G.R. No.

L-15895 November 29, 1920

RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma. Herrer,Plaintiff-Appellant, vs. SUN LIFE ASSURANCE
COMPANY OF CANADA, Defendant-Appellee.
Jose A. Espiritu for appellant.
Cohn, Fisher and DeWitt for appellee.
MALCOLM, J.:
This is an action brought by the plaintiff ad administrator of the estate of the late Joaquin Ma. Herrer to recover from the
defendant life insurance company the sum of pesos 6,000 paid by the deceased for a life annuity. The trial court gave judgment
for the defendant. Plaintiff appeals.chanroblesvirtualawlibrary chanrobles virtual law liby
The undisputed facts are these: On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance Company
of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the
company's Manila office and was given a receipt reading as follows:
MANILA, I. F., 26 de septiembre, 1917.chanroblesvirtualawlibrary chanrobles virtual law library
PROVISIONAL RECEIPT Pesos 6,000chanrobles virtual law library
Recibi la suma de seis mil pesos de Don Joaquin Herrer de Manila como prima dela Renta Vitalicia solicitada por dicho Don
Joaquin Herrer hoy, sujeta al examen medico y aprobacion de la Oficina Central de la Compaia.
The application was immediately forwarded to the head office of the company at Montreal, Canada. On November 26, 1917,
the head office gave notice of acceptance by cable to Manila. (Whether on the same day the cable was received notice was sent
by the Manila office of Herrer that the application had been accepted, is a disputed point, which will be discussed later.) On
December 4, 1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres wrote to the Manila
office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr.
Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917. This letter was
received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died on December 20,
1917.chanroblesvirtualawlibrarychanrobles virtual law library
As above suggested, the issue of fact raised by the evidence is whether Herrer received notice of acceptance of his application.
To resolve this question, we propose to go directly to the evidence of record.chanroblesvirtualawlibrary chanrobles virtual law
library
The chief clerk of the Manila office of the Sun Life Assurance Company of Canada at the time of the trial testified that he
prepared the letter introduced in evidence as Exhibit 3, of date November 26, 1917, and handed it to the local manager, Mr. E.
E. White, for signature. The witness admitted on cross-examination that after preparing the letter and giving it to he manager,
he new nothing of what became of it. The local manager, Mr. White, testified to having received the cablegram accepting the
application of Mr. Herrer from the home office on November 26, 1917. He said that on the same day he signed a letter notifying
Mr. Herrer of this acceptance. The witness further said that letters, after being signed, were sent to the chief clerk and placed
on the mailing desk for transmission. The witness could not tell if the letter had every actually been placed in the mails. Mr.
Tuason, who was the chief clerk, on November 26, 1917, was not called as a witness. For the defense, attorney Manuel Torres
testified to having prepared the will of Joaquin Ma. Herrer, that on this occasion, Mr. Herrer mentioned his application for a life
annuity, and that he said that the only document relating to the transaction in his possession was the provisional receipt. Rafael
Enriquez, the administrator of the estate, testified that he had gone through the effects of the deceased and had found no
letter of notification from the insurance company to Mr. Herrer.chanroblesvirtualawlibrary chanrobles virtual law library
Our deduction from the evidence on this issue must be that the letter of November 26, 1917, notifying Mr. Herrer that his
application had been accepted, was prepared and signed in the local office of the insurance company, was placed in the
ordinary channels for transmission, but as far as we know, was never actually mailed and thus was never received by the
applicant.chanroblesvirtualawlibrary chanrobles virtual law library
Not forgetting our conclusion of fact, it next becomes necessary to determine the law which should be applied to the facts. In
order to reach our legal goal, the obvious signposts along the way must be noticed.chanroblesvirtualawlibrary chanrobles
virtual law library
Until quite recently, all of the provisions concerning life insurance in the Philippines were found in the Code of Commerce and
the Civil Code. In the Code of the Commerce, there formerly existed Title VIII of Book III and Section III of Title III of Book III,
which dealt with insurance contracts. In the Civil Code there formerly existed and presumably still exist, Chapters II and IV,
entitled insurance contracts and life annuities, respectively, of Title XII of Book IV. On the after July 1, 1915, there was,
however, in force the Insurance Act. No. 2427. Chapter IV of this Act concerns life and health insurance. The Act expressly
repealed Title VIII of Book II and Section III of Title III of Book III of the code of Commerce. The law of insurance is consequently
now found in the Insurance Act and the Civil Code.chanroblesvirtualawlibrary chanrobles virtual law library
While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the methods to be followed in order that
there may be a contract of insurance. On the other hand, the Civil Code, in article 1802, not only describes a contact of life
annuity markedly similar to the one we are considering, but in two other articles, gives strong clues as to the proper disposition
of the case. For instance, article 16 of the Civil Code provides that "In matters which are governed by special laws, any
deficiency of the latter shall be supplied by the provisions of this Code." On the supposition, therefore, which is incontestable,
that the special law on the subject of insurance is deficient in enunciating the principles governing acceptance, the subject-
matter of the Civil code, if there be any, would be controlling. In the Civil Code is found article 1262 providing that "Consent is
shown by the concurrence of offer and acceptance with respect to the thing and the consideration which are to constitute the
contract. An acceptance made by letter shall not bind the person making the offer except from the time it came to his
knowledge. The contract, in such case, is presumed to have been entered into at the place where the offer was made." This
latter article is in opposition to the provisions of article 54 of the Code of
Commerce.chanroblesvirtualawlibrary chanroblesvirtual law library
If no mistake has been made in announcing the successive steps by which we reach a conclusion, then the only duty remaining
is for the court to apply the law as it is found. The legislature in its wisdom having enacted a new law on insurance, and
expressly repealed the provisions in the Code of Commerce on the same subject, and having thus left a void in the commercial
law, it would seem logical to make use of the only pertinent provision of law found in the Civil code, closely related to the
chapter concerning life annuities.chanroblesvirtualawlibrary chanrobles virtual law library
The Civil Code rule, that an acceptance made by letter shall bind the person making the offer only from the date it came to his
knowledge, may not be the best expression of modern commercial usage. Still it must be admitted that its enforcement avoids
uncertainty and tends to security. Not only this, but in order that the principle may not be taken too lightly, let it be noticed
that it is identical with the principles announced by a considerable number of respectable courts in the United States. The
courts who take this view have expressly held that an acceptance of an offer of insurance not actually or constructively
communicated to the proposer does not make a contract. Only the mailing of acceptance, it has been said, completes the
contract of insurance, as the locus poenitentiae is ended when the acceptance has passed beyond the control of the party. (I
Joyce, The Law of Insurance, pp. 235, 244.)chanrobles virtual law library
In resume, therefore, the law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code
providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his
knowledge. The pertinent fact is, that according to the provisional receipt, three things had to be accomplished by the
insurance company before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had to be
approval of the application by the head office of the company; and (3) this approval had in some way to be communicated by
the company to the applicant. The further admitted facts are that the head office in Montreal did accept the application, did
cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter
of notification and place it in the usual channels for transmission to the addressee. The fact as to the letter of notification thus
fails to concur with the essential elements of the general rule pertaining to the mailing and delivery of mail matter as
announced by the American courts, namely, when a letter or other mail matter is addressed and mailed with postage prepaid
there is a rebuttable presumption of fact that it was received by the addressee as soon as it could have been transmitted to him
in the ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For
instance, a letter will not be presumed to have been received by the addressee unless it is shown that it was deposited in the
post-office, properly addressed and stamped. ( See 22 C.J., 96, and 49 L. R. A. [N. S.], pp. 458, et seq., notes.)chanrobles virtual
law library
We hold that the contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily
that the acceptance of the application ever came to the knowledge of the applicant.chanroblesvirtualawlibrary chanrobles
virtual law library
Judgment is reversed, and the plaintiff shall have and recover from the defendant the sum of P6,000 with legal interest from
November 20, 1918, until paid, without special finding as to costs in either instance. So ordered.chanroblesvirtualaw
























FIRST DIVISION

[G.R. No. L-44059. October 28, 1977.]

THE INSULAR LIFE ASSURANCE COMPANY, LTD., Plaintiff-Appellee, v. CARPONIA T. EBRADO and PASCUALA VDA. DE
EBRADO, Defendants-Appellants.


D E C I S I O N


MARTIN, J.:


This is a novel question in insurance law: Can a common-law wife named as beneficiary in the life insurance policy of a legally
married man claim the proceeds thereof in case of death of the latter?

On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Insular Life Assurance Co., Ltd., Policy No. 009929 on a
whole-life plan for P5,882.00 with a rider for Accidental Death Benefits for the same amount. Buenaventura C. Ebrado
designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her as his wife.

On October 21, 1969, Buenventura C. Ebrado died as a result of an accident when he was hit by a falling branch of a tree. As the
insurance policy was in force, The Insular Life Assurance Co., Ltd. stands liable to pay the coverage of the policy in an amount of
P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental
death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid
premiums and interest thereon due for January and February, 1969, in the sum of P36.27.

Carponia T. Ebrado filed with the insurer a claim for the proceeds of the policy as the designated beneficiary therein, although
she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and wife without the benefit of
marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one
entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd. commenced an
action for Interpleader before the Court of First Instance of Rizal on April 29, 1970.

After the issues have been joined, a pre-trial conference was held on July 8, 1972, after which, a pre-trial order was entered
reading as follows:jgc:chanrobles.com.ph

"During the pre-trial conference, the parties manifested to the court that there is no possibility of amicable settlement. Hence,
the Court proceeded to have the parties submit their evidence for the purposes of the pre-trial and make admissions for the
purpose of pre-trial. During this conference, parties Carponia T. Ebrado and Pascuala Ebrado agreed and stipulated: 1) that the
deceased Buenaventura Ebrado was married to Pascuala Ebrado with whom she has six (legitimate) namely; Hernando,
Cresencio, Elsa, Erlinda, Felizardo and Helen, all surnamed Ebrado; 2) that during the lifetime of the deceased, he was insured
with Insular Life Assurance Co. Under Policy No. 009929 whole life plan, dated September 1, 1968 for the sum of P5,882.00 with
the rider for accidental death benefit as evidenced by Exhibits A for plaintiffs and Exhibit 1 for the defendant Pascuala and
Exhibit 7 for Carponia Ebrado; 3) that during the lifetime of Buenaventura Ebrado, he was living with his common-law wife,
Carponia Ebrado, with whom she had 2 children although he was not legally separated from his legal wife; 4) that Buenaventura
Ebrado died by accident on October 21, 1969 as evidenced by the death certificate Exhibit 3 and affidavit of the police report of
his death Exhibit 5; 5) that complainant Carponia Ebrado filed claim with the Insular Life Assurance Co. which was contested by
Pascuala Ebrado who also filed claim for the proceeds of said policy; 6) that in view of the adverse claims the insurance
company filed this action against the two herein claimants Carponia and Pascuala Ebrado; 7) that there is now due from the
Insular Life Assurance Co. as proceeds of the policy P11,745.73; 8) that the beneficiary designated by the insured in the policy is
Carponia Ebrado and the insured made reservation to change the beneficiary but although the insured made the option to
change the beneficiary, same was never changed up to the time of his death and the legal wife did not have any opportunity to
write the company that there was reservation to change the designation of the beneficiary; 9) the parties agreed that a decision
be rendered based on this agreement and stipulation of facts as to who among the two claimants is entitled to the policy.

"Upon motion of the parties, they are given ten (10) days to file their simultaneous memoranda from the receipt of this order.

SO ORDERED."cralaw virtua1aw library

On September 25, 1972, the trial court rendered judgment declaring, among others, Carponia T. Ebrado disqualified from
becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the
estate of the deceased insured. The trial court held:jgc:chanrobles.com.ph

"It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or concubinage is not
essential in order to establish the disqualification mentioned therein. Neither is it also necessary that a finding of such guilt or
commission of those acts be made in a separate independent action brought for the purpose. The guilt of the donee
(beneficiary) may be proved by preponderance of evidence in the same proceeding (the action brought to declare the nullity of
the donation).

