G.R. No.

L-20853             May 29, 1967 2. At its own option the Company may pay
in cash the amount of the loss or damage
BONIFACIO BROS., INC., ET AL., plaintiffs- or may repair, reinstate, or replace the
appellants, Motor Vehicle or any part thereof or its
vs. accessories or spare parts. The liability of
ENRIQUE MORA, ET AL., defendants-appellees. the Company shall not exceed the value of
the parts whichever is the less. The
G. Magsaysay for plaintiffs-appellants. Insured's estimate of value stated in the
Abad Santos and Pablo for defendant-appellee schedule will be the maximum amount
H. E. Reyes, Inc. payable by the Company in respect of any
J. P. Santilla and A. D. Hidalgo, Jr. for other claim for loss or damage.1äwphï1.ñët
defendant-appellee.
xxx     xxx     xxx
CASTRO, J.:
4. The Insured may authorize the repair of
This is an appeal from the decision of the Court the Motor Vehicle necessitated by damage
of First Instance of Manila, Branch XV, in civil for which the Company may be liable
case 48823, affirming the decision of the under this Policy provided that: — (a) The
Municipal Court of Manila, declaring the H.S. estimated cost of such repair does not
Reyes, Inc. as having a better right than the exceed the Authorized Repair Limit, (b) A
Bonifacio Bros., Inc. and the Ayala Auto Parts detailed estimate of the cost is forwarded
Company, appellants herein, to the proceeds of to the Company without delay, subject to
motor insurance policy A-0615, in the sum of the condition that "Loss, if any is payable
P2,002.73, issued by the State Bonding & to H.S. Reyes, Inc.," by virtue of the fact
Insurance Co. Inc., and directing payment of the that said Oldsmobile sedan was
said amount to the H. Reyes, Inc. mortgaged in favor of the said H.S. Reyes,
Inc. and that under a clause in said
Enrique Mora, owner of Oldsmobile sedan model insurance policy, any loss was made
1956, bearing plate No. QC- mortgaged the same payable to the H.S. Reyes, Inc. as
to the H.S. Reyes, Inc., with the condition that the Mortgagee;
former would insure the automobile with the latter
as beneficiary. The automobile was thereafter xxx     xxx     xxx
insured on June 23, 1959 with the State Bonding
& Insurance Co., Inc., and motor car insurance During the effectivity of the insurance contract,
policy A-0615 was issued to Enrique Mora, the the car met with an accident. The insurance
pertinent provisions of which read: company then assigned the accident to the
Bayne Adjustment Co. for investigation and
1. The Company (referring to the State appraisal of the damage. Enrique Mora, without
Bonding & Insurance Co., Inc.) will, subject the knowledge and consent of the H.S. Reyes,
to the Limits of Liability, indemnify the Inc., authorized the Bonifacio Bros. Inc. to furnish
Insured against loss of or damages to the the labor and materials, some of which were
Motor Vehicle and its accessories and supplied by the Ayala Auto Parts Co. For the cost
spare parts whilst thereon; (a) by of labor and materials, Enrique Mora was billed at
accidental collision or overturning or P2,102.73 through the H.H. Bayne Adjustment
collision or overturning consequent upon Co. The insurance company after claiming a
mechanical breakdown or consequent franchise in the amount of P100, drew a check in
upon wear and tear, the amount of P2,002.73, as proceeds of the
insurance policy, payable to the order of Enrique
xxx     xxx     xxx Mora or H.S. Reyes,. Inc., and entrusted the
check to the H.H. Bayne Adjustment Co. for
disposition and delivery to the proper party. In the
meantime, the car was delivered to Enrique Mora
without the consent of the H.S. Reyes, Inc., and
without payment to the Bonifacio Bros. Inc. and
the Ayala Auto Parts Co. of the cost of repairs
and materials.
Upon the theory that the insurance proceeds
should be paid directly to them, the Bonifacio
Bros. Inc. and the Ayala Auto Parts Co. filed on
May 8, 1961 a complaint with the Municipal Court
of Manila against Enrique Mora and the State
Bonding & Insurance Co., Inc. for the collection of
the sum of P2,002.73 The insurance company
filed its answer with a counterclaim for
interpleader, requiring the Bonifacio Bros. Inc.
and the H.S. Reyes, Inc. to interplead in order to
determine who has better right to the insurance
proceeds in question. Enrique Mora was declared
in default for failure to appear at the hearing, and
evidence against him was received ex parte.
However, the counsel for the Bonifacio Bros. Inc.,
Ayala Auto Parts Co. and State Bonding &
Insurance Co. Inc. submitted a stipulation of
facts, on the basis of which are Municipal Court
rendered a decision declaring the H.S. Reyes,
Inc. as having a better right to the disputed
amount and ordering State Bonding & Insurance
Co. Inc. to pay to the H. S. Reyes, Inc. the said
sum of P2,002.73. From this decision, the
appellants elevated the case to the Court of First
Instance of Manila which the stipulation of facts
was reproduced. On October 19, 1962 the latter
court rendered a decision, affirming the decision
of the Municipal Court. The Bonifacio Bros. Inc.
and the Ayala Auto Parts Co. moved for
reconsideration of the decision, but the trial court
denied the motion. Hence, this appeal.
The main issue raised is whether there is privity
of contract between the Bonifacio Bros. Inc. and
the Ayala Auto Parts Co. on the one hand and
the insurance company on the other. The
appellants argue that the insurance company and
Enrique Mora are parties to the repair of the car
as well as the towage thereof performed. The
authority for this assertion is to be found, it is
alleged, in paragraph 4 of the insurance contract
which provides that "the insured may authorize
the repair of the Motor Vehicle necessitated by
damage for which the company may be liable
under the policy provided that (a) the estimated
cost of such repair does not exceed the
Authorized Repair Limit, and (b) a detailed
estimate of the cost is forwarded to the company
without delay." It is stressed that the H.H. Bayne
Adjustment Company's recommendation of
payment of the appellants' bill for materials and
repairs for which the latter drew a check for
P2,002.73 indicates that Mora and the H.H.
Bayne Adjustment Co. acted for and in
representation of the insurance company.
This argument is, in our view, beside the point,
because from the undisputed facts and from the
pleadings it will be seen that the appellants'
alleged cause of action rests exclusively upon the
terms of the insurance contract. The appellants
seek to recover the insurance proceeds, and for
this purpose, they rely upon paragraph 4 of the
insurance contract document executed by and
between the State Bonding & Insurance
Company, Inc. and Enrique Mora. The appellants
are not mentioned in the contract as parties
thereto nor is there any clause or provision
thereof from which we can infer that there is an
obligation on the part of the insurance company
to pay the cost of repairs directly to them. It is
fundamental that contracts take effect only
between the parties thereto, except in some
specific instances provided by law where the
contract contains some stipulation in favor of a
third person.1 Such stipulation is known as
stipulation pour autrui or a provision in favor of a
third person not a pay to the contract. Under this
doctrine, a third person is allowed to avail himself
of a benefit granted to him by the terms of the
contract, provided that the contracting parties
have clearly and deliberately conferred a favor
upon such person.2 Consequently, a third person
not a party to the contract has no action against
the parties thereto, and cannot generally demand
the enforcement of the same.3 The question of
whether a third person has an enforcible interest
in a contract, must be settled by determining
whether the contracting parties intended to tender
him such an interest by deliberately inserting
terms in their agreement with the avowed
purpose of conferring a favor upon such third
person. In this connection, this Court has laid
down the rule that the fairest test to determine
whether the interest of a third person in a contract
is a stipulation pour autrui or merely an incidental
interest, is to rely upon the intention of the parties
as disclosed by their contract.4 In the instant case
the insurance contract does not contain any
words or clauses to disclose an intent to give any
benefit to any repairmen or materialmen in case
of repair of the car in question. The parties to the
insurance contract omitted such stipulation, which
is a circumstance that supports the said
conclusion. On the other hand, the "loss payable"
clause of the insurance policy stipulates that
"Loss, if any, is payable to H.S. Reyes, Inc."
indicating that it was only the H.S. Reyes, Inc.
which they intended to benefit.
the proceeds of it, unless there be some contract
of trust, expressed or implied between the
insured and third person."5 In this case, no
contract of trust, expressed or implied exists. We,
therefore, agree with the trial court that no cause
of action exists in favor of the appellants in so far
as the proceeds of insurance are concerned. The
appellants' claim, if at all, is merely equitable in
nature and must be made effective through
Enrique Mora who entered into a contract with
the Bonifacio Bros. Inc. This conclusion is
deducible not only from the principle governing
the operation and effect of insurance contracts in
general, but is clearly covered by the express
provisions of section 50 of the Insurance Act
which read:

We likewise observe from the brief of the State The insurance shall be applied exclusively
Bonding & Insurance Company that it has to the proper interests of the person in
vehemently opposed the assertion or pretension whose name it is made unless otherwise
of the appellants that they are privy to the specified in the policy.
contract. If it were the intention of the insurance
company to make itself liable to the repair shop The policy in question has been so framed that
or materialmen, it could have easily inserted in "Loss, if any, is payable to H.S. Reyes, Inc.,"
the contract a stipulation to that effect. To hold which unmistakably shows the intention of the
now that the original parties to the insurance parties.
contract intended to confer upon the appellants
the benefit claimed by them would require us to The final contention of the appellants is that the
ignore the indespensable requisite that a right of the H.S. Reyes, Inc. to the insurance
stipulation pour autrui must be clearly expressed proceeds arises only if there was loss and not
by the parties, which we cannot do. where there is mere damage as in the instant
case. Suffice it to say that any attempt to draw a
As regards paragraph 4 of the insurance contract, distinction between "loss" and "damage" is
a perusal thereof would show that instead of uncalled for, because the word "loss" in
establishing privity between the appellants and insurance law embraces injury or damage.
the insurance company, such stipulation merely
establishes the procedure that the insured has to Loss in insurance, defined. — The injury or
follow in order to be entitled to indemnity for damage sustained by the insured in
repair. This paragraph therefore should not be consequence of the happening of one or
construed as bringing into existence in favor of more of the accidents or misfortune
the appellants a right of action against the against which the insurer, in consideration
insurance company as such intention can never of the premium, has undertaken to
be inferred therefrom. indemnify the insured. (1 Bouv. Ins. No.
1215; Black's Law Dictionary; Cyclopedic
Another cogent reason for not recognizing a right Law Dictionary, cited in Martin's Phil.
of action by the appellants against the insurance Commercial Laws, Vol. 1, 1961 ed. p.
company is that "a policy of insurance is a distinct 608).
and independent contract between the insured
and insurer, and third persons have no right Indeed, according to sec. 120 of the Insurance
either in a court of equity, or in a court of law, to Act, a loss may be either total or partial.
Accordingly, the judgment appealed from is merely living as husband and wife without the
hereby affirmed, at appellants' cost. benefit of marriage.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala,
Makalintal, Bengzon, J.P., Zaldivar, Sanchez and
Castro, JJ., concur.
G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY,
LTD., plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA.
DE EBRADO, defendants-appellants.
MARTIN, J.:
This is a novel question in insurance law: Can a follows: ñé+.£ªwph!1
common-law wife named as beneficiary in the life
insurance policy of a legally married man claim
the proceeds thereof in case of death of the
latter?
On September 1, 1968, Buenaventura Cristor
Ebrado was issued by The Life Assurance Co.,
Ltd., Policy No. 009929 on a whole-life for
P5,882.00 with a, rider for Accidental Death for
the same amount Buenaventura C. Ebrado
designated T. Ebrado as the revocable
beneficiary in his policy. He to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado
died as a result of an t when he was hit by a
failing branch of a tree. As the policy was in force,
The Insular Life Assurance Co., Ltd. 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 also in the amount of
P5,882.00 and the refund of P18.00 paid for the
premium due November, 1969, minus the unpaid
premiums and interest thereon due for January
and February, 1969, in the sum of P36.27.
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
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 on April
29, 1970.
After the issues have been joined, a pre-trial
conference was held on July 8, 1972, after which,
a pre-trial order was entered reading as
During the pre-trial conference, the
parties manifested to the court. that
there is no possibility of amicable
settlement. Hence, the Court
proceeded to have the parties
submit their evidence for the
purpose of the pre-trial and make
admissions for the purpose of
pretrial. During this conference,
parties Carponia T. Ebrado and
Pascuala Ebrado agreed and
stipulated: 1) that the deceased
Buenaventura Ebrado was married
to Pascuala Ebrado with whom she
has six — (legitimate) namely;
Hernando, Cresencio, Elsa, Erlinda,
Felizardo and Helen, all surnamed
Ebrado; 2) that during the lifetime of
the deceased, he was insured with
Insular Life Assurance Co. Under
Policy No. 009929 whole life plan,
dated September 1, 1968 for the
sum of P5,882.00 with the rider for
accidental death benefit as
evidenced by Exhibits A for plaintiffs
and Exhibit 1 for the defendant
Pascuala and Exhibit 7 for Carponia
Ebrado; 3) that during the lifetime of
Buenaventura Ebrado, he was
living with his common-wife,
 Carponia Ebrado, with whom she to the estate of the deceased insured. The trial
had 2 children although he was not court held: ñé+.£ªwph!1
legally separated from his legal
wife; 4) that Buenaventura in
accident on October 21, 1969 as
evidenced by the death Exhibit 3
and affidavit of the police report of
his death Exhibit 5; 5) that
complainant Carponia Ebrado filed
claim with the Insular Life
Assurance Co. which was
contested by Pascuala Ebrado who
also filed claim for the proceeds of
said policy 6) that in view ofthe
adverse claims the insurance
company filed this action against
the two herein claimants Carponia
and Pascuala Ebrado; 7) that there
is now due from the Insular Life
Assurance Co. as proceeds of the
policy P11,745.73; 8) that the
beneficiary designated by the
insured in the policy is Carponia
Ebrado and the insured made
reservation to change the
beneficiary but although the insured
made the option to change the
beneficiary, same was never
changed up to the time of his death
and the wife did not have any
opportunity to write the company
that there was reservation to
change the designation of the
parties agreed that a decision be
rendered based on and stipulation
of facts as to who among the two
claimants is entitled to the policy.
Upon motion of the parties, they are
given ten (10) days to file their
simultaneous memoranda from the
receipt of this order.
SO ORDERED.
On September 25, 1972, the trial court rendered
judgment declaring among others, Carponia T.
Ebrado disqualified from becoming beneficiary of
the insured Buenaventura Cristor Ebrado and From this judgment, Carponia T. Ebrado
directing the payment of the insurance proceeds appealed to the Court of Appeals, but on July 11,
It is patent from the last paragraph
of Art. 739 of the Civil Code that 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. Since it is agreed in their
stipulation above-quoted that the
deceased insured and defendant
Carponia T. Ebrado were living
together as husband and wife
without being legally married and
that the marriage of the insured with
the other defendant Pascuala Vda.
de Ebrado was valid and still
existing at the time the insurance in
question was purchased there is no
question that defendant Carponia T.
Ebrado is disqualified from
becoming the beneficiary of the
policy in question and as such she
is not entitled to the proceeds of the
insurance upon the death of the
insured.
1976, the Appellate Court certified the case to Us Those made between persons
as involving only questions of law. found guilty of the same criminal
offense, in consideration thereof;
We affirm the judgment of the lower court.
3. Those made to a public officer or
1. It is quite unfortunate that the Insurance Act his wife, descendants or
(RA 2327, as amended) or even the new ascendants by reason of his office.
Insurance Code (PD No. 612, as amended) does
not contain any specific provision grossly In the case referred to in No. 1, the
resolutory of the prime question at hand. Section action for declaration of nullity may
50 of the Insurance Act which provides that "(t)he be brought by the spouse of the
insurance shag be applied exclusively to the donor or donee; and the guilt of the
proper interest of the person in whose name it is donee may be proved by
made" 1 cannot be validly seized upon to hold preponderance of evidence in the
that the mm includes the beneficiary. The word same action.
"interest" highly suggests that the provision refers
only to the "insured" and not to the beneficiary, 2. In essence, a life insurance policy is no
since a contract of insurance is personal in different from a civil donation insofar as the
character. 2 Otherwise, the prohibitory laws beneficiary is concerned. Both are founded upon
against illicit relationships especially on property the same consideration: liberality. A beneficiary is
and descent will be rendered nugatory, as the like a donee, because from the premiums of the
same could easily be circumvented by modes of policy which the insured pays out of liberality, the
insurance. Rather, the general rules of civil law beneficiary will receive the proceeds or profits of
should be applied to resolve this void in the said insurance. As a consequence, the
Insurance Law. Article 2011 of the New Civil proscription in Article 739 of the new Civil Code
Code states: "The contract of insurance is should equally operate in life insurance contracts.
governed by special laws. Matters not expressly The mandate of Article 2012 cannot be laid aside:
provided for in such special laws shall be any person who cannot receive a donation
regulated by this Code." When not otherwise cannot be named as beneficiary in the life
specifically provided for by the Insurance Law, insurance policy of the person who cannot make
the contract of life insurance is governed by the the donation. 5 Under American law, a policy of
general rules of the civil law regulating life insurance is considered as a testament and in
contracts. 3 And under Article 2012 of the same construing it, the courts will, so far as possible
Code, "any person who is forbidden from treat it as a will and determine the effect of a
receiving any donation under Article 739 cannot clause designating the beneficiary by rules under
be named beneficiary of a fife insurance policy by which wins are interpreted. 6
the person who cannot make a donation to
him. 4 Common-law spouses are, definitely, 3. Policy considerations and dictates of morality
barred from receiving donations from each other.
rightly justify the institution of a barrier between
Article 739 of the new Civil Code provides: ñé+.
common law spouses in record to Property
£ªwph!1 relations since such hip ultimately encroaches
upon the nuptial and filial rights of the legitimate
The following donations shall be family There is every reason to hold that the bar
void: in donations between legitimate spouses and
those between illegitimate ones should be
1. Those made between persons enforced in life insurance policies since the same
who were guilty of adultery or are based on similar consideration As above
concubinage at the time of pointed out, a beneficiary in a fife insurance
donation; policy is no different from a donee. Both are
recipients of pure beneficence. So long as
manage remains the threshold of family laws,
reason and morality dictate that the impediments
imposed upon married couple should likewise be
imposed upon extra-marital relationship. If
legitimate relationship is circumscribed by these
legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities.
Thus, in Matabuena v. Cervantes, 7 this Court,
through Justice Fernando, said: ñé+.£ªwph!1
If the policy of the law is, in the
language of the opinion of the then
Justice J.B.L. Reyes of that court
(Court of Appeals), 'to prohibit
donations in favor of the other
consort and his descendants
because of and undue and
improper pressure and influence
upon the donor, a prejudice deeply
rooted in our ancient law;" por-que
no se enganen desponjandose el
uno al otro por amor que han de
consuno' (According to) the
Partidas (Part IV, Tit. XI, LAW IV),
reiterating the rationale 'No Mutuato
amore invicem spoliarentur' the
Pandects (Bk, 24, Titl. 1, De donat,
inter virum et uxorem); then there is
very reason to apply the same
prohibitive policy to persons living
together as husband and wife
without the benefit of nuptials. For it
is not to be doubted that assent to
such irregular connection for thirty
years bespeaks greater influence of
one party over the other, so that the
danger that the law seeks to avoid
is correspondingly increased.
Moreover, as already pointed out by
Ulpian (in his lib. 32 ad Sabinum, fr.
1), 'it would not be just that such
donations should subsist, lest the
condition 6f those who incurred guilt
should turn out to be better.' So
long as marriage remains the
cornerstone of our family law,
reason and morality alike demand
that the disabilities attached to
marriage should likewise attach to
concubinage.
It is hardly necessary to add that
even in the absence of the above
pronouncement, any other
conclusion cannot stand the test of
scrutiny. It would be to indict the
frame of the Civil Code for a failure
to apply a laudable rule to a
situation which in its essentials
cannot be distinguished. Moreover,
if it is at all to be differentiated the
policy of the law which embodies a
deeply rooted notion of what is just
and what is right would be nullified if
such irregular relationship instead
of being visited with disabilities
would be attended with benefits.
Certainly a legal norm should not be
susceptible to such a reproach. If
there is every any occasion where
the principle of statutory
construction that what is within the
spirit of the law is as much a part of
it as what is written, this is it.
Otherwise the basic purpose
discernible in such codal provision
would not be attained. Whatever
omission may be apparent in an
interpretation purely literal of the
language used must be remedied
by an adherence to its avowed
objective.
4. We 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: ñé+.£ªwph!1
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.

