INSURANCE DIGESTS

Based on the syllabus of Professor A. E. Tayag

IV. RIGHT TO SUBROGATION

The Philippine American General Insurance Company, Inc. v. Court of Appeals

G.R. No. 116940, 11 June 1997

Facts
Coca-cola Bottlers Phils. loaded on board “MV Asilda”, which was owned by
respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink
bottles to be transported from Zamboanga to Cebu City for consignee Coca-Cola Bottlers,
Cebu. The shipment was insured with petitioner Philippine American General Insurance
Co., Inc. (Philamgen). At around 8:45AM, the vessel sank in the waters of Zamboanga Del
Norte, bringing down her entire cargo including the 7,500 bottles of Coca-Cola. The
consignee filed a claim with FELMAN for damages but FELMAN denied it. Thus, the
consignee filed an insurance claim with Philamgen who paid its claim.

Claiming its right of subrogation, Philamgen sued Felman, alleging that the total
loss of MV Asilda and its cargo were due to the vessel’s unseaworthiness; that the vessel
was improperly manned; and the officers were grossly negligent in failing to take
appropriate measures. Felman moved to dismiss claiming no right of subrogation accrued
in favor of Philamgen and that it abandoned its rights, interests, and ownership over MV
Asilda which limited and extinguished its liability pursuant to Art. 587 of the Code of
Commerce.

The trial court dismissed Philamgen’s complaint but it was nevertheless remanded
to it by the CA. finally, the trial court ruled in favor of Felman, holding that the loss was
due to fortuitous event, and that no liability should attach because Art. 587 of the Code of
Commerce should apply. Moreover, even assuming that MV Asilda was unseaworthy,
Philamgen could not recover from Felman because it breached its implied warranty on the
vessel’s seaworthiness. Thus, the payment it made was undue and mistaken. The CA held
that MV Asilda was unseaworthy for being top-heavy. Nonetheless, the CA denied
Philamgen’s claim because it breached the assured’s implied warranty of seaworthiness.

Issues
1. Was MV Asilda Seaworthy?
2. Is Art. 587 of the Code of Commerce applicable?
3. Could Philamgen be subrogated to the rights of Coca-Cola against Felman?

Ruling
1. NO. As found by the Elite Adjusters, Inc., the vessel was top-heavy, meaning the
distribution or stowage of the cargo was done in such a manner that the vessel was in top-
heavy condition which rendered her unstable and unseaworthy. Moreover, it was found
that the vessel was designed as a fishing vessel, which is not fit for carrying a substantial
amount of cargo on its deck. Thus, the proximate cause of MV Asilda’s sinking was her
unseaworthiness from being top-heavy.

Daverick Pacumio
UST Faculty of Civil Law
 2. NO. Under Art. 587, the ship agent’s liability for the negligence of the captain in the
care of goods on the vessel can be limited through abandonment of the vessel, its
equipment, and freightage. Here, the sinking of MV Asilda was due to its unseaworthiness
from the time of its departure. Closer supervision on the part of Felman, the shipowner,
could have prevented this. Thus, it cannot escape liability.

3. YES. In every marine insurance policy, the assured impliedly warrants to the assurer
that the vessel is seaworthy and such warranty is as much a term of the contract as if
expressly written on the face of the policy. Thus, it becomes the obligation of the assured
(cargo owner) to look for a reliable common carrier who keeps its vessels seaworthy. The
marine policy issued by Philamgen to Coca-Cola admitted the seaworthiness of the vessel.
As a result, it may mean either of two things: (a) that the warranty of the seaworthiness is
to be taken as fulfilled; or (b) that the risk of unseaworthiness is assumed by the insurance
company. Thus, with the categorical waiver, Philamgen has accepted the risk of
unseaworthiness so much so that if the ship should sink by unseaworthiness, Philamgen is
liable.

Art. 2207 of the Civil Code provides that, “If the plaintiff's property has been insured,
and he has received indemnity from the insurance company for the injury or loss arising
out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract.” In Pan Malayan Insurance Co. v. CA, the SC held that payment by
the assurer to the assured operates as an equitable assignment to the assurer of all the
remedies which the assured may have against the third party whose negligence or wrongful
act caused the loss. The doctrine of subrogation has its roots in equity. It 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 in justice, equity and good conscience ought to pay.
Therefore, the payment made by Philamgen to Coca-Cola Bottlers Philippines, Inc., gave
the former the right to bring an action as subrogee against Felman. Having failed to rebut
the presumption of fault, the liability of Felman for the loss of the 7,500 cases of 1-liter
Coca-Cola softdrink bottles is inevitable.