It is, however, essential that such adultery or concubinage exists at the time defendant Carponia T. Ebrado was made
beneficiary in the policy in question for the disqualification and incapacity to exist and that it is only necessary that such fact be
established by preponderance of evidence in the trial. Since it is agreed in their stipulation above-quoted that the deceased
insured and defendant Carponia T. Ebrado were living together as husband and wife without being legally married and that the
marriage of the insured with the other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the insurance
in question was purchased there is no question that defendant Carponia T. Ebrado is disqualified from becoming the beneficiary
of the policy in question and as such she is not entitled to the proceeds of the insurance upon the death of the
insured." chanrobles virtual lawlibrary

From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11, 1976, the Appellate Court certified
the case to Us as involving only questions of law.

We affirm the judgment of the lower court.

1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as
amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section 50 of the Insurance
Act which provides that" (t)he insurance shall be applied exclusively to the proper interest of the person in whose name it is
made" 1 cannot be validly seized upon to hold that the same includes the beneficiary. The word interest" highly suggests that
the provision refers only to the insured" and not to the beneficiary, since a contract of insurance is personal in character. 2
Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the
same could easily be circumvented by modes of insurance. Rather, the general rules of civil law should be applied to resolve
this void in the Insurance Law Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws.
Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically
provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating
contracts. 3 And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article
739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him." 4 Common-law
spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code
provides:jgc:chanrobles.com.ph

"The following donations shall be void:jgc:chanrobles.com.ph

"1. Those made between persons who were guilty of adultery or concubinage at the time of donation;

"Those made between persons found guilty of the same criminal offense, in consideration thereof;

"3. Those made to a public officer or his wife, descendants or ascendants by reason of his office.

"In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and
the guilt of the donee may be proved by preponderance of evidence in the same action."cralaw virtua1aw library

2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are
founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which
the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the
proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012
cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of
the person who cannot make the donation. 5 Under American law, a policy of life insurance is considered as a testament and in
construing it, the courts will, so far as possible treat it as a will and determine the effect of a clause designating the beneficiary
by rules under which wills are interpreted. 6

3. Policy considerations and dictates of morality rightly justify the institution of a barrier between common-law spouses in
regard to property relations since such relationship ultimately encroaches upon the nuptial and filial rights of the legitimate
family. There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones
should be enforced in life insurance policies since the same are based on similar consideration. As above pointed out, a
beneficiary in a life insurance policy is no different from a donee. Both the recipients of pure beneficence. So long as marriage
remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should
likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with
more reason should an illicit relationship be restricted by these disabilities. Thus, in Matabuena v. Cervantes, 7 this Court,
through Justice Fernando, said:jgc:chanrobles.com.ph

"If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that court (Court of Appeals), `to
prohibit donations in favor of the other consort and his descendants because of fear and undue and improper pressure and
influence upon the donor, a prejudice deeply rooted in our ancient law;" por-que no se enganen desponjandose el uno al otro
por amor que han de consuno (According to) the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale `No Mutuato amore
invicem spoliarentur of the Pandects (Bk, 24, Titl. 1 De donat, inter virum et uxorem); then there is very reason to apply the
same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. For it is not to be
doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that
the danger that the law seeks to avoid is correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32
ad Sabinum, fr. 1), `it would not be just that such donations should subsist, lest the condition of those who incurred guilt should
turn out to be better. So long as marriage remains the cornerstone of our family law, reason and morality alike demand that
the disabilities attached to marriage should likewise attach to concubinage.

It is hardly necessary to add that even in the absence of the above pronouncement, any other conclusion cannot stand the test
of scrutiny. It would be to indict the framers of the Civil Code for a failure to apply a laudable rule to a situation which in its
essentials cannot be distinguished. Moreover, if it is at all to be differentiated the policy of the law which embodies a deeply
rooted notion of what is just and what is right would be nullified if such irregular relationship instead of being visited with
disabilities would be attended with benefits. Certainly a legal norm should not be susceptible to such a reproach. If there is
every any occasion where the principle of statutory construction that what is within the spirit of the law is as much a part of it
as what is written, this is it. Otherwise the basic purpose discernible in such codal provision would not be attained. Whatever
omission may be apparent in an interpretation purely literal of the language used must be remedied by an adherence to its
avowed objective." chanrobles law library

4. We do not think that a conviction for adultery or concubinage is exacted before the disabilities mentioned in Article 739 may
effectuate. More specifically, with regard to the disability on "persons who were guilty of adultery or concubinage at the time
of the donation," Article 739 itself provides:jgc:chanrobles.com.ph

"In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and
the guilt of the donee may be proved by preponderance of evidence in the same action."cralaw virtua1aw library

The underscored clause neatly conveys that no criminal conviction for the disqualifying offense is a condition precedent. In fact,
it cannot even be gleaned from the aforequoted provision that a criminal prosecution is needed. On the contrary, the law
plainly states that the guilt of the party may be proved "in the same action" for declaration of nullity of donation. And, it would
be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in criminal
cases is not demanded.

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

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

SO ORDERED.

























[G.R. No. 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.
D E C I S I O N
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, 1995
1
and its Resolution dated February 22, 1996
2
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.
3
chanroblesvirtuallawlibrary
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 MSPC-1022.
4
chanroblesvirtuallawlibrary
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 third-party 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.
5
chanroblesvirtuallawlibrary
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.
6
chanroblesvirtuallawlibrary
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.
7
chanroblesvirtuallawlibrary
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. Alejandro
8
and the other cases
9
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."
10
chanroblesvirtuallawlibrary
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.
13
chanroblesvirtuallawlibrary
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.
[G.R. No. 113899. October 13, 1999.]

GREAT PACIFIC LIFE ASSURANCE CORP., Petitioner, v. COURT OF APPEALS AND MEDARDA V. LEUTERIO, Respondents.


D E C I S I O N


QUISUMBING, J.:


This petition for review, under Rule 45 of the Rules of Court, assails the Decision 1 dated May 17, 1993, of the Court of Appeals
and its Resolution 2 dated January 4, 1994 in CA-G.R. CV No. 18341. The appellate court affirmed in toto the judgment of the
Misamis Oriental Regional Trial Court, Branch 18, in an insurance claim filed by private respondent against Great Pacific Life
Assurance Co. The dispositive portion of the trial courts decision reads:chanrobles virtual lawlibrary

"WHEREFORE, judgment is rendered adjudging the defendant GREAT PACIFIC LIFE ASSURANCE CORPORATION as insurer under
its Group policy No. G-1907, in relation to Certification B-18558 liable and ordered to pay to the DEVELOPMENT BANK OF THE
PHILIPPINES as creditor of the insured Dr. Wilfredo Leuterio, the amount of EIGHTY SIX THOUSAND TWO HUNDRED PESOS
(P86,200.00); dismissing the claims for damages, attorneys fees and litigation expenses in the complaint and counterclaim,
with costs against the defendant and dismissing the complaint in respect to the plaintiffs, other than the widow-beneficiary, for
lack of cause of action." 3

The facts, as found by the Court of Appeals, are as follows:chanroblesvirtual|awlibrary

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). Grepalife agreed to insure the lives of eligible housing
loan mortgagors of DBP.

On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group
life insurance plan. In an application form, Dr. Leuterio answered questions concerning his health condition as
follows:jgc:chanrobles.com.ph

"7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or
stomach disorder or any other physical impairment?

Answer: No. If so give details ___________.

8. Are you now, to the best of your knowledge, in good health?

Answer: [ x ] Yes [ ] No." 4chanroblesvirtuallawlibrary:red

On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness amounting to eighty-six thousand, two hundred (P86,200.00) pesos.

On August 6, 1984, Dr. Leuterio died due to "massive cerebral hemorrhage." Consequently, DBP submitted a death claim to
Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance
coverage on November 15, 1983. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension,
which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim.

On October 20, 1986, the widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a complaint with the Regional
Trial Court of Misamis Oriental, Branch 18, against Grepalife for "Specific Performance with Damages." 5 During the trial, Dr.
Hernando Mejia, who issued the death certificate, was called to testify. Dr. Mejias findings, based partly from the information
given by the respondent widow, stated that Dr. Leuterio complained of headaches presumably due to high blood pressure. The
inference was not conclusive because Dr. Leuterio was not autopsied, hence, other causes were not ruled
out.chanroblesvirtual|awlibrary

On February 22, 1988, the trial court rendered a decision in favor of respondent widow and against Grepalife. On May 17, 1993,
the Court of Appeals sustained the trial courts decision. Hence, the present petition. Petitioners interposed the following
assigned errors:jgc:chanrobles.com.ph

"1. 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, INSTEAD OF DISMISSING THE CASE
AGAINST DEFENDANT-APPELLANT [Petitioner Grepalife] FOR LACK OF CAUSE OF ACTION.

2. 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.

3. THE LOWER COURT ERRED IN ORDERING DEFENDANT-APPELLANT TO PAY TO DBP THE AMOUNT OF P86,200.00 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 DEFENDANT-APPELLANT.chanroblesvirtual|awlibrary

4. THE LOWER COURT ERRED IN - 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." 6

Synthesized below are the assigned errors for our resolution:chanrob1es virtual 1aw library

1. 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. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate
the insurance contract?

3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six thousand, two hundred
(P86,200.00) pesos without proof of the actual outstanding mortgage payable by the mortgagor to DBP.

Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hence the trial
court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial courts judgment,
Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined
in the suit.chanrobles.com : virtual law library

To resolve the issue, we must consider the insurable interest in mortgaged properties and the parties to this type of contract.
The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage redemption insurance," is a device
for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, 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, the
proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the
mortgagor from paying the obligation. 7 In a similar vein, ample protection is given to the mortgagor under such a concept so
that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the
mortgage indebtedness. 8 Consequently, where the mortgagor pays the insurance premium under the group insurance policy,
making the loss payable to the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a
party to the contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-
payable clause does not make the mortgagee a party to the contract. 9

Section 8 of the Insurance Code provides:jgc:chanrobles.com.ph

"Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be
payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of
the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would
otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act
which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein
named, with the same effect as if it had been performed by the mortgagor." chanrobles.com : virtual law library

The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that:
"In the event of the debtors death before his indebtedness with the Creditor *DBP+ shall have been fully paid, an amount to pay
the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be
paid to the beneficiary/ies designated by the debtor." 10 When DBP submitted the insurance claim against petitioner, the latter
denied payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt
from the mortgagor and took the necessary action of foreclosure on the residential lot of private Respondent. 11 In Gonzales La
O v. Yek Tong Lin Fire & Marine Ins. Co. 12 we held:jgc:chanrobles.com.ph

"Insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. . . . Subject
to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person
named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. . . . Although
a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may
sue thereon in his own name, especially where the mortgagees interest is less than the full amount recoverable under the
policy, . . . .

And in volume 33, page 82, of the same work, we read the following:chanrob1es virtual 1aw library

Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has
assigned as collateral security any judgment he may obtain." 13chanrobles virtual lawlibrary

And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an
insurable interest or not, and such person may recover it whatever the insured might have recovered, 14 the widow of the
decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

The second assigned error refers to an alleged concealment that the petitioner interposed as its defense to annul the insurance
contract. Petitioner contends that Dr. Leuterio failed to disclose that he had hypertension, which might have caused his death.
Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing
requires that he should communicate it to the assured, but he designedly and intentionally withholds the same. 15

Petitioner merely relied on the testimony of the attending physician, Dr. Hernando Mejia, as supported by the information
given by the widow of the decedent. Grepalife asserts that Dr. Mejias technical diagnosis of the cause of death of Dr. Leuterio
was a duly documented hospital record, and that the widows declaration that her husband had "possible hypertension several
years ago" should not be considered as hearsay, but as part of res gestae.