In the caw before Us, the requisite proof of

common-law relationship between the insured
and the beneficiary has been conveniently
supplied by the stipulations between the parties
in the pre-trial conference of the case. It case
agreed upon and stipulated therein that the
deceased insured Buenaventura C. Ebrado was
married to Pascuala Ebrado with whom she has
six legitimate children; that during his lifetime, the
deceased insured was living with his common-
law wife, Carponia Ebrado, with whom he has
two children. These stipulations are nothing less
than judicial admissions which, as a
consequence, no longer require proof and cannot
be contradicted. 8 A fortiori, on the basis of these
admissions, a judgment may be validly rendered
without going through the rigors of a trial for the
sole purpose of proving the illicit liaison between
the insured and the beneficiary. In fact, in that
pretrial, the parties even agreed "that a decision
be rendered based on this agreement and
stipulation of facts as to who among the two
claimants is entitled to the policy."

ACCORDINGLY, the appealed judgment of the

lower court is hereby affirmed. Carponia T.
Ebrado is hereby declared disqualified to be the
beneficiary of the late Buenaventura C. Ebrado in
his life insurance policy. As a consequence, the
proceeds of the policy are hereby held payable to
the estate of the deceased insured. Costs against
Carponia T. Ebrado.

SO ORDERED.
G.R. No. L-28093 January 30, 1971
BASILIA BERDIN VDA. DE CONSUEGRA;
JULIANA, PACITA, MARIA LOURDES, JOSE,
JR., RODRIGO, LINEDA and LUIS, all
surnamed CONSUEGRA, petitioners-appellants,
vs.
GOVERNMENT SERVICE INSURANCE
SYSTEM, COMMISSIONER OF PUBLIC
HIGHWAYS, HIGHWAY DISTRICT ENGINEER
OF SURIGAO DEL NORTE, COMMISSIONER
OF CIVIL SERVICE, and ROSARIO
DIAZ, respondents-appellees.
Bernardino O. Almeda for petitioners-appellants.
Binag and Arevalo, Jr. for respondent-appellee
Government Service Insurance System.
Office of the Solicitor General for other
respondents-appellees.
ZALDIVAR, J.:
Appeal on purely questions of law from the
decision of the Court of First Instance of Surigao
del Norte, dated March 7, 1967, in its Special
Proceeding No. 1720.
The pertinent facts, culled from the stipulation of
facts submitted by the parties, are the following:
The late Jose Consuegra, at the time of his
death, was employed as a shop foreman of the
office of the District Engineer in the province of
Surigao del Norte. In his lifetime, Consuegra
contracted two marriages, the first with herein
respondent Rosario Diaz, solemnized in the
parish church of San Nicolas de Tolentino,
Surigao, Surigao, on July 15, 1937, out of which
marriage were born two children, namely, Jose
Consuegra, Jr. and Pedro Consuegra, but both
predeceased their father; and the second, which
was contracted in good faith while the first
marriage was subsisting, with herein petitioner
Basilia Berdin, on May 1, 1957 in the same parish
and municipality, out of which marriage were born
seven children, namely, Juliana, Pacita, Maria
Lourdes, Jose, Rodrigo, Lenida and Luz, all
surnamed Consuegra.
Being a member of the Government Service
Insurance System (GSIS, for short) when
Consuegra died on September 26, 1965, the
proceeds of his life insurance under policy No.
601801 were paid by the GSIS to petitioner
Basilia Berdin and her children who were the
beneficiaries named in the policy. Having been in
the service of the government for 22.5028 years,
Consuegra was entitled to retirement insurance
benefits in the sum of P6,304.47 pursuant to
Section 12(c) of Commonwealth Act 186 as
amended by Republic Acts 1616 and 3836.
Consuegra did not designate any beneficiary who
would receive the retirement insurance benefits
due to him. Respondent Rosario Diaz, the widow
by the first marriage, filed a claim with the GSIS
asking that the retirement insurance benefits be
paid to her as the only legal heir of Consuegra,
considering that the deceased did not designate
any beneficiary with respect to his retirement
insurance benefits. Petitioner Basilia Berdin and
her children, likewise, filed a similar claim with the
GSIS, asserting that being the beneficiaries
named in the life insurance policy of Consuegra,
they are the only ones entitled to receive the
retirement insurance benefits due the deceased
Consuegra. Resolving the conflicting claims, the
GSIS ruled that the legal heirs of the late Jose
Consuegra were Rosario Diaz, his widow by his
first marriage who is entitled to one-half, or 8/16,
of the retirement insurance benefits, on the one
hand; and Basilia Berdin, his widow by the
second marriage and their seven children, on the
other hand, who are entitled to the remaining
one-half, or 8/16, each of them to receive an
equal share of 1/16.
Dissatisfied with the foregoing ruling and
apportionment made by the GSIS, Basilia Berdin
and her children1 filed on October 10, 1966 a
petition for mandamus with preliminary injunction
in the Court of First Instance of Surigao, naming
as respondents the GSIS, the Commissioner of
Public Highways, the Highway District Engineer
of Surigao del Norte, the Commissioner of Civil
Service, and Rosario Diaz, praying that they
(petitioners therein) be declared the legal heirs
and exclusive beneficiaries of the retirement (1/2) of the retirement benefit in the
insurance of the late Jose Consuegra, and that a amount of Six Thousand Three
writ of preliminary injunction be issued restraining Hundred Four Pesos and Fourty-
the implementation of the adjudication made by Seven Centavos (P6,304.47) due to
the GSIS. On October 26, 1966, the trial court the deceased Jose Consuegra from
issued an order requiring therein respondents to the Government Service Insurance
file their respective answers, but refrained from System or the amount of
issuing the writ of preliminary injunction prayed P3,152.235 to be divided equally
for. On February 11, 1967, the parties submitted among them in the proportional
a stipulation of facts, prayed that the same be amount of 1/16 each. Likewise, the
admitted and approved and that judgment be respondent Rosario Diaz Vda. de
rendered on the basis of the stipulation of facts. Consuegra is hereby declared
On March 7, 1967, the court below rendered beneficiary and entitled to the other
judgment, the pertinent portions of which are half of the retirement benefit of the
quoted hereunder: late Jose Consuegra or the amount
of P3,152.235. The case with
This Court, in conformity with the respect to the Highway District
foregoing stipulation of facts, Engineer of Surigao del Norte is
likewise is in full accord with the hereby ordered dismissed.
parties with respect to the authority
cited by them in support of said Hence the present appeal by herein petitioners-
stipulation and which is herein- appellants, Basilia Berdin and her children.
below cited for purposes of this
judgment, to wit: It is the contention of appellants that the lower
court erred in not holding that the designated
"When two women innocently and beneficiaries in the life insurance of the late Jose
in good faith are legally united in Consuegra are also the exclusive beneficiaries in
holy matrimony to the same man, the retirement insurance of said deceased. In
they and their children, born of said other words, it is the submission of appellants
wedlock, will be regarded as that because the deceased Jose Consuegra
legitimate children and each family failed to designate the beneficiaries in his
be entitled to one half of the estate. retirement insurance, the appellants who were
Lao & Lao vs. Dee Tim, 45 Phil. the beneficiaries named in the life insurance
739; Estrella vs. Laong Masa, Inc., should automatically be considered the
(CA) 39 OG 79; Pisalbon vs. Bejec, beneficiaries to receive the retirement insurance
74 Phil. 88. benefits, to the exclusion of respondent Rosario
Diaz. From the arguments adduced by appellants
WHEREFORE, in view of the above in their brief We gather that it is their stand that
premises, this Court is of the the system of life insurance and the system of
opinion that the foregoing retirement insurance, that are provided for in
stipulation of facts is in order and in Commonwealth Act 186 as amended, are simply
accordance with law and the same complementary to each other, or that one is a
is hereby approved. Judgment, part or an extension of the other, such that
therefore, is hereby rendered whoever is named the beneficiary in the life
declaring the petitioner Basilia insurance is also the beneficiary in the retirement
Berdin Vda. de Consuegra and her insurance when no such beneficiary is named in
co-petitioners Juliana, Pacita, Maria the retirement insurance.
Lourdes, Jose, Jr., Rodrigo, Lenida
and Luis, all surnamed Consuegra, The contention of appellants is untenable.
beneficiary and entitled to one-half
It should be noted that the law creating the
Government Service Insurance System is
Commonwealth Act 186 which was enacted by
the National Assembly on November 14, 1936.
As originally approved, Commonwealth Act 186
provided for the compulsory membership in the
Government Service Insurance System of all
regularly and permanently appointed officials and
employees of the government, considering as
automatically insured on life all such officials and
employees, and issuing to them the
corresponding membership policy under the
terms and conditions as provided in the Act.2
Originally, Commonwealth Act 186 provided for
life insurance only. Commonwealth Act 186 was
amended by Republic Act 660 which was
enacted by the Congress of the Philippines on
June 16, 1951, and, among others, the
amendatory Act provided that aside from the
system of life insurance under the Government
Service Insurance System there was also
established the system of retirement insurance.
Thus, We will note in Republic Act 660 that there
is a chapter on life insurance and another chapter
on retirement insurance. 3 Under the chapter on
life insurance are sections 8, 9 and 10 of
Commonwealth Act 186, as amended; and under
the chapter on retirement insurance are sections
11, 12, 13 and 13-A. On May 31, 1957, Republic
Act 1616 was enacted by Congress, amending
section 12 of Commonwealth Act 186 as
amended by Republic Act 660, by adding thereto
two new subsections, designated as subsections
(b) and (c). This subsection (c) of section 12 of
Commonwealth Act 186, as amended by
Republic Acts 660, 1616 and 3096, was again
amended by Republic Act 3836 which was
enacted on June 22, 1963.lâwphî1.ñèt The
pertinent provisions of subsection (c) of Section
12 of Commonwealth Act 186, as thus amended
and reamended, read as follows:
(c) Retirement is likewise allowed to
a member, regardless of age, who
has rendered at least twenty years
of service. The benefit shall, in
addition to the return of his personal
contributions plus interest and the
payment of the corresponding
employer's premiums described in
subsection (a) of Section 5 hereof,
without interest, be only a gratuity
equivalent to one month's salary for
every year of service, based on the
highest rate received, but not to
exceed twenty-four
months; Provided, That the retiring
officer or employee has been in the
service of the said employer or
office for at least four years,
immediately preceding his
retirement.
xxx xxx xxx
The gratuity is payable by the
employer or office concerned which
is hereby authorized to provide the
necessary appropriation to pay the
same from any unexpended items
of appropriations.
Elective or appointive officials and
employees paid gratuity under this
subsection shall be entitled to the
commutation of the unused
vacation and sick leave, based on
the highest rate received, which
they may have to their credit at the
time of retirement.
Jose Consuegra died on September 26, 1965,
and so at the time of his death he had acquired
rights under the above-quoted provisions of
subsection (c) of Section 12 of Com. Act 186, as
finally amended by Rep. Act 3836 on June 22,
1963. When Consuegra died on September 26,
1965, he had to his credit 22.5028 years of
service in the government, and pursuant to the
above-quoted provisions of subsection (c) of
Section 12 of Com. Act 186, as amended, on the
basis of the highest rate of salary received by him
which was P282.83 per month, he was entitled to
receive retirement insurance benefits in the
amount of P6,304.47. This is the retirement
benefits that are the subject of dispute between
the appellants, on the one hand, and the appellee
Rosario Diaz, on the other, in the present case.
The question posed is: to whom should this
retirement insurance benefits of Jose Consuegra annuity chosen by him previously
be paid, because he did not, or failed to, shall be paid accordingly.
designate the beneficiary of his retirement
insurance? The above-quoted provisions of subsection (b) of
Section 11 of Commonwealth Act 186, as
If Consuegra had 22.5028 years of service in the amended by Rep. Act 660, clearly indicate that
government when he died on September 26, there is need for the employee to file an
1965, it follows that he started in the government application for retirement insurance benefits
service sometime during the early part of 1943, or when he becomes a member of the GSIS, and he
before 1943. In 1943 Com. Act 186 was not yet should state in his application the beneficiary of
amended, and the only benefits then provided for his retirement insurance. Hence, the beneficiary
in said Com. Act 186 were those that proceed named in the life insurance does not
from a life insurance. Upon entering the automatically become the beneficiary in the
government service Consuegra became a retirement insurance unless the same beneficiary
compulsory member of the GSIS, being in the life insurance is so designated in the
automatically insured on his life, pursuant to the application for retirement insurance.
provisions of Com. Act 186 which was in force at
the time. During 1943 the operation of the Section 24 of Commonwealth Act 186, as
Government Service Insurance System was amended by Rep. Act 660, provides for a life
suspended because of the war, and the operation insurance fund and for a retirement insurance
was resumed sometime in 1946. When fund. There was no such provision in Com. Act
Consuegra designated his beneficiaries in his life 186 before it was amended by Rep. Act 660.
insurance he could not have intended those Thus, subsections (a) and (b) of Section 24 of
beneficiaries of his life insurance as also the Commonwealth Act 186, as amended by Rep.
beneficiaries of his retirement insurance because Act 660, partly read as follows:
the provisions on retirement insurance under the
GSIS came about only when Com. Act 186 was (a) Life insurance fund. — This shall
amended by Rep. Act 660 on June 16, 1951. consist of all premiums for life
Hence, it cannot be said that because herein insurance benefit and/or earnings
appellants were designated beneficiaries in and savings therefrom. It shall meet
Consuegra's life insurance they automatically death claims as they may arise or
became the beneficiaries also of his retirement such equities as any member may
insurance. Rep. Act 660 added to Com. Act 186 be entitled to, under the conditions
provisions regarding retirement insurance, which of his policy, and shall maintain the
are Sections 11, 12, and 13 of Com. Act 186, as required reserves to the end of
amended. Subsection (b) of Section 11 of Com. guaranteeing the fulfillment of the
Act 186, as amended by Rep. Act 660, provides life insurance contracts issued by
as follows: the System ...

