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LIST OF CASES (2ND BATCH) 1. Great Pacific Life Assurance s. C!urt !f A""ea#s$ %1& SC'A &()$ 2.

Sun Life Assurance C!. !f Cana*a s. C!urt !f A""ea#s$ +une 22, 1--.$ %. P/i#a0care Hea#t/ S1ste0s Inc. s. C!urt !f A""ea#s$ %(- SC'A %.&$ 2. 3*a. De Cani#an4 s. C!urt !f A""ea#s$ +une 1(, 1--%$ .. Tan s. C!urt !f A""ea#s$ +une 2-, 1-)-$ &. Pru*entia# Guarantee s. Trans5Asia S/i""in4 Lines inc.$ +une 26, 266& (. B!nifaci! Br!s. inc. s. 7!ra$ 7a1 2-, 1-&($ ). T/e Insu#ar Life Assurance s. E8ra*!$ )6 SC'A 1)1$ -. 3*a. De C!nsue4ra s. GSIS$ %( SC'A %1. 16. G! s. 'e*fern$ (2 P/i#. (1$ 11. C!untr1 Ban9ers Ins. C!r". s. Lian4a Ba1$ +anuar1 2., 2662 12. Pacific Ti08er E:"!rt C!r". s. C!urt !f A""ea#s$ 112 SC'A 1--$ 1%. Great Pacific Life Insurance C!r". s. C!urt !f A""ea#s$ )- SC'A .2%$ 12. P/i#a0 Life an* Genera# Assurance C!. s. +u*4e 3a#encia5Ba4a#acsa$ Au4ust 1, 2662$ 1.. 7a9ati Tuscan1 c!n*!0iniu0 C!r". s. C!urt !f A""ea#s$ 21. SC'A 2&2 1&. ;CPB Genera# Insurance s. 7asa4ana Te#a0art$ +une ., 1--1(. ;CPB Genera# Insurance s. 7asa4ana Te#a0art$ %.& SC'A %6($ 1). A0erican H!0e Insurance s. C/ua$ +une 2), 1---$ 1-. Ti8a1 s. C!urt !f A""ea#s$ 2.( SC'A 12&$ 26. P/i#. P/!eni: Suret1 < Ins. C!. s. =!!*>!r9s Inc.$ -2 SC'A 2121. '!?ue s. IAC$ 1%- SC'A .-&$

22. G! Tiac! s. ;ni!n ins. S!ciet1 !f Cant!n$ 26 P/i#. 261$ 2%. Cat/a1 Ins. 3s. C!urt !f A""ea#s$ 1.1 SC'A (16$ 22. Fi#i"in! 7erc/ants Ins. C!. s. C!urt !f A""ea#s 1(SC'A &%)$ 2.. Orienta# Assurance C!r". s. C!urt !f A""ea#s$ 266 SC'A 2.2&. 3*a. De Ga8rie# s. C!urt !f A""ea#s$ N! e08er 12, 1--& 2(. 3*a. De 7a4#ana s. H!n. C!ns!#aci!n$ Au4ust &, 1--2 2). Tiu s. Arries4a*!$ Se"te08er 1, 2662

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a SECOND DI3ISION

G.'. N!. 11%)--

Oct!8er 1%, 1---

G'EAT PACIFIC LIFE ASS;'ANCE CO'P., "etiti!ner, s.

CO;'T OF APPEALS AND 7EDA'DA 3. LE;TE'IO, res"!n*ents. @;IS;7BING, +.A T/is "etiti!n f!r re ie>, un*er 'u#e 2. !f t/e 'u#es !f C!urt, assai#s t/e Decisi!n 1 *ate* 7a1 1(, 1--%, !f t/e C!urt !f A""ea#s an* its 'es!#uti!n 2 *ate* +anuar1 2, 1--2 in CA5G.'. C3 N!. 1)%21. T/e a""e##ate c!urt affir0e* in t!t! t/e Bu*40ent !f t/e 7isa0is Orienta# 'e4i!na# Tria# C!urt, Branc/ 1), in an insurance c#ai0 fi#e* 81 "ri ate res"!n*ent a4ainst Great Pacific Life Assurance C!. T/e *is"!siti e "!rti!n !f t/e tria# c!urtCs *ecisi!n rea*sA =HE'EFO'E, Bu*40ent is ren*ere* a*Bu*4in4 t/e *efen*ant G'EAT PACIFIC LIFE ASS;'ANCE CO'PO'ATION as insurer un*er its Gr!u" "!#ic1 N!. G5 1-6(, in re#ati!n t! Certificati!n B51)..) #ia8#e an* !r*ere* t! "a1 t! t/e DE3ELOP7ENT BAND OF THE PHILIPPINES as cre*it!r !f t/e insure* Dr. =i#fre*! Leuteri!, t/e a0!unt !f EIGHTE SIF THO;SAND T=O H;ND'ED PESOS (P)&,266.66)$ *is0issin4 t/e c#ai0s f!r *a0a4es, att!rne1Cs fees an* #iti4ati!n e:"enses in t/e c!0"#aint an* c!unterc#ai0, >it/ c!sts a4ainst t/e *efen*ant an* *is0issin4 t/e c!0"#aint in res"ect t! t/e "#aintiffs, !t/er t/an t/e >i*!>58eneficiar1, f!r #ac9 !f cause !f acti!n. % T/e facts, as f!un* 81 t/e C!urt !f A""ea#s, are as f!##!>sA A c!ntract !f 4r!u" #ife insurance >as e:ecute* 8et>een "etiti!ner Great Pacific Life Assurance C!r"!rati!n (/ereinafter Gre"a#ife) an* De e#!"0ent Ban9 !f t/e P/i#i""ines (/ereinafter DBP). Gre"a#ife

a4ree* t! insure t/e #i es !f e#i4i8#e /!usin4 #!an 0!rt4a4!rs !f DBP. On N! e08er 11, 1-)%, Dr. =i#fre*! Leuteri!, a "/1sician an* a /!usin4 *e8t!r !f DBP a""#ie* f!r 0e08ers/i" in t/e 4r!u" #ife insurance "#an. In an a""#icati!n f!r0, Dr. Leuteri! ans>ere* ?uesti!ns c!ncernin4 /is /ea#t/ c!n*iti!n as f!##!>sA (. Ha e 1!u e er /a*, !r c!nsu#te*, a "/1sician f!r a /eart c!n*iti!n, /i4/ 8#!!* "ressure, cancer, *ia8etes, #un4$ 9i*ne1 !r st!0ac/ *is!r*er !r an1 !t/er "/1sica# i0"air0entG Ans>erA N!. If s! 4i e *etai#s HHHHHHHHHHHHH.

