MARINE INSURANCE the fertilizer while inside the hatches, when the vessel took
on water because of the bad weather experienced at sea.
TRANSIMEX CO v. MAFRE ASIAN INSURANCE CORP
G.R. No. 190271, September 14, 2016
SC FIRST DIVISION
Insured: Fertiphil
Insurer-Respondent: Mafre Asian Insurance
Carrier-Petitioner: Transimex Co
FACTS
 M/V Meryem Ana received a shipment consisting of 21,857 metric
tons of Prilled Urea Fertilizer from Odessa, Ukraine. The shipment
was covered by two separate bills of lading and consigned to
Fertiphil for delivery to two ports - one in San Fernando, La Union;
and the other in Albay.
 Fertiphil insured the cargo against all risks under Marine Risk Note
Nos. MN-MAR-HO-0001341 and MN-MAR-HO-0001347 issued by
respondent Mafre
 M/V Meryem Ana arrived and The fertilizer unloaded at Albay
appeared to have a gross weight of 7,700 metric tons.The
present controversy involves only this second delivery.
 As soon as the vessel docked at the Tabaco port, the fertilizer was
bagged and stored inside a warehouse by employees of the
consignee. When the cargo was subsequently weighed, it was
discovered that only 7,350.35 metric tons of fertilizer had been
delivered.
 Because of the alleged shortage of 349.65 metric tons, Fertiphil filed
a claim with respondent for P1,617,527.37, which was found
compensable.
 After paying the claim of Fertiphil, respondent demanded
reimbursement from petitioner on the basis of the right of
subrogation.
 The claim was denied, prompting respondent to file a Complaint with
the RTC for recovery of sum of money.
o In support of its claim, respondent presented a Report of
Survey and a Certification from David Cargo Survey
Services to prove the shortage. In addition, respondent
submitted an Adjustment Report prepared by Adjustment
Standards Corporation (ASC) to establish the outturn
quantity and condition of the fertilizer discharged from the
vessel at the Tabaco port. In the report, the adjuster also
stated that the shortage was attributable to the melting of
o Petitioner, on the other hand, denied that there was loss or
damage to the cargo.It submitted survey certificates and
presented the testimony of a marine surveyor to prove that
there was, in fact, an excess of 3.340 metric tons of fertilizer
delivered to the consignee. Petitioner also alleged that
defendants had exercised extraordinary diligence in the
transport and handling of the cargo.
 RTC: ruled in favor of respondent and ordered petitioner to pay the
claim of P1,617,527.37
o there was indeed a shortage in the cargo delivered, for
which the common carrier must be held responsible under
Article 1734 of the Civil Code. CA:
 CA: The CA affirmed the ruling of the RTC and denied petitioner's
appeal.
o The CA also rejected the assertion that petitioner was not a
common carrier.
 Because the latter offered services to the public
for the transport of goods in exchange for
compensation, it was considered a common
carrier in accordance with Article 1732 of the Civil
Code.
 The CA further noted that petitioner had already
admitted this fact in the Answerand even raised
the defenses usually invoked by common carriers
during trial and on appeal, i.e., the exercise of
extraordinary care and diligence, and
fortuitous event.
o Defendants-appellants claim that the loss was due to a
fortuitous event that during its voyage, the vessel
encountered bad weather.
 But to excuse a common carrier fully of any
liability, Article 1739 of the Civil Code requires that
the fortuitous event must have been the proximate
and only cause of the loss. Moreover, it should
have exercised due diligence to prevent or
minimize the loss before, during and after the
occurrence of the fortuitous event.
 In the present case, defendants-appellants did not
present proof that the "bad weather" they
encountered was a "storm" as contemplated
by Article 1734(1). Article 1739 of the Civil Code,
defendants-appellants failed to show that such
 natural disaster or calamity was the proximate and
only cause of the loss. T
ISSUE1: Whether the transaction is governed by the provisions of the Civil
Code on common carriers or by the provisions of COGSA
HELD: This Court upholds the ruling of the CA with respect to the applicable
law. As expressly provided in Article 1753 of the Civil Code, "[t]he law of
the country to which the goods are to be transported shall govern the
liability of the common carrier for their loss, destruction or
deterioration." Since the cargo in this case was transported from Odessa,
Ukraine, to Tabaco, Albay, the liability of petitioner for the alleged shortage
must be determined in accordance with the provisions of the Civil Code on
common carriers.
ISSUE 2: Whether petitioner is liable for the loss or damage sustained by the
cargo because of bad weather
HELD: YES.
 In its Petition, Transimex summarizes the testimony of one witness
for respondent supposedly proving that the shortage in the shipment
was caused by inclement weather encountered by the vessel at sea.
Petitioner claims that this testimony proves that damage to the
cargo was the result of the melting of the fertilizer after seawater
entered Hatch No. 1 of the vessel as a result of the bad weather
conditions at sea
 The question before this Court therefore comes down to whether
there is sufficient proof that the loss or damage incurred by the cargo
was caused by a "storm" or a "peril of the sea."
 We rule in the negative. As will be discussed, petitioner failed to
prove the existence of a storm or a peril of the sea within the
context of Article 1734(1) of the Civil Code or Section 4(2)(c) of
COGSA. Furthermore, there was no sufficient proof that the
damage to the shipment was solely and proximately caused by
bad weather.
 not all instances of bad weather may be categorized as "storms" or
"perils of the sea" within the meaning of the provisions of the Civil
Code and COGSA on common carriers. To be considered absolutory
causes under either statute, bad weather conditions must reach a
certain threshold of severity.
o In Central Shipping Co. Inc. v. Insurance Company of North
America: According to PAGASA, a storm has a wind force
of 48 to 55 knots, equivalent to 55 to 63 miles per hour
or 10 to 11 in the Beaufort Scale.
o in US Courts, they generally limit the application of the
phrase to weather that is "so unusual, unexpected and
catastrophic as to be beyond reasonable expectation.
Accordingly, strong winds and waves are not automatically
deemed perils of the sea, if these conditions are not unusual
for that particular sea area at that specific time, or if they
could have been reasonably anticipated or foreseen
 In this case, the documentary and testimonial evidence cited by
petitioner indicate that M/V Meryem Anafaced winds of only up to
40 knots while at sea. This wind force clearly fell short of the 48 to
55 knots required for "storms" under Article 1734(1) of the Civil Code
based on the threshold established by PAGASA.
 Petitioner also failed to prove that the inclement weather
encountered by the vessel was unusual, unexpected, or
catastrophic. In particular, the strong winds and waves, which
allegedly assaulted the ship, were not shown to be worse than what
should have been expected in that particular location during that time
of the year.
