Republic of the Philippines SUPREME COURT Manila EN BANC DECISION December 16, 1955 G.R. No.

L-8151 VIRGINIA CALANOC, petitioner, vs. COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE CO., respondents. Lucio Javillonar for petitioner. J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo A. Reyes for respondents. , J.: This suit involves the collection of P2,000 representing the value of a supplemental policy covering accidental death which was secured by one Melencio Basilio from the Philippine American Life Insurance Company. The case originated in the Municipal Court of Manila and judgment being favorable to the plaintiff it was appealed to the court of first instance. The latter court affirmed the judgment but on appeal to the Court of Appeals the judgment was reversed and the case is now before us on a petition for review. Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was attached a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of Oroquieta and

Zurbaan streets. Virginia Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded the payment of the additional sum of P2,000 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were expressly excluded in the contract and have the effect of exempting the company from liability. The pertinent facts which need to be considered for the determination of the questions raised are those reproduced in the decision of the Court of Appeals as follows: The circumstances surrounding the death of Melencio Basilio show that when he was killed at about seven oclock in the night of January 25, 1951, he was on duty as watchman of the Manila Auto Supply at the corner of Avenida Rizal and Zurbaran; that it turned out that Atty. Antonio Ojeda who had his residence at the corner of Zurbaran and Oroquieta, a block away from Basilios station, had come home that night and found that his house was well-lighted, but with the windows closed; that getting suspicious that there were culprits in his house, Atty. Ojeda retreated to look for a policeman and finding Basilio in khaki uniform, asked him to accompany him to the house with the latter refusing on the ground that he was not a policeman, but suggesting that Atty. Ojeda should ask the traffic policeman on duty at the corner of Rizal Avenue and Zurbaran; that Atty. Ojeda went to the traffic policeman at said corner and reported the matter, asking the policeman to come along with him, to which the policeman agreed; that on the way to the Ojeda residence, the policeman and Atty. Ojeda passed by Basilio and somehow or other invited the latter to come along; that as the tree approached the Ojeda residence and stood in front of the main gate which was covered with galvanized iron, the fence itself being partly concrete and partly adobe stone, a shot was fired; that immediately after the shot, Atty. Ojeda and the

policeman sought cover; that the policeman, at the request of Atty. Ojeda, left the premises to look for reinforcement; that it turned out afterwards that the special watchman Melencio Basilio was hit in the abdomen, the wound causing his instantaneous death; that the shot must have come from inside the yard of Atty. Ojeda, the bullet passing through a hole waist-high in the galvanized iron gate; that upon inquiry Atty. Ojeda found out that the savings of his children in the amount of P30 in coins kept in his aparador contained in stockings were taken away, the aparador having been ransacked; that a month thereafter the corresponding investigation conducted by the police authorities led to the arrest and prosecution of four persons in Criminal Case No. 15104 of the Court of First Instance of Manila for Robbery in an Inhabited House and in Band with Murder. It is contended in behalf of the company that Basilio was killed which making an arrest as an officer of the law or as a result of an assault or murder committed in the place and therefore his death was caused by one of the risks excluded by the supplementary contract which exempts the company from liability. This contention was upheld by the Court of Appeals and, in reaching this conclusion, made the following comment: From the foregoing testimonies, we find that the deceased was a watchman of the Manila Auto Supply, and, as such, he was not boud to leave his place and go with Atty. Ojeda and Policeman Magsanoc to see the trouble, or robbery, that occurred in the house of Atty. Ojeda. In fact, according to the finding of the lower court, Atty. Ojeda finding Basilio in uniform asked him to accompany him to his house, but the latter refused on the ground that he was not a policeman and suggested to Atty. Ojeda to ask help from the traffic policeman on duty at the corner of Rizal Avenue and Zurbaran, but after Atty. Ojeda secured the help of the traffic policeman, the deceased went with Ojeda and said traffic policeman to the residence of Ojeda, and while the deceased was standing in front of the main gate of said residence, he was shot and thus died. The death, therefore, of Basilio, although

unexpected, was not caused by an accident, being a voluntary and intentional act on the part of the one wh robbed, or one of those who robbed, the house of Atty. Ojeda. Hence, it is out considered opinion that the death of Basilio, though unexpected, cannot be considered accidental, for his death occurred because he left his post and joined policeman Magsanoc and Atty. Ojeda to repair to the latters residence to see what happened thereat. Certainly, when Basilio joined Patrolman Magsanoc and Atty. Ojeda, he should have realized the danger to which he was exposing himself, yet, instead of remaining in his place, he went with Atty. Ojeda and Patrolman Magsanoc to see what was the trouble in Atty. Ojedas house and thus he was fatally shot. We dissent from the above findings of the Court of Appeals. For one thing, Basilio was a watchman of the Manila Auto Supply which was a block away from the house of Atty. Ojeda where something suspicious was happening which caused the latter to ask for help. While at first he declined the invitation of Atty. Ojeda to go with him to his residence to inquire into what was going on because he was not a regular policeman, he later agreed to come along when prompted by the traffic policeman, and upon approaching the gate of the residence he was shot and died. The circumstance that he was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on his part to expose his life to danger considering the fact that the place he was in duty-bound to guard was only a block away. In volunteering to extend help under the situation, he might have thought, rightly or wrongly, that to know the truth was in the interest of his employer it being a matter that affects the security of the neighborhood. No doubt there was some risk coming to him in pursuing that errand, but that risk always existed it being inherent in the position he was holding. He cannot therefore be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. And he cannot be considered as making an arrest as an officer of the law, as contended, simply

because he went with the traffic policeman, for certainly he did not go there for that purpose nor was he asked to do so by the policeman. Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. In the first place, there is no proof that the death of Basilio is the result of either crime for the record is barren of any circumstance showing how the fatal shot was fired. Perhaps this may be clarified in the criminal case now pending in court as regards the incident but before that is done anything that might be said on the point would be a mere conjecture. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life. We take note that these defenses are included among the risks excluded in the supplementary contract which enumerates the cases which may exempt the company from liability. While as a general rule the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss, and may expressly except other risks or causes of loss therefrom (45 C. J. S. 781-782), however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. (Article 1377, new Civil Code) 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 and most strongly 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 he 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 experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company. (44 C. J. S., p. 1174.) Insurance is, in its nature, complex and difficult for the layman to understand. Policies are prepared by experts who know and can anticipate the bearings and possible complications of every contingency. So long as insurance companies insist upon the use of ambiguous, intricate and technical provisions, which conceal rather than frankly disclose, their own intentions, the courts must, in fairness to those who purchase insurance, construe every ambiguity in favor of the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA 1917A, 1237.)</CITE></CITE> An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured. (Moore vs. Aetna Life Insurance Co., LRA 1915D, 264.) We are therefore persuaded to conclude that the circumstances unfolded in the present case do not warrant the finding that the death of the unfortunate victim comes within the purview of the exception clause of the supplementary policy and, hence, do not exempt the company from liability. Wherefore, reversing the decision appealed from, we hereby order the company to pay petitioner-appellant the amount of P2,000, with legal interest from January 26, 1951 until fully paid, with costs. Paras, C.J. Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.

provided that it would not apply where death resulted from an injury"intentionally inflicted by another party." Republic of the Philippines SUPREME COURT Manila EN BANC On the night of May 20, 1964, or during the first hours of the following day a band of robbers entered the house of the insured Juan S. Biagtan. What happened then is related in the decision of the trial court as follows: ...; that on the night of May 20, 1964 or the first hours of May 21, 1964, while the said life policy and supplementary contract were in full force and effect, the house of insured Juan S. Biagtan was robbed by a band of robbers who were charged in and convicted by the Court of First Instance of Pangasinan for robbery with homicide; that in committing the robbery, the robbers, on reaching the staircase landing on the second floor, rushed towards the door of the second floor room, where they suddenly met a person near the door of oneof the rooms who turned out to be the insured Juan S. Biagtan who received thrusts from their sharp-pointed instruments, causing wounds on the body of said Juan S. Biagtan resulting in his death at about 7 a.m. on the same day, May 21, 1964; Plaintiffs, as beneficiaries of the insured, filed a claim under the policy. The insurance company paid the basic amount of P5,000.00 but refused to pay the additional sum of P5,000.00 under the accidental death benefit clause, on the ground that the insured's death resulted from injuries intentionally inflicted by third parties and therefore was not covered. Plaintiffs filed suit to recover, and after due hearing the court a quo rendered judgment in their favor. Hence the present appeal by the insurer. The only issue here is whether under the facts are stipulated and found by the trial court the wounds received by the insured at the hands of the robbers nine in all, five of them mortal and four nonmortal were inflicted intentionally. The court, in ruling negatively on the issue, stated that since the parties presented no evidence and

G.R. No. L-25579 March 29, 1972 EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T. BIAGTAN and GRACIA T. BIAGTAN,plaintiffsappellees, vs. THE INSULAR LIFE ASSURANCE COMPANY, LTD., defendantappellant. Tanopo, Millora, Serafica, and Saez for plaintiff-appellees. Araneta, Mendoza and Papa for defendant-appellant.

MAKALINTAL, J.:p This is an appeal from the decision of the Court of First Instance of Pangasinan in its Civil Case No. D-1700. The facts are stipulated. Juan S. Biagtan was insured with defendant InsularLife Assurance Company under Policy No. 398075 for the sum of P5,000.00 and, under a supplementary contract denominated "Accidental Death Benefit Clause, for an additional sum of P5,000.00 if "the death of the Insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident ... and independently of all other causes." The clause, however,expressly

submitted the case upon stipulation, there was no "proof that the act of receiving thrust (sic) from the sharp-pointed instrument of the robbers was intended to inflict injuries upon the person of the insured or any other person or merely to scare away any person so as to ward off any resistance or obstacle that might be offered in the pursuit of their main objective which was robbery." The trial court committed a plain error in drawing the conclusion it did from the admitted facts. Nine wounds were inflicted upon the deceased, all by means of thrusts with sharp-pointed instruments wielded by the robbers. This is a physical fact as to which there is no dispute. So is the fact that five of those wounds caused the death of the insured. Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might offer, it cannot be denied that the act itself of inflicting the injuries was intentional. It should be noted that the exception in the accidental benefit clause invoked by the appellant does not speak of the purpose whether homicidal or not of a third party in causing the injuries, but only of the fact that such injuries have been "intentionally" inflicted this obviously to distinguish them from injuries which, although received at the hands of a third party, are purely accidental. This construction is the basic idea expressed in the coverage of the clause itself, namely, that "the death of the insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident ... and independently of all other causes." A gun which discharges while being cleaned and kills a bystander; a hunter who shoots at his prey and hits a person instead; an athlete in a competitive game involving physical effort who collides with an opponent and fatally injures him as a result: these are instances where the infliction of the injury is unintentional and therefore would be within the coverage of an accidental death benefit clause such as thatin question in this case. But where a gang of robbers enter a house and coming face to face with the owner, even if unexpectedly, stab him repeatedly, it is contrary to all reason and logic to say that his injuries are not intentionally inflicted, regardless of whether they prove fatal or not. As it was, in the present case they did prove fatal, and the robbers have been accused and convicted of the crime of robbery with homicide.

The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon by the trial court in support of its decision. The facts in that case, however, are different from those obtaining here. The insured there was a watchman in a certain company, who happened to be invited by a policeman to come along as the latter was on his way to investigate a reported robbery going on in a private house. As the two of them, together with the owner of the house, approached and stood in front of the main gate, a shot was fired and it turned out afterwards that the watchman was hit in the abdomen, the wound causing his death. Under those circumstances this Court held that it could not be said that the killing was intentional for there was the possibility that the malefactor had fired the shot to scare people around for his own protection and not necessarrily to kill or hit the victim. A similar possibility is clearly ruled out by the facts in the case now before Us. For while a single shot fired from a distance, and by a person who was not even seen aiming at the victim, could indeed have been fired without intent to kill or injure, nine wounds inflicted with bladed weapons at close range cannot conceivably be considered as innocent insofar as such intent is concerned. The manner of execution of the crime permits no other conclusion. Court decisions in the American jurisdiction, where similar provisions in accidental death benefit clauses in insurance policies have been construed, may shed light on the issue before Us. Thus, it has been held that "intentional" as used in an accident policy excepting intentional injuries inflicted by the insured or any other person, etc., implies the exercise of the reasoning faculties, consciousness and volition. 1 Where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling. 2 If the injuries suffered by the insured clearly resulted from the intentional act of a third person the insurer is relieved from liability as stipulated. 3 In the case of Hutchcraft's Ex'r v. Travelers' Ins. Co., 87 Ky. 300, 8 S.W. 570, 12 Am. St. Rep. 484, the insured was waylaid and assassinated for the purpose of robbery. Two (2) defenses were interposed to the action to recover indemnity, namely: (1) that the insured having been killed by intentional means, his death was not

accidental, and (2) that the proviso in the policy expressly exempted the insurer from liability in case the insured died from injuries intentionally inflicted by another person. In rendering judgment for the insurance company the Court held that while the assassination of the insured was as to him an unforeseen event and therefore accidental, "the clause of the proviso that excludes the (insurer's) liability, in case death or injury is intentionally inflicted by another person, applies to this case." In Butero v. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St. Rep. 61, 71 S.W. 811, the insured was shot three times by a person unknown late on a dark and stormy night, while working in the coal shed of a railroad company. The policy did not cover death resulting from "intentional injuries inflicted by the insured or any other person." The inquiry was as to the question whether the shooting that caused the insured's death was accidental or intentional; and the Court found that under the facts, showing that the murderer knew his victim and that he fired with intent to kill, there could be no recovery under the policy which excepted death from intentional injuries inflicted by any person. WHEREFORE, the decision appealed from is reversed and the complaint dismissed, without pronouncement as to costs. Zaldivar, Castro, Fernando and Villamor, JJ., concur. Makasiar, J., reserves his vote.

At first blush, one would feel that every death not suicidal should be considered accidental, for the purposes of an accident insurance policy or a life insurance policy with a double indemnity clause in case death results from accident. Indeed, it is quite logical to think that any event whether caused by fault, negligence, intent of a third party or any unavoidable circumstance, normally unforeseen by the insured and free from any possible connivance on his part, is an accident in the generally accepted sense of the term. And if I were convinced that in including in the policy the provision in question, both the insurer and the insured had in mind to exclude thereby from the coverage of the policy only suicide whether unhelped or helped somehow by a third party, I would disregard the American decisions cited and quoted in the main opinion as not even persuasive authorities. But examining the unequivocal language of the provision in controversy and considering that the insured accepted the policy without asking that it be made clear that the phrase "injury intentionally inflicted by a third party" should be understood to refer only to injuries inflicted by a third party without any wilful intervention on his part (of the insured) or, in other words, without any connivance with him (the insured) in order to augment the proceeds of the policy for his benificiaries, I am inclined to agree that death caused by criminal assault is not covered by the policies of the kind here in question, specially if the assault, as a matter of fact, could have been more or less anticipated, as when the insured happens to have violent enemies or is found in circumstances that would make his life fair game of third parties. As to the rest, I have no doubt that the killing of the insured in this case is as intentional as any intentional act can be, hence this concurrence. TEEHANKEE, J., dissenting: The sole issue at bar is the correctness in law of the lower court's appealed decision adjudging defendant insurance company liable, under its supplementary contract denominated "Accidental Death Benefit Clause" with the deceased insured, to plaintiffs-beneficiaries (excluding plaintiff Emilia T. Biagtan) in an additional amount of

Separate Opinions BARREDO, J., concurring During the deliberations in this case, I entertained some doubts as to the correctness and validity of the view upheld in the main opinion penned by Justice Makalintal. Further reflection has convinced me, however, that there are good reasons to support it.

P5,000.00 (with corresponding legal interest) and ruling that defendant company had failed to present any evidence to substantiate its defense that the insured's death came within the stipulated exceptions. Defendant's accidental death benefit clause expressly provides: ACCIDENTAL DEATH BENEFIT. (hereinafter called the benefit). Upon receipt and approval of due proof that the death of the Insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident, within ninety days after the date of sustaining such injury, and independently of all other causes, this Company shall pay, in addition to the sum insured specified on the first page of this Policy, a further sum equal to said sum insured payable at the same time and in the same manner as said sum insured, provided, that such death occurred during the continuance of this Clause and of this Policy and before the sixtieth birthday of the Insured." 1 A long list of exceptions and an Automatic Discontinuance clause immediately follow thereafter, thus: EXCEPTIONS. The Benefit shall not apply if the Insured's death shall result, either directly or indirectly, from any one of the following causes: (1) Self-destruction or self-inflicted injuries, whether the Insured be sane or insane; (2) Bodily or mental infirmity or disease of any kind; (3) Poisoning or infection, other than infection occurring simultaneously with and in consequence of a cut or wound sustained in an accident;

(4) Injuries of which there is no visible contusions or wound on the exterior of the body, drowning and internal injuries revealed by autopsy excepted; (5) Any injuries received (a) while on police duty in any military, naval or police organization; (b) in anyriot, civil commotion, insurrection or war or any act incident thereto; (c) while travelling as a passenger or otherwise in any form of submarine transportation, or while engaging in submarine operations; (d) in any violation of the law by the Insured or assault provoked by the Insured; (e) that has beeninflicted intentionally by a third party, either with or without provocation on the part of the Insured, and whether or not the attack or the defense by the third party was caused by a violation of the law by the Insured; (6) Operating or riding in or descending from any kind of aircraft if the Insured is a pilot, officer or member of the crew of the aircraft or is giving or receiving any kind of training or instruction or has any duties aboard the aircraft or requiring descent therefrom; and (7) Atomic energy explosion of any nature whatsoever. The Company, before making any payment under this Clause, shall have the right and opportunity to examine the body and make an autopsy thereof. AUTOMATIC DISCONTINUANCE. This Benefit shall automatically terminate and the additional premium therefor shall cease to be payable when and if: (1) This Policy is surrendered for cash, paid-up insurance or extended term insurance; or (2) The benefit under the Total and Permanent Disability Waiver of Premium Certificate is granted to the insured; or

(3) The Insured engages in military, naval or aeronautic service in time of war; or (4) The policy anniversary immediately preceding the sixtieth birthday of the Insured is reached. 2 It is undisputed that, as recited in the lower court's decision, the insured met his death, as follows: "that on the night of May 20, 1964 or the first hours of May 21, 1964, while the said life policy and supplementary contract were in full force and effect, the house of insured Juan S. Biagtan was robbed by a band of robbers who were charged in and convicted by the Court of First Instance of Pangasinan for robbery with homicide; that in committing the robbery, the robbers, on reaching the staircase landing of the second floor, rushed towards the doors of the second floor room, where they suddenly met a person near the door of one of the rooms who turned out to be the insured Juan S. Biagtan who received thrust from their sharp-pointed instruments, causing wounds on the body of said Juan S. Biagtan resulting in his death at about 7 a.m. on the same day, May 21, 1964." 3 Defendant company, while admitting the above-recited circumstances under which the insured met his death, disclaimed liability under its accidental death benefit clause under paragraph 5 of its stipulated "Exceptions" on its theory that the insured's death resulted from injuries "intentionally inflicted by a third party," i.e. the robbers who broke into the insured's house and inflicted fatal injuries on him. The case was submitted for decision upon the parties' stipulation of facts that (1) insurance companies such as the Lincoln National Life Insurance Co. and Sun Life Assurance Co. of Canada with which the deceased insured Juan S. Biagtan was also insured for much larger sums under similar contracts with accidental death benefit provisions have promptly paid the benefits thereunder to plaintiffs-beneficiaries; (2) the robbers who caused the insured's death were charged in and convicted by the Court of First Instance of Pangasinan for the crime of robbery with homicide; and (3) the injuries inflicted on the insured by the robbers consisted of five mortal and four non-mortal wounds. 4

The lower court thereafter rendered judgment against defendant, as follows: There is no doubt that the insured, Juan S. Biagtan, met his death as a result of the wounds inflicted upon him by the malefactors on the early morning of May 21, 1964 by means of thrusts from sharp-pointed instruments delivered upon his person, and there is likewise no question that the thrusts were made on the occasion of the robbery. However, it is defendants' position that the killing of the insured was intentionally done by the malefactors, who were charged with and convicted of the crime of robbery with homicide by the Court of First Instance of Pangasinan. It must be noted here that no evidence whatsoever was presented by the parties who submitted the case for resolution upon the stipulation of facts presented by them. Thus, the court does not have before it proof that the act of receiving thrust(s) from the sharp-pointed instrument of the robbers was intended to inflict injuries upon the person of the insured or any other person or merely to scare away any person so as to ward off any resistance or obstacle that might be offered in the pursuit of their main objective which was robbery. It was held that where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling ... and to come within the exception, the act which causes the injury must be wholly intentional, not merely partly. The case at bar has some similarity with the case of Virginia Calanoc vs. Court of Appeals, et al., L-8151, promulgated December 16, 1965, where the Supreme Court ruled that "the shot (which killed the insured) was merely to scare away the people around for his own protection and not necessarily to kill or hit the victim."