). Are 1!u n!>, t! t/e 8est !f 1!ur 9n!>#e*4e, in 4!!* /ea#t/G Ans>erA I:J Ees I J NO. 2

On N! e08er 1., 1-)%, Gre"a#ife issue* Certificate N!. B51)..), as insurance c! era4e !f Dr. Leuteri!, t! t/e e:tent !f /is DBP 0!rt4a4e in*e8te*ness a0!untin4 t! ei4/t15si: t/!usan*, t>! /un*re* (P)&,266.66) "es!s.1K>"/i1.nLt On Au4ust &, 1-)2, Dr. Leuteri! *ie* *ue t! M0assi e cere8ra# /e0!rr/a4e.M C!nse?uent#1, DBP su80itte* a *eat/ c#ai0 t! Gre"a#ife. Gre"a#ife *enie* t/e c#ai0 a##e4in4 t/at Dr. Leuteri! >as n!t "/1sica##1 /ea#t/1 >/en /e a""#ie* f!r an insurance c! era4e !n N! e08er 1., 1-)%. Gre"a#ife insiste* t/at Dr. Leuteri! *i* n!t *isc#!se /e /a* 8een sufferin4 fr!0 /1"ertensi!n, >/ic/ cause* /is *eat/. A##e4e*#1, suc/

n!n5*isc#!sure c!nstitute* c!ncea#0ent t/at Bustifie* t/e *enia# !f t/e c#ai0. On Oct!8er 26, 1-)&, t/e >i*!> !f t/e #ate Dr. Leuteri!, res"!n*ent 7e*ar*a 3. Leuteri!, fi#e* a c!0"#aint >it/ t/e 'e4i!na# Tria# C!urt !f 7isa0is Orienta#, Branc/ 1), a4ainst Gre"a#ife f!r MS"ecific Perf!r0ance >it/ Da0a4es.M . Durin4 t/e tria#, Dr. Hernan*! 7eBia, >/! issue* t/e *eat/ certificate, >as ca##e* t! testif1. Dr. 7eBiaCs fin*in4s, 8ase* "art#1 fr!0 t/e inf!r0ati!n 4i en 81 t/e res"!n*ent >i*!>, state* t/at Dr. Leuteri! c!0"#aine* !f /ea*ac/es "resu0a8#1 *ue t! /i4/ 8#!!* "ressure. T/e inference >as n!t c!nc#usi e 8ecause Dr. Leuteri! >as n!t aut!"sie*, /ence, !t/er causes >ere n!t ru#e* !ut. On Fe8ruar1 22, 1-)), t/e tria# c!urt ren*ere* a *ecisi!n in fa !r !f res"!n*ent >i*!> an* a4ainst Gre"a#ife. On 7a1 1(, 1--%, t/e C!urt !f A""ea#s sustaine* t/e tria# c!urtCs *ecisi!n. Hence, t/e "resent "etiti!n. Petiti!ners inter"!se* t/e f!##!>in4 assi4ne* err!rsA 1. THE LO=E' CO;'T E''ED IN HOLDING DEFENDANT5APPELLANT LIABLE TO THE DE3ELOP7ENT BAND OF THE PHILIPPINES (DBP) =HICH IS NOT A PA'TE TO THE CASE FO' PAE7ENT OF THE P'OCEEDS OF A 7O'TGAGE 'EDE7PTION INS;'ANCE ON THE LIFE OF PLAINTIFFCS H;SBAND =ILF'EDO LE;TE'IO ONE OF ITS LOAN BO''O=E'S, INSTEAD OF DIS7ISSING THE CASE AGAINST DEFENDANT5 APPELLANT IPetiti!ner Gre"a#ifeJ FO' LACD OF CA;SE OF ACTION. 2. THE LO=E' CO;'T E''ED IN NOT DIS7ISSING THE CASE FO' =ANT OF +;'ISDICTION O3E' THE

S;B+ECT O' NAT;'E OF THE ACTION AND O3E' THE PE'SON OF THE DEFENDANT. %. THE LO=E' CO;'T E''ED IN O'DE'ING DEFENDANT5APPELLANT TO PAE TO DBP THE A7O;NT OF P)&,266.66 IN THE ABSENCE OF ANE E3IDENCE TO SHO= HO= 7;CH =AS THE ACT;AL A7O;NT PAEABLE TO DBP IN ACCO'DANCE =ITH ITS G'O;P INS;'ANCE CONT'ACT =ITH DEFENDANT5APPELLANT. 2. THE LO=E' CO;'T E''ED IN HOLDING THAT THE'E =AS NO CONCEAL7ENT OF 7ATE'IAL INFO'7ATION ON THE PA'T OF =ILF'EDO LE;TE'IO IN HIS APPLICATION FO' 7E7BE'SHIP IN THE G'O;P LIFE INS;'ANCE PLAN BET=EEN DEFENDANT5 APPELLANT OF THE INS;'ANCE CLAI7 A'ISING F'O7 THE DEATH OF =ILF'EDO LE;TE'IO. & S1nt/esiNe* 8e#!> are t/e assi4ne* err!rs f!r !ur res!#uti!nA 1. =/et/er t/e C!urt !f A""ea#s erre* in /!#*in4 "etiti!ner #ia8#e t! DBP as 8eneficiar1 in a 4r!u" #ife insurance c!ntract fr!0 a c!0"#aint fi#e* 81 t/e >i*!> !f t/e *ece*entO0!rt4a4!rG 2. =/et/er t/e C!urt !f A""ea#s erre* in n!t fin*in4 t/at Dr. Leuteri! c!ncea#e* t/at /e /a* /1"ertensi!n, >/ic/ >!u#* itiate t/e insurance c!ntractG %. =/et/er t/e C!urt !f A""ea#s erre* in /!#*in4 Gre"a#ife #ia8#e in t/e a0!unt !f ei4/t1 si: t/!usan*, t>! /un*re* (P)&,266.66) "es!s >it/!ut "r!!f !f t/e actua# !utstan*in4 0!rt4a4e "a1a8#e 81 t/e 0!rt4a4!r t! DBP.

Petiti!ner a##e4es t/at t/e c!0"#aint >as institute* 81 t/e >i*!> !f Dr. Leuteri!, n!t t/e rea# "art1 in interest, /ence t/e tria# c!urt ac?uire* n! Buris*icti!n ! er t/e case. It ar4ues t/at >/en t/e C!urt !f A""ea#s affir0e* t/e tria# c!urtCs Bu*40ent, Gre"a#ife >as /e#* #ia8#e t! "a1 t/e "r!cee*s !f insurance c!ntract in fa !r !f DBP, t/e in*is"ensa8#e "art1 >/! >as n!t B!ine* in t/e suit. T! res!# e t/e issue, >e 0ust c!nsi*er t/e insura8#e interest in 0!rt4a4e* "r!"erties an* t/e "arties t! t/is t1"e !f c!ntract. T/e rati!na#e !f a 4r!u" insurance "!#ic1 !f 0!rt4a4!rs, !t/er>ise 9n!>n as t/e M0!rt4a4e re*e0"ti!n insurance,M is a *e ice f!r t/e "r!tecti!n !f 8!t/ t/e 0!rt4a4ee an* t/e 0!rt4a4!r. On t/e "art !f t/e 0!rt4a4ee, it /as t! enter int! suc/ f!r0 !f c!ntract s! t/at in t/e e ent !f t/e une:"ecte* *e0ise !f t/e 0!rt4a4!r *urin4 t/e su8sistence !f t/e 0!rt4a4e c!ntract, t/e "r!cee*s fr!0 suc/ insurance >i## 8e a""#ie* t! t/e "a10ent !f t/e 0!rt4a4e *e8t, t/ere81 re#ie in4 t/e /eirs !f t/e 0!rt4a4!r fr!0 "a1in4 t/e !8#i4ati!n. ( In a si0i#ar ein, a0"#e "r!tecti!n is 4i en t! t/e 0!rt4a4!r un*er suc/ a c!nce"t s! t/at in t/e e ent !f *eat/$ t/e 0!rt4a4e !8#i4ati!n >i## 8e e:tin4uis/e* 81 t/e a""#icati!n !f t/e insurance "r!cee*s t! t/e 0!rt4a4e in*e8te*ness. ) C!nse?uent#1, >/ere t/e 0!rt4a4!r "a1s t/e insurance "re0iu0 un*er t/e 4r!u" insurance "!#ic1, 0a9in4 t/e #!ss "a1a8#e t! t/e 0!rt4a4ee, t/e insurance is !n t/e 0!rt4a4!rCs interest, an* t/e 0!rt4a4!r c!ntinues t! 8e a "art1 t! t/e c!ntract. In t/is t1"e !f "!#ic1 insurance, t/e 0!rt4a4ee is si0"#1 an a""!intee !f t/e insurance fun*, suc/ #!ss5"a1a8#e c#ause *!es n!t 0a9e t/e 0!rt4a4ee a "art1 t! t/e c!ntract. -

