Republic vs. Sunlife Assurance Company of Canada [GR No.

15805; October 14, 2005]

Facts: On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR], which held that mutual life insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST. This pronouncement was later affirmed by this court in [CIR] v. Insular Life Assurance Company, Ltd. Sun Life surmised that[,] being a mutual life insurance company, it was likewise exempt from the payment of premium tax and DST. Hence, on August 20, 1999, Sun Life filed with the CIR an administrative claim for tax credit of its alleged erroneously paid premium tax and DST for the aforestated tax periods. For failure of the CIR to act upon the administrative claim for tax credit and with the 2-year period to file a claim for tax credit or refund dwindling away and about to expire, Sun Life filed with the CTA a petition for review. The CTA found in favor of Sun Life. Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life ought to have registered, foremost, with the Cooperative Development Authority before it could enjoy the exemptions from premium tax and DST extended to purely cooperative companies or associations under [S]ections 121 and 199 of the Tax Code. For its failure to register, it could not avail of the exemptions prayed for. The CTA denied the CIRs motion for reconsideration. Issue: Whether or not respondent is exempted from payment of tax on life insurance premiums and documentary stamp tax Held: YES. The Tax Code defines a cooperative as an association conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit. Without a doubt, respondent is a cooperative engaged in a mutual life insurance business. First, it is managed by its members. Both the CA and the CTA found that the management and affairs of respondent were conducted by its member-policyholders. SUNLIFE has been mutualized or converted from a stock life insurance company to a nonstock mutual life insurance corporation pursuant to Section 266 of the Insurance Code of 1978. On the basis of its bylaws, its ownership has been vested in its member-policyholders who are each entitled to one vote; and who, in turn, elect from among themselves the members of its board of trustees. Second, it is operated with money collected from its members. Since respondent is composed entirely of members who are also its policyholders, all premiums collected obviously come only from them. The member-policyholders constitute both insurer and insured who contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid. Third, it is licensed for the mutual protection of its members, not for the profit of anyone. A mutual life insurance company is conducted for the benefit of its member-policyholders, who pay into its capital by way of premiums. Under the Tax Code although respondent is a cooperative, registration with the Cooperative Development Authority (CDA) is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on policies of insurance or annuities it grants, under Section 199.

PEZA v. ALIKPALA
160 SCRA 31 NARVASA; April 15, 1988

NATURE Motion praying that Judge Alikpala be declared guilty of contempt of court for having decided the case on the merits despite the pendency in this Court of the certiorari action instituted by the plaintiffs FACTS - vehicular accident with 2 children running across the path of a Chevrolet "Carry-All", belonging to a partnership known as Diman & Company driven by its driver, Perfecto Amar, as it was passing a national highway at barrio Makiling Calamba, Laguna. They were killed. It was insured with the Empire Insurance Co., Inc. under a so-called 'comprehensive coverage" policy, loss by theft excluded. The policy was in force at the time of the accident. - Placida Peza, the managing partner of Diman & Co. filed a claim with Empire, for payment of compensation to the family of the 2 children who died as a result of the accident. Empire refused to pay on the ground that the driver had no authority to operate the vehicle, a fact which it expressly excepted from liability under the policy. What Peza did was to negotiate directly with the deceased children father for an out-of-court settlement. The father agreed to accept P6,200.00 in fun settlement of the liability of the vehicles owner and driver, and Peza paid him this sum. - Peza thereafter sued Empire to recover this sum of P6,200.00 as actual damages, as well as P20,000.00 as moral damages, P10,000.00 as exemplary damages, and P10,000.00 as attorney's fees. She amended her complaint shortly thereafter to include Diman & Co. as alternative party plaintiff. - Empire's basic defense to the suit was anchored on the explicit requirement in the policy limiting the operation of the insured vehicle to the "authorized driver" therein defined, namely, (a) the insured, or (b) any person driving on the insured order or with his permission, provided that... that the person driving is permited in accordance with the licensing or other laws or regulations to drive the Motor vehicle or has been so permitted and is not disqualified by order of the Court of Law of by reason of any enactment or regulation in that behalf from driving such Motor Vehicle.- driver Perfecto Amar, only having a temporary operator's permit (TVR) [ already expired] his drivers license having earlier been confiscated by an agent of the Land Transportation Commission for an alleged violation of Land Transportation and Traffic Rules, was not permitted by law and was in truth disqualified to operate any motor vehicle; Peza attempted to neutralize that fact by(1) the issuance of the TVR by the LTC officer to Amar; in proof of the proposition that there was no reason for confiscation of Amar's license (2) Amar's license had not expired, but had been renewed. - Judge Alikpala did not admit such evidence ISSUES 1. WON Judge Alikapala committed grave abuse of discretion in not admitting evidence 2. WON confiscation of license and expiration of TVR of the driver would serve as bar for Peza in recovering from Empire HELD 1. NO - Even positing error in the Judge's analysis of the evidence attempted to be introduced and his rejection thereof, it is clear that it was at most an error of judgment, not such an error as may be branded a grave abuse of discretion, i.e., such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, against which the writ of certiorari will lie. In any event, the established principle is "that ruling of the trial court on procedural questions and on admissibility of evidence during the course of the trial are interlocutory in nature and may not be the subject of separate appeal or review on certiorari, but are to be assigned as errors and reviewed in the appeal properly taken from the decision rendered by the trial court on the merits of the case. - In the meantime, Judge Alikpala rendered judgment on the merits, since the case was then already ripe for adjudication. The judgment ordered dismissal of the case for failure on the part of the plaintiff to prove their cause of action against Empire. Notice of the judgment was served on the parties in due course. 2. YES - It would seem fairly obvious that whether the LTC agent was correct or not in his opinion that driver Amar had violated some traffic regulation warranting confiscation of his license and issuance of a TVR in lieu thereof, this would not alter the undisputed fact that Amar's licence had indeed been confiscated and a TVR issued to him, and the TVR had already expired at the time that the vehicle being operated by him killed two children by accident. Neither would proof of the renewal of Amar's license change the fact that it had really been earlier confiscated by the LTC agent. Disposition petition is DISMISSED for lack of merit

SUN INSURANCE OFFICE, LTD. V CA (LIM)

