Topic: Contract of Insurance [G.R. No. 124050.

June 19, 1997] MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, Petitioners, v. COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, Respondents. DECISION PUNO, J.: This is a petition for review on certiorari to annul and set aside the Decision of respondent Court of Appeals dated December 14, 19951 and its Resolution dated February 22, 19962 in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe Corporation and Hongkong Government Supplies Department v. South Sea Surety Insurance Co., Inc. and The Charter Insurance Corporation.3chanroblesvirtuallawlibrary In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC1022.4chanroblesvirtuallawlibrary Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter. Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as thirdparty inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged. Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect. On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their defense, private respondents averred that they have no obligation to pay the amount claimed by petitioners because the damage to the goods is due to factory defects which are not covered by the insurance policies. The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to

manufacturing defects. It also noted that the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure against all causes of conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to fraud or intentional misconduct on the part of the insured. The dispositive portion of the decision states: WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally, to pay the plaintiffs the following: 1. the sum equivalent in Philippine currency of HK$299,345.30 with legal rate of interest as of the filing of the complaint; 2. P100,000.00 as and for attorney's fees; and 3. costs of suit. SO ORDERED.5chanroblesvirtuallawlibrary Private respondents elevated the case to respondent Court of Appeals. Respondent court affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the "all risks" insurance policies issued by private respondents to petitioner Mayer. However, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. It held that the action is barred under Section 3(6) of the Carriage of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel. Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered." Respondent court ruled that this provision applies not only to the carrier but also to the insurer, citing Filipino Merchants Insurance Co., Inc. vs. Alejandro.6chanroblesvirtuallawlibrary Hence this petition with the following assignments of error: 1. The respondent Court of Appeals erred in holding that petitioners' cause of action had already prescribed on the mistaken application of the Carriage of Goods by Sea Act and the doctrine of Filipino Merchants Co., Inc. v. Alejandro (145 SCRA 42); and 2. The respondent Court of Appeals committed an error in dismissing the complaint.7chanroblesvirtuallawlibrary The petition is impressed with merit. Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on

the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code. Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro8 and the other cases9 cited therein does not support respondent court's view that the insurer's liability prescribes after one year if no action for indemnity is filed against the carrier or the insurer. In that case, the shipper filed a complaint against the insurer for recovery of a sum of money as indemnity for the loss and damage sustained by the insured goods. The insurer, in turn, filed a third-party complaint against the carrier for reimbursement of the amount it paid to the shipper. The insurer filed the third-party complaint on January 9, 1978, more than one year after delivery of the goods on December 17, 1977. The court held that the Insurer was already barred from filing a claim against the carrier because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the goods or the date when the goods should have been delivered. The court said that "the coverage of the Act includes the insurer of the goods."10chanroblesvirtuallawlibrary The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril.11 An "all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured.12 Thus, when private respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.13chanroblesvirtuallawlibrary IN VIEW WHEREOF, the petition is GRANTED. The Decision of respondent Court of Appeals dated December 14, 1995 and its Resolution dated February 22, 1996 are hereby SET ASIDE and the Decision of the Regional Trial Court is hereby REINSTATED. No costs. SO ORDERED. Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.

FIRST DIVISION

PHILIPPINE HEALTH CARE

cralawcralawG.R.

No. 167330

PROVIDERS, INC., Petitioner, Present: -versuscralaw

COMMISSIONER OF INTERNAL REVENUE, Respondent. cralawPromulgated: affirmatively June 12, 2008

x-----------------------------------------x

DECISION CORONA, J.:

cralawIs

a health care agreement in the nature of an insurance contract and

therefore subject to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)? This is an issue of first impression. The Court of Appeals (CA) answered it in its August 16, 2004 decision[1] in CA-G.R. SP No. 70479. Petitioner Philippine Health Care Providers, Inc. believes otherwise and assails the CA decision in this petition for review under Rule 45 of the Rules of Court.

Petitioner is a domestic corporation whose primary purpose is [t]o establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health

maintenance organization to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization.[2] Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.[3]

The pertinent part of petitioners membership or health care agreement[4] provides:

VII BENEFITS Subject to paragraphs VIII [on pre-existing medical condition] and X [on claims for reimbursement] of this Agreement, Members shall have the following Benefits under this Agreement:
In-Patient Services. In the event that a Member contract[s] sickness or suffers injury which requires confinement in a participating Hospital[,] the services or benefits stated below shall be provided to the Member free of charge, but in no case shall [petitioner] be liable to pay more than P75,000.00 in benefits with respect to anyone sickness, injury or related causes. If a member has exhausted such maximum benefits with respect to a particular sickness, injury or related causes, all accounts in excess of P75,000.00 shall be borne by the enrollee. It is[,] however, understood that the payment by [petitioner] of the said maximum in In-Patient Benefits to any one member shall preclude a subsequent payment of benefits to such member in respect of an unrelated sickness, injury or related causes happening during the remainder of his membership term.

(a) Room and Board (b) Services of physician and/or surgeon or specialist

(b) The confinement shall be in a Participating Hospital and the accommodation shall be in accordance with the Member[]s benefit classification. (a) Gold Plan Standard Annual Physical Examination on the anniversary date of membership.e.. [petitioner] shall not be responsible for any charges incurred after discharge has been authorized. to be done at [petitioners] designated hospital/clinic. (c) Professional services shall be provided only by the [petitioners] Physicians or Participating Physicians. to wit: cralaw(i)cralawTaking a medical history cralaw(ii)cralawPhysical examination cralaw(iii)cralawChest x-ray cralaw(iv)cralawStool examination (v)cralawComplete Blood Count (vi)cralawUrinalysis cralaw(vii)cralawFasting Blood Sugar (FBS) cralaw(viii)cralawSGPT cralaw(ix)cralawCreatinine cralaw(x)cralawUric Acid cralaw(xi)cralawResting Electrocardiogram cralaw(xii)cralawPap Smear (Optional for women 40 years and above) (b) Platinum Family Plan/Gold Family Plan and Silver Annual Physical Examination. x-rays and other necessary diagnostic services (i) Transfusion of blood and other blood elements Condition for in-Patient Care. trombolytic agents) (f) Anesthesia and its administration (g) Dressings. A Member is entitled free of charge to the following services or benefits which shall be rendered or administered either in [petitioners] Clinic or in a Participating Hospital under the direction or supervision of [petitioners] Physician. Participating Physician or [petitioners] Medical Coordinator in that Hospital prior to confinement. plaster casts and other miscellaneous supplies (h) Laboratory tests. The provision of the services or benefits mentioned in the immediately preceding paragraph shall be subject to the following conditions: (a) The Hospital Confinement must be approved by [petitioners] Physician. (d) If discharge from the Hospital has been authorized by [petitioners] attending Physician or Participating Physician and the Member shall fail or refuse to do so. Out-Patient Services. Participating Physician or [petitioners] Medical Coordinator. cralawThe following tests are to be done as part of the Member[]s Annual checkcralaw cralaw .(c) Use of operating room and recovery room (d) Standard Nursing Services (e) Drugs and Medication for use in the hospital except those which are used to dissolve blood clots in the vascular systems (i.

the member shall be entitled to the following services free of charge: (a) doctors fees.][5] Provided. For this purpose. (d) oxygen. and 50% of the professional fees of non-participating physicians based on [petitioners] schedule of fees provided that the total amount[. (c) medicines used for immediate relief and during treatment. however. exercise and other healthy habits (iv)cralawImmunization but excluding drugs for vaccines used (d) Out-Patient Care. casts and sutures and (f) x-rays.] whichever is lesser. (e) dressings.00[. which shall include: (i)cralawConsultation. [petitioner] shall reimburse [him][6] 80% of the hospital bill or the amount of P5. If the Member received care in a non-participating hospital.000.] inclusive of hospital bills and professional fee shall not exceed P5. (b) emergency room fees.00. including specialist evaluation (ii)cralawTreatment of injury or illness (iii)cralawNecessary x-ray and laboratory examination (iv)cralawEmergency medicines needed for the immediate relief of symptoms (v)cralawMinor surgery not requiring confinement cralaw Emergency Care. inclusive of hospital bill and professional fees. which shall include: (i)cralawPeriodic Monitoring of Health Problems (ii)cralawFamily planning counseling (iii) Consultation and advices on diet. a Member is entitled to receive emergency care [in case of emergency. all hospitals and all attending physician(s) in the Emergency Room automatically become accredited. intravenous fluids and whole blood and human blood products.00.up program at [petitioners] designated clinic. to wit: 1)cralawRoutine Physical Examination cralaw2)cralawCBC (Complete Blood Count) cralaw * Hemoglobin * Hematocrit * Differential * RBC/WBC 3)cralawChest X-ray cralaw4)cralawUrinalysis cralaw5)cralawFecalysis (c) Preventive Health Care. laboratory and diagnostic examinations and other medical services related to the emergency treatment of the patient.000. that in no case shall the total amount payable by [petitioner] for said Emergency. In participating hospitals. .000. Subject to the conditions and limitations in this Agreement and those specified below. exceed P75.

23 1997 54. The assessment represented the following: Value Added Tax (VAT) 1996 P 45. and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province. plate.450. inland.19 68.258. or other public body or .030. On all policies of insurance or bonds or obligations of the nature of indemnity for loss.92 The deficiency DST assessment was imposed on petitioners health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code which provides: Section 185. for the taxable years 1996 and 1997 in the total amount of P224. employers liability. city.26 DST P 55.641. steam boiler.738. burglar.596. 2000. automatic sprinkler. including surcharges and interest.03__ P 100. municipality.702. and all bonds.196. and fire insurance). or liability made or renewed by any person. or other branch of insurance (except life.352. marine. for the doing or not doing of anything therein specified.18.73__ P 124. conditioned for the performance of the duties of any office or position. elevator. respondent Commissioner of Internal Revenue sent petitioner a formal demand letter and the corresponding assessment notices demanding the payment of deficiency taxes.506. glass.On January 27.767. or recognizances.434. Stamp tax on fidelity bonds and other insurance policies . fidelity. association or company or corporation transacting the business of accident.610.746. undertakings. damage.

