because by law the insurer must maintain a legal reserve fund to meet its contingent
obligations to the public, hence, the imperative need for its prompt payment and full
satisfaction. It must be emphasized here that all actuarial calculations and various
tabulations of probabilities of losses under the risks insured against are based on the
sound hypothesis of prompt payment of premiums. Upon this bedrock insurance firms
are enabled to other the assurance of security to the public at favorable rates. Here,
there is no dispute that the check was delivered to and was accepted by respondent's
agent, Trans-Pacific, only on September 28, 1996. No payment of premium had thus
been made at the time of the loss of the vehicle on September 27, 1996. While
petitioner claims that Trans-Pacific was informed that the check was ready for pick-up
on September 27, 1996, the notice of the availability of the check, by itself, does not
produce the effect of payment of the premium. Trans-Pacific could not be considered in
delay in accepting the check because when it informed petitioner that it will only be able
to pick-up the check the next day, petitioner did not protest to this, but instead allowed
Trans-Pacific to do so. Thus, at the time of loss, there was no payment of premium yet
to make the insurance policy effective.

There are, of course, exceptions to the rule that no insurance contract takes effect
unless premium is paid. The first exception is provided by Section 77 itself, and that is,
in case of a life or industrial life policy whenever the grace period provision applies. The
second is that covered by Section 78 of the Insurance Code, which provide:
SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of
premium is conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until premium is
actually paid. A third exception was laid down in Makati Tuscany Condominium
Corporation vs. Court of Appeals, wherein we ruled that Section 77 may not apply if the
parties have agreed to the payment in installments of the premium and partial payment
has been made at the time of loss. The records clearly show that the petitioners and
private respondent intended subject insurance policies to be binding and effective
notwithstanding the staggered payment of the premiums. The initial insurance contract
entered into in 1982 was renewed in 1983, then in 1984. In those three years, the
insurer accepted all the installment payments. Such acceptance of payments speaks
loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly,
basic principles of equity and fairness would not allow the insurer to continue collecting
and accepting the premiums, although paid on installments, and later deny liability on
the lame excuse that the premiums were not prepaid in full. Not only that. In Tuscany,
we also quoted with approval the following pronouncement of the Court of Appeals in its
Resolution denying the motion for reconsideration of its decision: While the import of
Section 77 is that prepayment of premiums is strictly required as a condition to the
validity of the contract, We are not prepared to rule that the request to make installment
payments duly approved by the insurer would prevent the entire contract of insurance
from going into effect despite payment and acceptance of the initial premium or first
installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of
the condition of prepayment by making an acknowledgment in the insurance policy of
receipt of premium as conclusive evidence of payment so far as to make the policy
binding despite the fact that premium is actually unpaid. Section 77 merely precludes
the parties from stipulating that the policy is valid even if premiums are not paid, but
docs not expressly prohibit an agreement granting credit extension, and such an
agreement is not contrary to morals, good customs, public order or public policy. At the
very least, both parties should be deemed in estoppel to question the arrangement they
have voluntarily accepted. By the approval of the aforequoted findings and conclusion of
the Court of Appeals, Tuscany has provided a fourth exception to Section 77, namely,
that the insurer may grant credit extension for the payment of the premium. This simply
means that if the insurer has granted the insured a credit term for the payment of the
premium and loss occurs before the expiration of the term, recovery on the policy
should be allowed even though the premium is paid after the loss but within the credit
term. Finally in the instant case, it would be unjust and inequitable if recovery on the
policy would not be permitted against Petitioner, which had consistently granted a 60- to
90-day credit term for the payment of premiums despite its full awareness of Section 77.
Estoppel bars it from taking refuge under said Section, since Respondent relied in good
faith on such practice. Estoppel then is the fifth exception to Section 77. (Citations
omitted.) In UCPB General Insurance Co., Inc., we summarized the exceptions as
follows: (1) in case of life or industrial life policy, whenever the grace period provision
applies, as expressly provided by Section 77 itself; (2) where the insurer acknowledged
in the policy or contract of insurance itself the receipt of premium, even if premium has
not been actually paid, as expressly provided by Section 78 itself; (3) where the parties
agreed that premium payment shall be in installments and partial payment has been
made at the time of loss, as held in Makati Tuscany Condominium Corp. v. Court of
Appeals; (4) where the insurer granted the insured a credit term for the payment of the
premium, and loss occurs before the expiration of the term, as held in Makati Tuscany
Condominium Corp.; and (5) where the insurer is in estoppel as when it has consistently
granted a 60 to 90-day credit term for the payment of premiums. The insurance policy in
question does not fall under the first to third exceptions laid out in UCPB General
Insurance Co., Inc.: (1) the policy is not a life or industrial life policy; (2) the policy does
not contain an acknowledgment of the receipt of premium but merely a statement of
account on its face; and (3) no payment of an installment was made at the time of loss
on September 27.

Petitioner argues that his case falls under the fourth and fifth exceptions because the
parties intended the contract of insurance to be immediately effective upon issuance,
despite non-payment of the premium. This waiver to a pre-payment in full of the
premium places respondent in estoppel. We do not agree with petitioner. The fourth and
fifth exceptions to Section 77 operate under the facts obtaining in Makati Tuscany
Condominium Corp. and UCPB General Insurance Co., Inc. Both contemplate situations
where the insurers have consistently granted the insured a credit extension or term for
the payment of the premium. Here, however, petitioner failed to establish the fact of a
grant by respondent of a credit term in his favor, or that the grant has been consistent.
While there was mention of a credit agreement between Trans-Pacific and respondent,
such arrangement was not proven and was internal between agent and principal. Under
the principle of relativity of contracts, contracts bind the parties who entered into it. It
cannot favor or prejudice a third person, even if he is aware of the contract and has
acted with knowledge. We cannot sustain petitioner's claim that the parties agreed that
the insurance contract is immediately effective upon issuance despite non- payment of
the premiums. Even if there is a waiver of pre-payment of premiums, that in itself does
not become an exception to Section 77, unless the insured clearly gave a credit term or
extension. This is the clear import of the fourth exception in the UCPB General
Insurance Co., Inc. To rule otherwise would render nugatory the requirement in Section
77 that 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. Moreover, the policy itself states: WHEREAS THE
INSURED, by his corresponding proposal and declaration, and which shall be the basis
of this Contract and deemed incorporated herein, has applied to the company for the
insurance hereinafter contained, subject to the payment of the Premium as
consideration for such insurance. The policy states that the insured's application for the
insurance is subject to the payment of the premium. There is no waiver of pre-payment,
in full or in installment, of the premiums under the policy. Consequently, respondent
cannot be placed in estoppel. Thus, we find that petitioner is not entitled to the
insurance proceeds because no insurance policy became effective for lack of premium
payment. The consequence of this declaration is that petitioner is entitled to a return of
the premium paid for the vehicle in the amount of P55,620.60 under the principle of
unjust enrichment. Petitioner cannot claim the full amount of P140,893.50, which
includes the payment of premiums for the two other vehicles. These two policies are not
affected by our ruling on the policy subject of this case because they were issued as
separate and independent contracts of insurance. We, however, find that the award
shall earn legal interest of 6% from the time of extrajudicial demand on July 7, 1997.

WHEREFORE, the petition is DENIED. The assailed Decision of the CA dated

September 11, 2009 and the Resolution dated November 24, 2009 are AFFIRMED with
the MODIFICATION that respondent should return the amount of P55,620.60 with the
legal interest computed at the rate of 6% per annum reckoned from July 7, 1997 until
finality of this judgment. Thereafter, the total amount shall earn interest at the rate of
6% per annum from the finality of this judgment until its full satisfaction.

10. PHILAM INSURANCE CO., INC., PETITIONER, v. PARC CHATEAU

CONDOMINIUM UNIT OWNERS ASSOCIATION, INC., AND/OR EDUARDO B.
COLET, RESPONDENTS.

FACTS OF THE CASE:

On October 7, 2003, petitioner Philam Insurance Co., Inc. (Philam) [now Chartis
Philippines Insurance, Inc.] submitted a proposal to respondent Parc Chateau
Condominium Unit Owners Association, Inc. (Parc Association) to cover fire and
comprehensive general liability insurance of its condominium building, Parc Chateau
Condominium. Respondent Eduardo B. Colet (Colet), as Parc Association's president,
informed Philam, through a letter dated November 24, 2003, that Parc Association's
board of directors selected it, among various insurance companies, to provide the
insurance requirements of the condominium. After Philam appraised the condominium,
it issued Fire and Lightning Insurance Policy No. 0601502995 for P900 million and
Comprehensive General Liability Insurance Policy No. 0301003155 for P1 Million, both
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 in the
Metropolitan Trial Court (MeTC) of Makati, Branch 65.
The Metropolitan Trial Court's Decision

On October 30, 2007, the MeTC dismissed the case. The MeTC determined that since
Philam admitted that Parc Association did not pay its premium, one of the elements of
an insurance contract was lacking, that is, the insured must pay a premium. The MeTC
explained that payment of premium is a condition precedent for the effectivity of an
insurance contract. Non-payment of premium prevents an insurance contract from
becoming binding even if there was an acceptance of the application or issuance of a
policy, unless payment of premium was waived. With one of the elements missing, there
is no insurance contract to speak of and Philam has no right to recover from defendant
Parc Association.
Decision of RTC:

Philam appealed to the Regional Trial Court (RTC) of Makati, Branch 137, which partly
affirmed the MeTC decision, except as to attorney's fees, in its June 3, 2008 Decision.
The RTC pronounced that there was no valid insurance contract between the parties
because of non-payment of premium, and there was no express waiver of full payment
of premiums.

The RTC did not accept Philam's argument that the Jumbo Risk Provision is an implied
waiver of premium payment. The RTC elucidated that the Jumbo Risk Provision
specifically requires full payment of premium within the given period, and in case of
default, the policy automatically becomes void and ineffective.