In the Calanoc case, one Melencio Basilio, a watchman of a certain company, took out life insurance from the Philippine American Life Insurance Company in the amount of P2,000.00 to which was attached a supplementary contract covering death by accident. Calanoc died of gunshot wounds on the occasion of a robbery committed in the house of a certain Atty. Ojeda in Manila. The insured's widow was paid P2,000.00, the face value of the policy, but when she demanded payment of the additional sum of P2,000.00 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were (as in this case) expressly excluded in the contract and have the effect of exempting the company from liability. The facts in the Calanoc case insofar as pertinent to this case are, as found by the Court of Appeals in its decision which findings of fact were adopted by the Supreme Court, as follows: "...that on the way to the Ojeda residence (which was then being robbed by armed men), the policeman and Atty. Ojeda passed by Basilio (the insured) and somehow or other invited the latter to come along; that as the three approached the Ojeda residence and stood in front of the main gate which was covered by galvanized iron, the fence itself being partly concrete and partly adobe stone, a shot was fired; ... that it turned out afterwards that the special watchman Melencio Basilio was hit in the abdomen, the wound causing his instantaneous death ..."

The Court of Appeals arrived at the conclusion that the death of Basilio, although unexpected, was not caused by an accident, being a voluntary and intentional act on the part of the one who robbed, or one of those who robbed, the house of Atty. Ojeda. In reversing this conclusion of the Court of Appeals, the Supreme Court said in part: "... Nor can it be said that the killing was intentional for there is the possibility that the malefactors had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from ability for the damage done, the fact remains that the happening was a pure accidentt on the part of the victim." With this ruling of the Supreme Court, and the utter absence of evidence in this case as to the real intention of the malefactors in making a thrust with their sharppointed instrument on any person, the victim in particular, the case falls squarely within the ruling in the Calanoc vs. Court of Appeals case. It is the considered view of this Court that the insured died because of an accident which happened on the occasion of the robbery being committed in his house. His death was not sought (at least no evidence was presented to show it was), and therefore was fortuitous. "Accident" was defined as that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual and unforeseen, or that which takes place without one's foresight or expectation an event that proceeds from an unknown cause, or is an unusual

effect of a known cause, and therefore not expected. (29 Am. Jur. 706). There is no question that the defense set up by the defendant company is one of those included among the risks excluded in the supplementary contract. However, there is no evidence here that the thrusts with sharppointed instrument (which led to the death of the insured) was "intentional," (sic) so as to exempt the company from liability. It could safely be assumed that it was purely accidental considering that the principal motive of the culprits was robbery, the thrusts being merely intended to scare away persons who might offer resistance or might obstruct them from pursuing their main objective which was robbery. 5 It is respectfully submitted that the lower court committed no error in law in holding defendant insurance company liable to plaintiffsbeneficiaries under its accidental death benefit clause, by virtue of the following considerations: 1. The case of Calanoc cited by the lower court is indeed controlling here. 6 This Court, there construing a similar clause, squarely ruled that fatal injuries inflicted upon an insured by a malefactor(s) during the latter's commission of a crime are deemed accidental and within the coverage of such accidental death benefit clauses and the burden of proving that the killing was intentional so as to have it fall within the stipulated exception of having resulted from injuries "intentionally inflicted by a third party" must be discharged by the insurance company. This Court there clearly held that in such cases where the killing does not amount to murder, it must be held to be a "pure accident" on the part of the victim, compensable with doubleindemnity, even though the malefactor is criminally liable for his act. This Court rejected the insurance-company's contrary claim, thus: Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. In the first place, there is no proof

that the death of Basilio is the result of either crime for the record is barren of any circumstance showing how the fatal shot was fired. Perhaps this may be clarified in the criminal case now pending in court a regards the incident but before that is done anything that might be said on the point would be a mere conjecture. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life. 7 2. Defendant company patently failed to discharge its burden of proving that the fatal injuries were inflicted upon the deceased intentionally, i.e. deliberately. The lower court correctly held that since the case was submitted upon the parties' stipulation of facts which did not cover the malefactors' intent at all, there was an "utter absence of evidence in this case as to the real intention of the malefactors in making a thrust with their sharp-pointed instrument(s) on any person, the victim in particular." From the undisputed facts, supra, 8 the robbers had "rushed towards the doors of the second floor room, where they suddenly met a person ... who turned out to be the insured Juan S. Biagtan who received thrusts from their pointed instruments." The thrusts were indeed properly termed "purely accidental" since they seemed to be a reflex action on the robbers' part upon their being surprised by the deceased. To argue, as defendant does, that the robbers' intent to kill must necessarily be deduced from the four mortal wounds inflicted upon the deceased is to beg the question. Defendant must suffer the consequences of its failure to discharge its burden of proving by competent evidence, e.g. the robbers' or eyewitnesses' testimony, that the fatal injuries were intentionally inflicted upon the insured so as to exempt itself from liability.

3. Furthermore, plaintiffs-appellees properly assert in their brief that the sole error assigned by defendant company, to wit, that the fatal injuries were not accidental as held by the lower court but should be held to have been intentionally inflicted, raises a question of fact which defendant is now barred from raising, since it expressly limited its appeal to this Court purely "on questions of law", per its noitice of appeal, 9 Defendant is therefore confined to "raising only questions of law" and "no other questions" under Rule 42, section 2 of the Rules of Court 10 and is deemed to have conceded the findings of fact of the trial court, since he thereby waived all questions of facts. 11 4. It has long been an established rule of construction of so-called contracts of adhesion such as insurance contracts, where the insured is handed a printed insurance policy whose fine-print language has long been selected with great care and deliberation by specialists and legal advisers employed by and acting exclusively in the interest of the insurance company, that the terms and phraseology of the policy, particularly of any exception clauses, must be clearly expressed so as to be easily understood by the insured and any "ambiguous, equivocal or uncertain terms" are to be "construed strictly and most strongly 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. The Court so expressly held in Calanoc that: ... While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss, and may expressly except other risks or causes of loss therefrom" (45 C.J.S. 781-782), however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. (Article 1377, new Civil Code) 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 and most strongly 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 experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company." (44 C.J.S., p. 1174) Insurance is, in its nature, complex and difficult for the layman to understand. Policies are prepared by experts who know and can anticipate the bearing and possible complications of every contingency.So long as insurance companies insist upon the use of ambiguous, intricate and technical provisions, which conceal rather than frankly disclose, their own intentions, the courts must, in fairness to those who purchase insurance construe every ambiguity in favor of the insured." (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324 LRA 1917A, 1237.) "An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured." (Moore vs. Aetna Life Insurance Co., LRA 1915D, 164). 12 The Court has but recently reiterated this doctrine in Landicho vs. GSIS 13 and again applied the provisions of Article 1377 of our Civil Code that "The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity." 5. The accidental death benefit clause assuring the insured's beneficiaries of double indemnity, upon payment of an extra premium, in the event that the insured meets violent accidental death is contractually stipulated as follows in the policy: "that the death of

the insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident," supra. The policy then lists numerous exceptions, which may be classified as follows: Injuries effected through non-external means which are excepted: self-destruction, bodily or mental infirmity or disease, poisoning or infection, injuries with no visible contusions or exterior wounds (exceptions 1 to 4 of policy clause); Injuries caused by some act of the insured which is proscribed by the policy, and are therefore similarly exepted: injuries received while on police duty, while travelling in any form of submarine transportation, or in any violation of law by the insured or assault provoked by the insured, or in any aircraft if the insured is a pilot or crew member; [exceptions 5 (a), (c) and (d), and 6 of the policy clause]; and Accidents expressly excluded: where death resulted in any riot, civil commotion, insurrection or war or atomic energy explosion. (Exceptions 5[b] and 7 of policy clause). The only exception which is not susceptible of classification is that provided in paragraph 5 (e), the very exception herein involved, which would also except injuries "inflicted intentionally by a third party, either with or without provocation on the part of the insured, and whether or not the attack or the defense by the third party was caused by a violation of the law by the insured." This ambiguous clause conflicts with all the other four exceptions in the same paragraph 5 particularly that immediately preceding it in item (d) which excepts injuries received where the insured has violated the law or provoked the injury, while this clause, construed as the insurance company now claims, would seemingly except also all other injuries, intentionally inflicted by a third party, regardless of any violation of law or provocation by the insured, and defeat the very purpose of the policy of giving the insured double indemnity in

case of accidental death by "external and violent means" in the very language of the policy." It is obvious from the very classification of the exceptions and applying the rule of noscitus a sociis that the double-indemnity policy covers the insured against accidental death, whether caused by fault, negligence or intent of a third party which is unforeseen and unexpected by the insured. All the associated words and concepts in the policy plainly exclude the accidental death from the coverage of the policy only where the injuries are self-inflicted or attended by some proscribed act of the insured or are incurred in some expressly excluded calamity such as riot, war or atomic explosion. Finally, the untenability of herein defendant insurer's claim that the insured's death fell within the exception is further heightened by the stipulated fact that two other insurance companies which likewise covered the insured for which larger sums under similar accidental death benefit clauses promptly paid the benefits thereof to plaintiffsbeneficiaries. I vote accordingly for the affirmance in toto of the appealed decision, with costs against defendant-appellant. Concepcion, C.J. and Reyes, J.B.L., J., concur. Separate Opinions BARREDO, J., concurring During the deliberations in this case, I entertained some doubts as to the correctness and validity of the view upheld in the main opinion penned by Justice Makalintal. Further reflection has convinced me, however, that there are good reasons to support it. At first blush, one would feel that every death not suicidal should be considered accidental, for the purposes of an accident insurance policy or a life insurance policy with a double indemnity clause in case death results from accident. Indeed, it is quite logical to think

that any event whether caused by fault, negligence, intent of a third party or any unavoidable circumstance, normally unforeseen by the insured and free from any possible connivance on his part, is an accident in the generally accepted sense of the term. And if I were convinced that in including in the policy the provision in question, both the insurer and the insured had in mind to exclude thereby from the coverage of the policy only suicide whether unhelped or helped somehow by a third party, I would disregard the American decisions cited and quoted in the main opinion as not even persuasive authorities. But examining the unequivocal language of the provision in controversy and considering that the insured accepted the policy without asking that it be made clear that the phrase "injury intentionally inflicted by a third party" should be understood to refer only to injuries inflicted by a third party without any wilful intervention on his part (of the insured) or, in other words, without any connivance with him (the insured) in order to augment the proceeds of the policy for his benificiaries, I am inclined to agree that death caused by criminal assault is not covered by the policies of the kind here in question, specially if the assault, as a matter of fact, could have been more or less anticipated, as when the insured happens to have violent enemies or is found in circumstances that would make his life fair game of third parties. As to the rest, I have no doubt that the killing of the insured in this case is as intentional as any intentional act can be, hence this concurrence. TEEHANKEE, J., dissenting: The sole issue at bar is the correctness in law of the lower court's appealed decision adjudging defendant insurance company liable, under its supplementary contract denominated "Accidental Death Benefit Clause" with the deceased insured, to plaintiffs-beneficiaries (excluding plaintiff Emilia T. Biagtan) in an additional amount of P5,000.00 (with corresponding legal interest) and ruling that defendant company had failed to present any evidence to substantiate its defense that the insured's death came within the stipulated exceptions.

Defendant's accidental death benefit clause expressly provides: ACCIDENTAL DEATH BENEFIT. (hereinafter called the benefit). Upon receipt and approval of due proof that the death of the Insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident, within ninety days after the date of sustaining such injury, and independently of all other causes, this Company shall pay, in addition to the sum insured specified on the first page of this Policy, a further sum equal to said sum insured payable at the same time and in the same manner as said sum insured, provided, that such death occurred during the continuance of this Clause and of this Policy and before the sixtieth birthday of the Insured." 1 A long list of exceptions and an Automatic Discontinuance clause immediately follow thereafter, thus: EXCEPTIONS. The Benefit shall not apply if the Insured's death shall result, either directly or indirectly, from any one of the following causes: (1) Self-destruction or self-inflicted injuries, whether the Insured be sane or insane; (2) Bodily or mental infirmity or disease of any kind; (3) Poisoning or infection, other than infection occurring simultaneously with and in consequence of a cut or wound sustained in an accident; (4) Injuries of which there is no visible contusions or wound on the exterior of the body, drowning and internal injuries revealed by autopsy excepted; (5) Any injuries received (a) while on police duty in any military, naval or police organization; (b) in anyriot, civil

commotion, insurrection or war or any act incident thereto; (c) while travelling as a passenger or otherwise in any form of submarine transportation, or while engaging in submarine operations; (d) in any violation of the law by the Insured or assault provoked by the Insured; (e) that has beeninflicted intentionally by a third party, either with or without provocation on the part of the Insured, and whether or not the attack or the defense by the third party was caused by a violation of the law by the Insured; (6) Operating or riding in or descending from any kind of aircraft if the Insured is a pilot, officer or member of the crew of the aircraft or is giving or receiving any kind of training or instruction or has any duties aboard the aircraft or requiring descent therefrom; and (7) Atomic energy explosion of any nature whatsoever. The Company, before making any payment under this Clause, shall have the right and opportunity to examine the body and make an autopsy thereof. AUTOMATIC DISCONTINUANCE. This Benefit shall automatically terminate and the additional premium therefor shall cease to be payable when and if: (1) This Policy is surrendered for cash, paid-up insurance or extended term insurance; or (2) The benefit under the Total and Permanent Disability Waiver of Premium Certificate is granted to the insured; or (3) The Insured engages in military, naval or aeronautic service in time of war; or (4) The policy anniversary immediately preceding the sixtieth birthday of the Insured is reached. 2

It is undisputed that, as recited in the lower court's decision, the insured met his death, as follows: "that on the night of May 20, 1964 or the first hours of May 21, 1964, while the said life policy and supplementary contract were in full force and effect, the house of insured Juan S. Biagtan was robbed by a band of robbers who were charged in and convicted by the Court of First Instance of Pangasinan for robbery with homicide; that in committing the robbery, the robbers, on reaching the staircase landing of the second floor, rushed towards the doors of the second floor room, where they suddenly met a person near the door of one of the rooms who turned out to be the insured Juan S. Biagtan who received thrust from their sharp-pointed instruments, causing wounds on the body of said Juan S. Biagtan resulting in his death at about 7 a.m. on the same day, May 21, 1964." 3 Defendant company, while admitting the above-recited circumstances under which the insured met his death, disclaimed liability under its accidental death benefit clause under paragraph 5 of its stipulated "Exceptions" on its theory that the insured's death resulted from injuries "intentionally inflicted by a third party," i.e. the robbers who broke into the insured's house and inflicted fatal injuries on him. The case was submitted for decision upon the parties' stipulation of facts that (1) insurance companies such as the Lincoln National Life Insurance Co. and Sun Life Assurance Co. of Canada with which the deceased insured Juan S. Biagtan was also insured for much larger sums under similar contracts with accidental death benefit provisions have promptly paid the benefits thereunder to plaintiffs-beneficiaries; (2) the robbers who caused the insured's death were charged in and convicted by the Court of First Instance of Pangasinan for the crime of robbery with homicide; and (3) the injuries inflicted on the insured by the robbers consisted of five mortal and four non-mortal wounds. 4 The lower court thereafter rendered judgment against defendant, as follows: There is no doubt that the insured, Juan S. Biagtan, met his death as a result of the wounds inflicted upon him by

the malefactors on the early morning of May 21, 1964 by means of thrusts from sharp-pointed instruments delivered upon his person, and there is likewise no question that the thrusts were made on the occasion of the robbery. However, it is defendants' position that the killing of the insured was intentionally done by the malefactors, who were charged with and convicted of the crime of robbery with homicide by the Court of First Instance of Pangasinan. It must be noted here that no evidence whatsoever was presented by the parties who submitted the case for resolution upon the stipulation of facts presented by them. Thus, the court does not have before it proof that the act of receiving thrust(s) from the sharp-pointed instrument of the robbers wasintended to inflict injuries upon the person of the insured or any other person or merely to scare away any person so as to ward off any resistance or obstacle that might be offered in the pursuit of their main objective which was robbery. It was held that where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling ... and to come within the exception, the act which causes the injury must be wholly intentional, not merely partly. The case at bar has some similarity with the case of Virginia Calanoc vs. Court of Appeals, et al., L-8151, promulgated December 16, 1965, where the Supreme Court ruled that "the shot (which killed the insured) was merely to scare away the people around for his own protection and not necessarily to kill or hit the victim." In the Calanoc case, one Melencio Basilio, a watchman of a certain company, took out life insurance from the Philippine American Life Insurance Company in the amount of P2,000.00 to which was attached a supplementary contract covering death by accident.

Calanoc died of gunshot wounds on the occasion of a robbery committed in the house of a certain Atty. Ojeda in Manila. The insured's widow was paid P2,000.00, the face value of the policy, but when she demanded payment of the additional sum of P2,000.00 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were (as in this case) expressly excluded in the contract and have the effect of exempting the company from liability. The facts in the Calanoc case insofar as pertinent to this case are, as found by the Court of Appeals in its decision which findings of fact were adopted by the Supreme Court, as follows: "...that on the way to the Ojeda residence (which was then being robbed by armed men), the policeman and Atty. Ojeda passed by Basilio (the insured) and somehow or other invited the latter to come along; that as the three approached the Ojeda residence and stood in front of the main gate which was covered by galvanized iron, the fence itself being partly concrete and partly adobe stone, a shot was fired; ... that it turned out afterwards that the special watchman Melencio Basilio was hit in the abdomen, the wound causing his instantaneous death ..." The Court of Appeals arrived at the conclusion that the death of Basilio, although unexpected, was not caused by an accident, being a voluntary and intentional act on the part of the one who robbed, or one of those who robbed, the house of Atty. Ojeda.