Fireman’s Fund Insurance Co. v. Jamia & Company

G.R. No. 27427, 07 April 1976, Aquino, J.

Facts
Jamila promised to supply security guards to Firestone. First Quezon City Insurance
Co., Inc. executed a bond to guarantee Jamila’s obligations. On 18 May 1963, properties of
Firestone were lost due to the acts of its employees who connived with the security guard
supplied by Jamila. The Fireman’s Fund, as insurer, paid to Firestone the amount of the
loss. Thus, Fireman’s Fund, being subrogated to the rights of Firestone, sought
reimbursement from Jamila before the CFI. The CFI, however dismissed the complaint on
the ground that there was no proof that Jamila had consented to the subrogation. Firestone
and Fireman’s Fund moved for reconsideration, and the CFI set aside its earlier dismissal
of the case without saying why.

Jamila, upon noticing after many years that it had lost, filed a motion to reconsider,
saying that the complaint did not allege that Firestone, pursuant to the contractual
stipulation, had investigated the loss and that Jamila was represented in the investigation.
The CFI reconsidered its decision and granted Jamila’s motion but for a different reason. It
reverted to its earlier ruling, dismissing the case because there was allegedly no proof that
Jamila consented to the subrogation of Fireman’s Fund.

Issue
Did the complaint of Firestone and Fireman’s Fund state a cause of action against
Jamila?

Ruling
YES. Firestone is merely a nominal party because it had already been indemnified
by Fireman’s Fund. On the other hand, Fireman’s Fund’s action against Jamila is squarely
sanctioned by Art. 2207 of the Civil Code. As the insurer, Fireman’s Fund is entitled to go
after the person or entity that violated its contractual commitment to answer for the loss
insured against.

The trial court erred in applying to this case the rules on novation. The plaintiffs in
alleging in their complaint that Fireman's Fund "became a party in interest in this case by
virtue of a subrogation right given in its favor by" Firestone, were not relying on the
novation by change of creditors as contemplated in articles 1291 and 1300 to 1303 of the Civil
Code but rather on article 2207.

Subrogation is founded on principles of justice and equity, and its operation is

governed by principles of equity. It rests on the principle that substantial justice should be
attained regardless of form, that is, its basis is the doing of complete, essential, and perfect
justice between all the parties without regard to form. Subrogation is a normal incident of
indemnity insurance. Upon payment of the loss, the insurer is entitled to be subrogated
pro tanto to any right of action which the insured may have against the third person whose
negligence or wrongful act caused the loss.

Pan Malayan Insurance Corp. v. Court of Appeals

G.R. No. 81026, 03 April 1990, Cortes, J.
Facts
Pan Malayan insured a Mitsubishi Colt Lancer registered in the name of Canlubang
Automotive (Canlubang). On 26 May 1985, due to the recklessness and imprudence of the
unknown driver of a pick-up, the insured car was hit and suffered damages. Pan Malayan
defrayed the costs of repair and was subrogated to the rights of Canlubang against the
unknown driver of the pick-up and his employer, private respondent Erlinda Fabie.
 Private respondents filed a motion for bill of particulars, where Pan Malayan
clarified, among others, that the damage caused to the insured car was settled under the
“own damage” coverage of the insurance policy. With this, private respondents moved to
dismiss arguing that payment under the “own damage” clause of the insurance policy
precluded subrogation under Art. 2207 of the Civil Code since the indemnification was
made on the assumption that there was no wrongdoer or third party at fault.

The RTC dismissed Pan Malayan’s complaint for lack of cause of action. The RTC
held that payment by Pan Malay under the “own damage” clause was an admission by it
that the damage was caused by the assured and/or its representatives The CA affirmed,
holding this time that applying the ejusdem generis rule, Section III-1 of the insurance policy
in this case did not cover the damage arising from collision or overturning due to
negligence of third parties as one of the insurable risks.

Issue
Did Pan Malayan have a valid cause of action?

Ruling
YES. Art. 2207 provides that if the insured property is destroyed or damaged through
the fault or negligence of a party other than the assured, then the insurer, upon payment
to the assured, will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. There are a few
recognized exceptions to this: (a) if the assured, by his own act, releases the wrongdoer
from liability; (b) where the insurer pays the assured the value of the lost goods without
notifying the carrier who has in good faith settled the assured’s claim for loss; and (c) where
the insuerer pays the assured for a loss which is not a risk covered by the policy, thereby
effecting “voluntary payment.” However, none of these exceptions are present.