Sec. ) !f t/e Insurance C!*e "r! i*esA ;n#ess t/e "!#ic1 "r! i*es, >/ere a 0!rt4a4!r !f "r!"ert1 effects insurance in /is !>n na0e "r! i*in4 t/at t/e #!ss s/a## 8e "a1a8#e t! t/e 0!rt4a4ee, !r assi4ns a "!#ic1 !f insurance t! a 0!rt4a4ee, t/e insurance is *ee0e* t! 8e u"!n t/e interest !f t/e 0!rt4a4!r, >/! *!es n!t cease t! 8e a "art1 t! t/e !ri4ina# c!ntract, an* an1 act !f /is, "ri!r t! t/e #!ss, >/ic/ >!u#* !t/er>ise a !i* t/e insurance, >i## /a e t/e sa0e effect, a#t/!u4/ t/e "r!"ert1 is in t/e /an*s !f t/e 0!rt4a4ee, 8ut an1 act >/ic/, un*er t/e c!ntract !f insurance, is t! 8e "erf!r0e* 81 t/e 0!rt4a4!r, 0a1 8e "erf!r0e* 81 t/e 0!rt4a4ee t/erein na0e*, >it/ t/e sa0e effect as if it /a* 8een "erf!r0e* 81 t/e 0!rt4a4!r. T/e insure* "ri ate res"!n*ent *i* n!t ce*e t! t/e 0!rt4a4ee a## /is ri4/ts !r interests in t/e insurance, t/e "!#ic1 statin4 t/atA MIn t/e e ent !f t/e *e8t!rCs *eat/ 8ef!re /is in*e8te*ness >it/ t/e Cre*it!r IDBPJ s/a## /a e 8een fu##1 "ai*, an a0!unt t! "a1 t/e !utstan*in4 in*e8te*ness s/a## first 8e "ai* t! t/e cre*it!r an* t/e 8a#ance !f su0 assure*, if t/ere is an1, s/a## t/en 8e "ai* t! t/e 8eneficiar1Oies *esi4nate* 81 t/e *e8t!r.M 16 =/en DBP su80itte* t/e insurance c#ai0 a4ainst "etiti!ner, t/e #atter *enie* "a10ent t/ere!f, inter"!sin4 t/e *efense !f c!ncea#0ent c!00itte* 81 t/e insure*. T/ereafter, DBP c!##ecte* t/e *e8t fr!0 t/e 0!rt4a4!r an* t!!9 t/e necessar1 acti!n !f f!rec#!sure !n t/e resi*entia# #!t !f "ri ate res"!n*ent. 11 In G!nNa#es La O s. Ee9 T!n4 Lin Fire < 7arine Ins. C!. 12 >e /e#*A

Insure*, 8ein4 t/e "ers!n >it/ >/!0 t/e c!ntract >as 0a*e, is "ri0ari#1 t/e "r!"er "ers!n t! 8rin4 suit t/ere!n. P P P Su8Bect t! s!0e e:ce"ti!ns, insure* 0a1 t/us sue, a#t/!u4/ t/e "!#ic1 is ta9en >/!##1 !r in "art f!r t/e 8enefit !f an!t/er "ers!n na0e* !r unna0e*, an* a#t/!u4/ it is e:"ress#1 0a*e "a1a8#e t! an!t/er as /is interest 0a1 a""ear !r !t/er>ise. P P P A#t/!u4/ a "!#ic1 issue* t! a 0!rt4a4!r is ta9en !ut f!r t/e 8enefit !f t/e 0!rt4a4ee an* is 0a*e "a1a8#e t! /i0, 1et t/e 0!rt4a4!r 0a1 sue t/ere!n in /is !>n na0e, es"ecia##1 >/ere t/e 0!rt4a4eeCs interest is #ess t/an t/e fu## a0!unt rec! era8#e un*er t/e "!#ic1, P P P. An* in !#u0e %%, "a4e )2, !f t/e sa0e >!r9, >e rea* t/e f!##!>in4A Insure* 0a1 8e re4ar*e* as t/e rea# "art1 in interest, a#t/!u4/ /e /as assi4ne* t/e "!#ic1 f!r t/e "ur"!se !f c!##ecti!n, !r /as assi4ne* as c!##atera# securit1 an1 Bu*40ent /e 0a1 !8tain. 1% An* since a "!#ic1 !f insurance u"!n #ife !r /ea#t/ 0a1 "ass 81 transfer, >i## !r successi!n t! an1 "ers!n, >/et/er /e /as an insura8#e interest !r n!t, an* suc/ "ers!n 0a1 rec! er it >/ate er t/e insure* 0i4/t /a e rec! ere*, 12 t/e >i*!> !f t/e *ece*ent Dr. Leuteri! 0a1 fi#e t/e suit a4ainst t/e insurer, Gre"a#ife. T/e sec!n* assi4ne* err!r refers t! an a##e4e* c!ncea#0ent t/at t/e "etiti!ner inter"!se* as its *efense t! annu# t/e insurance c!ntract. Petiti!ner c!nten*s t/at Dr. Leuteri! fai#e* t! *isc#!se t/at /e /a* /1"ertensi!n, >/ic/ 0i4/t /a e cause* /is *eat/. C!ncea#0ent e:ists >/ere t/e assure* /a* 9n!>#e*4e !f a fact 0ateria# t! t/e ris9, an* /!nest1, 4!!* fait/,