211 SCRA 554 CRUZ; July 17, 1992 NATURE

Petition for review from the decision of the Court of Appeals FACTS - Felix Lim was issued a Personal Accident Policy insurance with petitioner company with a face value of P200,000. beneficiary was his wife Nerissa. - October 6, 1982 Felix accidentally shot himself in the head with his own gun. - He was playing with the handgun after he had removed the guns magazine ( kasi naman). - He pointed the gun at his secretary and only witness Pilar Nalagon as a joke and assured her that the gun was not loaded (are you sure). - He then put the gun to his temple and fired it ( haaay, sabi ko na nga ba). - Both parties are in agreement that there was no suicide. - Nerissa claimed as Felixs beneficiary but Sun Insurance would not grant her claim, saying that her husbands death was not an accident. - Nerissa sued Sun Insurance and won the case. Sun Insurance was ordered to pay her P200,000 representing the face value of the claim along with moral, exemplary and compensatory damages and attorneys fees. The decision was affirmed by the CA. Petitioners Claim - Sun Insurance cites one of the four exceptions in the contract of insurance which includes bodily injury consequent upon the insured person attempting to commit suicide or willfully exposing himself to needless peril in an attempt to save a human life. - There mere act of pointing the gun to his temple showed that Felix willfully exposed himself to danger because a gun should always be handled with caution. Respondents Comments - Felix believed the gun to be safe because he had removed the magazine. - He repeatedly assured his secretary that the gun was not loaded. ISSUES 1. WON Felix Lims death was an accident, thus making his widow Nerissa liable to claim the accident insurance 2. WON the award of damages to Nerissa Lim was justified HELD 1. YES, Felix Lims death was an accident. Ratio There is no accident when a deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs which produces or brings bout their injury or death. Reasoning - An accident has been defined to be that which happens by chance or fortuitously without intention or design and which is unexpected, unusual and unforeseen. It an event that takes pace without ones foresight or expectastion an event that proceeds from an unknown cause or is an unusual effect of a known case and therefore not expected. It happens without any human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. - The firing of the gun was deemed to be the unexpected and independent and unforeseen occurrence that led to the insured persons death. - There was no willful exposure to needless peril for the part of Felix. Suicide and exposure to needless peril are similar in the sense that both signify disregard for ones life. Suicide imparts a positive act of ending ones life whereas the latter indicates recklessness that is almost suicidal in intent. His

- Accident insurance policies were never meant to reward the insured for his tendency to show off or for his miscalculations. They were intended to provide for contingencies. - Lim was unquestionably negligent but it should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. - Insurance contracts are, as a rule, supposed to be interpreted liberally in favor of the assured. 2. NO, the claim for damages should not be granted for being unjust. Ratio A person may be made liable to the payment of moral damages if his act is 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. Reasoning - Petitioner was acting in good faith when it resisted the private respondents claim on the ground that the death of the insured was covered by the exception. - The issue was debatable and was clearly not raised only for the purpose of evading a legitimate obligation.

DE LA CRUZ v. CAPITAL INSURANCE

17 SCRA 554 BARRERA; June 30, 1966 NATURE Appeal from the decision of the CFI of Pangasinan FACTS - Eduardo de la Cruz, employed in the Itogon-Suyoc Mines, Inc., was the holder of an accident insurance policy underwritten by the Capital Insurance & Surety Co., Inc., for the period beginning November 13, 1956 to November 12, 1957. - On January 1, 1957, the Itogon-Suyoc Mines, Inc. sponsored a boxing contest wherein the insured Eduardo de la Cruz participated. - In the course of his bout, Eduardo slipped and was hit by his opponent on the left part of the back of the head, causing Eduardo to fall, with his head hitting the rope of the ring. - He was brought to the Baguio General Hospital, but he died as a result of hemorrhage, intracranial, left. - Simon de la Cruz, the father and named beneficiary of the insured, filed a claim with the insurance company for payment of the indemnity, but it was denied. - He instituted the action in the CFI of Pangasinan for specific performance. - Defendant insurer set up the defense that the death of the insured, caused by his participation in a boxing contest, was not accidental and, therefore, not covered by insurance - The court rendered the decision in favor of the plaintiff, hence, the present appeal. ISSUE WON the death of the insured was not accidental and, therefore, not covered by insurance HELD NO - 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 policies insuring against death or injury from accident. - In the present case, while the participation of the insured in the boxing contest is voluntary, the injury was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring. - The fact that boxing is attended with some risks of external injuries does not make any injuries received in the course of the game not accidental. In boxing as in other equally physically rigorous sports, such as basketball or baseball, death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death can only be accidental or produced by some unforeseen happening or event as what occurred in this case. - Furthermore, the policy involved herein specifically excluded from its coverage: (e) Death or disablement consequent upon the Insured engaging in football, hunting, pigsticking, steeplechasing, poloplaying, racing of any kind, mountaineering, or motorcycling. - Death or disablement resulting from engagement in boxing contests was not declared outside of the protection of the insurance contract. Failure of the defendant insurance company to include death resulting from a boxing match or other sports among the prohibitive risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such death. Disposition The decision appealed from is affirmed

FINMAN GENERAL ASSURANCE CORPORATION v. CA (SURPOSA)

213 SCRA 493 NOCON; September 2, 1992 NATURE Certiorari FACTS - Oct. 22, 1986: Carlie Surposa was insured with 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, Charles, Chester and Clifton, all surnamed, Surposa, as beneficiaries. - 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 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 after attending the celebration of the "Maskarra Annual Festival." - Thereafter, Julia Surposa and the other beneficiaries of said insurance policy filed a written notice of claim with the FINMAN Corp which denied said claim contending that murder and assault are not within the scope of the coverage of the insurance policy. - Feb. 24, 1989: Surposa filed a complaint with the Insurance Commission which subsequently ordered FINMAN to pay Surposa the proceeds of the policy with interest. - CA affirmed said decision. ISSUE WON CA committed GAD 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 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) [TF they cannot be made to indemnify the Surposa h eirs] HELD NO - The record is barren of any circumstance showing how the stab wound was inflicted. 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. Reasoning - De la Cruz vs. Capital Insurance & Surety Co., Inc (1966)~ 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. Ratio 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. - The personal accident insurance policy involved herein specifically enumerated only 10 circumstances wherein no liability attaches to FINMAN 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: the failure of the FINMAN 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. - A1377 NCC: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. - NPC vs. CA [1986]~ 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.

Disposition DENIED for lack of merit.

UCPB GENERAL INSURANCE CO., INC. v. MASAGANA TELAMART, INC. (EN BANC)
356 SCRA 307 DAVIDE; April 4, 2001 NATURE Motion for reconsideration of the decision of the Supreme Court.

FACTS - In its decision of 15 June 1999, the SC defined the main issue to be whether the fire insurance policies issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the (fire) risk insured against. The Court resolved this issue in the negative in view of Section 77 of the Insurance Code and its decisions in Valenzuela v. Court of Appeals ; South Sea Surety and Insurance Co., Inc. v. Court of Appeals ; and Tibay v. Court of Appeals. Accordingly, it reversed and set aside the decision of the Court of Appeals. - Respondent seasonably filed a motion for the reconsideration of the adverse verdict. It alleges in the motion that the SC had made in the decision its own findings of facts, which are not in accord with those of the trial court and the Court of Appeals. The courts below correctly found that no notice of non-renewal was made within 45 days before 22 May 1992, or before the expiration date of the fire insurance policies. Thus, the policies in question were renewed by operation of law and were effective and valid on 30 June 1992 when the fire occurred, since the premiums were paid within the 60- to 90-day credit term. - Respondent likewise disagrees with its ruling that parties may neither agree expressly or impliedly on the extension of credit or time to pay the premium nor consider a policy binding before actual payment. It urges the Court to take judicial notice of the fact that despite the express provision of Section 77 of the Insurance Code, extension of credit terms in premium payment has been the prevalent practice in the insurance industry. Most insurance companies, including Petitioner, extend credit terms because Section 77 of the Insurance Code is not a prohibitive injunction but is merely designed for the protection of the parties to an insurance contract. The Code itself, in Section 78, authorizes the validity of a policy notwithstanding nonpayment of premiums. - Respondent also asserts that the principle of estoppel applies to Petitioner. Despite its awareness of Section 77 Petitioner persuaded and induced Respondent to believe that payment of premium on the 60- to 90-day credit term was perfectly alright; in fact it accepted payments within 60 to 90 days after the due dates. By extending credit and habitually accepting payments 60 to 90 days from the effective dates of the policies, it has implicitly agreed to modify the tenor of the insurance policy and in effect waived the provision therein that it would pay only for the loss or damage in case the same occurred after