(b) Survivors benefit. — Upon death (b) Retirement insurance fund. —

before he becomes eligible for
retirement, his beneficiaries as
recorded in the application for
retirement annuity filed with the
System shall be paid his own
premiums with interest of three per
centum per annum, compounded
monthly. If on his death he is
eligible for retirement, then the
automatic retirement annuity or the
This shall consist of all contributions
for retirement insurance benefit and
of earnings and savings therefrom.
It shall meet annuity payments and
establish the required reserves to
the end of guaranteeing the
fulfillment of the contracts issued by
the System. ...
Thus, We see that the GSIS offers two separate
and distinct systems of benefits to its members —
one is the life insurance and the other is the
retirement insurance. These two distinct systems
of benefits are paid out from two distinct and
separate funds that are maintained by the GSIS.
In the case of the proceeds of a life insurance,
the same are paid to whoever is named the
beneficiary in the life insurance policy. As in the
case of a life insurance provided for in the
Insurance Act (Act 2427, as amended), the
beneficiary in a life insurance under the GSIS
may not necessarily be a heir of the insured. The
insured in a life insurance may designate any
person as beneficiary unless disqualified to be so
under the provisions of the Civil Code.4 And in the
absence of any beneficiary named in the life
insurance policy, the proceeds of the insurance
will go to the estate of the insured.
Retirement insurance is primarily intended for the
benefit of the employee — to provide for his old
age, or incapacity, after rendering service in the
government for a required number of years. If the
employee reaches the age of retirement, he gets
the retirement benefits even to the exclusion of
the beneficiary or beneficiaries named in his
application for retirement insurance. The
beneficiary of the retirement insurance can only
claim the proceeds of the retirement insurance if
the employee dies before retirement. If the
employee failed or overlooked to state the
beneficiary of his retirement insurance, the
retirement benefits will accrue to his estate and
will be given to his legal heirs in accordance with
law, as in the case of a life insurance if no WHEREFORE, the decision appealed from is
beneficiary is named in the insurance policy.
It is Our view, therefore, that the respondent
GSIS had correctly acted when it ruled that the Concepcion, C.J., Reyes, J.B.L., Dizon,
proceeds of the retirement insurance of the late Makalintal, Castro, Fernando, Teehankee,
Jose Consuegra should be divided equally Barredo, Villamor and Makasiar, JJ., concur.
between his first living wife Rosario Diaz, on the
one hand, and his second wife Basilia Berdin and
his children by her, on the other; and the lower
court did not commit error when it confirmed the
action of the GSIS, it being accepted as a fact
that the second marriage of Jose Consuegra to
Basilia Berdin was contracted in good faith. The
lower court has correctly applied the ruling of this
Court in the case of Lao, et al. vs. Dee Tim, et al.,
45 Phil. 739 as cited in the stipulation of facts and
in the decision appealed from.5 In the recent case
of Gomez vs. Lipana, L-23214, June 30,
1970,6 this Court, in construing the rights of two
women who were married to the same man — a
situation more or less similar to the case of
appellant Basilia Berdin and appellee Rosario
Diaz — held "that since the defendant's first
marriage has not been dissolved or declared void
the conjugal partnership established by that
marriage has not ceased. Nor has the first wife
lost or relinquished her status as putative heir of
her husband under the new Civil Code, entitled to
share in his estate upon his death should she
survive him. Consequently, whether as conjugal
partner in a still subsisting marriage or as such
putative heir she has an interest in the husband's
share in the property here in dispute.... " And with
respect to the right of the second wife, this Court
observed that although the second marriage can
be presumed to be void ab initio as it was
celebrated while the first marriage was still
subsisting, still there is need for judicial
declaration of such nullity. And inasmuch as the
conjugal partnership formed by the second
marriage was dissolved before judicial
declaration of its nullity, "[t]he only lust and
equitable solution in this case would be to
recognize the right of the second wife to her
share of one-half in the property acquired by her
and her husband and consider the other half as
pertaining to the conjugal partnership of the first
marriage."
affirmed, with costs against petitioners-
appellants. It is so ordered.
G.R. No. 171406               April 4, 2011 On November 29, 1995, the stevedores of
petitioner began loading the bags in the trucks of
ASIAN TERMINALS, INC., Petitioner, MEC Customs Brokerage for transport and
vs. delivery to the consignee.10 On December 28,
MALAYAN INSURANCE, CO., 1995, after all the bags were unloaded in the
INC., Respondent. warehouses of the consignee, a total of 2,881
bags were in bad order condition due to spillage,
DECISION caking, and hardening of the contents.11

DEL CASTILLO, J.: On April 19, 1996, respondent, as insurer, paid

the value of the lost/ damaged cargoes to the
Once the insurer pays the insured, equity consignee in the amount of ₱643,600.25.12
demands reimbursement as no one should
benefit at the expense of another. Ruling of the Regional Trial Court

This Petition for Review on Certiorari1 under Rule
45 of the Rules of Court assails the July 14, 2005
Decision2 and the February 14, 2006
3
Resolution  of the Court of Appeals (CA) in CA
G.R. CV No. 61798.
Factual Antecedents
On November 14, 1995, Shandong Weifang
Soda Ash Plant shipped on board the vessel MV
"Jinlian I" 60,000 plastic bags of soda ash dense
(each bag weighing 50 kilograms) from China to
Manila.4 The shipment, with an invoice value of
US$456,000.00, was insured with respondent
Malayan Insurance Company, Inc. under Marine
Risk Note No. RN-0001-21430, and covered by a
Bill of Lading issued by Tianjin Navigation
Company with Philippine Banking Corporation as
the consignee and Chemphil Albright and Wilson
Corporation as the notify party.5
On November 21, 1995, upon arrival of the
vessel at Pier 9, South Harbor, Manila,6 the
stevedores of petitioner Asian Terminals, Inc., a
duly registered domestic corporation engaged in
providing arrastre and stevedoring
services,7 unloaded the 60,000 bags of soda ash
dense from the vessel and brought them to the
open storage area of petitioner for temporary
storage and safekeeping, pending clearance from
the Bureau of Customs and delivery to the
consignee.8 When the unloading of the bags was
completed on November 28, 1995, 2,702 bags
were found to be in bad order condition.9
On November 20, 1996, respondent, as subrogee
of the consignee, filed before the Regional Trial
Court (RTC) of Manila, Branch 35, a
Complaint13 for damages against petitioner, the
shipper Inchcape Shipping Services, and the
cargo broker MEC Customs Brokerage.14
After the filing of the Answers,15 trial ensued.
On June 26, 1998, the RTC rendered a
Decision16 finding petitioner liable for the
damage/loss sustained by the shipment but
absolving the other defendants. The RTC found
that the proximate cause of the damage/loss was
the negligence of petitioner’s stevedores who
handled the unloading of the cargoes from the
vessel.17 The RTC emphasized that despite the
admonitions of Marine Cargo Surveyors Edgar
Liceralde and Redentor Antonio not to use steel
hooks in retrieving and picking-up the bags,
petitioner’s stevedores continued to use such
tools, which pierced the bags and caused the
spillage.18 The RTC, thus, ruled that petitioner, as
employer, is liable for the acts and omissions of
its stevedores under Articles 217619 and 2180
paragraph (4)20 of the Civil Code.21 Hence, the
dispositive portion of the Decision reads:
WHEREFORE, judgment is rendered ordering
defendant Asian Terminal, Inc. to pay plaintiff
Malayan Insurance Company, Inc. the sum of
₱643,600.25 plus interest thereon at legal rate
computed from November 20, 1996, the date the
Complaint was filed, until the principal obligation
is fully paid, and the costs.
The complaint of the plaintiff against defendants SUBROGEE, IT NEVER PRESENTED
Inchcape Shipping Services and MEC Customs ANY VALID, EXISTING, ENFORCEABLE
Brokerage, and the counterclaims of said INSURANCE POLICY OR ANY COPY
defendants against the plaintiff are dismissed. THEREOF IN COURT.