an* fair *ea#in4 re?uires t/at /e s/!u#* c!00unicate it t! t/e assure*, 8ut /e *esi4ne*#1 an* intenti!na##1 >it//!#*s t/e sa0e. 1. Petiti!ner 0ere#1 re#ie* !n t/e testi0!n1 !f t/e atten*in4 "/1sician, Dr. Hernan*! 7eBia, as su""!rte* 81 t/e inf!r0ati!n 4i en 81 t/e >i*!> !f t/e *ece*ent. Gre"a#ife asserts t/at Dr. 7eBiaCs tec/nica# *ia4n!sis !f t/e cause !f *eat/ !f Dr. Leuteri! >as a *u#1 *!cu0ente* /!s"ita# rec!r*, an* t/at t/e >i*!>Cs *ec#arati!n t/at /er /us8an* /a* M"!ssi8#e /1"ertensi!n se era# 1ears a4!M s/!u#* n!t 8e c!nsi*ere* as /earsa1, 8ut as "art !f res 4estae. On t/e c!ntrar1 t/e 0e*ica# fin*in4s >ere n!t c!nc#usi e 8ecause Dr. 7eBia *i* n!t c!n*uct an aut!"s1 !n t/e 8!*1 !f t/e *ece*ent. As t/e atten*in4 "/1sician, Dr. 7eBia state* t/at /e /a* n! 9n!>#e*4e !f Dr. Leuteri!Cs an1 "re i!us /!s"ita# c!nfine0ent. 1& Dr. Leuteri!Cs *eat/ certificate state* t/at /1"ertensi!n >as !n#1 Mt/e "!ssi8#e cause !f *eat/.M T/e "ri ate res"!n*entCs state0ent, as t! t/e 0e*ica# /ist!r1 !f /er /us8an*, >as *ue t! /er unre#ia8#e rec!##ecti!n !f e ents. Hence, t/e state0ent !f t/e "/1sician >as "r!"er#1 c!nsi*ere* 81 t/e tria# c!urt as /earsa1. T/e ?uesti!n !f >/et/er t/ere >as c!ncea#0ent >as a"t#1 ans>ere* 81 t/e a""e##ate c!urt, t/usA T/e insure*, Dr. Leuteri!, /a* ans>ere* in /is insurance a""#icati!n t/at /e >as in 4!!* /ea#t/ an* t/at /e /a* n!t c!nsu#te* a *!ct!r !r an1 !f t/e enu0erate* ai#0ents, inc#u*in4 /1"ertensi!n$ >/en /e *ie* t/e atten*in4 "/1sician /a* certifie* in t/e *eat/ certificate t/at t/e f!r0er *ie* !f cere8ra#

/e0!rr/a4e, "r!8a8#1 sec!n*ar1 t! /1"ertensi!n. Fr!0 t/is re"!rt, t/e a""e##ant insurance c!0"an1 refuse* t! "a1 t/e insurance c#ai0. A""e##ant a##e4e* t/at t/e insure* /a* c!ncea#e* t/e fact t/at /e /a* /1"ertensi!n. C!ntrar1 t! a""e##antCs a##e4ati!ns, t/ere >as n! sufficient "r!!f t/at t/e insure* /a* suffere* fr!0 /1"ertensi!n. Asi*e fr!0 t/e state0ent !f t/e insure*Cs >i*!> >/! >as n!t e en sure if t/e 0e*icines ta9en 81 Dr. Leuteri! >ere f!r /1"ertensi!n, t/e a""e##ant /a* n!t "r! en n!r "r!*uce* an1 >itness >/! c!u#* attest t! Dr. Leuteri!Cs 0e*ica# /ist!r1 . . . ::: ::: :::

0!rt4a4!rCs *eat/. Hence, f!r "ri ate res"!n*entCs fai#ure t! esta8#is/ t/e sa0e, t/e acti!n f!r s"ecific "erf!r0ance s/!u#* 8e *is0isse*. Petiti!nerCs c#ai0 is >it/!ut 0erit. A #ife insurance "!#ic1 is a a#ue* "!#ic1. 26 ;n#ess t/e interest !f a "ers!n insure* is susce"ti8#e !f e:act "ecuniar1 0easure0ent, t/e 0easure !f in*e0nit1 un*er a "!#ic1 !f insurance u"!n #ife !r /ea#t/ is t/e su0 fi:e* in t/e "!#ic1. 21 T/e 0!rt4a4!r "ai* t/e "re0iu0 acc!r*in4 t! t/e c! era4e !f /is insurance, >/ic/ states t/atA T/e "!#ic1 states t/at u"!n recei"t !f *ue "r!!f !f t/e De8t!rCs *eat/ *urin4 t/e ter0s !f t/is insurance, a *eat/ 8enefit in t/e a0!unt !f P)&,266.66 s/a## 8e "ai*. In t/e e ent !f t/e *e8t!rCs *eat/ 8ef!re /is in*e8te*ness >it/ t/e cre*it!r s/a## /a e 8een fu##1 "ai*, an a0!unt t! "a1 t/e !utstan*in4 in*e8te*ness s/a## first 8e "ai* t! t/e Cre*it!r an* t/e 8a#ance !f t/e Su0 Assure*, if t/ere is an1 s/a## t/en 8e "ai* t! t/e 8eneficiar1Oies *esi4nate* 81 t/e *e8t!r.M 22 (E0"/asis !0itte*) H!>e er, >e n!te* t/at t/e C!urt !f A""ea#sC *ecisi!n >as "r!0u#4ate* !n 7a1 1(, 1--%. In "ri ate res"!n*entCs 0e0!ran*u0, s/e states t/at DBP f!rec#!se* in 1--. t/eir resi*entia# #!t, in satisfacti!n !f 0!rt4a4!rCs !utstan*in4 #!an. C!nsi*erin4 t/is su"er enin4 e ent, t/e insurance "r!cee*s s/a## inure t! t/e 8enefit !f t/e /eirs !f t/e *ecease* "ers!n !r /is 8eneficiaries. E?uit1 *ictates t/at DBP s/!u#* n!t unBust#1 enric/ itse#f at t/e e:"ense !f an!t/er (Ne0! cu0 a#terius *etri0eni! "r!test). Hence, it cann!t c!##ect t/e insurance "r!cee*s, after it a#rea*1 f!rec#!se* !n t/e 0!rt4a4e. T/e "r!cee*s n!> ri4/t#1

A""e##ant insurance c!0"an1 /a* fai#e* t! esta8#is/ t/at t/ere >as c!ncea#0ent 0a*e 81 t/e insure*, /ence, it cann!t refuse "a10ent !f t/e c#ai0. 1( T/e frau*u#ent intent !n t/e "art !f t/e insure* 0ust 8e esta8#is/e* t! entit#e t/e insurer t! rescin* t/e c!ntract. 1) 7isre"resentati!n as a *efense !f t/e insurer t! a !i* #ia8i#it1 is an affir0ati e *efense an* t/e *ut1 t! esta8#is/ suc/ *efense 81 satisfact!r1 an* c!n incin4 e i*ence rests u"!n t/e insurer. 1- In t/e case at 8ar, t/e "etiti!ner fai#e* t! c#ear#1 an* satisfact!ri#1 esta8#is/ its *efense, an* is t/eref!re #ia8#e t! "a1 t/e "r!cee*s !f t/e insurance.1K>"/i1.nLt An* t/at 8rin4s us t! t/e #ast "!int in t/e re ie> !f t/e case at 8ar. Petiti!ner c#ai0s t/at t/ere >as n! e i*ence as t! t/e a0!unt !f Dr. Leuteri!Cs !utstan*in4 in*e8te*ness t! DBP at t/e ti0e !f t/e