payment of the premium. - Petitioner filed an opposition to the Respondents motion for reconsideration. It argues that both the trial court and the Court of Appeals overlooked the fact that on 6 April 1992 Petitioner sent by ordinary mail to Respondent a notice of nonrenewal and sent by personal delivery a copy thereof to Respondents broker, Zuellig. Both courts likewise ignored the fact that Respondent was fully aware of the notice of non-renewal. A reading of Section 66 of the Insurance Code readily shows that in order for an insured to be entitled to a renewal of a non-life policy, payment of the premium due on the effective date of renewal should first be made. Respondents argument that Section 77 is not a prohibitive provision finds no authoritative support. - The following facts, as found by the trial court and the Court of Appeals, are indeed duly established: 1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies were annually renewed. 2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to pay the premiums on the renewed policies. 3. There was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by ordinary mail was received by Respondent, and the copy thereof allegedly sent to Zuellig was ever transmitted to Respondent. 4. The premiums for the policies in question in the aggregate amount of P225,753.95 were paid by Respondent within the 60- to 90-day credit term and were duly accepted and received by Petitioners cashier.

ISSUE WON Sec. 77 of the Insurance Code of 1978 must be strictly applied to Petitioners advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums HELD NO - Section 77 of the Insurance Code of 1978 provides: SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. - This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code) promulgated on 18 December 1974. In turn, this Section has its source in Section 72 of Act No. 2427 otherwise known as the Insurance Act as amended by R.A. No. 3540, approved on 21 June 1963, which read: SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due . No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied) - It can be seen at once that Section 77 does not restate the portion of Section 72 expressly permitting an agreement to extend the period to pay the premium. But there are exceptions to Section 77. The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies. The second is that covered by Section 78 of the Insurance Code, which provides: SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid. - A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss. Tuscany has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties. Article 1306 of the Civil Code provides: ART. 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. - Finally, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section since Respondent relied in good faith on such practice. Estoppel then is the fifth exception to Section 77. Disposition Judgment reconsidered and set aside, that of the Court of Appeals affirmed in toto.

NEW LIFE ENTERPRISES V CA

207 SCRA 669 REGALADO; March 31, 1992 NATURE Appeal by certiorari FACTS - The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business partnership in the City of Lucena. Under the business name of New Life Enterprises, the partnership engaged in the sale of construction materials at its place of business, a two storey building situated at Iyam, Lucena City. The facts show that Julian Sy insured the stocks in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance Co. Inc., and Equitable Insurance Corporation. - On May 15, 1981, Western Guaranty Corporation issued Fire Insurance Policy No. 37201 in the amount of P350,000.00. This policy was renewed on May 13, 1982. - On July 30, 1981, Reliance Surety and Insurance Co., Inc. issued Fire Insurance Policy No. 69135 in the amount of P300,000.00 (Renewed under Renewal Certificate No. 41997). An additional insurance was issued by the same company on November 12, 1981 under Fire Insurance Policy No. 71547 in the amount of P700,000.00. - On February 8, 1982, Equitable Insurance Corporation issued Fire Insurance Policy No. 39328 in the amount of P200,000.00. - Thus when the building occupied by the New Life Enterprises was gutted by fire at about 2:00 o'clock in the morning of October 19, 1982, the stocks in trade inside said building were insured against fire in the total amount of P1,550,000.00. According to the certification issued by the Headquarters, Philippine Constabulary/Integrated National Police, Camp Crame, the cause of fire was electrical in nature. According to the plaintiffs, the building and the stocks inside were burned. After the fire, Julian Sy went to the agent of Reliance Insurance whom he asked to accompany him to the office of the company so that he can file his claim. He averred that in support of his claim, he submitted the fire clearance, the insurance policies and inventory of stocks. He further testified that the three insurance companies are sister companies, and as a matter of fact when he was followingup his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance Insurance and if said company agrees to pay, they would also pay. The same treatment was given him by the other insurance companies. Ultimately, the three insurance companies denied plaintiffs' claim for payment. Respondents comments > Western Guaranty Corporation through Claims Manager Bernard S. Razon told the plaintiff that his claim 'is denied for breach of policy conditions.' Reliance Insurance purveyed the same message as well as Equitable Insurance Corporation.

- The said policy in question follows: "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 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 on 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 loss or damage is not more than P200,000.00." Petitioners comments > Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon Alvarez (for Western) and Yap Kam Chuan (for Reliance and Equitable) knew about the existence of the additional insurance coverage and that they were not informed about the requirement that such other or additional insurance should be stated in the policy, as they have not even read said policies. ISSUE WON New Life Enterprises claim for payment be denied HELD YES Ratio Furthermore, when the words and language of documents are clear and plain or readily understandable by an ordinary reader thereof, there is absolutely no room for interpretation or construction anymore. Courts are not allowed to make contracts for the parties; rather, they will intervene only when the terms of the policy are ambiguous, equivocal, or uncertain. The parties must abide by the terms of the contract because such terms constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer. - While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. Moreover, obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Reasoning a. The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any other insurance and its particulars which he may have effected on the same subject matter. The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that would stop the insurers from denying the claim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is knowledge of the principal, aside from being of dubious applicability here has likewise been roundly refuted by respondent court whose factual findings we find acceptable. b. Petitioners should be aware of the fact that a party is not relieved of the duty to exercise the ordinary care and prudence that would be exacted in relation to other contracts. The conformity of the insured to the terms of the policy is implied from his failure to express any disagreement with what is provided for.

GEAGONIA VS CA [G.R. No. 114427. February 6, 1995]