In reversing this conclusion of the Court of Appeals, the Supreme Court said in part: "... Nor can it be said that the killing was intentional for there is the possibility that the malefactors had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from ability for the damage done, the fact remains that the happening was a pure accidentt on the part of the victim." With this ruling of the Supreme Court, and the utter absence of evidence in this case as to the real intention of the malefactors in making a thrust with their sharppointed instrument on any person, the victim in particular, the case falls squarely within the ruling in the Calanoc vs. Court of Appeals case. It is the considered view of this Court that the insured died because of an accident which happened on the occasion of the robbery being committed in his house. His death was not sought (at least no evidence was presented to show it was), and therefore was fortuitous. "Accident" was defined as that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual and unforeseen, or that which takes place without one's foresight or expectation an event that proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected. (29 Am. Jur. 706). There is no question that the defense set up by the defendant company is one of those included among the risks excluded in the supplementary contract. However, there is no evidence here that the thrusts with sharp-

pointed instrument (which led to the death of the insured) was "intentional," (sic) so as to exempt the company from liability. It could safely be assumed that it was purely accidental considering that the principal motive of the culprits was robbery, the thrusts being merely intended to scare away persons who might offer resistance or might obstruct them from pursuing their main objective which was robbery. 5 It is respectfully submitted that the lower court committed no error in law in holding defendant insurance company liable to plaintiffsbeneficiaries under its accidental death benefit clause, by virtue of the following considerations: 1. The case of Calanoc cited by the lower court is indeed controlling here. 6 This Court, there construing a similar clause, squarely ruled that fatal injuries inflicted upon an insured by a malefactor(s) during the latter's commission of a crime are deemed accidental and within the coverage of such accidental death benefit clauses and the burden of proving that the killing was intentional so as to have it fall within the stipulated exception of having resulted from injuries "intentionally inflicted by a third party" must be discharged by the insurance company. This Court there clearly held that in such cases where the killing does not amount to murder, it must be held to be a "pure accident" on the part of the victim, compensable with doubleindemnity, even though the malefactor is criminally liable for his act. This Court rejected the insurance-company's contrary claim, thus: Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. In the first place, there is no proof that the death of Basilio is the result of either crime for the record is barren of any circumstance showing how the fatal shot was fired. Perhaps this may be clarified in the criminal case now pending in court a regards the incident but before that is done anything that might be said on the point would be a mere conjecture. Nor can it be said that the killing was intentional for there is the

possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life. 7 2. Defendant company patently failed to discharge its burden of proving that the fatal injuries were inflicted upon the deceased intentionally, i.e. deliberately. The lower court correctly held that since the case was submitted upon the parties' stipulation of facts which did not cover the malefactors' intent at all, there was an "utter absence of evidence in this case as to the real intention of the malefactors in making a thrust with their sharp-pointed instrument(s) on any person, the victim in particular." From the undisputed facts, supra, 8 the robbers had "rushed towards the doors of the second floor room, where they suddenly met a person ... who turned out to be the insured Juan S. Biagtan who received thrusts from their pointed instruments." The thrusts were indeed properly termed "purely accidental" since they seemed to be a reflex action on the robbers' part upon their being surprised by the deceased. To argue, as defendant does, that the robbers' intent to kill must necessarily be deduced from the four mortal wounds inflicted upon the deceased is to beg the question. Defendant must suffer the consequences of its failure to discharge its burden of proving by competent evidence, e.g. the robbers' or eyewitnesses' testimony, that the fatal injuries were intentionally inflicted upon the insured so as to exempt itself from liability. 3. Furthermore, plaintiffs-appellees properly assert in their brief that the sole error assigned by defendant company, to wit, that the fatal injuries were not accidental as held by the lower court but should be held to have been intentionally inflicted, raises a question of fact which defendant is now barred from raising, since it expressly limited its appeal to this Court purely "on questions of law", per its noitice of

appeal, 9 Defendant is therefore confined to "raising only questions of law" and "no other questions" under Rule 42, section 2 of the Rules of Court 10 and is deemed to have conceded the findings of fact of the trial court, since he thereby waived all questions of facts. 11 4. It has long been an established rule of construction of so-called contracts of adhesion such as insurance contracts, where the insured is handed a printed insurance policy whose fine-print language has long been selected with great care and deliberation by specialists and legal advisers employed by and acting exclusively in the interest of the insurance company, that the terms and phraseology of the policy, particularly of any exception clauses, must be clearly expressed so as to be easily understood by the insured and any "ambiguous, equivocal or uncertain terms" are to be "construed strictly and most strongly 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. The Court so expressly held in Calanoc that: ... While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss, and may expressly except other risks or causes of loss therefrom" (45 C.J.S. 781-782), however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. (Article 1377, new Civil Code) 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 and most strongly 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 experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company." (44 C.J.S., p. 1174) Insurance is, in its nature, complex and difficult for the layman to understand. Policies are prepared by experts who know and can anticipate the bearing and possible complications of every contingency.So long as insurance companies insist upon the use of ambiguous, intricate and technical provisions, which conceal rather than frankly disclose, their own intentions, the courts must, in fairness to those who purchase insurance construe every ambiguity in favor of the insured." (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324 LRA 1917A, 1237.) "An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured." (Moore vs. Aetna Life Insurance Co., LRA 1915D, 164). 12 The Court has but recently reiterated this doctrine in Landicho vs. GSIS 13 and again applied the provisions of Article 1377 of our Civil Code that "The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity." 5. The accidental death benefit clause assuring the insured's beneficiaries of double indemnity, upon payment of an extra premium, in the event that the insured meets violent accidental death is contractually stipulated as follows in the policy: "that the death of the insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident," supra. The policy then lists numerous exceptions, which may be classified as follows:

Injuries effected through non-external means which are excepted: self-destruction, bodily or mental infirmity or disease, poisoning or infection, injuries with no visible contusions or exterior wounds (exceptions 1 to 4 of policy clause); Injuries caused by some act of the insured which is proscribed by the policy, and are therefore similarly exepted: injuries received while on police duty, while travelling in any form of submarine transportation, or in any violation of law by the insured or assault provoked by the insured, or in any aircraft if the insured is a pilot or crew member; [exceptions 5 (a), (c) and (d), and 6 of the policy clause]; and Accidents expressly excluded: where death resulted in any riot, civil commotion, insurrection or war or atomic energy explosion. (Exceptions 5[b] and 7 of policy clause). The only exception which is not susceptible of classification is that provided in paragraph 5 (e), the very exception herein involved, which would also except injuries "inflicted intentionally by a third party, either with or without provocation on the part of the insured, and whether or not the attack or the defense by the third party was caused by a violation of the law by the insured." This ambiguous clause conflicts with all the other four exceptions in the same paragraph 5 particularly that immediately preceding it in item (d) which excepts injuries received where the insured has violated the law or provoked the injury, while this clause, construed as the insurance company now claims, would seemingly except also all other injuries, intentionally inflicted by a third party, regardless of any violation of law or provocation by the insured, and defeat the very purpose of the policy of giving the insured double indemnity in case of accidental death by "external and violent means" in the very language of the policy." It is obvious from the very classification of the exceptions and applying the rule of noscitus a sociis that the double-indemnity policy covers the insured against accidental death, whether caused by fault,

negligence or intent of a third party which is unforeseen and unexpected by the insured. All the associated words and concepts in the policy plainly exclude the accidental death from the coverage of the policy only where the injuries are self-inflicted or attended by some proscribed act of the insured or are incurred in some expressly excluded calamity such as riot, war or atomic explosion. Finally, the untenability of herein defendant insurer's claim that the insured's death fell within the exception is further heightened by the stipulated fact that two other insurance companies which likewise covered the insured for which larger sums under similar accidental death benefit clauses promptly paid the benefits thereof to plaintiffsbeneficiaries. I vote accordingly for the affirmance in toto of the appealed decision, with costs against defendant-appellant. Concepcion, C.J. and Reyes, J.B.L., J., concur. Footnotes 1 Berger v. Pacific Mut. life Ins. Co., 88 F. 241, 242. 2 Traveler's Protective Ass'n. of America vs. Fawcett, 104 N.E. 991, 50 Ind. App. 111. 3 Continental Cas. Co. v. Klinge, 82 Ind. App. 277, 144 N.E. 246; Washington v. Union C. & Sur. Co., 115 Mo. App. 627, 91 S.C. 998; National L & Accidents Co. v. De Lopez (Tex. Civ. App.), 207 S.W. 160. Teehankee, J., dissenting. 1 Rec. on Appeal, pp. 7-8, emphasis furnished. 2 Idem, pp. 8-10, emphasis furnished. 3 Idem, pp. 46-47.

4 Idem, pp. 37-38. 5 Idem, pp. 49-54, emphasis furnished. 6 98 Phil. 79. 7 Idem, at page 83, emphasis furnished. 8 At page 3. 9 Rec. on Appeal, p. 56. 10 "SEC 2. Appeal on pure question of law. Where the appellant states in his notice of appeal or record on appeal that he will raise only questions of law, no other questions shall be allowed, and the evidence need not be elevated." (Rule 42). 11 See 2 Moran's Comments on Rules of Court, 1970 Ed., pp. 456-457 and cases cited therein. 12 Emphasis furnished. 13 L-28866, prom. March 17, 1972, per Concepcion, C.J., and cases cited therein.

Charles, Chester and Clifton, all surnamed, Surposa, as beneficiaries. 3 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION While said insurance policy was in full force and effect, the insured, Carlie Surposa, died on October 18, 1988 as a result of a stab wound inflicted by one of the three (3) unidentified men without provocation and warning on the part of the former as he and his cousin, Winston Surposa, were waiting for a ride on their way home along Rizal-Locsin Streets, Bacolod City after attending the celebration of the "Maskarra Annual Festival." Thereafter, private respondent and the other beneficiaries of said insurance policy filed a written notice of claim with the petitioner insurance company which denied said claim contending that murder and assault are not within the scope of the coverage of the insurance policy. On February 24, 1989, private respondent filed a complaint with the Insurance Commission which subsequently rendered a decision, the pertinent portion of which reads: In the light of the foregoing. we find respondent liable to pay complainant the sum of P15,000.00 representing the proceeds of the policy with interest. As no evidence was submitted to prove the claim for mortuary aid in the sum of P1,000.00, the same cannot be entertained. WHEREFORE, judgment is hereby rendered ordering respondent to pay complainant the sum of P15,000.00 with legal interest from the date of the filing of the complaint until fully satisfied. With costs. 4 On July 11, 1991, the appellate court affirmed said decision. Hence, petitioner filed this petition alleging grove abuse of discretion on the part of the appellate court in applying the principle of "expresso unius exclusio alterius" in a personal accident insurance policy since death resulting from murder and/or assault are impliedly

G.R. No. 100970 September 2, 1992 FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and JULIA SURPOSA, respondents. Aquino and Associates for petitioner. Public Attorney's Office for private respondent.

NOCON, J.: This is a petition for certiorari with a prayer for the issuance of a restraining order and preliminary mandatory injunction to annul and set aside the decision of the Court of Appeals dated July 11, 1991, 1 affirming the decision dated March 20, 1990 of the Insurance Commission 2 in ordering petitioner Finman General Assurance Corporation to pay private respondent Julia Surposa the proceeds of the personal accident Insurance policy with interest. It appears on record that on October 22, 1986, deceased, Carlie Surposa was insured with petitioner Finman General Assurance Corporation under Finman General Teachers Protection Plan Master Policy No. 2005 and Individual Policy No. 08924 with his parents, spouses Julia and Carlos Surposa, and brothers Christopher,

excluded in said insurance policy considering that the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the former as indicated by the location of the lone stab wound on the insured. Therefore, said death was committed with deliberate intent which, by the very nature of a personal accident insurance policy, cannot be indemnified. We do not agree. The terms "accident" and "accidental" as used in insurance contracts have not acquired any technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An accident is an event that takes place without one's foresight or expectation an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected. . . . The generally accepted rule is that, death or injury does not result from accident or accidental means within the terms of an accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the death or injury. There is no accident when a deliberate act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. In other words, where the death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the doing of the act which produces the injury, the resulting death is within the protection of the policies insuring against death or injury from accident. 5 As correctly pointed out by the respondent appellate court in its decision:

In the case at bar, it cannot be pretended that Carlie Surposa died in the course of an assault or murder as a result of his voluntary act considering the very nature of these crimes. In the first place, the insured and his companion were on their way home from attending a festival. They were confronted by unidentified persons. The record is barren of any circumstance showing how the stab wound was inflicted. Nor can it be pretended that the malefactor aimed at the insured precisely because the killer wanted to take his life. In any event, while the act may not exempt the unknown perpetrator from criminal liability, the fact remains that the happening was a pure accident on the part of the victim. The insured died from an event that took place without his foresight or expectation, an event that proceeded from an unusual effect of a known cause and, therefore, not expected. Neither can it be said that where was a capricious desire on the part of the accused to expose his life to danger considering that he was just going home after attending a festival. 6 Furthermore, the personal accident insurance policy involved herein specifically enumerated only ten (10) circumstances wherein no liability attaches to petitioner insurance company for any injury, disability or loss suffered by the insured as a result of any of the stimulated causes. The principle of " expresso unius exclusio alterius" the mention of one thing implies the exclusion of another thing is therefore applicable in the instant case since murder and assault, not having been expressly included in the enumeration of the circumstances that would negate liability in said insurance policy cannot be considered by implication to discharge the petitioner insurance company from liability for, any injury, disability or loss suffered by the insured. Thus, the failure of the petitioner insurance company to include death resulting from murder or assault among the prohibited risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such death. Article 1377 of the Civil Code of the Philippines provides that:

The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Moreover, it is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary. 7 WHEREFORE, finding no irreversible error in the decision of the respondent Court of Appeals, the petition forcertiorari with restraining order and preliminary injunction is hereby DENIED for lack of merit. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.

6 Rollo, pp. 15-16. 7 National Power Corporation vs. Court of Appeals, 145 SCRA 533 [1986].

Footnotes 1 Rollo, pp. 12-17. Ponente: Justice Luis L. Victor with the concurrence of Justice Santiago M. Kapunan and Justice Segundino G. Chua. 2 Original Record, pp. 50-54. Penned by Insurance Commissioner Adelita A. Vergel de Dios. 3 Id., at pp. 2-5. 4 Id.. at p. 50. 5 De la Cruz vs. Capital Insurance & Surety Co., Inc., 17 SCRA 559 [1966].

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

two (2) months, Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages resulting from the refusal of Zenith to pay the amount claimed. The complaint was docketed as Civil Case No. CEB-1215. Aside from actual damages and interests, Fernandez also prayed for moral damages in the amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00. On September 28, 1983, Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract which, the private respondent rejected. After the issues had been joined, the pre-trial was scheduled on October 17, 1983 but the same was moved to November 4, 1983 upon petitioner's motion, allegedly to explore ways to settle the case although at an amount lower than private respondent's claim. On November 14, 1983, the trial court terminated the pre-trial. Subsequently, Fernandez presented his evidence. Petitioner Zenith, however, failed to present its evidence in view of its failure to appear in court, without justifiable reason, on the day scheduled for the purpose. The trial court issued an order on August 23, 1984 submitting the case for decision without Zenith's evidence (pp. 10-11, Rollo). Petitioner filed a petition for certiorari with the Court of Appeals assailing the order of the trial court submitting the case for decision without petitioner's evidence. The petition was docketed as C.A.-G.R. No. 04644. However, the petition was denied due course on April 29, 1986 (p. 56, Rollo). On June 4, 1986, a decision was rendered by the trial court in favor of private respondent Fernandez. The dispositive portion of the trial court's decision provides: WHEREFORE, defendant is hereby ordered to pay to the plaintiff: 1. The amount of P3,640.00 representing the damage incurred plus interest at the rate of twice the prevailing interest rates; 2. The amount of P20,000.00 by way of moral damages;

G.R. No. 85296 May 14, 1990 ZENITH INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and LAWRENCE FERNANDEZ, respondents. Vicente R. Layawen for petitioner. Lawrence L. Fernandez & Associates for private respondent.

MEDIALDEA, J.: Assailed in this petition is the decision of the Court of Appeals in CAG.R. C.V. No. 13498 entitled, "Lawrence L. Fernandez, plaintiffappellee v. Zenith Insurance Corp., defendant-appellant" which affirmed in toto the decision of the Regional Trial Court of Cebu, Branch XX in Civil Case No. CEB-1215 and the denial of petitioner's Motion for Reconsideration. The antecedent facts are as follows: On January 25, 1983, private respondent Lawrence Fernandez insured his car for "own damage" under private car Policy No. 50459 with petitioner Zenith Insurance Corporation. On July 6, 1983, the car figured in an accident and suffered actual damages in the amount of P3,640.00. After allegedly being given a run around by Zenith for

3. The amount of P20,000.00 by way of exemplary damages; 4. The amount of P5,000.00 as attorney's fees; 5. The amount of P3,000.00 as litigation expenses; and 6. Costs. (p. 9, Rollo) Upon motion of Fernandez and before the expiration of the period to appeal, the trial court, on June 20, 1986, ordered the execution of the decision pending appeal. The order was assailed by petitioner in a petition forcertiorari with the Court of Appeals on October 23, 1986 in C.A. G.R. No. 10420 but which petition was also dismissed on December 24, 1986 (p. 69, Rollo). On June 10, 1986, petitioner filed a notice of appeal before the trial court. The notice of appeal was granted in the same order granting private respondent's motion for execution pending appeal. The appeal to respondent court assigned the following errors: I. The lower court erred in denying defendant appellant to adduce evidence in its behalf. II. The lower court erred in ordering Zenith Insurance Corporation to pay the amount of P3,640.00 in its decision. III. The lower court erred in awarding moral damages, attorneys fees and exemplary damages, the worst is that, the court awarded damages more than what are prayed for in the complaint. (p. 12,Rollo) On August 17, 1988, the Court of Appeals rendered its decision affirming in toto the decision of the trial court. It also ruled that the matter of the trial court's denial of Fernandez's right to adduce evidence is a closed matter in view of its (CA) ruling in AC-G.R. 04644 wherein Zenith's petition questioning the trial court's order

submitting the case for decision without Zenith's evidence, was dismissed. The Motion for Reconsideration of the decision of the Court of Appeals dated August 17, 1988 was denied on September 29, 1988, for lack of merit. Hence, the instant petition was filed by Zenith on October 18, 1988 on the allegation that respondent Court of Appeals' decision and resolution ran counter to applicable decisions of this Court and that they were rendered without or in excess of jurisdiction. The issues raised by petitioners in this petition are: a) The legal basis of respondent Court of Appeals in awarding moral damages, exemplary damages and attomey's fees in an amount more than that prayed for in the complaint. b) The award of actual damages of P3,460.00 instead of only P1,927.50 which was arrived at after deducting P250.00 and P274.00 as deductible franchise and 20% depreciation on parts as agreed upon in the contract of insurance. Petitioner contends that while the complaint of private respondent prayed for P10,000.00 moral damages, the lower court awarded twice the amount, or P20,000.00 without factual or legal basis; while private respondent prayed for P5,000.00 exemplary damages, the trial court awarded P20,000.00; and while private respondent prayed for P3,000.00 attorney's fees, the trial court awarded P5,000.00. The propriety of the award of moral damages, exemplary damages and attorney's fees is the main issue raised herein by petitioner. The award of damages in case of unreasonable delay in the payment of insurance claims is governed by the Philippine Insurance Code, which provides: Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of

the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attomey's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. It is clear that under the Insurance Code, in case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1) attorney's fees; 2) other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim. As regards the award of moral and exemplary damages, the rules under the Civil Code of the Philippines shall govern. "The purpose of moral damages is essentially indemnity or reparation, not punishment or correction. Moral damages are emphatically not intended to enrich a complainant at the expense of a defendant, they are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action." (J. Cezar S. Sangco, Philippine Law on Torts and Damages, Revised Edition, p. 539) (See also R and B Surety & Insurance Co., Inc. v. IAC, G.R. No. 64515, June 22, 1984; 129 SCRA 745). While it is true that no proof of pecuniary loss is necessary in order that moral

damages may be adjudicated, the assessment of which is left to the discretion of the court according to the circumstances of each case (Art. 2216, New Civil Code), it is equally true that in awarding moral damages in case of breach of contract, there must be a showing that the breach was wanton and deliberately injurious or the one responsible acted fraudently or in bad faith (Perez v. Court of Appeals, G.R. No. L-20238, January 30,1965; 13 SCRA 137; Solis v. Salvador, G.R. No. L-17022, August 14, 1965; 14 SCRA 887). In the instant case, there was a finding that private respondent was given a "runaround" for two months, which is the basis for the award of the damages granted under the Insurance Code for unreasonable delay in the payment of the claim. However, the act of petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to justify an award of P20,000.00 as moral damages, taking into consideration also the fact that the actual damage on the car was only P3,460. In the pre-trial of the case, it was shown that there was no total disclaimer by respondent. The reason for petitioner's failure to indemnify private respondent within the twomonth period was that the parties could not come to an agreement as regards the amount of the actual damage on the car. The amount of P10,000.00 prayed for by private respondent as moral damages is equitable. On the other hand, exemplary or corrective damages are imposed by way of example or correction for the public good (Art. 2229, New Civil Code of the Philippines). In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227, exemplary damages were not awarded as the insurance company had not acted in wanton, oppressive or malevolent manner. The same is true in the case at bar. The amount of P5,000.00 awarded as attomey's fees is justified under the circumstances of this case considering that there were other petitions filed and defended by private respondent in connection with this case. As regards the actual damages incurred by private respondent, the amount of P3,640.00 had been established before the trial court and affirmed by the appellate court. Respondent appellate court correctly

ruled that the deductions of P250.00 and P274.00 as deductible franchise and 20% depreciation on parts, respectively claimed by petitioners as agreed upon in the contract, had no basis. Respondent court ruled: Under its second assigned error, defendant-appellant puts forward two arguments, both of which are entirely without merit. It is contented that the amount recoverable under the insurance policy defendant-appellant issued over the car of plaintiff-appellee is subject to deductible franchise, and . . . . The policy (Exhibit G, pp. 4-9, Record), does not mntion any deductible franchise, . . . (p. 13, Rollo) Therefore, the award of moral damages is reduced to P10,000.00 and the award of exemplary damages is hereby deleted. The awards due to private respondent Fernandez are as follows: 1) P3,640.00 as actual claim plus interest of twice the ceiling prescribed by the Monetary Board computed from the time of submission of proof of loss; 2) P10,000.00 as moral damages; 3) P5,000.00 as attorney's fees; 4) P3,000.00 as litigation expenses; and 5) Costs. ACCORDINGLY, the appealed decision is MODIFIED as above stated. SO ORDERED. Narvasa, Cruz and Grio-Aquino, JJ., concur. Gancayco, J., is on leave.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained. 2 The petitioner was sentenced to pay her P200,000.00, representing the face value of the policy, with interest at the legal rate; P10,000.00 as moral damages; P5,000.00 as exemplary damages; P5,000.00 as actual and compensatory damages; and P5,000.00 as attorney's fees, plus the costs of the suit. This decision was affirmed on appeal, and the motion for reconsideration was denied. 3 The petitioner then came to this Court to fault the Court of Appeals for approving the payment of the claim and the award of damages. The term "accident" has been defined as follows: The words "accident" and "accidental" have never acquired any technical signification in law, and when used in an insurance contract are to be construed and considered according to the ordinary understanding and common usage and speech of people generally. Insubstance, the courts are practically agreed that the words "accident" and "accidental" mean that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The definition that has usually been adopted by the courts is that an accident is an event that takes place without one's foresight or expectation an event that proceeds from an unknown cause, or is an unusual effect of a known case, and therefore not expected. 4 An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some violence or casualty to the injured without his design, consent, or voluntary co-operation. 5 In light of these definitions, the Court is convinced that the incident that resulted in Lim's death was indeed an accident. The petitioner, invoking the case of De la Cruz v. Capital Insurance, 6 says that "there is no accident when a deliberate act is performed unless some additional, unexpected, independent and unforeseen happening

G.R. No. 92383 July 17, 1992 SUN INSURANCE OFFICE, LTD., petitioner, vs. THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

CRUZ, J.: The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr. with a face value of P200,000.00. Two months later, he was dead with a bullet wound in his head. As beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was rejected. The petitioner agreed that there was no suicide. It argued, however that there was no accident either. Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on October 6, 1982, at about 10 o'clock in the evening, after his mother's birthday party. According to Nalagon, Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might he loaded. He assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He was dead before he fell. 1

occurs which produces or brings about their injury or death." There was such a happening. This was the firing of the gun, which was the additional unexpected and independent and unforeseen occurrence that led to the insured person's death. The petitioner also cites one of the four exceptions provided for in the insurance contract and contends that the private petitioner's claim is barred by such provision. It is there stated: Exceptions The company shall not be liable in respect of 1. Bodily injury xxx xxx xxx b. consequent upon i) The insured person attempting to commit suicide or willfully exposing himself to needless peril except in an attempt to save human life. To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner contends that the insured willfully exposed himself to needless peril and thus removed himself from the coverage of the insurance policy. It should be noted at the outset that suicide and willful exposure to needless peril are in pari materia because they both signify a disregard for one's life. The only difference is in degree, as suicide imports a positive act of ending such life whereas the second act indicates a reckless risking of it that is almost suicidal in intent. To illustrate, a person who walks a tightrope one thousand meters above the ground and without any safety device may not actually be intending to commit suicide, but his act is nonetheless suicidal. He would thus be considered as "willfully exposing himself to needless peril" within the meaning of the exception in question.