 As a side note, we observe that there are no definite statutory
standards for determining the existence of a "storm" or "peril of the
sea" that would exempt a common carrier from liability. Hence, in
marine insurance cases, courts are constrained to rely upon their
own understanding of these terms of art, or upon imprecise accounts
of the speed of the winds encountered and the strength of the waves
experienced by a vessel. To obviate uncertainty, it may be time for
Congress to lay down specific rules to distinguish "storms" and other
"perils of the sea" from the ordinary action of the wind and waves.
While uniform measures of severity may prove difficult to establish,
the legislature may consider providing more detailed standards to be
used by the judiciary in resolving maritime cases. These may include
wind velocity, violence of the seas, the height of the waves, or even
the expected weather conditions in the area involved at the time of
the incident.
 Even assuming that the inclement weather encountered by the
vessel amounted to a "storm" under Article 1734(1) of the Civil Code,
there are two other reasons why this Court cannot absolve petitioner
from liability for loss or damage to the cargo under the Civil Code.
o First, there is no proof that the bad weather
encountered by M/V Meryem Ana was the proximate
and only cause of damage to the shipment.
o Second, petitioner failed to establish that it had
exercised the diligence required from common carriers
to prevent loss or damage to the cargo.

FIRE INSURANCE
Issue: WON there was material concealment and/or violation of the warranty
on the part of insured to exempt insurer from liability
GENERAL INSURANCE AND SURETY CORPORATION vs. NG HUA
G.R. No. L-14373 January 30, 1960
Held: YES
SC EN BANC
FACTS
 the defendant General Insurance and Surety Corporation issued
its insurance Policy No. 471, insuring against fire, for one year, the
stock in trade of the Central Pomade Factory owned by Ng Hua, the
court insured.
 The next day, the Pomade factory building burned, resulting in
destruction by fire of the insured properties. Ng Hua claimed
indemnity from the insurer. The policy covered damages up to
P10,000.00; but after some negotiations he reduced the claim of
P5,000.00.
 Nevertheless, the defendant insurer refused to pay for various
reasons, namely (a) action was not filed in time; (b) violation of
warranty; (c) submission of fraudulent claim; and (f) failure to pay
the premium.
 The aforesaid Policy No. 471 contains this stipulation on the back
thereof;.
o 3. The insured shall give notice to the company of any
insurance or insurances already affected, or which may
subsequently be effected, covering any of the property
hereby insured, and unless such notice be given and the
particulars of such insurance or insurances be stated in or
endorsed on this Policy by or on behalf of the Company
before the occurrence of any loss or damage, all benefits
under the policy shall be forfeited. (Emphasis ours.)
 The face of the policy bore the annotation: "Co-Insurance Declared
— NIL"
 It is undenied that Ng Hua had obtained fire insurance on the
same goods, for the same period of time, in the amount of
P20,000.00 from General Indemnity Co.
 RTC: required to pay insurer
 CA: affirmed judgment
o Court of Appeals referring to the annotation and overruling
the defense, held that there was no violation of the above
clause, inasmuch as "co-insurance exists when a condition
of the policy requires the insured to bear ratable proportion
of the loss when the value of the insured property exceeds
the face value of the policy," hence there is no co-insurance
here.
 considering the terms of the policy which required the insured
to declare other insurances, the statement in question must be
deemed to be a statement (warranty) binding on both insurer
and insured, that there were no other insurance on the property.
 Remember it runs "Co-Insurance declared"; emphasis on the last
word. If "Co-Insurance" means that the Court of Appeals says, the
annotation served no purpose. It would even be contrary to the
policy itself, which in its clause No. 17 made the insured a co-insurer
for the excess of the value of the property over the amount of the
policy.
 The annotation then, must be deemed to be a warranty that the
property was not insured by any other policy. Violation thereof
entitles the insurer to rescind. (Sec. 69. Insurance Act) The
materiality of non-disclosure of other insurance policies is not open
to doubt.
 Furthermore, even if the annotations were overlooked, the defendant
insurer would still be free from liability because there is no question
that the policy issued by General Indemnity had not been stated
in nor endorsed on Policy No. 471 of defendant. And as
stipulated in the above-quoted provisions of such policy "all
benefit under this policy shall be forfeited."
 To avoid the dissastrous effect of the misrepresentation or
concealment of the other insurance policy, Ng Hua alleges "actual
knowledge" on the part of General insurance of the fact that he had
taken out additional insurance with General Indemnity.
o He does not say when such knowledge was acquired or
imparted.
o If General Insurance know before issuing its policy
or before the fire, such knowledge might overcome the
insurer's defense.
o However, the Court of Appeals found no evidence of such
knowledge. We have read the pages of the stenographic
notes cited by Ng Hua and we all gather is evidence of the
existence of the Insurance General Indemnity Company. As
to knowledge of General Insurance before issuance of its
policy or the fire, there was none.

PHILIPPINE HOME ASSURANCE CORPORATION V. CA
GR No. 106999, June 20, 1996
Facts:
 Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern
Explorer in Kobe, Japan, the following shipment for carriage to Manila
and Cebu, freight pre-paid and in good order and condition, viz: (a) two
(2) boxes internal combustion engine parts, consigned to William Lines,
Inc. under Bill of Lading No. 042283; (b) ten (10) metric tons (334 bags)
ammonium chloride, consigned to Orca's Company under Bill of Lading
No. KCE-12; (c) two hundred (200) bags Glue 300, consigned to Pan
Oriental Match Company under Bill of Lading No. KCE-8; and (d)
garments, consigned to Ding Velayo under Bills of Lading Nos. KMA-73
and KMA-74.
 While the vessel was off Okinawa, Japan, a small flame was detected
on the acetylene cylinder located in the accommodation area near the
engine room on the main deck level. As the crew was trying to extinguish
the re, the acetylene cylinder suddenly exploded sending a ash of flame
throughout the accommodation area, thus causing death and severe
injuries to the crew and instantly setting re to the whole superstructure
of the vessel. The incident forced the master and the crew to abandon
the ship.
 Thereafter, SS Eastern Explorer was found to be a constructive total loss
and its voyage was declared abandoned.
 Several hours later, a tugboat under the control of Fukuda Salvage Co.
arrived near the vessel and commenced to tow the vessel for the port of
Naha, Japan.
 Fire fighting operations were again conducted at the said port. After the
fire was extinguished, the cargoes which were saved were loaded to
another vessel for delivery to their original ports of destination. ESLI
charged the consignees several amounts corresponding to additional
freight and salvage charges
 The charges were all paid Philippine Home Assurance Corporation
(PHAC) under protest for and in behalf of the consignees.