Facts: Armando Geagonia is the owner of Norman's Mart located in the public market of San Francisco, Agusan del Sur. On December 22, 1989, he obtained from Country Bankers Insurance Corporation fire insurance policy No. F-14622 2 for P100,000.00. The period of the policy was from December 22, 1989 to December 22, 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." Geagonia declared in the policy under the subheading entitled COINSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, Geagonia had in his inventory stocks amounting to P392,130.50, itemized as follows: Zenco Sales, Inc., P55,698.00; F. Legaspi Gen. Merchandise, 86,432.50; and Cebu Tesing Textiles, 250,000.00 (on credit); totalling P392,130.50. The policy contained the following condition, that "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 or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless 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 May 27, 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San Francisco, Agusan del Sur. Geagonia's insured stocks-in-trade were completely destroyed prompting him to file with Country Bankers a claim under the policy. On December 28, 1990, Country Bankers denied the claim because it found that at the time of the loss. Geagonia's stocks-in-trade were likewise covered by fire insurance policies GA-28146 and GA-28144, for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC). These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause reading ""MORTGAGEE: 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. CO-INSURANCE DECLARED: P100,000. Phils. First CEB/F24758" The basis of Country Bankers' denial was Geagonia's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against Country Bankers with the Insurance Commission (Case 3340) for the recovery of P100,000.00 under fire insurance policy F-14622 and for attorney's fees and costs of litigation. He attached his letter of January 18, 1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the time he obtained Country Bankers'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 Country Bankers' policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by Country Bankers' agent; and had it been so 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 decision of June 21, 1993, the Insurance Commission found that Geagonia 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 Geagonia's testimony that he came to know of the PFIC policies only when he filed his claim with Country Bankers and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof. The Insurance Commission ordered Country Bankers to pay Geagonia 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. Its motion for the reconsideration of the decision having been denied by the Insurance Commission in its resolution of August 20, 1993, Country Bankers appealed to the Court of Appeals by way of a petition for review (CA-GR SP 31916). In its decision of December 29, 1993, the Court of Appeals reversed the decision of the Insurance Commission because it found that Geagonia knew of the existence of the two other policies issued by the PFIC. His motion to reconsider the adverse decision having been denied, Geagonia filed the petition for review on certiorari. Issue: WON there is double insurance in the case at bar so as to deny Geagonia from recovering on the insurance policy Held: NO. 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. 20 Thus, 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 XXX 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 non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy.

PHIL. AMERICAN LIFE INSURANCE v. PINEDA

175 SCRA 416 PARAS; July 19, 1989 NATURE Petition for review on certiorari the orders of CFI Judge Pineda FACTS - In 1968, Private Respondent Rodolfo Dimayuga procured an ordinary life insurance policy from the petitioner company and designated his wife and children as irrevocable beneficiaries. On Feb. 22, 1980, Dimayuga filed with the CFI a petition to amend the designation of the beneficiaries in his life policy from irrevocable to revocable. Petitioner filed an Urgent Motion to reset hearing as well as its comment and/or Opposition to the respondents petition. - Respondent Judge denied petitioners Urgent Motion, thus allowing private respondent to adduce evidence, the consequence of which was the issuance of the questioned Order granting the petition. Petitioner then filed a MFR which was also denied hence this petition. ISSUE

1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable beneficiaries 2. WON the irrevocable beneficiaries herein, one of whom is already deceased while the others are all minors could validly give consent to the change or amendment in the designation of the irrevocable beneficiaries

HELD 1. NO - Based on the provision of their contract and the law applicable, it is only with the consent of all the beneficiaries that any change or amendment in the policy concerning the irrevocable beneficiaries may be legally and validly effected. Both the law and the Policy do not provide for any other exception. Reasoning - Since the policy was procured in 1968, the applicable law in this case is the Insurance Act and under that law, the beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy. - The Beneficiary Designation Indorsement in the policy in the name of Dimayuga states that the designation of the beneficiaries is irrevocable: no right or privilege under the Policy may be exercised, or agreement made with the Company to any change in or amendment to the Policy, without the consent of the said beneficiary/beneficiaries. - 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 in what form they may be, whenever the essential requisites for their validity are present. - Finally, the fact that the contract of insurance does not contain a contingency when the change in the designation of beneficiaries could be validly effected means that it was never within the contemplation of the parties. 2. NO - The parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract, for otherwise, the vested rights of the irrevocable beneficiaries would be rendered inconsequential. The alleged acquiescence of the 6 children beneficiaries cannot be considered an effective ratification to the change of the beneficiaries from irrevocable to revocable. They were minors at the time, and could not validly give consent. Neither could they act through their father-insured since their interests are quite divergent from one another. Disposition questioned Orders of respondent judge are nullified and set aside.

GERCIO v. SUN LIFE ASSURANCE OF CANADA

48 PHIL 53 MALCOLM; September 28, 1925 NATURE Mandamus to compel Sun Life Assurance Co. of Canada to change the beneficiary in the policy issued by the defendant company on the life of the plaintiff Hilario Gercio FACTS - On January 29, 1910, the Sun Life Assurance Co. of Canada issued an insurance policy on the life of Hilario Gercio. The policy was what is known as a 20-year endowment policy. By its terms, the insurance company agreed to insure the life of Hilario Gercio for the sum of P2,000, to be paid him on February 1, 1930, or if the insured should die before said date, then to his wife, Mrs. Andrea Zialcita, should she survive him; otherwise to the executors, administrators, or assigns of the insured. The policy did not include any provision reserving to the insured the right to change the beneficiary.

- On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio. Towards the end of the year 1919, she was convicted of the crime of adultery. On September 4, 1920, a decree of divorce was issued in civil case no. 17955, which had the effect of completely dissolving their bonds of matrimony - On March 4, 1922, Hilario Gercio formally notified the Sun Life that he had revoked his donation in favor of Andrea Zialcita, and that he had designated in her stead his present wife, Adela Garcia de Gercio, as the beneficiary of the policy. Gercio requested the insurance company to eliminate Andrea Zialcita as beneficiary. This, the insurance company has refused and still refuses to do.

ISSUES 1. (Preliminary) WON the provisions of the Code of Commerce and the Civil Code shall be in force in 1910, or the provisions of the Insurance Act now in force, or the general principles of law, guide the court in its decision 2. WON the insured, the husband, has the power to change the beneficiary, the former wife, and to name instead his actual wife, where the insured and the beneficiary have been divorced and where the policy of insurance does not expressly reserve to the insured the right to change the beneficiary HELD 1. Whether the case be considered in the light of the Code of Commerce, the Civil Code, or the Insurance Act, the deficiencies in the law will have to be supplemented by the general principles prevailing on the subject. To that end, we have gathered the rules which follow from the best considered American authorities. In adopting these rules, we do so with the purpose of having the Philippine Law of Insurance conform as nearly as possible to the modern Law of Insurance as found in the United States proper. - Courts first duty is to determine what law should be applied to the facts. The insurance policy was taken out in 1910, that the Insurance Act. No. 2427, became effective in 1914, and that the effort to change the beneficiary was made in 1922. - Code of Commerce- there can be found in it no provision either permitting or prohibiting the insured to change the beneficiary. - Civil Code- it would be most difficult, if indeed it is practicable, to test a life insurance policy by its provisions. In the case of Del Val vs. Del Val, it declined to consider the proceeds of the insurance policy as a donation or gift, saying "the contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contracts or to the destination of life-insurance proceeds. . . ." - Insurance Act- there is likewise no provision either permitting or prohibiting the insured to change the beneficiary. 2. NO Ratio The wife has an insurable interest in the life of her husband. The beneficiary has an absolute vested interest in the policy from the date of its issuance and delivery. So when a policy of life insurance is taken out by the husband in which the wife is named as beneficiary, she has a subsisting interest in the policy. And this applies to a policy to which there are attached the incidents of a loan value, cash surrender value, an automatic extension by premiums paid, and to an endowment policy, as well as to an ordinary life insurance policy. If the husband wishes to retain to himself the control and ownership of the policy he may so provide in the policy. But if the policy contains no provision authorizing a change of beneficiary without the beneficiary's consent, the insured cannot make such change. Accordingly, it is held that a life insurance policy of a husband made payable to the wife as beneficiary, is the separate property of the beneficiary and beyond the control of the husband. - Unlike the statutes of a few jurisdictions, there is no provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the husband to be changed after a divorce. It must follow, therefore, in the absence of a statute to the contrary, that if a policy is taken out upon a husband's life the wife is named as beneficiary therein, a subsequent divorce does not destroy her rights under the policy. Reasoning