Philam averred that Parc Association's newsletter and treasurer's report confirmed that
there was a perfected insurance contract. The RTC held that Parc Association's
newsletter and treasurer's report, informing the condominium unit owners that the
building was insured, is not proof of a perfected insurance contract. The newsletter
stated that negotiations were ongoing to try to lower the insurance premium per square
meter, while the treasurer's report did not categorically mention that there was a
perfected and effective insurance contract. Hence, the RTC affirmed in part the MeTC
decision. Philam moved for reconsideration, which the RTC denied in a Resolution
dated September 17, 2009.
Decision of CA:

Unconvinced, Philam elevated the case before the Court of Appeals (CA) through a
petition for review under Rule 42 of the Rules of Court, as amended.

On July 29, 2011, the CA rendered a Decision 12 denying Philam's petition and affirming
the June 3, 2008 RTC Decision and September 17, 2009 Resolution. The CA discussed
that based on Section 77 of Presidential Decree 612 or the Insurance Code of the
Philippines, the general rule is that no insurance contract issued by an insurance
company is valid and binding unless and until the premium has been paid. Although
there are exceptions laid down in UCPB General Insurance Co., Inc. v. Masagana
Telamart, Inc., the CA determined that none of these exceptions were applicable to the
case at hand.

The first exception is in Section 77 of the Insurance Code, that is, "in the case of a life or
an industrial life policy whenever the grace period provision applies." This exception
does not apply to this case because the policies involved here are fire and
comprehensive general liability insurance.

The second exception is in Section 78 of the Insurance Code, which states that "an
acknowledgment in a policy or contract of insurance or the receipt of premium is
conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the premium is
actually paid."

The exception in Section 78 is inapplicable in this case, because there was no

acknowledgment of receipt of premium in the policy or insurance contract, and in fact,
no premium was ever paid.

The third exception is taken from the case of Makati Tuscany Condominium Corporation
v. Court of Appeals, wherein the Court ruled that the general rule in Section 77 may not
apply if the parties agreed to the payment of premium in installment and partial payment
has been made at the time of loss. Here, the parties agreed to a payment by
installment, but no actual payment was made. Thus, the third exception has no
application in this case.

The Makati Tuscany case also provided the fourth exception, that is, if the insurer has
granted the insured a credit term for the payment of the premium, then the general rule
may not apply. Philam argues that the 90-day payment term is a credit extension.
However, the CA emphasized that the Jumbo Risk Provision is clear that failure to pay
each installment on the due date automatically voids the insurance policy. Here, Parc
Association did not pay any premium, which resulted in a void insurance policy. Hence,
the fourth exception finds no application.
The fifth and last exception, taken from the UCPB case, is estoppel in instances when
the insurer had consistently granted a credit term for the payment of premium despite
full awareness of Section 77. The insurer cannot deny recovery by the insured by citing
the general rule in Section 77, because the insured had relied in good faith on the credit
term granted.

The CA held that the factual circumstances of the UCPB case differ from this case. In
the UCPB case, the insurer granted a credit extension for several years and the insured
relied in good faith on such practice. Here, the fire and lightning insurance policy and
comprehensive general insurance policy were the only policies issued by Philam, and
there were no other policy/ies issued to Parc Association in the past granting credit
extension. Thus, the last exception is inapplicable.

After establishing that none of the exceptions are applicable, the CA concluded that the
general rule applies, that is, no insurance contract or policy is valid and binding unless
and until the premium has been paid. Since Parc Association did not pay any premium,
then there was no insurance contract to speak of.

Moreover, the CA pointed out that the Jumbo Risk Provision clearly stated 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. As a consequence, Philam cannot collect P3
63,215.21 unpaid premiums of void insurance policies.

Philam moved for reconsideration, which the CA denied in its March 14, 2012
Resolution. Undeterred, Philam filed a Petition for Review on Certiorari under Rule 45 of
the Rules of Court, as amended, before the Court.

ISSUES:

1. THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENTS'

REQUEST FOR TERMS OF PAYMENT OF PREMIUM AFTER THE POLICIES WERE
ISSUED AND PETITIONER'S GRANT OF SAID REQUEST CONSTITUTE THE
INTENTION OF THE PARTIES TO BE BOUND BY THE INSURANCE CONTRACT.

2. THE APPELLATE COURT ERRED IN RULING THAT THE FOURTH EXCEPTION

PROVIDED FOR UNDER SECTION 77 OF THE INSURANCE CODE OF THE
PHILIPPINES DOES NOT APPLY IN THE INSTANT CASE.

3. THE COURT OF APPEALS ERRED IN NOT FINDING THE NEGOTIATIONS

WHICH THE PARTIES HAD WITH RESPECT TO THE TERMS OF PAYMENT OF
PREMIUM ALREADY AGREED UPON AND NOT ON THE REDUCTION OF THE
AMOUNT THEREOF AS TO NEGATE THE EXISTENCE OF A PERFECTED
CONTRACT OF INSURANCE BETWEEN THEM.
DECISION: In its Comment, Parc Association alleged that Philam did not raise new
issues before the Court, and the issues presented had been resolved by the MeTC and
RTC. Parc Association averred that Philam's proposal was accepted for consideration of
the board of directors, who later disapproved the terms and conditions. As such, there
was no meeting of the minds of the parties, and there was no insurance contract
initiated.31

Parc Association further argued that non-payment of premium means no juridical tie
was created between the insured and the insurer, and the insured was not exposed to
the insurable risk for lack of consideration. Parc Association asserted that it would be
unjust to allow Philam to recover premiums on an insurance contract that was never
effective and despite not having been exposed to any risk at all.

In its Reply, Philam insisted that there was a perfected insurance contract, and Parc
Association's request for terms of payment indicate its intention to be bound by the
insurance contract.

In sum, the sole issue to be resolved is whether or not the CA committed a reversible
error in affirming the RTC decision and ruling that Philam has no right to recover the
unpaid premium based on void and ineffective insurance policies.
DECISION: The petition is denied. Rule 45 of the Rules of Court, as amended, states
that only questions of law shall be raised in a petition for review on certiorari. While the
rule has exceptions, they are irrelevant in this case, as Philam did not properly plead
and substantiate the applicability of the exceptions. Thus, the Court applies the general
rule.

In resolving whether the CA was correct in affirming the RTC decision, the Court
considered the following simplified alleged errors as presented by Philam:
1. Whether or not respondents' request for terms of payment of premium after the
policies were issued and the grant of said request by petitioner constitute the parties'
intention to be bound by the insurance contract;

2. Whether or not the fourth exception provided for under Section 77 of the Insurance
Code of the Philippines applies in the instant case; and

3. Whether or not the negotiations which the parties had were with respect to the terms
of payment of premium already agreed upon by the parties and not on the lowering of
the amount of premium as to negate the existence of a perfected contract of
insurance.36
The first and third alleged errors refer to the request for the terms of payment. Does
Parc Association's request and Philam's subsequent grant of the request constitute their
intention to be bound by the insurance contract? Does the negotiation refer to the terms
of payment or to the lowering of the premium?

In arriving at the answers to the questions, the Court has to determine the intention of
the parties. In doing so, the Court has to read the transcript of stenographic notes of the
witnesses, and review the language or tenor of some of the documentary evidence,
such as: Philam's proposal on October 7, 2003, Colet's acceptance letter dated
November 24, 2003, the Jumbo Risk Provision, and the written communications
between Philam and Parc Association.

In short, the Court has to re-evaluate the evidence on record. Evaluation of evidence is
an indication that the question or issue posed before the Court is a question of fact or a
factual issue.

In Century Iron Works, Inc. v. Biñas the Court differentiated between question of law
and question of fact. A question of law arises when there is doubt as to what the law is
on a certain state of facts, while there is a question of fact when the doubt arises as to
the truth or falsity of the alleged facts. For a question to be one of law, the question
must not involve an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a
review of the evidence presented, the question posed is one of fact.

Thus, the test of whether a question is one of law or of fact is not the appellation given
to such question by the party raising the same; rather, it is whether the appellate court
can determine the issue raised without reviewing or evaluating the evidence, in which
case, it is a question of law; otherwise it is a question of fact. 38 (Citation omitted)
Applying the test to this case, it is without a doubt that the questions/issues presented
before the Court are factual in nature, which are not proper subjects of a petition for
review on certiorari under Rule 45 of the Rules of Court, as amended. It has been
repeatedly pronounced that the Court is not a trier of facts. Evaluation of evidence is the
function of the trial court. As for the second alleged error, Philam avers that this case
falls under the fourth exception as explained in the Makati Tuscany case. The Makati
Tuscany case 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 should be considered as an exception to the
general rule.

However, 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.

The Court resolves to deny the petition after finding that the CA did not commit any
reversible error in the assailed decision and resolution. The CA had exhaustively
explained the law and jurisprudence, which are the bases of its decision and resolution.
Both trial courts and the appellate court are consistent in its findings of fact that there is
no perfected insurance contract, because of the absence of one of the elements, that is,
payment of premium. As a consequence, Philam cannot collect P363,215.21 unpaid
premiums of void insurance policies.

WHEREFORE, premises considered, the petition is DENIED. The CA’s Decision dated
July 29, 2011 and Resolution dated March 14, 2012 in CA-G.R. SP No. 110980
are AFFIRMED.

11. INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES, INC., PETITIONER,

V. COUNTRY BANKERS INSURANCE CORPORATION, RESPONDENT. October 17,
2018

FACTS OF THE CASE: As narrated by the CA in its assailed Decision, the essential
facts and antecedent proceedings of the instant case are as follows:
In 2000, Industrial Personnel and Management Services, Inc. (IPAMS) began recruiting
registered nurses for work deployment in the United States of America (U.S.). It takes
eighteen (18) to twenty four (24) months for the entire immigration process to complete.
As the process requires huge amounts of money, such amounts are advanced to the
nurse applicants.
By reason of the advances made to the nurse applicants, the latter were required to
post surety bond. The purpose of the bond is to guarantee the following during its
validity period: (a) that they will comply with the entire immigration process, (b) that they
will complete the documents required, and (c) that they will pass all the qualifying
examinations for the issuance of immigration visa. The Country Bankers Insurance
Corporation (Country Bankers for brevity) and IPAMS agreed to provide bonds for the
said nurses. Under the agreement of IPAMS and Country Bankers, the latter will provide
surety bonds and the premiums therefor were paid by IPAMS on behalf of the nurse
applicants. [The surety bonds issued specifically state that the liability of the surety
company, i.e., respondent Country Bankers, "shall be limited only to actual damages
arising from Breach of Contract by the applicant. A Memorandum of Agreement (MOA)
was executed by the said parties on February 1, 2002 which stipulated the various
requirements for collecting claims from Country Bankers, namely:

SURETY BOND:
1st demand letter requiring his/her to submit complete documents.
2nd Demand letter (follow up of above).
Affidavit stating reason of any violation to be executed by responsible officer of
Recruitment Agency;
Statement of Account (detailed expenses).
Transmittal Claim Letter. On the basis of the MOA, IPAMS submitted its claims under
the surety bonds issued by Country Bankers. For its part, Country Bankers, upon
receipt of the documents enumerated under the MOA, paid the claims to IPAMS.
According to IPAMS, starting 2004, some of its claims were not anymore settled by
Country Bankers. In 2004, Country Bankers was not able to pay six (6) claims of
IPAMS. The claims were not denied by Country Bankers, which instead asked for time
within which to pay the claims, as it alleged to be cash strapped at that time. Thereafter,
the number of unpaid claims increased. By February 16, 2007, the total amount of
unpaid claims was P11,309,411.56. IPAMS took the matter up with the General
Manager of Country Bankers, Mr. Ignacio Ong (Ong). In response, Country Bankers,
through its letter[14] dated November 14, 2005 signed by Mr. Ong, acknowledged the
obligations of Country Bankers, apologized for the delay in the payment of claims, and
proposed to amortize the settlement of claims by paying a semi-monthly amount of
P850,000.00. In addition, Country Bankers promised to pay future claims within a ninety
(90)-day period. That commitment made by Country Bankers was not fulfilled and
IPAMS had to deal with Country Bankers' new General Manager, Ms. Tess Valeriano
(Valeriano). Ms. Valeriano assured IPAMS that the obligations of Country Bankers
would be paid promptly.
However, the counsel of Country Bankers, Atty. Marisol Caleja, started to oppose the
payment of claims and insisted on the production of official receipts of IPAMS on the
expenses it incurred for the application of nurses. IPAMS opposed this, saying that the
Country Bankers' insistence on the production of official receipts was contrary to, and
not contemplated in, the MOA and was an impossible condition considering that the
U.S. authorities did not issue official receipts. In lieu of official receipts, IPAMS
submitted statements of accounts, as provided in the MOA.
Then, in a letter dated August 22, 2006, Country Bankers limited the authority of its
agent [assigned to the accounts of IPAMS,] Mr. Jaime C. Lacaba [(Lacaba), to transact
business with IPAMS. Due to the unwillingness of Country Bankers to settle the claims
of IPAMS, the latter sought the intervention of the IC, through a letter-complaint dated
February 9, 2007. Country Bankers on the other hand alleged that until the third quarter
of 2006, it never received any complaint from IPAMS. Due to remarkable high loss ratio
of IPAMS, the latter's accounts were evaluated and audited by the Country Bankers.
The IPAMS was informed of the same problem. Instead of complying with the
requirements for claim processes, IPAMS insisted that the supporting documents
cannot be produced. The contending parties went to a series of conferences to settle
the differences but to no avail. The [IC] therefore ordered the parties to submit their
respective Position Papers. On June 26, 2007, the Claims Division of the IC issued a
Resolution declaring the following:

"IN VIEW OF THE FOREGOING, this Commission believes and so holds that there
is no ground for the refusal of CBIC to pay the claims of IPAMS. Its failure to settle the
claim after having entered into an Agreement with the complainant, IPAMS,
demonstrates respondent's bad faith in the fulfillment of their obligation, to the prejudice
of the complainant. Accordingly, we find the insurance company liable to settle the
subject claim otherwise, this Commission shall be constrained to take disciplinary action
pursuant to Sections 241 and 247 of the Insurance Code, as amended.
The move by Country Bankers to reconsider the above resolution was denied by the
[IC] in an Order dated December 4, 2007. Country Bankers made an appeal before the
DOF. The [DOF] decided to affirm the assailed orders of the IC. The dispositive portion
of the said Decision dated September 30, 2008 reads:
"WHEREFORE, foregoing premises considered, the questioned Resolution of the
Commission dated June 26, 2007, as reiterated in its Order dated December 7, 2007, is
hereby AFFIRMED and that the same be implemented in accordance with Sec. 241, in
relation to Sec. 247 of the Insurance Code and other pertinent rules and regulations on
the matter. A motion to reconsider the x x x aforementioned decision was filed but was
denied [by the DOF in its Resolution dated] April 29, 2009.
On appeal to the [OP], the ruling of the [DOF] was affirmed in a Decision docketed as
O.P. Case No. 09-E-190 and dated January 8, 2010[:
WHEREFORE, herein appeal is DISMISSED for lack of merit. The Decision of the
Secretary of Finance dated September 17, 2008 and its Resolution dated April 29, 2009
are hereby AFFIRMED.]
A subsequent motion to reconsider the same was denied by the said office in its
Resolution dated June 1, 2010.
Hence, [the] instant Petition [for Review filed by respondent Country Bankers before the
CA under Rule 43 of the Rules of Court.
The Ruling of the CA
In its assailed Decision, the CA granted the Rule 43 Petition filed by respondent Country
Bankers, reversing and setting aside the rulings of the IC, DOF, and OP, the dispositive
portion of which states:
WHEREFORE, premises considered, the petition is GRANTED and the following
issuances are hereby REVERSED and SET ASIDE:
June 1, 2010 decision of the Office of the President in O.P. Case No. 09-E-190;
January 8, 2010 decision of the Office of the President in O.P. Case No. 09-E-190;
Department of Finance resolution dated April 29, 2009;
Department of Finance decision dated September 17, 2008;
Insurance Commission order dated December 4, 2007; and the
Insurance Commission resolution dated June 26, 2007.
SO ORDERED.[27] (Emphasis in the original)
The CA held that respondent Country Bankers was justified in delaying the payment of
the claims to petitioner IPAMS because of the purported lack of submission by petitioner
IPAMS of official receipts and other "competent proof on the expenses incurred by
petitioner IPAMS in its recruitment of nurse applicants. The CA held that Section 241
(now Section 247) of the Insurance Code, which defines an unfair claim settlement
practice, and Section 247 (now Section 254), which provides for the suspension or
revocation of the insurer's authority to conduct business, should not be made to apply to
respondent Country Bankers because of the failure of petitioner IPAMS to provide
competent proof of its claims.
Instead of filing a motion for reconsideration, petitioner IPAMS decided to directly file
the instant Petition dated November 2, 2010 on November 4, 2010 before the Court.
On April 4, 2011, respondent Country Bankers filed its Comment (To Petition for Review
on Certiorari dated November 2, 2010) On August 18, 2011, petitioner IPAMS filed its
Reply.

ISSUE: WHETHER THE CA ERRED IN ISSUING ITS ASSAILED DECISION WHICH

REVERSED AND SET ASIDE THE RULINGS OF THE IC, DOF, AND OP, WHICH
FOUND THAT RESPONDENT COUNTRY BANKERS HAS NO GROUND TO
REFUSE THE PAYMENT OF PETITIONER IPAMS' CLAIMS AND SHALL
ACCORDINGLY BE SUBJECTED TO DISCIPLINARY ACTION PURSUANT TO
SECTIONS 241 (NOW SECTION 247) AND 247 (NOW SECTION 254) OF THE
INSURANCE CODE IF THE LATTER DOES NOT SETTLE THE SUBJECT CLAIMS
OF PETITIONER IPAMS.

DECISION: The appeal is partly meritorious. In reversing and setting aside the rulings
of the IC, DOF, and OP, the CA, in the main, found that as provisions of applicable law
are deemed written into contracts, Article 2199 of the Civil Code [32] should be applied
regarding the MOA between petitioner IPAMS and respondent Country Bankers. The
CA reasoned that since "[c]ompetent proof x x x must be presented to justify award for
actual damages,"[33] respondent Country Bankers was correct in not paying the subject
claims of petitioner IPAMS because the latter failed to present official receipts and other
"competent" evidence establishing the actual costs and expenses incurred by petitioner
IPAMS. Apparently, the CA concurred with the reason posited by respondent Country
Bankers for not paying the claims presented by petitioner IPAMS, i.e., the failure of
petitioner IPAMS to present official receipts of expenses it incurred. Consequently, the
CA found that mere Statements of Accounts with detailed expenses, without
accompanying official receipts or any other "competent" evidence, cannot prove actual
expenses. Hence, respondent Country Bankers was supposedly justified in not paying
the claims of petitioner IPAMS.
Autonomy of Contracts
At the onset, it is important to note that according to the autonomy characteristic of
contracts, the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.
The stipulation of the MOA at issue is the provision enumerating requirements
(Requirements for Claim Clause) that must be presented by petitioner IPAMS in order to
make a valid claim against the surety bond. To reiterate, the Requirements for Claim
Clause provides: REQUIREMENTS FOR CLAIM are as follows:
SURETY BOND:
F. 1st demand letter requiring his/her to submit complete documents.
G. 2nd Demand letter (follow up of above).
H. Affidavit stating reason of any violation to be executed by responsible office of
Recruitment Agency:
I. Statement of Account
J. Transmittal Claim Letter.
Petitioner IPAMS and respondent Country Bankers in essence made a stipulation to the
effect that mere demand letters, affidavits, and statements of accounts are enough
proof of actual damages — that more direct and concrete proofs of expenditures by the
petitioner such as official receipts have been dispensed with in order to prove actual
losses.
As to why the parties agreed on the sufficiency of the listed requirements under the
MOA goes into the motives of the parties, which is not hard to understand, considering
that the covered transactions, i.e., the processing of applications of nurses in the U.S.,
are generally not subject to the issuance of official receipts by the U.S. government and
its agencies. Considering the foregoing, the question is crystallized: Can the parties
stipulate on the requirements that must be presented in order to claim against a surety
bond? And the answer is a definite YES, pursuant to the autonomy characteristic of
contracts, they can. In an insurance contract, founded on the autonomy of contracts, the
parties are generally not prevented from imposing the terms and conditions that
determine the contract's obligatory force. Thus, the view posited by the CA that the
Requirements for Claim Clause is contrary to law because it is incongruent with Article
2199 of the Civil Code and, therefore, an exception to the rule on autonomy of contracts
is erroneous. A more thorough examination of Article 2199 does not support the CA's
view. Article 2199 of the Civil Code states: Article 2199. Except as provided by law or by
stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or
compensatory damages. The law is clear and unequivocal when it states that one is
entitled to adequate compensation for pecuniary loss only for such losses as he has
duly proved EXCEPT: (1) when the law provides otherwise, or (2) by stipulation of the
parties. Otherwise stated, the amount of actual damages is limited to losses that were
actually incurred and proven, except when the law provides otherwise, or when the
parties stipulate that actual damages are not limited to the actual losses incurred or that
actual damages are to be proven by specific documents agreed upon.