The RTC erred in ruling that the “own damage” clause pertains to damage caused
by the assured and/or its representatives. When Pan Malayan utilized the phrase “own
damage,” it simply meant that it had assumed to reimburse the costs for repairing the
damage to the insured vehicle. It is in this sense that the so-called "own damage" coverage
under Section III of the insurance policy is differentiated from Sections I and IV-1 which
refer to "Third Party Liability" coverage (liabilities arising from the death of, or bodily
injuries suffered by, third parties) and from Section IV-2 which refer to "Property Damage"
coverage (liabilities arising from damage caused by the insured vehicle to the properties of
third parties).

The CA likewise erred in ruling that the coverage of the insured rsks under Sec. III-
1 of the policy does not cover the damage resulting from negligent third parties. It is a basic
rule in the interpretation of contracts that the terms of a contract are to be construed
according to the sense and meaning the parties thereto have used. Sec. III-1 (a) of the policy
states that Pan Malayan will indemnify the insured against loss or damage by accidental
collision or overturning. Pan Malayan contends that this is comprehensive enough to
include damage arising from the negligent acts of third persons. Canlubang is of the same
understanding. Since the very parties were not shown to be in disagreement regarding the
meaning of Sec. III-1 (a), it was improper for the CA to indulge in contract construction.
Moreover, the meaning advanced by Pan Malayan is more beneficial to Canlubang, which
is more in keeping with the rules of interpretation of insurance contracts.

Even assuming that Sec. III-1(a) does not cover damage to insured vehicles caused
by negligent third parties, Pan Malayan could still have a cause of action against private
respondents. In Sveriges Angfartygs v. Qua Chee Gan, the Court held that the insurer who
may have no rights of subrogation due to "voluntary" payment may nevertheless recover
from the third party responsible for the damage to the insured property under Article 1236
of the Civil Code.

Aboitiz Shipping Corporation v. Insurance Company of North America

G.R. No. 168402, 06 August 2008, Reyes, R.T., J.

Facts
MSAS Cargo International procured a marine insurance policy from ICNA UK Ltd.
of London. The insurance was for a transshipment of certain woodwork tools and
workbenches purchased for the consignee, Science Teaching Improvement Project (STIP),
Cebu City, PH. ICNA issued an “all risk” open marine policy, stating that “[it] does insure
for MSAS Cargo loss, if any, payable to the Assured or order.”

On 26 July 1993, the cargo was received by petitioner Aboitiz Shipping Corp.
(Aboitiz). The bill of lading issued by Aboitiz contained the notation “grounded outside
warehouse.” On 01 August 1993, the container van was loaded on board Aboitiz’ vessel and
went to Cebu City. On 03 August 1993, the shipment arrived in Cebu City, and was
discharged onto a receiving apron of the Cebu International Port. In the Stripping Report
dated 05 August 1993, Aboitiz’ checker noted that the crates were slightly broken or cracked
at the bottom. On 11 August 1993, the cargo was withdrawn by STIP’s representative, and
was delivered to Don Bosco Technical High School in Cebu City. On 13 August 1993, Mr.
Bernhard Willig phoned Mayo B. Perez, the Claims Head of Aboitiz, informing him that
the cargo sustained water damage. Upon receiving the call, Perez immediately went to the
bonded warehouse and checked the condition of the container and other cargoes and
found that the van and other cargoes stuffed were dry and showed no signs of wetness.

Perez, despite finding that the crate was dry, found that its bottom was slightly
broken, and the tools stored inside were corroded. He further explained that the “grounded
outside warehouse” notation in the BL referred only to the container van, not the cargo.
The consignee then contacted the Philippine office of ICNA for insurance claims. The
Claimsmen Adjustment Corp. (CAC) conducted an ocular inspection and survey, and
reported to ICNA that the goods indeed sustained water damage, molds, and corrosion.
Thus, the consignee filed a formal claim with Aboitiz. In a supplemental report, CAC
reported to ICNA that based on the weather report from PAGASA, heavy rains occurred on
28 and 29 July 1993, which caused water damage to the shipment which was placed outside
the warehouse when it was delivered on 26 July 1993. It was only on 31 July 1993 when the
shipment was stuffed in another container van for shipment to Cebu.