8e#!n4 t! Dr. Leuteri!Cs /eirs re"resente* 81 /is >i*!>, /erein "ri ate res"!n*ent 7e*ar*a Leuteri!. =HE'EFO'E, t/e "etiti!n is /ere81 DENIED. T/e Decisi!n an* 'es!#uti!n !f t/e C!urt !f A""ea#s in CA5 G.'. C3 1)%21 is AFFI'7ED >it/ 7ODIFICATION t/at t/e "etiti!ner is O'DE'ED t! "a1 t/e insurance "r!cee*s a0!untin4 t! Ei4/t15si: t/!usan*, t>! /un*re* (P)&,266.66) "es!s t! t/e /eirs !f t/e insure*, Dr. =i#fre*! Leuteri! (*ecease*), u"!n "resentati!n !f "r!!f !f "ri!r sett#e0ent !f 0!rt4a4!rCs in*e8te*ness t! De e#!"0ent Ban9 !f t/e P/i#i""ines. C!sts a4ainst "etiti!ner.1K>"/i1.nLt SO O'DE'ED.

@;IASON, +.A T/is is a "etiti!n f!r re ie> f!r certi!rari un*er 'u#e 2. !f t/e 'e ise* 'u#es !f C!urt t! re erse an* set asi*e t/e Decisi!n *ate* Fe8ruar1 21, 1--2 !f t/e C!urt !f A""ea#s in CA5G.'. C3 N!. 2-6&), an* its 'es!#uti!n *ate* A"ri# 22, 1--2, *en1in4 rec!nsi*erati!n t/ere!f. =e 4rant t/e "etiti!n. I On A"ri# 1., 1-)&, '!8ert +!/n B. Bacani "r!cure* a #ife insurance c!ntract f!r /i0se#f fr!0 "etiti!ner. He >as issue* P!#ic1 N!. %5-6%5(&&5F a#ue* at P166,666.66, >it/ *!u8#e in*e0nit1 in case !f acci*enta# *eat/. T/e *esi4nate* 8eneficiar1 >as /is 0!t/er, res"!n*ent Bernar*a Bacani. On +une 2&, 1-)(, t/e insure* *ie* in a "#ane cras/. 'es"!n*ent Bernar*a Bacani fi#e* a c#ai0 >it/ "etiti!ner, see9in4 t/e 8enefits !f t/e insurance "!#ic1 ta9en 81 /er s!n. Petiti!ner c!n*ucte* an in esti4ati!n an* its fin*in4s "r!0"te* it t! reBect t/e c#ai0. In its #etter, "etiti!ner inf!r0e* res"!n*ent Bernar*a Bacani, t/at t/e insure* *i* n!t *isc#!se 0ateria# facts re#e ant t! t/e issuance !f t/e "!#ic1, t/us ren*erin4 t/e c!ntract !f insurance !i*a8#e. A c/ec9 re"resentin4 t/e t!ta# "re0iu0s "ai* in t/e a0!unt !f P16,1(2.66 >as attac/e* t! sai* #etter. Petiti!ner c#ai0e* t/at t/e insure* 4a e fa#se state0ents in /is a""#icati!n >/en /e ans>ere* t/e f!##!>in4 ?uesti!nsA

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION

G.'. N!. 16.1%.

+une 22, 1--.

S;NLIFE ASS;'ANCE CO7PANE OF CANADA, "etiti!ner, s. T/e H!n. CO;'T OF APPEALS an* S"!uses 'OLANDO an* BE'NA'DA BACANI, res"!n*ents.

..

=it/in t/e "ast . 1ears /a e 1!uA an1 *!ct!r !r !t/er /ea#t/

a) c!nsu#te* "ractiti!nerG 8)

su80itte* t!A

On N! e08er 1(, 1-)), res"!n*ent Bernar*a Bacani an* /er /us8an*, res"!n*ent '!#an*! Bacani, fi#e* an acti!n f!r s"ecific "erf!r0ance a4ainst "etiti!ner >it/ t/e 'e4i!na# Tria# C!urt, Branc/ 1-1, 3a#enNue#a, 7etr! 7ani#a. Petiti!ner fi#e* its ans>er >it/ c!unterc#ai0 an* a #ist !f e:/i8its c!nsistin4 !f 0e*ica# rec!r*s furnis/e* 81 t/e Lun4 Center !f t/e P/i#i""ines. On +anuar1 12, 1--6, "ri ate res"!n*ents fi#e* a MPr!"!se* Sti"u#ati!n >it/ Pra1er f!r Su00ar1 +u*40entM >/ere t/e1 0anifeste* t/at t/e1 M/a e n! e i*ence t! refute t/e *!cu0entar1 e i*ence !f c!ncea#0entO0isre"resentati!n 81 t/e *ece*ent !f /is /ea#t/ c!n*iti!n ('!##!, ". &2). Petiti!ner fi#e* its 'e?uest f!r A*0issi!ns re#ati e t! t/e aut/enticit1 an* *ue e:ecuti!n !f se era# *!cu0ents as >e## as a##e4ati!ns re4ar*in4 t/e /ea#t/ !f t/e insure*. Pri ate res"!n*ents fai#e* t! !""!se sai* re?uest !r re"#1 t/eret!, t/ere81 ren*erin4 an a*0issi!n !f t/e 0atters a##e4e*. Petiti!ner t/en 0! e* f!r a su00ar1 Bu*40ent an* t/e tria# c!urt *eci*e* in fa !r !f "ri ate res"!n*ents. T/e *is"!siti e "!rti!n !f t/e *ecisi!n is re"r!*uce* as f!##!>sA =HE'EFO'E, Bu*40ent is /ere81 ren*ere* in fa !r !f t/e "#aintiffs an* a4ainst t/e *efen*ant, c!n*e0nin4 t/e #atter t! "a1 t/e f!r0er t/e a0!unt !f One Hun*re* T/!usan* Pes!s (P166,666.66) t/e face a#ue !f insure*Cs Insurance P!#ic1 N!. %-6%(&&, an* t/e Acci*enta# Deat/ Benefit in t/e a0!unt !f One Hun*re* T/!usan* Pes!s (P166,666.66) an* furt/er

EGGG F5ra1sG 8#!!* testsG !t/er testsG c) atten*e* !r 8een a*0itte* t! an1 /!s"ita# !r !t/er 0e*ica# faci#it1G &. ::: 8) Ha e 1!u e er /a* !r s!u4/t a* ice f!rA ::: :::

urine, 9i*ne1 !r 8#a**er *is!r*erG ('!##!, ". .%)