- Yore vs. Booth . . . It seems to be the settled doctrine, with but slight dissent in the courts of this country, that a person who procures a policy upon his own life, payable to a designated beneficiary, although he pays the premiums himself, and keeps the policy in his exclusive possession, has no power to change the beneficiary, unless the policy itself, or the charter of the insurance company, so provides. In policy, although he has parted with nothing, and is simply the object of another's bounty, has acquired a vested and irrevocable interest in the policy, which he may keep alive for his own benefit by paying the premiums or assessments if the person who effected the insurance fails or refuses to do so. - Connecticut Mutual Life Insurance Company vs Schaefer We do not hesitate to say, however, that a policy taken out in good faith and valid at its inception, is not avoided by the cessation of the insurable interest, unless such be the necessary effect of the provisions of the policy itself.. . . .In our judgment of life policy, originally valid, does not cease to be so by the cessation of the assured party's interest in the life insured. - Central National Bank of Washington City vs. Hume It is indeed the general rule that a policy, and the money to become due under it, belong, the moment it is issued, to the person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance, by any act of his, by deed or by will, to transfer to any other person the interest of the person named. - In re Dreuil & Co. In so far as the law of Louisiana is concerned, it may also be considered settled that where a policy is of the semitontine variety, as in this case, the beneficiary has a vested right in the policy, of which she cannot be deprived without her consent - Wallace vs Mutual Benefit Life Insurance Co. As soon as the policy was issued Mrs. Wallace acquired a vested interest therein, of which she could not be deprived without her consent, except under the terms of the contract with the insurance company. No right to change the beneficiary was reserved. Her interest in the policy was her individual property, subject to be divested only by her death, the lapse of time, or by the failure of the insured to pay the premiums. She could keep the policy alive by paying the premiums, if the insured did not do so. It was contingent upon these events, but it was free from the control of her husband. He had no interest in her property in this policy, contingent or otherwise. Her interest was free from any claim on the part of the insured or his creditors. He could deprive her of her interest absolutely in but one way, by living more than twenty years. - Filley vs. Illinois Life Insurance Company The benefit accruing from a policy of life insurance upon the life of a married man, payable upon his death to his wife, naming her, is payable to the surviving beneficiary named, although she may have years thereafter secured a divorce from her husband, and he was thereafter again married to one who sustained the relation of wife to him at the time of his death. The rights of a beneficiary in an ordinary life insurance policy become vested upon the issuance of the policy, and can thereafter, during the life of the beneficiary, be defeated only as provided by the terms of the policy. - On the admitted facts and the authorities supporting the nearly universally accepted principles of insurance, we are irresistibly led to the conclusion that the question at issue must be answered in the negative Disposition The judgment appealed from will be reversed and the complaint ordered dismissed as to the appellant.

Go vs. Redfern [GR 47705, 25 April 1941]

Second Division, Horrilleno (J): 4 concur Decision in Spanish [Rough translation, accuracy unverified] Facts: In October 1937, Edward K. Redfern obtained an insurance policy against accidents from the International Assurance Co, Ltd. On 31 August 1938, Redfern died from an accident. The mother of the deceased, presenting the necessary evidence of the death of Redfern, sought to claim the proceeds of the insurance policy from the assurance company. The company, however, denied such claim, on the ground that the insurance policy was amended on 22 November 1937 to include another beneficiary, Concordia Go.

Hence, an action was filed to determine who has the right to collect the insurance proceeds of the deceased Redfern. The mother claimed that the addition of the co-beneficiary is illegal. Go, on her part, alleged the contrary. The trial court ruled in favor of Angela Redfern, the mother. Go appealed. Issue: Whether the addition of Gos name as co-beneficiary can be allowed for her share in the insurance proceeds. Held: When designated in a policy, the beneficiary acquires a right of which he cannot be deprived of without his consent, unless the right has been reserved specifically to the insured to modify the policy. The same doctrine was enunciated by the Court in the cases of Gercio vs. Sun Life Assurance Co. of Canada (48 Phil.55) and Insular Life vs. Suva (34 Off. Gaz. 861). Thus, unless the insured has reserved specifically the right to change or to modify the policy, with respect to the beneficiary, said policy constitutes an acquired right of the beneficiary, which cannot be modified except with the consent of the latter. Herein, it is admitted that Redfern did not reserve expressly his right to change or modify the policy. Change implies the idea of an alteration. The addition of Go's name as one of the beneficiaries of the policy constitutes change as all addition is an alteration. The addition of Go's name changed the policy inasmuch as there are two beneficiaries instead of one, and thus in effect the original beneficiary cannot recieve the full amount of the policy. The Supreme Court affirmed the appealed judgment in all of its parts, with costs against Go.

DELFIN NARIO and ALEJANDRA SANTOS-NARIO vs. THE PHILIPPINE AMERICAN LIFEINSURANCE COMPANY (G.R. No. L-22796, June 26, 1967) FACTS
: Mrs. Nario was issued by respondent Philamlife a life insurance policy. She designated her husband, Delfin and their unemancipated minor son, Ernesto, as her irrevocable beneficiaries. She a ppl i e d f or a l oa n o n t he po l i c y f or t he s c h ool e x pe ns e s of he r s o n. T he l oa n a p pl i c a t i o n b or e t he signature of Delfin as the father-guardian of minor son and as the legal administrator of the minor's properties. Philamlife denied the application because the written consent for the minor son must not only be given by his father as legal guardian but it must also be authorized by the court in a competent guardianship proceeding. After the denial, Mrs. Nario decided to surrender her policy to Philamlife and demanded its cash value of then amounting to P520. Philamlife also denied the surrender of the policy, on the same ground, hence, Nario brought suit. Philamlife claims that under Articles 320 and 326 of the Civil Code, mere written consent given by the father-guardian, for and in behalf of the minor son, without any court authority, was insufficient, inasmuch as the policy loan application and the surrender of the policy involved acts of disposition and alienation of the property rights of the minor, and said acts are notwithin the powers of the legal administrator. The lower court agreed with Philamlife and dismissed petitioners claim. It held that under the policy, the minor son, as one of the designated irrevocable beneficiaries, "acquired a vested right to all benefits accruing to the policy, including that of obtaining a policy loan to the extent stated in the schedule of values attached to the policy. On appeal to the SC, petitioner averred that the minor's interest amounted to only one-half of the policy's cash surrender value of P520; that payment of the ward's debts is within the powers of the guardian, where no realty is involved( R ul e 96, Se c . 2 of t h e R e vi s e d R ul e s of Co ur t ) ; he nc e , f a t he r m a y va l i dl y a gr e e t o t he p r o pos e d transaction on behalf of the minor without need of court authority.