 PHAC, as subrogee of the consignees, thereafter filed a complaint
before the RTC, against ESLI to recover the sum paid under protest on
the ground that the same were actually damages directly brought about
by the fault, negligence, illegal act and/or breach of contract of ESLI.
 In its answer, ESLI contended that it exercised the diligence required by
law in the handling, custody and carriage of the shipment; that the re was
caused by an unforeseen event; that the additional freight charges are
due and demandable pursuant to the Bill of Lading; and that salvage
charges are properly collectible under Act No. 2616, known as the
Salvage Law.
 TC dismissed and ruled in favor of ESLI, it also found that the additional
freight charged were also demandable, furthermore, the terms and
conditions of the Bill of Lading authorize the imposition of additional
freight charges in case of forced interruption or abandonment of the
voyage. Stating also that the fire was a fortuitous event and all necessary
checks were made prior to the explosion that caused the fire
 CA affirmed
Issues: WON CA was right in affirming the RTC
Held:
 It is worthy to note at the outset that the goods subject of the present
controversy were neither lost nor damaged in transit by the re that razed
the carrier. In fact, the said goods were all delivered to the consignees,
even if the transshipment took longer than necessary.
 What is at issue therefore is not whether or not the carrier is liable for the
loss, damage, or deterioration of the goods transported by them but who,
among the carrier, consignee or insurer of the goods, is liable for the
additional charges or expenses incurred by the owner of the ship in the
salvage operations and in the transshipment of the goods via a different
carrier.
 In the case at bar, it is not disputed that a small flame was detected on
the acetylene cylinder and that by reason thereof, the same exploded
despite efforts to extinguish the re. Neither is there any doubt that the
acetylene cylinder, obviously fully loaded, was stored in the
accommodation area near the engine room and not in a storage area
considerably far, and in a safe distance, from the engine room.
Moreover, there was no showing, and none was alleged by the parties,
that the re was caused by a natural disaster or calamity not attributable
to human agency. On the contrary, there is strong evidence
indicating that the acetylene cylinder caught fire because of the
fault and negligence of respondent ESLI, its captain and its crew.
 First, the acetylene cylinder which was fully loaded should not have been
stored in the accommodation area near the engine room where the heat
generated therefrom could cause the acetylene cylinder to explode by
reason of spontaneous combustion. Respondent ESLI should have
easily foreseen that the acetylene cylinder, containing highly in
flammable material, was in a real danger of exploding because it was
stored in close proximity to the engine room.
 Second, respondent ESLI should have known that by storing the
acetylene cylinder in the accommodation area supposed to be reserved
for passengers, it unnecessarily exposed its passengers to grave danger
and injury. Curious passengers, ignorant of the danger the tank might
 have on humans and property, could have handled the same or could
have lighted and smoked cigarettes while repairing in the
accommodation area.
 Third, the fact that the acetylene cylinder was checked, tested and
examined and subsequently certified as having complied with the safety
measures and standards by qualified experts before it was loaded in the
vessel only shows to a great extent that negligence was present in the
handling of the acetylene cylinder after it was loaded and while it was on
board the ship. Indeed, had the respondent and its agents not been
negligent in storing the acetylene cylinder near the engine room, then
the same would not have leaked and exploded during the voyage.
 ELSI was ordered to pay back PHAC
LIFE INSURANCE
BPI V. POSADAS
GR No. 34583, Oct. 22, 1931
FACTS:
 The present complaint seeks to recover from the defendant Juan
Posadas, Jr., Collector of Internal Revenue, the amount of P1,209 paid
by the plaintiff under protest, in its capacity of administrator of the estate
of the late Adolphe Oscar Schuetze, as inheritance tax upon the sum of
P20,150, which is the amount of an insurance policy on the deceased's
life, wherein his own estate was named the beneficiary
 That the plaintiff, Rosario Gelano Vda. de Schuetze, widow of the late
Adolphe Oscar Schuetze, is of legal age, a native of Manila, Philippine
Islands, and is and was at all times hereinafter mentioned a resident of
Germany, and at the time of the death of her husband, the late Adolphe
Oscar Schuetze, she was actually residing and living in Germany;
 on or about August 23, 1928, the herein plaintiff before notary public
Salvador Zaragoza, drew a general power appointing the above-
mentioned Bank of the Philippine Islands as her attorney-in- fact, and
among the powers conferred to said attorney-in-fact was the power to
represent her in all legal actions instituted by or against her;
 Adolphe Oscar Schuetze died. When he was in Germany, however,
executed a will, in accordance with its laws, wherein plaintiff was named
his universal heir;
 Bpi was appointed as administrator of the estate, which consisted of real
property and personal property consisting of shares of stock in nineteen
(19) domestic corporations
 Bank of the Philippine Islands, as administrator of the estate of the
deceased rendered its final account on June 19, 1929, and that said
estate was closed on July 16, 1929
 among the personal property of the deceased was found life- insurance
policy No. 194538 issued at Manila, Philippine Islands, on January 14,
1913, for the sum of $10,000 by the Sun Life Assurance Company of
Canada, Manila branch
 That in the insurance policy the estate of the said Adolphe Oscar
Schuetze was named the beneficiary without any qualification
whatsoever;
 for five consecutive years, the deceased Adolphe Oscar Schuetze paid
the premiums of said policy to the Sun Life Assurance Company of
Canada, Manila branch;
 That on or about the year 1918, the Sun Life Assurance Company of
Canada, Manila branch, transferred said policy to the Sun Life
Assurance Company of Canada, London branch
 That due to said transfer the said Adolphe Oscar Schuetze from 1918 to
the time of his death paid the premiums of said policy to the Sun Life
Assurance Company of Canada, London Branch;
 That the sole and only heir of the deceased Adolphe Oscar Schuetze is
his widow, the plaintiff herein;
 That at the time of the death of the deceased and at all times thereafter
including the date when the said insurance policy was paid, the
insurance policy was in the hands of the Head O ce of the Sun Life
Assurance Company of Canada, at Montreal, Canada
 That on July 13, 1928, the Bank of the Philippine Islands as administrator
of the decedent's estate received from the Sun Life Assurance Company
of Canada, Manila branch, the sum of P20,150 representing the
proceeds of the insurance policy, which BPI delivered to plaintiff
 That the herein defendant on or about July 5, 1929, imposed an
inheritance tax upon the transmission of the proceeds of the policy in
question in the sum of P20,150 from the estate of the late Adolphe Oscar
Schuetze to the sole heir of the deceased, or the plaintiff herein, which
inheritance tax amounted to the sum of P1,209;
Issues: (1) WON the wife was the proper beneficiary /// (2) WON an
inheritance tax may be imposed on the ½ payable to the estate?