T/e *ecease* ans>ere* ?uesti!n N!. .(a) in t/e affir0ati e 8ut #i0ite* /is ans>er t! a c!nsu#tati!n >it/ a certain Dr. 'eina#*! D. 'a10un*! !f t/e C/inese Genera# H!s"ita# !n Fe8ruar1 1-)&, f!r c!u4/ an* f#u c!0"#icati!ns. T/e !t/er ?uesti!ns >ere ans>ere* in t/e ne4ati e ('!##!, ". .%). Petiti!ner *isc! ere* t/at t>! >ee9s "ri!r t! /is a""#icati!n f!r insurance, t/e insure* >as e:a0ine* an* c!nfine* at t/e Lun4 Center !f t/e P/i#i""ines, >/ere /e >as *ia4n!se* f!r rena# fai#ure. Durin4 /is c!nfine0ent, t/e *ecease* >as su8Becte* t! urina#1sis, u#tra5s!n!4ra"/1 an* /e0at!#!41 tests.

su0 !f P.,666.66 in t/e c!nce"t !f reas!na8#e att!rne1Cs fees an* c!sts !f suit. Defen*antCs c!unterc#ai0 is /ere81 Dis0isse* ('!##!, "". 2%522). In ru#in4 f!r "ri ate res"!n*ents, t/e tria# c!urt c!nc#u*e* t/at t/e facts c!ncea#e* 81 t/e insure* >ere 0a*e in 4!!* fait/ an* un*er a 8e#ief t/at t/e1 nee* n!t 8e *isc#!se*. 7!re! er, it /e#* t/at t/e /ea#t/ /ist!r1 !f t/e insure* >as i00ateria# since t/e insurance "!#ic1 >as Mn!n50e*ica#M. Petiti!ner a""ea#e* t! t/e C!urt !f A""ea#s, >/ic/ affir0e* t/e *ecisi!n !f t/e tria# c!urt. T/e a""e##ate c!urt ru#e* t/at "etiti!ner cann!t a !i* its !8#i4ati!n 81 c#ai0in4 c!ncea#0ent 8ecause t/e cause !f *eat/ >as unre#ate* t! t/e facts c!ncea#e* 81 t/e insure*. It a#s! sustaine* t/e fin*in4 !f t/e tria# c!urt t/at 0atters re#atin4 t! t/e /ea#t/ /ist!r1 !f t/e insure* >ere irre#e ant since "etiti!ner >ai e* t/e 0e*ica# e:a0inati!n "ri!r t! t/e a""r! a# an* issuance !f t/e insurance "!#ic1. 7!re! er, t/e a""e##ate c!urt a4ree* >it/ t/e tria# c!urt t/at t/e "!#ic1 >as Mn!n50e*ica#M ('!##!, "". 25.). Petiti!nerCs 0!ti!n f!r rec!nsi*erati!n >as *enie*$ /ence, t/is "etiti!n. II =e re erse t/e *ecisi!n !f t/e C!urt !f A""ea#s. T/e ru#e t/at factua# fin*in4s !f t/e #!>er c!urt an* t/e a""e##ate c!urt are 8in*in4 !n t/is C!urt is n!t a8s!#ute an* a*0its !f e:ce"ti!ns, suc/ as >/en t/e

Bu*40ent is 8ase* !n a 0isa""reciati!n !f t/e facts (Ger!ni0! . C!urt !f A""ea#s, 222 SC'A 2-2 I1--%J). In >ei4/in4 t/e e i*ence "resente*, t/e tria# c!urt c!nc#u*e* t/at in*ee* t/ere >as c!ncea#0ent an* 0isre"resentati!n, /!>e er, t/e sa0e >as 0a*e in M4!!* fait/M an* t/e facts c!ncea#e* !r 0isre"resente* >ere irre#e ant since t/e "!#ic1 >as Mn!n50e*ica#M. =e *isa4ree. Secti!n 2& !f T/e Insurance C!*e is e:"#icit in re?uirin4 a "art1 t! a c!ntract !f insurance t! c!00unicate t! t/e !t/er, in 4!!* fait/, a## facts >it/in /is 9n!>#e*4e >/ic/ are 0ateria# t! t/e c!ntract an* as t! >/ic/ /e 0a9es n! >arrant1, an* >/ic/ t/e !t/er /as n! 0eans !f ascertainin4. Sai* Secti!n "r! i*esA A ne4#ect t! c!00unicate t/at >/ic/ a "art1 9n!>s an* !u4/t t! c!00unicate, is ca##e* c!ncea#0ent. 7ateria#it1 is t! 8e *eter0ine* n!t 81 t/e e ent, 8ut s!#e#1 81 t/e "r!8a8#e an* reas!na8#e inf#uence !f t/e facts u"!n t/e "art1 t! >/!0 c!00unicati!n is *ue, in f!r0in4 /is esti0ate !f t/e *isa* anta4es !f t/e "r!"!se* c!ntract !r in 0a9in4 /is in?uiries (T/e Insurance C!*e, Sec. %1). T/e ter0s !f t/e c!ntract are c#ear. T/e insure* is s"ecifica##1 re?uire* t! *isc#!se t! t/e insurer 0atters re#atin4 t! /is /ea#t/. T/e inf!r0ati!n >/ic/ t/e insure* fai#e* t! *isc#!se >ere 0ateria# an* re#e ant t! t/e a""r! a# an* issuance !f t/e insurance "!#ic1. T/e 0atters c!ncea#e* >!u#* /a e *efinite#1 affecte* "etiti!nerCs

acti!n !n /is a""#icati!n, eit/er 81 a""r! in4 it >it/ t/e c!rres"!n*in4 a*Bust0ent f!r a /i4/er "re0iu0 !r reBectin4 t/e sa0e. 7!re! er, a *isc#!sure 0a1 /a e >arrante* a 0e*ica# e:a0inati!n !f t/e insure* 81 "etiti!ner in !r*er f!r it t! reas!na8#1 assess t/e ris9 in !# e* in acce"tin4 t/e a""#icati!n. In 3*a. *e Cani#an4 . C!urt !f A""ea#s, 22% SC'A 22% (1--%), >e /e#* t/at 0ateria#it1 !f t/e inf!r0ati!n >it//e#* *!es n!t *e"en* !n t/e state !f 0in* !f t/e insure*. Neit/er *!es it *e"en* !n t/e actua# !r "/1sica# e ents >/ic/ ensue. T/us, M4!a* fait/M is n! *efense in c!ncea#0ent. T/e insure*Cs fai#ure t! *isc#!se t/e fact t/at /e >as /!s"ita#iNe* f!r t>! >ee9s "ri!r t! fi#in4 /is a""#icati!n f!r insurance, raises 4ra e *!u8ts a8!ut /is 8!nafi*es. It a""ears t/at suc/ c!ncea#0ent >as *e#i8erate !n /is "art. T/e ar4u0ent, t/at "etiti!nerCs >ai er !f t/e 0e*ica# e:a0inati!n !f t/e insure* *e8un9s t/e 0ateria#it1 !f t/e facts c!ncea#e*, is untena8#e. =e reiterate !ur ru#in4 in Saturnin! . P/i#i""ine A0erican Life Insurance C!0"an1, ( SC'A %1& (1-&%), t/at M . . . t/e >ai er !f a 0e*ica# e:a0inati!n Iin a n!n50e*ica# insurance c!ntractJ ren*ers e en 0!re 0ateria# t/e inf!r0ati!n re?uire* !f t/e a""#icant c!ncernin4 "re i!us c!n*iti!n !f /ea#t/ an* *iseases suffere*, f!r suc/ inf!r0ati!n necessari#1 c!nstitutes an i0"!rtant fact!r >/ic/ t/e insurer ta9es int! c!nsi*erati!n in *eci*in4 >/et/er t! issue t/e "!#ic1 !r n!t . . . M 7!re! er, suc/ ar4u0ent !f "ri ate res"!n*ents >!u#* 0a9e Secti!n 2( !f t/e Insurance C!*e, >/ic/ a##!>s t/e inBure* "art1 t! rescin* a c!ntract !f