To reiterate, Article 2199 of the Civil Code explicitly provides that the prerequisite of
proof for the recovery of actual damages is not absolute. This was illustrated in People
of the Philippines v. Jonjie Eso y Hungoy, et al., wherein this Court held that the
requirement of providing actual proof found under Article 2199 for the recovery of actual
and compensatory damages may be dispensed with, considering that there was a
stipulation to that effect made by the parties. In the instant case, it is not disputed by
any party that in the MOA entered into by the petitioner IPAMS and respondent Country
Bankers, the parties expressly agreed upon a list of requirements to be fulfilled by the
petitioner in order to claim from respondent Country Bankers under the surety bond.
Hence, it is crystal clear that the petitioner IPAMS and respondent Country Bankers,
by express stipulation, agreed that in order for the former to have a valid claim under
the surety bond, the only requirements that need to be submitted are the two demand
letters, an Affidavit stating reason of any violation to be executed by responsible officer
of the Recruitment Agency, a Statement of Account detailing the expenses incurred,
and the Transmittal Claim Letter. Evidently, the parties did not include as preconditions
for the payment of claims the submission of official receipts or any other more direct or
concrete piece of evidence to substantiate the expenditures of petitioner IPAMS. If the
parties truly had the intention of treating the submission of official receipts as a
requirement for the payment of claims, they would have included such requirement in
the MOA. But they did not. It is elementary that when the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed upon and
there can be no evidence on such terms other than the contents of the written
agreement. Further, when the terms of the contract are clear and leave no doubt upon
the intention of the contracting parties, the stipulations of the parties are controlling.
In the case at hand, respondent Country Banker failed to present any compelling
evidence that convinces the Court that the parties had the intention of adding
requirements other than the five requirements for payment of claims enumerated in the
Requirements for Claim Clause. On the contrary, several circumstances show that the
submission of official receipts was really NOT intended by the parties to be a
precondition for the payment of claims. As found by the OP in its Decision dated
January 8, 2010, respondent Country Bankers "knew as a matter of IPAMS' regular
course of business that these covered transactions are generally not issued official
receipts by US government and its agencies and the US based professional
organizations and institutions involved to complete the requirements for the issuance of
an immigrant visa. Further, as found by the IC in its Resolution dated June 26,
2007, which the CA did not controvert in its assailed Decision, respondent Country
Bankers had previously admitted liability and promised to make payment on similar
claims under the surety agreement even without the submission of official receipts. In
fact, respondent Country Bankers had previously paid similar claims made by petitioner
IPAMS on the basis of the same set of documents, even without the submission of
official receipts and other pieces of evidence. As the contemporaneous and subsequent
acts of the contracting parties shall be principally considered in determining the intention
of the parties, and that, by virtue of estoppel, an admission or representation is
rendered conclusive upon the person making it and cannot be denied or disproved as
against the person relying thereon,[44] the prior actuations of respondent Country
Bankers clearly establish that it did not intend the submission of official receipts to be a
prerequisite for the payment of claims. Respondent Country Bankers is therefore
estopped from claiming that the submission of official receipts and other "competent
proof” is a further requirement for the payment of claims. Hence, the Court finds that, by
stipulation of petitioner IPAMS and respondent Country Bankers in their MOA, the
parties waived the requirement of actually proving the expenses incurred by petitioner
IPAMS through the submission of official receipts and other documentary evidence.
Thus, respondent Country Bankers was not justified in denying the payment of claims
presented by petitioner IPAMS based on the lack of official receipts. While placing
utmost concentration on Article 2199 of the Civil Code in ruling that competent proof is
required for the payment of the subject claims, the assailed Decision of the CA failed to
take into consideration the applicable provisions of the Insurance Code. The subject
agreement of the parties indubitably contemplates a surety agreement, which is
governed mainly by the Insurance Code, considering that a contract of surety ship shall
be deemed an insurance contract within the contemplation of the Insurance Code if
made by a surety which is doing an insurance business. In this case, the surety, i.e.,
respondent Country Bankers, is admittedly an insurance company engaged in the
business of insurance. In fact, the CA itself in its assailed Decision mentioned that a
contract of suretyship is defined and covered by the Insurance Code. Moreover, the
Insurance Code specifically provides applicable provisions on suretyship, stating that
pertinent provisions of the Civil Code shall only apply suppletorily whenever necessary
in interpreting the provisions of a contract of suretyship. Jurisprudence also holds that a
specific law should prevail over a law of general character. Hence, in the resolution of
the instant case, the CA erred in not considering the applicable provisions under the
Insurance Code on the required proof of loss and when such requirement is waivable.
Therefore, Section 92 of the Insurance Code must be taken into consideration. The said
provision states that all defects in the proof of loss, which the insured might remedy,
are waived as grounds for objection when the insurer omits to specify to him without
unnecessary delay. It is the duty of the insurer to indicate the defects on the proofs of
loss given, so that the deficiencies may be supplied by the insured. When the insurer
recognizes his liability to pay the claim, there is waiver by the insurer of any defect in
the proof of loss. In the instant case, it must be emphasized that respondent Country
Bankers, through its General Manager, Mr. Ong, issued a letter dated November 14,
2005 which readily acknowledged the obligations of Country Bankers under the surety
agreement, apologized for the delay in the payment of claims, and proposed to amortize
the settlement of claims by paying a semi-monthly amount of P850,000.00. In addition,
Country Bankers promised to pay future claims within a 90-day period:
First of all, allow us to apologize for the delay in our response to you considering that
we still had to do some reconciliation of our records with that of Mr. Lacaba. After
evaluating the total number of claims filed by IPAMS, we have come up with the final
figure of P20,575,492.25. In this regard, we wish to propose to amortize the settlement
of the said amount by paying you the semi-monthly amount of P850,000.00 until the
entire amount of P20,575,492.25 is fully paid. With respect to future claims (after the
cut-off date, October 28, 2005), we shall see to it that they are settled within the 90
days’ time frame allowed us. It bears stressing that respondent Country Bankers, after
undergoing an evaluation of the total number of claims of petitioner IPAMS, undertook
the settlement of such claims even WITHOUT the submission of official receipts. In fact,
respondent Country Bankers raised up the issue on the missing official receipts and
other evidence to prove the expenses incurred by petitioner IPAMS only when the latter
requested the intervention of the IC in 2007. If respondent Country Bankers truly
believed that the submission of official receipts was critical in providing proof as to
petitioner IPAMS' claims, then it would have raised the issue on the lack of official
receipts at the earliest possible opportunity. This only shows that the argument of
respondent Country Bankers on the lack of official receipts was a mere afterthought to
evade its obligation to pay the claims presented by petitioner IPAMS. While not denying
the existence of the said letter, respondent Country Bankers attempts to downplay it by
arguing that the claims covered by the letter and the claims raised by petitioner IPAMS
before the IC are different and distinct from each other. Such argument deserves scant
consideration. While the claims in the said letter may be different from the specific
claims presented before the IC, both sets of claims were similarly made under the same
suretyship agreement between the parties. Thus, the fact still remains that respondent
Country Bankers had previously acknowledged the validity of a set of claims under a
surety bond within the purview of the Requirements for Claim Clause despite the lack of
official receipts and other pieces of evidence aside from the required documents
enumerated in the MOA. To be sure, it must also be pointed out that the representations
of respondent Country Bankers in the said letter likewise refer to future and similar
claims of petitioner IPAMS. Hence, respondent Country Bankers' attempt to downplay
the ramifications of its letter dated November 14, 2005 is puerile. Also, it must be
emphasized that the IC, after holding a series of conferences between the parties and
after the assessment of the respective position papers and evidence from both parties,
made the factual finding in its Resolution dated June 26, 2007 that respondent Country
Bankers committed certain acts constituting a waiver of its right to require the
presentation of additional documents to prove the expenses incurred by petitioner
IPAMS, such as the issuance of the letter dated November 14, 2005 and the
acceptance by respondent Country Bankers of reimbursement from the nurse
applicants of petitioner IPAMS on the basis of the Statements of Accounts presented,
even without any official receipt attached. In fact, the records show that respondent
Country Bankers does not deny the fact that it accepted the reimbursements from the
nurse applicants based on the Statements of Accounts of petitioner IPAMS.
Furthermore, the DOF likewise factually determined that respondent Country Bankers,
through its new General Manager, Ms. Valeriano, had assured IPAMS that the
obligations of Country Bankers would be paid promptly, again, even without the
submission of official receipts and other pieces of evidence. [57] The DOF similarly found
that the proposal by respondent Country Bankers to amortize the settlement of
petitioner IPAMS' claims by paying the latter the semi-monthly amount of P850,000.00
and respondent Country Bankers' acceptance of reimbursements from the nurse
applicants based on the mere Statements of Accounts submitted by petitioner IPAMS
are tantamount to an acknowledgment on the part of respondent Country Bankers of its
liability for claims under the surety bonds. Moreover, the OP also factually found that
respondent Country Bankers "knew as a matter of IPAMS' regular course of business
that these covered transactions are generally not issued official receipts by US
government and its agencies and the US based professional organizations and
institutions involved to complete the requirements for the issuance of an immigrant visa.
These factual findings of three separate administrative agencies, which were not at all
reversed or refuted by the CA in its assailed Decision, should not be perturbed by the
Court without any compelling countervailing reason. The Court has continuously
adopted the policy of respecting the findings of facts of specialized administrative
agencies. In Villafor v. Court of Appeals, the Court held that the findings of fact of an
administrative agency must be respected as long as they are supported by substantial
evidence, even if such evidence might not be overwhelming or even preponderant,
because it is not the task of an appellate court to weigh once more the evidence
submitted before the administrative body and to substitute its own judgment for that of
the administrative agency in respect of sufficiency of evidence.
Hence, considering that the IC, through the Insurance Commissioner, is particularly
tasked by the Insurance Code to issue such rulings, instructions, circulars, orders and
decisions as may be deemed necessary to secure the enforcement of the provisions of
the law, to ensure the efficient regulation of the insurance industry, and considering that
there are no compelling reasons provided by respondent Country Bankers to overthrow
the IC's factual findings, the Court upholds the findings of the IC, as concurred in by
both the DOF and OP, that respondent Country Bankers committed certain acts
constituting a waiver of its right to require the presentation of additional documents to
prove the expenses incurred by petitioner IPAMS.
Accordingly, under Section 92 of the Insurance Code, the failure to attach official
receipts and other documents evidencing the expenses incurred by petitioner IPAMS,
even assuming that it can be considered a defect on the required proof of loss, is
therefore considered waived as ground for objecting the claims of petitioner IPAMS.
For the foregoing reasons, the ruling of the CA, which sets aside the rulings of the IC,
DOF, and OP, which found that respondent Country Bankers has no ground to refuse
the payment of petitioner IPAMS' claims and shall accordingly be subjected to
disciplinary action pursuant to Sections 241 (now Section 247) and 247 (now Section
254) of the Insurance Code if the latter does not settle the subject claims of petitioner
IPAMS, should be reversed. Be that as it may, despite the reversal of the CA's assailed
Decision, petitioner IPAMS' prayers for (1) the suspension/revocation of the license of
respondent Country Bankers due to its commission of an unfair claim settlement
practice for unreasonable delay in paying petitioner IPAMS' claim for the total amount of
P21,230,643.19; (2) awarding of a total amount of P21,230,643.19 and 20% thereof;
and (3) awarding of moral and exemplary damages, as well as attorney's fees and
judicial costs, are denied. It must be stressed that the instant case resolved by the Court
is not a claims adjudication case. The subject Resolution and Order of the IC that was
concurred in by the DOF and OP, which the Court now reinstates, were issued in the
IC's capacity as a regulator and not as an adjudicator of claims, as admitted by the IC
itself. Hence, while the Court herein reinstates the IC's Resolution finding that
disciplinary action is warranted in the eventuality that respondent Country Bankers
continues to delay settling the claims of petitioner IPAMS, the matter should be referred
back to the IC so that it could determine the remaining amount and extent of the liability
that should be settled by respondent Country Bankers in order to avoid the IC's
disciplinary action. WHEREFORE, in view of the foregoing, the appeal is
hereby PARTIALLY GRANTED. The Decision dated October 14, 2010 issued by the
Court of Appeals in CA-G.R. SP No. 114683 is REVERSED AND SET ASIDE. The
Resolution dated June 26, 2007 and Order dated December 4, 2007 issued by the
Insurance Commission, the Decision dated September 17, 2008 and Resolution dated
April 29, 2009 issued by the Department of Finance, and the Decision dated January 8,
2010 and Resolution dated June 1, 2010 issued by the Office of the President
are REINSTATED and AFFIRMED.