On the contrary the medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the
decedent. As the attending physician, Dr. Mejia stated that he had no knowledge of Dr. Leuterios any previous hospital
confinement. 16 Dr. Leuterios death certificate stated that hypertension was only "the possible cause of death." The private
respondents statement, as to the medical history of her husband, was due to her unreliable recollection of events. Hence, the
statement of the physician was properly considered by the trial court as hearsay.chanroblesvirtual|awlibrary

The question of whether there was concealment was aptly answered by the appellate court, thus:jgc:chanrobles.com.ph

"The insured, Dr. Leuterio, 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, including hypertension; when he died the attending physician had certified in the
death certificate that the former died of cerebral hemorrhage, probably secondary to hypertension. From this report, the
appellant insurance company refused to pay the insurance claim. Appellant alleged that the insured had concealed the fact that
he had hypertension.

Contrary to appellants allegations, there was no sufficient proof that the insured had suffered from hypertension. Aside from
the statement of the insureds widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, the
appellant had not proven nor produced any witness who could attest to Dr. Leuterios medical history. . .
x x x


Appellant insurance company had failed to establish that there was concealment made by the insured, hence, it cannot refuse
payment of the claim." 17chanrobles.com : virtual law library

The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. 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. 19 In the case at bar, the petitioner failed to clearly and
satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance.

And that brings us to the last point in the review of the case at bar. Petitioner claims that there was no evidence as to the
amount of Dr. Leuterios outstanding indebtedness to DBP at the time of the mortgagors death. Hence, for private
respondents failure to establish the same, the action for specific performance should be dismissed. Petitioners claim is
without merit. A life insurance policy is a valued policy. 20 Unless the interest of a person insured is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.
21 The mortgagor paid the premium according to the coverage of his insurance, which states that:jgc:chanrobles.com.ph

"The policy states that upon receipt of due proof of the Debtors death during the terms of this insurance, a death benefit in the
amount of P86,200.00 shall be paid.chanroblesvirtuallawlibrary:red

In the event of the debtors death before his indebtedness with the creditor shall have been fully paid, an amount to pay the
outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be
paid to the beneficiary/ies designated by the debtor." 22 (Emphasis omitted)

However, we noted that the Court of Appeals decision was promulgated on May 17, 1993. In private respondents
memorandum, she states that DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagors outstanding loan.
Considering this supervening event, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his
beneficiaries. Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius
detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage. The proceeds
now rightly belong to Dr. Leuterios heirs represented by his widow, herein private respondent Medarda Leuterio.

WHEREFORE, the petition is hereby DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV 18341 is
AFFIRMED with MODIFICATION that the petitioner is ORDERED to pay the insurance proceeds amounting to Eighty-six
thousand, two hundred (P86,200.00) pesos to the heirs of the insured, Dr. Wilfredo Leuterio (deceased), upon presentation of
proof of prior settlement of mortgagors indebtedness to Development Bank of the Philippines. Costs against
petitioner.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

SO ORDERED.













G.R. No. 94071 March 31, 1992
NEW LIFE ENTERPRISES and JULIAN SY, petitioners, vs. HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION,
RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION, respondents.chanrobles virtual law
library
REGALADO, J.:
This appeal by certiorari seeks the nullification of the decision
1
of respondent Court of Appeals in CA-G.R. CV No. 13866 which
reversed the decision of the Regional Trial Court, Branch LVII at Lucena City, jointly deciding Civil Cases Nos. 6-84, 7-84 and 8-84
thereof and consequently ordered the dismissal of the aforesaid actions filed by herein
petitioners.chanroblesvirtualawlibrarychanrobles virtual law library
The undisputed background of this case as found by the court a quo and adopted by respondent court, being sustained by the
evidence on record, we hereby reproduce the same with approval.
2

The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business partnership in the City of Lucena.
Under the business name of New Life Enterprises, the partnership engaged in the sale of construction
materials at its place of business, a two storey building situated at Iyam, Lucena City. The facts show that Julian Sy insured the
stocks in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance. Co., Inc., and
Equitable Insurance Corporation.chanroblesvirtualawlibrarychanrobles virtual law library
On May 15, 1981, Western Guaranty Corporation issued Fire Insurance PolicyNo. 37201 in the amount of P350,000.00. This
policy was renewed on May, 13, 1982.chanroblesvirtualawlibrarychanrobles virtual law library
On July 30,1981, Reliance Surety and Insurance Co., Inc. issued Fire InsurancePolicy No. 69135 in the amount of P300,000.00
(Renewed under Renewal Certificate No. 41997) An additional insurance was issued by the samecompany on
November 12, 1981 under Fire Insurance Policy No. 71547 in the amount of P700,000.00.chanroblesvirtualawlibrarychanrobles
virtual law library
On February 8, 1982, Equitable Insurance Corporation issued Fire InsurancePolicy No. 39328 in the amount of
P200,000.00.chanroblesvirtualawlibrarychanrobles virtual law library
Thus when the building occupied by the New Life Enterprises was gutted by fireat about 2:00
o'clock in the morning of October 19, 1982, the stocks in the trade inside said building were insured against
fire in the total amount ofP1,550,000.00. According to the certification issued by the Headquarters,Philippine Constabulary
/Integrated National Police, Camp Crame, the cause offire was electrical in nature. According to the plaintiffs,
the building and thestocks inside were burned. After the fire, Julian Sy went to the agent of
Reliance Insurance whom he asked to accompany him to the office of thecompany so that he can file
his claim. He averred that in support of his claim,he submitted the fire clearance, the insurance policies and inventory
of stocks.He further testified that the three insurance companies are sister companies,and as a matter of fact when he was
following-up his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance
Insurance and ifsaid company agrees to pay, they would also pay. The same treatment wasgiven him by the other insurance
companies. Ultimately, the three insurancecompanies denied plaintiffs' claim for
payment.chanroblesvirtualawlibrarychanrobles virtual law library
In its letter of denial dated March 9, 1983, (Exhibit "C" No. 8-
84) WesternGuaranty Corporation through Claims Manager Bernard S. Razon told the plaintiff that his claim "is
denied for breach of policy conditions." RelianceInsurance purveyed the same message in its letter dated November 23,
1982and signed by Executive Vice-President Mary Dee Co (Exhibit "C" No. 7-84)which said that "plaintiff's
claim is denied for breach of policy conditions." Theletter of denial received by the plaintiff from Equitable Insurance
Corporation(Exhibit "C" No. 6-84) was of the same tenor, as said letter dated February 22, 1983, and signed by Vice-President
Elma R. Bondad, said "we find that certain policy conditions were violated, therefore, we regret, we have to deny yourclaim,
as it is hereby denied in its entirety."chanrobles virtual law library
In relation to the case against Reliance Surety and Insurance Company, acertain Atty. Serafin D. Dator, acting in behalf of the
plaintiff, sent a letterdated February 13, 1983 (Exhibit "G-l" No 7-84) to Executive Vice-President Mary Dee Co asking that he
be informed as to the specific policy conditions allegedly violated by the plaintiff. In her reply-letter dated March
30, 1983,Executive Vice-President Mary Dee Co informed Atty. Dator that Julian Syviolated Policy Condition No.
"3" which requires the insured to give notice ofany insurance or insurances already effected covering the stocks in
trade.
3
chanrobles virtual law library
Because of the denial of their claims for payment by the three (3) insurance companies,petitioner filed separate
civil actions against the former before the Regional Trial Courtof Lucena City, which cases were consolidated for trial,
and thereafter the court belowrendered its decision on December 19, l986 with the following disposition:
WHEREFORE, judgment in the above-entitled cases is rendered in the following manner, viz:chanrobles virtual law library
1. In Civil Case No. 6-84, judgment is rendered for the plaintiff New LifeEnterprises and against the defendant Equitable
Insurance Corporation ordering the latter to pay the former the sum of Two Hundred Thousand(P200,000.00) Pesos and
considering that payment of the claim of the insuredhas been unreasonably denied, pursuant to Sec. 244 of the Insurance Code
,defendant is further ordered to pay the plaintiff attorney's fees in the amount of Twenty Thousand (P20,000.00)
Pesos. All sums of money to be paid byvirtue hereof shall bear interest at 12% per annum (pursuant
to Sec. 244 ofthe Insurance Code) from February 14, 1983, (91st day from November 16, 1982, when Sworn Statement of Fire
Claim was received from the insured) untilthey are fully paid;chanrobles virtual law library
2. In Civil Case No. 7-84, judgment is rendered for the plaintiff Julian Sy andagainst the defendant Reliance Surety and Insurance
Co., Inc., ordering thelatter to pay the former the sum of P1,000,000.00 (P300,000.00 under Policy
No. 69135 and P700,000.00 under Policy No. 71547) and considering thatpayment of the claim of the
insured has been unreasonably denied, pursuantto Sec. 244 of the Insurance Code, defendant is further ordered
to pay theplaintiff the amount of P100,000.00 as attorney's fees.chanroblesvirtualawlibrarychanrobles virtual law library
All sums of money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec.
244 of the Insurance Code) from February 14, 1983, (91st day from November 16,
1982 when Sworn Statement of Fire Claim wasreceived from the insured) until they are fully paid;chanrobles virtual law library
3. In Civil Case No. 8-84, judgment is rendered for
the plaintiff New LifeEnterprises and against the defendant Western Guaranty Corporation ordering
the latter to pay the sum of P350,000.00 to the Consolidated Bank and TrustCorporation,
Lucena Branch, Lucena City, as stipulated on the face of PolicyNo. 37201, and considering that payment of the
aforementioned sum of moneyhas been unreasonably denied, pursuant to Sec. 244 of the Insurance Code,
defendant is further ordered to pay the plaintiff attorney's fees in the amountof
P35,000.00.chanroblesvirtualawlibrarychanrobles virtual law library
All sums of money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec. 244 of the Insurance
Code) from February 5, 1982, (91st day from 1st week of November 1983 when insured filed formal claim forfull indemnity
according to adjuster Vetremar Dela Merced) until they are fully paid.
4
chanrobles virtual law library
As aforestated, respondent Court of Appeals reversed said judgment of the trial court, hence this petition the crux wherein is
whether or not Conditions Nos. 3 and 27 of theinsurance contracts were violated by petitioners thereby resulting in
their forfeiture of allthe benefits thereunder.chanroblesvirtualawlibrarychanrobles virtual law library
Condition No. 3 of said insurance policies, otherwise known as the "Other InsuranceClause," is uniformly contained
in all the aforestated insurance contracts of hereinpetitioners, as follows:
3. The insured shall give notice to the Company of any insurance or insurancesalready effected, or which
may subsequently be effected, covering any of theproperty or properties consisting of stocks in trade, goods in process
and/orinventories only hereby insured, and unless such notice be given and theparticulars of such
insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of the Insurance
Code, by or on behalf of theCompany before the occurrence of any loss or damage, all benefits under thispolicy shall be
deemed forfeited, provided however, that this condition shallnot apply when the total insurance or insurances in force at
the time of loss ordamage not more than P200,000.00.
5
chanrobles virtual law library
Petitioners admit that the respective insurance policies issued by private respondentsdid not state or endorse thereon
the other insurance coverage obtained or subsequently effected on the same stocks in trade for the loss of which
compensation is claimed by petitioners.
6
The policy issued by respondent Western Guaranty Corporation (Western) did not
declare respondent Reliance Surety and Insurance Co., Inc. (Reliance) and respondent Equitable Insurance
Corporation (Equitable) as co-insurers on the samestocks, while Reliance's Policies covering the same stocks did not
likewise declareWestern and Equitable as such co-insurers. It is further admitted by petitioners thatEquitable's policy stated
"nil" in the space thereon requiring indication of any co-insurance although there were three (3) policies subsisting on the same
stocks in trade at the time of the loss, namely, that of Western in the amount of P350,000.00 and two(2) policies of Reliance in
the total amount of P1,000,000.00.
7
chanrobles virtual law library
In other words, the coverage by other insurance or co-insurance effected or subsequentlyarranged by petitioners were
neither stated nor endorsed in the policies of the three (3) private respondents, warranting forfeiture of all benefits
thereunder if we are to followthe express stipulation in the aforequoted Policy Condition No.
3.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioners contend that they are not to be blamed for the omissions, alleging thatinsurance agent Leon Alvarez (for Western)
and Yap Kam Chuan (for Reliance andEquitable) knew about the existence of the additional insurance coverage and that they
were not informed about the requirement that such other or additional insurance shouldbe stated in the
policy, as they have not even read policies.
8
These contentions cannot pass judicial
muster.chanroblesvirtualawlibrarychanrobles virtual law library
The terms of the contract are clear and unambiguous. The insured is specifically requiredto disclose to the insurer any other
insurance and its particulars which he may have effected on the same subject matter. The knowledge of such insurance
by the insurer'sagents, even assuming the acquisition thereof by the former, is not the "notice" that would estop the insurers
from denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is
knowledge of the principal, asidefrom being of dubious applicability here has likewise been roundly
refuted by respondentcourt whose factual findings we find acceptable.chanroblesvirtualawlibrarychanrobles virtual law library
Thus, it points out that while petitioner Julian Sy claimed that he had informedinsurance agent Alvarez regarding the co-
insurance on the property, he contradicted himself by inexplicably claiming that he had not read the terms of the policies; that
YapDam Chuan could not likewise have obtained such knowledge for the same reason, asidefrom the fact that
the insurance with Western was obtained before those of Relianceand Equitable; and that the conclusion of
the trial court that Reliance and Equitable are"sister companies" is an unfounded conjecture drawn from the mere fact that Yap
Kam Chuan was an agent for both companies which also had the same insurance claimsadjuster. Availment of the
services of the same agents and adjusters by different companies is a common practice in the insurance business and such facts
do not warrantthe speculative conclusion of the trial court.chanroblesvirtualawlibrarychanrobles virtual law library
Furthermore, when the words and language of documents are clear and plain or readilyunderstandable by an ordinary reader
thereof, there is absolutely no room for interpretation or construction anymore.
9
Courts are not allowed to make contracts
forthe parties; rather, they will intervene only when the terms of the policy are ambiguous, equivocal,
or uncertain.
10
The parties must abide by the terms of the contract becausesuch terms constitute the
measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the
insurer.
11
chanrobles virtual law library
While it is a cardinal principle of insurance law that a policy or contract of insurance is tobe construed liberally
in favor of the insured and strictly against the insurer company,yet contracts of insurance, like other contracts, are to be
construed according to thesense and meaning of the terms which the parties themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary and popular sense.
12
Moreover,
obligations arising from contracts have the force of law between the contracting parties and should be complied with in good
faith.
13
chanrobles virtual law library
Petitioners should be aware of the fact that a party is not relieved of the duty to exercise the ordinary care and
prudence that would be exacted in relation to other contracts. The conformity of the insured to the terms of the
policy is implied from hisfailure to express any disagreement with what is provided for.
14
It may be true that themajority rule,
as cited by petitioners, is that injured persons may accept policies withoutreading them, and that this is not negligence per
se. 15 But, this is not without any exception. It is and was incumbent upon petitioner Sy to read the insurance contracts, and
this can be reasonably expected of him considering that he has been a businessman since 1965
16
and the contract concerns
indemnity in case of loss in his money-makingtrade of which important consideration he could not have been unaware as it was
pre-in case of loss in his money-making trade of which important consideration he could not have been unaware as it was
precisely the reason for his procuring the same.We reiterate our pronouncement in Pioneer Insurance and Surety Corporation
vs. Yap:
17