The petitioner maintains that by the mere act of pointing the gun to hip temple, Lim had willfully exposed himself to needless peril and so came under the exception. The theory is that a gun is per se dangerous and should therefore be handled cautiously in every case. That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the magazine from the gun and believed it was no longer dangerous. He expressly assured her that the gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The act was precisely intended to assure Nalagon that the gun was indeed harmless. The contrary view is expressed by the petitioner thus: Accident insurance policies were never intended to reward the insured for his tendency to show off or for his miscalculations. They were intended to provide for contingencies. Hence, when I miscalculate and jump from the Quezon Bridge into the Pasig River in the belief that I can overcome the current, I have wilfully exposed myself to peril and must accept the consequences of my act. If I drown I cannot go to the insurance company to ask them to compensate me for my failure to swim as well as I thought I could. The insured in the case at bar deliberately put the gun to his head and pulled the trigger. He wilfully exposed himself to peril. The Court certainly agrees that a drowned man cannot go to the insurance company to ask for compensation. That might frighten the insurance people to death. We also agree that under the circumstances narrated, his beneficiary would not be able to collect on the insurance policy for it is clear that when he braved the currents below, he deliberately exposed himself to a known peril. The private respondent maintains that Lim did not. That is where she says the analogy fails. The petitioner's hypothetical swimmer knew

when he dived off the Quezon Bridge that the currents below were dangerous. By contrast, Lim did not know that the gun he put to his head was loaded. Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed to his own accident. Indeed, most accidents are caused by negligence. There are only four exceptions expressly made in the contract to relieve the insurer from liability, and none of these exceptions is applicable in the case at bar. ** It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor of the assured. There is no reason to deviate from this rule, especially in view of the circumstances of this case as above analyzed. On the second assigned error, however, the Court must rule in favor of the petitioner. The basic issue raised in this case is, as the petitioner correctly observed, one of first impression. It is evident that the petitioner was acting in good faith then it resisted the private respondent's claim on the ground that the death of the insured was covered by the exception. The issue was indeed debatable and was clearly not raised only for the purpose of evading a legitimate obligation. We hold therefore that the award of moral and exemplary damages and of attorney's fees is unjust and so must be disapproved. In order that a person may be made liable to the payment of moral damages, the law requires that his act be wrongful. The adverse result of an action does not per se make the act wrongful and subject the act or to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously. For these the law taxes costs. 7

The fact that the results of the trial were adverse to Barreto did not alone make his act in bringing the action wrongful because in most cases one party will lose; we would be imposing an unjust condition or limitation on the right to litigate. We hold that the award of moral damages in the case at bar is not justified by the facts had circumstances as well as the law. If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is not the fact of winning alone that entitles him to recover such damages of the exceptional circumstances enumerated in Art. 2208. Otherwise, every time a defendant wins, automatically the plaintiff must pay attorney's fees thereby putting a premium on the right to litigate which should not be so. For those expenses, the law deems the award of costs as sufficient. 8 WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds the petitioner liable to the private respondent in the sum of P200,000.00 representing the face value of the insurance contract, with interest at the legal rate from the date of the filing of the complaint until the full amount is paid, but MODIFIED with the deletion of all awards for damages, including attorney's fees, except the costs of the suit. SO ORDERED. Grio-Aquino, Medialdea and Bellosillo, JJ., concur. Footnotes 1 TSN, October 1, 1985, pp. 25-30. 2 Decided by Judge Omar J. Amen. 3 Penned by Justice Nicolas P. Lapea, Jr., with Campos. Jr. and Cui, JJ., concurring.

4 43 Am. Jur. 2d 627. 5 Ibid., p. 628. 6 17 SCRA 559. ** Exceptions The Company shall not be liable in respect of 1. bodily injury a) sustained i) while the Insured Person is engaging in (or practicing for or taking part in training peculiar to) any of the Excluded Activities. ii) by any person before such person attains the Lower Age Limit or after the expiry of the Period of Insurance during which such person attains the Upper Age Limit. b) consequent upon i) the Insured Person committing or attempting to commit suicide or wilfully exposing himself to needless peril except in an attempt to save human life. ii) war, invasion, act of foreign enemy, hostilities (whether war be declared or not) civil war, rebellion, revolution, insurrection, or military or usurped power. 2. bodily injury or Death Disablement or Medical Expenses consequent upon or contributed to by the Insured Person a) having taken a drug unless the Insured proves that the drug was taken in accordance with proper medical

prescription and directions and not for treatment of drug addiction. b) suffering from pre-existing physical or mental defect or infirmity which had not been declared to and accepted in writing by the Company. 3. Death Disablement or Medical Expenses consequent upon or contributed to by the Insured Person being pregnant or suffering from sickness or disease not resulting from bodily injury or suffering from bodily injury due to a gradually operating cause. 4. Risks of Murder and Assault. 7 Barreto vs. Arevalo, 99 Phil. 771. 8 Rizal Surety vs. Court of Appeals, 20 SCRA 61.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-54171 October 28, 1980 JEWEL VILLACORTA, assisted by her husband, GUERRERO VILLACORTA, petitioner, vs. THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY, respondents.

Sunday Machine Works, Inc., for general check-up and repairs. On May 11, 1978, while it was in the custody of the Sunday Machine Works, the car was allegedly taken by six (6) persons and driven out to Montalban, Rizal. While travelling along Mabini St., Sitio Palyasan, Barrio Burgos, going North at Montalban, Rizal, the car figured in an accident, hitting and bumping a gravel and sand truck parked at the right side of the road going south. As a consequence, the gravel and sand truck veered to the right side of the pavement going south and the car veered to the right side of the pavement going north. The driver, Benito Mabasa, and one of the passengers died and the other four sustained physical injuries. The car, as well, suffered extensive damage. Complainant, thereafter, filed a claim for total loss with the respondent company but claim was denied. Hence, complainant, was compelled to institute the present action. The comprehensive motor car insurance policy for P35,000.00 issued by respondent Empire Insurance Company admittedly undertook to indemnify the petitioner-insured against loss or damage to the car (a) by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft; and (c) by malicious act. Respondent insurance commission, however, dismissed petitioner's complaint for recovery of the total loss of the vehicle against private respondent, sustaining respondent insurer's contention that the accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage, invoking the policy provision on "Authorized Driver" clause. 1 Respondent commission upheld private respondent's contention on the "Authorized Driver" clause in this wise: "It must be observed that under the above-quoted provisions, the policy limits the use of the insured vehicle to two (2) persons only, namely: the insured himself or

TEEHANKEE, Acting C.J.: The Court sets aside respondent Insurance Commission's dismissal of petitioner's complaint and holds that where the insured's car is wrongfully taken without the insured's consent from the car service and repair shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride, in the course of which it was totally smashed in an accident), respondent insurer is liable and must pay insured for the total loss of the insured vehicle under the theft clause of the policy. The undisputed facts of the case as found in the appealed decision of April 14, 1980 of respondent insurance commission are as follows: Complainant [petitioner] was the owner of a Colt Lancer, Model 1976, insured with respondent company under Private Car Policy No. MBI/PC-0704 for P35,000.00 Own Damage; P30,000.00 Theft; and P30,000.00 Third Party Liability, effective May 16, 1977 to May 16, 1978. On May 9, 1978, the vehicle was brought to the

any person on his (insured's) permission. Under the second category, it is to be noted that the words "any person' is qualified by the phrase ... on the insured's order or with his permission.' It is therefore clear that if the person driving is other than the insured, he must have been duly authorized by the insured, to drive the vehicle to make the insurance company liable for the driver's negligence. Complainant admitted that she did not know the person who drove her vehicle at the time of the accident, much less consented to the use of the same (par. 5 of the complaint). Her husband likewise admitted that he neither knew this driver Benito Mabasa (Exhibit '4'). With these declarations of complainant and her husband, we hold that the person who drove the vehicle, in the person of Benito Mabasa, is not an authorized driver of the complainant. Apparently, this is a violation of the 'Authorized Driver' clause of the policy. Respondent commission likewise upheld private respondent's assertion that the car was not stolen and therefore not covered by the Theft clause, ruling that "The element of 'taking' in Article 308 of the Revised Penal Code means that the act of depriving another of the possession and dominion of a movable thing is coupled ... with the intention. at the time of the 'taking', of withholding it with the character of permanency (People vs. Galang, 7 Appt. Ct. Rep. 13). In other words, there must have been shown a felonious intent upon the part of the taker of the car, and the intent must be an intent permanently to deprive the insured of his car," and that "Such was not the case in this instance. The fact that the car was taken by one of the residents of the Sunday Machine Works, and the withholding of the same, for a joy ride should not be construed to mean 'taking' under Art. 308 of the Revised Penal Code. If at all there was a 'taking', the same was merely temporary in nature. A temporary taking is held not a taking insured against (48 A LR 2d., page 15)." The Court finds respondent commission's dismissal of the complaint to be contrary to the evidence and the law.

First, respondent commission's ruling that the person who drove the vehicle in the person of Benito Mabasa, who, according to its finding, was one of the residents of the Sunday Machine Works, Inc. to whom the car had been entrusted for general check-up and repairs was not an "authorized driver" of petitioner-complainant is too restrictive and contrary to the established principle that insurance contracts, being contracts of adhesion where the only participation of the other party is the signing of his signature or his "adhesion" thereto, "obviously call for greater strictness and vigilance on the part of courts of justice with a view of protecting the weaker party from abuse and imposition, and prevent their becoming traps for the unwary. 2 The main purpose of the "authorized driver" clause, as may be seen from its text, supra, is that a person other than the insured owner, who drives the car on the insured's order, such as his regular driver, or with his permission, such as a friend or member of the family or the employees of a car service or repair shop must be duly licensed drivers and have no disqualification to drive a motor vehicle. A car owner who entrusts his car to an established car service and repair shop necessarily entrusts his car key to the shop owner and employees who are presumed to have the insured's permission to drive the car for legitimate purposes of checking or road-testing the car. The mere happenstance that the employee(s) of the shop owner diverts the use of the car to his own illicit or unauthorized purpose in violation of the trust reposed in the shop by the insured car owner does not mean that the "authorized driver" clause has been violated such as to bar recovery, provided that such employee is duly qualified to drive under a valid driver's license. The situation is no different from the regular or family driver, who instead of carrying out the owner's order to fetch the children from school takes out his girl friend instead for a joy ride and instead wrecks the car. There is no question of his being an "authorized driver" which allows recovery of the loss although his trip was for a personal or illicit purpose without the owner's authorization.

Secondly, and independently of the foregoing (since when a car is unlawfully taken, it is the theft clause, not the "authorized driver" clause, that applies), where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be they employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban without the owner's consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in Article 308 of the Revised Penal Code, viz. "Who are liable for theft. Theft is committed by any person who, with intent to gain but without violence against or intimidation of persons nor force upon things, shall take personal property of another without the latter's consent," for purposes of recovering the loss under the policy in question. The Court rejects respondent commission's premise that there must be an intent on the part of the taker of the car "permanently to deprive the insured of his car" and that since the taking here was for a "joy ride" and "merely temporary in nature," a "temporary taking is held not a taking insured against." The evidence does not warrant respondent commission's findings that it was a mere "joy ride". From the very investigator's report cited in its comment, 3 the police found from the waist of the car driver Benito Mabasa Bartolome who smashed the car and was found dead right after the incident "one cal. 45 Colt. and one apple type grenade," hardly the materials one would bring along on a "joy ride". Then, again, it is equally evident that the taking proved to be quite permanent rather than temporary, for the car was totally smashed in the fatal accident and was never returned in serviceable and useful condition to petitioner-owner. Assuming, despite the totally inadequate evidence, that the taking was "temporary" and for a "joy ride", the Court sustains as the better view that which holds that when a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives therefrom utility, satisfaction,

enjoyment and pleasure. Justice Ramon C. Aquino cites in his work Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it "hurt de uso. " 4 The insurer must therefore indemnify the petitioner-owner for the total loss of the insured car in the sum of P35,000.00 under the theft clause of the policy, subject to the filing of such claim for reimbursement or payment as it may have as subrogee against the Sunday Machine Works, Inc. ACCORDINGLY, the appealed decision is set aside and judgment is hereby rendered sentencing private respondent to pay petitioner the sum of P35,000.00 with legal interest from the filing of the complaint until full payment is made and to pay the costs of suit. SO ORDERED. Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.

Footnotes 1 The "Authorized Driver" clause reads, thus: 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 the licensing or other laws or regulations, to drive the Scheduled Vehicle, or has been permitted and is not disqualified by order of a Court of Law or by reason or any enactment or regulation in that behalf."

2 Sweet Lines, Inc. vs. Teves, 83 SCRA 361 (1978), citing Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd., 98 Phil. 95. 3 Rollo, page 38. 4 Aquino's Revised Penal Code, Vol. III, 1977 Edition, p. 1516.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-36480 May 31, 1988 ANDREW PALERMO, plaintiff-appellee, vs. PYRAMID INSURANCE CO., INC., defendant- appellant.

On November 26, 1969, the plaintiff filed a "Motion for Immediate Execution Pending Appeal." It was opposed by the defendant, but was granted by the trial court on December 15, 1969. The trial court found the following facts to be undisputed: On October 12,1968, after having purchased a brand new Nissan Cedric de Luxe Sedan car bearing Motor No. 087797 from the Ng Sam Bok Motors Co. in Bacolod City, plaintiff insured the same with the defendant insurance company against any loss or damage for P 20,000.00 and against third party liability for P 10,000.00. Plaintiff paid the defendant P 361.34 premium for one year, March 12, 1968 to March 12, 1969, for which defendant issued Private Car Comprehensive Policy No. MV-1251, marked Exhibit "A." The automobile was, however, mortgaged by the plaintiff with the vendor, Ng Sam Bok Motors Co., to secure the payment of the balance of the purchase price, which explains why the registration certificate in the name of the plaintiff remains in the hands of the mortgagee, Ng Sam Bok Motors Co. On April 17, 1968, while driving the automobile in question, the plaintiff met a violent accident. The La Carlota City fire engine crashed head on, and as a consequence, the plaintiff sustained physical injuries, his father, Cesar Palermo, who was with am in the car at the time was likewise seriously injured and died shortly thereafter, and the car in question was totally wrecked. The defendant was immediately notified of the occurrence, and upon its orders, the damaged car was towed from the scene of the accident to the compound of Ng Sam Bok Motors in Bacolod City where it remains deposited up to the present time.

GRIO-AQUINO, J: The Court of Appeals certified this case to Us for proper disposition as the only question involved is the interpretation of the provision of the insurance contract regarding the "authorized driver" of the insured motor vehicle. On March 7, 1969, the insured, appellee Andrew Palermo, filed a complaint in the Court of First Instance of Negros Occidental against Pyramid Insurance Co., Inc., for payment of his claim under a Private Car Comprehensive Policy MV-1251 issued by the defendant (Exh. A). In its answer, the appellant Pyramid Insurance Co., Inc., alleged that it disallowed the claim because at the time of the accident, the insured was driving his car with an expired driver's license. After the trial, the court a quo rendered judgment on October 29, 1969 ordering the defendant "to pay the plaintiff the sum of P20,000.00, value of the insurance of the motor vehicle in question and to pay the costs."

The insurance policy, Exhibit "A," grants an option unto the defendant, in case of accident either to indemnify the plaintiff for loss or damage to the car in cash or to replace the damaged car. The defendant, however, refused to take either of the above-mentioned alternatives for the reason as alleged, that the insured himself had violated the terms of the policy when he drove the car in question with an expired driver's license. (Decision, Oct. 29, 1969, p. 68, Record on Appeal.) Appellant alleges that the trial court erred in interpreting the following provision of the Private Car Comprehensive Policy MV-1251: 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 the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of law or by reason of any enactment or regulation in that behalf. (Exh. "A.") There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the insured motor vehicle because his driver's license had expired. The driver of the insured motor vehicle at the time of the accident was, the insured himself, hence an "authorized driver" under the policy. While the Motor Vehicle Law prohibits a person from operating a motor vehicle on the highway without a license or with an expired license, an infraction of the Motor Vehicle Law on the part of the insured, is not a bar to recovery under the insurance contract. It

however renders him subject to the penal sanctions of the Motor Vehicle Law. The requirement that the driver be "permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of Law or by reason of any enactment or regulation in that behalf," applies only when the driver" is driving on the insured's order or with his permission." It does not apply when the person driving is the insured himself. This view may be inferred from the decision of this Court in Villacorta vs. Insurance Commission, 100 SCRA 467, where it was held that: The main purpose of the "authorized driver" clause, as may be seen from its text, is that a person other than the insured owner, who drives the car on the insured's order, such as his regular driver, or with his permission, such as a friend or member of the family or the employees of a car service or repair shop, must be duly licensed drivers and have no disqualification to drive a motor vehicle. In an American case, where the insured herself was personally operating her automobile but without a license to operate it, her license having expired prior to the issuance of the policy, the Supreme Court of Massachusetts was more explicit: ... Operating an automobile on a public highway without a license, which act is a statutory crime is not precluded by public policy from enforcing a policy indemnifying her against liability for bodily injuries The inflicted by use of the automobile." (Drew C. Drewfield McMahon vs. Hannah Pearlman, et al., 242 Mass. 367, 136 N.E. 154, 23 A.L.R. 1467.) WHEREFORE, the appealed decision is affirmed with costs against the defendant-appellant.

SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 60506 August 6, 1992 FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR, LEONILA M. MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and ELVIRA, all surnamed MAGLANA, herein represented by their mother, FIGURACION VDA. DE MAGLANA, petitioners, vs. HONORABLE FRANCISCO Z. CONSOLACION, Presiding Judge of Davao City, Branch II, and AFISCO INSURANCE CORPORATION, respondents. Jose B. Guyo for petitioners. Angel E. Fernandez for private respondent.

. . . Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa, here in Davao City. On December 20, 1978, early morning, Lope Maglana was on his way to his work station, driving a motorcycle owned by the Bureau of Customs. At Km. 7, Lanang, he met an accident that resulted in his death. He died on the spot. The PUJ jeep that bumped the deceased was driven by Pepito Into, operated and owned by defendant Destrajo. From the investigation conducted by the traffic investigator, the PUJ jeep was overtaking another passenger jeep that was going towards the city poblacion. While overtaking, the PUJ jeep of defendant Destrajo running abreast with the overtaken jeep, bumped the motorcycle driven by the deceased who was going towards the direction of Lasa, Davao City. The point of impact was on the lane of the motorcycle and the deceased was thrown from the road and met his untimely death. 1 Consequently, the heirs of Lope Maglana, Sr., here petitioners, filed an action for damages and attorney's fees against operator Patricio Destrajo and the Afisco Insurance Corporation (AFISCO for brevity) before the then Court of First Instance of Davao, Branch II. An information for homicide thru reckless imprudence was also filed against Pepito Into. During the pendency of the civil case, Into was sentenced to suffer an indeterminate penalty of one (1) year, eight (8) months and one (1) day of prision correccional, as minimum, to four (4) years, nine (9) months and eleven (11) days of prision correccional, as maximum, with all the accessory penalties provided by law, and to indemnify the heirs of Lope Maglana, Sr. in the amount of twelve thousand pesos (P12,000.00) with subsidiary imprisonment in case of insolvency, plus five thousand pesos (P5,000.00) in the concept of moral and exemplary damages with costs. No appeal was interposed by accused who later applied for probation. 2

ROMERO, J.: The nature of the liability of an insurer sued together with the insured/operator-owner of a common carrier which figured in an accident causing the death of a third person is sought to be defined in this petition for certiorari. The facts as found by the trial court are as follows:

On December 14, 1981, the lower court rendered a decision finding that Destrajo had not exercised sufficient diligence as the operator of the jeepney. The dispositive portion of the decision reads: WHEREFORE, the Court finds judgment in favor of the plaintiffs against defendant Destrajo, ordering him to pay plaintiffs the sum of P28,000.00 for loss of income; to pay plaintiffs the sum of P12,000.00 which amount shall be deducted in the event judgment in Criminal Case No. 3527-D against the driver, accused Into, shall have been enforced; to pay plaintiffs the sum of P5,901.70 representing funeral and burial expenses of the deceased; to pay plaintiffs the sum of P5,000.00 as moral damages which shall be deducted in the event judgment (sic) in Criminal Case No. 3527-D against the driver, accused Into; to pay plaintiffs the sum of P3,000.00 as attorney's fees and to pay the costs of suit. The defendant insurance company is ordered to reimburse defendant Destrajo whatever amounts the latter shall have paid only up to the extent of its insurance coverage. SO ORDERED.
3

In its Order of February 9, 1982, the lower court denied the motion for reconsideration ruling that since the insurance contract "is in the nature of suretyship, then the liability of the insurer is secondary only up to the extent of the insurance coverage." 5 Petitioners filed a second motion for reconsideration reiterating that the liability of the insurer is direct, primary and solidary with the jeepney operator because the petitioners became direct beneficiaries under the provision of the policy which, in effect, is a stipulation pour autrui. 6 This motion was likewise denied for lack of merit. Hence, petitioners filed the instant petition for certiorari which, although it does not seek the reversal of the lower court's decision in its entirety, prays for the setting aside or modification of the second paragraph of the dispositive portion of said decision. Petitioners reassert their position that the insurance company is directly and solidarily liable with the negligent operator up to the extent of its insurance coverage. We grant the petition. The particular provision of the insurance policy on which petitioners base their claim is as follows:

Petitioners filed a motion for the reconsideration of the second paragraph of the dispositive portion of the decision contending that AFISCO should not merely be held secondarily liable because the Insurance Code provides that the insurer's liability is "direct and primary and/or jointly and severally with the operator of the vehicle, although only up to the extent of the insurance coverage." 4 Hence, they argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been awarded in their favor. In its comment on the motion for reconsideration, AFISCO argued that since the Insurance Code does not expressly provide for a solidary obligation, the presumption is that the obligation is joint.

Sec. 1 LIABILITY TO THE PUBLIC 1. The Company will, subject to the Limits of Liability, pay all sums necessary to discharge liability of the insured in respect of (a) death of or bodily injury to any THIRD PARTY (b) . . . . 2. . . . .

3. In the event of the death of any person entitled to indemnity under this Policy, the Company will, in respect of the liability incurred to such person indemnify his personal representatives in terms of, and subject to the terms and conditions hereof. 7 The above-quoted provision leads to no other conclusion but that AFISCO can be held directly liable by petitioners. As this Court ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here an insurance policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or even upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured." 8 The underlying reason behind the third party liability (TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy . . ." 9 Since petitioners had received from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's liability is now limited to P15,000.00. However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo. In Malayan Insurance Co., Inc. v. Court of Appeals, 10 this Court had the opportunity to resolve the issue as to the nature of the liability of the insurer and the insured vis-a-vis the third party injured in an accident. We categorically ruled thus: While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort.

In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos (the injured third party), but it cannot, as incorrectly held by the trial court, be made "solidarily" liable with the two principal tortfeasors, namely respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said, two (2) respondents by reason of the indemnity contract against third party liability under which an insurer can be directly sued by a third party this will result in a violation of the principles underlying solidary obligation and insurance contracts. (emphasis supplied) The Court then proceeded to distinguish the extent of the liability and manner of enforcing the same in ordinary contracts from that of insurance contracts. While in solidary obligations, the creditor may enforce the entire obligation against one of the solidary debtors, in an insurance contract, the insurer undertakes for a consideration to indemnify the insured against loss, damage or liability arising from an unknown or contingent event. 11 Thus, petitioner therein, which, under the insurance contract is liable only up to P20,000.00, can not be made solidarily liable with the insured for the entire obligation of P29,013.00 otherwise there would result "an evident breach of the concept of solidary obligation." Similarly, petitioners herein cannot validly claim that AFISCO, whose liability under the insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for the total amount of P53,901.70 in accordance with the decision of the lower court. Since under both the law and the insurance policy, AFISCO's liability is only up to P20,000.00, the second paragraph of the dispositive portion of the decision in question may have unwittingly sown confusion among the petitioners and their counsel. What should have been clearly stressed as to leave no room for doubt was the liability of AFISCO under the explicit terms of the insurance contract. In fine, we conclude that the liability of AFISCO based on the insurance contract is direct, but not solidary with that of Destrajo which is based on Article 2180 of the Civil Code. 12 As such,

petitioners have the option either to claim the P15,000 from AFISCO and the balance from Destrajo or enforce the entire judgment from Destrajo subject to reimbursement from AFISCO to the extent of the insurance coverage. While the petition seeks a definitive ruling only on the nature of AFISCO's liability, we noticed that the lower court erred in the computation of the probable loss of income. Using the formula: 2/3 of (80-56) x P12,000.00, it awarded P28,800.00. 13 Upon recomputation, the correct amount is P192,000.00. Being a "plain error," we opt to correct the same. 14 Furthermore, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 15 WHEREFORE, premises considered, the present petition is hereby GRANTED. The award of P28,800.00 representing loss of income is INCREASED to P192,000.00 and the death indemnity of P12,000.00 to P50,000.00. SO ORDERED. Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur. Footnotes 1 Decision, p. 5; Annex "A" to Petition, Rollo, p. 27. 2 Civil Case No. 12706. 3 Rollo, pp. 31-32. 4 Motion for Reconsideration, p. 2; Rollo, p. 34. 5 Rollo, pp. 37-38. 6 lbid., pp. 39-43. 7 Ibid, p. 41.

8 G.R. No. 78848, November 14,. 1988, 167 SCRA 386, 391. 9 Ibid. 10 L-36413, September 26, 1988, 165 SCRA 536; 444. 11 Supra, at p. 544 citing The Imperial Insurance, Inc. V. David, L-32425, November 21, 1984, 133 SCRA 317 and Philippine Phoenix Surety Insurance Co. v. Woodworks, Inc., L-25317, August 6, 1979, 92 SCRA 419. See: Quiombing v. Court of Appeals, G.R. No. 93010, August 30, 1990, 189 SCRA 325, 328 re concept of solidary obligation. 12 Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. 13 Decision, p. 9, Annex "A," Rollo, p. 31; Citing Villa Rey Transit, Inc. v. Court of Appeals, L-25499, February 18, 1970, 31 SCRA 511 and Davila v. Philippine Airlines, L28512, February 28, 1973, 49 SCRA 497. 14 Section 7, Rule 51, Rules of Court. 15 Dangwa Transportation Co., Inc. v. Court of Appeals, G.R. No. 95582, October 7, 1991, 202 SCRA 574.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

CA-G.R. No. 13037, which reversed the decision of the Regional Trial Court of Manila, Branch VIII in Civil Case No. 83-19098 for replevin and damages. The dispositive portion of the decision of the Court of Appeals reads, as follows: WHEREFORE, the decision appealed from is reversed; and appellee Perla Compania de Seguros, Inc. is ordered to indemnify appellants Herminio and Evelyn Lim for the loss of their insured vehicle; while said appellants are ordered to pay appellee FCP Credit Corporation all the unpaid installments that were due and payable before the date said vehicle was carnapped; and appellee Perla Compania de Seguros, Inc. is also ordered to pay appellants moral damages of P12,000.00 for the latter's mental sufferings, exemplary damages of P20,000.00 for appellee Perla Compania de Seguros, Inc.'s unreasonable refusal on sham grounds to honor the just insurance claim of appellants by way of example and correction for public good, and attorney's fees of P10,000.00 as a just and equitable reimbursement for the expenses incurred therefor by appellants, and the costs of suit both in the lower court and in this appeal. 2 The facts as found by the trial court are as follows: On December 24, 1981, private respondents spouses Herminio and Evelyn Lim executed a promissory note in favor Supercars, Inc. in the sum of P77,940.00, payable in monthly installments according to the schedule of payment indicated in said note, 3 and secured by a chattel mortgage over a brand new red Ford Laser 1300 5DR Hatchback 1981 model with motor and serial No. SUPJYK-03780, which is registered under the name of private respondent Herminio Lim 4 and insured with the petitioner Perla Compania de Seguros, Inc. (Perla for brevity) for comprehensive coverage under Policy No. PC/41PP-QCB-43383. 5 On the same date, Supercars, Inc., with notice to private respondents spouses, assigned to petitioner FCP Credit Corporation (FCP for

G.R. No. 96452 May 7, 1992 PERLA COMPANIA DE SEGUROS, INC. petitioner, vs. THE COURT OF APPEALS, HERMINIO LIM and EVELYN LIM, respondents. G.R. No. 96493 May 7, 1992 FCP CREDIT CORPORATION, petitioner, vs. THE COURT OF APPEALS, Special Third Division, HERMINIO LIM and EVELYN LIM, respondents. Yolanda Quisumbing-Javellana and Nelson A. Loyola for petitioner. Wilson L. Tee for respondents Herminio and Evelyn Lim.

NOCON, J.: These are two petitions for review on certiorari, one filed by Perla Compania de Seguros, Inc. in G.R. No. 96452, and the other by FCP Credit Corporation in G.R. No. 96493, both seeking to annul and set aside the decision dated July 30, 1990 1 of the Court of Appeals in

brevity) its rights, title and interest on said promissory note and chattel mortgage as shown by the Deed of Assignment. 6 At around 2:30 P.M. of November 9, 1982, said vehicle was carnapped while parked at the back of Broadway Centrum along N. Domingo Street, Quezon City. Private respondent Evelyn Lim, who was driving said car before it was carnapped, immediately called up the AntiCarnapping Unit of the Philippine Constabulary to report said incident and thereafter, went to the nearest police substation at Araneta, Cubao to make a police report regarding said incident, as shown by the certification issued by the Quezon City police. 7 On November 10, 1982, private respondent Evelyn Lim reported said incident to the Land Transportation Commission in Quezon City, as shown by the letter of her counsel to said office, 8 in compliance with the insurance requirement. She also filed a complaint with the Headquarters, Constabulary Highway Patrol Group. 9 On November 11, 1982, private respondent filed a claim for loss with the petitioner Perla but said claim was denied on November 18, 1982 10 on the ground that Evelyn Lim, who was using the vehicle before it was carnapped, was in possession of an expired driver's license at the time of the loss of said vehicle which is in violation of the authorized driver clause of the insurance policy, which states, to wit: 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 the licensing or other laws or regulations, to drive the Scheduled Vehicle, or has been permitted and is not disqualified by order of a Court of Law or by reason of any enactment or regulation in that behalf. 11

On November 17, 1982, private respondents requests from petitioner FCP for a suspension of payment on the monthly amortization agreed upon due to the loss of the vehicle and, since the carnapped vehicle insured with petitioner Perla, said insurance company should be made to pay the remaining balance of the promissory note and the chattel mortgage contract. Perla, however, denied private respondents' claim. Consequently, petitioner FCP demanded that private respondents pay the whole balance of the promissory note or to return the vehicle 12 but the latter refused. On July 25, 1983, petitioner FCP filed a complaint against private respondents, who in turn filed an amended third party complaint against petitioner Perla on December 8, 1983. After trial on the merits, the trial court rendered a decision, the dispositive portion which reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: 1. Ordering defendants Herminio Lim and Evelyn Lim to pay, jointly and severally, plaintiff the sum of P55,055.93 plus interest thereon at the rate of 24% per annum from July 2, 1983 until fully paid; 2. Ordering defendants to pay plaintiff P50,000.00 as and for attorney's fees; and the costs of suit. Upon the other hand, likewise, ordering the DISMISSAL of the Third-Party Complaint filed against Third-Party Defendant. 13 Not satisfied with said decision, private respondents appealed the same to the Court of Appeals, which reversed said decision.

After petitioners' separate motions for reconsideration were denied by the Court of Appeals in its resolution of December 10, 1990, petitioners filed these separate petitions for review on certiorari. Petitioner Perla alleged that there was grave abuse of discretion on the part of the appellate court in holding that private respondents did not violate the insurance contract because the authorized driver clause is not applicable to the "Theft" clause of said Contract. For its part, petitioner FCP raised the issue of whether or not the loss of the collateral exempted the debtor from his admitted obligations under the promissory note particularly the payment of interest, litigation expenses and attorney's fees. We find no merit in Perla's petition. The comprehensive motor car insurance policy issued by petitioner Perla undertook to indemnify the private respondents against loss or damage to the car (a) by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear; (b) by fire, external explosion, selfignition or lightning or burglary, housebreaking or theft; and (c) by malicious act. 14 Where a car is admittedly, as in this case, unlawfully and wrongfully taken without the owner's consent or knowledge, such taking constitutes theft, and, therefore, it is the "THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should apply. As correctly stated by the respondent court in its decision: . . . Theft is an entirely different legal concept from that of accident. Theft is committed by a person with the intent to gain or, to put it in another way, with the concurrence of the doer's will. On the other hand, accident, although it may proceed or result from negligence, is the happening of an event without the concurrence of the will of the person by whose agency it was caused. (Bouvier's Law Dictionary, Vol. I, 1914 ed., p. 101).

Clearly, the risk against accident is distinct from the risk against theft. The "authorized driver clause" in a typical insurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction often seized upon by insurance companies in resisting claims from their assureds between death occurring as a result of accident and death occurring as a result of intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had figured in an accident at the time she drove it with an expired license, then, appellee Perla Compania could properly resist appellants' claim for indemnification for the loss or destruction of the vehicle resulting from the accident. But in the present case. The loss of the insured vehicle did not result from an accident where intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intent. 15 It is worthy to note that there is no causal connection between the possession of a valid driver's license and the loss of a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadow. We however find the petition of FCP meritorious. This Court agrees with petitioner FCP that private respondents are not relieved of their obligation to pay the former the installments due on the promissory note on account of the loss of the automobile. The chattel mortgage constituted over the automobile is merely an accessory contract to the promissory note. Being the principal contract, the promissory note is unaffected by whatever befalls the subject matter of the accessory contract. Therefore, the unpaid balance on the promissory note should be paid, and not just the installments due and payable before the automobile was carnapped, as erronously held by the Court of Appeals.

However, this does not mean that private respondents are bound to pay the interest, litigation expenses and attorney's fees stipulated in the promissory note. Because of the peculiar relationship between the three contracts in this case, i.e., the promissory note, the chattel mortgage contract and the insurance policy, this Court is compelled to construe all three contracts as intimately interrelated to each other, despite the fact that at first glance there is no relationship whatsoever between the parties thereto. Under the promissory note, private respondents are obliged to pay Supercars, Inc. the amount stated therein in accordance with the schedule provided for. To secure said promissory note, private respondents constituted a chattel mortgage in favor of Supercars, Inc. over the automobile the former purchased from the latter. The chattel mortgage, in turn, required private respondents to insure the automobile and to make the proceeds thereof payable to Supercars, Inc. The promissory note and chattel mortgage were assigned by Supercars, Inc. to petitioner FCP, with the knowledge of private respondents. Private respondents were able to secure an insurance policy from petitioner Perla, and the same was made specifically payable to petitioner FCP. 16 The insurance policy was therefore meant to be an additional security to the principal contract, that is, to insure that the promissory note will still be paid in case the automobile is lost through accident or theft. The Chattel Mortgage Contract provided that: THE SAID MORTGAGOR COVENANTS AND AGREES THAT HE/IT WILL CAUSE THE PROPERTY/IES HEREINABOVE MORTGAGED TO BE INSURED AGAINST LOSS OR DAMAGE BY ACCIDENT, THEFT AND FIRE FOR A PERIOD OF ONE YEAR FROM DATE HEREOF AND EVERY YEAR THEREAFTER UNTIL THE MORTGAGE OBLIGATION IS FULLY PAID WITH AN INSURANCE COMPANY OR COMPANIES ACCEPTABLE TO THE MORTGAGEE IN AN AMOUNT NOT LESS THAN THE OUTSTANDING BALANCE OF THE MORTGAGE OBLIGATION; THAT HE/IT WILL MAKE ALL LOSS, IF ANY,

UNDER SUCH POLICY OR POLICIES, PAYABLE TO THE MORTGAGE OR ITS ASSIGNS AS ITS INTERESTS MAY APPEAR AND FORTHWITH DELIVER SUCH POLICY OR POLICIES TO THE MORTGAGEE, . . . . 17 It is clear from the abovementioned provision that upon the loss of the insured vehicle, the insurance company Perla undertakes to pay directly to the mortgagor or to their assignee, FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage contract. If the claim on the insurance policy had been approved by petitioner Perla, it would have paid the proceeds thereof directly to petitioner FCP, and this would have had the effect of extinguishing private respondents' obligation to petitioner FCP. Therefore, private respondents were justified in asking petitioner FCP to demand the unpaid installments from petitioner Perla. Because petitioner Perla had unreasonably denied their valid claim, private respondents should not be made to pay the interest, liquidated damages and attorney's fees as stipulated in the promissory note. As mentioned above, the contract of indemnity was procured to insure the return of the money loaned from petitioner FCP, and the unjustified refusal of petitioner Perla to recognize the valid claim of the private respondents should not in any way prejudice the latter. Private respondents can not be said to have unduly enriched themselves at the expense of petitioner FCP since they will be required to pay the latter the unpaid balance of its obligation under the promissory note. In view of the foregoing discussion, We hold that the Court of Appeals did not err in requiring petitioner Perla to indemnify private respondents for the loss of their insured vehicle. However, the latter should be ordered to pay petitioner FCP the amount of P55,055.93, representing the unpaid installments from December 30, 1982 up to July 1, 1983, as shown in the statement of account prepared by petitioner FCP, 18 plus legal interest from July 2, 1983 until fully paid.

As to the award of moral damages, exemplary damages and attorney's fees, private respondents are legally entitled to the same since petitioner Perla had acted in bad faith by unreasonably refusing to honor the insurance claim of the private respondents. Besides, awards for moral and exemplary damages, as well as attorney's fees are left to the sound discretion of the Court. Such discretion, if well exercised, will not be disturbed on appeal. 19 WHEREFORE, the assailed decision of the Court of Appeals is hereby MODIFIED to require private respondents to pay petitioner FCP the amount of P55,055.93, with legal interest from July 2, 1983 until fully paid. The decision appealed from is hereby affirmed as to all other respects. No pronouncement as to costs. SO ORDERED. Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

9 Exhibit "8". 10 Exhibit "2-a-Perla". 11 Exhibit "1-a Perla de Seguro"; Records, p. 88. 12 Exhibits "C" and "D". 13 RTC's Decision, pp. 8-9; Records, pp. 34-35. 14 Exhibit, "2". 15 Decision of the Court of Appeals, p. 6; Rollo, p. 62. 16 Exhibit "2"; Records, p. 88. 17 Exhibit "B"; Records, p. 80. Emphasis supplied. 18 Exhibit "D", Records, p. 84.