12. MALAYAN INSURANCE, COMPANY, INC. VS. PAP COMAPANY. AUGUST 17,
2013.

FACTS OF THE CASE: Malayan issued Fire Insurance Policy to PAP Co. for the
latter's machineries and equipment located at Sanyo Precision Phils. Bldg., Phase III,
Lot 4, Block 15, PEZA, Rosario, Cavite. The insurance, which was for P15,000,000.00
and effective for a period of (1) year, was procured by PAP Co. for RCBC, the
mortgagee of the insured machineries and equipment.

After the passage of almost a year but prior to the expiration of the insurance coverage,
PAP Co. renewed the policy on an "asis" basis. Pursuant thereto, a renewal policy was
issued by Malayan to PAP Co. for the period May 13, 1997 to May 13, 1998. And during
the subsistence of the renewal policy, the insured machineries and equipment were
totally lost by fire. Hence, PAP Co. filed a fire insurance claim with Malayan in the
amount insured. Malayan denied the claim on the ground that, at the time of the loss,
the insured machineries and equipment were transferred by PAP Co. in September
1996 from the Sanyo Building to the Pace Pacific Bldg., Lot 14, Block 14, Phase III,
PEZA, Rosario, Cavite. Contesting the denial, PAP Co. argued that Malayan cannot
avoid liability as it was informed of the transfer by RCBC, the party duty-bound to relay
such information. However, Malayan reiterated its denial of PAP Co.'s claim.
RTC: Ordered Malayan to pay PAP Company Ltd. (PAP) an indemnity for the loss
under the fire insurance policy as well as for attorney's fees. The RTC explained that
Malayan is liable to indemnify PAP for the loss under the subject fire insurance policy
because, although there was a change in the condition of the thing insured as a result of
the transfer of the subject machineries to another location, said insurance company
failed to show proof that such transfer resulted in the increase of the risk insured
against. In the absence of proof that the alteration of the thing insured increased the
risk, the contract of fire insurance is not affected per Article 169 of the Insurance Code.
The RTC further stated that PAP's notice to Rizal Commercial Banking Corporation
(RCBC) sufficiently complied with the notice requirement under the policy considering
that it was RCBC which procured the insurance. PAP acted in good faith in notifying
RCBC about the transfer and the latter even conducted an inspection of the machinery
in its new location. CA: Malayan failed to show proof that there was a prohibition on the
transfer of the insured properties during the efficacy of the insurance policy. Malayan
also failed to show that its contractual consent was needed before carrying out a
transfer of the insured properties. Despite its bare claim that the original and the
renewed insurance policies contained provisions on transfer limitations of the insured
properties, Malayan never cited the specific provisions. The CA further stated that even
if there was such a provision on transfer restrictions of the insured properties, still
Malayan could not escape liability because the transfer was made during the
subsistence of the original policy, not the renewal policy.

ISSUE: WHETHER OR NOT MALAYAN SHOULD BE HELD LIABLE UNDER THE

INSURANCE CONTRACT BECAUSE PAP COMMITTED CONCEALMENT,
MISREPRESENTATION AND BREACH OF AN AFFIRMATIVE WARRANTY UNDER
THE RENEWAL POLICY WHEN IT TRANSFERRED THE LOCATION OF THE
INSURED PROPERTIES WITHOUT INFORMING IT.

DECISION: No. Malayan cannot be held liable for the loss of the insured properties
under the fire insurance policy. RATIO: Condition No. 9 (c) of the renewal policy
provides: 9. Under any of the following circumstances the insurance ceases to attach as
regards the property affected unless the insured, before the occurrence of any loss or
damage, obtains the sanction of the company signified by endorsement upon the policy,
by or on behalf of the Company:(c) If property insured be removed to any building or
place other than in that which is herein stated to be insured. Evidently, by the clear and
express condition in the renewal policy, the removal of the insured property to any
building or place required the consent of Malayan. Any transfer effected by the insured,
without the insurer's consent, would free the latter from any liability. The records are
bereft of any convincing and concrete evidence that Malayan was notified of the transfer
of the insured properties

13. ALPHA INSURANCE AND SURETY CO. vs. ARSENIA SONIA CASTOR
July 2, 2014 

FACTS OF THE CASE: Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for
her Toyota Revo DLX DSL with Alpha Insurance and Surety Co (Alpha). The contract of
insurance obligates the petitioner to pay the respondent the amount of P630,000 in
case of loss or damage to said vehicle during the period covered. On April 16, 2007,
respondent instructed her driver, Jose Joel Salazar Lanuza to bring the vehicle to
nearby auto-shop for a tune up. However, Lanuza no longer returned the motor vehicle
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. Alpha,
however, denied the demand of Castor claiming that they are not liable since the culprit
who stole the vehicle is employed with Castor. Under the Exceptions to Section III of the
Policy, the Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by “A PERSON IN THE INSURED’S SERVICE”.
Castor filed a Complaint for Sum of Money with Damages against Alpha before the
Regional Trial Court of Quezon City. The trial court rendered its decision in favor of
Castor which decision is affirmed in toto by the Court of Appeals. Hence, this Petition for
Review on Certiorari.

ISSUE: WHETHER OR NOT THE LOSS OF RESPONDENT’S VEHICLE IS

EXCLUDED UNDER THE INSURANCE POLICY?

DECISION: NO. The words “loss” and “damage” mean different things in common
ordinary usage. The word “loss” refers to the act or fact of losing, or failure to keep
possession, while the word “damage” means deterioration or injury to property.
Therefore, petitioner cannot exclude the loss of Castor’s vehicle under the insurance
policy under paragraph 4 of “Exceptions to Section III”, since the same refers only to
“malicious damage”, or more specifically, “injury” to the motor vehicle caused by a
person under the insured’s service. Paragraph 4 clearly does not contemplate “loss of
property”. 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. Thus, in Eternal
Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company,
this Court ruled that it must be remembered that an insurance contract is a contract of
adhesion which must be construed liberally in favor of the insured and strictly against
the insurer in order to safeguard the latter’s interest.

14. EQUITABLE INSURANCE CORPORATION, PETITIONER, VS. TRANSMODAL

INTERNATIONAL, INC., RESPONDENT.

FACTS OF THE CASE: Sytengco Enterprises Corporation (Sytengco) hired respondent

Transmodal International, Inc. (Transmodal) to clear from the customs authorities and
withdraw, transport, and deliver to its warehouse, cargoes consisting of 200 cartons of
gum Arabic with a total weight of 5,000 kilograms valued at US21,750.00.