50) on each four pesos (P4. 1998 until fully paid for the 1997 VAT deficiency. 2004. the CA rendered its decision. petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST assessments. of the premium charged. Accordingly. VAT Ruling No. there shall be collected a documentary stamp tax of fifty centavos (P0.organization. On August 16. 1997 until fully paid for the 1996 VAT deficiency and P31. 2000. (emphasis supplied) Petitioner protested the assessment in a letter dated February 23. company or corporation. April 5.75 inclusive of 25% surcharge plus 20% interest from January 20.094.[10] It held that petitioners health care agreement was in the nature of a non-life insurance contract subject to DST: . [231]-88 is declared void and without force and effect. As respondent did not act on the protest.163. the CTA rendered a decision. or guaranteeing any mercantile credits. and on all obligations guaranteeing the title to any real estate.87 inclusive of 25% surcharge plus 20% interest from January 20. The 1996 and 1997 deficiency DST assessment against petitioner is hereby CANCELLED AND SET ASIDE.00). He claimed that petitioners health care agreement was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code. or fractional part thereof.[8] cralawRespondent appealed the CTA decision to the CA[9] insofar as it cancelled the DST assessment. in view of the foregoing. Respondent is ORDERED to DESIST from collecting the said DST deficiency tax. 2002. the instant Petition for Review is PARTIALLY GRANTED. cralaw cralaw SO ORDERED.054. which may be made or renewed by any such person.831. Petitioner is hereby ORDERED to PAY the deficiency VAT amounting to P22.[7] the dispositive portion of which read: cralawOn WHEREFORE.

or facility offered at exchanges for the transaction of the business.[11] Petitioner moved for reconsideration but the CA denied it. damage or liability arising from an unknown or contingent event. The DST is levied on the exercise by persons of certain privileges conferred by law for the creation. or termination of specific legal relationships through the execution of specific instruments. not an insurance company under the jurisdiction of the Insurance Commission. or liability. We do not agree.450. respectively. Respondent is ordered to pay the amounts of P55. It is a health maintenance organization regulated by the Department of Health. 2000. plus 25% surcharge for late payment and 20% interest per annum from January 27. Petitioner essentially argues that its health care agreement is not a contract of insurance but a contract for the provision on a prepaid basis of medical services.258.[12] It is an excise upon the privilege.[14] The event insured against must be designated in the contract and must either be unknown or contingent. revision. the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance (except life. bond or obligation in the nature of indemnity for loss. that are not based on loss or damage. petitioner asserts that the health care agreement is not subject to DST. until the same shall have been fully paid.WHEREFORE. For these reasons. The Decision of the Court of Tax Appeals. inland and fire insurance).19 and P68. cralaw cralaw SO ORDERED. insofar as it cancelled and set aside the 1996 and 1997 deficiency documentary stamp tax assessment and ordered petitioner to desist from collecting the same is REVERSED and SET ASIDE. the petition for review is GRANTED. opportunity.352. marine. Petitioner also insists that it is not engaged in the insurance business.[13] In particular. a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss. including medical check-up. Hence. Under the law.[15] . this petition.746.73 as deficiency Documentary Stamp Tax for 1996 and 1997. pursuant to Sections 248 and 249 of the Tax Code. damage.

if they can be predicted at all. its health care agreement is not a contract for the provision of medical services. In case of exposure o f entitled to indemnification by petitioner. v. Olivares. It is also incorrect to say that the health care agreement is not based on loss or damage because. vaccine administration and family planning counseling) is the contingent event which gives rise to liability on the part of the member. x-ray and laboratory tests. And in the recent case of Blue Cross Healthcare. the fact that petitioner must relieve its member from liability by paying for expenses arising from the stipulated contingencies belies its claim that its services are prepaid. The expenses to be incurred by each member cannot be predicted beforehand. petitioner assumes the liability and indemnifies its member for hospital. Petitioner assumes the risk of paying for the costs of the services even if they are significantly and substantially more than what the member has the member to liability. medical and related expenses (such as professional fees of physicians).[16] this Court ruled that a health care agreement is in the nature of a non-life insurance policy. injury or emergency or his availment of so-called out-patient services (including physical examination. medical and professional services to the member in case of sickness. he would be . Under the health care agreement. medical consultations. Furthermore. under the said agreement. Contrary to petitioners claim. Petitioner does not actually provide medical or hospital services but merely arranges for the same[17] and pays for them up to the stipulated maximum amount of coverage.Petitioners health care agreement is primarily a contract of indemnity. Inc. the rendition of hospital. The term loss or damage is broad enough to cover the monetary expense or liability a member will incur in case of illness or injury.

medical or any other expense arising from sickness. the health care provider must pay for the same to the extent agreed upon under the contract. petitioner is bound to indemnify any member who incurs hospital.prepaid. Under the agreement. Petitioner does not bear the costs alone but distributes or spreads them out among a large group of persons bearing a similar risk. which is primarily a contract of indemnity.: [T]he insurable interest of [the subscriber] in obtaining the health care agreement was his own health. v. Petitioners contention that it is a health maintenance organization and not an insurance company is irrelevant. medical or any other expense arising from sickness. Contracts between companies like petitioner and the beneficiaries under their plans are treated as insurance contracts. that is. This Court ruled in Philamcare Health Systems. [21] It is .[20] Moreover.[19] (emphasis supplied) Similarly. This is insurance. the insurable interest of every member of petitioners health care program in obtaining the health care agreement is his own health.[18] The health care agreement in that case entitled the subscriber to avail of the hospitalization benefits. injury or other stipulated contingency to the extent agreed upon under the contract. listed therein. The health care agreement was in the nature of non-life insurance. injury or other stipulated contingency. It also provided for out-patient benefits such as annual physical examinations. Inc. among all the other members of the health care program. Petitioners health care agreement is substantially similar to that involved in Philamcare Health Systems. DST is not a tax on the business transacted but an excise on the privilege. or facility offered at exchanges for the transaction of the business. Once the member incurs hospital. preventive health care and other out-patient services. Inc. whether ordinary or emergency. CA. opportunity.

166245 PARK CORPORATION.746. 2004 decision of the Court of Appeals in CA-G.R.258. The August 16. SO ORDERED.cralawApril 9. Petitioner is ordered to pay the amounts of P55. 2008 . No. c cralaw cralawCARPIO cralaw MORALES.352.[22] WHEREFORE. SP No.450. Costs against petitioner.19 and P68. 70479 is AFFIRMED. plus 25% surcharge for late payment and 20% interest per annum from January 27. SECOND DIVISION ETERNAL GARDENS MEMORIALcralawG. 2000 until full payment thereof.R.73 as deficiency documentary stamp tax for 1996 and 1997. THE PHILIPPINE AMERICANcralawPromulgated: LIFE INSURANCE COMPANY. the petition is hereby DENIED. separate and apart from the business itself.cralaw cralawRespondent.an excise on the facilities used in the transaction of the business. respectively.

x-----------------------------------------------------------------------------------------x DECISION cralaw VELASCO. 57810 is the query: May the inaction of the insurer on the insurance application be considered as approval of the application? The Facts cralawOn December 10. is indebted to the Assured for the unpaid balance of his loan with the Assured. respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. cralawThe relevant provisions of the policy are: ELIGIBILITY. 2004 Decision[1] of the Court of Appeals (CA) in CA-G. the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. JR. and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age. . CV No. 1980. Under the policy..R. crlaw EVIDENCE OF INSURABILITY. renewable on a yearly basis.: The Case cralawCentral to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26. P-1920[2] with petitioner Eternal Gardens Memorial Park Corporation (Eternal). J. The policy was to be effective for a period of one year.

Any amount of insurance in excess of P50. which served as an insurance claim for Chuangs death. 2.000. Any lot purchaser who is more than 55 years of age. (3) Certificate of Claimant. LIFE INSURANCE BENEFIT. 1984. while still living.000. and (4) Statement of Account showing the unpaid balance of Chuang before his death. a declaration of good health shall be required for all Lot Purchasers as part of the application. (3) Application for Insurance accomplished and signed by the insured. whichever is smaller. One of those included in the list as new business was a certain John Chuang. (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen. Attached to the claim were the following documents: (1) Chuangs Certificate of Death. 1984[5] to Philamlife.000. 1982. (4) Certificate of Attending Physician. together with a copy of the application of each purchaser. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy.000. However. Eternal complied by submitting a letter dated December 29.[3] cralaw cralawEternal was required under the policy to submit to Philamlife a list of all new lot purchasers.No medical examination shall be required for amounts of insurance up to P50.[4] containing a list of insurable balances of its lot buyers for October 1982. (2) Assureds Certificate (with form attached). The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100. 1984. Chuang. In relation to the instant petition. cralaw EFFECTIVE DATE OF BENEFIT.00. On August 2. Philamlife wrote Eternal a letter on November 12. and the amounts of the respective unpaid balances of all insured lot purchasers. and (5) Assureds Certificate. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following: cralaw cralaw 1. [6] requiring Eternal to submit the following documents relative to its insurance claim for Chuangs death: (1) Certificate of Claimant (with form attached).00. In reply. there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.00. However. Chuang died. cralawEternal sent a letter dated August 20. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. . His balance of payments was PhP 100.

[7] which was received by Philamlife on November 15. 1986. With regard to our acceptance of premiums. No application for Group Insurance was submitted in our office prior to his death on August 2. prior to his death. 1984. 1984. We cite further the provision on Effective Date of Coverage under the policy which states that there shall be no insurance if the application is not approved by the Company. Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife. We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was therefore aware of these pertinent provisions.000 on April 25. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100. under Evidence of Insurability provision. 1984. 1986. the dispositive portion of which reads: . for our approval but was submitted instead on November 15. a declaration of good health shall be required for all Lot Purchasers as party of the application.000. Philamlife denied Eternals insurance claim in a letter dated May 20.Eternal transmitted the required documents through a letter dated November 14. return all the premiums which have been paid in behalf of John Uy Chuang. We will however.00 each. after his death. P-1920. Mr. The trial court decided in favor of Eternal. After more than a year. 1984. Philamlife had not furnished Eternal with any reply to the latters insurance claim. 14736. Since no application had been submitted by the Insured/Assured. these do not connote our approval per se of the insurance coverage but are held by us in trust for the payor until the prerequisites for insurance coverage shall have been met. John Uy Chuang was not covered under the Policy.[8] In response to Eternals demand. docketed as Civil Case No.[9] a portion of which reads: The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100. cralawConsequently. In accordance with our Creditors Group Life Policy No.

1982.00. and. cralawHence. ordering the Defendant PHILAMLIFE. thus: WHEREFORE. to pay the sum of P10. [10] It further ruled that due to Philamlifes inaction from the submission of the requirements of the group insurance on December 29.[11] cralawThe CA based its Decision on the factual finding that Chuangs application was not enclosed in Eternals letter dated December 29. 1982.000. Philamlife appealed to the CA. as well as Philamlifes acceptance of the premiums during the same period. judgment is hereby rendered in favor of Plaintiff ETERNAL. stating. among others: Encl: Phil-Am Life Insurance Application Forms & Cert. Philamlife was deemed to have approved Chuangs application. representing the proceeds of the Policy of John Uy Chuang. Chuang was not covered by Philamlifes insurance. 1982 to Chuangs death on August 2. cralaw cralaw SO ORDERED. payment must follow. the decision of the Regional Trial Court of Makati in Civil Case No. not .000. The RTC found that Eternal submitted Chuangs application for insurance which he accomplished before his death. The RTC said that since the contract is a group life insurance. No costs. Thus. until fully paid. It further ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance Code. we have this petition with the following grounds: The Honorable Court of Appeals has decided a question of substance. SO ORDERED. 57810 is REVERSED and SET ASIDE. to pay the sum of P100. the CA concluded. 1984. plus legal rate of interest. which ruled. premises considered. against Defendant PHILAMLIFE. as testified to by Eternals witness and evidenced by the letter dated December 29. and the complaint is DISMISSED. there being no application form.WHEREFORE. once proof of death is submitted.00 as attorneys fees.