. .
And considering the terms of the policy which required the insured todeclare other insurances, the statement in question must
be deemed to be astatement (warranty) binding on both insurer and insured, that there were noother insurance on the
property. . . .chanroblesvirtualawlibrarychanrobles virtual law library
The annotation then, must be deemed to be a warranty that the property wasnot insured by any other policy.
Violation thereof entitled the insurer to rescind (Sec. 69, Insurance Act). Such misrepresentation is fatal in the light of
ourviews in Santa Ana vs. Commercial Union Assurance Company, Ltd., 55 Phil. 329. The materiality of non-disclosure of other
insurance policies is not open to doubt.virtual law library
The obvious purpose of the aforesaid requirement in the policy is to preventover-insurance and thus avert the perpetration of
fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to
the insured. According to Justice Story: "The insured has no rightto complain, for he assents to comply
with all the stipulations on his side, inorder to entitle himself to the benefit of the contract, which, upon reason or principle, he
has no right to ask the court to dispense with the performance ofhis own part of the agreement, and yet to
bind the other party to obligations,which, but for those stipulations, would not have been entered into."
Subsequently, in the case of Pacific Banking Corporation vs. Court of Appeals, et al.,
18
we held:
It is not disputed that the insured failed to reveal before the loss three otherinsurances. As found by the Court
of Appeals, by reason of said unrevealed insurances, the insured had been guilty of a
false declaration; a clearmisrepresentation and a vital one because where the insured had been asked to reveal
but did not, that was deception. Otherwise stated, had the insurerknown that there were many co-insurances, it could
have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty ofclear fraud (Rollo, p.
25).chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner's contention that the allegation of fraud is but a mere inference orsuspicion is untenable. In fact,
concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged inthe
policy under clauses "Co-Insurances Declared" and "Other InsuranceClause" are materially different from the actual number
of co-insurances takenover the subject property. Consequently, "the whole foundation of the contract fails, the
risk does not attach and the policy never becomes a contract between the parties." Representations of facts are the
foundation of thecontract and if the foundation does not exist, the superstructure does
notarise. Falsehood in such representations is not shown to vary or add to thecontract, or to terminate a contract which has
once been made, but to showthat no contract has ever existed (Tolentino, Commercial Laws of thePhilippines, p.
991, Vol. II, 8th Ed.,) A void or inexistent contract is one which has no force and effect from the very beginning, as if it had
never beenentered into, and which cannot be validated either by time or by ratification (Tongoy vs. C.A., 123 SCRA 99 (1983);
Avila v. C.A., 145 SCRA, 1986).chanroblesvirtualawlibrarychanrobles virtual law library
As the insurance policy against fire expressly required that notice should be given by
the insured of other insurance upon the same property, the totalabsence of such notice nullifies the policy.
To further warrant and justify the forfeiture of the benefits under the insurance contractsinvolved, we need
merely to turn to Policy Condition No. 15 thereof, which reads in part:
15. . . . if any false declaration be made or used in support thereof, . . . allbenefits under this Policy shall be forfeited . . .
.
19
chanrobles virtual law library
Additionally, insofar as the liability of respondent Reliance is concerned, it is not deniedthat the complaint for recovery was
filed in court by petitioners only on January 31,1984, or after more than one (1) year had
elapsed from petitioners' receipt of theinsurers' letter of denial on November 29, 1982. Policy Condition No. 27 of their
insurance contract with Reliance provides:
27. Action or suit clause. - If a claim be made and rejected and an action orsuit be not commenced
either in the Insurance Commission or any court ofcompetent jurisdiction of notice of such
rejection, or in case of arbitrationtaking place as provided herein, within twelve (12) months after due
notice ofthe award made by the arbitrator or arbitrators or umpire, then the claim shallfor all purposes be
deemed to have been abandoned and shall not thereafter be recoverable hereunder.
20
chanrobles virtual law library
On this point, the trial court ruled: However, because of the peculiar circumstances of this case, we hesitate
in concluding that plaintiff's right to ventilate his claim in court has beenbarred by reason of the time constraint provided in the
insurance contract. It is evident that after the plaintiff had received
the letter of denial, he still foundit necessary to be informed of the specific causes or reasons for
the denial ofhis claim, reason for which his lawyer, Atty. Dator deemed it wise to send a
letter of inquiry to the defendant which was answered by defendant's ExecutiveVice-President in a letter dated March 30, 1983,
. . . . Assuming, gratuitously,that the letter of Executive Vice-President Mary Dee Co dated March 30, 1983, was
received by plaintiff on the same date, the period of limitation should start to run only from said date in the spirit of fair play
and equity. . . .
21
chanrobles virtual law library
We have perforce to reject this theory of the court below for being contrary to what we have heretofore declared:
It is important to note the principle laid down by this Court in the case of Ang vs. Fulton Fire Insurance Co. (2 SCRA 945
[1961]) to wit:
The condition contained in an insurance policy that claims must bepresented within one year
after rejection is not merely a proceduralrequirement but an important matter essential to a prompt settlement of claims
against insurance companies as it demands thatinsurance suits be brought by the insured while the evidence as tothe
origin and cause of destruction have not yet disappeared.
In enunciating the above-cited principle, this Court had definitely settled therationale for the
necessity of bringing suits against the Insurer within one yearfrom the rejection of the claim. The contention
of the respondents that theone-year prescriptive period does
not start to run until the petition forreconsideration had been resolved by the insurer, runs counter to the declaredpurpose
for requiring that an action or suit be filed in the Insurance Commission or in a court of competent
jurisdiction from the denial of theclaim. To uphold respondents' contention would contradict and defeat the very principle
which this Court had laid down. Moreover, it can easily be used byinsured persons as a scheme or device to waste time
until any evidence whichmay be considered against them is destroyed.virtual law library
While in the Eagle Star case (96 Phil. 701), this Court uses the phrase "finalrejection", the
same cannot be taken to mean the rejection of a petition forreconsideration as insisted by respondents.
Such was clearly not the meaningcontemplated by this Court. The insurance policy in said
case provides that theinsured should file his claim first, with the carrier and then with the insurer.
The "final rejection" being referred to in said case is the rejection by the insurance company.
22
chanrobles virtual law library
Furthermore, assuming arguendo that petitioners felt the legitimate need to be clarifiedas to the policy condition
violated, there was a considerable lapse of time from their receipt of the insurer's clarificatory letter dated March 30,
1983, up to the time the complaint was filed in court on January 31, 1984. The one-year prescriptive period wasyet
to expire on November 29, 1983, or about eight (8) months from the receipt of theclarificatory letter, but petitioners let the
period lapse without bringing their action incourt. We accordingly find no "peculiar circumstances" sufficient to
relax the enforcementof the one-year prescriptive period and we, therefore, hold that petitioners' claim was definitely filed out
of time.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREFORE, finding no cogent reason to disturb the judgment
of respondent Court ofAppeals, the same is hereby AFFIRMED.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.
SECOND DIVISION

[G.R. No. 89741. March 13, 1991.]

SUN INSURANCE OFFICE, LTD., Petitioner, v. COURT OF APPEALS and EMILIO TAN,Respondents.

Alfonso Felix, Jr., for Petitioner.

William B. Devilles for Private Respondent.


SYLLABUS


1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS OF INSURANCE; CONSTRUED ACCORDING TO ITS LIBERAL SENSE
AND MEANING. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed
liberally in favor of the insured and strictly against the insurer company, yet, contracts of insurance, like other contracts, are to
be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear
and unambiguous, they must be taken and understood in their plain, ordinary and popular sense (Pacific Banking Corp. v. Court
of Appeals, 168 SCRA 1[1988]).

2. MERCANTILE LAW; INSURANCE; INSURANCE POLICY; PRESCRIPTIVE PERIOD OF FILING CLAIMS, JURISDICTIONAL. The
condition contained in an insurance policy that claims must be presented within one year after rejection is not merely a
procedural requirement but an important matter essential to a prompt settlement of claims against insurance companies as it
demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not
yet disappeared (Ang v. Fulton Fire Insurance Co., 2 SCRA 945 [1961]).