Held:
1. LI policy for $10,000 issued on Jan. 14, 1913. Marriage of Schuetze and
Gelano, Jan. 16, 1914. With the exception of the premium for the rst year
covering the period from January 14, 1913 to January 14, 1914, all the money
used for paying the premiums is conjugal property inasmuch as it does not
appear to have exclusively belonged to him or to his wife. As the sum of
 P20,150 here in controversy is a product of such premium it must also be
deemed community property, because it was acquired for a valuable
consideration, during said Adolphe Oscar Schuetze's marriage with Rosario
Gelano at the expense of the common fund, except for the small part
corresponding to the first premium paid with the deceased's own money.
 Manresa on Life Insurance:
"The amount of the policy represents the premium to be paid, and the right to
it arises the moment the contract is perfected, for at that moment the power of
disposing of it may be exercised, and if death occurs payment may be
demanded. It is therefore something acquired for a valuable consideration
during the marriage, though the period of its fulfillment, depend upon the death
of one of the spouses, which terminates the partnership. So considered, the
question may be said to be decided by articles 1396 and 1401: if the premiums
are paid with the exclusive property of husband or wife, the policy belongs to
the owner; if with conjugal property, or if the money cannot be proved as
coming from one or the other of the spouses, the policy is community
property."
 Supreme Court of Texas, United States, in the case of Martin vs. Moran:
"COMMUNITY PROPERTY — LIFE INSURANCE POLICY. — A husband
took out an endowment life insurance policy on his life, payable 'as directed
by will.' He paid the premiums thereon out of community funds, and by his will
made the proceeds of the policy payable to his own estate. Held, that the
proceeds were community estate, one-half of which belonged to the wife
 In re Stan's Estate, Myr. Prob (Cal.) 5, the Supreme Court of California laid
down the following doctrine:
"A testator, after marriage, took out an insurance policy, on which he paid the
premiums from his salary. Held that the insurance money was community
property, to one-half of which, the wife was entitled as survivor."
 I n In re Webb's Estate, Myr. Prob. (Cal.), 93, the same court laid down the
following doctrine:
"A decedant paid the first third of the amount of the premiums on his life-
insurance policy out of his earnings before marriage, and the remainder from
his earnings received after marriage. Held, that one- third of the policy
belonged to his separate estate, and the remainder to the community
property."
 Thus both according to our Civil Code and to the ruling of those North
American States where the Spanish Civil Code once governed, the proceeds
of a life-insurance policy whereon the premiums were paid with conjugal
money, belong to the conjugal partnership.
 The estate of a deceased person cannot be placed on the same footing as an
individual heir. The proceeds of a life-insurance policy payable to the
estate of the insured passed to the executor or administrator of such estate,
and forms part of its; whereas the proceeds of a life-insurance policy
payable to an heir of the insured as beneficiary belongs exclusively to said
heir and does not form part of the deceased's estate subject to administration.
 In a conjugal partnership the husband is the manager, empowered to alienate
the partnership property without the wife's consent (art. 1413, Civil Code), a
third person, therefore, named beneficiary in a life-insurance policy becomes
the absolute owner of its proceeds upon the death of the insured even if the
premiums should have been paid with money belonging to the community
property.
 When a married man has his life insured and names his own estate after
death, beneficiary, he makes no alienation of the proceeds of conjugal funds
to a third person, but appropriates them himself, adding them to the assets of
his estate, in contravention of the provisions of article 1401, paragraph 1, of
the Civil Code cited above, which provides that "To the conjugal partnership
belongs: (1) Property acquired for a valuable consideration during the
marriage at the expense of the common fund, whether the acquisition is made
for the partnership or for one of the spouses only." Furthermore, such
appropriation is a fraud practised upon the wife, which cannot be
allowed to prejudice her, according to article 1413, paragraph 2, of said
Code. Although the husband is the manager of the conjugal partnership,
he cannot of his own free will convert the partnership property into his
own exclusive property.
 As all the premiums on the life-insurance policy taken out by the late
Adolphe Oscar Schuetze, were paid out of the conjugal funds, with the
exception of the first, the proceeds of the policy, excluding the
proportional part corresponding to the first premium, constitute
community property, notwithstanding the fact that the policy was made
payable to the deceased's estate, so that one-half of said proceeds
belongs to the estate, and the other half to the deceased's widow, the
plaintiff-appellant Rosario Gelano Vda. de Schuetze.
2. If the proceeds of the life-insurance policy taken out by the late Adolphe
Oscar Schuetze and made payable to his estate, were delivered to the Bank
of the Philippine Islands for administration and distribution, they were not in
transit but were more or less permanently located in the Philippine Islands,
according to the foregoing rules. If this be so, half of the proceeds which is
community property, belongs to the estate of the deceased and is subject to
the inheritance tax, in accordance with the legal provision quoted above,
irrespective of whether or not the late Adolphe Oscar Schuetze was domiciled
in the Philippine Islands at the time of his death.
 In sum:
1. That the proceeds of a life-insurance policy payable to the insured's
estate, on which the premiums were paid by the conjugal partnership,
 constitute community property, and belong one-half to the husband and
the other half to the wife, exclusively;
2. that if the premiums were paid partly with paraphernal and partly
conjugal funds, the proceeds are likewise in like proportion paraphernal
in part and conjugal in part; and
3. that the proceeds of a life- insurance policy payable to the insured's
estate as the beneficiary, if delivered to the testamentary administrator
of the former as part of the assets of said estate under probate
administration, are subject to the inheritance tax according to the law on
the matter, if they belong to the assured exclusively, and it is immaterial
that the insured was domiciled in these Islands or outside.
 Ordered the return of the inheritance tax
THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T.
EBRADO and PASCUALA VDA. DE EBRADO
G.R. No. L-44059 October 28, 1977
FACTS:
 Buenaventura Cristor Ebrado was issued by The Life Assurance Co.,
Ltd., a policy for P5, 882.00 with a rider for Accidental Death.
 He designated Carponia T. Ebrado as the revocable beneficiary in
his policy. He referred to her as his wife.
 Cristor was killed when he was hit by a failing branch of a tree. Insular
Life was made liable to pay the coverage in the total amount of P11,
745.73, representing the face value of the policy in the amount of P5,
882.00 plus the additional benefits for accidental death.
 Carponia T. Ebrado filed with the insurer a claim for the proceeds of
the Policy as the designated beneficiary therein, although she admits
that she and the insured Buenaventura C. Ebrado were merely living
as husband and wife without the benefit of marriage.
 Pascuala Vda. De Ebrado also filed her claim as the widow of the
deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia T. Ebrado.
 In doubt as to whom the insurance proceeds shall be paid, the
insurer, The Insular Life Assurance Co., Ltd. commenced an action
for Interpleader before the Court of First Instance of Rizal.