SO ORDERED.22 2. THE HONORABLE COURT OF

APPEALS ERRED WHEN IT
Ruling of the Court of Appeals OVERLOOKED THE FACT THAT THE
TOSBOC & RESBOC WERE ADOPTED
Aggrieved, petitioner appealed23 to the CA but the AS COMMON EXHIBITS BY BOTH
appeal was denied. In its July 14, 2005 Decision, PETITIONER AND RESPONDENT.
the CA agreed with the RTC that the
damage/loss was caused by the negligence of 3. CONTRARY TO TESTIMONIAL
petitioner’s stevedores in handling and storing the EVIDENCE ON RECORD, VARIOUS
subject shipment.24 The CA likewise rejected DOCUMENTATIONS WOULD POINT TO
petitioner’s assertion that it received the subject THE VESSEL’S LIABILITY AS THERE IS,
shipment in bad order condition as this was IN THIS INSTANT CASE, AN
belied by Marine Cargo Surveyors Redentor OVERWHELMING DOCUMENTARY
Antonio and Edgar Liceralde, who both testified EVIDENCE TO PROVE THAT THE
that the actual counting of bad order bags was DAMAGE IN QUESTION WERE
done only after all the bags were unloaded from SUSTAINED WHEN THE SHIPMENT
the vessel and that the Turn Over Survey of Bad WAS IN THE CUSTODY OF THE
Order Cargoes (TOSBOC) upon which petitioner VESSEL.
anchors its defense was prepared only on
November 28, 1995 or after the unloading of the 4. THE HONORABLE COURT OF
bags was completed.25 Thus, the CA disposed of APPEALS ERRED WHEN IT ADJUDGED
the appeal as follows: HEREIN DEFENDANT LIABLE DUE TO
[THE] FACT THAT THE TURN OVER
WHEREFORE, premises considered, the appeal SURVEY OF BAD ORDER CARGOES
is DENIED. The assailed Decision dated June 26, (TOSBOC) WAS PREPARED ONLY
1998 of the Regional Trial Court of Manila, AFTER THE COMPLETION OF THE
Branch 35, in Civil Case No. 96-80945 is DISCHARGING OPERATIONS OR ON
hereby AFFIRMED in all respects. NOVEMBER 28, 1995. THUS,
CONCLUDING THAT DAMAGE TO THE
SO ORDERED.26 CARGOES WAS DUE TO THE
IMPROPER HANDLING THEREOF BY
Petitioner moved for reconsideration27 but the CA ATI STEVEDORES.
denied the same in a Resolution28 dated February
14, 2006 for lack of merit. 5. THE HONORABLE COURT OF
APPEALS ERRED IN NOT TAKING
Issues JUDICIAL NOTICE OF THE CONTRACT
FOR CARGO HANDLING SERVICES
Hence, the present recourse, petitioner BETWEEN PPA AND ATI AND
contending that: APPLYING THE PERTINENT
PROVISIONS THEREOF AS REGARDS
1. RESPONDENT-INSURER IS NOT ATI’S LIABILITY.29
ENTITLED TO THE RELIEF GRANTED
AS IT FAILED TO ESTABLISH ITS In sum, the issues are: (1) whether the
CAUSE OF ACTION AGAINST HEREIN non-presentation of the insurance contract
PETITIONER SINCE, AS THE ALLEGED or policy is fatal to respondent’s cause of
 action; (2) whether the proximate cause of Respondent’s Arguments
the damage/loss to the shipment was the
negligence of petitioner’s stevedores; and Respondent, on the other hand, argues that the
(3) whether the court can take judicial non-presentation of the insurance contract or
notice of the Management Contract policy was not raised in the trial court. Thus, it
between petitioner and the Philippine Ports cannot be raised for the first time on
Authority (PPA) in determining petitioner’s appeal.39 Respondent likewise contends that
liability. under prevailing jurisprudence, presentation of
the insurance policy is not
40
Petitioner’s Arguments indispensable.  Moreover, with or without the
insurance contract or policy, respondent claims
Petitioner contends that respondent has no cause that it should be allowed to recover under Article
of action because it failed to present the 123641 of the Civil Code.42 Respondent further
insurance contract or policy covering the subject avers that "the right of subrogation has its roots in
shipment.30 Petitioner argues that the equity - it is designed to promote and to
Subrogation Receipt presented by respondent is accomplish justice and is the mode which equity
not sufficient to prove that the subject shipment adopts to compel the ultimate payment of a debt
was insured and that respondent was validly by one who in justice, equity and good
subrogated to the rights of the consignee.31 Thus, conscience ought to pay."43
petitioner submits that without proof of a valid
subrogation, respondent is not entitled to any Respondent likewise maintains that the RTC and
reimbursement.32 the CA correctly found that the damage/loss
sustained by the subject shipment was caused by
Petitioner likewise puts in issue the finding of the the negligent acts of petitioner’s
RTC, which was affirmed by the CA, that the stevedores.44 Such factual findings of the RTC,
proximate cause of the damage/loss to the affirmed by the CA, are conclusive and should no
shipment was the negligence of petitioner’s longer be disturbed.45 In fact, under Section 146 of
stevedores.33 Petitioner avers that such finding is Rule 45 of the Rules of Court, only questions of
contrary to the documentary evidence, i.e., the law may be raised in a petition for review on
TOSBOC, the Request for Bad Order Survey certiorari.47
(RESBOC) and the Report of Survey.34 According
to petitioner, these documents prove that it As to the Management Contract for cargo
received the subject shipment in bad order handling services, respondent contends that this
condition and that no additional damage was is outside the operation of judicial notice.48 And
sustained by the subject shipment under its even if it is not, petitioner’s liability cannot be
custody.35 Petitioner asserts that although the limited by it since it is a contract of adhesion.49
TOSBOC was prepared only after all the bags
were unloaded by petitioner’s stevedores, this Our Ruling
does not mean that the damage/loss was caused
by its stevedores.36 The petition is bereft of merit.

Petitioner also claims that the amount of
damages should not be more than ₱5,000.00,
pursuant to its Management Contract for cargo
handling services with the PPA.37 Petitioner
contends that the CA should have taken judicial
notice of the said contract since it is an official act
of an executive department subject to judicial
cognizance.38
Non-presentation of the insurance contract or
policy is not fatal in the instant case
Petitioner claims that respondent’s non-
presentation of the insurance contract or policy
between the respondent and the consignee is
fatal to its cause of action.
We do not agree.
First of all, this was never raised as an issue
before the RTC. In fact, it is not among the issues
agreed upon by the parties to be resolved during
the pre-trial.50 As we have said, "the
determination of issues during the pre-trial
conference bars the consideration of other
questions, whether during trial or on
51
appeal."  Thus, "[t]he parties must disclose
during pre-trial all issues they intend to raise
during the trial, except those involving privileged
or impeaching matters. x x x The basis of the rule
is simple. Petitioners are bound by the
delimitation of the issues during the pre-trial
because they themselves agreed to the same."52
Neither was this issue raised on appeal.53 Basic
is the rule that "issues or grounds not raised
below cannot be resolved on review by the
Supreme Court, for to allow the parties to raise
new issues is antithetical to the sporting idea of
fair play, justice and due process."54
port of departure to the M/S Oriental Statesman;
third, from the M/S Oriental Statesman to the M/S
Pacific Conveyor; fourth, from the M/S Pacific
Conveyor to the port of arrival; fifth, from the port
of arrival to the arrastre operator; sixth, from the
arrastre operator to the hauler, Mabuhay
Brokerage Co., Inc. (private respondent therein);
and lastly, from the hauler to the consignee. We
emphasized in that case that in the absence of
proof of stipulations to the contrary, the hauler
can be liable only for any damage that occurred
from the time it received the cargo until it finally
delivered it to the consignee. Ordinarily, it cannot
be held responsible for the handling of the cargo
before it actually received it. The insurance
contract, which was not presented in evidence in
that case would have indicated the scope of the
insurer’s liability, if any, since no evidence was
adduced indicating at what stage in the handling
process the damage to the cargo was
sustained.57 (Emphasis supplied.)

Besides, non-presentation of the insurance In International Container Terminal Services, Inc.

contract or policy is not v. FGU Insurance Corporation,58 we used the
same line of reasoning in upholding the Decision
necessarily fatal.  In Delsan Transport Lines, Inc. of the CA finding the arrastre contractor liable for
55