3. ID.; ID.; CAUSE OF ACTION; "FINAL REJECTION" OF CLAIM, CONSTRUED. The right of the insured to the payment of his loss
accrues from the happening of the loss. However, the cause of action in an insurance contract does not accrue until the
insureds claim is finally rejected by the insurer. This is because before such final rejection there is no real necessity for bringing
suit. (Eagle Star Insurance Co. v. Chu Yu, 96 Phil. 696 [1955] While in the Eagle Star case (96 Phil. 701), this Court uses the
phrase "final rejection", the same cannot be taken to mean the rejection of a petition for reconsideration as insisted by
respondents. Such was clearly not the meaning contemplated by this Court. The Insurance policy in said case provides that the
insured should file his claim, first, with the carrier and then with the insurer. The "final rejection" being referred to in said case
is the rejection by the insurance company.


D E C I S I O N


PARAS, J.:


This is a petition for review on certiorari of the June 20, 1989 decision 1 of the Court of Appeals in CA-G.R. SP. Case No. 13848
affirming the November 3, 1987 and January 14, 1988 Orders of the Regional Trial Court 2 of Iloilo, Branch 27, in Civil Case No.
16817, denying the motion to dismiss and the subsequent motion for reconsideration; and the August 22, 1989 resolution of
the same court denying the motion for reconsideration.

On August 15, 1983, herein private respondent Emilio Tan took from herein petitioner a P300,000.00 property insurance policy
to cover his interest in the electrical supply store of his brother housed in a building in Iloilo City. Four (4) days after the
issuance of the policy, the building was burned including the insured store. On August 20, 1983, Tan filed his claim for fire loss
with petitioner, but on February 29, 1984, petitioner wrote Tan denying the latters claim. On April 3, 1984, Tan wrote
petitioner, seeking reconsideration of the denial of his claim. On September 3, 1985, Tans counsel wrote the Insurer inquiring
about the status of his April 3, 1984 request for reconsideration. Petitioner answered the letter on October 11, 1985, advising
Tans counsel that the Insurers denial of Tans claim remained unchanged, enclosing copies of petitioners letters of February
29, 1984 and May 17, 1985 (response to petition for reconsideration). On November 20, 1985, Tan filed Civil Case No. 16817
with the Regional Trial Court of Iloilo, Branch 27 but petitioner filed a motion to dismiss on the alleged ground that the action
had already prescribed. Said motion was denied in an order dated November 3, 1987; and petitioners motion for
reconsideration was also denied in an order dated January 14, 1988.

Petitioner went to the Court of Appeals and sought the nullification of the said Nov. 3, 1987 and January 14, 1988 orders, but
the Court of Appeals, in its June 20, 1989 decision denied the petition and held that the court a quo may continue until its final
termination.

A motion for reconsideration was filed, but the same was denied by the Court of Appeals in its resolution of August 22, 1989
(Rollo, pp. 42-43).

Hence, the instant petition.

The Second Division of this Court, in its resolution of December 18, 1989 resolved to give due course to the petition and to
require the parties to submit simultaneous memoranda (Ibid., p 56).chanrobles virtual lawlibrary

Petitioner raised two (2) issues which may be stated in substance, as follows:chanrob1es virtual 1aw library
I


WHETHER OR NOT THE FILING OF A MOTION FOR RECONSIDERATION INTERRUPTS THE TWELVE (12) MONTHS PRESCRIPTIVE
PERIOD TO CONTEST THE DENIAL OF THE INSURANCE CLAIM; and.
II


WHETHER OR NOT THE REJECTION OF THE CLAIM SHALL BE DEEMED FINAL ONLY IF IT CONTAINS WORDS TO THE EFFECT THAT
THE DENIAL IS FINAL.

The answer to the first issue is in the negative.

While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the
insured and strictly against the insurer company, yet, contracts of insurance, like other contracts, are to be construed according
to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they
must be taken and understood in their plain, ordinary and popular sense (Pacific Banking Corp. v. Court of Appeals, 168 SCRA
1[1988]).

Condition 27 of the Insurance Policy, which is the subject of the conflicting contentions of the parties,
reads:jgc:chanrobles.com.ph

"27. Action or suit clause If a claim be made and rejected and an action or suit be not commenced either in the Insurance
Commission or in any court of competent jurisdiction within twelve (12) months from receipt of notice of such rejection, or in
case of arbitration taking place as provided herein, within twelve (12) months after due notice of the award made by the
arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to have been abandoned and shall not
thereafter be recoverable hereunder."cralaw virtua1aw library

As the terms are very clear and free from any doubt or ambiguity whatsoever, it must be taken and understood in its plain,
ordinary and popular sense pursuant to the above-cited principle laid down by this Court.

Respondent Tan, in his letter addressed to the petitioner insurance company dated April 3, 1984 (Rollo, pp. 50-52), admitted
that he received a copy of the letter of rejection on April 2, 1984. Thus, the 12-month prescriptive period started to run from
the said date of April 2, 1984, for such is the plain meaning and intention of Section 27 of the insurance policy.

While the question of whether or not the insured was definitely advised of the rejection of his claim through the letter (Rollo,
pp. 48-49) of petitioner dated February 29, 1984, may arise, the certainty of the denial of Tans claim was clearly manifested in
said letter, the pertinent portion of which reads:jgc:chanrobles.com.ph

"We refer to your claim for fire loss of 20th August, 1983 at Huervana St., La Paz, Iloilo City.

"We now have the report of our adjusters and after a thorough and careful review of the same and the accompanying
documents at hand, we are rejecting, much to our regrets, liability for the claim under our policies for one or more of the
following reasons:chanrob1es virtual 1aw library
"For your information, we have referred all these matters to our lawyers for their opinion as to the compensability of your
claim, particularly referring to the above violations. It is their opinion and in fact their strong recommendation to us to deny
your claim. By this letter, we do not intend to waive or relinquish any of our rights or defenses under our policies of
insurance."cralaw virtua1aw library

It is also important to note the principle laid down by this Court in the case of Ang v. Fulton Fire Insurance Co., (2 SCRA 945
[1961]), to wit:jgc:chanrobles.com.ph

"The condition contained in an insurance policy that claims must be presented within one year after rejection is not merely a
procedural requirement but an important matter essential to a prompt settlement of claims against insurance companies as it
demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not
yet disappeared."cralaw virtua1aw library

In enunciating the above-cited principle, this Court had definitely settled the rationale for the necessity of bringing suits against
the Insurer within one year from the rejection of the claim. The contention of the respondents that the one-year prescriptive
period does not start to run until the petition for reconsideration had been resolved by the insurer, runs counter to the
declared purpose for requiring that an action or suit be filed in the Insurance Commission or in a court of competent jurisdiction
from the denial of the claim. To uphold respondents contention would contradict and defeat the very principle which this
Court had laid down. Moreover, it can easily be used by insured persons as a scheme or device to waste time until any evidence
which may be considered against them is destroyed.cralawnad

It is apparent that Section 27 of the insurance policy was stipulated pursuant to Section 63 of the Insurance Code, which states
that:jgc:chanrobles.com.ph

"Sec. 63. A condition, stipulation or agreement in any policy of insurance, limiting the time for commencing an action
thereunder to a period of less than one year from the time when the cause of action accrues, is void."cralaw virtua1aw library

The crucial issue in this case is: When does the cause of action accrue?

In support of private respondents view, two rulings of this Court have been cited, namely, the case of Eagle Star Insurance Co.
v. Chia Yu (96 Phil. 696 [1955]), where the Court held:jgc:chanrobles.com.ph

"The right of the insured to the payment of his loss accrues from the happening of the loss. However, the cause of action in an
insurance contract does not accrue until the insureds claim is finally rejected by the insurer. This is because before such final
rejection there is no real necessity for bringing suit."cralaw virtua1aw library

and the case of ACCFA v. Alpha Insurance & Surety Co., Inc. (24 SCRA 151 [1968], holding that:jgc:chanrobles.com.ph

"Since cause of action requires as essential elements not only a legal right of the plaintiff and a correlated obligation of the
defendant in violation of the said legal right, the cause of action does not accrue until the party obligated (surety) refuses,
expressly or impliedly, to comply with its duty (in this case to pay the amount of the bond)."cralaw virtua1aw library

Indisputably, the above-cited pronouncements of this Court may be taken to mean that the insureds cause of action or his
right to file a claim either in the Insurance Commission or in a court of competent jurisdiction commences from the time of the
denial of his claim by the Insurer, either expressly or impliedly.

But as pointed out by the petitioner insurance company, the rejection referred to should be construed as the rejection, in the
first instance, for if what is being referred to is a reiterated rejection conveyed in a resolution of a petition for reconsideration,
such should have been expressly stipulated.

Thus, to allow the filing of a motion for reconsideration to suspend the running of the prescriptive period of twelve months, a
whole new body of rules on the matter should be promulgated so as to avoid any conflict that may be brought by it, such
as:chanrob1es virtual 1aw library

a) whether the mere filing of a plea for reconsideration of a denial is sufficient or must it be supported by arguments/affidavits/
material evidence;

b) how many petitions for reconsideration should be permitted?

While in the Eagle Star case (96 Phil. 701), this Court uses the phrase "final rejection", the same cannot be taken to mean the
rejection of a petition for reconsideration as insisted by respondents. Such was clearly not the meaning contemplated by this
Court. The Insurance policy in said case provides that the insured should file his claim, first, with the carrier and then with the
insurer. The "final rejection" being referred to in said case is the rejection by the insurance company.

PREMISES CONSIDERED, the questioned decision of the Court of Appeals is REVERSED and SET ASIDE, and Civil Case No. 16817
filed with the Regional Trial Court is hereby DISMISSED.

SO ORDERED.





















FIRST DIVISION

[G.R. No. 138941. October 8, 2001.]

AMERICAN HOME ASSURANCE COMPANY, Petitioner, v. TANTUCO ENTERPRISES, INC.,Respondent.

D E C I S I O N


PUNO, J.:


Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CA-G.R. CV No. 52221
promulgated on January 14, 1999, which affirmed in toto the Decision of the Regional Trial Court, Branch 53, Lucena City in Civil
Case No. 92-51 dated October 16, 1995.

Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry. It owns two oil mills. Both are
located at factory compound at Iyam, Lucena City. It appears that respondent commenced its business operations with only one
oil mill. In 1988, it started operating its second oil mill. The latter came to be commonly referred to as the new oil
mill.chanrob1es virtua1 1aw 1ibrary

The two oil mills were separately covered by fire insurance policies issued by petitioner American Home Assurance Co.,
Philippine Branch. 1 The first oil mill was insured for three million pesos (P3,000,000.00) under Policy No. 306-7432324-3 for
the period March 1, 1991 to 1992. 2 The new oil mill was insured for six million pesos (P6,000,000.00) under Policy No. 306-
7432321-9 for the same term. 3 Official receipts indicating payment for the full amount of the premium were issued by the
petitioners agent. 4

A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill. Respondent
immediately notified the petitioner of the incident. The latter then sent its appraisers who inspected the burned premises and
the properties destroyed. Thereafter, in a letter dated October 15, 1991, petitioner rejected respondents claim for the
insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the description of
the insured establishment referred to another building thus: "Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps
3M) extend insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was under Building No. 14."
5chanrob1es virtua1 1aw 1ibrary

A complaint for specific performance and damages was consequently instituted by the respondent with the RTC, Branch 53 of
Lucena City. On October 16, 1995, after trial, the lower court rendered a Decision finding the petitioner liable on the insurance
policy thus:jgc:chanrobles.com.ph

"WHEREFORE, judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff:chanrob1es virtual 1aw library

(a) P4,406,536.40 representing damages for loss by fire of its insured property with interest at the legal rate;

(b) P80,000.00 for litigation expenses;

(c) P300,000.00 for and as attorneys fees; and

(d) Pay the costs.