Aboitiz refused to settle the claim, and ICNA paid the claim, and a subrogation
receipt was duly signed by Willig. After Aboitiz refused to reply to the advise of ICNA of its
subrogation, the latter filed a civil complaint against Aboitiz for collection. The RTC ruled
against ICNA, holding that it failed to prove that it is the real party-in-interest; and that it
did not present evidence to show that it was ICNA UK’s authorized representative.

ICNA appealed to the CA, who reversed and set aside the RTC ruling holding that
the right of subrogation accrues simply upon payment by the insurance company of the
insurance claim, and that ICNA is entitled to reimbursement from Aboitiz, even assuming
it was an unlicensed foreign corp.

Issues
1. Is ICNA the real party-in-interest?
2. Was there a timely filing of notice as required under Art. 366 of the Code of
Commerce?
3. Is petitioner liable for damages?

Ruling
1. YES. A foreign corporation not licensed to do business in the PH is not absolutely
incapacitated from filing a suit in local courts. Only when the foreign corporation is
“transacting” or “doing business” in the PH, will a license be required before it may institute
suits. It may, however, bring suits on isolated business transactions which is not prohibited
by PH law. While it was ICNA UK who issued the subject marine policy, the present case
was filed by the company’s authorized agent in Manila. Its authority is expressly provided
for in the open policy which includes the ICNA office in the PH as one of the foreign
company’s agents. The terms of the open policy authorize the filing of any claim on the
insured goods, to be brought against ICNA UK, or against any of its listed agents. Hence, a
formal indorsement of the policy to the agent in the PH was unnecessary for the latter to
exercise the rights of the insurer.

Moreover, the open policy provides that ICNA insures MSAS in behalf of the title
holder and that loss, if any, is payable to the assured or order. The policy benefits any
subsequent assignee or holder, including the consignee, who may file claims on behalf of
the assured. This is in keeping with Sec. 57 of the Insurance Code which provides that a
policy may be framed that will inure to the benefit of whosoever during the continuance of
the risk, may become the owner of the interest insured.

In this regard, the SC held that ICNA’s cause of action is founded on it being
subrogated to the rights of the consignee of the damaged shipment. As held in Pan Malayan
v. CA, payment by the insurer to the assured operates as an equitable assignment of all
remedies the assured may have against the third party who caused the damage.
Subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon
written assignment of claim. It accrues simply upon payment of the insurance claim by the
insurer. Upon payment to the consignee of indemnity for damage to the insured goods,
ICNA's entitlement to subrogation equipped it with a cause of action against petitioner in
case of a contractual breach or negligence. This right of subrogation, however, has its
limitations: First, both the insurer and the consignee are bound by the contractual
stipulations under the bill of lading. Second, the insurer can be subrogated only to the rights
as the insured may have against the wrongdoer. If by its own acts after receiving payment
from the insurer, the insured releases the wrongdoer who caused the loss from liability, the
insurer loses its claim against the latter.

2. YES. Under the Code of Commerce, the notice of claim must be made within 24
hours from receipt of the cargo if the damage is not apparent from the outside of the
package. This notice requirement protects the carrier by affording it an opportunity to
investigate the claim while the matter is still fresh. Here, the shipment was delivered 11
August 1993, and Mayo B. Perez, claims head of Aboitiz, was informed on 13 August 1993.
The SC noted that the final destination of the damaged cargo was a school institution,
where authorities are bound by rules and regulations governing their actions.
Understandably, the delay in informing Mayo Perez was excusable because clearances were
needed to be secured. Thus, there is substantial compliance herein, albeit being pro hac
vice.

3. YES. Art. 1735 of the Civil Code states that where the goods are lost, destroyed, or
deteriorated, common carriers, like Aboitiz, are presumed to have been at fault or to have
acted negligently, unless they prove that they exercised extraordinary diligence. The bill
of lading issued by petitioner on 31 July 1993 contains the notation "grounded outside
warehouse", suggesting that from July 26 to 31, the goods were kept outside the warehouse.
And since evidence showed that rain fell over Manila during the same period, we can
conclude that this was when the shipment sustained water damage.

Malayan Insurance Co., Inc. v. Rodelio Alberto

G.R. No. 194320, 01 February 2012, Velasco, Jr., J.