The said cargoes arrived in Manila on August 14, 2004 and were brought to Ocean
Links Container Terminal Center, Inc. pending their release by the Bureau of Customs
(BOC) and on September 2, 2004, respondent Transmodal withdrew the same cargoes
and delivered them to Sytengco's warehouse. It was noted in the delivery receipt that all
the containers were wet.

In a preliminary survey conducted by Elite Adjusters and Surveyors, Inc. (Elite

Surveyors), it was found that 187 cartons had water marks and the contents of the 13
wet cartons were partly hardened. On October 13, 2004, a re-inspection was conducted
and it was found that the contents of the randomly opened 20 cartons were about 40%
to 60% hardened, while 8 cartons had marks of previous wetting. In its final report dated
October 27, 2004, Elite Surveyor fixed the computed loss payable at P728,712.00 after
adjustment of 50% loss allowance.

Thus, on November 2, 2004, Sytengco demanded from respondent Transmodal the

payment of P1,457,424.00 as compensation for total loss of shipment. On that same
date, petitioner Equitable Insurance, as insurer of the cargoes per Marine Open Policy
No. MN-MRN-HO-000549 paid Sytengco's claim for P728,712.00. On October 4, 2004,
Sytengco then signed a subrogation receipt and loss receipt in favor of petitioner
Equitable Insurance. As such, petitioner Equitable Insurance demanded from
respondent Transmodal reimbursement of the payment given to Sytengco.

Petitioner Equitable Insurance filed a complaint for damages invoking its right as
subrogee after paying Sytengco's insurance claim and averred that respondent
Transmodal's fault and gross negligence were the causes of the damages sustained by
Sytengco's shipment. Petitioner Equitable Insurance prayed for the payment of
P728,712.00 actual damages with 6% interest from the date of the filing of the complaint
until full payment, plus attorney's fees and cost of suit. Respondent Transmodal denied
knowledge of an insurance policy and claimed that petitioner Equitable Insurance has
no cause of action against it because the damages to the cargoes were not due to its
fault or gross negligence. According to the same respondent, the cargoes arrived at
Sytengco's warehouse around 11:30 AM of September 1, 2004, however, Sytengco did
not immediately receive the said cargoes and as a result, the cargoes got wet due to the
rain that occurred on the night of September 1, 2004. Respondent Transmodal also
questioned the timeliness of Sytengco's formal claim for payment which was allegedly
made more than 14 days from the time the cargoes were placed at its disposal in
contravention of the stipulations in the delivery receipts.

The RTC, in its Decision dated June 18, 2013, found in favor of petitioner Equitable
Insurance, thus, the following dispositive portion of said decision: WHEREFORE, based
on the foregoing, judgment is hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay the following:
(1) Actual damages in the amount of Php728,712.00 plus 6% interest from judicial
demand until full payment;

(2) Attorney's fees in the amount equivalent to 10% of the amount claimed;

(3) Costs of suit. SO ORDERED.

According to the RTC, petitioner Equitable Insurance was able to prove by substantial
evidence its right to institute an action as subrogee of Sytengco. It also ruled that
petitioner Equitable Insurance's non-presentation of the insurance policy and non-
compliance with Section 7, Rule 8 of the Rules of Court on actionable document were
raised for the first time in respondent Transmodal's memorandum and also noted that
petitioner Equitable Insurance had, in fact, submitted a copy of the insurance contract.

Respondent Transmodal appealed the RTC's decision to the CA. The CA, on
September 15, 2015, promulgated its decision reversing the RTC's decision. It disposed
of the appeal as follows: WHEREFORE, the appeal is hereby GRANTED. The June 18,
2013 Decision of the RTC, Branch 26, Manila in Civil Case No. 06-114861 is
REVERSED and SET ASIDE. Accordingly, Equitable Insurance Corp.'s complaint is
DISMISSED for failure to prove cause of action. The CA ruled that there was no proof of
insurance of the cargoes at the time of the loss and that the subrogation was improper.
According to the CA, the insurance contract was neither attached in the complaint nor
offered in evidence for the perusal and appreciation of the RTC, and what was
presented was just the marine risk note.

ISSEUS:

1. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THAT

THE CASE OF MALAYAN INSURANCE CO., INC. V. REGIS BROKERAGE CORP.
(G.R. NO. 172156, NOVEMBER 23, 2007) IS NOT APPLICABLE IN THE INSTANT
CASE;

2. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THAT

THE FACTS SURROUNDING THE CASE OF MALAYAN INSURANCE CO., INC. V.
REGIS BROKERAGE CORP. (G.R. NO. 172156, NOVEMBER 23, 2007) IS
DIFFERENT FROM THE FACTS ATTENDING THE INSTANT CASE;

3. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE CASE

OF TISON V. COURT OF APPEALS, 276 SCRA 582;

4. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE CASE

OF COMPAÑA MARITIMA V. INSURANCE COMPANY OF NORTH AMERICA, 12
SCRA 213;

5. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE CASE

OF DELSAN TRANSPORT LINES, INC. V. COURT OF APPEALS, 273 SCRA 262;

6. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE

STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE.

DECISION: It is the contention of petitioner Equitable Insurance that the CA erred in not
applying certain jurisprudence on this case which it deemed applicable. It also argues
that the present case is not a suit between the insured Sytengco and the insurer but one
between the consignee Sytengco and the respondent common carrier since petitioner
Equitable Insurance merely stepped into the shoes of the said insured who has a direct
cause of action against respondent Transmodal on account of the damage sustained by
the subject cargo, thus, the carrier cannot set up as defense any defect in the insurance
policy because it cannot avoid its liability to the consignee under the contract of carriage
which binds it to pay any loss or damage that may be caused to the cargo involved
therein. In its Comment dated July 25, 2016, respondent Transmodal avers that the CA
did not err in not applying certain jurisprudence in the latter's decision. Respondent
Transmodal further refutes all the assigned errors that petitioner Equitable Insurance
enumerated in its petition.

A closer look at the arguments raised in the petition would show that petitioner is indeed
asking this Court to review the factual findings of the CA which is not within the scope of
a petition for review under Rule 45 of the Rules of Court. However, this Court has
recognized exceptions to the rule that the findings of fact of the CA are conclusive and
binding in the following instances: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when in making its findings the CA went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioner's main and reply briefs are not disputed
by the respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; and (11) when the CA
manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.Considering that the findings of
facts of the RTC and the CA are glaringly in contrast, this Court deems it proper to
review the present case.

In ruling that petitioner's subrogation right is improper, the CA stated that it found no
proof of insurance of the cargoes at the time of their loss. It also found that what was
presented in court was the marine risk note and not the insurance contract or policy,
thus: A perusal of the complaint and the other documentary evidence submitted by
Equitable Insurance such as the preliminary and final report clearly shows that the
claims for damages and subrogation were based on Policy No. MN-MRN-HO-0005479.
However, said insurance contract was neither attached in the complaint nor offered in
evidence for the perusal and appreciation of the court a quo. Instead, Equitable
Insurance presented the marine risk note.

Plaintiff was able to prove by substantial evidence their right to institute this action as
subrogee of the insured. The defendant did not present any evidence or witness to
bolster their defense and to contradict plaintiff’s allegation. To reiterate, in this case,
petitioner was able to present as evidence the marine open policy that vested upon it,
its rights as a subrogee. Subrogation is designed to promote and to accomplish justice
and is the mode which equity adopts to compel the ultimate payment of a debt by one
who injustice, equity and good conscience ought to pay.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of

Court, dated May 11, 2016, of petitioner Equitable Insurance Corporation is GRANTED.
Consequently, the Decision dated September 15, 2015 and Resolution dated March 17,
2016 of the Court of Appeals in CA-G.R. CV No. 101296 are REVERSED and SET
ASIDE, and the Decision dated June 18, 2013 of the Regional Trial Court, Branch 26,
Manila is AFFIRMED and REINSTATED.

15. H.H. HOLLERO CONSTRUCTION INC. VS. GOVERNMENT SERVICES

INSURANCE SYSTEM, September 24, 2014.

FACTS OF THE CASE: On April 26, 1988, the GSIS and petitioner entered into a
Project Agreement whereby the latter undertook the development of a GSIS housing
project known as Modesta Village Section B (Project). Petitioner obligated itself to
insure the 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
P1,000,000.00 for land development, which was later increased to P10,000,000.00,
effective from May 2, 1988 to May 2, 1989. Petitioner likewise secured CAR Policy No.
88/086 in the amount of P1,000,000.00 for the construction of twenty (20) housing units,
which amount was later increased to P17,750,000.00 to cover the construction of
another 355 new units, effective from May 2, 1988 to June 1, 1989. 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 to such 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 brought 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 brought by Typhoon Saling on a no loss basis, it appeared from its records
that the policies were not renewed before the onset of the said typhoon.
In a letter dated April 18, 1991, petitioner impugned the rejection of its claims for
damages/loss on account of Typhoon Saling, and reiterated its demand for the
settlement of its claims.

On September 27, 1991, petitioner filed a Complaint for Sum of Money and Damages
before the RTC, docketed as Civil Case No. 91-10144, [27] which was opposed by the
GSIS through a Motion to Dismiss dated October 25, 1991 on the ground that the
causes of action stated therein are barred by the twelve-month limitation provided under
the policies, the complaint was filed more than one (1) year from the rejection of the
indemnity claims. The RTC, in an Order dated May 13, 1993, denied the said motion;
hence, the GSIS filed its answer with counterclaims for litigation expenses, attorney's
fees, and exemplary damages. Subsequently, the GSIS filed a Third Party Complaint for
indemnification against Pool, the reinsurer.