 The trial court rendered judgment declaring among others, Carponia
T. Ebrado disqualified from becoming beneficiary of the insured
Buenaventura Cristor Ebrado and directing the payment of the
insurance proceeds to the estate of the deceased insured.
RULING OF THE TRIAL COURT: Under Art. 739 of the Civil Code a criminal
conviction for adultery or concubinage is not essential in order to establish the
disqualification mentioned therein. Neither is it also necessary that a finding
of such guilt or commission of those acts be made in a separate independent
action brought for the purpose. The guilt of the donee (beneficiary) may be
proved by preponderance of evidence in the same proceeding (the action
brought to declare the nullity of the donation).
It is, however, essential that such adultery or concubinage exists at the time
defendant Carponia T. Ebrado was made beneficiary in the policy in question
for the disqualification and incapacity to exist and that it is only necessary that
such fact be established by preponderance of evidence in the trial.
ISSUE: WON Carponia Ebrado is disqualified as beneficiary.
HELD: YES. Common-law spouses are, definitely, barred from receiving
donations from each other. Article 739 of the new Civil Code provides: The
following donations shall be void: 1. those made between persons who were
guilty of adultery or concubinage at the time of donation; xxx. In essence, a
life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration:
liberality. A beneficiary is like a donee, because from the premiums of the
policy which the insured pays out of liberality, the beneficiary will receive the
proceeds or profits of said insurance. As a consequence, the proscription in
Article 739 of the new Civil Code should equally operate in life insurance
contracts.
The Supreme Court stated that they do not think that a conviction for adultery
or concubinage is exacted before the disabilities mentioned in Article 739 may
effectuate. More specifically, with record to the disability on "persons who
were guilty of adultery or concubinage at the time of the donation," Article 739
itself provides: In the case referred to in No. 1, the action for declaration of
nullity may be brought by the spouse of the donor or donee; and the guilty of
the donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the
offense is a condition precedent. In fact, it cannot even be from the
aforequoted provision that a prosecution is needed. On the contrary, the law
plainly states that the guilt of the party may be proved "in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence
preponderates upon the guilt of the consort for the offense indicated. The
quantum of proof in criminal cases is not demanded.

CASUALTY INSURANCE AND COMPULSORY THIRD
PARTY LIABILITY INSURANCE
GOVERNMENT SERVICE INSURANCE SYSTEM VS. JUM ANGEL
G.R. No. 166863 July 20, 2011
FACTS:
 The late Sgt. Angel started his military training on 1 July 1974. On 7
October 1977, he was admitted into active service. He was in active
service until his death on 3 March 1998.
 On 3 March 1998, Sgt. Angel was "fetched/invited" from his post by
a certain Capt. Fabie M. Lamerez of the Intelligence Service Group
of the Philippine Army to shed light on his alleged involvement in a
"pilferage/gunrunning" case being investigated by the Philippine
Army. On or about 2 p.m. of the same day, he was placed inside a
detention cell to await further investigation.
 The following day, the lifeless body of Sgt. Angel was found hanging
inside his cell with an electric cord tied around his neck. According to
the Autopsy Report conducted by the Crime Laboratory of the
Philippine National Police (PNP), the cause of death was asphyxia
by strangulation.
 Respondent, the wife of the late Sgt. Angel, filed a complaint before
the PNP Criminal Investigation Command, alleging that her husband
was murdered by the group of Capt. Lamerez.
 The Provost Marshal found it incredible that Sgt. Angel would take
his life, in view of his impending retirement and being a father to four
(4) children. The Provost Marshal concluded that foul play may have
been committed against Sgt. Angel and recommended that the case
be tried by a court martial.
 The Inspector General, upon referral of the case, held that there is
no evidence suggesting foul play in the death of Sgt. Angel and
maintained that the detention of Sgt. Angel could have triggered a
mental block that caused him to hang himself.
 Judge Advocate General Honorio Capulong in his report
recommended that Sgt. Angel be declared to have died in line of
duty. The Chief of Staff declared the recommended status.
 Respondent, as widow of Sgt. Angel, filed a claim for death benefits
with the Government Service Insurance System (GSIS) under
Presidential Decree No. 626, as amended. On 29 September 1999,
the GSIS denied the respondent’s claim on the ground that Sgt.
Angel’s death did not arise out of and in the course of employment.
A motion for reconsideration was filed but the same was denied by
the GSIS. On appeal before the ECC, the ECC in its Decision dated
13 April 2000 likewise denied the claim for want of merit.
 The ECC ruled on the ground that: Rule III, Section 1(a) of the
Implementing Rules of PD 626, as amended, defines when an injury
or death is considered compensable, to wit: "For the injury and the
resulting disability or death to be compensable, the injury must be
the result of accident arising out of and in the course of employment."
 The CA reversed the ruling of the ECC: He went with Capt. Lamerez
to shed light on the investigation. It was never shown that Sgt.
Angel’s subsequent detention was a punishment for any wrong
doing. A soldier on active duty status is really on a 24 hours a day
official duty status and is subject to military discipline and military law
24 hours a day. He is subject to call and to the orders of his superior
officers at all times, seven (7) days a week, except, of course, when
he is on vacation leave status. Thus, a soldier should be presumed
to be on official duty unless he is shown to have clearly and
unequivocally put aside that status or condition temporarily by going
on an approved vacation leave.
ISSUE: WON respondent should be compensated by the GSIS.
HELD: NO.
For injury to be compensable, the law (PD 626) provides: (a) For the injury
and the resulting disability or death to be comoensable, the injury must be the
result of accident arising out of and in the course of employment.
Pertinent jurisprudence outline that the injury must be the result of an
employment accident satisfying all of the following: 1) the employee must have
been injured at the place where his work requires him to be; 2) the employee
must have been performing his official functions; and 3) if the injury is
sustained elsewhere, the employee must have been executing an order for
the employer.
It is important to note, however, that the requirement that the injury must arise
out of and in the course of employment proceeds from the limiting premise
that the injury must be the result of an accident.
The term accident has been defined in an insurance case. We find the
definition applicable to the present case. Thus:
The words accident and accidental have never acquired any
technical signification in law, and when used in an insurance
contract are to be construed and considered according to the
ordinary understanding and common usage and speech of
 people generally. In substance, the courts are practically
agreed that the words accident and accidental mean that which
happens by chance or fortuitously, without intention or design,
and which is unexpected, unusual, and unforeseen. The
definition that has usually been adopted by the courts is that an
accident is an event that takes place without ones foresight or
expectation an event that proceeds from an unknown cause, or
is an unusual effect of a known case, and therefore not
expected.