Reversing and setting aside the Decision of the Regional Trial Court dated May 29. this Court may review them. if properly considered. Eternal added it was noted at the bottom of said letter that the . which. and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties. surmises or conjectures. such rule is subject to exceptions. (2) when the inference made is manifestly mistaken. (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondent. (7) when the findings [of the CA] are contrary to the trial court. Court of Appeals: (1) when the findings are grounded entirely on speculation. absurd or impossible. would justify a different conclusion. There was no valid insurance coverage. (3) when there is grave abuse of discretion. including Chuang in the list of new businesses. or its findings are contrary to the admissions of both the appellant and the appellee. The application for insurance was not duly submitted to respondent PhilamLife before the death of John Chuang. considering their findings of facts are conclusive and binding on this Court. 1982. thus.) cralawIn the instant case. (5) when the findings of facts are conflicting. (4) when the judgment is based on a misapprehension of facts. (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record. The Courts Ruling As a general rule. In Eternals letter dated December 29. II. cralawEternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance application of Chuang before his death.therefore determined by this Honorable Court.[12] (Emphasis supplied. However. (8) when the findings are conclusions without citation of specific evidence on which they are based. or has decided it in a way not in accord with law or with the applicable jurisprudence. 1996. (6) when in making its findings the [CA] went beyond the issues of the case. as enunciated in Sampayan v. in holding that: I. and III. this Court is not a trier of facts and will not re-examine factual issues raised before the CA and first level courts. a list of insurable interests of buyers for October 1982 was attached. the factual findings of the RTC were reversed by the CA.

or misinterpreted. might affect the result of the case. were enclosed in the letter that was apparently received by Philamlife on January 15. the letter dated December 29. cralawOn the other hand. as shown by the testimony of Edilberto Mendoza: cralaw cralaw Atty. cralawPhilamlife primarily claims that Eternal did not even know where the original insurance application of Chuang was. cralawThe states that the insurance forms for the attached list of burial lot buyers were attached to the letter. however. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. Philamlife is deemed to have received Chuangs insurance application. cralawTo reiterate.[13] The burden of evidence has shifted to Philamlife. Arevalo: Q cralawWhere is the original of the application form which is required in case of new coverage? cralaw . reveals no overlooked facts of substance and value. conduct. if considered. 1983. fact of the matter is. cralawThe evidence on record supports Eternals position. misapprehended. The trial court is in the best position to determine the reliability and credibility of the witnesses. the contents of the letter are correct and accounted for. 1982. it was Philamlifes bounden duty to make sure that before a transmittal letter is stamped as received. However. Finally. which must prove that the letter did not contain Chuangs insurance application. which Philamlife stamped as received.corresponding Phil-Am Life Insurance Application Forms & Cert.[15] cralawAn examination of the testimonies of the witnesses mentioned by Philamlife. Philamlife claims that the evidence presented by Eternal is insufficient. Philamlife failed to do so. arguing that Eternal must present evidence showing that Philamlife received a copy of Chuangs insurance application. thus. Such receipt is an admission by Philamlife against its own interest. Findings of the trial court on such matters are binding and conclusive on the appellate court. and attitude.[14] that. cralawPhilamlifes allegation that Eternals witnesses ran out of credibility and reliability due to inconsistencies is groundless. Eternal alleged that it provided a copy of the insurance application which was signed by Chuang himself and executed before his death. because it has the opportunity to observe firsthand the witnesses demeanor. unless some facts or circumstances of weight and substance have been overlooked.

[16] In other words.[17] cralawWe reiterated the above ruling in Merencillo v. cralaw Atty.[18] cralaw cralawIn the present case. cralaw Atty. Thus. The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and substantially coincide with each other so as to make a consistent and coherent whole. we ruled in People v.[Mendoza:] AcralawIt is [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the marketing department of Eternal Gardens. the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternals witnesses. and these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed. As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form. the witness admitted not knowing where the original insurance application was. Miranda: We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not [ask] for the number of copy. People: Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecutions evidence as a whole or reflect on the witnesses honesty. cralaw but believed that the application was transmitted to Philamlife as an attachment to a transmittal letter. Paredes that minor inconsistencies are too trivial to affect the credibility of witnesses. Thus. these are minor inconsistencies that do not affect the credibility of the witnesses. Arevalo: cralaw QcralawWhere is the original? [Mendoza:] AcralawAs far as I remember I do not know where the original but when I submitted with that payment together with the new clients all the originals I see to it before I sign the transmittal letter the originals are attached therein. neither is whether the insurance application presented by Eternal has been falsified. the number of copies of the insurance application that Chuang executed is not at issue. .

1980. being a contract of adhesion. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective. courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. As earlier stated. Court of Appeals. this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured. stating that: When the terms of insurance contract contain limitations on liability. This question must be answered in the affirmative. par excellence. especially to avoid forfeiture. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. Court of Appeals. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. it should be construed liberally in favor of the insured and strictly against the insurer.[19] (Emphasis supplied. there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. P-1920 dated December 10. In the policy. the question arises as to whether Philamlife assumed the risk of loss without approving the application. An examination of the above provision would show ambiguity between its two sentences. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. we reiterated the above ruling.[20] . the terms of an insurance contract are to be construed strictly against the party which prepared the contract. Thus. it is provided that: EFFECTIVE DATE OF BENEFIT. A contract of insurance. However. Inc. in other words. Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. in Malayan Insurance Corporation v. v. where the contract or policy is prepared by the insurer. any ambiguity therein should be resolved against the insurer. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latters interest. Being a contract of adhesion.However.) In the more recent case of Philamcare Health Systems. the insurer.

binding. the vague contractual provision. the mere inaction of the insurer on the insurance application must not work to prejudice the insured.Clearly. Moreover. As such. More often than not.R. 1996. As a final note. insurance companies must be obligated to act with haste upon insurance applications.000 representing the proceeds of the Life Insurance Policy of Chuang. insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. 1996 RTC Decision on June 17. or otherwise be bound to honor the application as a valid. the seemingly conflicting provisions must be harmonized to mean that upon a partys purchase of a memorial lot on installment from Eternal. 1980. that are imposed on those who wish to avail of insurance. The second sentence of Creditor Group Life Policy No. Hence. 57810 is REVERSED and SET ASIDE. cralaw(2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100. to characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best. CV No. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage. we GRANT the petition. valid.[21] cralawWHEREFORE. to either deny or approve the same. an insurance contract covering the lot purchaser is created and the same is effective. in order to protect the interest of insurance applicants. must be construed in favor of the insured and in favor of the effectivity of the insurance contract. it cannot be interpreted as a termination of the insurance contract. Branch 138 is MODIFIED. confusing if at all understandable to laypersons. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. and effective insurance contract. insurance contracts are contracts of adhesion containing technical terms and conditions of the industry. cralaw(3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100. 1996 Decision of the Makati City RTC.000 from the time of extra-judicial demand by Eternal until Philamlifes receipt of the May 29. in Creditor Group Life Policy No. 2004 CA Decision in CA-G. P-1920 dated December 10. The May 29. The termination of the insurance contract by the insurer must be explicit and unambiguous. and binding until terminated by Philamlife by disapproving the insurance application.000 from . Philamlife is hereby ORDERED: cralaw(1) To pay Eternal the amount of PhP 100. On the other hand. The November 26.

June 17.Company will. HONORABLE COURT OF APPEALS. SO ORDERED. FELICIANO. THIRD DIVISION G.. She was treated at the Protacio Emergency Hospital and later on hospitalized at the San Juan De Dios Hospital. Her face was permanently disfigured. subject to the Limits of Liability. RODRIGUEZ. the company's payment per victim in any one accident shall not exceed the limits . No. 91666 July 20. however. provided that the liability shall have first been determined. then driven by one Walter Saga y Aspero The bus driver disregarded the stop signal given by a traffic policeman to allow pedestrians to cross the road. cralawNo costs. 1996 until full payment of this award. while crossing Airport Road on a pedestrian lane on her way to work. and cralaw(4) To pay Eternal attorneys fees in the amount of PhP 10. shall the Company's total payment under both Section I and Section 11 combined exceed the Limits of Liability set forth herein. among other things. PRISCILLA E. Respondent bus company was insured with petitioner Western Guaranty Corporation ("Western") under its Master Policy which provided.: At around 4:30 in the afternoon of 27 March 1982.. Priscilla was thrown to the ground.R. Liability to the Public . pay all sums necessary to discharge liability of the insured in respect of chanrobles virtual law library (a) death of or bodily injury to or damage to property of any passenger as defined herein. INC. In no case. hitting her forehead. the relevant section reading as follows: Section 1. vs. and DE DIOS TRANSPORTATION CO. Rodriguez was struck by a De Dios passenger bus owned by respondent De Dios Transportation Co. for protection against third party liability. J. Respondents.. chanrobl esvirtualawlibrary chanrobles virtual law library (b) death of or bodily injury or damage to property of any THIRD PARTY as defined herein in any accident caused by or arising out of the use of the Schedule Vehicle. 1990 WESTERN GUARANTY CORPORATION.000. With respect to death of or bodily injury to any third party or passenger. Inc. causing her serious anxiety and moral distress. Petitioner.. respondent Priscilla E.

chanrobl es virtual law library c) the sum of P10. The scope of liability of Western is marked out in comprehensive terms: "all sums necessary to discharge liability of the insured in respect of [the . chanrobl esvirtualawlibrary ch anrobles virtual law library An examination of Section 1 entitled "Liability to the Public". quoted above.000. by way of contribution.indicated in the Schedule of indemnities provided for in this policy excluding the cost of additional medicines. ordering the latter to pay the former. judgment is hereby rendered in favor of plaintiff and against the defendants. Petitioner moved for the reconsideration of the appellate court's decision. the Court of Appeals denied the motion for reconsideration petition for lack of merit. filed a third-party complaint against its insurance carrier. in turn. moral damages and attorney's fees because these items are not among those included in the Schedule of Indemnities set forth in the insurance policy.500. we consider that petitioner Western has failed to show any reversible error on the part of the Court of Appeals in rendering its Decision dated 26 April 1989 and its Resolution dated 10 January 1990. chanroblesvirtualawlibrary chanrobl es virtual law library Deliberating on the instant Petition for Review. the dispositive portion of which read: WHEREFORE.000. In a Resolution dated 10 January 1990. Succinctly stated..00 as actual damages representing doctor's fees. chanrobl es virtual law library d) the sum of P10. indemnity or subrogation whatever amount may be left unpaid by the defendant De Dios Transportation Company. moral damages and attorney's fees. petitioner Western. chanrobl es virtual law library b) the sum of P1. to the extent of not more than P50. jointly and severally. chanrobl es virtual law library On appeal. the trial court rendered a decision in favor of respondent Priscilla E. and such other burial and funeral expenses that might have been incurred. the Court of Appeals affirmed in toto the decision of the trial court. and Walter A.00 by way of compensation for loss of earning during plaintiffs incapacity to work. Saga Respondent De Dios Transportation Co.00 as and by way of moral damages . as follows: chanrobles virtual law library a) The sum of P2. ch anroblesvirtualawlibrary chanrobl es virtual law library Petitioner Western is now before us on a Petition for Review alleging that the Court of Appeals erred in holding petitioner liable to pay beyond the limits set forth in the Schedule of Indemnities and in finding Western liable for loss of earnings. of the Master Policy issued by petitioner Western shows that that Section defines the scope of the liability of insurer Western as well as the events which generate such liability.and e) the cost of suit. Inc. Rodriguez.776.00 as and by way of attorney's fees . (Emphasis supplied) Respondent Priscilla Rodriguez filed a complaint for damages before the Regional Trial Court of Makati against De Dios Transportation Co. it is petitioner Western's position that it cannot be held liable for loss of earnings.000.00. hospitalization and medicines. On 6 August 1985. and for the third-party defendant to pay to the plaintiff.

no liability is created so far as concerns the insurer. chanroblesvirtualawlibrary chanrobl es virtual law library The "Schedule of Indemnities for Death and/or Bodily Injury" attached to the Master Policy. professional fees and hospital charges. bodily injuries of.00 chanrobles virtual law library PERMA NENT DISABL EMENT DESCRI PTION OF DISABL EMENT Loss of two limbs Loss of both hands. petitioner Western.000. or (2) bodily injury to. either in favor of a passenger or a third party. no bodily injury and no damage to property resulted from the casualty ("any accident caused by or arising out of the use of the Schedule Vehicle").00 . needs to be quoted in full: Schedule of Indemnities for Death and/or Bodily Injury: The following schedule of indemnities should be observed in the settlement of claims for death. for services rendered to traffic accident victims under CMVLI coverage: DEATH INDEM NITY P12. which petitioner Western invokes. Where no death. the passenger or the third party.000. or (3) damage to property of. are specified in the following terms: (1) death of.precipitating events]-" The precipitating events which generate liability on the part of the insurer. or all fingers and Amount P6.