SO ORDERED." 6

Petitioner assailed this judgment before the Court of Appeals. The appellate court upheld the same in a Decision promulgated
on January 14, 1999, the pertinent portion of which states:jgc:chanrobles.com.ph

"WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit and the trial courts Decision dated October 16, 1995 is
hereby AFFIRMED in toto.

SO ORDERED." 7

Petitioner moved for reconsideration. The motion, however, was denied for lack of merit in a Resolution promulgated on June
10, 1999.

Hence, the present course of action, where petitioner ascribes to the appellate court the following
errors:jgc:chanrobles.com.ph

"(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." 8

"(2) The Court of Appeals erred in its legal interpretation of Fire Extinguishing Appliances Warranty of the policy." 9

"(3) With due respect, the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the principle of
estoppel is erroneous." 10

The petition is devoid of merit.

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. According to it, the oil mill insured is specifically described in the policy by its boundaries in the
following manner:jgc:chanrobles.com.ph

"Front: by a driveway thence at 18 meters distance by Bldg. No. 2.

Right: by an open space thence by Bldg. No. 4.

Left: Adjoining thence an imperfect wall by Bldg. No. 4.

Rear: by an open space thence at 8 meters distance."cralaw virtua1aw library

However, it argues that this specific boundary description clearly pertains, not to the burned oil mill, but to the other mill. In
other words, the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy.

What exacerbates respondents predicament, petitioner posits, is that it did not have the supposed wrong description or
mistake corrected. Despite the fact that the policy in question was issued way back in 1988, or about three years before the
fire, and despite the "Important Notice" in the policy that "Please read and examine the policy and if incorrect, return it
immediately for alteration," respondent apparently did not call petitioners attention with respect to the misdescription.

By way of conclusion, 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," just as it is
"barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, because it retained the
policy without having the same corrected before the fire by an endorsement in accordance with its Condition No.
28." chanrob1es virtua1 1aw 1ibrary

These contentions cannot pass judicial muster.

In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to
the insurance. 11 In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a
mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy
of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be.

Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly
intended to insure was the new oil mill. This is obvious from the categorical statement embodied in the policy, extending its
protection:jgc:chanrobles.com.ph

"On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra, copra cake and
copra mills whilst contained in the new oil mill building, situate (sic) at UNNO. ALONG NATIONAL HIGH WAY, BO. IYAM, LUCENA
CITY UNBLOCKED. 13 (Emphasis supplied.)

If the parties really intended to protect the first oil mill, then there is no need to specify it as new.

Indeed, it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered
its second one. As mentioned earlier, the first oil mill is already covered under Policy No. 306-7432324-4 issued by the
petitioner. It is unthinkable for respondent to obtain the other policy from the very same company. The latter ought to know
that a second agreement over that same realty results in its over insurance.

The imperfection in the description of the insured oil mills boundaries can be attributed to a misunderstanding between the
petitioners general agent, Mr. Alfredo Borja, and its policy issuing clerk, who made the error of copying the boundaries of the
first oil mill when typing the policy to be issued for the new one. As testified to by Mr. Borja:chanrob1es virtua1 1aw 1ibrary

"Atty. G. Camaligan:chanrob1es virtual 1aw library

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. Edison Tantuco is to cover the new oil mill that is why
when I presented the existing policy of the old policy, 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, I had the policy prepared. In fact, 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, sir." 14 (Emphasis
supplied)

It is thus clear that the source of the discrepancy happened during the preparation of the written contract.

These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule.
Under the Rules of Court, a party may present evidence to modify, explain or add to the terms of the written agreement if he
puts in issue in his pleading, among others, its failure to express the true intent and agreement of the parties thereto. 15 Here,
the contractual intention of the parties cannot be understood from a mere reading of the instrument. Thus, while the contract
explicitly stipulated that it was for the insurance of the new oil mill, the boundary description written on the policy concededly
pertains to the first oil mill. This irreconcilable difference can only be clarified by admitting evidence aliunde, which will explain
the imperfection and clarify the intent of the parties.

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, we find that the same proceeds from a wrong assumption. Evidence on record reveals that
respondents operating manager, Mr. Edison Tantuco, notified Mr. Borja (the petitioners agent with whom respondent
negotiated for the contract) about the inaccurate description in the policy. However, Mr. Borja assured Mr. Tantuco that the
use of the adjective new will distinguish the insured property. The assurance convinced respondent, despite the impreciseness
in the specification of the boundaries, the insurance will cover the new oil mill. This can be seen from the testimony on cross of
Mr. Tantuco:jgc:chanrobles.com.ph

"ATTY. SALONGA:chanrob1es virtual 1aw library

Q: You mentioned, sir, that at least in so far as Exhibit A is concern you have read what the policy contents. (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, 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.

A: It was not, I called up Mr. Borja regarding this matter and he told me that what is important is the word new oil mill. Mr.
Borja said, as a matter of fact, you can never insured (sic) one property with two (2) policies, you will only do that if you will
make to increase the amount and it is by indorsement not by another policy, sir.,, 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. In determining what the parties intended, the courts will read
and construe the policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind always, however,
the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In determining the intent of the
parties to the contract, the courts will consider the purpose and object of the contract. 17chanrob1es virtua1 1aw 1ibrary

In a further attempt to avoid liability, 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.

The amount of the premium stated on the face of the policy was P89,770.20. From the admission of respondents own witness,
Mr. Borja, which the petitioner cited, the former only paid it P75,147.00, leaving a difference of P14,623.20. The deficiency,
petitioner argues, suffices to invalidate the policy, in accordance with Section 77 of the Insurance Code. 18

The Court of Appeals refused to consider this contention of the petitioner. It held that this issue was raised for the first time on
appeal, hence, beyond its jurisdiction to resolve, pursuant to Rule 46, Section 18 of the Rules of Court. 19

Petitioner, however, contests this finding of the appellate court. It insists that the issue was raised in paragraph 24 of its
Answer, viz.:jgc:chanrobles.com.ph

"24. 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."cralaw virtua1aw library

Petitioner adds that the issue was the subject of the cross-examination of Mr. Borja, who acknowledged that the paid amount
was lacking by P14,623.20 by reason of a discount or rebate, which rebate under Sec. 361 of the Insurance Code is illegal.

The argument fails to impress. 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. Yet, it did not
contain any specific and definite allegation that respondent did not pay the premium, or that it did not pay the full amount, or
that it did not pay the amount on time.

Likewise, when the issues to be resolved in the trial court were formulated at the pre-trial proceedings, the question of the
supposed inadequate payment was never raised. Most significant to point, petitioner fatally neglected to present, during the
whole course of the trial, any witness to testify that respondent indeed failed to pay the full amount of the premium. The thrust
of the cross-examination of Mr. Borja, on the other hand, was not for the purpose of proving this fact. Though it briefly touched
on the alleged deficiency, such was made in the course of discussing a discount or rebate, which the agent apparently gave
the Respondent. Certainly, the whole tenor of Mr. Borjas testimony, both during direct and cross examinations, implicitly
assumed a valid and subsisting insurance policy. 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.

Finally, petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty. The said
warranty provides:jgc:chanrobles.com.ph

"WARRANTED that during the currency of this Policy, Fire Extinguishing Appliances as mentioned below shall be maintained in
efficient working order on the premises to which insurance applies:chanrob1es virtual 1aw library

- PORTABLE EXTINGUISHERS

- INTERNAL HYDRANTS

- EXTERNAL HYDRANTS

- FIRE PUMP

- 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." 20

Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. The breach
occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. This fact was
admitted by the oil mills expeller operator, Gerardo Zarsuela.

Again, the argument lacks merit. 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. Additionally, we find that neither
did it require that the appliances are restricted to those mentioned in the warranty. In other words, what the warranty
mandates is that respondent should maintain in efficient working condition within the premises of the insured property, fire
fighting equipments such as, but not limited to, those identified in the list, which will serve as the oil mills first line of defense
in case any part of it bursts into flame.

To be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be found the following
devices: numerous portable fire extinguishers, two fire hoses, 21 fire hydrant, 22 and an emergency fire engine. 23 All of these
equipments were in efficient working order when the fire occurred.

It ought to be remembered that not only are warranties strictly construed against the insurer, but they should, likewise, by
themselves be reasonably interpreted. 24 That reasonableness is to be ascertained in light of the factual conditions prevailing in
each case. Here, we find that there is no more need for an internal hydrant considering that inside the burned building were:
(1) numerous portable fire extinguishers, (2) an emergency fire engine, and (3) a fire hose which has a connection to one of the
external hydrants.

IN VIEW WHEREOF, finding no reversible error in the impugned Decision, the instant petition is hereby DISMISSED.

SO ORDERED.



















EN BANC
G.R. No. L-16215 June 29, 1963
SIMEON DEL ROSARIO, Plaintiff-Appellee, vs. THE EQUITABLE INSURANCE AND CASUALTY CO., INC., Defendant-Appellant.
Vicente J. Francisco and Jose R. Francisco for plaintiff-appellee.
K. V. Faylona for defendant-appellant.
PAREDES, J.:chanrobles virtual law library
On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal Accident Policy No. 7136 on the
life of Francisco del Rosario, alias Paquito Bolero, son of herein plaintiff-appellee, binding itself to pay the sum of P1,000.00 to
P3,000.00, as indemnity for the death of the insured. The pertinent provisions of the Policy, recite:
Part I. Indemnity For Deathchanrobles virtual law library
If the insured sustains any bodily injury which is effected solely through violent, external, visible and accidental means, and
which shall result, independently of all other causes and within sixty (60) days from the occurrence thereof, in the Death of the
Insured, the Company shall pay the amount set opposite such injury:
Section 1. Injury sustained other than those specified below unless excepted
hereinafter. . . . . . . . P1,000.00
Section 2. Injury sustained by the wrecking or disablement of a railroad
passenger car or street railway car in or on which the Insured is travelling as
a farepaying passenger. . . . . . . . P1,500.00
Section 3. Injury sustained by the burning of a church, theatre, public library
or municipal administration building while the Insured is therein at the
commencement of the fire. . . . . . . . P2,000.00
Section 4. Injury sustained by the wrecking or disablement of a regular
passenger elevator car in which the Insured is being conveyed as a
passenger (Elevator in mines excluded) P2,500.00