The RTC ruled that in a Judgment dated February 3, 1999, the RTC granted petitioner's
indemnity claims. It held that: (a) the average clause provision in the policies which did
not contain the assent or signature of the petitioner cannot limit the GSIS' liability, for
being inefficacious and contrary to public policy; [33] (b) petitioner has established that the
damages it sustained were due to the peril insured against; [34] and (c) CAR Policy No.
88/086 was deemed renewed when the GSIS withheld the amount of P35,855.00
corresponding to the premium payable,[35] from the retentions it released to
petitioner. The RTC thereby declared the GSIS liable for petitioner's indemnity claims
for the damages brought about by the said typhoons, less the stipulated deductions
under the policies, plus 6% legal interest from the dates of extra-judicial demand, as
well as for attorney's fees and costs of suit. It further dismissed for lack of merit GSIS's
counterclaim and third party complaint. Dissatisfied, the GSIS elevated the matter to the
CA. The CA set aside and reversed the RTC Judgment, thereby dismissing the
complaint. It ruled that the complaint filed on September 27, 1991 was barred by
prescription, having been commenced beyond the twelve-month limitation provided
under the policies, reckoned from the final rejection of the indemnity claims on April 26,
1990 and June 21, 1990.

ISSUE: WHETHER OR NOT THE CA COMMITTED REVERSIBLE ERROR IN

DISMISSING THE COMPLAINT ON THE GROUND OF PRESCRIPTION.

DECISION: The petition lacks merit. 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: 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 rejection or, 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.

PRE-NEED CASE DIGESTS:

1. SECURITIES AND EXCAHNGE COMMISSION VS. REYNALDO M. LAIGO

Dated September 2, 2015

FACTS OF THE CASE:

Petition for certiorari under Rule 65 of the Rules of Court, (SEC) to prescribe rules and
regulations governing the pre-need industry.
New Rules on the Registration and Sale of Pre-Need Plans (New Rules)
Rule 1.9 of the New Rules, Trust Fund means a fund set up from plan holder’s
payments, separate and distinct from the paid-up capital of a registered pre-need
company, established with a trustee under a trust agreement approved by the SEC, to
pay for the benefits as provided in the pre-need plan.
Legacy, being a pre-need provider, complied with the trust fund requirement and
entered into a trust agreement with the Land Bank of the Philippines (IBP). Mid-2000,
the industry collapsed for a range of reasons. Legacy being the subject of a petition for
involuntary insolvency filed by private respondents in their capacity as plan holders.
Legacy did not object to the proceedings.
Declared insolvent by the RTC trial court also ordered Legacy to submit an inventory of
its assets and liabilities
RTC ordered the SEC, being the pre-need industry's regulator, to submit the documents
pertaining to Legacy's assets and liabilities.
SEC opposed the inclusion of the trust fund in the inventory of corporate assets on the
ground that to do so would contravene the New Rules which treated trust funds as
principally established for the exclusive purpose of guaranteeing the delivery of benefits
due to the plan holders.
It was of the position that the inclusion of the trust fund in the insolvent's estate and its
being opened to claims by non-plan holders would contravene the purpose for its
establishment.
Judge Laigo viewed the trust fund as Legacy's corporate assets and, for said reason,
included it in the insolvent's estate.
SEC filed this present recourse directly to this Honorable Court in accordance with
Section 5 (1), Article VIII of the 1987 Constitution for the reason that the matters involve
an issue of transcendental importance
SEC contends that the trust fund should redound exclusively to the benefit of the plan
holders, who are the ultimate beneficial owners, the trust fund is held, managed and
administered by the trustee bank to address and answer the claims against the pre-
need company by all its plan holders and/or beneficiaries in issuing the order, Judge
Laigo effectively allowed non-plan holders to reach the trust fund in patent violation of
the New Rules established to protect the pre-need investors.
SEC stressed that the setting-up of the trust funds effectively created a demarcation line
between the claims of plan holders vis-a-vis those of the other creditors of Legacy;
SEC is of the position that Section 52 of the Pre-Need Code should be given retroactive
effect for being procedural in character.
the private respondents... submit that nothing in the New Rules expressly provided that
the trust fund is excluded from the inventory of... corporate assets which is required to
be submitted to the insolvency court... under the provisions of the Insolvency Law, all
claims, including those against the trust funds... should be filed in the liquidation
proceedings. The Assignee contends that the trust fund forms part of Legacy's
corporate assets... insolvency court has jurisdiction over all the claims... against the
insolvent cited Abrera v. College Assurance Plan, Court held that claims arising from
pre-need contracts should not be treated separately from other claims... against a pre-
need company. No law authorized the SEC to interfere in the insolvency proceedings
because its authority under the SRC is only to regulate the sale of pre-need plans and
not to regulate the management of trust funds.

ISSUES: Whether or not the Trust Funds of Legacy form part of its Corporate Assets.
Whether or not respondent Trial Court Judge committed grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the herein assailed Order dated
June 26. Whether or not the claims of plan holders are to be treated differently from the
claims of other creditors of Legacy.
Whether or not Legacy retains ownership over the trust funds assets despite the
execution of trust agreements.
Whether or not the insolvency court, presided by respondent Trial Court Judge, has the
authority to enjoin petitioner SEC from further validating the claims of Legacy's plan
holders and treating them as if they are ordinary creditors of Legacy.
Whether or not the provision of the Pre-need Code regarding liquidation is in the nature
of a procedural law that can be retroactively applied to the case at bar.

DECISION: The overarching consideration in the legislative mandate to establish trust

funds is the protection of the interest of the plan holders in the investment plans.
It is in this context that this Court rules to grant the petition filed by the SEC.
The Trust Fund is for the sole benefit of the plan holders and cannot be used to satisfy
the claims of other creditors of Legacy... the Pre-Need Code clearly provides that the
proceeds of trust funds shall redound solely to the plan holders.
SECTION 30. Trust Fund. To ensure the delivery of the guaranteed benefits and
services provided under a pre-need plan contract, a trust fund per pre-need plan
category shall be established. A portion of the installment payment collected shall be
deposited by the... pre-need company in the trust fund, the amount of which will be as
determined by the actuary based on the viability study of the pre-need plan approved by
the Commission. Assets in the trust fund shall at all times remain for the sole benefit of
the plan holders. No time shall any part of the trust fund be used for or diverted to any
purpose other than for the exclusive benefit of the plan holders. In no case shall the
trust fund assets be used to satisfy claims of other creditors of the pre-need company.
The provision of... any law to the contrary notwithstanding, in case of insolvency of the
pre-need company, the general creditors shall not be entitled to the trust fund.
Legacy's claimed interest in the enforcement of the trust and in the trust properties is
more apparent than real. Legacy is not a beneficiary. A person is considered as a
beneficiary of a trust if there is a manifest intention to give such a person the beneficial
interest over the trust properties. Here, the terms of the trust agreement plainly confer
the status of beneficiary to the plan holders, not to Legacy. This categorical declaration
doubtless indicates that the intention of the trustor is to make the plan holders the
beneficiaries of the trust properties, and not Legacy. Second, considering the fact that a
mandated pre-need trust is one imbued with public interest, the issue on who the
beneficiary is must be determined on the basis of the entire regulatory framework.
Under the New Rules, it is unmistakable that the beneficial interest... over the trust
properties is with the plan holders. Rule 16.3 No withdrawal shall be made from the trust
fund except for paying the benefits such as monetary consideration, the cost of services
rendered or property delivered, trust... fees, bank charges and investment expenses in
the operation of the trust fund, termination values payable to the plan holders, annuities,
contributions of cancelled plans to the fund and taxes on trust funds. Rule 17.1 to
ensure the liquidity of the trust fund to guarantee the delivery of the benefits provided for
under the plan contract and to obtain sufficient capital growth to meet the growing
actuarial reserve liabilities, all investments of the trust fund shall. Be limited to Fixed
Income Instruments, Mutual Funds, Equities, and Real Estate, subject to certain
limitations. Trustee to exercise due diligence for the protection of the plan holders
guided by sound investment principles in the exclusive management and control over
the funds and its right.

2. SECURTIES AND EXCHANGE COMMISSION VS. COLLEGE ASSURANCE PLAN

Dated March 7, 2018

FACTS OF THE CASE: Petitioner College Assurance Plan Philippines, Inc. (CAP) is a
duly registered domestic corporation with the primary purpose of selling pre-need
educational plans. To guarantee the payment of benefits under its educational plans,
CAP set up a Trust Fund contributing therein a certain percentage of the amount
actually collected from each plan holder. The Trust Fund, with the aid of trustee banks,
is invested in assets and securities with yields higher than the projected increase in
tuition fees. With the adoption of the policy of deregulation of private educational
institutions by the Department of Education in 1993 and the economic crisis and peso
devaluation which started in 1997, CAP and its Trust Fund were adversely affected.

In 2000, Republic Act No. 8799 (Securities Regulation Code) was passed. Pursuant
thereto, the Securities and Exchange Commission (SEC) promulgated on August 16,
2001 the New Rules on the Registration and Sale of Pre-Need Plans under Section 16
of the Securities Regulation Code. With the adoption of the Pre-Need Uniform Chart of
Accounts for the accounting and reporting of the operations of the pre-need companies
in the Philippines and the new rules on the valuation of trust funds invested in real
property, CAP incurred a trust fund deficiency of 3.179 billion as of December 31, 2001.
In compliance with the directive of SEC to submit a funding scheme to correct the
deficiency, CAP, among others, proposed to purchase MRT III Bonds and assign the
same to the Trust Fund. Hence, on August 6, 2002, CAP purchased MRT III Bonds with
a present value then of $14 million from Smart and FEMI, and assigned the same to the
Trust Fund. The purchase price was to be paid by CAP in sixty (60) monthly
installments payable over five (5) years. This obligation was secured by a Deed of
Chattel Mortgage over 9,762,982 common shares of Comprehensive Annuity Plans &
Pension Corporation owned by CAP. In 2003, after having paid US$6,536,405.01 of the
total purchase price, CAP was ordered by the SEC Oversight Board to stop paying
SMART/FEMI due to its perceived inadequacy of CAP's funds.

On August 23, 2005, CAP filed a Petition for Rehabilitation. After finding the petition to
be sufficient in form and substance, a Stay Order was issued by the court effectively
staying and suspending the enforcement of all claims against CAP. Mr. Mamerto
Marcelo, Jr. was appointed as Interim Rehabilitation Receiver.