An accident is an event which happens without any human
agency or, if happening through human agency, an event
which, under the circumstances, is unusual to and not expected
by the person to whom it happens. It has also been defined as
an injury which happens by reason of some violence or casualty
to the insured without his design, consent, or voluntary
cooperation.
Significantly, an accident excludes that which happens with intention or
design, with ones foresight or expectation or that which under the
circumstances is expected by the person to whom it happens.
The Supreme Court concluded that the death of Sgt. Angel did not result from
an accident which is compensable under Presidential Decree No. 626. It was
on the contrary occasioned by an intentional or designed act which removes
the resulting death from the coverage of the State Insurance Fund. Clearly the
deceased was not performing his official duties at the time of the incident. On
the contrary, he was being investigated regarding his alleged involvement on
a pilferage/gunrunning case when he was found dead in his cell, an activity
which is foreign and unrelated to his employment as a soldier.
The presumption afforded by the Order relied upon by the PNP Board
concerns itself merely with the query as to whether one died in the line of duty,
while P.D. No. 626 addressed the issue of whether a causal relation existed
between a claimant’s ailment and his working conditions.
PARAMOUNT INSURANCE CORPORATION vs. SPOUSES YVES and
MARIA TERESA REMONDEULAZ
G.R. No. 173773, November 28, 2012
FACTS:
 On May 26, 1994, respondents insured with petitioner their 1994 Toyota
Corolla sedan under a comprehensive motor vehicle insurance policy for
one year.
 During the effectivity of said insurance, respondents’ car was unlawfully
taken. Respondents alleged that a certain Ricardo Sales (Sales) took
possession of the subject vehicle to add accessories and improvements
thereon, however, Sales failed to return the subject vehicle within the
agreed three-day period.
 Then, respondents notified petitioner to claim for the reimbursement of
their lost vehicle.
 However, petitioner refused to pay.
 Respondents lodged a complaint for a sum of money against petitioner
before the RTC but was dismissed.
 Not in conformity with the trial court’s Order, respondents filed an appeal
to the Court of Appeals and in its decision the appellate court reversed
and set aside the Order issued by the trial court.
 Petitioner, thereafter, filed a motion for reconsideration against said
Decision, but the same was denied by the appellate court.
 Hence this Petition for Review on Certiorari.
 Petitioner argues that the loss of respondents' vehicle is not a peril
covered by the policy. It maintains that it is not liable for the loss since
the car cannot be classified as stolen as respondents entrusted the
possession thereof to another person.
ISSUE:
Whether or not Paramount Insurance Corporation is liable under the insurance
policy for the loss of respondents’ vehicle.
HELD: Yes!
The Supreme Court DENIED the motion of Paramount Insurance Company
and AFFIRMED the Decision of the Court of Appeals entirely.
Adverse to petitioner's claim, respondents' policy clearly undertook to
indemnify the insured against loss of or damage to the scheduled vehicle
when caused by theft, to wit:
SECTION III — LOSS OR DAMAGE
1) The Company will, subject to the Limits of Liability, indemnify the insured
against loss of or damage to the Scheduled Vehicle and its accessories
and spare parts whilst thereon: —
a) by accidental collision or overturning, or collision or overturning
consequent upon mechanical breakdown or consequent upon wear
and tear;
b) by fire, external explosion, self-ignition or lightning or burglary,
housebreaking or theft;
c) by malicious act;
d) whilst in transit (including the [process] of loading and unloading)
incidental to such transit by road, rail, inland waterway, lift or elevator.

In People v. Bustinera this Court had the occasion to interpret the "theft
clause" of an insurance policy. In this case, the Court explained that when one
takes the motor vehicle of another without the latter’s consent even if the motor
vehicle is later returned, there is theft; there being intent to gain as the use of
the thing unlawfully taken constitutes gain.
Also, in Malayan Insurance Co., Inc. v. Court of Appeals, this Court held that
the taking of a vehicle by another person without the permission or authority
from the owner thereof is sufficient to place it within the ambit of the word theft
as contemplated in the policy, and is therefore, compensable.
Moreover, the case of Santos v. People is worthy of note. Similarly, in Santos,
the owner of a car entrusted his vehicle to therein petitioner Lauro Santos who
owns a repair shop for carburetor repair and repainting. However, when the
owner tried to retrieve her car, she was not able to do so since Santos had
abandoned his shop. In the said case, the crime that was actually committed
was Qualified Theft. However, the Court held that because of the fact that it
was not alleged in the information that the object of the crime was a car, which
is a qualifying circumstance, the Court found that Santos was only guilty of the
crime of Theft and merely considered the qualifying circumstance as an
aggravating circumstance in the imposition of the appropriate penalty. The
Court therein clarified the distinction between the crime of Estafa and Theft,
to wit:
. . . The principal distinction between the two crimes is that in theft the thing is
taken while in estafa the accused receives the property and converts it to his
own use or benefit. However, there may be theft even if the accused has
possession of the property. If he was entrusted only with the material or
physical (natural) or de facto possession of the thing, his misappropriation of
the same constitutes theft, but if he has the juridical possession of the thing,
his conversion of the same constitutes embezzlement or estafa.
In the instant case, Sales did not have juridical possession over the vehicle.
Here, it is apparent that the taking of respondents' vehicle by Sales is without
any consent or authority from the former.
Records would show that respondents entrusted possession of their
vehicle only to the extent that Sales will introduce repairs and
improvements thereon, and not to permanently deprive them of
possession thereof. Since, Theft can also be committed through
misappropriation, the fact that Sales failed to return the subject vehicle to
respondents constitutes Qualified Theft. Hence, since respondents' car is
undeniably covered by a Comprehensive Motor Vehicle Insurance Policy that
allows for recovery in cases of theft, petitioner is liable under the policy for the
loss of respondents'
vehicle under the "theft clause."
WILLIAM TIU (D ROUGH RIDERS) VS. PEDRO A. ARRIESGADO
G.R. No. 138060, September 1, 2004
Callejo, Sr. J.
Facts:
On March 15, 1987, 10 PM, a truck marked “Condor Hollow Blocks and
General Merchandise” with plate # GBP-675 was on its way to Bogo, Cebu
when it’s rear tire exploded. The driver Sergio Pedrano then parked the truck
on the side of the National Highway, left the rear lights on, and instructed his
helper, Jose Mitante, to watch over the truck and place a spare tire on the
road a few meters away from the tire to serve as a warning device as he went
and had the faulty tire vulcanized.