00 6.00 6.both thumbs Loss of both feet Loss of one hand and one foot Loss of sight of both eyes Injuries resulting in being permane ntly bedridde n Any other injury causing permane nt total disablem ent Loss of arm or above elbow 6.000.00 6.00 6.000.000.000.200.00 6.00 4.000.00 .000.

Loss of arm between elbow and wrist Loss of hand Loss of four fingers and thumb of one hand Loss of four fingers Loss of leg at or above knee Loss of leg below knee Loss of one foot Loss of toes-all of one foot Loss of thumb 3.400.550.600.100.00 .550.00 P2.00 900.00 3.00 2.00 2.000.00 2.400.00 2.00 900.

00 3.00 Total of Accommodation of Professional Attendance Exte nded Services Rendered F ee s or C h ar g es P 3 6.00 450.000.800. .00 1.Loss of index finger Loss of sight of one eye Loss of hearing both ears Loss of hearingone ear 600. 0 0/ d a y HOS PIT AL RO OM Maximum of 45 days/year- Laboratory drugs fees.

00 Minor Operation 50. 0 0 EXP ENS ES Medium Operation Minor Operation AN AES THE SIO LOG IST LOG ISTS ' FEE S Major Operation 300.x-rays. 0 0 1 0 0. 300. etc.00 OPE RAT ING Major Operation 1 5 0 .00 Medium Operation 150.0 0 SUR GIC AL Major Operation 1. 0 0 0. 0 0 5 0 0.

e. .000.RO OM Medium Operation 1 0 0. 0 0 4 0.g.00.00 1 It will be seen that the above quoted Schedule of Indemnities establishes monetary limits which Western may invoke in case of occurrence of the particular kinds of physical injury there listed.: loss of both feet P6. 0 0 Minor Operation ME DIC AL EXP ENS ES For daily visits of Practitioner or 2 0. 0 0 / d a y Specialist Total amount of medical expenses must not exceed (for single period of confinement) 400.

such as those in question.g. it was incumbent upon Western to use language far more specific and precise than that used in fact by Western. chanroblesvirtualawlibrary chanrobl es virtual law library Firstly.actual or compensatory damages".' and not necessarily exclude claims against the insurance policy for other kinds of damages. "anaesthesiologists' fee". "liquidated damages". It must be stressed. much less a closed enumeration. Accordingly.000. that contractual limitations of liability found in insurance contracts should be regarded by courts with a jaundiced eye and extreme care and should be so construed as to preclude the insurer from evading compliance with its just obligations. professional services and hospital charges. "operating room" and "medical expenses" that Schedule should be read as excluding liability for any other type of expense or damage or loss even though actually sustained or incurred by the third party victim. 3 chanrobles virtual law library Finally. 4 chanrobl es virtual law library . and the essential requisites or conditions for grant of each species of damages are present. For Western's reading would drastically and without warning limit the otherwise unlimited (save for the over-all quantitative limit of liability of P50. the species of bodily injury occurrence of which generate liability for petitioner Western. Secondly. and potential purchasers of its Master Policy.Liability to the Public" . We are not persuaded by Western's contention. an insurance contract is a contract of adhesion. which in this case happens to be petitioner Western. a foot or an arm or an eye). all kinds of damages allowable by law" . result in injury to internal organs of a passenger or third party. Section 1. as already noted. "surgical expenses". is comprehensively defined in Section 1 . without any accompanying amputation or loss of an external member (e. however. Petitioner Western in effect contends before this Court.. may be properly informed and act accordingly. quoted above. This result.00. as it did before the Court of Appeals. for instance. "nominal damages". we agree with the Court of Appeals that: . It appears to us self-evident that the Schedule of Indemnities was not intended to be an enumeration. chanroblesvirtualawlibrary chanrobl es virtual law library Petitioner Western would have us construe the Schedule of Indemnities as comprising contractual limitations of liability which. P1. that because the Schedule of Indemnities limits the amount payable for certain kinds of expenses -"hospital room". and the Office of the Insurance Commissioner. As we see it. bodily injuries of.400.00.loss of one foot loss of sight of one eye P2. however.800. does refer to certain "Limits of Liability" which in the case of the third party liability section of the Master Policy. the Schedule of Indemnities does not purport to restrict the kinds of damages that may be awarded against Western once liability has arisen. quoted above. for services rendered to traffic accident victims.00 per person per accident) and comprehensive scope of liability assumed by the insurer Western under Section 1: "all sums necessary to discharge liability of the insured in respect of [bodily injury to a third party]". "temperate or moderate damages".. It is wellsettled.000. and "exemplary damages" 2 .. If what Western now urges is what Western intended to achieve by its Schedule of Indemnities. or to enumerate exhaustively.which is not essentially different from taking away with the left hand what had been given with the right hand we must avoid as obviously repugnant to public policy. that the Schedule of Indemnities does not purport to limit. A car accident may. the reading urged by Western of the Schedule of Indemnities comes too close to working fraud upon both the insured and the third party beneficiary of Section 1. The rule is well entrenched in our jurisprudence that the terms of such contract are to be construed strictly against the party which prepared the contract. is apparently P50. of the specific kinds of damages which may be awarded under the Master Policy Western has issued. Within this over-all quantitative limit.00 per person per accident.may be awarded by a competent court against the insurer once liability is shown to have arisen. since they certainly constitute bodily injuries.of the Master Policy. "moral damages'. so that the insured. But such internal injuries are surely covered by Section I of the Master Policy. we cannot agree with the movant that the schedule was meant to be an exclusive enumeration of the nature of the damages for which it would be liable under its policy. the schedule was merely meant to set limits to the amounts the movant would be liable for in cases of claims for death.

No. 1983. of the Court of Appeals and its Resolution[2 dated January 4.00). in relation to Certification B-18558 liable and ordered to pay to the DEVELOPMENT BANK OF THE PHILIPPINES as creditor of the insured Dr. October 13.ACCORDINGLY. to the best of your knowledge. in good health? . cancer. If so give details ___________. Branch 18.200. Fernan (Chairman). with costs against the defendant and dismissing the complaint in respect to the plaintiffs. the Court Resolved to DENY the Petition for Review for lack of merit Costs against petitioner. LEUTERIO. in an insurance claim filed by private respondent against Great Pacific Life Assurance Co. Jr. 8.. G-1907.[3 The facts. J. chanrobles virtual SECOND DIVISION [G. a physician and a housing debtor of DBP applied for membership in the group life insurance plan. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. Are you now. petitioner vs. 1994 in CA-G. 1999] GREAT PACIFIC LIFE ASSURANCE CORP. or consulted. dismissing the claims for damages. Dr. kidney or stomach disorder or any other physical impairment? Answer: No. lung. other than the widowbeneficiary. Dr. On November 11. concur. Wilfredo Leuterio.. DECISION QUISUMBING. under Rule 45 of the Rules of Court. Wilfredo Leuterio. diabetes. 113899. The dispositive portion of the trial courts decision reads: WHEREFORE. CV No. attorneys fees and litigation expenses in the complaint and counterclaim. are as follows: A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter DBP). the amount of EIGHTY SIX THOUSAND TWO HUNDRED PESOS (P86. Bidin and Cortes.: This petition for review. COURT OF APPEALS AND MEDARDA V. Have you ever had. 1993.. JJ.R. Leuterio answered questions concerning his health condition as follows: 7. 18341. In an application form. Respondents. for lack of cause of action. Gutierrez. assails the Decision[1 dated May 17. high blood pressure. The appellate court affirmed in toto the judgment of the Misamis Oriental Regional Trial Court. judgment is rendered adjudging the defendant GREAT PACIFIC LIFE ASSURANCE CORPORATION as insurer under its Group policy No. as found by the Court of Appeals.R. a physician for a heart condition.

On May 17.HOLDING THAT THERE WAS NO CONCEALMENT OF MATERIAL INFORMATION ON THE PART OF WILFREDO LEUTERIO IN HIS APPLICATION FOR MEMBERSHIP IN THE GROUP LIFE INSURANCE PLAN BETWEEN DEFENDANT-APPELLANT OF THE INSURANCE CLAIM ARISING FROM THE DEATH OF WILFREDO LEUTERIO. who issued the death certificate. other causes were not ruled out. Dr. two hundred (P86. 1984. The inference was not conclusive because Dr. Leuterio concealed that he had hypertension. 2. On February 22. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor? 2. not the real party in interest. which would vitiate the insurance contract? 3. the present petition. THE LOWER COURT ERRED IN ORDERING DEFENDANT-APPELLANT TO PAY TO DBP THE AMOUNT OF P86. hence. based partly from the information given by the respondent widow. INSTEAD OF DISMISSING THE CASE AGAINST DEFENDANT-APPELLANT [Petitioner Grepalife] FOR LACK OF CAUSE OF ACTION. Whether the Court of Appeals erred in not finding that Dr. THE LOWER COURT ERRED IN NOT DISMISSING THE CASE FOR WANT OF JURISDICTION OVER THE SUBJECT OR NATURE OF THE ACTION AND OVER THE PERSON OF THE DEFENDANT. as insurance coverage of Dr. Hence. On October 20. Consequently. Grepalife insisted that Dr. the Court of Appeals sustained the trial courts decision.00) pesos. Branch 18. stated that Dr. 1983. against Grepalife for Specific Performance with Damages. Grepalife denied the claim alleging that Dr. THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE TO THE DEVELOPMENT BANK OF THE PHILIPPINES (DBP) WHICH IS NOT A PARTY TO THE CASE FOR PAYMENT OF THE PROCEEDS OF A MORTGAGE REDEMPTION INSURANCE ON THE LIFE OF PLAINTIFFS HUSBAND WILFREDO LEUTERIO ONE OF ITS LOAN BORROWERS. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six thousand. Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP. Leuterio was not physically healthy when he applied for an insurance coverage on November 15. Petitioner alleges that the complaint was instituted by the widow of Dr. THE LOWER COURT ERRED IN . 1993.200. to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand. 1986. 1983.200. Petitioners interposed the following assigned errors: "1. Leuterio complained of headaches presumably due to high blood pressure. Leuterio.00 IN THE ABSENCE OF ANY EVIDENCE TO SHOW HOW MUCH WAS THE ACTUAL AMOUNT PAYABLE TO DBP IN ACCORDANCE WITH ITS GROUP INSURANCE CONTRACT WITH DEFENDANTAPPELLANT. Leuterio was not autopsied.[6 Synthesized below are the assigned errors for our resolution: 1. Mejias findings. Leuterio did not disclose he had been sufferingjustified the denial of the claim. Leuterio. was called to testify. 3. It argues that when the Court of Appeals affirmed the trial courts judgment.00) pesos without proof of the actual outstanding mortgage payable by the mortgagor to DBP. the trial court rendered a decision in favor of respondent widow and against Grepalife. On August 6.200. B-18558.[5 During the trial. DBP submitted a death claim to Grepalife.[4 On November 15. Leuterio. Dr. 4. the . respondent Medarda V. Leuterio. filed a complaint with the Regional Trial Court of Misamis Oriental. Dr. the widow of the late Dr.Answer: [ x ] Yes [ ] No. Leuterio died due to massive cerebral hemorrhage. Grepalife issued Certificate No. Hernando Mejia. 1988. hence the trial court acquired no jurisdiction over the case. two hundred (P86.