In its Order dated December 16, 2005, the trial court gave due course to CAP's Petition
for Rehabilitation and directed the Receiver to submit a report on the rehabilitation plan.
The 2006 Revised Business Plan was approved by the court on November 8, 2006.
Under the Rehabilitation Plan, CAP intended to sell in 2009 the MRT Bonds at 60% of
their face value of US$ 81.2 million.

While negotiations to effect the sale were ongoing, Smart demanded that CAP settle its
outstanding balance of US$ 10,680,045.25 as February 28, 2009 and warned that,
should CAP insist on holding on to the MRT III Bonds instead of selling them, Smart
would demand the immediate return of the MRT III Bonds as full and final settlement of
CAP's outstanding obligation. The Receiver denied that CAP has agreed to pay its
liabilities to FEMI and Smart from the proceeds of the prospective sale of the MRT III
Bonds. On April 13, 2009, the Receiver filed a Manifestation seeking the public
respondent's approval of the sale of MRT III Bonds, with a face value of US$
81,2000,000.00, "at the best possible price" to the Development Bank of the Philippines
(DBP) and the Land Bank of the Philippines.

In the Order of April 15, 2009, the public respondent approved the ale of MRT III Bonds
"at the best possible price." Two days later, the Receiver received a letter from FEMI
that Smart intended to annotate a notice of unpaid seller's lien on the MRT III Bonds
with Deutsche Bank, the custodian bank. However, Smart opted not to do so and would
instead assist in finding a buyer provided that the seller's lien of US$ 9.5 million will be
settled through the arrangement it presented, subject to the approval of the
rehabilitation court. The Receiver then filed a Manifestation with Motion dated April 22,
2009 where he sought the public respondent's approval of CAP's payment of its
obligations to Smart and FEMI, partly from the proceeds of the sale of the MRT III
Bonds. The MRT III Bonds were in fact sold at US$ 21,501,760 to DBP and Land Bank.
The Buyers agreed to purchase the MRT III Bonds at a premium of 3.30% made
possible by: (1) Smart's desistance from enforcing its unpaid seller's lien, (2) FEMI's
relinquishing its four (4) board seats with Metro Rail Transit Corporation, (3) swap
arrangement of FEMI shares held by CAP to liquidate $3.5 million of the outstanding
obligation; and (4) substantial discount of $1.2 million from CAP's outstanding liabilities.
The contract of sale was perfected and partly consummated-FEMI gave up its four (4)
board seats in MRTC, the MRT III Bonds were delivered to the buyers, and the buyers
paid $21,501,760 to CAP, which amount was credited to its trust accounts with
Philippine Veterans Bank (PVB). However, CAP's payment to Smart and FEMI
remained to be executed.
Based on the foregoing antecedents, the receiver moved for the payment of the
respondent's obligations to Smart and FEMI. The RTC approved the motion in open
court on April 24, 2009. However, on April 29, 2009, the RTC withdrew the approval and
instead ordered the receiver and the respondent to file their reply to the opposition.
[10]
 After the exchange of pleadings, the RTC issued a joint order dated September 18,
2009 denying the motion to approve payment to Smart as well as the motion to approve
the respondent's additional equity infusion in CAP General Insurance.

The respondent received summons from the High Court of Hong Kong Special
Administrative Region, Court of First Instance, directing it to either satisfy the claim of
Smart and FEMI, or to return the Acknowledgment of Service, stating whether it
intended to contest the proceedings or to make an admission. In view of this, the
respondent filed its motion dated December 21, 2009 in the RTC seeking authorization
to pay the claims of Smart and FEMI and explaining that the institution of the action in
Hong Kong presented a real threat that the buyers would rescind their contact with the
respondent and demand the return of the purchase price of $21,501,760.00.

On January 18, 2010, the RTC issued the assailed order denying the respondent's
motion for payment to Smart and FEMI, and holding that in keeping with the principle of
"equality is equity" in rehabilitation proceedings, the respondent's assets should be held
in trust for the equal benefit of all the creditors, both secured and unsecured, who stood
on equal footing during the rehabilitation.The RTC disposed as follows:

WHEREFORE, premises considered, the motion dated December 21, 2009 for authority
to settle CAP's obligations to Smart Share Investments Ltd. and Fil Estate Management,
Inc. is hereby denied for utter lack of merit. This appeal assails the decision
promulgated on June 14, 2011, whereby the CA nullified the orders issued by the
Regional Trial Court (RTC), Branch 149, in Makati City on April 29, 2009, September 18,
2009 and January 18, 2010 in SP. No. M-6144 entitled In the Matter of Petition for
Corporate Rehabilitation, College Assurance Plan Philippines, Inc., Petitioner, which
states that: WHEREFORE, premises considered, finding grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the public respondent, the
instant petition is GRANTED. The assailed Orders dated April 29, 2009, September 18,
2009 and January 18, 2010 of the Regional Trial Court of Makati City, Branch 149, is
hereby NULLIFIED. Petitioner College Assurance Plan Philippines, Inc., through its
Receiver, is directed to pay its outstanding obligation to Smart Share Investment, Ltd.,
and Fil-Estate Management, Inc. in the amount of $6 million as set aside by the Trustee,
Philippine Veterans Bank.
ISSUE: DID THE CA CORRECTLY RULE THAT THE OBLIGATION TO PAY TO
SMART AND FEMI CONSTITUTED "BENEFITS" OR "COST OF SERVICES
RENDERED OR PROPERTY DELIVERED" OR "ADMINISTRATIVE EXPENSE"
THAT COULD BE VALIDLY WITHDRAWN FROM THE TRUST FUND PURSUANT
TO SECTION 16.4, RULE 16 OF THE NEW RULES AND SECTION 30 OF R.A. NO.
9829?

DECISION: The appeal is meritorious. The obligation to pay Smart and FEMI did not
constitute the benefits or "cost of services rendered or property delivered under Section
16.4, Rule 16 of the New Rules and Section 30 of R.A. No. 9829. The petitioners submit
that the trust fund should be treated separately and distinctly from the corporate assets
and obligations of the respondent. On the other hand, the respondent insists that the CA
correctly ruled that the payment to Smart and FEMI constituted a valid withdrawal from
the trust fund because it was upon a benefit in the nature of cost for services rendered
or property delivered. We uphold the submission of the petitioners. In respect of pre-
need companies, the trust fund is set up from the plan holders' payments to pay for the
cost of benefits and services, termination values payable to the plan holders and other
costs necessary to ensure the delivery of benefits or services to the plan holders as
provided for in the contracts. The trust fund is to be treated as separate and distinct
from the paid-up capital of the company, and is established with a trustee under a trust
agreement approved by the Securities and Exchange Commission to pay the benefits
as provided in the pre-need plans. Section 16.4, Rule 16 of the New Rules, which
governs the utilization of the trust fund, states as follows:

16.4. No withdrawal shall be made from the Trust Fund except for paying
the Benefits such as the monetary consideration, the cost of services rendered or
property delivered, trust fees, bank charges and investment expenses in the operation
of the Trust Fund, termination values payable to the Plan holders, annuities,
contributions of cancelled plans to the fund and taxes on Trust Funds. Furthermore,
only reasonable withdrawals for minor repairs and costs of ordinary maintenance of
trust fund assets shall be allowed.

The term "benefits" used in Section 16.4 is defined as "the money or services
which the Pre-Need Company undertakes to deliver in the future to the plan holder or
his beneficiary."[37] Accordingly, benefits refer to the payments made to the plan holders
as stipulated in their pre-need plans. Worthy of emphasis herein is that the trust fund is
established "to ensure the delivery of the guaranteed benefits and services provided
under a pre-need plan contract. Hence, benefits can only mean payments or services
rendered to the plan holders by virtue of the pre-need contracts.

Moreover, Section 30 of R.A. No. 9829 expressly stipulates that the trust fund is
to be used at all times for the sole benefit of the plan holders, and cannot ever be
applied to satisfy the claims of the creditors of the company.

Section 30. Trust Fund. - To ensure the delivery of the guaranteed benefits and
services provided under a pre-need plan contract, a trust fund per pre-need plan
category shall be established. A portion of the installment payment collected shall be
deposited by the pre-need company in the trust fund, the amount of which will be as
determined by the actuary based on the viability study of the pre-need plan approved by
the Commission. Assets in the trust fund shall at all times remain for the sole benefit of
the plan holders. At no time shall any part of the trust fund be used for or diverted to any
purpose other than for the exclusive benefit of the plan holders. In no case shall the
trust fund assets be used to satisfy claims of other creditors of the pre-need company.
The provision of any law to the contrary notwithstanding, in case of insolvency of the
pre-need company, the general creditors shall not be entitled to the trust fund.

Except for the payment of the cost of benefits or services, the termination values
payable to the plan holders, the insurance premium payments for insurance-funded
benefits of memorial life plans and other costs necessary to ensure the delivery of
benefits or services to plan holders, no withdrawal shall be made from the trust fund
unless approved by the Commission. The benefits received by the plan holders shall be
exempt from all taxes and the trust fund shall not be held liable for attachment,
garnishment, levy or seizure by or under any legal or equitable processes except to pay
for the debt of the plan holder to the benefit plan or that arising from criminal liability
imposed in a criminal action. The trust fund shall at all times be sufficient to cover the
required pre-need reserve.
Section 30 prohibits the utilization of the trust fund for purposes other than for the
benefit of the plan holders. The allowed withdrawals (specifically, the cost of benefits or
services, the termination values payable to the plan holders, the insurance premium
payments for insurance-funded benefits of memorial life plans and other costs) refer to
payments that the pre-need company had undertaken to be made based on the
contracts. Accordingly, the CA gravely erred in authorizing the payment out of the trust
fund of the obligations due to Smart and FEMI. Even assuming that the obligations were
incurred by the respondent in order to infuse sufficient money in the trust fund to correct
its deficiencies, such obligations should be paid for by its assets, not by the trust fund.
Indeed, Section 30 definitely provided that the trust fund could not be used to satisfy the
claims of the respondent's creditors.