insurance >/ere t/ere is c!ncea#0ent, ineffecti e (See 3*a. *e Cani#an4 . C!urt !f A""ea#s, su"ra). Anent t/e fin*in4 t/at t/e facts c!ncea#e* /a* n! 8earin4 t! t/e cause !f *eat/ !f t/e insure*, it is >e## sett#e* t/at t/e insure* nee* n!t *ie !f t/e *isease /e /a* fai#e* t! *isc#!se t! t/e insurer. It is sufficient t/at /is n!n5*isc#!sure 0is#e* t/e insurer in f!r0in4 /is esti0ates !f t/e ris9s !f t/e "r!"!se* insurance "!#ic1 !r in 0a9in4 in?uiries (Hens!n . T/e P/i#i""ine A0erican Life Insurance C!., .& O.G. N!. 2) I1-&6J). =e, t/eref!re, ru#e t/at "etiti!ner "r!"er#1 e:ercise* its ri4/t t! rescin* t/e c!ntract !f insurance 81 reas!n !f t/e c!ncea#0ent e0"#!1e* 81 t/e insure*. It 0ust 8e e0"/asiNe* t/at rescissi!n >as e:ercise* >it/in t/e t>!51ear c!ntesta8i#it1 "eri!* as rec!4niNe* in Secti!n 2) !f T/e Insurance C!*e. =HE'EFO'E, t/e "etiti!n is G'ANTED an* t/e Decisi!n !f t/e C!urt !f A""ea#s is 'E3E'SED an* SET ASIDE. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. 12.&() 7arc/ 1), 2662

PHILA7CA'E HEALTH SESTE7S, INC., "etiti!ner, s.

CO;'T OF APPEALS an* +;LITA T'INOS, res"!n*ents. ENA'ES5SANTIAGO, +.A Ernani Trin!s, *ecease* /us8an* !f res"!n*ent +u#ita Trin!s, a""#ie* f!r a /ea#t/ care c! era4e >it/ "etiti!ner P/i#a0care Hea#t/ S1ste0s, Inc. In t/e stan*ar* a""#icati!n f!r0, /e ans>ere* n! t! t/e f!##!>in4 ?uesti!nA Ha e 1!u !r an1 !f 1!ur fa0i#1 0e08ers e er c!nsu#te* !r 8een treate* f!r /i4/ 8#!!* "ressure, /eart tr!u8#e, *ia8etes, cancer, #i er *isease, ast/0a !r "e"tic u#cerG (If Ees, 4i e *etai#s).1 T/e a""#icati!n >as a""r! e* f!r a "eri!* !f !ne 1ear fr!0 7arc/ 1, 1-)) t! 7arc/ 1, 1-)-. Acc!r*in4#1, /e >as issue* Hea#t/ Care A4ree0ent N!. P6161-2. ;n*er t/e a4ree0ent, res"!n*entQs /us8an* >as entit#e* t! a ai# !f /!s"ita#iNati!n 8enefits, >/et/er !r*inar1 !r e0er4enc1, #iste* t/erein. He >as a#s! entit#e* t! a ai# !f M!ut5"atient 8enefitsM suc/ as annua# "/1sica# e:a0inati!ns, "re enti e /ea#t/ care an* !t/er !ut5"atient ser ices. ;"!n t/e ter0inati!n !f t/e a4ree0ent, t/e sa0e >as e:ten*e* f!r an!t/er 1ear fr!0 7arc/ 1, 1-)- t! 7arc/ 1, 1--6, t/en fr!0 7arc/ 1, 1--6 t! +une 1, 1--6. T/e a0!unt !f c! era4e >as increase* t! a 0a:i0u0 su0 !f P(.,666.66 "er *isa8i#it1.2 Durin4 t/e "eri!* !f /is c! era4e, Ernani suffere* a /eart attac9 an* >as c!nfine* at t/e 7ani#a 7e*ica# Center (77C) f!r !ne 0!nt/ 8e4innin4 7arc/ -, 1--6. =/i#e /er /us8an* >as in t/e /!s"ita#, res"!n*ent trie* t! c#ai0 t/e 8enefits un*er t/e /ea#t/ care

a4ree0ent. H!>e er, "etiti!ner *enie* /er c#ai0 sa1in4 t/at t/e Hea#t/ Care A4ree0ent >as !i*. Acc!r*in4 t! "etiti!ner, t/ere >as a c!ncea#0ent re4ar*in4 ErnaniQs 0e*ica# /ist!r1. D!ct!rs at t/e 77C a##e4e*#1 *isc! ere* at t/e ti0e !f ErnaniQs c!nfine0ent t/at /e >as /1"ertensi e, *ia8etic an* ast/0atic, c!ntrar1 t! /is ans>er in t/e a""#icati!n f!r0. T/us, res"!n*ent "ai* t/e /!s"ita#iNati!n e:"enses /erse#f, a0!untin4 t! a8!ut P(&,666.66. After /er /us8an* >as *isc/ar4e* fr!0 t/e 77C, /e >as atten*e* 81 a "/1sica# t/era"ist at /!0e. Later, /e >as a*0itte* at t/e C/inese Genera# H!s"ita#. Due t! financia# *ifficu#ties, /!>e er, res"!n*ent 8r!u4/t /er /us8an* /!0e a4ain. In t/e 0!rnin4 !f A"ri# 1%, 1--6, Ernani /a* fe er an* >as fee#in4 er1 >ea9. 'es"!n*ent >as c!nstraine* t! 8rin4 /i0 8ac9 t! t/e C/inese Genera# H!s"ita# >/ere /e *ie* !n t/e sa0e *a1. On +u#1 22, 1--6, res"!n*ent institute* >it/ t/e 'e4i!na# Tria# C!urt !f 7ani#a, Branc/ 22, an acti!n f!r *a0a4es a4ainst "etiti!ner an* its "resi*ent, Dr. Benit! 'e erente, >/ic/ >as *!c9ete* as Ci i# Case N!. -65.%(-.. S/e as9e* f!r rei08urse0ent !f /er e:"enses "#us 0!ra# *a0a4es an* att!rne1Qs fees. After tria#, t/e #!>er c!urt ru#e* a4ainst "etiti!ners, iNA =HE'EFO'E, in ie> !f t/e f!r4!in4, t/e C!urt ren*ers Bu*40ent in fa !r !f t/e "#aintiff +u#ita Trin!s, !r*erin4A 1. Defen*ants t! "a1 an* rei08urse t/e 0e*ica# an* /!s"ita# c! era4e !f t/e #ate Ernani Trin!s in t/e a0!unt !f P(&,666.66 "#us interest, unti# t/e a0!unt is fu##1 "ai* t! "#aintiff >/! "ai* t/e sa0e$