v. Court of Appeals,56 we ruled that: the lost shipment despite the failure of the
insurance company to offer in evidence the
Anent the second issue, it is our view and so hold insurance contract or policy. We explained:
that the presentation in evidence of the marine
insurance policy is not indispensable in this case Indeed, jurisprudence has it that the marine
before the insurer may recover from the common insurance policy needs to be presented in
carrier the insured value of the lost cargo in the evidence before the trial court or even belatedly
exercise of its subrogatory right. The subrogation before the appellate court. In Malayan Insurance
receipt, by itself, is sufficient to establish not only Co., Inc. v. Regis Brokerage Corp., the Court
the relationship of herein private respondent as stated that the presentation of the marine
insurer and Caltex, as the assured shipper of the insurance policy was necessary, as the issues
lost cargo of industrial fuel oil, but also the raised therein arose from the very existence of an
amount paid to settle the insurance claim. The insurance contract between Malayan Insurance
right of subrogation accrues simply upon and its consignee, ABB Koppel, even prior to the
payment by the insurance company of the loss of the shipment. In Wallem Philippines
insurance claim. Shipping, Inc. v. Prudential Guarantee and
Assurance, Inc., the Court ruled that the
The presentation of the insurance policy was insurance contract must be presented in
necessary in the case of Home Insurance evidence in order to determine the extent of the
Corporation v. CA (a case cited by petitioner) coverage. This was also the ruling of the Court in
because the shipment therein (hydraulic engines) Home Insurance Corporation v. Court of Appeals.
passed through several stages with different
parties involved in each stage. First, from the However, as in every general rule, there are
shipper to the port of departure; second, from the admitted exceptions. In Delsan Transport Lines,
Inc. v. Court of Appeals, the Court stated that the examine, and evaluate or weigh all over again the
presentation of the insurance policy was not fatal probative value of the evidence
because the loss of the cargo undoubtedly presented,"63 especially where the findings of
occurred while on board the petitioner’s vessel, both the trial court and the appellate court
unlike in Home Insurance in which the cargo coincide on the matter.64 As we have often said,
passed through several stages with different factual findings of the CA affirming those of the
parties and it could not be determined when the RTC are conclusive and binding, except in the
damage to the cargo occurred, such that the following cases: "(1) when the inference made is
insurer should be liable for it. manifestly mistaken, absurd or impossible; (2)
when there is grave abuse of discretion; (3) when
As in Delsan, there is no doubt that the loss of the findings are grounded entirely on
the cargo in the present case occurred while in speculations, surmises or conjectures; (4) when
petitioner’s custody. Moreover, there is no issue the judgment of the [CA] is based on
as regards the provisions of Marine Open Policy misapprehension of facts; (5) when the [CA], in
No. MOP-12763, such that the presentation of making its findings, went beyond the issues of the
the contract itself is necessary for perusal, not to case and the same is contrary to the admissions
mention that its existence was already admitted of both appellant and appellee; (6) when the
by petitioner in open court. And even though it findings of fact are conclusions without citation of
was not offered in evidence, it still can be specific evidence on which they are based; (7)
considered by the court as long as they have when the [CA] manifestly overlooked certain
been properly identified by testimony duly relevant facts not disputed by the parties and
recorded and they have themselves been which, if properly considered, would justify a
incorporated in the records of the case.59 different conclusion; and (8) when the findings of
fact of the [CA] are premised on the absence of
Similarly, in this case, the presentation of the evidence and are contradicted by the evidence
insurance contract or policy was not necessary. on record."65 None of these are availing in the
Although petitioner objected to the admission of present case.
the Subrogation Receipt in its Comment to
respondent’s formal offer of evidence on the Both the RTC and the CA found the negligence of
ground that respondent failed to present the petitioner’s stevedores to be the proximate cause
insurance contract or policy,60 a perusal of of the damage/loss to the shipment. In
petitioner’s Answer61 and Pre-Trial Brief62 shows disregarding the contention of petitioner that such
that petitioner never questioned respondent’s finding is contrary to the documentary evidence,
right to subrogation, nor did it dispute the the CA had this to say:
coverage of the insurance contract or policy.
Since there was no issue regarding the validity of ATI, however, contends that the finding of the trial
the insurance contract or policy, or any provision court was contrary to the documentary evidence
thereof, respondent had no reason to present the of record, particularly, the Turn Over Survey of
insurance contract or policy as evidence during Bad Order Cargoes dated November 28, 1995,
the trial. which was executed prior to the turn-over of the
cargo by the carrier to the arrastre operator ATI,
Factual findings of the CA, affirming the RTC, are and which showed that the shipment already
conclusive and binding contained 2,702 damaged bags.

Petitioner’s attempt to absolve itself from liability We are not persuaded.

must likewise fail.
Contrary to ATI’s assertion, witness Redentor
Only questions of law are allowed in petitions for Antonio, marine cargo surveyor of Inchcape for
review on certiorari under Rule 45 of the Rules of the vessel Jinlian I which arrived on November
Court. Thus, it is not our duty "to review, 21, 1995 and up to completion of discharging on
November 28, 1995, testified that it was only respect and will not be reversed on appeal,
after all the bags were unloaded from the unless it overlooked substantial facts and
vessel that the actual counting of bad order circumstances which, if considered, would
bags was made, thus: materially affect the result of the case.

xxxx We also find ATI liable for the additional 179

damaged bags discovered upon delivery of the
The above testimony of Redentor Antonio shipment at the consignee’s warehouse in Pasig.
was corroborated by Edgar Liceralde, marine The final Report of Survey executed by SMS
cargo surveyor connected with SMS Average Average Surveyors & Adjusters, Inc., and
Surveyors and Adjusters, Inc., the company independent surveyor hired by the consignee,
requested by consignee Chemphil Albright and shows that the subject shipment incurred a total
Wilson Corporation to provide superintendence, of 2881 damaged bags.
report the condition and determine the final
outturn of quantity/weight of the subject shipment. The Report states that the withdrawal and
xxx delivery of the shipment took about ninety-five
(95) trips from November 29, 1995 to December
xxxx 28, 1995 and it was upon completion of the
delivery to consignee’s warehouse where the
Defendant-appellant ATI, for its part, presented final count of 2881 damaged bags was made.
its claim officer as witness who testified that a The damage consisted of torn/bad order
survey was conducted by the shipping company condition of the bags due to spillages and
and ATI before the shipment was turned over to caked/hardened portions.
the possession of ATI and that the Turn Over
Survey of Bad Order Cargoes was prepared by We agree with the trial court that the damage to
ATI’s Bad Order (BO) Inspector. the shipment was caused by the negligence of
ATI’s stevedores and for which ATI is liable under
Considering that the shipment arrived on Articles 2180 and 2176 of the Civil Code. The
November 21, 1998 and the unloading proximate cause of the damage (i.e., torn bags,
operation commenced on said date and was spillage of contents and caked/hardened portions
completed on November 26, 1998, while the of the contents) was the improper handling of the
Turn Over Survey of Bad Order Cargoes, cargoes by ATI’s stevedores, x x x
reflecting a figure of 2,702 damaged bags,
was prepared and signed on November 28, x x x x
1998 by ATI’s BO Inspector and co-signed by a
representative of the shipping company, the trial ATI has not satisfactorily rebutted plaintiff-
court’s finding that the damage to the cargoes appellee’s evidence on the negligence of ATI’s
was due to the improper handling thereof by stevedores in the handling and safekeeping of
ATI’s stevedores cannot be said to be without the cargoes. x x x
substantial support from the records.
xxxx
We thus see no cogent reason to depart from the
ruling of the trial court that ATI should be made We find no reason to disagree with the trial
liable for the 2,702 bags of damaged shipment. court’s conclusion. Indeed, from the nature of the
Needless to state, it is hornbook doctrine that the [damage] caused to the shipment, i.e., torn bags,
assessment of witnesses and their testimonies is spillage of contents and hardened or caked
a matter best undertaken by the trial court, which portions of the contents, it is not difficult to see
had the opportunity to observe the demeanor, that the damage caused was due to the
conduct or attitude of the witnesses. The findings negligence of ATI’s stevedores who used steel
of the trial court on this point are accorded great hooks to retrieve the bags from the higher
portions of the piles thereby piercing the bags executive department. The PPA, which was
and spilling their contents, and who piled the created by virtue of Presidential Decree No. 857,
bags in the open storage area of ATI with as amended,68 is a government-owned and
insufficient cover thereby exposing them to the controlled corporation in charge of administering
elements and [causing] the contents to cake or the ports in the country.69 Obviously, the PPA
harden.66 was only performing a proprietary function when
it entered into a Management Contract with
Clearly, the finding of negligence on the part of petitioner. As such, judicial notice cannot be
petitioner’s stevedores is supported by both applied.
testimonial and documentary evidence. Hence,
we see no reason to disturb the same. WHEREFORE, the petition is hereby DENIED.
The assailed July 14, 2005 Decision and the
Judicial notice does not apply February 14, 2006 Resolution of the Court of
Appeals in CA-G.R. CV No. 61798 are hereby
Finally, petitioner implores us to take judicial AFFIRMED.
notice of Section 7.01,67 Article VII of the
Management Contract for cargo handling SO ORDERED.
services it entered with the PPA, which limits
petitioner’s liability to ₱5,000.00 per package. MARIANO C. DEL CASTILLO
Associate Justice
Unfortunately for the petitioner, it cannot avail of
judicial notice. WE CONCUR:

Sections 1 and 2 of Rule 129 of the Rules of

Court provide that:

SECTION 1. Judicial notice, when mandatory. —

A court shall take judicial notice, without the
introduction of evidence, of the existence and
territorial extent of states, their political history,
forms of government and symbols of nationality,
the law of nations, the admiralty and maritime
courts of the world and their seals, the political
constitution and history of the Philippines, the
official acts of the legislative, executive and
judicial departments of the Philippines, the laws
of nature, the measure of time, and the
geographical divisions.1avvphi1

SEC. 2. Judicial notice, when discretionary. — A

court may take judicial notice of matters which
are of public knowledge, or are capable of
unquestionable demonstration or ought to be
known to judges because of their judicial
functions.

The Management Contract entered into by

petitioner and the PPA is clearly not among the
matters which the courts can take judicial notice
of. It cannot be considered an official act of the
G.R. No. 184300               July 11, 2012 previously stated, the same contract of carriage
had been annually executed by the parties every
MALAYAN INSURANCE CO., INC., Petitioner, year since 1989.5
vs.
PHILIPPINES FIRST INSURANCE CO., INC. Under the contract, Reputable undertook to
and REPUTABLE FORWARDER SERVICES, answer for "all risks with respect to the goods and
INC., Respondents. shall be liable to the COMPANY (Wyeth), for the
loss, destruction, or damage of the
DECISION goods/products due to any and all causes
whatsoever, including theft, robbery, flood, storm,
REYES, J.: earthquakes, lightning, and other force majeure
while the goods/products are in transit and until
Before the Court is a petitiOn for review on actual delivery to the customers, salesmen, and
certiorari filed by petitioner Malayan Insurance dealers of the COMPANY".6
Co., lnc. (Malayan) assailing the Decision1 dated
February 29, 2008 and Resolution2 dated August The contract also required Reputable to secure
28, 2008 of the Court of Appeals (CA) in CA-G.R. an insurance policy on Wyeth’s goods.7 Thus, on
CV No. 71204 which affirmed with modification February 11, 1994, Reputable signed a Special
the decision of the Regional Trial Court (RTC), Risk Insurance Policy (SR Policy) with petitioner
Branch 38 of Manila. Malayan for the amount of P1,000,000.00.