Section 5. Injury sustained by a stroke of lightning or by a cyclone. . . . . . . . P3,000.00
x x x x x x x x x
Part VI. Exceptionschanrobles virtual law library
This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability, Hospital fees, or Loss of Time, caused
to the insured:chanrobles virtual law library
. . . (h) By drowning except as a consequence of the wrecking or disablement in the Philippine waters of a passenger steam or
motor vessel in which the Insured is travelling as a farepaying passenger; . . . .
A rider to the Policy contained the following:
IV. DROWNINGchanrobles virtual law library
It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy is hereby waived by the
company, and to form a part of the provision covered by the policy.chanroblesvirtualawlibrarychanrobles virtual law library
On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the motor launch "ISLAMA"
together with 33 others, including his beneficiary in the Policy, Remedios Jayme, were forced to jump off said launch on
account of fire which broke out on said vessel, resulting in the death of drowning, of the insured and beneficiary in the waters
of Jolo.chanroblesvirtualawlibrarychanrobles virtual law library
On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for payment with defendant
company, and on September 13, 1957, defendant company paid to him (plaintiff) the sum of P1,000.00, pursuant to Section 1
of Part I of the policy. The receipt signed by plaintiff reads -
RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO., INC., the sum of PESOS - ONE THOUSAND (P1,000.00) Philippine
Currency, being settlement in full for all claims and demands against said Company as a result of an accident which occurred on
February 26, 1957, insured under out ACCIDENT Policy No. 7136, causing the death of the
Assured.chanroblesvirtualawlibrarychanrobles virtual law library
In view of the foregoing, this policy is hereby surrendered and CANCELLED.
LOSS COMPUTATION
Amount of Insurance P1,000.00
__________
v v v v v
On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company acknowledging receipt by his
client (plaintiff herein), of the P1,000.00, but informing said company that said amount was not the correct one. Atty. Francisco
claimed -
The amount payable under the policy, I believe should be P1,500.00 under the provision of Section 2, part 1 of the policy, based
on the rule of pari materia as the death of the insured occurred under the circumstances similar to that provided under the
aforecited section.
Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner, who rendered an opinion
that the liability of the company was only P1,000.00, pursuant to Section 1, Part I of the Provisions of the policy (Exh. F, or 3).
Because of the above opinion, defendant insurance company refused to pay more than P1,000.00. In the meantime, Atty.
Vicente Francisco, in a subsequent letter to the insurance company, asked for P3,000.00 which the Company refused, to pay.
Hence, a complaint for the recovery of the balance of P2,000.00 more was instituted with the Court of First Instance of Rizal
(Pasay City, Branch VII), praying for it further sum of P10,000.00 as attorney's fees, expenses of litigation and
costs.chanroblesvirtualawlibrarychanrobles virtual law library
Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is set forth in the complaint
had already been released, plaintiff having received the full amount due as appearing in policy and as per opinion of the
Insurance Commissioner. An opposition to the motion to dismiss, was presented by plaintiff, and other pleadings were
subsequently file by the parties. On December 28, 1957, the trial court deferred action on the motion to dismiss until
termination of the trial of the case, it appearing that the ground thereof was not indubitable. In the Answer to the complaint,
defendant company practically admitted all the allegations therein, denying only those which stated that under the policy its
liability was P3,000.00.chanroblesvirtualawlibrarychanrobles virtual law library
On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent portions of which read -
x x x x x x x x xchanrobles virtual law library
Since the contemporaneous and subsequent acts of the parties show that it was not their intention that the payment of
P1,000.00 to the plaintiff and the signing of the loss receipt exhibit "1" would be considered as releasing the defendant
completely from its liability on the policy in question, said intention of the parties should prevail over the contents of the loss
receipt "1" (Articles 1370 and 1371, New Civil Code).chanroblesvirtualawlibrarychanrobles virtual law library
". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to P3,000.00 as indemnity for the death of
the insured. The insured died of drowning. Death by drowning is covered by the policy the pertinent provisions of which reads
as follows:
x x x x x x x x x
"Part I of the policy fixes specific amounts as indemnities in case of death resulting from "bodily injury which is effected solely
thru violence, external, visible and accidental means" but, Part I of the Policy is not applicable in case of death by drowning
because death by drowning is not one resulting from "bodily injury which is affected solely thru violent, external, visible and
accidental means" as "Bodily Injury" means a cut, a bruise, or a wound and drowning is death due to suffocation and not to any
cut, bruise or wound."
x x x x x x x x xchanrobles virtual law library
Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for recovery apart from the bodily injury
because death by bodily injury is covered by Part I of the policy while death by drowning is covered by Part VI thereof. But while
the policy mentions specific amounts that may be recovered for death for bodily injury, yet, there is not specific amount
mentioned in the policy for death thru drowning although the latter is, under Part VI of the policy, a ground for recovery
thereunder. Since the defendant has bound itself to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but
the policy does not positively state any definite amount that may be recovered in case of death by drowning, there is an
ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against the
insurer so as to allow greater indemnity.
x x x x x x x x xchanrobles virtual law library
. . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the amount of P1,000.00 to the plaintiff
so that there still remains a balance of P2,000.00 of the amount to which plaintiff is entitled to recover under the policy Exhibit
"A".chanroblesvirtualawlibrarychanrobles virtual law library
The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation. However, since it is evident that the
defendant had not acted in bad faith in refusing to pay plaintiff's claim, the Court cannot award plaintiff's claim for attorney's
fees and expenses of litigation.chanroblesvirtualawlibrarychanrobles virtual law library
IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision dated July 21, 1958 and hereby renders
judgment, ordering the defendant to pay plaintiff the sum of Two Thousand (P2,000.00) Pesos and to pay the costs.
The above judgment was appealed to the Court of Appeals on three (3) counts. Said Court, in a Resolution dated September 29,
1959, elevated the case to this Court, stating that the genuine issue is purely legal in
nature.chanroblesvirtualawlibrarychanrobles virtual law library
All the parties agree that indemnity has to be paid. The conflict centers on how much should the indemnity be. We believe that
under the proven facts and circumstances, the findings and conclusions of the trial court, are well taken, for they are supported
by the generally accepted principles or rulings on insurance, which enunciate that where there is an ambiguity with respect to
the terms and conditions of the policy, the same will be resolved against the one responsible thereof. It should be recalled in
this connection, that generally, the insured, has little, if any, participation in the preparation of the policy, together with the
drafting of its terms and Conditions. The interpretation of obscure stipulations in a contract should not favor the party who
cause the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance company.
. . . . And so it has been generally held that the "terms in an insurance policy, which are ambiguous, equivocal or uncertain . . .
are to be construed strictly against, the insurer, and liberally in favor of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and the reason for this rule 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 care and deliberation by expert and legal advisers employed by, and acting exclusively in the
interest of, the insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151, Dec. 16,
1955.chanroblesvirtualawlibrarychanrobles virtual law library
. . . . Where two interpretations, equally fair, of languages used in an insurance policy may be made, that which allows the
greater indemnity will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70,
5 Ann. Cas. 749).
At any event, the policy under consideration, covers death or disability by accidental means, and the appellant insurance
company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the insured.chanroblesvirtualawlibrarychanrobles
virtual law library
In view of the conclusions reached, it would seem unnecessary to discuss the other issues raised in the
appeal.chanroblesvirtualawlibrarychanrobles virtual law library
The judgment appealed from is hereby affirmed. Without costs.




