Facts
On 17 December 1995, an accident occurred involving four (4) vehicles: (1) a Nissan
Bus; (2) an Isuzu Tanker; (3) a Fuzo truck; and (4) a Mitsubishi Galant. Based on the Police
Report issued by the on-the-spot investigator SPO1 Dungga, the Isuzu Tanker was in front
of the Mitsubishi Galant with the Nissan Bus on the right side, with all three vehicles at a
full stop, when the Fuzo Cargo Truck simultaneously bumped the rear portion of the
Mitsubishi Galant and the rear left portion of the Nissan Bus. Malayan Insurance, the
insurer of the Mitsubishi Galant, paid the damages sustained by the same. Claiming it was
subrogated to the rights and interests of the assured by operation of law, Malayan
Insurance initially sent demand letters to respondents Rodelio Alberto (Alberto) and
Enrico Alberto Reyes (Reyes), the registered owner and the driver, respectively, of the Fuzo
Cargo Truck. When respondents failed to heed its demands, Malayan Insurance instituted
a civil action against them.

The RTC ruled in favor of Malayan Insurance. The CA, however, reversed and set
aside the RTC, holding that the evidence on record failed to establish the negligence of the
respondents. It also held that the police report, which has been made part of the records of
the trial court, was not properly identified by the police officer who conducted the on-the-
spot investigation of the collision.

Issues
1. Is the police report admissible in evidence?
2. Should respondents be liable?
3. Is there valid subrogation in this case?

Ruling
1. YES. A witness may not testify on matters which he or she merely learned from
others either because said witness was told or read or heard those matters. Such testimony
is considered hearsay, and may not be received as proof of the truth of what the witness
has learned. Nevertheless, as an exception to this rule, entries in official records made in
the performance of his duty by a public officer of the PH, or by a person in the performance
of a duty specially enjoined by law, are prima facie evidence of the facts stated therein. For
this exception to apply, (a) the entry must be made by a public officer/person specially
enjoined by law to do so; (b) it was made by the public officer in the performance of a duty
enjoined by law; and (c) the public officer had sufficient knowledge of the facts by him or
her stated, which must have been acquired by the public officer or other person personally
or through official information.

Here, there is no dispute that SPO1 Dungga, the on-the-spot investigator, prepared
the report, and he did so in the performance of his duty. However, what is not clear is
whether SPO1 Dungga had sufficient personal knowledge of the facts contained in his
report. Thus, the third requisite is lacking. Respondents failed to make a timely objection
to the police report's presentation in evidence; thus, they are deemed to have waived their
right to do so. As a result, the police report is still admissible in evidence.

2. YES, under the doctrine of res ipsa loquitur. The requisites for the application
of the res ipsa loquitur rule are the following: (1) the accident was of a kind which does not
ordinarily occur unless someone is negligent; (2) the instrumentality or agency which
caused the injury was under the exclusive control of the person charged with negligence;
and (3) the injury suffered must not have been due to any voluntary action or contribution
on the part of the person injured. In the instant case, the Fuzo Cargo Truck would not have
had hit the rear end of the Mitsubishi Galant unless someone is negligent. Also, the Fuzo
Cargo Truck was under the exclusive control of its driver, Reyes. Even if respondents avert
liability by putting the blame on the Nissan Bus driver, still, this allegation was self-serving
and totally unfounded. Finally, no contributory negligence was attributed to the driver of
the Mitsubishi Galant. Consequently, all the requisites for the application of the doctrine
of res ipsa loquitur are present, thereby creating a reasonable presumption of negligence
on the part of respondents.

3. YES. Firstly, Malayan Insurance contends that there was valid subrogation, as
evidenced by the claim check voucher and the release of claim and subrogation receipt
presented by it before the trial court. Respondents argue that these do not indicate
important details that would show proper subrogation. Nevertheless, respondents had all
the opportunity, but failed to object to the presentation of its evidence. Thus, they are
deemed to have waived their right to make an objection.

Secondly, and more importantly, payment by the insurer to the insured operates as
an equitable assignment to the insurer of all the remedies that the insured may have against
the third party whose negligence or wrongful act caused the loss. The right of subrogation
is not dependent upon, nor does it grow out of, any privity of contract. It accrues simply
upon payment by the insurance company of the insurance claim. The doctrine of
subrogation has its roots in equity. It is designed to promote and to accomplish justice; and
is the mode that equity adopts to compel the ultimate payment of a debt by one who, in
justice, equity, and good conscience, ought to pay. Thus, it is but rightful for Malayan
Insurance to be subrogated to the rights of the assured.
 V. WHO MAY BE INSURED

Filipinas Compañia de Seguros v. Christern Huenefeld & Co., Inc.