we read the following: Insured may be regarded as the real party in interest. where the mortgagor pays the insurance premium under the group insurance policy.[14 the widow of the decedent Dr. DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent. good faith. or has assigned as collateral security any judgment he may obtain. Grepalife.[8 Consequently. Yek Tong Lin Fire & Marine Ins.[11 In Gonzales La O vs. shall then be paid to the beneficiary/ies designated by the debtor. is primarily the proper person to bring suit thereon. thereby relieving the heirs of the mortgagor from paying the obligation. interposing the defense of concealment committed by the insured. under the contract of insurance. is a device for the protection of both the mortgagee and the mortgagor. The second assigned error refers to an alleged concealment that the petitioner interposed as its defense to annul the insurance contract. the insurance is deemed to be upon the interest of the mortgagor. we must consider the insurable interest in mortgaged properties and the parties to this type of contract. where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee. * * * Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him. Leuterio failed to disclose that he had hypertension. especially where the mortgagees interest is less than the full amount recoverable under the policy. will have the same effect. On the part of the mortgagee. but any act which. but he designedly and intentionally withholds the same. and honesty. Concealment exists where the assured had knowledge of a fact material to the risk. making the loss payable to the mortgagee. the insurance is on the mortgagors interest.[7 In a similar vein. prior to the loss. Petitioner contends that Dr.[12 we held: Insured. * * *. is to be performed by the mortgagor. which would otherwise avoid the insurance. * * * Subject to some exceptions. ample protection is given to the mortgagor under such a concept so that in the event of death. with the same effect as if it had been performed by the mortgagor. may be performed by the mortgagee therein named. it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract. which might have caused his death. To resolve the issue. the mortgagee is simply an appointee of the insurance fund. will or succession to any person. such loss-payable clause does not make the mortgagee a party to the contract. although he has assigned the policy for the purpose of collection. And in volume 33. yet the mortgagor may sue thereon in his own name. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance. In this type of policy insurance.[13 And since a policy of insurance upon life or health may pass by transfer. who does not cease to be a party to the original contract. or assigns a policy of insurance to a mortgagee. page 82. the latter denied payment thereof. and any act of his. and such person may recover it whatever the insured might have recovered. an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured. Leuterio may file the suit against the insurer. Thereafter. the proceeds from such insurance will be applied to the payment of the mortgage debt. the policy stating that: In the event of the debtors death before his indebtedness with the Creditor [DBP] shall have been fully paid. although the policy is taken wholly or in part for the benefit of another person named or unnamed.[10 When DBP submitted the insurance claim against petitioner. whether he has an insurable interest or not.[9 Section 8 of the Insurance Code provides: Unless the policy provides. if there is any. and fair dealing requires that he should communicate it to the assured. and the mortgagor continues to be a party to the contract. insured may thus sue.[15 . although the property is in the hands of the mortgagee. being the person with whom the contract was made. The rationale of a group insurance policy of mortgagors. Co.indispensable party who was not joined in the suit. of the same work. otherwise known as the mortgage redemption insurance. the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. and although it is expressly made payable to another as his interest may appear or otherwise.

in satisfaction of mortgagors outstanding loan. xxx Appellant insurance company had failed to establish that there was concealment made by the insured. herein private respondent Medarda Leuterio. Leuterios medical history. Hernando Mejia.[21 The mortgagor paid the premium according to the coverage of his insurance. we noted that the Court of Appeals decision was promulgated on May 17. As the attending physician. In private respondents memorandum. which states that: The policy states that upon receipt of due proof of the Debtors death during the terms of this insurance. Leuterio were for hypertension.[16 Dr. and is therefore liable to pay the proceeds of the insurance. the statement of the physician was properly considered by the trial court as hearsay. Mejia stated that he had no knowledge of Dr. Mejias technical diagnosis of the cause of death of Dr. In the event of the debtors death before his indebtedness with the creditor shall have been fully paid. Leuterios any previous hospital confinement. Mejia did not conduct an autopsy on the body of the decedent. hence. for private respondents failure to establish the same. there was no sufficient proof that the insured had suffered from hypertension. And that brings us to the last point in the review of the case at bar. 1993. A life insurance policy is a valued policy. Leuterios death certificate stated that hypertension was only the possible cause of death. Leuterio was a duly documented hospital record. Hence. as to the medical history of her husband. thus: The insured. if there is any shall then be paid to the beneficiary/ies designated by the debtor. Leuterios heirs represented by his widow. but as part of res gestae. had answered in his insurance application that he was in good health and that he had not consulted a doctor or any of the enumerated ailments. the appellant had not proven nor produced any witness who could attest to Dr.. .[19 In the case at bar. Grepalife asserts that Dr. the petitioner failed to clearly and satisfactorily establish its defense. it cannot refuse payment of the claim. Leuterios outstanding indebtedness to DBP at the time of the mortgagors death. a death benefit in the amount of P86. the action for specific performance should be dismissed. Hence. probably secondary to hypertension.[17 The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Leuterio. when he died the attending physician had certified in the death certificate that the former died of cerebral hemorrhage.[22 (Emphasis omitted) However. The question of whether there was concealment was aptly answered by the appellate court. From this report. Dr. an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured. Petitioners claim is without merit. the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Hence. Considering this supervening event.200. the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.Petitioner merely relied on the testimony of the attending physician.[20 Unless the interest of a person insured is susceptible of exact pecuniary measurement. was due to her unreliable recollection of events. The private respondents statement. including hypertension.[18 Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. Dr. Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest). the appellant insurance company refused to pay the insurance claim. Aside from the statement of the insureds widow who was not even sure if the medicines taken by Dr..00 shall be paid. after it already foreclosed on the mortgage. it cannot collect the insurance proceeds. Appellant alleged that the insured had concealed the fact that he had hypertension. Dr. On the contrary the medical findings were not conclusive because Dr. she states that DBP foreclosed in 1995 their residential lot. Petitioner claims that there was no evidence as to the amount of Dr. as supported by the information given by the widow of the decedent. The proceeds now rightly belong to Dr. and that the widows declaration that her husband had possible hypertension several years ago should not be considered as hearsay. Contrary to appellants allegations.

00) Pesos and eventually increased to One Million Five Hundred Thousand (P1. on commission or on joint account with others and/or for which they (sic) responsible in case of loss whilst contained and/or stored during the currency of this Policy in the .00) Pesos. 45727 in favor of Transworld Knitting Mills.00) pesos to the heirs of the insured. 1980 to March 13. raw materials and supplies of every kind and description. 2000] RIZAL SURETY & INSURANCE COMPANY. Costs against petitioner. Petitioner.R. No. Dr. the petition is hereby DENIED. J. 1981.500. Inc. 1993 Decision1 and October 22. The Decision and Resolution of the Court of Appeals in CA-G. v. Branch 161. upon presentation of proof of prior settlement of mortgagors indebtedness to Development Bank of the Philippines. covering the period from August 14.R. the properties of the Insureds and/or held by them in trust. July 18. Wilfredo Leuterio (deceased). 28779. SO ORDERED.000. (Transworld). 1993 Resolution2 of the Court of Appeals3 in CA-G.. read: "On stocks of finished and/or unfinished products. initially for One Million (P1. The antecedent facts that matter are as follows: On March 13.200. CV NO.: At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the July 15. Pertinent portions of subject policy on the buildings insured. two hundred (P86. and location thereof. CV 18341 is AFFIRMED with MODIFICATION that the petitioner is ORDERED to pay the insurance proceeds amounting to Eighty-six thousand. COURT OF APPEALS and TRANSWORLD KNITTING MILLS.000. 1980. THIRD DIVISION [G. Respondents. which modified the Ruling4 of the Regional Trial Court of Pasig. INC.WHEREFORE. 112360. DECISION PURISIMA.000. 46106. Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy No.R. in Civil Case No.

601. (New India).. xxx Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills.. METRO MANILA.'"5 The same pieces of property insured with the petitioner were also insured with New India Assurance Company. was also destroyed by the fire.. PASIG. Ltd. BLOCK NO... BARRIO UGONG. garment and lingerie factory. 1981. A two-storey building (behind said four-span building) where fun and amusement machines and spare parts were stored... and at the rear by open spaces.premises occupied by them forming part of the buildings situate (sic) within own Compound at MAGDALO STREET. fire broke out in the compound of Transworld... warehouse and caretaker's quarters. offices.. On May 26...... on its right and left by driveway. timber above undergalvanized iron roof occupied as garage and quarters and partly by open space and/or tracking/ packing... . xxx. razing the middle portion of its four-span building and partly gutting the left and right sections thereof. partly by building of two and partly one storey constructed of concrete below... thence open spaces... beyond which is the aforementioned Magdalo Street. PHILIPPINES.. transistor-stereo assembly plant... 'Bounds in front partly by one-storey concrete building under galvanized iron roof occupied as canteen and guardhouse. On January 12.. 1982. private respondent brought against the said . Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India Assurance Company but to no avail. xxx....

based on the actual losses sustained by plaintiff .67. disposing as follows: "ACCORDINGLY. and not the damage caused by the fire on the two-storey annex building. praying for judgment ordering Rizal Insurance and New India to pay the amount of P2.. 1990. 500. which came out with its decision of July 15. Transworld Knitting Mills. and (3) Cost against defendant Rizal Surety and Insurance Company. and upon all the foregoing. expenses of litigation of P50.747.000. 1993 under attack. exemplary damages.. 46106 before Branch 161 of the then Court of First Instance of Rizal. went to the Court of Appeals."8 Both the petitioner.7 On January 4.818. the decision of the court below is MODIFIED in that defendant New India Assurance Company has and is hereby required to pay plaintiff-appellant the amount of P1. SO ORDERED. the trial court rendered its decision. Ltd.000. Inc. Inc.604.. the amount of P826.6 Petitioner Rizal Insurance countered that its fire insurance policy sued upon covered only the contents of the four-span building.00 as attorney's fees.00 and costs of suit. the decretal portion of which reads: "WHEREFORE.328. judgment is hereby rendered as follows: (1)Dismissing the case as against The New India Assurance Co. and private respondent.00 representing the actual value of the losses suffered by it. Rizal Insurance Company.19 while the other Rizal Surety has to pay the plaintiff-appellant P470. 867.00 plus legal interest. which was partly burned. docketed as Civil Case No.insurance companies an action for collection of sum of money and damages. P400. (2) Ordering defendant Rizal Surety And Insurance Company to pay Transwrold (sic) Knitting Mills.

67. 1993. SAID DECISION (ANNEX A) ERRED IN ASSUMING THAT THE ANNEX BUILDING WHERE THE BULK OF THE BURNED .376. from the aforesaid judgment of the Court of Appeals New India appealed to this Court theorizing inter alia that the private respondent could not be compensated for the loss of the fun and amusement machines and spare parts stored at the two-storey building because it (Transworld) had no insurable interest in said goods or items. On February 2.000. on the assessment against New India Assurance Company on the amount of P1. No.604. SO ORDERED. and on October 22. interposed a Motion for Reconsideration before the Court of Appeals.818..R. the Court of Appeals reconsidered its decision of July 15..00. ruling thus: "WHEREFORE.328. totalling P2. SO ORDERED. 1993. that. No costs."10 Undaunted.19 and that against Rizal Surety & Insurance Company on the amount of P470.00 as against the amounts of fire insurance coverages respectively extended by New India in the amount of P5. Petitioner Rizal Insurance and private respondent Transworld. from May 26. 1982 when the complaint was filed until payment is made.500.. 1993 is amended but only insofar as the imposition of legal interest is concerned. the Court denied the appeal with finality in G."9 On August 20. The rest of the said decision is retained in all other respects. 1994. the Decision of July 15. contending that: I. L-111118 (New India Assurance Company Ltd..000. petitioner Rizal Surety & Insurance Company found its way to this Court via the present Petition.800.00 and Rizal Surety and Insurance Company in the amount of P1.790. as regards the imposition of interest. vs. 1993. Court of Appeals).Transworld in the fire.