ISSUE
: Can an insurer refuse to grant the loan application (on a cash surrender value and not full face value) and the surrender of the policy claimed by a father-guardian in behalf of his minor son when it is without court authority?

HELD
: Yes, the insurer can validly refuse. The vested interest or right of the beneficiaries in the policy should be measured on its full face value and not on its cash surrender value, for in case of death of the insured, said

beneficiaries are paid o n t h e b a s i s of i t s f a c e va l ue a n d i n c a s e t h e i ns ur e d s ho ul d di s c o nt i n ue p a yi ng pr e m i um s , t he beneficiaries may continue paying it and are entitled to automatic extended term or paid-up insurance options, etc. and that said vested right under the policy cannot be divisible at any given time. As above noted, the full face value of the policy is P5,000 and the minor's vested interest therein, as one of the two irrevocable beneficiaries, consists of one-half () of said amount or P2,500.The transactions in question (policy loan and surrender of policy) constitute acts of disposition or alienation of property rights and not merely of management or administration because they involve the incurring or termination of contractual obligations. Under Articles 320 and 326 of the Civil Code provide that the father, or in his absence the mother, is the legal administrator of their childs property and when it is worth more than two thousand pesos, as in this case, he should have filed a formal application or petition for guardianship and bond. As there was no such petition for guardianship and bond, the consent given by the father-guardian, was insufficient and ineffective, and defendant-appellee was justified in disapproving the proposed transactions in question. The result would be the same even if interest is worth less than P2,000. The parent's authority over the estate of the ward as a legal-guardian would not extend to acts of encumbrance or disposition, as distinguished from acts of management or administration. Since the law merely constitutes the parent as legal administrator of the child's property (which is a general power), the parent requires special authority for the acts above specified, and this authority can be given only by a court.

SUNLIFE ASSURANCE COMPANY v. CA (SPS. BACANI)

245 SCRA 268 QUIASON; June 22, 1995 NATURE A petition for review on certiorari. FACTS - April 15, 1986: Robert John B. Bacani procured a life insurance contract for himself from SUNLIFE (petitioner) valued at P100K. The designated beneficiary was his mother, Bernarda Bacani (respondent). - June 26, 1987: the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its findings prompted it to reject the claim on the ground that the insured did not disclose facts material to the issuance of the policy. The insured gave false statements in the application when he answered in the negative to the question have you ever had or sought advice for urine, kidney, bladder disorder? - Sunlife discovered that two weeks prior to the issuance, insured was diagnosed with renal failure, was confined, and underwent tests. - November 17, 1988: Bacani and her husband filed for specific performance against Sunlife. RTC granted the plea on the ground that that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed, and that the disclosure was not material since the policy was non-medical. - Sunlife appealed to the CA, but the latter denied the appeal on the ground that the cause of death was unrelated to the facts concealed by the insured.

Petitioners Claim > The insured did not disclose facts relevant to the issuance of the policy, thus rescission of the contract may be invoked by the insurance company. Respondents Comments > The actual cause of death was not relevant to the concealed information, and the policy was entered into by the insured in good faith.

ISSUE WON the concealment renders the insurance policy rescissible

HELD YES Ratio The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. Reasoning SEC. 26 (IC) A neglect to communicate that which a party knows and ought to communicate, is called a concealment. SEC. 31 (IC) Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries - The information which the insured failed to disclose was material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. - Good faith is no defense in concealment. It appears that such concealment was deliberate on the part of the insured. - The waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. - Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries Disposition Petition is granted and the decision of CA is reversed and set aside.

FILIPINO MERCHANTS INS. v. CA (CHOA TIEK SENG)

179 SCRA 638 REGALADO; November 28, 1989 NATURE Review of the decision of the CA FACTS - Plaintiff insured said shipment with defendant insurance company under said cargo for the goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms. - Some of the goods arrived in bad condition. Plaintiff made a claim against Filipino Merchants Insurance Company. The latter refused to pay. Plaintiff brought an action against them. The defendant insurance company presented a third party complaint against the vessel and the arrastre contractor.

- Judgment was rendered against the insurance company. On the third party complaint, the third party defendants were ordered to pay the third party plaintiffs. The CA affirmed, but modified the same with regard to the adjudication of the thirdparty complaint ISSUES 1. WON some fortuity, casualty or accidental cause is needed to be proved despite the all risks policy (as asserted by the insurance company) 2. WON the respondent has an insurable interest

HELD 1. NO - The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. 7 This is pursuant to the very purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. - Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. As we held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that the insurance company has the burden of proving that the loss is caused by the risk excepted and for want of such proof, the company is liable. In the present case, there being no showing that the loss was caused by any of the excepted perils, the insurer is liable under the policy. 2. YES - Section 13 of the Insurance Code defines insurable interest in property as every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. In principle, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property y. 16 Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. - Respondents interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. - Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid the insurance premium covering them - Moreover, the issue of lack of insurable interest was not raised in petitioners answer. Disposition Petition denied

[G.R. No. 137775. March 31, 2005] FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO TO, respondents. [G.R. No. 140704. March 31, 2005]

ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO TO, petitioners, vs. THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and FGU INSURANCE CORP., respondents. DECISION CHICO-NAZARIO, J.: Before Us are two separate Petitions for review assailing the Decision[1] of the Court of Appeals in CAG.R. CV No. 49624 entitled, San Miguel Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang, and Co To, Defendants-Appellants, Third Party Plaintiffs versus FGU Insurance Corporation, Third-Party Defendant-Appellant, which affirmed in toto the decision[2] of the Regional Trial Court of Cebu City, Branch 22. The dispositive portion of the Court of Appeals decision reads: WHEREFORE, for all the foregoing, judgment is hereby rendered as follows: 1) Ordering defendants to pay plaintiff the sum of P1,346,197.00 and an interest of 6% per annum to be reckoned from the filing of this case on October 2, 1990; 2) Ordering defendants to pay plaintiff the sum of P25,000.00 for attorneys fees and an additional sum of P10,000.00 as litigation expenses; 3) With cost against defendants. For the Third-Party Complaint: 1) Ordering third-party defendant FGU Insurance Company to pay and reimburse defendants the amount of P632,700.00.[3] The Facts Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another. On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO, the following cargoes: Bill of Lading No. 1 2 Shipment 25,000 cases Pale Pilsen 350 cases Cerveza Negra 15,000 cases Pale Pilsen 200 cases Cerveza Negra Destination Estancia, Iloilo Estancia, Iloilo San Jose, Antique San Jose, Antique

The consignee for the cargoes covered by Bill of Lading No. 1 was SMCs Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the consignee for the cargoes covered by Bill of Lading No. 2 was SMCs BMD-San Jose Beer Sales Office, San Jose, Antique.