After Pedrano left, at about 4:45 am, D’ Rough Riders passenger bus bearing
plate number PBP-724 carrying the respondent, passed by the same route
and hit the truck. The petitioner was injured in the collision and his wife, Felissa
Arriesgado eventually died after sustaining injuries from the same. Hence, he
filed a complaint against the petitioner for breach of contract of carriage,
damages and for attorney’s fees against the petitioner, the owner of the bus,
William Tiu and his driver, Laspias.
However, the petitioner filed a third-party complaint alleging that the said truck
was parked in a slanted manner and did not have any early warning devices
displayed while it was left by the driver which resulted to the collision and
would therefore make, Benjamin Condor, the owner of the truck liable as well.
Also, the petitioner included that he was covered by Philippine Phoenix Surety
and Insurance (PPSI) at the time of the incident which would therefore make
the same liable for part of the damages that may arise as well.
PPSI, however argued that it already attended to and settled claims of those
who were injured in the collision and that it could not accede to the claim of
Arriesgado because it was beyond that of the terms of the insurance.
The trial court found that the contention of the petitioner was invalid because
the said truck had left it’s tail lights open and that the said road was well lit at
the time of the accident. Hence, it was the fault of the bus, for traveling at a
fast pace, that the collision happened. The Petitioner, Tiu, appealed to the CA
but was denied which prompted him to seek another reconsideration.

Issue/s:
1. W/N The owner and driver of the Truck, Benjamin Condor and Sergio
Pedrano, was liable due to their negligence in the lack of an early warning
device and hence liable to the respondent as well. (Violation of Sec 34 of LTO
Land traffic code.)
2. W/N Petitioner was negligent
3. W/N Petitioner was also liable for exemplary damages, attorney’s fees and
litigation expenses.
4. W/N PPSI is also liable.
Held:
A close study and evaluation of the testimonies and the documentary proofs
submitted by the parties which have direct bearing on the issue of negligence,
this Court as shown by preponderance of evidence that defendant Virgilio Te
Laspias failed to observe extraordinary diligence as a driver of the common
carrier in this case. It is quite hard to accept his version of the incident that he
did not see at a reasonable distance ahead the cargo truck that was parked
when the Rough Rider [Bus] just came out of the bridge which is on an (sic)
[more] elevated position than the place where the cargo truck was parked.
With its headlights fully on, defendant driver of the Rough Rider was in a
vantage position to see the cargo truck ahead which was parked and he could
just easily have avoided hitting and bumping the same by maneuvering to the
left without hitting the said cargo truck. Besides, it is (sic) shown that there
was still much room or space for the Rough Rider to pass at the left lane of
the said national highway even if the cargo truck had occupied the entire right
lane thereof. It is not true that if the Rough Rider would proceed to pass
through the left lane it would fall into a canal considering that there was much
space for it to pass without hitting and bumping the cargo truck at the left lane
of said national highway. The records, further, showed that there was no
incoming vehicle at the opposite lane of the national highway which would
have prevented the Rough Rider from not swerving to its left in order to avoid
hitting and bumping the parked cargo truck. But the evidence showed that the
Rough Rider instead of swerving to the still spacious left lane of the national
highway plowed directly into the parked cargo truck hitting the latter at its rear
portion; and thus, the (sic) causing damages not only to herein plaintiff but to
the cargo truck as well
Also, the doctrine of “Last Clear Chance” is inapplicable to the case because
it could only apply to a controversy between two colliding vehicles. In this case,
it was the passenger and not another driver who was injured and thus, the
said doctrine could not be applied.
However, the respondents Pedrano and Condor was found by the court to be
negligent as well. The court found that there was merit in the contention of the
petitioner that the said truck violated Section 34 or RA 4136, wherein they did
not have proper warning devices in accordance with the said law.
Lastly, with regard to PPSI, the court held that since it admitted to being bound
by a contract with the petitioner, it would be liable as well. However, the said
liability would only fall within the amount settled in the said contract. Obviously,
the insurer could be held liable only up to the extent of what was provided for
by the contract of insurance, in accordance with the CMVLI law. (Php 12,000
per victim)
Hence, the petition was partially granted.
SURETYSHIP
LIM VS. SECURITY BANK CORPORATION
G.R. No. 188539 March 12, 2014
PETITIONER:MARIANO LIM
RESPONDENT: SECURITY BANK CORPORATION
FACTS:
 Petitioner executed a Continuing Suretyship in favor of respondent
to secure "any and all types of credit accommodation that may be
granted by the bank hereinto and hereinafter" in favor of Raul Arroyo
for the amount of ₱2,000,000.00 which is covered by a Credit
Agreement/ Promissory Note. Said promissory note stated that the
interest on the loan shall be 19% per annum, compounded monthly,
for the first 30 days from the date thereof, and if the note is not fully
paid when due, an additional penalty of 2% per month of the total
outstanding principal and interest due and unpaid, shall be imposed.
 The Continuing Suretyship executed by petitioner stipulated that:
The liability of the Surety is solidary and not contingent upon the
pursuit of the Bank of whatever remedies it may have against the
Debtor or the collaterals/liens it may possess. If any of the
Guaranteed Obligations is not paid or performed on due date (at
stated maturity or by acceleration), the Surety shall, without need
for any notice, demand or any other act or deed, immediately
become liable therefor and the Surety shall pay and perform the
same.
  Guaranteed Obligations are defined in the same document as
follows:
a) "Guaranteed Obligations" - the obligations of the Debtor arising
from all credit accommodations extended by the Bank to the Debtor,
including increases, renewals, roll-overs, extensions, restructurings,
amendments or novations thereof, as well as (i) all obligations of the
Debtor presently or hereafter owing to the Bank, as appears in the
accounts, books and records of the Bank, whether direct or indirect,
and (ii) any and all expenses which the Bank may incur in enforcing
any of its rights, powers and remedies under the Credit Instruments
as defined hereinbelow.
 The debtor, Raul Arroyo, defaulted on his loan obligation.
Thereafter, petitioner received a Notice of Final Demand dated
August 2, 2001, informing him that he was liable to pay the loan
obtained by Raul and Edwina Arroyo, including the interests and
penalty fees amounting to ₱7,703,185.54, and demanding payment
thereof.
 For failure of petitioner to comply with said demand, respondent filed
a complaint for collection of sum of money against him and the
Arroyo spouses. Since the Arroyo spouses can no longer be
located, summons was not served on them, hence, only petitioner
actively participated in the case.
 After trial, the Regional Trial Court rendered judgment against
petitioner.
 Petitioner appealed to the CA, but the appellate court affirmed the
RTC judgment with the modification that interest be computed from
August 1, 1997; the penalty should start only from August 28, 1997;
the award of attorney's fees is set at 10% of the total amount due;
and the award for litigation expenses increased to ₱92,321.10.9
 Petitioner's motion for reconsideration of the CA Decision was
denied. Petitioner then elevated the matter to this Court via a petition
for review on certiorari
ISSUE: WON petitioner may validly be held liable for the principal debtor's
loan obtained six months after the execution of the Continuing Suretyship.
