ACCFA v Alpha Insurance

In order to guarantee the Asingan FACOMA against loss on account of personal dishonesty,

amounting to estafa of its Secretary-Treasurer, Ricardo A. Ladines,

Respondent Alpha Insurance & Surety Company had issued its bond for P5,000.00 with said
Ricardo Ladines as principal and respondent itself as soldiery surety.
On the same date, the Asingan FACOMA assigned its rights to Petitioner ACCFA with approval of

the principal and the surety.

During the effectivity of the bond, Ricardo Ladines converted and misappropriated to his personal
benefit the FACOMA funds.

Upon discovery of the loss, ACCFA immediately notified in writing Alpha Insurance on October
1958 and presented the proof of loss within the period fixed in the bond.
But despite repeated demands, Alpha Insurance refused and failed to pay.
Whereupon, ACCFA filed suit on May 1960.
Alpha Insurance moved to dismiss on the ground that the complaint was filed more than 1 year
after plaintiff made claim for loss, contrary to the eighth condition of the bond, providing as
follows:
No action, suit or proceeding shall be had or maintained upon this Bond unless the same be
commenced within one year from the time of making claim for the loss upon which such action.
WON Alpha Insurance is correct.
NO.
A fidelity bond is, in effect, in the nature of a contract of insurance against loss from misconduct.
The condition of the bond in question, limiting the period for bringing action thereon, is subject to
the provisions of Section 61-A of the Insurance Act:
SEC. 61-A 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.
Cause of action does not accrue until a party refuses to comply with its duty.

The year for instituting action in court must be from the time of refusal to comply with its bond; it
can not be counted from the creditor's filing of the claim of loss, for that does not import that the
surety company will refuse to pay.
In so far, therefore, as condition eight of the bond requires action to be filed within one year from
the filing of the claim for loss, such stipulation contradicts the public policy expressed in Section
61-A of the Philippine Insurance Act.
Condition eight of the bond, therefore, is null and void, and the appellant is not bound to comply
with its provisions.