G.R. No. L-2294, 25 May 1951, Paras, C.J.

Facts
On 01 October 1941, respondent corporation Christern Huenefeld & Co., Inc.
(Respondent), obtained a fire insurance policy covering its merchandise in 711 Roman St.,
Binondo, Manila from petitioner Filipinas Compañia de Seguro (Petitioner). On 27
February 1942, during the Japanese military occupation, the insured merchandise were
burned. Thus, respondent claimed from petitioner, who refused because the policy issued
to respondent had ceased to be in force on the date the US declared war in favor of Germany
and since respondent (though organized under the laws of the PH), were controlled by
German subjects, it became an enemy corporation.

Nevertheless, petitioner was ordered by the Director of the Bureau of Financing,

Phil. Executive Commission, to pay to the respondent the sums owing it. Thus, on 06
August 1946, petitioner filed an action against respondent seeking to recover the sums it
paid, arguing that since the insured merchandise were burned on 27 February 1942, after
the declaration of war by the US against Germany on 10 December 1941 which resulted to
the invalidation of the insurance policy, the payment it made was undue and coerced.

The CFI dismissed the action, which was affirmed by the CA, holding that a
corporation is a citizen of the country or state by and under the laws of which it was created
or organized and since the respondent was organized under the laws of the PH, it was
deemed by the CA as a Filipino corp., relying on English and American cases.

Issue
Should the sums paid by petitioner be returned?

Ruling
YES. The English and American cases relied upon by the CA are no longer
controlling, because the latest ruling of the US Supreme Court in Clark v. Uebersee adopts
the control test, i.e., the nationality of a corporation is determined by the citizenship of its
controlling stockholders. Since the majority of respondents’ stockholders are Germans, it
is deemed a German corporation. The Philippine Insurance Law (Act No. 2427, as
amended), in section 8, provides that "anyone except a public enemy may be insured." It
stands to reason that an insurance policy ceases to be allowable as soon as an insured
becomes a public enemy.

The respondent having become an enemy corporation on 10 December 1941, the

insurance policy issued in its favor on 01 October 1941, by the petitioner (a Philippine
corporation) had ceased to be valid and enforceable, and since the insured goods were
burned after 10 December 1941, and during the war, the respondent was not entitled to any
indemnity under said policy from the petitioner.
 VI. MERE PROPOSAL FOR INSURANCE

People of the Philippines v. Yip Wai Ming

G.R. No. 120959, 14 November 1996, Melo, J.

Facts
The prosecution alleges that at around 7:00PM on 10 July 1993, accused-appellant
Yip Wai Ming and his fiancée Lam Po Chun, HK nationals, checked in at Park Hotel. After
staying at their hotel room for an hour, appellant asked the front desk receptionist to call
Gwen delos Santos and instruct her to pick them up the following day, 11 July 1993, at
10:00AM. 10 July 1993, 8:00PM, Cariza Destreza, occupant of the adjacent room, heard a
noise which sounded like a heated argument between a man and a woman. At around
9:15AM of 11 July 1993, Destreza heard stomping and heard the cry of a woman as if she
cannot breathe. 10:00AM, Gwen delos Santos arrived and appellant went down without
Lam Po Chun, and left the hotel with Gwen. When appellant arrived at around 11:00PM, he
asked the receptionist to open his room and there, Lam Po Chun was found dead, lying face
down. Appellant removed the blanket covering Lam Po Chun and pretended to exclaim
“My God, she is dead,” but did not even embrace her.

Accused-appellant, for his counter-statement of facts, alleged that he met Lam Po

Chun at a party in 1991. Both were sportsminded and after a short courtship, began a
relationship and lived together. They went to the PH, upon the prodding of Tessie “Amay”
Ticar, who told them to celebrate their engagement here. Ticar gave them the names of her
cousins in Manila, Toots, Monique, and Gwen. They arrived in Manila on 10 July 1993. From
their hotel room, appellant called their contact, Gwen, informing them of their arrival.
Thereafter, the couple ate at McDonald’s. the following morning, 11 July 1993, the two had
breakfast in the hotel restaurant and at around 10:00AM, appellant was informed that their
visitors had arrived. Gwen invited the couple to tour the city, but Lam Po Chun refused
because it was very hot and she had a headache. Appellant asked the hotel reception to give
medicine to Lam Po Chun and not disturb her. Appellant, with Gwen, Monique, and the
sisters’ mother, went shopping.