Antecedent Facts On October 6, 1994, during the effectivity of the

Since 1989, Wyeth Philippines, Inc. (Wyeth) and
respondent Reputable Forwarder Services, Inc.
(Reputable) had been annually executing a
contract of carriage, whereby the latter undertook
to transport and deliver the former’s products to
its customers, dealers or salesmen.3
On November 18, 1993, Wyeth procured Marine
Policy No. MAR 13797 (Marine Policy) from
respondent Philippines First Insurance Co., Inc.
(Philippines First) to secure its interest over its
own products. Philippines First thereby insured
Wyeth’s nutritional, pharmaceutical and other
products usual or incidental to the insured’s
business while the same were being transported
or shipped in the Philippines. The policy covers
all risks of direct physical loss or damage from
any external cause, if by land, and provides a
limit of P6,000,000.00 per any one land vehicle.
Marine Policy and SR Policy, Reputable received
from Wyeth 1,000 boxes of Promil infant formula
worth P2,357,582.70 to be delivered by
Reputable to Mercury Drug Corporation in Libis,
Quezon City. Unfortunately, on the same date,
the truck carrying Wyeth’s products was hijacked
by about 10 armed men. They threatened to kill
the truck driver and two of his helpers should they
refuse to turn over the truck and its contents to
the said highway robbers. The hijacked truck was
recovered two weeks later without its cargo.
On March 8, 1995, Philippines First, after due
investigation and adjustment, and pursuant to the
Marine Policy, paid Wyeth P2,133,257.00 as
indemnity. Philippines First then demanded
reimbursement from Reputable, having been
subrogated to the rights of Wyeth by virtue of the
payment. The latter, however, ignored the
demand.

On December 1, 1993, Wyeth executed its Consequently, Philippines First instituted an

annual contract of carriage with Reputable. It
turned out, however, that the contract was not
signed by Wyeth’s
representative/s.4 Nevertheless, it was admittedly
signed by Reputable’s representatives, the terms
thereof faithfully observed by the parties and, as
action for sum of money against Reputable on
August 12, 1996.8 In its complaint, Philippines
First stated that Reputable is a "private
corporation engaged in the business of a
common carrier." In its answer,9 Reputable
claimed that it is a private carrier. It also claimed
that it cannot be made liable under the contract of
carriage with Wyeth since the contract was not
signed by Wyeth’s representative and that the
cause of the loss was force majeure, i.e., the
hijacking incident.
On the third-party Complaint, judgment is hereby
rendered finding
Malayan liable to indemnify [Reputable] the
following:

Subsequently, Reputable impleaded Malayan as 1. the amount of P1,000,000.00

third-party defendant in an effort to collect the representing the proceeds of the insurance
amount covered in the SR Policy. According to policy;
Reputable, "it was validly insured with Malayan
for P1,000,000.00 with respect to the lost 2. the amount of P50,000.00 as attorney’s
products under the latter’s Insurance Policy No. fees; and
SR-0001-02577 effective February 1, 1994 to
February 1, 1995" and that the SR Policy covered 3. the costs of suit.
the risk of robbery or hijacking.10
SO ORDERED.12
Disclaiming any liability, Malayan argued, among
others, that under Section 5 of the SR Policy, the Dissatisfied, both Reputable and Malayan filed
insurance does not cover any loss or damage to their respective appeals from the RTC decision.
property which at the time of the happening of
such loss or damage is insured by any marine Reputable asserted that the RTC erred in holding
policy and that the SR Policy expressly excluded that its contract of carriage with Wyeth was
third-party liability. binding despite Wyeth’s failure to sign the same.
Reputable further contended that the provisions
After trial, the RTC rendered its Decision11 finding of the contract are unreasonable, unjust, and
Reputable liable to Philippines First for the contrary to law and public policy.
amount of indemnity it paid to Wyeth, among
others. In turn, Malayan was found by the RTC to For its part, Malayan invoked Section 5 of its SR
be liable to Reputable to the extent of the policy Policy, which provides:
coverage. The dispositive portion of the RTC
decision provides: Section 5. INSURANCE WITH OTHER
COMPANIES. The insurance does not cover any
WHEREFORE, on the main Complaint, judgment loss or damage to property which at the time of
is hereby rendered finding [Reputable] liable for the happening of such loss or damage is insured
the loss of the Wyeth products and orders it to by or would but for the existence of this policy, be
pay Philippines First the following: insured by any Fire or Marine policy or policies
except in respect of any excess beyond the
1. the amount of P2,133,257.00 amount which would have been payable under
representing the amount paid by the Fire or Marine policy or policies had this
Philippines First to Wyeth for the loss of insurance not been effected.
the products in question;
Malayan argued that inasmuch as there was
2. the amount of P15,650.00 representing already a marine policy issued by Philippines
the adjustment fees paid by Philippines First securing the same subject matter against
First to hired adjusters/surveyors; loss and that since the monetary coverage/value
of the Marine Policy is more than enough to
3. the amount of P50,000.00 as attorney’s indemnify the hijacked cargo, Philippines First
fees; and alone must bear the loss.

4. the costs of suit.

Malayan sought the dismissal of the third-party
complaint against it. In the alternative, it prayed
that it be held liable for no more than
P468,766.70, its alleged pro-rata share of the
loss based on the amount covered by the policy,
subject to the provision of Section 12 of the SR
Policy, which states:
Hence, this petition.
Malayan insists that the CA failed to properly
resolve the issue on the "statutory limitations on
the liability of common carriers" and the
"difference between an ‘other insurance clause’
and an ‘over insurance clause’."

12. OTHER INSURANCE CLAUSE. If at the time Malayan also contends that the CA erred when it
of any loss or damage happening to any property held that Reputable is a private carrier and
hereby insured, there be any other subsisting should be bound by the contractual stipulations in
insurance or insurances, whether effected by the the contract of carriage. This argument is based
insured or by any other person or persons, on its assertion that Philippines First judicially
covering the same property, the company shall admitted in its complaint that Reputable is a
not be liable to pay or contribute more than its common carrier and as such, Reputable should
ratable proportion of such loss or damage. not be held liable pursuant to Article 1745(6) of
the Civil Code.16 Necessarily, if Reputable is not
On February 29, 2008, the CA rendered the liable for the loss, then there is no reason to hold
assailed decision sustaining the ruling of the Malayan liable to Reputable.
RTC, the decretal portion of which reads:
Further, Malayan posits that there resulted in an
WHEREFORE, in view of the foregoing, the impairment of contract when the CA failed to
assailed Decision dated 29 September 2000, as apply the express provisions of Section 5
modified in the Order dated 21 July 2001, is (referred to by Malayan as over insurance clause)
AFFIRMED with MODIFICATION in that the and Section 12 (referred to by Malayan as other
award of attorney’s fees in favor of Reputable is insurance clause) of its SR Policy as these
DELETED. provisions could have been read together there
being no actual conflict between them.
SO ORDERED.13
Reputable, meanwhile, contends that it is exempt
The CA ruled, among others, that: (1) Reputable from liability for acts committed by
is estopped from assailing the validity of the thieves/robbers who act with grave or irresistible
contract of carriage on the ground of lack of threat whether it is a common carrier or a
signature of Wyeth’s representative/s; (2) private/special carrier. It, however, maintains the
Reputable is liable under the contract for the correctness of the CA ruling that Malayan is liable
value of the goods even if the same was lost due to Philippines First for the full amount of its policy
to fortuitous event; and (3) Section 12 of the SR coverage and not merely a ratable portion thereof
Policy prevails over Section 5, it being the latter under Section 12 of the SR Policy.
provision; however, since the ratable proportion
provision of Section 12 applies only in case of Finally, Philippines First contends that the factual
double insurance, which is not present, then it finding that Reputable is a private carrier should
should not be applied and Malayan should be be accorded the highest degree of respect and
held liable for the full amount of the policy must be considered conclusive between the
coverage, that is, P1,000,000.00.14 parties, and that a review of such finding by the
Court is not warranted under the circumstances.
On March 14, 2008, Malayan moved for As to its alleged judicial admission that Reputable
reconsideration of the assailed decision but it was is a common carrier, Philippines First proffered
denied by the CA in its Resolution dated August the declaration made by Reputable that it is a
28, 2008.15 private carrier. Said declaration was allegedly
reiterated by Reputable in its third party
complaint, which in turn was duly admitted by meritorious circumstances, none of which are
Malayan in its answer to the said third-party present in this case.18
complaint. In addition, Reputable even presented
evidence to prove that it is a private carrier. Malayan relies on the alleged judicial admission
of Philippines First in its complaint that Reputable
As to the applicability of Sections 5 and 12 in the is a common carrier.19 Invoking Section 4, Rule
SR Policy, Philippines First reiterated the ruling of 129 of the Rules on Evidence that "an admission
the CA. Philippines First, however, prayed for a verbal or written, made by a party in the course of
slight modification of the assailed decision, the proceeding in the same case, does not
praying that Reputable and Malayan be rendered require proof," it is Malayan’s position that the
solidarily liable to it in the amount of RTC and CA should have ruled that
P998,000.00, which represents the balance from
the P1,000.000.00 coverage of the SR Policy Reputable is a common carrier. Consequently,
after deducting P2,000.00 under Section 10 of pursuant to Article 1745(6) of the Civil Code, the
the said SR Policy.17 liability of Reputable for the loss of Wyeth’s
goods should be dispensed with, or at least
Issues diminished.