Footnotes 1 Ponente: Justice Jesus M. Elbinias; Justices Pedro P. Ramirez and Regina G. Ordoez-Benitez, concurring. 2 Decision of the Court of Appeals, p. 7; Rollo, p. 63. 3 Exhibit "A", Exhibit "5". 4 Exhibit "B". 5 Exhibit "2", Exhibit "1-Perla". 6 Exhibit "B". 7 Exhibit "6", Records, p. 101. 8 Exhibit "7".

19 Philippine Airline, Inc. vs. Court of Appeals, 188 SCRA 461 (1990).

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

The petitioner declared in the policy under the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the coinsurer for P50,000.00. From 1989 to 1990, the petitioner had in his inventory stocks amounting to P392,130.50, itemized as follows: Zenco Sales, Inc. F. Legaspi Gen. Merchandise Cebu Tesing Textiles P55,698.00 86,432.50 250,000.00 (on credit) P392,130.50

G.R. No. 114427 February 6, 1995 ARMANDO GEAGONIA, petitioner, vs. COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION, respondents.

The policy contained the following condition: 3. The insured shall give notice to the Company of any insurance or insurances already affected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00. On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San Francisco, Agusan del Sur. The petitioner's insured stock-in-trade were completely destroyed prompting him to file with the private respondent a claim under the policy. On 28 December 1990, the private respondent denied the claim because it found that at the time of the loss the petitioner's stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144, for P100,000.00 each, issued by the

DAVIDE, JR., J.: Four our review under Rule 45 of the Rules of Court is the decision 1 of the Court of Appeals in CA-G.R. SP No. 31916, entitled "Country Bankers Insurance Corporation versus Armando Geagonia," reversing the decision of the Insurance Commission in I.C. Case No. 3340 which awarded the claim of petitioner Armando Geagonia against private respondent Country Bankers Insurance Corporation. The petitioner is the owner of Norman's Mart located in the public market of San Francisco, Agusan del Sur. On 22 December 1989, he obtained from the private respondent fire insurance policy No. F14622 2 for P100,000.00. The period of the policy was from 22 December 1989 to 22 December 1990 and covered the following: "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business."

Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC). 3 These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause reading: MORTGAGE: Loss, if any shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy. COINSURANCE DECLARED: P100,000. Phils. First CEB/F 24758. 4 The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. The petitioner then filed a complaint 5 against the private respondent with the Insurance Commission (Case No. 3340) for the recovery of P100,000.00 under fire insurance policy No. F-14622 and for attorney's fees and costs of litigation. He attached as Annex "AM" 6 thereof his letter of 18 January 1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the time he obtained the private respondent's fire insurance policy he knew that the two policies issued by the PFIC were already in existence; however, he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by the private respondent's agent; and had it been mentioned, he would not have withheld such information. He further asserted that the total of the amounts claimed under the three policies was below the actual value of his stocks at the time of loss, which was P1,000,000.00. In its answer, 7 the private respondent specifically denied the allegations in the complaint and set up as its principal defense the violation of Condition 3 of the policy. In its decision of 21 June 1993, 8 the Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles which procured the PFIC

policies without informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on the petitioner's testimony that he came to know of the PFIC policies only when he filed his claim with the private respondent and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof. The Insurance Commission then decreed: WHEREFORE, judgment is hereby rendered ordering the respondent company to pay complainant the sum of P100,000.00 with legal interest from the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as attorney's fees. With costs. The compulsory counterclaim of respondent is hereby dismissed. Its motion for the reconsideration of the decision 9 having been denied by the Insurance Commission in its resolution of 20 August 1993, 10 the private respondent appealed to the Court of Appeals by way of a petition for review. The petition was docketed as CA-G.R. SP No. 31916. In its decision of 29 December 1993, 11 the Court of Appeals reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC. It said: It is apparent from the face of Fire Policy GA 28146/Fire Policy No. 28144 that the insurance was taken in the name of private respondent [petitioner herein]. The policy states that "DISCOUNT MART (MR. ARMANDO GEAGONIA, PROP)" was the assured and that "TESING TEXTILES" [was] only the mortgagee of the goods. In addition, the premiums on both policies were paid for by private respondent, not by the Tesing Textiles which is alleged to have taken out the other insurance without the knowledge of private respondent. This is shown by

Premium Invoices nos. 46632 and 46630. (Annexes M and N). In both invoices, Tesing Textiles is indicated to be only the mortgagee of the goods insured but the party to which they were issued were the "DISCOUNT MART (MR. ARMANDO GEAGONIA)." In is clear that it was the private respondent [petitioner herein] who took out the policies on the same property subject of the insurance with petitioner. Hence, in failing to disclose the existence of these insurances private respondent violated Condition No. 3 of Fire Policy No. 1462. . . . Indeed private respondent's allegation of lack of knowledge of the provisions insurances is belied by his letter to petitioner [of 18 January 1991. The body of the letter reads as follows;] xxx xxx xxx Please be informed that I have no knowledge of the provision requiring me to inform your office about my prior insurance under FGA-28146 and FCEB-24758. Your representative did not mention about said requirement at the time he was convincing me to insure with you. If he only die or even inquired if I had other existing policies covering my establishment, I would have told him so. You will note that at the time he talked to me until I decided to insure with your company the two policies aforementioned were already in effect. Therefore I would have no reason to withhold such information and I would have desisted to part with my hard earned peso to pay the insurance premiums [if] I know I could not recover anything.

Sir, I am only an ordinary businessman interested in protecting my investments. The actual value of my stocks damaged by the fire was estimated by the Police Department to be P1,000,000.00 (Please see xerox copy of Police Report Annex "A"). My Income Statement as of December 31, 1989 or five months before the fire, shows my merchandise inventory was already some P595,455.75. . . . These will support my claim that the amount claimed under the three policies are much below the value of my stocks lost. xxx xxx xxx The letter contradicts private respondent's pretension that he did not know that there were other insurances taken on the stock-in-trade and seriously puts in question his credibility. His motion to reconsider the adverse decision having been denied, the petitioner filed the instant petition. He contends therein that the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction: A . . . WHEN IT REVERSED THE FINDINGS OF FACTS OF THE INSURANCE COMMISSION, A QUASI-JUDICIAL BODY CHARGED WITH THE DUTY OF DETERMINING INSURANCE CLAIM AND WHOSE DECISION IS ACCORDED RESPECT AND EVEN FINALITY BY THE COURTS; B . . . WHEN IT CONSIDERED AS EVIDENCE MATTERS WHICH WERE NOT PRESENTED AS EVIDENCE DURING THE HEARING OR TRIAL; AND

C . . . WHEN IT DISMISSED THE CLAIM OF THE PETITIONER HEREIN AGAINST THE PRIVATE RESPONDENT. The chief issues that crop up from the first and third grounds are (a) whether the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the policy, and (b) if he had, whether he is precluded from recovering therefrom. The second ground, which is based on the Court of Appeals' reliance on the petitioner's letter of reconsideration of 18 January 1991, is without merit. The petitioner claims that the said letter was not offered in evidence and thus should not have been considered in deciding the case. However, as correctly pointed out by the Court of Appeals, a copy of this letter was attached to the petitioner's complaint in I.C. Case No. 3440 as Annex "M" thereof and made integral part of the complaint. 12 It has attained the status of a judicial admission and since its due execution and authenticity was not denied by the other party, the petitioner is bound by it even if it were not introduced as an independent evidence. 13 As to the first issue, the Insurance Commission found that the petitioner had no knowledge of the previous two policies. The Court of Appeals disagreed and found otherwise in view of the explicit admission by the petitioner in his letter to the private respondent of 18 January 1991, which was quoted in the challenged decision of the Court of Appeals. These divergent findings of fact constitute an exception to the general rule that in petitions for review under Rule 45, only questions of law are involved and findings of fact by the Court of Appeals are conclusive and binding upon this Court. 14 We agree with the Court of Appeals that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission madeante

litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original. Policy No. GA-28144 was a renewal of Policy No. F-24758, while Policy No. GA28146 had been renewed twice, the previous policy being F-24792. Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code 15 which provides that "[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy." Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy. 16 However, in order to constitute a violation, the other insurance must be upon same subject matter, the same interest therein, and the same risk. 17 As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable interest therein and both interests may be one policy, or each may take out a separate policy covering his interest, either at the same or at separate times. 18 The mortgagor's insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. 19 The mortgagee's insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. 20Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee. A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual practice. The mortgagee may be made the beneficial payee in several ways. He may become the assignee of the policy with the consent of the insurer; or the mere pledgee without

such consent; or the original policy may contain a mortgage clause; or a rider making the policy payable to the mortgagee "as his interest may appear" may be attached; or a "standard mortgage clause," containing a collateral independent contract between the mortgagee and insurer, may be attached; or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by a mortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee acquires an equitable lien upon the proceeds. 21 In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such by the insurer but not made a party to the contract himself. Hence, any act of the mortgagor which defeats his right will also defeat the right of the mortgagee. 22 This kind of policy covers only such interest as the mortgagee has at the issuing of the policy. 23 On the other hand, a mortgagee may also procure a policy as a contracting party in accordance with the terms of an agreement by which the mortgagor is to pay the premiums upon such insurance. 24 It has been noted, however, that although the mortgagee is himself the insured, as where he applies for a policy, fully informs the authorized agent of his interest, pays the premiums, and obtains on the assurance that it insures him, the policy is in fact in the form used to insure a mortgagor with loss payable clause. 25 The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a mortgage clause which reads: Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of this policy. This is clearly a simple loss payable clause, not a standard mortgage clause.

It must, however, be underscored that unlike the "other insurance" clauses involved in General Insurance and Surety Corp. vs. Ng Hua 26 or in Pioneer Insurance & Surety Corp. vs. Yap, 27 which read: The insured shall give notice to the company of any insurance or insurances already effected, or which may subsequently be effected covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited. or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co. 28 which provided "that any outstanding insurance upon the whole or a portion of the objects thereby assured must be declared by the insured in writing and he must cause the company to add or insert it in the policy, without which such policy shall be null and void, and the insured will not be entitled to indemnity in case of loss," Condition 3 in the private respondent's policy No. F-14622 does not absolutely declare void any violation thereof. It expressly provides that the condition "shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00." It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being, undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any construction which would result in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture. 29 Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose

benefits they are inserted, and most favorably toward those against whom they are intended to operate. 30 The reason for this is that, except for riders which may later be inserted, the insured sees the contract already in its final form and has had no voice in the selection or arrangement of the words employed therein. On the other hand, the language of the contract was carefully chosen and deliberated upon by experts and legal advisers who had acted exclusively in the interest of the insurers and the technical language employed therein is rarely understood by ordinary laymen. 31 With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally free from ambiguity and must, perforce, be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. The first conclusion is supported by the portion of the condition referring to other insurance "covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured," and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. As earlier stated, the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double insurance exists. The nondisclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy. Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance"

clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured. 32 WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Commission in Case No. 3340 is REINSTATED. Costs against private respondent Country Bankers Insurance Corporation. SO ORDERED. Padilla, Bellosillo, Quiason and Kapunan, JJ., concur.

Footnotes 1 Annex "A" of Petition; Rollo, 18-26. Per Associate Justice Vicente V. Mendoza, concurred in by Associate Justices Jesus M. Elbinias and Lourdes K. Tayao-Jaguros. 2 Exhibit "1"; Original Records (OR) (CA-G.R. SP. No. 31916), 34. 3 Exhibit "4"; Annex "C" of Petition; OR (CA-G.R. SP No. 31916), 27. 4 Exhibits "2" and "3"; Annexes "F" and "G," Id., 45-46. 5 Annex "E," Id.; Rollo, 38.

6 Annex "L," Id.; OR (CA-G.R. SP No. 31916), 66. 7 Annex "E" of Petition; Rollo, 43. 8 Annex "D," Id.; Id., 32. 9 Annex "G," Id.; Id., 47. 10 Annex "H" of Petition; Rollo, 52. 11 Annex "A," Id.; Id., 18. 12 It is specifically referred to in paragraph 7 of the complaint. Rollo, 40. 13 Philippine Bank of Communications vs. Court of Appeals, 195 SCRA 567 [1991]. 14 Tolentino vs. De Jesus, 56 SCRA 167 [1974]; Remalante vs. Tibe, 158 SCRA 138 [1988]. 15 P.D. No. 1460. 16 MARIA CLARA L. CAMPOS, Insurance (1983 ed.) citing General Insurance & Surety Corp. vs. Ng Hua, 106 Phil. 1117 [1960]; Petitioner Insurance & Surety Corp. vs. Yap, 61 SCRA 426 [1974]; Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc., 47 SCRA 271 [1972]. 17 Id., JOHN F. DOBBYN, Insurance Law in a Nutshell 204 (2d ed. 1989.) 18 COUCH on Insurance 2d 24:68 (1960 ed.). 19 Id., 24:69. 20 Id., 24:72.

21 WILLIAM R. VANCE, Handbook on the Law on Insurance 773-774 (3rd ed.) 22 Id., 775. 23 COUCH, op cit., 24:72. 24 VANCE, op cit., 775. 25 COUCH, op cit., 23:36. 26 Supra note 16. 27 Supra note 16. 28 55 Phil. 329, 334 [1930]. 29 2 TEODORICO C. MARTIN, Commentaries and Jurisprudence on the Philippine Commercial Laws,143 (1986 rev. ed.). 30 Trinidad vs. Orient Protective Assurance Association, 67 Phil. 181 [1939]. 31 CAMPOS, op cit., 12. 32 Pioneer Insurance and Surety Corp. vs. Yap, supra note 16.

After joinder of issues, the parties asked the trial court to render judgment based on the following stipulation of facts: Republic of the Philippines SUPREME COURT Manila FIRST DIVISION 1. The plaintiff was insured by the defendants and an insurance policy was issued, the duplicate original of which is hereto attached as Exhibit "A"; 2. An armored car of the plaintiff, while in the process of transferring cash in the sum of P725,000.00 under the custody of its teller, Maribeth Alampay, from its Pasay Branch to its Head Office at 8737 Paseo de Roxas, Makati, Metro Manila on June 29, 1987, was robbed of the said cash. The robbery took place while the armored car was traveling along Taft Avenue in Pasay City; 3. The said armored car was driven by Benjamin Magalong Y de Vera, escorted by Security Guard Saturnino Atiga Y Rosete. Driver Magalong was assigned by PRC Management Systems with the plaintiff by virtue of an Agreement executed on August 7, 1983, a duplicate original copy of which is hereto attached as Exhibit "B"; 4. The Security Guard Atiga was assigned by Unicorn Security Services, Inc. with the plaintiff by virtue of a contract of Security Service executed on October 25, 1982, a duplicate original copy of which is hereto attached as Exhibit "C"; 5. After an investigation conducted by the Pasay police authorities, the driver Magalong and guard Atiga were charged, together with Edelmer Bantigue Y Eulalio, Reynaldo Aquino

G.R. No. 115278 May 23, 1995 FORTUNE INSURANCE AND SURETY CO., INC., petitioner, vs. COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES, respondents.

DAVIDE, JR., J.: The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is liable under the Money, Security, and Payroll Robbery policy it issued to the private respondent or whether recovery thereunder is precluded under the general exceptions clause thereof. Both the trial court and the Court of Appeals held that there should be recovery. The petitioner contends otherwise. This case began with the filing with the Regional Trial Court (RTC) of Makati, Metro Manila, by private respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner Fortune Insurance and Surety Co., Inc. (hereinafter Fortune) of a complaint for recovery of the sum of P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its head office in Makati. The case was docketed as Civil Case No. 1817 and assigned to Branch 146 thereof.

and John Doe, with violation of P.D. 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City. A copy of the complaint is hereto attached as Exhibit "D"; 6. The Fiscal of Pasay City then filed an information charging the aforesaid persons with the said crime before Branch 112 of the Regional Trial Court of Pasay City. A copy of the said information is hereto attached as Exhibit "E." The case is still being tried as of this date; 7. Demands were made by the plaintiff upon the defendant to pay the amount of the loss of P725,000.00, but the latter refused to pay as the loss is excluded from the coverage of the insurance policy, attached hereto as Exhibit "A," specifically under page 1 thereof, "General Exceptions" Section (b), which is marked as Exhibit "A-1," and which reads as follows: GENERAL EXCEPTIONS The company shall not be liable under this policy in report of xxx xxx xxx (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction with others. . . .

8. The plaintiff opposes the contention of the defendant and contends that Atiga and Magalong are not its "officer, employee, . . . trustee or authorized representative . . . at the time of the robbery. 1 On 26 April 1990, the trial court rendered its decision in favor of Producers. The dispositive portion thereof reads as follows: WHEREFORE, premises considered, the Court finds for plaintiff and against defendant, and (a) orders defendant to pay plaintiff the net amount of P540,000.00 as liability under Policy No. 0207 (as mitigated by the P40,000.00 special clause deduction and by the recovered sum of P145,000.00), with interest thereon at the legal rate, until fully paid; (b) orders defendant to pay plaintiff the sum of P30,000.00 as and for attorney's fees; and (c) orders defendant to pay costs of suit. All other claims and counterclaims are accordingly dismissed forthwith. SO ORDERED.
2

The trial court ruled that Magalong and Atiga were not employees or representatives of Producers. It Said:

The Court is satisfied that plaintiff may not be said to have selected and engaged Magalong and Atiga, their services as armored car driver and as security guard having been merely offered by PRC Management and by Unicorn Security and which latter firms assigned them to plaintiff. The wages and salaries of both Magalong and Atiga are presumably paid by their respective firms, which alone wields the power to dismiss them. Magalong and Atiga are assigned to plaintiff in fulfillment of agreements to provide driving services and property protection as such in a context which does not impress the Court as translating into plaintiff's power to control the conduct of any assigned driver or security guard, beyond perhaps entitling plaintiff to request are replacement for such driver guard. The finding is accordingly compelled that neither Magalong nor Atiga were plaintiff's "employees" in avoidance of defendant's liability under the policy, particularly the general exceptions therein embodied. Neither is the Court prepared to accept the proposition that driver Magalong and guard Atiga were the "authorized representatives" of plaintiff. They were merely an assigned armored car driver and security guard, respectively, for the June 29, 1987 money transfer from plaintiff's Pasay Branch to its Makati Head Office. Quite plainly it was teller Maribeth Alampay who had "custody" of the P725,000.00 cash being transferred along a specified money route, and hence plaintiff's then designated "messenger" adverted to in the policy. 3 Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G.R. CV No. 32946. In its decision 4 promulgated on 3 May 1994, it affirmed in toto the appealed decision.

The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were neither employees nor authorized representatives of Producers and ratiocinated as follows: A policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurance company (New Life Enterprises vs. Court of Appeals, 207 SCRA 669; Sun Insurance Office, Ltd. vs. Court of Appeals, 211 SCRA 554). 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 (New Life Enterprises Case, supra, p. 676; Sun Insurance Office, Ltd. vs. Court of Appeals, 195 SCRA 193). The language used by defendant-appellant in the above quoted stipulation is plain, ordinary and simple. No other interpretation is necessary. The word "employee" must be taken to mean in the ordinary sense. The Labor Code is a special law specifically dealing with/and specifically designed to protect labor and therefore its definition as to employer-employee relationships insofar as the application/enforcement of said Code is concerned must necessarily be inapplicable to an insurance contract which defendant-appellant itself had formulated. Had it intended to apply the Labor Code in defining what the word "employee" refers to, it must/should have so stated expressly in the insurance policy. Said driver and security guard cannot be considered as employees of plaintiff-appellee bank because it has no power to hire or to dismiss said driver and security guard under the contracts (Exhs. 8 and C) except only to ask for their replacements from the contractors. 5

On 20 June 1994, Fortune filed this petition for review on certiorari. It alleges that the trial court and the Court of Appeals erred in holding it liable under the insurance policy because the loss falls within the general exceptions clause considering that driver Magalong and security guard Atiga were Producers' authorized representatives or employees in the transfer of the money and payroll from its branch office in Pasay City to its head office in Makati. According to Fortune, when Producers commissioned a guard and a driver to transfer its funds from one branch to another, they effectively and necessarily became its authorized representatives in the care and custody of the money. Assuming that they could not be considered authorized representatives, they were, nevertheless, employees of Producers. It asserts that the existence of an employeremployee relationship "is determined by law and being such, it cannot be the subject of agreement." Thus, if there was in reality an employer-employee relationship between Producers, on the one hand, and Magalong and Atiga, on the other, the provisions in the contracts of Producers with PRC Management System for Magalong and with Unicorn Security Services for Atiga which state that Producers is not their employer and that it is absolved from any liability as an employer, would not obliterate the relationship. Fortune points out that an employer-employee relationship depends upon four standards: (1) the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or absence of a power to dismiss; and (4) the presence and absence of a power to control the putative employee's conduct. Of the four, the right-of-control test has been held to be the decisive factor. 6 It asserts that the power of control over Magalong and Atiga was vested in and exercised by Producers. Fortune further insists that PRC Management System and Unicorn Security Services are but "labor-only" contractors under Article 106 of the Labor Code which provides: Art. 106. Contractor or subcontractor. There is "laboronly" contracting where the person supplying workers to an employer does not have substantial capital or

investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Fortune thus contends that Magalong and Atiga were employees of Producers, following the ruling in International Timber Corp. vs. NLRC 7 that a finding that a contractor is a "labor-only" contractor is equivalent to a finding that there is an employeremployee relationship between the owner of the project and the employees of the "labor-only" contractor. On the other hand, Producers contends that Magalong and Atiga were not its employees since it had nothing to do with their selection and engagement, the payment of their wages, their dismissal, and the control of their conduct. Producers argued that the rule in International Timber Corp. is not applicable to all cases but only when it becomes necessary to prevent any violation or circumvention of the Labor Code, a social legislation whose provisions may set aside contracts entered into by parties in order to give protection to the working man. Producers further asseverates that what should be applied is the rule in American President Lines vs. Clave, 8 to wit: In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct.