SAID DECISION (ANNEX A) ERRED IN NOT HOLDING THAT TRANSWORLD HAD ACTED IN PALPABLE BAD FAITH AND WITH MALICE IN FILING ITS CLEARLY UNFOUNDED CIVIL ACTION. PLUS ATTORNEY'S FEES AND EXPENSES OF LITIGATION (ART.. CIVIL CODE)... WHICH CLEARLY SHOW THAT THE PREMISES OCCUPIED BY TRANSWORLD. 2208 PARS. It is petitioner's submission that the fire insurance policy litigated upon protected only the contents of the main building (fourspan). 2205. SAID DECISION AND RESOLUTION (ANNEXES A AND B) ERRED IN NOT CONSIDERING THE PICTURES (EXHS. WHERE THE INSURED PROPERTIES WERE LOCATED.. II. As opined by the trial court of origin. 4 and 11. the goods and items stored therein were covered by the same fire insurance policy. 3 TO 7C-RIZAL SURETY). WAS INCLUDED IN THE COVERAGE OF THE INSURANCE POLICY ISSUED BY RIZAL SURETY TO TRANSWORLD. Resolution of the issues posited here hinges on the proper interpretation of the stipulation in subject fire insurance policy regarding its coverage.PROPERTIES WERE STORED. it can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what were stored in the four-span building.12 and did not include those stored in the two-storey annex building.11 The Petition is not impressed with merit. AND IN NOT ORDERING TRANSWORLD TO PAY TO RIZAL SURETY MORAL AND PUNITIVE DAMAGES (ART. which reads: "xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound xxx" Therefrom. the private respondent theorized that the so called "annex" was not an annex but was actually an integral part of the four-span building13 and therefore. two requirements must concur in order that the said fun and . CIVIL CODE). SUSTAINED PARTIAL DAMAGE ONLY. On the other hand. III. TAKEN IMMEDIATELY AFTER THE FIRE.

' The Court is mindful of the well-entrenched doctrine that factual findings by the Court of Appeals are conclusive on the parties and not reviewable by this Court. offices. said properties must be contained and/or stored in the areas occupied by Transworld and second. said areas must form part of the building described in the policy xxx"14 'Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills.i. to wit: "First."16 Verily.amusement machines and spare parts would be deemed protected by the fire insurance policy under scrutiny. and the same carry even more weight when the Court of Appeals has affirmed the findings of fact arrived at by the lower court. transistor-stereo assembly plant. both the trial court and the Court of Appeals found that the so called "annex " was not an annex building but an integral and inseparable part of the four-span building described in the policy and consequently. roof which is adjoining and intercommunicating with the repair of the first right span of the lofty storey building and thence by property fence wall. the two-storey building involved. . describes the "annex" building as follows: "Two-storey building constructed of partly timber and partly concrete hollow blocks under g.15 In the case under consideration. garment and lingerie factory. which petitioner itself cited and invoked.17 formed part thereof. and meets the requisites for compensability under the fire insurance policy sued upon. the machines and spare parts stored therein were covered by the fire insurance in dispute. a permanent structure which adjoins and intercommunicates with the "first right span of the lofty storey building". The letter-report of the Manila Adjusters and Surveyor's Company. ware house and caretaker's quarter.

1377. Article 1377 of the New Civil Code provides: "Art. especially where forfeiture is involved' (29 Am. equivocal. the Court does not find any basis for disturbing what the lower courts found and arrived at. Indeed. which are ambiguous. Rizal Surety Insurance Company. the Court in Landicho vs. went on to provide that such fire insurance policy covers the products. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity" Conformably. whose lawyer or managers drafted the fire insurance policy contract under scrutiny. and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured. Jur.19 ruled: "This is particularly true as regards insurance policies.18 petitioner should have specifically excluded the said two-storey building from the coverage of the fire insurance if minded to exclude the same but if did not. and instead. knowing fully well the existence of such building adjoining and intercommunicating with the right section of the four-span building.. in respect of which it is settled that the 'terms in an insurance policy. 1981. the stipulation as to the coverage of the fire insurance policy under controversy has created a doubt regarding the portions of the building insured thereby. it stands to reason that the doubt should be resolved against the petitioner. and the reason for this is that the 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great . Government Service Insurance System. having been constructed sometime in 1978. After a careful study. 181). or uncertain x x x are to be construed strictly and most strongly against the insurer.So also. Citing the aforecited provision of law in point. considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on January 12. raw materials and supplies stored within the premises of respondent Transworld which was an integral part of the four-span building occupied by Transworld.

21 to wit: "'This rigid application of the rule on ambiguities has become necessary in view of current business practices. The rule on conclusiveness of judgment. "xxx the judgment in the prior action operates as estoppel only as to those matters in issue or points controverted. The courts cannot ignore that nowadays monopolies. Sent.. Ltd. In fine.R. L-111118. and acting exclusively in the interest of.S. such contracts (of which policies of insurance and international bills of lading are prime example) obviously call for greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from abuses and imposition. in contrast to these entered into by parties bargaining on an equal footing.J. upon the determination of which the finding or judgment was rendered. of Supreme Court of Spain. 27 February 1942. which obtains under the premises. was denied with finality by this Court on February 2. and prevent their becoming traps for the unwary (New Civil Code. precludes the relitigation of a particular fact or issue in another action between the same parties based on a different claim or cause of action. which entitles it to be indemnified for the loss thereof. cartels and concentration of capital. had been settled in G. Article 24. his participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats [sic] d'adhesion). vs. 1934.. 1174).""20 Equally relevant is the following disquisition of the Court in Fieldmen's Insurance Company. 1994. Inc.care and deliberation by experts and legal advisers employed by.)'"22 The issue of whether or not Transworld has an insurable interest in the fun and amusement machines and spare parts. 13 Dec. Vda. vs. entitled New India Assurance Company. p. endowed with overwhelming economic power. the insurance company. Court of Appeals. No. De Songco. manage to impose upon parties dealing with them cunningly prepared 'agreements' that the weaker party may not change one whit. the previous judgment is .' (44 C. where the appeal of New India from the decision of the Court of Appeals under review.

the question of which vessel had been negligent in the collision between the two (2) vessels. Reyes.R. and by this Court in G. Inc. the Court. only as those matters actually and directly controverted and determined and not as to matters merely involved therein. Court of Appeals. Private respondent Go Thong was certainly bound by the ruling or judgment of Reyes."23 Applying the abovecited pronouncement. No.R. L-111118. had been adjudicated.R.R. J.. The Reyes Decision thus became final and executory approximately two (2) years before the Sison Decision.R..conclusive in the second case.-G. L. No.B. dated February . the issue of which vessel ('Don Carlos' or 'Yotai Maru') had been negligent. No. which issue had already been passed upon in a case filed by one of the insurers.A. Ratiocinating further. as already noted. L-48839 in a Resolution dated 6 December 1987. J. had long been settled by this Court and could no longer be relitigated in C. CV NO. the Court opined: "In the case at bar. or so negligent as to have proximately caused the collision between them. directly and expressly raised. resolved that issue in his Decision and held the 'Don Carlos' to have been negligent rather than the 'Yotai Maru' and. settled and sustained by the Court of Appeals in CA-G. which is assailed in the case at bar.. Applying the rule of conclusiveness of judgment. and that of this Court.24 held that the issue of negligence of the shipping line. in a Resolution. 61206-R. 61320-R. The Court of Appeals fell into clear and reversible error when it disregarded the Decision of this Court affirming the Reyes Decision. was an issue that was actually. was promulgated.B. Considering that private respondent's insurable interest in. controverted and litigated in C. that Decision was affirmed by this Court in G.-G. L. 28779. No. and compensability for the loss of subject fun and amusement machines and spare parts. is conclusive and can no longer be relitigated in a similar case filed by another insurer against the same shipping line on the basis of the same factual circumstances.)."25 The controversy at bar is on all fours with the aforecited case. in Smith Bell and Company (Phils.A. vs.

67. 1993. Vitug.R. liable for the destruction and loss of the insured buildings and articles of the private respondent. SO ORDERED. Rizal Surety Insurance Company. the Court is of the irresistible conclusion. and should be indemnified for the loss of the same. dated July 15. No pronouncement as to costs. CV NO.328.2. and so finds. So also. dated October 22. the same can no longer be relitigated and passed upon in the present case. the petitioner. 28779 are AFFIRMED in toto. . it being the total loss and damage suffered by Transworld for which petitioner Rizal Insurance is liable. the Court of Appeals correctly adjudged petitioner liable for the amount of P470. and the Resolution. WHEREFORE . 1994. Melo. of the Court of Appeals in CAG. 1993. the Decision. is bound by the ruling of the Court of Appeals and of this Court that the private respondent has an insurable interest in the aforesaid fun and amusement machines and spare parts.26 All things studiedly considered and viewed in proper perspective. (Chairman). that the Court of Appeals erred not in holding the petitioner. Rizal Surety Insurance Company. Ineluctably.

000. 1991 to 1992. whilst the affected oil mill was under Building No. and .FIRST DIVISION [G.00) under Policy No.000. It appears that respondent commenced its business operations with only one oil mill. (b) P80. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No. 306-7432321-9 for the same term. in a letter dated October 15. The latter came to be commonly referred to as the new oil mill.406. (c) P300. Branch 53. [2 The new oil mill was insured for six million pesos (P6. It owns two oil mills. Respondent immediately notified the petitioner of the incident. which affirmed in toto the Decision of the Regional Trial Court. 1991. 1995. 1995.000. Respondent Tantuco Enterprises.536. The latter then sent its appraisers who inspected the burned premises and the properties destroyed. 306-7432324-3 for the period March 1. It stated that the description of the insured establishment referred to another building thus: Our policy nos. [4 A fire that broke out in the early morning of September 30. petitioner rejected respondents claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. No..40 representing damages for loss by fire of its insured property with interest at the legal rate. INC. 92-51 dated October 16. TANTUCO ENTERPRISES. [5 A complaint for specific performance and damages was consequently instituted by the respondent with the RTC. J.1991 gutted and consumed the new oil mill.00 for litigation expenses. the lower court rendered a Decision finding the petitioner liable on the insurance policy thus: WHEREFORE. The two oil mills were separately covered by fire insurance policies issued by petitioner American Home Assurance Co. 1999. respondent. 138941. Lucena City in Civil Case No.. vs.000. Lucena City.000. is engaged in the coconut oil milling and refining industry. it started operating its second oil mill. 2001] AMERICAN HOME ASSURANCE COMPANY.000. after trial.R. 14. 52221 promulgated on January 14. [3 Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent. CV No. DECISION PUNO.R. Petitioner. October 8.00) under Policy No. In 1988. Inc. Philippine Branch. On October 16. Thereafter. 5. Both are located at its factory compound at Iyam. [1 The first oil mill was insured for three million pesos (P3. Branch 53 of Lucena City.: Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CAG.00 for and as attorneys fees. judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff: (a) P4.