G.R. No. L-23491 July 31, 1968
TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET AL., Plaintiffs-Appellees, v. THE CAPITAL INSURANCE & SURETY CO.,
INC., Defendant-Appellant.
Vergara and Dayot for plaintiffs-appellees.
Achacoso, Nera and Ocampo for defendant-appellant.
FERNANDO, J.:chanrobles virtual law library
The principal legal question in this appeal from a lower court decision, ordering defendant-appellant The Capital Insurance &
Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi Co., Inc. as well as plaintiffs-appellees, widow and children of the
deceased Alfredo Monje, who, in his lifetime, was employed as a taxi driver of such plaintiff-appellee, "the sum of P5,000.00
with interest thereon at the legal rate from the filing of the complaint until fully paid," with P500.00 as attorney's fees and the
costs of the suit, is whether or not a provision in the insurance contract that defendant-appellant will indemnify any authorized
driver provided that [he] is not entitled to any indemnity under any other policy, it being shown that the deceased was paid his
workman's compensation from another insurance policy, should defeat such a right to recover under the insurance contract
subject of this suit. The lower court answered in the negative. Its holding cannot be successfully
impugned.chanroblesvirtualawlibrarychanrobles virtual law library
The appealed decision stated at the outset that the motion for judgment on the pleadings filed by the plaintiffs was granted,
the defendant having no objection and the issue presented being capable of resolution without the need of presenting any
evidence. Then the decision continues: "Alfredo Monje, according to the complaint, was employed as taxi driver by the plaintiff
Taurus Taxi Co., Inc. On December 6, 1962, the taxi he was driving collided with a Transport Taxicab at the intersection of Old
Sta. Mesa and V. Mapa Streets, Manila, resulting in his death. At the time of the accident, there was subsisting and in force
Commercial Vehicle Comprehensive Policy No. 101, 737 ... issued by the defendant to the Taurus Taxi Co., Inc. The amount for
which each passenger, including the driver, is insured is P5,000.00. After the issuance of policy No. 101, 737, the defendant
issued the Taurus Taxi Co., Inc. Indorsement No. 1 which forms part of the policy ... "
1
Reference was then made to plaintiff-
appellee Felicitas Monje being the widow of the taxi driver, the other plaintiffs-appellees with the exception of the Taurus Taxi
Co., Inc., being the children of the couple. After which it was noted that plaintiff Taurus Taxi Co., Inc. made representations "for
the payment of the insurance benefit corresponding to her and her children since it was issued in its name, benefit
corresponding to her and her children, ... but despite demands ... the defendant refused and still refuses to pay
them."
2
chanrobles virtual law library
On the above facts, the liability apparently clear, the defenses interposed by defendant insurance company being in the opinion
of the lower court without merit, the aforesaid judgment was rendered. This being a direct appeal, to us on questions of law,
the facts as found by the lower court cannot be controverted.chanroblesvirtualawlibrarychanrobles virtual law library
Defendant-appellant Capital Insurance & Surety Co. Inc. alleged as the first error of the lower court its failure to hold "that in
view of the fact that the deceased Alfredo Monje was entitled to indemnity under another insurance policy issued by Ed. A.
Keller Co., Ltd., the heirs of the said deceased are not entitled to indemnity under the insurance policy issued by appellant for
the reason that the latter policy contains a stipulation that "the company will indemnify any authorized driver provided that
such authorized driver is not entitled to indemnity under any other policy." "
3
In the discussion of the above error, defendant-
appellant stated the following: "The facts show that at the time of his death, the deceased Alfredo Monje, as authorized driver
and employee of plaintiff Taurus Taxi Co., Inc., was entitled to indemnity under another insurance policy, then subsisting, which
was Policy No. 50PH-1605 issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi Co., Inc. As a matter of fact, the indemnity to
which the deceased Alfredo Monje was entitled under the said Policy No. 50PH-1605 was paid by Ed. A. Keller Co., Ltd. to the
heirs of Alfredo Monje on December 28, 1962, as evidenced by the records of W.C.C. Case No. A88637 entitled "Felicitas V.
Monje, et al. vs. Taurus Taxi Co., Inc.", Regional Office No. 4, Department of Labor, Manila ... "
4
chanrobles virtual law library
The above defense, based on a fact which was not disputed, was raised and rightfully rejected by the lower court. From its own
version, defendant-appellant would seek to escape liability on the plea that the workman's compensation to which the
deceased driver was rightfully entitled was settled by the employer through a policy issued by another insurance firm. What
was paid therefore was not indemnity but compensation.chanroblesvirtualawlibrarychanrobles virtual law library
Since what is prohibited by the insurance policy in question is that any "authorized driver of plaintiff Taurus Taxi Co., Inc."
should not be "entitled to any indemnity under any policy", it would appear indisputable that the obligation of defendant-
appellant under the policy had not in any wise been extinguished. It is too well-settled to need the citation of authorities that
what the law requires enters into and forms part of every contract. The Workmen's Compensation Act, explicitly requires that
an employee suffering any injury or death arising out of or in the course of employment be compensated. The fulfillment of
such statutory obligation cannot be the basis for evading the clear, explicit and mandatory terms of a
policy.chanroblesvirtualawlibrarychanrobles virtual law library
In the same way as was held in Benguet Consolidated, Inc. v. Social Security System
5
that sickness benefits under the Social
Security Act may be recovered simultaneously with disability benefits under the Workmen's Compensation Act, the previous
payment made of the compensation under such legislation is no obstacle by virtue of a clause like that invoked by defendant-
appellant to the payment of indemnity under the insurance policy.chanroblesvirtualawlibrarychanrobles virtual law library
Assuming however that there is a doubt concerning the liability of defendant-appellant insurance firm, nonetheless, it should
be resolved against its pretense and in favor of the insured. It was the holding in Eagle Star Insurance, Ltd. v. Chia Yu
6
that
courts are to regard "with extreme jealousy" limitations of liability found in insurance policies and to construe them in such a
way as to preclude the insurer from non-compliance with his obligation. In other words, to quote a noted authority on the
subject, "a contract of insurance couched in language chosen by the insurer is, if open to the construction contended for by the
insured, to be construed most strongly, or strictly, against the insurer and liberally in favor of the contention of the insured,
which means in accordance with the rule contra proferentem."
7
Enough has been said therefore to dispose of the first assigned
error.chanroblesvirtualawlibrarychanrobles virtual law library
The point is made in the second alleged error that the lower court ought to have held "that by joining the heirs of Alfredo
Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc. committed a breach of policy condition and thus forfeited whatever
benefits, if any, to which it might be entitled under appellant's policy."
8
The basis for such an allegation is one of the conditions
set forth in the policy. Thus: " "5. No admission, offer, promise or payment shall be made by or on behalf of the insured without
the written consent of the Company which shall be entitled if it so desires to take over and conduct in his name the defense or
settlement of any claim or to prosecute in his name for its own benefit any claim for indemnity or damages or otherwise and
shall have full discretion in the conduct of any proceedings and in the settlement of any claim and the Insured shall give all such
information and assistance as the Company may require ... "
9
chanrobles virtual law library
Such a plea is even less persuasive. It is understandable then why the lower court refused to be swayed by it. The plaintiff
Taurus Taxi Co., inc. had to join the suit on behalf of the real beneficiaries, the heirs of the deceased driver, who are the other
plaintiffs as it was a party to the policy.chanroblesvirtualawlibrarychanrobles virtual law library
Moreover, as noted in the decision appealed from: "The institution of the action cannot possibly be construed as an admission,
offer, promise, or payment by the company, for it merely seeks to enforce, by court action, the only legal remedy available to it,
its rights under the contract of insurance to which it is a party. To consider, furthermore, the commencement of an action by
the insured, alone or with others, as a breach of the policy, resulting in forfeiture of the benefits thereunder, to place in the
hands of the insurer the power to nullify at will the whole contract of insurance by the simple expedient of refusing to make
payment and compelling the insured to bring a suit to enforce the policy."
10
chanrobles virtual law library
To so construe the policy to yield a contrary result is to put a premium on technicality. If such a defense is not frowned upon
and rejected, the time will come when the confidence on the part of the public in the good faith of insurance firms would be
minimized, if not altogether lost. Such a deplorable consequence ought to be avoided and a construction of any stipulation that
would be fraught with such a risk repudiated. What the lower court did then cannot be characterized as
error.chanroblesvirtualawlibrarychanrobles virtual law library
The third error assigned, namely, that the lower court should have considered the filing of the complaint against defendant-
appellant as unjust and unwarranted, is, in the light of the above, clearly without merit.chanroblesvirtualawlibrarychanrobles
virtual law library
WHEREFORE, the appealed decision of the lower court ordering defendant-appellant "to pay the plaintiffs the sum of P5,000.00
with interest thereon at the legal rate from the filing of the complaint until fully paid, P500.00 as attorney's fees,"
11
with costs
is affirmed. Costs against defendant-appellant.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-25920 January 30, 1970
CCC INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS (Fourth Division) and CARLOS F. ROBES, respondents.
Kalaw and Felipe for petitioner.
Adalia B. Francisco for respondents.
Petition for review of the decision of the Court of Appeals, affirming that of the Court of First Instance of Rizal (Quezon City)
allowing insurance indemnification of plaintiff for his damaged car and the payment of attorney's fees.
The following facts are not in dispute:
On 1 March 1961, Carlos F. Robes took an insurance, with the CCC Insurance Corporation, on his Dodge Kingsway car against
loss or damage through accident for an amount not exceeding P8,000.00 (Policy No. M1156). On 25 June 1961, and during the
effectivity of the policy, the insured vehicle, while being driven by the owner's driver, became involved in a vehicular collision
along Rizal Avenue Extension, Potrero, Malabon, Rizal. The car was damaged, and the repair was estimated to cost P5,300.00.
As the insurance company refused either to pay for the repair or to cause the restoration of the car to its original condition,
Robes instituted Civil Case No. Q-6063 in the Court of First Instance of Rizal for recovery not only of the amount necessary for
the repair of the insured car but also of actual and moral damages, attorneys' fees and costs. Resisting plaintiff's claim, the
insurance company disclaimed liability for payment, alleging that there had been violation of the insurance contract because
the one driving the car at the time of the incident was not an "authorized driver."
After due hearing, judgment was rendered for the plaintiff, and defendant insurer was ordered to pay unto the former the cost
of repair of the car in the sum of P5,031.28; the sum of P150.00, for the hauling and impounding of the car at the repair shop;
P2,000.00 as actual damages; and P1,000.00 as attorneys' fees, plus costs.
The insurance company went to the Court of Appeals, raising inter alia the questions of the qualification of plaintiff's driver to
operate the insured vehicle and the correctness of the trial court's award to plaintiff of the amount of P5,013.28 as cost of
repairs, and of actual damages and attorneys' fees. In its decision of 31 January 1966, the Court of Appeals affirmed the ruling
of the lower court except the award of actual damages in the sum of P2,000.00, which was eliminated on the ground that it was
too speculative. Not content, the insurance company filed the present petition for review of the aforesaid decision of the Court
of Appeals on two grounds: (1) that the proceedings observed in the trial court were irregular and invalid; and (2) that the
damage to the insured car was not covered by the insurance policy because at the time of the accident it was being driven by
one who was not an authorized driver.
The second issue constitutes the main contention of herein appellant, and will be considered first. It is vigorously urged by the
insurer that the one driving the insured vehicle at the time of the accident was not an authorized driver thereof within the
purview of the following provision of the insurance policy:
AUTHORIZED DRIVER:
Any of the following: (a) The insured;
(b) Any person driving on the Insured's order or with his permission, provided that the person driving
is permitted in accordance with licensing laws or regulations to drive the motor vehicle covered by this
Policy, or has been so permitted and is not disqualified by order of a court of law or by reason of any
enactment or regulation from driving such Motor Vehicle. (Emphasis ours)
It has been found as a fact by the Court of Appeals that Domingo Reyes, the, driver who was at the wheel of the insured car at
the time of the accident, does not know how to read and write; that he was able to secure a driver's license, without passing
any examination therefor, by paying P25.00 to a certain woman; and that the Cavite agency of the Motor Vehicles Office has
certified not having issued Reyes' purported driver's license No. 271703 DP.
In holding that the damage sustained by the car comes within the coverage of the insurance policy, the Court of Appeals argued
that since Reyes' purported driver's license (Exhibit "A") bears all the earmarks of a duly issued license, then it is a public
document, and petitioner insurance company then has the burden of disproving its genuineness, which the latter has failed to
do. In this respect the Court of Appeals ruled:
... . The fact that the Cavite Agency of the Motor Vehicles Office states that Driver's License No. 271703 DP
was not issued by that office, does not remove the possibility that said office may have been mistaken or
that said license was issued by another agency. Indeed Exhibit 13 shows that a certain Gloria Presa made
the notation thereon "no license issued" and which notation was the basis of the 1st Indorsement, Exhibit
12, signed by the MVO Cavite City Agency's officer-in-charge. Neither Gloria Presa nor the officer-in-charge
Marciano A. Monzon was placed on the witness stand to be examined in order to determine whether said
license is indeed void. As it is, as heretofore pointed out, the fact remains that Domingo Reyes is in
possession of a driver's license issued by the Motor Vehicles Office which on its face appears to have been
regularly issued.
In effect, the Court of Appeals found that the driver's license No. 271703 DP was genuine, that is, one really issued by the
Motor Vehicles Office or its authorized deputy; and this finding of fact is now conclusive and may not be questioned in this
appeal.
Nevertheless, the appellant insurer insists that, under the established facts of this case, Reyes, being admittedly one who
cannot read and write, who has never passed any examination for drivers, and has not applied for a license from the duly
constituted government agency entrusted with the duty of licensing drivers, cannot be considered an authorized driver.
The fatal flaw in appellant's argument is that it studiously ignores the provisions of law existing at the time of the mishap.
Under Section 24 of the Revised Motor Vehicles Law, Act 3992 of the Philippine Legislature, as amended by Republic Acts Nos.
587, 1204 and 2863,
1

An examination or demonstration to show any applicant's ability to operate motor vehicles may also be
required in the discretion of the Chief, Motor Vehicles Office or his deputies. (Emphasis supplied)
and reinforcing such discretion, Section 26 of the Act prescribes further:
SEC. 26. Issuance of chauffeur's license; professional badge: If, after examination, or without the same, the
Chief, Motor Vehicles Office or his deputies, believe the applicant to possess the necessary qualifications
and knowledge, they shall issue to such applicant a license to operate as chauffeur ... (Emphasis supplied)
It is thus clear that the issuance of a driving license without previous examination does not necessarily imply that the license
issued is invalid. As the law stood in 1961, when the claim arose, the examinations could be dispensed with in the discretion of
the Motor Vehicles Office official officials. Whether discretion was abused in issuing the license without examination is not a
proper subject of inquiry in these proceedings, though, as a matter of legislative policy, the discretion should be eliminated.
There is no proof that the owner of the automobile knew that the circumstance surrounding such issuance showed that it was
irregular.
The issuance of the license is proof that the Motor Vehicles Office official considered Reyes, the driver of the insured- appellee,
qualified to operate motor vehicles, and the insured was entitled to rely upon such license. In this connection, it should be
observed that the chauffeur, Reyes, had been driving since 1957,
2
and without mishap, for all the record shows. Considering
that, as pointed out by the Court of Appeals, the weight of authority is in favor of a liberal interpretation of the insurance policy
for the benefit of the party insured, and strictly against the insurer, We find no reason to diverge from the conclusion reached
by the Court of Appeals that no breach was committed of the above-quoted provision of the policy.
The next issue assigned is anchored on the fact that the decision of the trial court was based on evidence presented to and
received by the clerk of court who acted as commissioner, although allegedly, there was no written court order constituting
him as such commissioner, no written request for his commission was made by the parties; he did not take an oath prior to
entering into the discharge of his commission; no written report of his findings was ever submitted to the court; and no notice
thereof was sent to the parties, contrary to the specific provisions of Rule 33 of the Rules of Court.
Actually there is nothing basically wrong with the practice of delegating to a commissioner, usually the clerk of court, who is a
duly sworn court officer, the reception of both parties and for him to submit a report thereon to the court. In fact, this
procedure is expressly sanctioned by Revised Rule 33 of the Rules of Court.
3
Petitioner's objection in this case, however, is
directed not against its referral to the clerk of court but against the alleged non-observance of the prescribed steps in
connection with such delegation.
We find no cause sufficient to invalidate the proceedings had in the trial court. We note that this issue was brought up by the
appellant insurance company or the first time only in its motion for reconsideration filed in the Court of Appeals. It was not
raised in the trial court, where the defect could still be remedied. This circumstance precludes ventilation of the issue of validity
of the hearing at this stage; for, if such irregularity is to vitiate the proceeding, the question should have been seasonably
raised, i.e., either before the parties proceeded with the hearing or before the court handed down its ruling.
4
It is a procedural
point that can be waived by consent of the parties, express or implied.
5

For the same reason, appellant cannot insist now on the annulment of the proceeding on the basis of alleged lack of written
consent of the parties to the commission, or of an order appointing the clerk as commissioner, or of notice of the submission of
his report to the court. Furthermore, appellant has presented no proof that the clerk of court committed any mistake or abuse
in the performance of the task entrusted to him, or that the trial court was not able to properly appreciate the evidence in the
case because it was received by another person. If indeed there were errors at all, they would be non-prejudicial and could not
justify the holding of a new trial, as urged by herein petitioner.
6

WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against appellant CCC Insurance Corporation.