The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30 September 1979. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique. When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over the area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to transfer the barge to a safer place because the vessel might not be able to withstand the big waves. ANCOs representative did not heed the request because he was confident that the barge could withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator. At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barges rope attached to the wharf was cut off by the big waves. At around midnight, the barge run aground and was broken and the cargoes of beer in the barge were swept away. As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00). As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred NinetySeven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as attorneys fees. Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a second amended complaint which was admitted by the Court impleading the surviving partner, Co To and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang. The substituted defendants adopted the original answer with counterclaim of ANCO since the substantial allegations of the original complaint and the amended complaint are practically the same. ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed loaded on the vessel belonging to ANCO. It claimed however that it had an agreement with SMC that ANCO would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk the vessel in which they were loaded, they should not be held liable. ANCO further asserted that there was an agreement between them and SMC to insure the cargoes in order to recover indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591. Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that before the vessel of ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the extent of Twenty Thousand (20,000) cases, were insured with FGU for a total amount of Eight Hundred

Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance Policy No. 29591. ANCO further alleged that on or about 02 October 1979, by reason of very strong winds and heavy waves brought about by a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or destroyed. According to ANCO, the loss of said cargoes occurred as a result of risks insured against in the insurance policy and during the existence and lifetime of said insurance policy. ANCO went on to assert that in the remote possibility that the court will order ANCO to pay SMCs claim, the third-party defendant corporation should be held liable to indemnify or reimburse ANCO whatever amounts, or damages, it may be required to pay to SMC. In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the said insurance policy. According to FGU, it is only liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the following: a) b) c) total loss of the entire shipment; loss of any case as a result of the sinking of the vessel; or loss as a result of the vessel being on fire.

Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss and/or destruction. Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual, moral, and exemplary damages and attorneys fees.[1] The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on ANCOs part, through their representatives, to observe the degree of diligence required that would exonerate them from liability. The trial court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment. With respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes. According to the trial court: . . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken and the beer cargoes on the said barge were swept away. It is the sense of this Court that the risk insured against was the cause of the loss. . . . Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of the policy was only for P858,500.00, defendants as assured, therefore, were considered co-insurers of thirdparty defendant FGU Insurance Corporation to the extent of 975,405.00 value of the cargo. Consequently, inasmuch as there was partial loss of only P1,346,197.00, the assured shall bear 53% of the loss[4] [Emphasis ours] The appellate court affirmed in toto the decision of the lower court and denied the motion for reconsideration and the supplemental motion for reconsideration.

Hence, the petitions. The Issues In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1) Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the insurance contract considering the circumstances surrounding the loss of the cargoes; and 2) Whether or not the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies in the instant case. In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court based on the following assignments of error: 1) The Court of Appeals committed grave abuse of discretion in affirming the findings of the lower court that the negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of the cargoes; and 2) The respondent court acted with grave abuse of discretion when it ruled that the appeal was without merit despite the fact that said court had accepted the decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme Court, as res judicata. Ruling of the Court First, we shall endeavor to dispose of the common issue raised by both petitioners in their respective petitions for review, that is, whether or not the doctrine of res judicata applies in the instant case. It is ANCOs contention that the decision in Civil Case No. R-19341,[5] which was decided in its favor, constitutes res judicata with respect to the issues raised in the case at bar. The contention is without merit. There can be no res judicata as between Civil Case No. R-19341 and the case at bar. In order for res judicata to be made applicable in a case, the following essential requisites must be present: 1) the former judgment must be final; 2) the former judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; 3) the former judgment must be a judgment or order on the merits; and 4) there must be between the first and second action identity of parties, identity of subject matter, and identity of causes of action.[6] There is no question that the first three elements of res judicata as enumerated above are indeed satisfied by the decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due to the absence of the last essential requisite of identity of parties, subject matter and causes of action. The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants, with the latter merely impleading FGU as third-party defendant. The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter of litigation is the loss of the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to deliver to SMCs consignees the lost cargo. Otherwise stated, the controversy in the first case involved the rights and liabilities of the shipowner vis--vis that of the insurer, while the present case involves the rights and liabilities of the shipper vis--vis that of the shipowner. Specifically, Civil Case No. R-19341 was an action for Specific Performance and Damages based on FGU Marine Hull Insurance Policy No. VMF-MH-13519 covering the vessel D/B Lucio, while the instant case is an action for Breach of Contract of Carriage and Damages filed by SMC against ANCO based on Bill of Lading

No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU under Insurance Policy No. MA-58486, should the former be held liable to pay SMC. Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former, the third-party complaint arose from the insurance contract covering the cargoes on board the D/B Lucio. The doctrine of res judicata precludes the re-litigation of a particular fact or issue already passed upon by a court of competent jurisdiction in a former judgment, in another action between the same parties based on a different claim or cause of action. The judgment in the prior action operates as estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered.[7] If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit.[8] Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only findings with respect to matters passed upon by the court in the former judgment are conclusive in the disposition of the instant case. A careful perusal of the decision in Civil Case No. R-19341 will reveal that the pivotal issues resolved by the lower court, as affirmed by both the Court of Appeals and the Supreme Court, can be summarized into three legal conclusions: 1) that the D/B Lucio before and during the voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the reglementary period; and 3) that the vessel D/B Lucio was a constructive total loss. Said decision, however, did not pass upon the issues raised in the instant case. Absent therein was any discussion regarding the liability of ANCO for the loss of the cargoes. Neither did the lower court pass upon the issue of the alleged negligence of the crewmembers of the D/B Lucio being the cause of the loss of the cargoes owned by SMC. Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals that there is res judicata. Anent ANCOs first assignment of error, i.e., the appellate court committed error in concluding that the negligence of ANCOs representatives was the proximate cause of the loss, said issue is a question of fact assailing the lower courts appreciation of evidence on the negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule, findings of fact of lower courts, particularly when affirmed by the appellate court, are deemed final and conclusive. The Supreme Court cannot review such findings on appeal, especially when they are borne out by the records or are based on substantial evidence.[9] As held in the case of Donato v. Court of Appeals,[10] in this jurisdiction, it is a fundamental and settled rule that findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.[11] It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion.[12]

A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained by the appellate court, that ANCOs representatives failed to exercise the extraordinary degree of diligence required by the law to exculpate them from liability for the loss of the cargoes. First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine of its own and could not maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO left it to fend for itself notwithstanding the fact that as the two vessels arrived at the port of San Jose, Antique, signs of the impending storm were already manifest. As stated by the lower court, witness Mr. Anastacio Manilag testified that the captain or patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it reached San Jose, Antique, despite the fact that there were already big waves and the area was already dark. This is corroborated by defendants own witness, Mr. Fernando Macabueg.[13] The trial court continued: At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant could have placed D/B Lucio in a very safe location before they left knowing or sensing at that time the coming of a typhoon. The presence of big waves and dark clouds could have warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a barge, without its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by itself. Had the patron or captain of M/T ANCO, the representative of the defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the cargo of the plaintiff could not have occurred. In short, therefore, defendants through their representatives, failed to observe the degree of diligence required of them under the provision of Art. 1733 of the Civil Code of the Philippines.
[14]

Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of respondents SMC and FGU that the crewmembers of D/B Lucio should have left port at the onset of the typhoon is like advising the fish to jump from the frying pan into the fire and an advice that borders on madness.[15] The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San Jose, Antique, during the time in question. The other vessels were transferred and temporarily moved to Malandong, 5 kilometers from wharf where the barge remained.[16] Clearly, the transferred vessels were definitely safer in Malandong than at the port of San Jose, Antique, at that particular time, a fact which petitioners failed to dispute ANCOs arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang, a fortuitous event (caso fortuito), and there was no fault or negligence on their part. In fact, ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of the cargoes but their efforts proved no match to the forces unleashed by the typhoon which, in petitioners own words was, by any yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of which petitioners could not be held liable for.[17] The Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . . Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) . . . Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods . . . (Emphasis supplied) Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability)[18] by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable. It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.[19] In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have had the foresight not to leave the barge alone considering the pending storm. While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape liability to respondent SMC. The records clearly show the failure of petitioners representatives to exercise the extraordinary degree of diligence mandated by law. To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss.[20] There must have been no contributory negligence on the part of the common carrier. As held in the case of Limpangco Sons v. Yangco Steamship Co.:[21] . . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excused.[22] Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMCs representatives to have the Flood, storm, earthquake, lightning, or other natural disaster or calamity;

barge transferred to a safer place, as was done by the other vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the cargoes. We now come to the issue of whether or not FGU can be held liable under the insurance policy to reimburse ANCO for the loss of the cargoes despite the findings of the respondent court that such loss was occasioned by the blatant negligence of the latters employees. One of the purposes for taking out insurance is to protect the insured against the consequences of his own negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents constitute no defense on the part of the insurer.[23] This rule however presupposes that the loss has occurred due to causes which could not have been prevented by the insured, despite the exercise of due diligence. The question now is whether there is a certain degree of negligence on the part of the insured or his agents that will deprive him the right to recover under the insurance contract. We say there is. However, to what extent such negligence must go in order to exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case. When evidence show that the insureds negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated. In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,[24] the United States Supreme Court held that: The ordinary negligence of the insured and his agents has long been held as a part of the risk which the insurer takes upon himself, and the existence of which, where it is the proximate cause of the loss, does not absolve the insurer from liability. But willful exposure, gross negligence, negligence amounting to misconduct, etc., have often been held to release the insurer from such liability.[25] [Emphasis ours] ... In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the owners of an insured vessel attempted to put her across the bar at Hatteras Inlet. She struck on the bar and was wrecked. The master knew that the depth of water on the bar was such as to make the attempted passage dangerous. Judge Clifford held that, under the circumstances, the loss was not within the protection of the policy, saying: Authorities to prove that persons insured cannot recover for a loss occasioned by their own wrongful acts are hardly necessary, as the proposition involves an elementary principle of universal application. Losses may be recovered by the insured, though remotely occasioned by the negligence or misconduct of the master or crew, if proximately caused by the perils insured against, because such mistakes and negligence are incident to navigation and constitute a part of the perils which those who engage in such adventures are obliged to incur; but it was never supposed that the insured could recover indemnity for a loss occasioned by his own wrongful act or by that of any agent for whose conduct he was responsible.[26] [Emphasis ours] From the above-mentioned decision, the United States Supreme Court has made a distinction between ordinary negligence and gross negligence or negligence amounting to misconduct and its effect on the insureds right to recover under the insurance contract. According to the Court, while mistake and negligence of the master or crew are incident to navigation and constitute a part of the perils that the insurer is obliged to incur, such negligence or recklessness must not be of such gross character as to

amount to misconduct or wrongful acts; otherwise, such negligence shall release the insurer from liability under the insurance contract. In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit: There was blatant negligence on the part of the employees of defendants-appellants when the patron (operator) of the tug boat immediately left the barge at the San Jose, Antique wharf despite the looming bad weather. Negligence was likewise exhibited by the defendants-appellants representative who did not heed Macabuags request that the barge be moved to a more secure place. The prudent thing to do, as was done by the other sea vessels at San Jose, Antique during the time in question, was to transfer the vessel to a safer wharf. The negligence of the defendants-appellants is proved by the fact that on 01 October 1979, the only simple vessel left at the wharf in San Jose was the D/B Lucio.[27] [Emphasis ours] As stated earlier, this Court does not find any reason to deviate from the conclusion drawn by the lower court, as sustained by the Court of Appeals, that ANCOs representatives had failed to exercise extraordinary diligence required of common carriers in the shipment of SMCs cargoes. Such blatant negligence being the proximate cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) This Court, taking into account the circumstances present in the instant case, concludes that the blatant negligence of ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance contract. WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February 1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party complaint. SO ORDERED.

Gulf Resorts Inc. vs. Philippine Charter Insurance Corporation [G.R. No. 156167 May 16, 2005]
Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only to petitioners two swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy provided that the policy wording and rates in said policy be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by defendant, the shock endorsement provided that In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" the word "included" above the underlined portion was deleted. On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged.

Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for damages on its properties. Respondent denied petitioners claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort. The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid only a premium of P393.00 against the peril of earthquake shock, the same premium it had paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC. Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties damaged therein Held: YES. All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the subject policy, no premium payments were made with regard to earthquake shock coverage except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioners insurance policies with AHAC.

Republic vs. Sunlife Assurance Company of Canada [GR No. 15805; October 14, 2005]
Facts: On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR], which held that mutual life insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST. This pronouncement was later affirmed by this court in [CIR] v. Insular Life Assurance Company, Ltd. Sun Life surmised that[,] being a mutual life insurance company, it was likewise exempt from the payment of premium tax and DST. Hence, on August 20, 1999, Sun Life filed with the CIR an administrative claim for tax credit of its alleged erroneously paid premium tax and DST for the aforestated tax periods. For failure of the CIR to act upon the administrative claim for tax credit and with the 2-year period to file a claim for tax credit or refund dwindling away and about to expire, Sun Life filed with the CTA a petition for review. The CTA found in favor of Sun Life. Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life ought to have registered, foremost, with the Cooperative Development Authority before it could enjoy the exemptions from premium tax and DST extended to purely cooperative companies or associations under [S]ections 121 and 199 of the Tax Code. For its failure to register, it could not avail of the exemptions prayed for. The CTA denied the CIRs motion for reconsideration. Issue: Whether or not respondent is exempted from payment of tax on life insurance premiums and documentary stamp tax Held: YES. The Tax Code defines a cooperative as an association conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit. Without a doubt, respondent is a cooperative engaged in a mutual life insurance business. First, it is managed by its members. Both the CA and the CTA found that the management and affairs of respondent were conducted by its member-policyholders. SUNLIFE has been mutualized or converted

from a stock life insurance company to a nonstock mutual life insurance corporation pursuant to Section 266 of the Insurance Code of 1978. On the basis of its bylaws, its ownership has been vested in its member-policyholders who are each entitled to one vote; and who, in turn, elect from among themselves the members of its board of trustees. Second, it is operated with money collected from its members. Since respondent is composed entirely of members who are also its policyholders, all premiums collected obviously come only from them. The member-policyholders constitute both insurer and insured who contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid. Third, it is licensed for the mutual protection of its members, not for the profit of anyone. A mutual life insurance company is conducted for the benefit of its member-policyholders, who pay into its capital by way of premiums. Under the Tax Code although respondent is a cooperative, registration with the Cooperative Development Authority (CDA) is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on policies of insurance or annuities it grants, under Section 199.