[9 (3) With due respect. or about three years before the fire. 4. petitioner posits. The motion. and despite the Important Notice in the policy that Please . 1995 is hereby AFFIRMED in toto. the instant appeal is hereby DISMISSED for lack of merit and the trial courts Decision dated October 16. 2. Right: by an open space thence by Bldg. No.[10 The petition is devoid of merit.[8 (2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy. SO ORDERED. 1999. not to the burned oil mill. The primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil mill is not covered by any insurance policy. 4. Hence. it argues that this specific boundary description clearly pertains. No.[6 Petitioner assailed this judgment before the Court of Appeals. Rear: by an open space thence at 8 meters distance. where petitioner ascribes to the appellate court the following errors: (1) The Court of Appeals erred in its conclusion that the issue of non-payment of the premium was beyond its jurisdiction because it was raised for the first time on appeal. is that it did not have the supposed wrong description or mistake corrected. However. What exacerbates respondents predicament. but to the other mill.(d) Pay the costs. the pertinent portion of which states: WHEREFORE. 1999. SO ORDERED. was denied for lack of merit in a Resolution promulgated on June 10. No. the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy. the oil mill insured is specifically described in the policy by its boundaries in the following manner: Front: by a driveway thence at 18 meters distance by Bldg. the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the principle of estoppel is erroneous. Left: Adjoining thence an imperfect wall by Bldg. The appellate court upheld the same in a Decision promulgated on January 14. the present course of action. however. In other words. According to it. Despite the fact that the policy in question was issued way back in 1988.[7 Petitioner moved for reconsideration.

sir. and its policy issuing clerk. however inaccurate the description may be. the misdescription in the policy. [11 In view of the custom of insurance agents to examine buildings before writing policies upon them.Borja: Atty. extending its protection: On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra. the policy issuing clerk just merely (sic) copied the wording from the old policy and what she typed is that the description of the boundaries from the old policy was copied but she inserted covering the new oil mill and to me at that time the important thing is that it covered the new oil mill because it is just within one compound and there are only two oil mill[s] and so just enough. BO. it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. two policies were prepared having the same date one for the old one and the other for the new oil mill and exactly the same policy period. return it immediately for alteration. It is unthinkable for respondent to obtain the other policy from the very same company. [12 Notwithstanding. The imperfection in the description of the insured oil mills boundaries can be attributed to a misunderstanding between the petitioners general agent. and since a mistake as to the identity and character of the building is extremely unlikely. Alfredo Borja. These contentions can not pass judicial muster. Mr. 28. LUCENA CITY UNBLOCKED. respondent apparently did not call petitioners attention with respect to the misdescription. This is obvious from the categorical statement embodied in the policy. that what the parties manifestly intended to insure was the new oil mill. the greatest liberality is shown by the courts in giving effect to the insurance. copra cake and copra mills whilst contained in the new oil mill building. just as it is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong.[13 (emphasis supplied.read and examine the policy and if incorrect. 306-7432324-4 issued by the petitioner. petitioner argues that respondent is barred by the parole evidence rule from presenting evidence (other than the policy in question) of its self-serving intention (sic) that it intended really to insure the burned oil mill. Camaligan: Q: What did you do when you received the report? A: I told them as will be shown by the map the intention really of Mr. to our mind. In construing the words used descriptive of a building insured. ALONG NATIONAL HIGH WAY. the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure. therefore. situate (sic) at UNNO. then there is no need to specify it as new. In fact. I had the policy prepared.) If the parties really intended to protect the first oil mill. IYAM. As mentioned earlier. it is beyond dispute. the first oil mill is already covered under Policy No. because it retained the policy without having the same corrected before the fire by an endorsement in accordance with its Condition No. Edison Tantuco is to cover the new oil mill that is why when I presented the existing policy of the old policy. The latter ought to know that a second agreement over that same realty results in its overinsurance. G. As testified to by Mr.[14 (emphasis supplied) It is thus clear that the source of the discrepancy happened during the preparation of the written contract. By way of conclusion. Indeed. . who made the error of copying the boundaries of the first oil mill when typing the policy to be issued for the new one.

sir. Borja assured Mr. 361 of the Insurance Code is illegal. Thus. In determining the intent of the parties to the contract. It insists that the issue was raised in paragraph 24 of its Answer. The amount of the premium stated on the face of the policy was P89. Evidence on record reveals that respondents operating manager.: 24. The argument fails to impress. in accordance with Section 77 of the Insurance Code. This irreconcilable difference can only be clarified by admitting evidence aliunde. that at least in so far as Exhibit A is concern you have read what the policy contents. petitioner argues. while the contract explicitly stipulated that it was for the insurance of the new oil mill. [15 Here. who acknowledged that the paid amount was lacking by P14.The assurance convinced respondent that. Borja said. as a matter of fact. In determining what the parties intended. however. we find that the same proceeds from a wrong assumption. Mr. [18 The Court of Appeals refused to consider this contention of the petitioner.147. explain or add to the terms of the written agreement if he puts in issue in his pleading. this doubt is to be resolved against the insurer. despite the impreciseness in the specification of the boundaries. the prime rule that in the event of doubt. SALONGA: Q: You mentioned. Edison Tantuco. the boundary description written on the policy concededly pertains to the first oil mill. viz. Mr. you can never insured (sic) one property with two (2) policies. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date. Mr. however. its failure to express the true intent and agreement of the parties thereto. give effect to all the parts of the contract.623. will you tell us as the manager of the company whether the boundaries stated in Exhibit A-2 are the boundaries of the old (sic) mill that was burned or not. [19 Petitioner. which the petitioner cited. Tantuco that the use of the adjective new will distinguish the insured property. Borja. Borja (the petitioners agent with whom respondent negotiated for the contract) about the inaccurate description in the policy. From the admission of respondents own witness. Under the Rules of Court. a party may present evidence to modify. The deficiency. It is true that the asseverations petitioner made in paragraph 24 of its Answer ostensibly spoke of the policys condition for payment of the renewal premium on time and respondents non-compliance with it. pursuant to Rule 46. It held that this issue was raised for the first time on appeal. Borja regarding this matter and he told me that what is important is the word new oil mill.These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule. leaving a difference of P14. it . Mr. However. keeping in mind always.20 by reason of a discount or rebate. sir. Anent petitioners argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong. Borja. [17 In a further attempt to avoid liability. hence. notified Mr.20.20. A: It was not.(sic) Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the boundaries of the property insured by the insurance policy Exhibit A. petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium and breach of the Fire Extinguishing Appliances Warranty. Section 18 of the Rules of Court. you will only do that if you will make to increase the amount and it is by indorsement not by another policy. which will explain the imperfection and clarify the intent of the parties. the contractual intention of the parties cannot be understood from a mere reading of the instrument.00. beyond its jurisdiction to resolve. Tantuco: "ATTY.623. among others. the insurance will cover the new oil mill. This can be seen from the testimony on cross of Mr. Yet. I called up Mr. which rebate under Sec."[16 We again stress that the object of the court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. the former only paid it P75. Petitioner adds that the issue was the subject of the cross-examination of Mr. the courts will consider the purpose and object of the contract. the courts will read and construe the policy as a whole and if possible. contests this finding of the appellate court. suffices to invalidate the policy.770.

24-HOUR SECURITY SERVICES BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss which may occur. or that it did not pay the amount on time. In other words. the whole tenor of Mr. [24 That reasonableness is to be ascertained in light of the factual conditions prevailing in each case. Fire Extinguishing Appliances as mentioned below shall be maintained in efficient working order on the premises to which insurance applies: . [21 fire hydrant. We agree with the appellate courts conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein. both during direct and cross examinations. those identified in the list. but they should. It must be remembered that he was called to the stand basically to demonstrate that an existing policy issued by the petitioner covers the burned building. the question of the supposed inadequate payment was never raised. petitioner fatally neglected to present. Borja. Though it briefly touched on the alleged deficiency.EXTERNAL HYDRANTS . Most significant to point. but not limited to. It ought to be remembered that not only are warranties strictly construed against the insurer. the instant petition is hereby DISMISSED. Again. Here. respondent was able to comply with the warranty. IN VIEW WHEREOF . two fire hoses. which will serve as the oil mills first line of defense in case any part of it bursts into flame. fire fighting equipments such as. SO ORDERED. . likewise. Additionally. was not for the purpose of proving this fact. such was made in the course of discussing a discount or rebate. any witness to testify that respondent indeed failed to pay the full amount of the premium. implicitly assumed a valid and subsisting insurance policy. during the whole course of the trial.[20 Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. when the issues to be resolved in the trial court were formulated at the pre-trial proceedings. (2) an emergency fire engine. This fact was admitted by the oil mills expeller operator. Gerardo Zarsuela. [22 and an emergency fire engine. we find that there is no more need for an internal hydrant considering that inside the burned building were: (1) numerous portable fire extinguishers. petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty.PORTABLE EXTINGUISHERS . which the agent apparently gave the respondent.did not contain any specific and definite allegation that respondent did not pay the premium. what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property. To be sure. Borjas testimony. or that it did not pay the full amount. Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers. The thrust of the cross-examination of Mr. [23 All of these equipments were in efficient working order when the fire occurred. we find that neither did it require that the appliances are restricted to those mentioned in the warranty. and (3) a fire hose which has a connection to one of the external hydrants. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted.FIRE PUMP . The said warranty provides: WARRANTED that during the currency of this Policy. finding no reversible error in the impugned Decision. Certainly. on the other hand. by themselves be reasonably interpreted. Finally. Likewise. the argument lacks merit.INTERNAL HYDRANTS .

recklessness. private respondents filed a Motion to Dismiss alleging that PANMALAY had no cause of action against them.Davide. ch anroblesvirtualawlibrary chanrobl es virtual law library Private respondents. 81026 April 3. and Ynares-Santiago. PANMALAY filed a complaint for damages with the RTC of Makati against private respondents Erlinda Fabie and her driver. chanrobl esvirtualawlibrary ch anrobles virtual law library On February 12. Petitioner. concur. that the damage caused to the insured car was settled under the "own damage". C. 1985. 1985. ERLINDA FABIE AND HER UNKNOWN DRIVER.J. coverage of the insurance policy. filed a Motion for Bill of Particulars and a supplemental motion thereto.: Petitioner Pan Malayan Insurance Company (PANMALAY) seeks the reversal of a decision of the Court of Appeals which upheld an order of the trial court dismissing for no cause of action PANMALAY's complaint for damages against private respondents Erlinda Fabie and her driver. on official leave. Library THIRD DIVISION G. Erlinda Fabie.R. thereafter. In compliance therewith. PANMALAY also submitted a copy of the insurance policy and the Release of Claim and Subrogation Receipt executed by CANLUBANG in favor of PANMALAY. at the time of the accident.00. and that. chanrobl esvirtualawlibrary chanrobles virtual law library On December 10. was subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer. (Chairman). since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault... They argued that payment under the "own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code. defendants. Kapunan. Respondents. No. Pardo. that PANMALAY defrayed the cost of repair of the insured car and. among others. 1990 PAN MALAYAN INSURANCE CORPORATION. vs. chanrobl esvirtualawlibrary ch anrobles virtual law library . J. despite repeated demands. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car with plate No. failed and refused to pay the claim of PANMALAY. DDZ-431 and registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG]. PCR-220.. Jr. due to the "carelessness. and that the driver of the insured car was. that on May 26. an authorized driver duly licensed to drive the vehicle.. PANMALAY clarified. CORTES. chanrobl esvirtualawlibrary ch anrobles virtual law library The principal issue presented for resolution before this Court is whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its assured in settlement of an insurance claim against private respondents as the parties allegedly responsible for the damage caused to the insured vehicle.052. therefore. JJ. COURT OF APPEALS. J. and imprudence" of the unknown driver of a pick-up with plate no. the insured car was hit and suffered damages in the amount of P42. 1986.