Appellant returned to the Park Hotel around 10:30PM. After his knocks at their door
went unreturned, he asked the staff to open the door for him and there, to his horror, he
saw Lam Po Chun dead. Several people rushed to Room 210, a foreigner looked at Lam Po
Chun and said she was dead.

The trial court convicted Yip Wai Ming for murder based entirely on circumstantial
evidence, one of which is that there was evident premeditation because Lam Po Chun
apparently insured herself for the amounts of USD 498,750 and USD 249,375, naming
appellant as the beneficiary.

Issue
Is appellant guilty of the crime?
Ruling
NO. There is no evidence that the victim secured an insurance policy for a big
amount in US dollars and indicated accused-appellant as the beneficiary. The prosecution
presented Exhibit "X", a mere xerox copy of a document captioned "Proposal for Life
Insurance" as proof of the alleged insurance. It is not a certified copy, nor was the original
first identified. It is not shown how and from whom the information about any alleged
insurance having been secured came. There is a signature of Apple Lam which is most
unusual for an insurance application because the victim's name is Lam Po Chun. To be sure
nobody insures himself or herself under a nickname.

It needs not much emphasis to say that an application form does not prove that
insurance was secured. Anybody can get an application form for insurance, fill it up at home
before filing it with the insurance company. In fact, the very first sentence of the form states
that it merely "forms the basis of a contract between you and NZI Life." There was no
contract yet. There is no proof that the insurance company approved the proposal, no proof
that any premium payments were made, and no proof from the record of exhibits as to the
date it was accomplished. It appearing that no insurance was issued to Lam Po Chun with
accused-appellant as the beneficiary, the motive capitalized upon by the trial court
vanishes. Thus, the picture changes to one of the alleged perpetrator killing his fiancee
under cold-blooded circumstances for nothing.

Moreover, Lam Po Chun was working for the National Insurance Company. Why
then should she insure her life with the New Zealand Insurance Company? Lam's monthly
salary was only HK $5,000.00. The premiums for the insurance were HK $5,400.00 or US
$702.00 per month. Why should Lam insure herself with the monthly premiums exceeding
her monthly salary? And why should any insurance company approve insurance, the
premiums of which the supposed insured obviously cannot afford to pay, in the absence of
any showing that somebody else is paying for said premiums. It is not even indicated
whether or not there are rules in Hongkong allowing a big amount of insurance to be
secured where the beneficiary is not a spouse, a parent, a sibling, a child, or other close
relative.

Lam Po Chun must have been unbelievably trusting or stupid to follow the alleged
advice of Andy Kwong. It is usually the man who insures himself with the wife or future
wife as beneficiary instead of the other way around. Why should Lam Po Chun, with her
relatively small salary which is not even enough to pay for the monthly premiums, insure
herself for such a big amount. This is another reason why doubts arise as to the truth of the
insurance angle.
 VII. RIGHT TO CHANGE BENEFICIARY

Philippine American Life Insurance Company v. Hon. Gregorio Pineda

G.R. No. 54216, 19 July 1989, Paras, J.

Facts
Private respondent Rodolfo Dimayuga procured an ordinary life insurance policy
from petitioner and designated his wife and children as irrevocable beneficiaries of said
policy. Thereafter, private respondent filed a petition before the CFI of Rizal to amend the
designation of the beneficiaries in his life policy from irrevocable to revocable. The CFI
granted private respondent’s petition.

Issue
Did the CFI err?

Ruling
YES. Under the Insurance Law, the beneficiary designated in a life insurance
contract cannot be changed without the consent of the beneficiary because he has a vested
interest in the policy. In this case, the Beneficiary Designation Indorsement in the policy
states that the designation of the beneficiaries is irrevocable, and that “no right or privilege
under the Policy may be exercised, or agreement made with the Company to any change in
or amendment to the policy, without the consent of the said beneficiary/ies.” Thus, it is
only with the consent of all beneficiaries that any change or amendment in the policy
concerning the irrevocable beneficiaries may be legally and validly effected.

The alleged acquiescence of the children beneficiaries cannot be considered an

effective ratification to the change of beneficiaries from irrevocable to revocable because
the children were minors at the time, and were thus incapable of giving consent. The
insured can do nothing to divest the beneficiary of his rights without his consent.