Since under Producers' contract with PRC Management Systems it is the latter which assigned Magalong as the driver of Producers' armored car and was responsible for his faithful discharge of his duties and responsibilities, and since Producers paid the monthly compensation of P1,400.00 per driver to PRC Management Systems and not to Magalong, it is clear that Magalong was not Producers' employee. As to Atiga, Producers relies on the provision of its contract with Unicorn Security Services which provides that the guards of the latter "are in no sense employees of the CLIENT." There is merit in this petition. It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is a form of casualty insurance. Section 174 of the Insurance Code provides: Sec. 174. Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of insurance such as fire or marine. It includes, but is not limited to, employer's liability insurance, public liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance. (emphases supplied) Except with respect to compulsory motor vehicle liability insurance, the Insurance Code contains no other provisions applicable to casualty insurance or to robbery insurance in particular. These contracts are, therefore, governed by the general provisions applicable to all types of insurance. Outside of these, the rights and obligations of the parties must be determined by the terms of their contract, taking into consideration its purpose and always in accordance with the general principles of insurance law. 9

It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud the insurer the moral hazard is so great that insurers have found it necessary to fill up their policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer assume the risk of all losses due to the hazards insured against." 10 Persons frequently excluded under such provisions are those in the insured's service and employment. 11 The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. 12 In such cases, the terms specifying the excluded classes are to be given their meaning as understood in common speech. 13 The terms "service" and "employment" are generally associated with the idea of selection, control, and compensation. 14 A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, 15 or it should be construed liberally in favor of the insured and strictly against the insurer. 16 Limitations of liability should be regarded with extreme jealousy and must be construed in such a way, as to preclude the insurer from non-compliance with its obligation. 17 It goes without saying then that if the terms of the contract are clear and unambiguous, there is no room for construction and such terms cannot be enlarged or diminished by judicial construction. 18 An insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 It is settled that the terms of the policy constitute the measure of the insurer's liability. 20 In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. With the foregoing principles in mind, it may now be asked whether Magalong and Atiga qualify as employees or authorized representatives of Producers under paragraph (b) of the general exceptions clause of the policy which, for easy reference, is again quoted:

GENERAL EXCEPTIONS The company shall not be liable under this policy in respect of xxx xxx xxx (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction with others. . . . (emphases supplied) There is marked disagreement between the parties on the correct meaning of the terms "employee" and "authorized representatives." It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted access to Producers' money or payroll. When it used then the term "employee," it must have had in mind any person who qualifies as such as generally and universally understood, or jurisprudentially established in the light of the four standards in the determination of the employer-employee relationship, 21 or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "laboronly" contract as employees of the party employing them and not of the party who supplied them to the employer. 22 Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security Services are "labor-only" contracts. Producers, however, insists that by the express terms thereof, it is not the employer of Magalong. Notwithstanding such express assumption of PRC Management Systems and Unicorn Security Services that the drivers and the security guards each shall

supply to Producers are not the latter's employees, it may, in fact, be that it is because the contracts are, indeed, "labor-only" contracts. Whether they are is, in the light of the criteria provided for in Article 106 of the Labor Code, a question of fact. Since the parties opted to submit the case for judgment on the basis of their stipulation of facts which are strictly limited to the insurance policy, the contracts with PRC Management Systems and Unicorn Security Services, the complaint for violation of P.D. No. 532, and the information therefor filed by the City Fiscal of Pasay City, there is a paucity of evidence as to whether the contracts between Producers and PRC Management Systems and Unicorn Security Services are "labor-only" contracts. But even granting for the sake of argument that these contracts were not "labor-only" contracts, and PRC Management Systems and Unicorn Security Services were truly independent contractors, we are satisfied that Magalong and Atiga were, in respect of the transfer of Producer's money from its Pasay City branch to its head office in Makati, its "authorized representatives" who served as such with its teller Maribeth Alampay. Howsoever viewed, Producers entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the needed security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the three acted as agents of Producers. A "representative" is defined as one who represents or stands in the place of another; one who represents others or another in a special capacity, as an agent, and is interchangeable with "agent." 23 In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the insurance policy. WHEREFORE , the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court of Makati in

Civil Case No. 1817 are REVERSED and SET ASIDE. The complaint in Civil Case No. 1817 is DISMISSED. No pronouncement as to costs. SO ORDERED. Bellosillo and Kapunan, JJ., concur. Padilla, J., took no part. Quiason, J., is on leave.

10 WILLIAM B. VANCE, Handbook on the Law of Insurance, 3rd ed. by Buist M. Andersen [1951], 1014. 11 Bowling vs. Hamblen County Motor Co., 66 S.W. 2d 229, 16 Tenn. App. 52. 12 Barret vs. Commercial Standard Ins. Co., Tex. Civ. App., 145 S.W. 2d 315. 13 Ledvinka vs. Home Ins. Co. of New York, 115 A. 596, 139 Md. 434, 19 A.L.R. 167. 14 Id.; Gulf Finance & Securities Co. vs. National Fire Ins. Co., 7 La. App. 8.

Footnotes 1 Rollo, 46-47 (emphases supplied). 2 Id., 8. 3 Rollo, 10-11. 4 Annex "A" of Petition; Id., 45-53. Per Austria-Martinez, A., J., with Marigomen, A. and Reyes, R., JJ., concurring. 5 Rollo, 51-52. 6 Citing in the Petition, Broadway Motors, Inc. vs. NLRC, 156 SCRA 522 [1987], and in the Memorandum, Vallum Security Services vs. NLRC, 224 SCRA 781 [1993]. 7 169 SCRA 341 [1989]. 8 114 SCRA 832 [1982]. 9 MARIA CLARA M. CAMPOS, Insurance, 1983 ed., 199.

15 CAMPOS, op. cit., 22. 16 Verendia vs. Court of Appeals, 217 SCRA 417 [1993]. 17 CAMPOS, op. cit., 13. 18 43 Am Jur 2d Insurance 271 [1982]. 19 Stokes vs. Malayan Insurance, 127 SCRA 766 [1984]. 20 Paramount Insurance Corp. vs. Japzon, 211 SCRA 879 [1992]. 21 See Broadway Motors, Inc. vs. NLRC, supra note 6; Canlubang Security Agency Corp. vs. NLRC, 216 SCRA 280 [1992]; Vallum Security Services vs. NLRC, supra note 6; and Villuga vs. NLRC, 225 SCRA 537 [1993]. 22 See International Timber Corp. vs. NLRC, supra note 7; Baguio vs. NLRC, 202 SCRA 465 [1965]. 23 Black's Law Dictionary, Fifth ed., 1170.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-34200 September 30, 1982 REGINA L. EDILLON, as assisted by her husband, MARCIAL EDILLON, petitioners-appellants, vs. MANILA BANKERS LIFE INSURANCE CORPORATION and the COURT OF FIRST INSTANCE OF RIZAL, BRANCH V, QUEZON CITY, respondents-appellees. K.V. Faylona for petitioners-appellants. L. L. Reyes for respondents-appellees.

was dated April 15, 1969, she gave the date of her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued the corresponding receipt signed by an authorized agent of the respondent insurance corporation. (Rollo, p. 27.) Upon the filing of said application and the payment of the premium on the policy applied for, the respondent insurance corporation issued to Carmen O. Lapuz its Certificate of Insurance No. 128866. (Rollo, p. 28.) The policy was to be effective for a period of 90 days. On May 31, 1969 or during the effectivity of Certificate of Insurance No. 12886, Carmen O. Lapuz died in a vehicular accident in the North Diversion Road. On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the named beneficiary in the policy, filed her claim for the proceeds of the insurance, submitting all the necessary papers and other requisites with the private respondent. Her claim having been denied, Regina L. Edillon instituted this action in the Court of First Instance of Rizal on August 27, 1969. In resisting the claim of the petitioner, the respondent insurance corporation relies on a provision contained in the Certificate of Insurance, excluding its liability to pay claims under the policy in behalf of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years ..." It is pointed out that the insured being over sixty (60) years of age when she applied for the insurance coverage, the policy was null and void, and no risk on the part of the respondent insurance corporation had arisen therefrom. The trial court sustained the contention of the private respondent and dismissed the complaint; ordered the petitioner to pay attorney's fees in the sum of ONE THOUSAND (P1,000.00) PESOS in favor of the private respondent; and ordered the private respondent to return the sum of TWENTY (P20.00) PESOS received by way of premium on the insurancy policy. It was reasoned out that a policy of insurance being a contract of adhesion, it was the duty of the insured to know the terms of the contract he or she is entering into; the insured in this

VASQUEZ, J.: The question of law raised in this case that justified a direct appeal from a decision of the Court of First Instance Rizal, Branch V, Quezon City, to be taken directly to the Supreme Court is whether or not the acceptance by the private respondent insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of overage stated in the said certificate of insurance. The material facts are not in dispute. Sometime in April 1969, Carmen O, Lapuz applied with respondent insurance corporation for insurance coverage against accident and injuries. She filled up the blank application form given to her and filed the same with the respondent insurance corporation. In the said application form which

case, upon learning from its terms that she could not have been qualified under the conditions stated in said contract, what she should have done is simply to ask for a refund of the premium that she paid. It was further argued by the trial court that the ruling calling for a liberal interpretation of an insurance contract in favor of the insured and strictly against the insurer may not be applied in the present case in view of the peculiar facts and circumstances obtaining therein. We REVERSE the judgment of the trial court. The age of the insured Carmen 0. Lapuz was not concealed to the insurance company. Her application for insurance coverage which was on a printed form furnished by private respondent and which contained very few items of information clearly indicated her age of the time of filing the same to be almost 65 years of age. Despite such information which could hardly be overlooked in the application form, considering its prominence thereon and its materiality to the coverage applied for, the respondent insurance corporation received her payment of premium and issued the corresponding certificate of insurance without question. The accident which resulted in the death of the insured, a risk covered by the policy, occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for. There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so. If the private respondent failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances, the insurance corporation is already deemed in estoppel. It inaction to revoke the policy despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such condition, as was held in the case of "Que Chee Gan vs. Law Union Insurance Co., Ltd.,", 98 Phil. 85. This case involved a claim on an insurance policy which contained a provision as to the installation of fire hydrants the number of which depended on the height of the external wan perimeter of the bodega that was insured. When it was determined that the bodega should have eleven (11) fire hydrants in the

compound as required by the terms of the policy, instead of only two (2) that it had, the claim under the policy was resisted on that ground. In ruling that the said deviation from the terms of the policy did not prevent the claim under the same, this Court stated the following: We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to claim violation of the so-called fire hydrants warranty, for the reason that knowing fully an that the number of hydrants demanded therein never existed from the very beginning, the appellant nevertheless issued the policies in question subject to such warranty, and received the corresponding premiums. It would be perilously close to conniving at fraud upon the insured to allow appellant to claim now as void ab initio the policies that it had issued to the plaintiff without warning of their fatal defect, of which it was informed, and after it had misled the defendant into believing that the policies were effective. The insurance company was aware, even before the policies were issued, that in the premises insured there were only two fire hydrants installed by Que Chee Gan and two others nearby, owned by the municipality of Tabaco, contrary to the requirements of the warranty in question. Such fact appears from positive testimony for the insured that appellant's agents inspected the premises; and the simple denials of appellant's representative (Jamiczon) can not overcome that proof. That such inspection was made it moreover rendered probable by its being a prerequisite for the fixing of the discount on the premium to which the insured was entitled, since the discount depended on the number of hydrants, and the fire fighting equipment available (See"'Scale of Allowances" to which the policies were expressly made subject). The law, supported by a long line of cases, is expressed by American Jurisprudence (Vol. 29, pp. 611-612) to be as follows:

It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has knowledge of existing facts which, if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the known facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The law is charitable enough to assume, in the absence of any showing to the contrary, that an insurance company intends to execute a valid contract in return for the premium received; and when the policy contains a condition which renders it voidable at its inception, and this result is known to the insurer, it will be presumed to have intended to waive the conditions and to execute a binding contract, rather than to have deceived the insured into thinking he is insured when in fact he is not, and to have taken is money without consideration.' (29 Am. Jur., Insurance, section 807, at pp. 611612.) The reason for the rule is not difficult to find. The plain, human justice of this doctrine is perfectly apparent. To allow a company to accept one's money for a policy of insurance which it then knows to be void and of no effect, though it knows as it must, that the assured believes it to be valid and binding, is so contrary to the dictates of honesty and fair dealing, and so closely related to positive fraud, as to be abhorent to fairminded men. It would be to allow the company to treat the policy as valid long enough to get the

premium on it, and leave it at liberty to repudiate it the next moment. This cannot be deemed to be the real intention of the parties. To hold that a literal construction of the policy expressed the true intention of the company would be to indict it, for fraudulent purposes and designs which we cannot believe it to be guilty of (Wilson vs. Commercial Union Assurance Co., 96 Atl. 540, 543544). A similar view was upheld in the case of Capital Insurance & Surety Co., Inc. vs. Plastic Era Co., Inc., 65 SCRA 134, which involved a violation of the provision of the policy requiring the payment of premiums before the insurance shall become effective. The company issued the policy upon the execution of a promissory note for the payment of the premium. A check given subsequent by the insured as partial payment of the premium was dishonored for lack of funds. Despite such deviation from the terms of the policy, the insurer was held liable. Significantly, in the case before Us the Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within thirty (30) days from the effective date of policy. By so doing, it has impliedly agreed to modify the tenor of the insurance policy and in effect, waived the provision therein that it would only pay for the loss or damage in case the same occurs after the payment of the premium. Considering that the insurance policy is silent as to the mode of payment, Capital Insurance is deemed to have accepted the promissory note in payment of the premium. This rendered the policy immediately operative on the date it was delivered. The view taken in most cases in the United States: ... is that although one of conditions of an insurance policy is that "it shall not be valid or binding until the first premium is paid", if

it is silent as to the mode of payment, promissory notes received by the company must be deemed to have been accepted in payment of the premium. In other words, a requirement for the payment of the first or initial premium in advance or actual cash may be waived by acceptance of a promissory note... WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. In lieu thereof, the private respondent insurance corporation is hereby ordered to pay to the petitioner the sum of TEN THOUSAND (P10,000.00) PESOS as proceeds of Insurance Certificate No. 128866 with interest at the legal rate from May 31, 1969 until fully paid, the further sum of TWO THOUSAND (P2,000.00) PESOS as and for attorney's fees, and the costs of suit. SO ORDERED. Teehankee (Chairman), Makasiar, Plana, Relova and Gutierrez, Jr., JJ., concur. Melencio-Herrera, J., took no part.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 78860 May 28, 1990 PERLA COMPANIA DE SEGUROS, INC., Petitioner, vs. HONORABLE COURT OF APPEALS and MILAGROS CAYAS, Respondents.

of Cavite, Branch 6docketed as Civil Case No. NC-794; while three others, namely: Rosario del Carmen, Ricardo Magsarili and Charlie Antolin, agreed to a settlement of P4,000.00 each with Milagros Cayas. At the pre-trial of Civil Case No. NC-794, Milagros Cayas failed to appear and hence, she was declared as in default. After trial, the court rendered a decision 7in favor of Perea with its dispositive portion reading thus: WHEREFORE, under our present imperatives, judgment is hereby rendered in favor of the plaintiffs and against the defendant Milagros Cayas who is hereby ordered to compensate the plaintiff' Edgar Perea with damages in the sum of Ten Thousand (Pl0,000.00) Pesos for the medical predicament he found himself as damaging consequences of defendant Milagros Cayas complete lack of diligence of a good father of a family' when she secured the driving services of one Oscar Figueroa on December, 17, 1978; the sum of Ten Thousand (P10,000.00) Pesos for exemplary damages; the sum of Five Thousand (P5,000.00) Pesos for moral damages; the sum of Seven Thousand (P7,000.00) Pesos for Attorney's fees, under the imperatives of the monetary power of the peso today; With costs against the defendant. SO ORDERED. When the decision in Civil Case No. NC-794 was about to be executed against her, Milagros Cayas filed a complaint against PCSI in the Office of the Insurance Commissioner praying that PCSI be ordered to pay P40,000.00 for all the claims against her arising from the vehicular accident plus legal and other expenses. 8 Realizing her procedural mistake, she later withdrew said complaint.9 Consequently, on November 11, 1981, Milagros Cayas filed a complaint for a sum of money and damages against PCSI in the Court of First Instance of Cavite (Civil Case No. N-4161). She alleged therein that to satisfy the judgment in Civil Case No. NC-794, her house and

FERNAN, C.J.: This is a petition for review on certiorari of the decision of the Court of Appeals 1affirming in toto the decision of the Regional Trial Court of Cavite, Branch XVI, 2the dispositive portion of which states: IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant Perla Compania de Seguros, Inc. to pay plaintiff Milagros Cayas the sum of P50,000.00 under its maximum liability as provided for in the insurance policy; and the sum of P5,000.00 as reasonable attorney's fee with costs against said defendant. SO ORDERED.
3

Private respondent Milagros Cayas was the registered owner of a Mazda bus with serial No. TA3H4 P-000445 and plate No. PUB-4G593. 4Said passenger vehicle was insured with Perla Compania de Seguros, Inc. (PCSI) under policy No. LTO/60CC04241 issued on February 3, 1978. 5 On December 17, 1978, the bus figured in an accident in Naic, Cavite injuring several of its passengers. One of them, 19-year old Edgardo Perea, sued Milagros Cayas for damages in the Court of First Instance

lot were levied upon and sold at public auction for P38,200; 10that to avoid numerous suits and the "detention" of the insured vehicle, she paid P4,000 to each of the following injured passengers: Rosario del Carmen, Ricardo Magsarili and Charlie Antolin; that she could not have suffered said financial setback had the counsel for PCSI, who also represented her, appeared at the trial of Civil Case No. NC-794 and attended to the claims of the three other victims; that she sought reimbursement of said amounts from the defendant, which notwithstanding the fact that her claim was within its contractual liability under the insurance policy, refused to make such reimbursement; that she suffered moral damages as a consequence of such refusal, and that she was constrained to secure the services of counsel to protect her rights. She prayed that judgment be rendered directing PCSI to pay her P50,000 for compensation of the injured victims, such sum as the court might approximate as damages, and P6,000 as attorney's fees. In view of Milagros Cayas' failure to prosecute the case, the court motu propio ordered its dismissal without prejudice. 11 Alleging that she had not received a copy of the answer to the complaint, and that "out of sportsmanship", she did not file a motion to hold PCSI in default, Milagros Cayas moved for the reconsideration of the dismissal order. Said motion for reconsideration was acted upon favorably by the court in its order of March 31, 1982. About two months later, Milagros Cayas filed a motion to declare PCSI in default for its failure to file an answer. The motion was granted and plaintiff was allowed to adduce evidence ex-parte. On July 13, 1982, the court rendered judgment by default ordering PCSI to pay Milagros Cayas P50,000 as compensation for the injured passengers, P5,000 as moral damages and P5,000 as attorney's fees. Said decision was set aside after the PCSI filed a motion therefor. Trial of the case ensued. In due course, the court promulgated a decision in Civil Case No. N-4161, the dispositive portion of which was quoted earlier, finding that:

In disavowing its obligation to plaintiff under the insurance policy, defendant advanced the proposition that before it can be made to pay, the liability must first be determined in an appropriate court action. And so plaintiffs liability was determined in that case filed against her by Perea in the Naic CFI. Still, despite this determination of liability, defendant sought escape from its obligation by positing the theory that plaintiff Milagros Cayas lost the Naic case due to her negligence because of which, efforts exerted by defendant's lawyers in protecting Cayas' rights proved futile and rendered nugatory. Blame was laid entirely on plaintiff by defendant for losing the Naic case. Defendant labored under the impression that had Cayas cooperated fully with defendant's lawyers, the latter could have won the suit and thus relieved of any obligation to Perea Defendant's posture is stretching the factual circumstances of the Naic case too far. But even accepting defendant's postulate, it cannot be said, nor was it shown positively and convincingly, that if the Naic case had proceeded on trial on the merits, a decision favorable to Milagros Cayas could have been obtained. Nor was it definitely established that if the pre-trial was undertaken in that case, defendant's lawyers could have mitigated the claim for damages by Perea against Cayas. 12 The court, however, held that inasmuch as Milagros Cayas failed to establish that she underwant moral suffering and mental anguish to justify her prayer for damages, there should be no such award. But, there being proof that she was compelled to engage the services of counsel to protect her rights under the insurance policy, the court allowed attorney's fees in the amount of P5,000. PCSI appealed to the Court of Appeals, which, in its decision of May 8, 1987 affirmed in toto the lower court's decision. Its motion for reconsideration having been denied by said appellate court, PCSI filed the instant petition charging the Court of Appeals with having erred in affirming in toto the decision of the lower court. At the outset, we hold as factual and therefore undeserving of this Court's attention, petitioner's assertions that private respondent lost Civil Case No. NC-794 because of her negligence and that there is no proof that the decision in said case has been executed. Said

contentions, having been raised and threshed out in the Court of Appeals and rejected by it, may no longer be addressed to this Court. Petitioner's other contentions are primarily concerned with the extent of its liability to private respondent under the insurance policy. This, we consider to be the only issue in this case. Petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other three (3) injured passengers Rosario del Carmen, Ricardo Magsarili and Charlie Antolin in the amount of P4,000.00 each or a total of P12,000.00. There is merit in petitioner's assertions. The insurance policy involved explicitly limits petitioner's liability to P12,000.00 per person and to P50,000.00 per accident. 13Pertinent provisions of the policy also state: SECTION I-Liability to the Public xxx xxx xxx 3. The Limit of Liability stated in Schedule A as applicable (a) to THIRD PARTY is the limit of the Company's liability for all damages arising out of death, bodily injury and damage to property combined so sustained as the result of any one accident; (b) "per person" for PASSENGER liability is the limit of the Company's liability for all damages arising out of death or bodily injury sustained by one person as the result of any one accident: (c) "per accident" for PASSENGER liability is, subject to the above provisions respecting per person, the total limit of the Company's liability for all such damages arising out of death or bodily injury sustained by two or more persons as the result of any one accident. Conditions Applicable to All Sections

xxx xxx xxx 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 (sic) name the defense or settlement of any claim, or to prosecute in his (sic) name for its own benefit any claim for indemnity or damages or otherwise, and shall have full discretion in the conduct of any proceedings in the settlement of any claim, and the insured shall give all such information and assistance as the Company may require. If the Company shall make any payment in settlement of any claim, and such payment includes any amount not covered by this Policy, the Insured shall repay the Company the amount not so covered. We have ruled in Stokes vs. Malayan Insurance Co., Inc., 14that the terms of the contract 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. In the case at bar, the insurance policy clearly and categorically placed petitioner's liability for all damages arising out of death or bodily injury sustained by one person as a result of any one accident at P12,000.00. Said amount complied with the minimum fixed by the law then prevailing, Section 377 of Presidential Decree No. 612 (which was retained by P.D. No. 1460, the Insurance Code of 1978), which provided that the liability of land transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use of their vehicles shall not be less than P12,000. In other words, under the law, the minimum liability is P12,000 per passenger. Petitioner's liability under the insurance contract not being less than P12,000.00, and therefore not contrary to law, morals, good customs, public order or public policy, said stipulation must be upheld as effective, valid and binding as between the parties. 15 In like manner, we rule as valid and binding upon private respondent the condition above-quoted requiring her to secure the written permission of petitioner before effecting any payment in settlement of any claim against her. There is nothing unreasonable, arbitrary or

objectionable in this stipulation as would warrant its nullification. The same was obviously designed to safeguard the insurer's interest against collusion between the insured and the claimants. In her cross-examination before the trial court, Milagros Cayas admitted, thus: Atty. Yabut: q With respect to the other injured passengers of your bus wherein you made payments you did not secure the consent of defendant (herein petitioner) Perla Compania de Seguros when you made those payments? a I informed them about that q But they did not give you the written authority that you were supposed to pay those claims? a No, sir . l6 It being specifically required that petitioner's written consent be first secured before any payment in settlement of any claim could be made, private respondent is precluded from seeking reimbursement of the payments made to del Carmen, Magsarili and Antolin in view of her failure to comply with the condition contained in the insurance policy. Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case. 17 Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy. In Phil. American General Insurance Co., Inc vs. Mutuc, 18 we ruled that contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter what form

they may be, whenever the essential requisites for their validity are present. Moreover, we stated in Pacific Oxygen & Acetylene Co. vs. Central Bank," 19 that the first and fundamental duty of the courts is the application of the law according to its express terms, interpretation being called for only when such literal application is impossible. We observe that although Milagros Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident. 20 Finally, we find no reason to disturb the award of attorney's fees. WHEREFORE, the decision of the Court of Appeals is hereby modified in that petitioner shall pay Milagros Cayas the amount of Twelve Thousand Pesos (P12,000. 00) plus legal interest from the promulgation of the decision of the lower court until it is fully paid and attorney's fees in the amount of P5,000.00. No pronouncement as to costs. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.

Endnotes: 1 Jose A.R. Melo, J., ponente, with Esteban M. Lising and Celso L. Magsino, JJ., concurring. 2 Luis L. Victor, presiding judge.

3 p. 25, Rollo. 4 Exh. B. 5 Exh. A. 6 Pablo D. Suarez, presiding judge. Exh. C. 8 Exh. G. 9 Exh. H. 10 Original Record on Appeal, pp. 2 & 16. 11 Original Record on Appeal, p. 10. 12 p. 24. Rollo. 13 Limits; of Liabilities Exh. "A" 14 L-34768, February 28, 1984, 127 SCRA 766, 769, citing Young vs. Midland Textile Insurance, Co., 30 Phil. 617. l5 Art. 1306, Civil Code. 16 TSN, April 29, 1983, p. 9. 17 Henson vs. Intermidiate Appellate Court, G.R. No, 72456, February 19, 1987, 148 SCRA 11; Dihiansan, et al. vs. Court of Appeals, G.R. No. 49839, September 14, 1987, 153 SCRA 712; Escano vs. Court of Appeals. 100 SCRA 197. 18 G.R. No L-19632, November 13. 1974. 61 SCRA 22. cited in Castro vs. Court of Appeals, G.R. No. L-44727, September 11, 1980, 99 SCRA 197. 19 G.R. No. L-21881, March 1, 1969, 22 SCRA 917.

20 SEc. 383, Insurance Code of 1978.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-39419 April 12, 1982 MAPALAD AISPORNA, petitioner, vs. THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.

of an application for insurance by soliciting therefor the application of one Eugenio S. Isidro, for and in behalf of Perla Compania de Seguros, Inc., a duly organized insurance company, registered under the laws of the Republic of the Philippines, resulting in the issuance of a Broad Personal Accident Policy No. 28PI-RSA 0001 in the amount not exceeding FIVE THOUSAND PESOS (P5,000.00) dated June 21, 1969, without said accused having first secured a certificate of authority to act as such agent from the office of the Insurance Commissioner, Republic of the Philippines. CONTRARY TO LAW. The facts, 4 as found by the respondent Court of Appeals are quoted hereunder: IT RESULTING: That there is no debate that since 7 March, 1969 and as of 21 June, 1969, appellant's husband, Rodolfo S. Aisporna was duly licensed by Insurance Commission as agent to Perla Compania de Seguros, with license to expire on 30 June, 1970, Exh. C; on that date, at Cabanatuan City, Personal Accident Policy, Exh. D was issued by Perla thru its author representative, Rodolfo S. Aisporna, for a period of twelve (12) months with beneficiary as Ana M. Isidro, and for P5,000.00; apparently, insured died by violence during lifetime of policy, and for reasons not explained in record, present information was filed by Fiscal, with assistance of private prosecutor, charging wife of Rodolfo with violation of Sec. 189 of Insurance Law for having, wilfully, unlawfully, and feloniously acted, "as agent in the solicitation for insurance by soliciting therefore the application of one Eugenio S. Isidro for and in behalf of Perla Compaa de Seguros, ... without said accused having first secured a certificate of authority to act as such agent from the office of the Insurance Commission, Republic of the Philippines."

DE CASTRO, J.: In this petition for certiorari, petitioner-accused Aisporna seeks the reversal of the decision dated August 14, 19741 in CA-G.R. No. 13243-CR entitled "People of the Philippines, plaintiff-appellee, vs. Mapalad Aisporna, defendant-appellant" of respondent Court of Appeals affirming the judgment of the City Court of Cabanatuan 2rendered on August 2, 1971 which found the petitioner guilty for having violated Section 189 of the Insurance Act (Act No. 2427, as amended) and sentenced her to pay a fine of P500.00 with subsidiary imprisonment in case of insolvency, and to pay the costs. Petitioner Aisporna was charged in the City Court of Cabanatuan for violation of Section 189 of the Insurance Act on November 21, 1970 in an information 3 which reads as follows: That on or before the 21st day of June, 1969, in the City of Cabanatuan, Republic of the Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, did then and there, wilfully, unlawfully and feloniously act as agent in the solicitation or procurement

and in the trial, People presented evidence that was hardly disputed, that aforementioned policy was issued with active participation of appellant wife of Rodolfo, against which appellant in her defense sought to show that being the wife of true agent, Rodolfo, she naturally helped him in his work, as clerk, and that policy was merely a renewal and was issued because Isidro had called by telephone to renew, and at that time, her husband, Rodolfo, was absent and so she left a note on top of her husband's desk to renew ... Consequently, the trial court found herein petitioner guilty as charged. On appeal, the trial court's decision was affirmed by the respondent appellate court finding the petitioner guilty of a violation of the first paragraph of Section 189 of the Insurance Act. Hence, this present recourse was filed on October 22, 1974. 5 In its resolution of October 28, 1974, 6 this Court resolved, without giving due course to this instant petition, to require the respondent to comment on the aforesaid petition. In the comment 7 filed on December 20, 1974, the respondent, represented by the Office of the Solicitor General, submitted that petitioner may not be considered as having violated Section 189 of the Insurance Act. 8 On April 3, 1975, petitioner submitted his Brief 9 while the Solicitor General, on behalf of the respondent, filed a manifestation 10 in lieu of a Brief on May 3, 1975 reiterating his stand that the petitioner has not violated Section 189 of the Insurance Act. In seeking reversal of the judgment of conviction, petitioner assigns the following errors 11 allegedly committed by the appellate court: 1. THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT RECEIPT OF COMPENSATION IS NOT AN ESSENTIAL ELEMENT OF THE CRIME DEFINED BY THE FIRST PARAGRAPH OF SECTION 189 OF THE INSURANCE ACT.

2. THE RESPONDENT COURT OF APPEALS ERRED IN GIVING DUE WEIGHT TO EXHIBITS F, F-1, TO F-17, INCLUSIVE SUFFICIENT TO ESTABLISH PETITIONER'S GUILT BEYOND REASONABLE DOUBT. 3. THE RESPONDENT COURT OF APPEALS ERRED IN NOT ACQUITTING HEREIN PETITIONER. We find the petition meritorious. The main issue raised is whether or not a person can be convicted of having violated the first paragraph of Section 189 of the Insurance Act without reference to the second paragraph of the same section. In other words, it is necessary to determine whether or not the agent mentioned in the first paragraph of the aforesaid section is governed by the definition of an insurance agent found on its second paragraph. The pertinent provision of Section 189 of the Insurance Act reads as follows: No insurance company doing business within the Philippine Islands, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining new insurance, unless such person shall have first procured from the Insurance Commissioner a certificate of authority to act as an agent of such company as hereinafter provided. No person shall act as agent, sub-agent, or broker in the solicitation of procurement of applications for insurance, or receive for services in obtaining new insurance, any commission or other compensation from any insurance company doing business in the Philippine Islands, or agent thereof, without first procuring a certificate of authority so to act from the Insurance Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. Such certificate shall be issued by the Insurance Commissioner only upon the written

application of persons desiring such authority, such application being approved and countersigned by the company such person desires to represent, and shall be upon a form approved by the Insurance Commissioner, giving such information as he may require. The Insurance Commissioner shall have the right to refuse to issue or renew and to revoke any such certificate in his discretion. No such certificate shall be valid, however, in any event after the first day of July of the year following the issuing of such certificate. Renewal certificates may be issued upon the application of the company. Any person who for compensation solicits or obtains insurance on behalf of any insurance company, or transmits for a person other than himself an application for a policy of insurance to or from such company or offers or assumes to act in the negotiating of such insurance, shall be an insurance agent within the intent of this section, and shall thereby become liable to all the duties, requirements, liabilities, and penalties to which an agent of such company is subject. Any person or company violating the provisions of this section shall be fined in the sum of five hundred pesos. On the conviction of any person acting as agent, subagent, or broker, of the commission of any offense connected with the business of insurance, the Insurance Commissioner shall immediately revoke the certificate of authority issued to him and no such certificate shall thereafter be issued to such convicted person. A careful perusal of the above-quoted provision shows that the first paragraph thereof prohibits a person from acting as agent, sub-agent or broker in the solicitation or procurement of applications for insurance without first procuring a certificate of authority so to act from the Insurance Commissioner, while its second paragraph defines who is an insurance agent within the intent of this section and,

finally, the third paragraph thereof prescribes the penalty to be imposed for its violation. The respondent appellate court ruled that the petitioner is prosecuted not under the second paragraph of Section 189 of the aforesaid Act but under its first paragraph. Thus ... it can no longer be denied that it was appellant's most active endeavors that resulted in issuance of policy to Isidro, she was there and then acting as agent, and received the pay thereof her defense that she was only acting as helper of her husband can no longer be sustained, neither her point that she received no compensation for issuance of the policy because any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy of insurance to or from such company or offers or assumes to act in the negotiating of such insurance, shall be an insurance agent within the intent of this section, and shall thereby become liable to all the duties, requirements, liabilities, and penalties, to which an agent of such company is subject. paragraph 2, Sec. 189, Insurance Law, now it is true that information does not even allege that she had obtained the insurance, for compensation which is the gist of the offense in Section 189 of the Insurance Law in its 2nd paragraph, but what appellant apparently overlooks is that she is prosecuted not under the 2nd but under the 1st paragraph of Sec. 189 wherein it is provided that,

No person shall act as agent, sub-agent, or broker, in the solicitation or procurement of applications for insurance, or receive for services in obtaining new insurance any commission or other compensation from any insurance company doing business in the Philippine Island, or agent thereof, without first procuring a certificate of authority to act from the insurance commissioner, which must be renewed annually on the first day of January, or within six months thereafter. therefore, there was no technical defect in the wording of the charge, so that Errors 2 and 4 must be overruled.12 From the above-mentioned ruling, the respondent appellate court seems to imply that the definition of an insurance agent under the second paragraph of Section 189 is not applicable to the insurance agent mentioned in the first paragraph. Parenthetically, the respondent court concludes that under the second paragraph of Section 189, a person is an insurance agent if he solicits and obtains an insurance for compensation, but, in its first paragraph, there is no necessity that a person solicits an insurance for compensation in order to be called an insurance agent. We find this to be a reversible error. As correctly pointed out by the Solicitor General, the definition of an insurance agent as found in the second paragraph of Section 189 is intended to define the word "agent" mentioned in the first and second paragraphs of the aforesaid section. More significantly, in its second paragraph, it is explicitly provided that the definition of an insurance agent is within the intent of Section 189. Hence Any person who for compensation ... shall be an insurance agent within the intent of this section, ... Patently, the definition of an insurance agent under the second paragraph holds true with respect to the agent mentioned in the other

two paragraphs of the said section. The second paragraph of Section 189 is a definition and interpretative clause intended to qualify the term "agent" mentioned in both the first and third paragraphs of the aforesaid section. Applying the definition of an insurance agent in the second paragraph to the agent mentioned in the first and second paragraphs would give harmony to the aforesaid three paragraphs of Section 189. Legislative intent must be ascertained from a consideration of the statute as a whole. The particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious whole. 13 A statute must be so construed as to harmonize and give effect to all its provisions whenever possible. 14 The meaning of the law, it must be borne in mind, is not to be extracted from any single part, portion or section or from isolated words and phrases, clauses or sentences but from a general consideration or view of the act as a whole. 15 Every part of the statute must be interpreted with reference to the context. This means that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment, not separately and independently. 16 More importantly, the doctrine of associated words (Noscitur a Sociis) provides that where a particular word or phrase in a statement is ambiguous in itself or is equally susceptible of various meanings, its true meaning may be made clear and specific by considering the company in which it is found or with which it is associated. 17 Considering that the definition of an insurance agent as found in the second paragraph is also applicable to the agent mentioned in the first paragraph, to receive a compensation by the agent is an essential element for a violation of the first paragraph of the aforesaid section. The appellate court has established ultimately that the petitioneraccused did not receive any compensation for the issuance of the insurance policy of Eugenio Isidro. Nevertheless, the accused was convicted by the appellate court for, according to the latter, the receipt of compensation for issuing an insurance policy is not an essential

element for a violation of the first paragraph of Section 189 of the Insurance Act. We rule otherwise. Under the Texas Penal Code 1911, Article 689, making it a misdemeanor for any person for direct or indirect compensation to solicit insurance without a certificate of authority to act as an insurance agent, an information, failing to allege that the solicitor was to receive compensation either directly or indirectly, charges no offense. 18 In the case of Bolen vs. Stake, 19 the provision of Section 3750, Snyder's Compiled Laws of Oklahoma 1909 is intended to penalize persons only who acted as insurance solicitors without license, and while acting in such capacity negotiated and concluded insurance contracts for compensation. It must be noted that the information, in the case at bar, does not allege that the negotiation of an insurance contracts by the accused with Eugenio Isidro was one for compensation. This allegation is essential, and having been omitted, a conviction of the accused could not be sustained. It is well-settled in Our jurisprudence that to warrant conviction, every element of the crime must be alleged and proved. 20 After going over the records of this case, We are fully convinced, as the Solicitor General maintains, that accused did not violate Section 189 of the Insurance Act. WHEREFORE, the judgment appealed from is reversed and the accused is acquitted of the crime charged, with costs de oficio. SO ORDERED. Teehankee (Acting C.J.,) Makasiar, De Castro, Fernandez, Guerrero and Melencio-Herrera, JJ., concur. Plana, J., took no part. Footnotes 1 p. 21, Rollo.

2 p. 11, CA Rollo. 3 p. 10, CA Rollo. 4 pp. 21-22, Rollo. 5 p. 7, Rollo. 6 p. 36, Rollo. 7 p. 51, Rollo. 8 p. 58, Rollo. 9 p. 69, Rollo. 10 p. 71, Rollo. 11 p. 69, Rollo; p. 6, Brief for the Petitioner. 12 pp. 25 and 26, Rollo. 13 Araneta vs. Concepcion, 99 Phil. 709; Tamayo vs. Gsell, 35 Phil. 953; Lopez vs. El Hogar Filipino, 47 Phil. 249; Chartered Bank vs. Imperial, 48 Phil. 931. 14 People vs. Polmon 86 Phil. 350. 15 82 C.J.S., Section 345, pp. 699-700. 16 Tamayo vs. Gsell, 35 Phil. 953. 17 Co Kim Cham vs. Valdez Tan Keh & Dizon, 75 Phil. 371. 18 Jasper vs. State, 73 Tex. Cr. R 197; 164 S.W. 851. 19 149 p. 1074, 11 Okla. Crim. 594.

20 People vs. Sy Gesiong, 60 Phil. 614.