which reads: If the plaintiffs property has been insured. Jamilla & Company. ch anrobles virtual law library chanrobl esvirtualawlibrary PANMALAY alleged in its complaint that. L-18965. No. pursuant to a motor vehicle insurance policy. 1987. Ed. 229 F 2d 705 (1956)]. Inc. 21 SCRA . thereby effecting "voluntary payment". of Brooklyn v. from liability. ch anroblesvirtualawlibrary chanrobl es virtual law library Deliberating on the various arguments adduced in the pleadings. ch anroblesvirtualawlibrary chanrobl es virtual law library After private respondents filed its comment to the petition. Erie & Western Transport. G. .. the RTC issued an order dated June 16. the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. the RTC denied PANMALAY's motion for reconsideration. The right of subrogation is not dependent upon. 1986 dismissing PANMALAY's complaint for no cause of action. then the insurer. opposition thereto. the Court finds merit in the petition. chanrobl esvirtualawlibrary ch anrobles virtual law library On appeal taken by PANMALAY. 70 SCRA 323]. and the latter cannot bring an action against the carrier on his right of subrogation [McCarthy v. PANMALAY filed the present petition for review. It accrues simply upon payment of the insurance claim by the insurer [Compania Maritima v. Qua Chee Gan. Co. 1976. Consequently. 1986. nor does it grow out of. Joliet & Eastern Railway Co.R. October 30. G. 1964. where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss. Erlinda Fabie. September 5. .. Fireman's Fund Insurance Company v.. Co. Insurance Company of North America. For instance. therefore. the insurer's right of subrogation is defeated [Phoenix Ins. Inc. upon payment to the assured. G.. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. the Court considered the issues joined and the case submitted for decision. R. any privity of contract or upon written assignment of claim. reply and rejoinder. 12 SCRA 213. Insurance Company of North America v. PANMALAY contended. No.R. L-27427. will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. 45 Phil. Similarly. and petitioner filed its reply. and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of. And where the insurer pays the assured for a loss which is not a risk covered by the policy. 29 L. On August 19. it had indemnified CANLUBANG for the damage to the insured car resulting from a traffic accident allegedly caused by the negligence of the driver of private respondent. No. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured. L-22146. 488 (1923)]. that its cause of action against private respondents was anchored upon Article 2207 of the Civil Code. 1967. Elgin. April 7.After hearings conducted on the motion. the settlement is binding on both the assured and the insurer. 117 US 312. chanrobl esvirtualawlibrary ch anrobles virtual law library There are a few recognized exceptions to this rule. Barber Steamship Lines. these orders were upheld by the Court of Appeals on November 27. if the assured by his own act releases the wrongdoer or third party liable for the loss or damage. chanroblesvirtualawlibrary chanrobl es virtual law library Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. PANMALAY is correct. the former has no right of subrogation against the third party liable for the loss [Sveriges Angfartygs Assurans Forening v. . 873 (1886).

In the case of property insurance policies. p. Record. determine the import of the various terms and provisions embodied in the policy.R. is not found in the insurance policy to define the basis for its settlement of CANLUBANG's claim under the policy. v. incidentally. it simply meant that it had assumed to reimburse the costs for repairing the damage to the insured vehicle [See PANMALAY's Compliance with Supplementary Motion for Bill of Particulars. 1972. that the courts will intervene. L-43706.e. the trial court held that payment by PANMALAY of CANLUBANG's claim under the "own damage" clause of the insurance policy was an admission by the insurer that the damage was caused by the assured and/or its representatives. Also Articles 1370-1378 of the Civil Code]. i. No. In such an event. chanrobl esvirtualawlibrary ch anrobles virtual law library . chanroblesvirtualawlibrary chanrobl es virtual law library None of the exceptions are availing in the present case. 168 SCRA 1.12]. p. Both tribunals concluded that PANMALAY could not now invoke Article 2207 and claim reimbursement from private respondents as alleged wrongdoers or parties responsible for the damage. G. Inc. did not cover damage arising from collision or overturning due to the negligence of third parties as one of the insurable risks. instead of third parties. 47 SCRA 271. G. It is only when the terms of the policy are ambiguous. November 14. were of the opinion that PANMALAY was not legally subrogated under Article 2207 of the Civil Code to the rights of CANLUBANG. chanrobl esvirtualawlibrary ch anrobles virtual law library The above conclusion is without merit. Court of Appeals. chanrobl esvirtualawlibrary chanrobles virtual law library Neither is there merit in the Court of Appeals' ruling that the coverage of insured risks under Section III-1 of the policy does not include to the insured vehicle arising from collision or overturning due to the negligent acts of the third party. Inc. November 28. 1988. L-41014. chanroblesvirtualawlibrary chanrobl es virtual law library It must be emphasized that the lower court's ruling that the "own damage" coverage under the policy implies damage to the insured car caused by the assured itself.R. L-27932. chanrobl esvirtualawlibrary ch anrobles virtual law library The lower court and Court of Appeals. G. chanroblesvirtualawlibrary chanrobl es virtual law library It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the sense and meaning of the terms which the parties thereto have used. It is in this sense that the so-called "own damage" coverage under Section III of the insurance policy is differentiated from Sections I and IV-1 which refer to "Third Party Liability" coverage (liabilities arising from the death of. 1986. third parties) and from Section IV-2 which refer to "Property Damage" coverage (liabilities arising from damage caused by the insured vehicle to the properties of third parties).. and therefore did not have any cause of action against private respondents. such that the parties themselves disagree about the meaning of particular provisions. 1. National Power Corporation v. 31]. but it also violates a fundamental rule on the interpretation of property insurance contracts.. No. Not only does it stem from an erroneous interpretation of the provisions of the section.R. 145 SCRA 533. When PANMALAY utilized the phrase "own damage" . No.. Pacific Banking Corporation v.. October 30. the Court of Appeals in applying the ejusdem generis rule held that Section III-1 of the policy. On the other hand. Court of Appeals.a phrase which. On the one hand. which was the basis for settlement of CANLUBANG's claim. however. the policy will be construed by the courts liberally in favor of the assured and strictly against the insurer [Union Manufacturing Co. equivocal or uncertain. proceeds from an incorrect comprehension of the phrase "own damage" as used by the insurer. the evident intention of the contracting parties.. Philippine Guaranty Co. or bodily injuries suffered by. the insurer and the assured.

subject to the Limits of Liability. an event that proceeds from an unknown cause. It then accepted payment from PANMALAY. reads as follows: SECTION III . indemnify the Insured against loss of or damage to the Scheduled Vehicle and its accessories and spare parts whilst thereon: (a) by accidental collision or overturning. or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear. p. it was improper for the appellate court to indulge in contract construction. ch anrobles virtual law library (b) by fire. p. waterway. chanroblesvirtualawlibrary chanrobl es virtual law library Considering that the very parties to the policy were not shown to be in disagreement regarding the meaning and coverage of Section III-1. chanrobl es virtual law library (c) by malicious act. and executed a Release of Claim and Subrogation Receipt in favor of latter. therefore. specifically sub-paragraph (a) thereof. is comprehensive enough to include damage to the insured vehicle arising from collision or overturning due to the fault or negligence of a third party. xxx xxx xxx ch anrobles virtual law library [Annex "A-1" of PANMALAY's Compliance with Supplementary Motion for Bill of Particulars. Although the terms "accident" or "accidental" as used in insurance contracts have not acquired a technical meaning. specifically Section III-1(a). inland. the driver thereof fled the scene [Record. CANLUBANG is apparently of the same understanding. rail. CANLUBANG filed its claim with PANMALAY for indemnification of the damage caused to its car. Emphasis supplied]. lift or elevator. the Court has on several occasions defined these terms to mean that which takes place "without one's foresight or expectation.LOSS OR DAMAGE ch anrobles virtual law library 1. PANMALAY contends that the coverage of insured risks under the above section. self ignition or lightning or burglary. not expected" [De la Cruz v. Based on a police report wherein the driver of the insured car reported that after the vehicle was sideswiped by a pick-up. chanrobl es virtual law library (d) whilst in transit (including the processes of loading and unloading) incidental to such transit by road. ch anroblesvirtualawlibrary chanrobl es virtual law library It cannot be said that the meaning given by PANMALAY and CANLUBANG to the phrase "by accidental collision or overturning" found in the first paint of sub-paragraph (a) is untenable. Record. The Capital Insurance & Surety . housebreaking or theft.Section III-1 of the insurance policy which refers to the conditions under which the insurer PANMALAY is liable to indemnify the assured CANLUBANG against damage to or loss of the insured vehicle. 34. external explosion. and to ascribe meaning contrary to the clear intention and understanding of these parties. to apply the ejusdem generis rule. 20]. or is an unusual effect of a known cause and. The Company will.

chanrobl esvirtualawlibrary chanrobles virtual law library For even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of its assured under Article 2207 of the Civil Code. Inc. Qua Chee Gan. 17 SCRA 559. furthermore. even assuming for the sake of argument that Section III-1(a) of the insurance policy does not cover damage to the insured vehicle caused by negligent acts of third parties. 1963.Co.R. 1989]. the insured vehicle due to negligent or careless acts of third parties is not listed under the general and specific exceptions to the coverage of insured risks which are enumerated in detail in the insurance policy itself [See Annex "A-1" of PANMALAY's Compliance with Supplementary Motion for Bill of Particulars. supra. is more in keeping with the rationale behind the various rules on the interpretation of insurance contracts favoring the assured or beneficiary so as to effect the dominant purpose of indemnity or payment [See Calanoc v.. And this. By arguing that this section covers losses or damages due not only to malicious.. v.R. Court of Appeals. Filipino Merchants Insurance Co. Inc. L-35529. Hence. Inc. chanrobl esvirtualawlibrary ch anrobles virtual law library . without qualification. 85141. and that PANMALAY's settlement of CANLUBANG's claim for damages allegedly arising from a collision due to private respondents' negligence would amount to unwarranted or "voluntary payment". chanroblesvirtualawlibrary chanrobl es virtual law library Parenthetically. the insurer PANMALAY as subrogee merely prays that it be allowed to institute an action to recover from third parties who allegedly caused damage to the insured vehicle. It may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man. July 16. chanrobl esvirtualawlibrary ch anrobles virtual law library In conclusion.R. 1984.] chanrobl es virtual law library The Court. The Equitable Insurance and Casualty Co. G. it is now for the trial court to determine if in fact the damage caused to the insured vehicle was due to the "carelessness. a perusal of the provisions of the insurance policy reveals that damage to. 79 (1955). No.. G. PANMALAY would still have a cause of action against private respondents.R. 130 SCRA 327]. supra. it must be reiterated that in this present case. G. the Court ruled that the insurer who may have no rights of subrogation due to "voluntary" payment may nevertheless recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code. Del Rosario v. June 30. No. it cannot be inferred from jurisprudence that these terms. PANMALAY in effect advocates for a more comprehensive coverage of insured risks. No.. exclude events resulting in damage or loss due to the fault. Certainly. In the pertinent case of Sveriges Angfartygs Assurans Forening v. in the final analysis. recklessness or negligence of third parties. chanrobl esvirtualawlibrary ch anrobles virtual law library Moreover. The concept "accident" is not necessarily synonymous with the concept of "no fault". G. No. Court of Appeals. L-21574. 98 Phil. June 29. 1966. Respondent Court of Appeals therefore committed reversible error in sustaining the lower court's order which dismissed PANMALAY's complaint against private respondents for no cause of action. the Court holds that there is no legal obstacle to the filing by PANMALAY of a complaint for damages against private respondents as the third parties allegedly responsible for the damage.. finds it noteworthy that the meaning advanced by PANMALAY regarding the coverage of Section III-1(a) of the policy is undeniably more beneficial to CANLUBANG than that insisted upon by respondents herein. Court of Appeals. but also to negligent acts of third parties. or loss of. recklessness and imprudence" of the driver of private respondent Erlinda Fabie.. the amount which it had paid its assured under the insurance policy. Serrano v. Having thus shown from the above discussion that PANMALAY has a cause of action against third parties whose negligence may have caused damage to CANLUBANG's car. November 28. 8 SCRA 343. L-16215. dismissal of PANMALAY's complaint against private respondents for no cause of action would still be a grave error of law.

concur. Gutierrez.J. Let the case be remanded to the lower court for trial on the merits. JJ. Jr.. Fernan. Feliciano and Bidin.WHEREFORE.. . in view of the foregoing. C. Petitioner's complaint for damages against private respondents is hereby REINSTATED.. the present petition is GRANTED. chanrobl esvirtualawlibrary chanrobles virtual law library SO ORDERED.