The liability of Malayan under the SR Policy It is true that judicial admissions, such as matters
hinges on the following issues for resolution: alleged in the pleadings do not require proof, and
need not be offered to be considered by the
1) Whether Reputable is a private carrier; court. "The court, for the proper decision of the
case, may and should consider, without the
2) Whether Reputable is strictly bound by introduction of evidence, the facts admitted by the
the stipulations in its contract of carriage parties."20 The rule on judicial admission,
with Wyeth, such that it should be liable for however, also states that such allegation,
any risk of loss or damage, for any cause statement, or admission is conclusive as against
whatsoever, including that due to theft or the pleader,21 and that the facts alleged in the
robbery and other force majeure; complaint are deemed admissions of the plaintiff
and binding upon him.22 In this case, the pleader
3) Whether the RTC and CA erred in or the plaintiff who alleged that Reputable is a
rendering "nugatory" Sections 5 and common carrier was Philippines First. It cannot,
Section 12 of the SR Policy; and by any stretch of imagination, be made
conclusive as against Reputable whose nature of
4) Whether Reputable should be held business is in question.
solidarily liable with Malayan for the
amount of P998,000.00 due to Philippines It should be stressed that Philippines First is not
First. privy to the SR Policy between Wyeth and
Reputable; rather, it is a mere subrogee to the
The Court’s Ruling right of Wyeth to collect from Reputable under the
terms of the contract of carriage. Philippines First
On the first issue – Reputable is a private carrier. is not in any position to make any admission,
much more a definitive pronouncement, as to the
The Court agrees with the RTC and CA that nature of Reputable’s business and there
Reputable is a private carrier. Well-entrenched in appears no other connection between Philippines
jurisprudence is the rule that factual findings of First and Reputable which suggests mutual
the trial court, especially when affirmed by the familiarity between them.
appellate court, are accorded the highest degree
of respect and considered conclusive between Moreover, records show that the alleged judicial
the parties, save for certain exceptional and admission of Philippines First was essentially
disputed by Reputable when it stated in The extent of a private carrier’s obligation is
paragraphs 2, 4, and 11 of its answer that it is dictated by the stipulations of a contract it entered
actually a private or special carrier.23 In addition, into, provided its stipulations, clauses, terms and
Reputable stated in paragraph 2 of its third-party conditions are not contrary to law, morals, good
complaint that it is "a private carrier engaged in customs, public order, or public policy. "The Civil
the carriage of goods."24 Such allegation was, in Code provisions on common carriers should not
turn, admitted by Malayan in paragraph 2 of its be applied where the carrier is not acting as such
answer to the third-party complaint.25 There is but as a private carrier. Public policy governing
also nothing in the records which show that common carriers has no force where the public at
Philippines First persistently maintained its large is not involved."30
stance that Reputable is a common carrier or that
it even contested or proved otherwise Thus, being a private carrier, the extent of
Reputable’s position that it is a private or special Reputable’s liability is fully governed by the
carrier. stipulations of the contract of carriage, one of
which is that it shall be liable to Wyeth for the loss
Hence, in the face of Reputable’s contrary of the goods/products due to any and all causes
admission as to the nature of its own business, whatsoever, including theft, robbery and other
what was stated by Philippines First in its force majeure while the goods/products are in
complaint is reduced to nothing more than mere transit and until actual delivery to Wyeth’s
allegation, which must be proved for it to be given customers, salesmen and dealers.31
any weight or value. The settled rule is that mere
allegation is not proof.26 On the third issue – other insurance vis-à-vis over
insurance.
More importantly, the finding of the RTC and CA
that Reputable is a special or private carrier is Malayan refers to Section 5 of its SR Policy as an
warranted by the evidence on record, primarily, "over insurance clause" and to Section 12 as a
the unrebutted testimony of Reputable’s Vice "modified ‘other insurance’ clause".32 In rendering
President and General Manager, Mr. William Ang inapplicable said provisions in the SR Policy, the
Lian Suan, who expressly stated in open court CA ruled in this wise:
that Reputable serves only one customer,
Wyeth.27 Since Sec. 5 calls for Malayan’s complete
absolution in case the other insurance would be
Under Article 1732 of the Civil Code, common sufficient to cover the entire amount of the loss, it
carriers are persons, corporations, firms, or is in direct conflict with Sec. 12 which provides
associations engaged in the business of carrying only for a pro-rated contribution between the two
or transporting passenger or goods, or both by insurers. Being the later provision, and pursuant
land, water or air for compensation, offering their to the rules on interpretation of contracts, Sec. 12
services to the public. On the other hand, a should therefore prevail.
private carrier is one wherein the carriage is
generally undertaken by special agreement and it x x x x
does not hold itself out to carry goods for the
general public.28 A common carrier becomes a x x x The intention of both Reputable and
private carrier when it undertakes to carry a Malayan should be given effect as against the
special cargo or chartered to a special person wordings of Sec. 12 of their contract, as it was
only.29 For all intents and purposes, therefore, intended by the parties to operate only in case of
Reputable operated as a private/special carrier double insurance, or where the benefits of the
with regard to its contract of carriage with Wyeth. policies of both plaintiff-appellee and Malayan
should pertain to Reputable alone. But since the
On the second issue – Reputable is bound by the court a quo correctly ruled that there is no double
terms of the contract of carriage. insurance in this case inasmuch as Reputable
was not privy thereto, and therefore did not stand insurance or insurances in force at the time of the
to benefit from the policy issued by plaintiff- loss or damage is not more than P200,000.00."
appellee in favor of Wyeth, then Malayan’s stand
should be rejected. In this case, similar to Condition No. 3 in
Geagonia, Section 5 does not provide for the
To rule that Sec. 12 operates even in the nullity of the SR Policy but simply limits the
absence of double insurance would work injustice liability of Malayan only up to the excess of the
to Reputable which, despite paying premiums for amount that was not covered by the other
a P1,000,000.00 insurance coverage, would not insurance policy. In interpreting the "other
be entitled to recover said amount for the simple insurance clause" in Geagonia, the Court ruled
reason that the same property is covered by that the prohibition applies only in case of double
another insurance policy, a policy to which it was insurance. The Court ruled that in order to
not a party to and much less, from which it did not constitute a violation of the clause, the other
stand to benefit. Plainly, this unfair situation could insurance must be upon same subject matter, the
not have been the intention of both Reputable same interest therein, and the same risk. Thus,
and Malayan in signing the insurance contract in even though the multiple insurance policies
question.33 involved were all issued in the name of the same
assured, over the same subject matter and
In questioning said ruling, Malayan posits that covering the same risk, it was ruled that there
Sections 5 and 12 are separate provisions was no violation of the "other insurance clause"
applicable under distinct circumstances. Malayan since there was no double insurance.
argues that "it will not be completely absolved
under Section 5 of its policy if it were the assured Section 12 of the SR Policy, on the other hand, is
itself who obtained additional insurance coverage the over insurance clause. More particularly, it
on the same property and the loss incurred by covers the situation where there is over insurance
Wyeth’s cargo was more than that insured by due to double insurance. In such case, Section
Philippines First’s marine policy. On the other 15 provides that Malayan shall "not be liable to
hand, Section 12 will not completely absolve pay or contribute more than its ratable proportion
Malayan if additional insurance coverage on the of such loss or damage." This is in accord with
same cargo were obtained by someone besides the principle of contribution provided under
Reputable, in which case Malayan’s SR policy Section 94(e) of the Insurance Code,37 which
will contribute or share ratable proportion of a states that "where the insured is over insured by
covered cargo loss."34 double insurance, each insurer is bound, as
between himself and the other insurers, to
Malayan’s position cannot be countenanced. contribute ratably to the loss in proportion to the
amount for which he is liable under his contract."
Section 5 is actually the other insurance clause
(also called "additional insurance" and "double Clearly, both Sections 5 and 12 presuppose the
insurance"), one akin to Condition No. 3 in issue existence of a double insurance. The pivotal
in Geagonia v. CA,35 which validity was upheld by question that now arises is whether there is
the Court as a warranty that no other insurance double insurance in this case such that either
exists. The Court ruled that Condition No. 336 is a Section 5 or Section 12 of the SR Policy may be
condition which is not proscribed by law as its applied.
incorporation in the policy is allowed by Section
75 of the Insurance Code. It was also the Court’s By the express provision of Section 93 of the
finding that unlike the other insurance clauses, Insurance Code, double insurance exists where
Condition No. 3 does not absolutely declare void the same person is insured by several insurers
any violation thereof but expressly provides that separately in respect to the same subject and
the condition "shall not apply when the total interest. The requisites in order for double
insurance to arise are as follows:38
 1. The person insured is the same; correctly ruled by the RTC and CA, neither
Section 5 nor Section 12 of the SR Policy can be
2. Two or more insurers insuring applied.
separately;
Apart from the foregoing, the Court is also wont
3. There is identity of subject matter; to strictly construe the controversial provisions of
the SR Policy against Malayan.1âwphi1 This is in
4. There is identity of interest insured; and keeping with the rule that:

5. There is identity of the risk or peril "Indemnity and liability insurance policies are
insured against. construed in accordance with the general rule of
resolving any ambiguity therein in favor of the
In the present case, while it is true that the insured, where the contract or policy is prepared
Marine Policy and the SR Policy were both by the insurer. A contract of insurance, being a
issued over the same subject matter, i.e. goods contract of adhesion, par excellence, any
belonging to Wyeth, and both covered the same ambiguity therein should be resolved against the
peril insured against, it is, however, beyond cavil insurer; in other words, it should be construed
that the said policies were issued to two different liberally in favor of the insured and strictly against
persons or entities. It is undisputed that Wyeth is the insurer. Limitations of liability should be
the recognized insured of Philippines First under regarded with extreme jealousy and must be
its Marine Policy, while Reputable is the construed in such a way as to preclude the
recognized insured of Malayan under the SR insurer from noncompliance with its obligations."40
Policy. The fact that Reputable procured
Malayan’s SR Policy over the goods of Wyeth Moreover, the CA correctly ruled that:
pursuant merely to the stipulated requirement
under its contract of carriage with the latter does To rule that Sec. 12 operates even in the
not make Reputable a mere agent of Wyeth in absence of double insurance would work injustice
obtaining the said SR Policy. to Reputable which, despite paying premiums for
a P1,000,000.00 insurance coverage, would not
The interest of Wyeth over the property subject be entitled to recover said amount for the simple
matter of both insurance contracts is also reason that the same property is covered by
different and distinct from that of Reputable’s. another insurance policy, a policy to which it was
The policy issued by Philippines First was in not a party to and much less, from which it did not
consideration of the legal and/or equitable stand to benefit. x x x41
interest of Wyeth over its own goods. On the
other hand, what was issued by Malayan to On the fourth issue – Reputable is not solidarily
Reputable was over the latter’s insurable interest liable with Malayan.
over the safety of the goods, which may become
the basis of the latter’s liability in case of loss or There is solidary liability only when the obligation
damage to the property and falls within the expressly so states, when the law so provides or
contemplation of Section 15 of the Insurance when the nature of the obligation so requires.
Code.39
In Heirs of George Y. Poe v. Malayan lnsurance
Therefore, even though the two concerned Company., lnc.,42 the Court ruled that:
insurance policies were issued over the same
goods and cover the same risk, there arises no Where the insurance contract provides for
double insurance since they were issued to two indemnity against liability to third persons, the
different persons/entities having distinct insurable liability of the insurer is direct and such third
interests. Necessarily, over insurance by double persons can directly sue the insurer. The direct
insurance cannot likewise exist. Hence, as liability of the insurer under indemnity contracts
against third party[- ]liability does not mean,
however, that the insurer can be held solidarily
liable with the insured and/or the other parties
found at fault, since they are being held liable
under different obligations. The liability of the
insured carrier or vehicle owner is based on tort,
in accordance with the provisions of the Civil
Code; while that of the insurer arises from
contract, particularly, the insurance
43 
policy: (Citation omitted and emphasis supplied)

Suffice it to say that Malayan's and Reputable's

respective liabilities arose from different
obligations- Malayan's is based on the SR Policy
while Reputable's is based on the contract of
carriage.

All told, the Court finds no reversible error in the

judgment sought to be reviewed.

WHEREFORE, premises considered, the petition

is DENIED. The Decision dated February 29,
2008 and Resolution dated August 28, 2008 of
the Court of Appeals in CA-G.R. CV No. 71204
are hereby AFFIRMED.

Cost against petitioner Malayan Insurance Co.,

Inc.

SO ORDERED.