HELD:
The surety's obligation is not an original and direct one for the
performance of his own act, but merely accessory or collateral to the
obligation contracted by the principal. Nevertheless, although the contract
of a surety is in essence secondary only to a valid principal obligation, his
liability to the creditor or promisee of the principal is said to be direct,
primary and absolute; in other words, he is directly and equally bound
with the principal.
Thus, suretyship arises upon the solidary binding of a person deemed the
surety with the principal debtor for the purpose of fulfilling an obligation. A
surety is considered in law as being the same party as the debtor in relation
to whatever is adjudged touching the obligation of the latter, and their liabilities
are interwoven as to be inseparable. x x x.12
In this case, what petitioner executed was a Continuing Suretyship.
Comprehensive or continuing surety agreements are, in fact, quite
commonplace in present day financial and commercial practice. A bank or
financing company which anticipates entering into a series of credit
transactions with a particular company, normally requires the projected
principal debtor to execute a continuing surety agreement along with its
sureties. By executing such an agreement, the principal places itself in a
position to enter into the projected series of transactions with its creditor; with
such suretyship agreement, there would be no need to execute a separate
surety contract or bond for each financing or credit accommodation extended
to the principal debtor.
The terms of the Continuing Suretyship executed by petitioner, quoted earlier,
are very clear. It states that petitioner, as surety, shall, without need for
any notice, demand or any other act or deed, immediately become liable
and shall pay "all credit accommodations extended by the Bank to the
Debtor, including increases, renewals, roll-overs, extensions, restructurings,
amendments or novations thereof, as well as
(i) all obligations of the Debtor presently or hereafter owing to the Bank, as
appears in the accounts, books and records of the Bank, whether direct or
indirect, and
(ii) any and all expenses which the Bank may incur in enforcing any of its
rights, powers and remedies under the Credit Instruments as defined
hereinbelow."
Such stipulations are valid and legal and constitute the law between the
parties, as Article 2053 of the Civil Code provides that "[a] guaranty may
also be given as security for future debts, the amount of which is not yet
known." Thus, petitioner is unequivocally bound by the terms of the
Continuing Suretyship. There can be no cavil then that petitioner is liable for
the principal of the loan, together with the interest and penalties due thereon,
even if said loan was obtained by the principal debtor even after the date of
execution of the Continuing Suretyship.
CAPITAL INSURANCE SURETY V. RONQUILLO TRADING
G.R. No. L-36488
July 25, 1983
Doctrine: It must be noted that in the surety bond it is stipulated that the
"Liability of surety on this bond will expire on May 5, 1963 and said bond will
be cancelled 15 days after its expiration, unless surety is notified of any
existing obligations thereunder." Under this stipulation the bond expired on the
stated date and the phrase "unless surety is notified of any existing obligations
thereunder" refers to obligations incurred during the term of the bond.
Petitioner: Capital Insurance Surety Co., Inc., herein represented by its
General Agent, the Pan American Insurance Agencies, Inc.
Respondents: Ronquillo Trading and Jose L. Bautista
FACTS:
 Capital Surety, thru its general agent, executed and issued a
surety bond in the amount of $14,800.00 or its peso equivalent in
behalf of Ronquillo Trading and in favor of S.S. Eurygenes, its
master, and/or its agents, Delgado Shipping Agencies.
o It was a guarantee for any additional freight which may be
determined to be due on a cargo of 258 surplus army
vehicles consigned from Pusan, Korea to the Ronquillo
Trading on board the S.S. Eurygenes and booked on said
vessel by the Philippine Merchants Steamship Company,
Inc.
 In consideration for the surety bond, Ronquillo Trading and Bautista
executed an indemnity agreement whereby among other things,
they jointly and severally promised to pay the appellant the sum of
P1,827.00 in advance as premium and documentary stamps for each
period of twelve months while the surety bond was in effect.
 5 days before the expiration of the liability on the bond, P.D.
Marchessini and Co., Ltd. and Delgado Shipping Agencies, Inc.,
filed Civil Case before the CFI Manila against the Philippine
Merchants Steamship Co., Inc., and herein petitioners and
respondents for the sum of $14,800.00 or its equivalent in Philippine
currency, for the loss they allegedly suffered as a direct consequence
of the failure of the defendants to load the stipulated quantity of 406
U.S. surplus army vehicles.
 Upon the expiration of the 12 months life of the bond, the Capital
Insurance made a formal demand for the payment of the renewal
premiums and cost of documentary stamps for another year in the
amount of P1,827.00. The respondents refused to pay, contending
that the liability of the petitioner under the surety bond accrued during
the period of twelve months the said bond was originally in force and
before its expiration and that the respondents were under no
obligation to renew the surety bond.
 City Court of Manila - absolved the defendants; CFI Manila –
affirmed the judgement
 Capital Insurance - It can be deduced that the payment of renewal
premiums should depend upon the life and effectivity of the bond and
not on the accrual of its liability. It states that as long as the bond is
in full force and effect, the principal should pay the corresponding
renewal premium and should continue to do so even if the liability on
the bond has accrued, otherwise, surety companies will be at the
mercy of their principals because while their liability continues to
subsist as long as their accrued liability is not determined, or as long
as the court has not determined their liability, which may take years,
the principals pay no consideration for the use of their bond.
 Ronquillo Trading - countered that the only purpose of Civil Case
was to enforce a liability which existed even before the bond was
executed. The bond was given to secure payment by appellees of
such additional freight as would already be due on the cargo when it
actually arrived in Manila. The bond was not executed to secure an
obligation or liability which was still to arise after its 12-month life.
ISSUE: WON the respondents are under no obligation to pay the premiums
and costs of documentary stamps once surety's liability under the bond has
accrued
HELD:
 Yes.
 Furthermore, under the Indemnity Agreement, Roqnuillo Trading
"agree to pay the COMPANY the sum of ONE THOUSAND EIGHT
HUNDRED ONLY (P1,800.00) Pesos, Philippine Currency, in
advance as premium thereof for every twelve (12) months or fraction
thereof, while this bond or any renewal or substitution thereof is in
effect." Obviously, the duration of the bond is for "every 12 months
or fraction thereof, while this bond or any renewal or substitution is in
effect."
 Since the respondents opted not to renew the contract they
cannot be obliged to pay the premiums. More specifically, where
a contract of surety is terminated under its terms, the liability of
the principal for premiums after such termination ceases
notwithstanding the pendency of a lawsuit to enforce a liability that
accrued during its stipulated lifetime.