Moreover, contracts which are the private laws of the contracting parties should be
fulfilled according to the literal sense of their stipulations, if their terms are clear and leave
no room for doubt as to the intention of the contracting parties, for contracts are
obligatory, no matter in what form they may be, whenever the essential requisites for their
validity are present. Undeniably, the contract in the case at bar, contains the indispensable
elements for its validity and does not in any way violate the law, morals, customs, orders,
etc. Finally, the fact that the contract of insurance does not contain a contingency when
the change in the designation of beneficiaries could be validly effected means that it was
never within the contemplation of the parties. The lower court, in gratuitously providing
for such contingency, made a new contract for them.

Heirs of Loreto Maramag v. Eva Verna De Guzman Maramag

G.R. No. 181132, 05 June 2009, Nachura, J.
Facts
Petitioners filed a petition for the revocation and/or reduction of insurance proceeds
for being void and/or inofficious. The petitioners were the legitimate wife and children of
Loreto Maramag, while respondents were Loreto’s illegitimate family. Eva Maramag was a
concubine of Loreto and a suspect in his killing and thus, petitioners claim that she is
disqualified to receive proceeds from Loreto’s insurance policies from Insular Life (Insular)
and Great Pacific Life Assurance Corp (Grepalife). The petitioners further claim that the
illegitimate children of Loreto – Odessa, Karl Brian, and Trisha Angelie, were entitled only
to one-half of the legitime of the legitimate children thus, the proceeds released to Odessa
and those to be released to Karl Brian and Trisha were inofficious and should be reduced.

Insular admitted that Loreto misrepresented that respondents were his legitimate
family; and that when it ascertained that Eva was not the legal wife of Loreto, it disqualified
her as a beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha
Angelie, as the remaining beneficiaries. Insular alleged that the petition failed to state a
cause of action insofar as it sought to declare as inofficious the shares of Odessa, Karl Brian,
and Trisha Angelie as it was bound to honor the insurance policies designating the said
children as beneficiaries pursuant to Sec. 53 of the Insurance Code. Gerpalife on the other
hand alleged that the law on succession does not apply where the designation of insurance
beneficiaries is clear.

The RTC granted Insular and Grepalife’s motions to dismiss. It held that Sec. 53 of
the Insurance Code mandates that the insurance proceeds be applied exclusively to the
proper interest of the beneficiaries and since the respondents were the ones named as the
beneficiaries thereof, the insurance proceeds shall exclusively be paid to them. Neither
could petitioners invoke the law on donations or the rules on testamentary succession
because the beneficiary in a contract of insurance is not the donee in donation and the
rules on testamentary succession do not apply as insurance indemnity does not partake of
a donation. With respect to Eva’s share, as she was disqualified by Art. 739 of the Civil Code,
the insurance indemnity should be paid to the legal heirs of Loreto, i.e., the respondents.

Before the SC, petitioners assert that Eva, being a concubine of Loreto and a suspect
of his murder, is disqualified from being a beneficiary and that Eva’s children, being
illegitimate, are entitled to a lesser share in the proceeds of the policies, petitioners being
the legitimate heirs.

Issue
Is petitioners’ contention valid?

Ruling
NO. Art. 2011 of the Civil Code provides that insurance contracts shall be governed
by special laws, i.e., the Insurance Code, Sec. 53 of which provides that, “The insurance
proceeds shall be applied exclusively to the proper interest of the person in whose name or
for whose benefit it is made unless otherwise specified in the policy.” Thus, the only persons
entitled to claim the insurance proceeds are either the insured or the beneficiary. The
exception is where the insurance contract was intended to benefit third persons who are
not parties to the same in the form of favorable stipulations or indemnity.

Petitioners are third parties to the insurance contracts with Insular and Grepalife
and, thus, are not entitled to the proceeds thereof. Accordingly, respondents Insular and
Grepalife have no legal obligation to turn over the insurance proceeds to petitioners. The
revocation of Eva as a beneficiary in one policy and her disqualification as such in another
are of no moment considering that the designation of the illegitimate children as
beneficiaries in Loreto's insurance policies remains valid. Because no legal proscription
exists in naming as beneficiaries the children of illicit relationships by the insured, the
shares of Eva in the insurance proceeds, whether forfeited by the court in view of the
prohibition on donations under Article 739 of the Civil Code or by the insurers themselves
for reasons based on the insurance contracts, must be awarded to the said illegitimate
children, the designated beneficiaries, to the exclusion of petitioners. It is only in cases
where the insured has not designated any beneficiary, or when the designated beneficiary
is disqualified by law to receive the proceeds, that the insurance policy proceeds shall
redound to the benefit of the estate of the insured.