2. Defen*ants t! "a1 t/e re*uce* a0!unt !f 0!ra# *a0a4es !f P16,666.66 t! "#aintiff$ %. Defen*ants t! "a1 t/e re*uce* a0!unt P16,666.66 as e:e0"#ar1 *a0a4es t! "#aintiff$ !f

Petiti!ner furt/er ar4ues t/at it is n!t an insurance c!0"an1, >/ic/ is 4! erne* 81 t/e Insurance C!00issi!n, 8ut a Hea#t/ 7aintenance Or4aniNati!n un*er t/e aut/!rit1 !f t/e De"art0ent !f Hea#t/. Secti!n 2 (1) !f t/e Insurance C!*e *efines a c!ntract !f insurance as an a4ree0ent >/ere81 !ne un*erta9es f!r a c!nsi*erati!n t! in*e0nif1 an!t/er a4ainst #!ss, *a0a4e !r #ia8i#it1 arisin4 fr!0 an un9n!>n !r c!ntin4ent e ent. An insurance c!ntract e:ists >/ere t/e f!##!>in4 e#e0ents c!ncurA 1. T/e insure* /as an insura8#e interest$ 2. T/e insure* is su8Bect t! a ris9 !f #!ss 81 t/e /a""enin4 !f t/e *esi4nate* "eri#$ %. T/e insurer assu0es t/e ris9$ 2. Suc/ assu0"ti!n !f ris9 is "art !f a 4enera# sc/e0e t! *istri8ute actua# #!sses a0!n4 a #ar4e 4r!u" !f "ers!ns 8earin4 a si0i#ar ris9$ an* .. In c!nsi*erati!n !f t/e insurerQs "r!0ise, t/e insure* "a1s a "re0iu0.) Secti!n % !f t/e Insurance C!*e states t/at an1 c!ntin4ent !r un9n!>n e ent, >/et/er "ast !r future, >/ic/ 0a1 *a0nif1 a "ers!n /a in4 an insura8#e interest a4ainst /i0, 0a1 8e insure* a4ainst. E er1 "ers!n /as an insura8#e interest in t/e #ife an* /ea#t/ !f /i0se#f. Secti!n 16 "r! i*esA E er1 "ers!n /as an insura8#e interest in t/e #ife an* /ea#t/A

2. Defen*ants t! "a1 att!rne1Qs fees !f P26,666.66, "#us c!sts !f suit. SO O'DE'ED.% On a""ea#, t/e C!urt !f A""ea#s affir0e* t/e *ecisi!n !f t/e tria# c!urt 8ut *e#ete* a## a>ar*s f!r *a0a4es an* a8s!# e* "etiti!ner 'e erente.2 Petiti!nerQs 0!ti!n f!r rec!nsi*erati!n >as *enie*.. Hence, "etiti!ner 8r!u4/t t/e instant "etiti!n f!r re ie>, raisin4 t/e "ri0ar1 ar4u0ent t/at a /ea#t/ care a4ree0ent is n!t an insurance c!ntract$ /ence t/e Minc!ntesta8i#it1 c#auseM un*er t/e Insurance C!*e& *!es n!t a""#1.1K>"/i1.nLt Petiti!ner ar4ues t/at t/e a4ree0ent 4rants M#i in4 8enefits,M suc/ as 0e*ica# c/ec95u"s an* /!s"ita#iNati!n >/ic/ a 0e08er 0a1 i00e*iate#1 enB!1 s! #!n4 as /e is a#i e u"!n effecti it1 !f t/e a4ree0ent unti# its e:"irati!n !ne51ear t/ereafter. Petiti!ner a#s! "!ints !ut t/at !n#1 0e*ica# an* /!s"ita#iNati!n 8enefits are 4i en un*er t/e a4ree0ent >it/!ut an1 in*e0nificati!n, un#i9e in an insurance c!ntract >/ere t/e insure* is in*e0nifie* f!r /is #!ss. 7!re! er, since Hea#t/ Care A4ree0ents are !n#1 f!r a "eri!* !f !ne 1ear, as c!0"are* t! insurance c!ntracts >/ic/ #ast #!n4er,( "etiti!ner ar4ues t/at t/e inc!ntesta8i#it1 c#ause *!es n!t a""#1, as t/e sa0e re?uires an effecti it1 "eri!* !f at #east t>! 1ears.

(1) !f /i0se#f, !f /is s"!use an* !f /is c/i#*ren$ (2) !f an1 "ers!n !n >/!0 /e *e"en*s >/!##1 !r in "art f!r e*ucati!n !r su""!rt, !r in >/!0 /e /as a "ecuniar1 interest$ (%) !f an1 "ers!n un*er a #e4a# !8#i4ati!n t! /i0 f!r t/e "a10ent !f 0!ne1, res"ectin4 "r!"ert1 !r ser ice, !f >/ic/ *eat/ !r i##ness 0i4/t *e#a1 !r "re ent t/e "erf!r0ance$ an* (2) !f an1 "ers!n u"!n >/!se #ife an1 estate !r interest este* in /i0 *e"en*s. In t/e case at 8ar, t/e insura8#e interest !f res"!n*entQs /us8an* in !8tainin4 t/e /ea#t/ care a4ree0ent >as /is !>n /ea#t/. T/e /ea#t/ care a4ree0ent >as in t/e nature !f n!n5#ife insurance, >/ic/ is "ri0ari#1 a c!ntract !f in*e0nit1.- Once t/e 0e08er incurs /!s"ita#, 0e*ica# !r an1 !t/er e:"ense arisin4 fr!0 sic9ness, inBur1 !r !t/er sti"u#ate* c!ntin4ent, t/e /ea#t/ care "r! i*er 0ust "a1 f!r t/e sa0e t! t/e e:tent a4ree* u"!n un*er t/e c!ntract. Petiti!ner ar4ues t/at res"!n*entQs /us8an* c!ncea#e* a 0ateria# fact in /is a""#icati!n. It a""ears t/at in t/e a""#icati!n f!r /ea#t/ c! era4e, "etiti!ners re?uire* res"!n*entQs /us8an* t! si4n an e:"ress aut/!riNati!n f!r an1 "ers!n, !r4aniNati!n !r entit1 t/at /as an1 rec!r* !r 9n!>#e*4e !f /is /ea#t/ t! furnis/ an1 an* a## inf!r0ati!n re#ati e t! an1 /!s"ita#iNati!n, c!nsu#tati!n, treat0ent !r an1 !t/er 0e*ica# a* ice !r e:a0inati!n.16 S"ecifica##1, t/e Hea#t/ Care A4ree0ent si4ne* 81 res"!n*entQs /us8an* statesA

=e /ere81 *ec#are an* a4ree t/at a## state0ent an* ans>ers c!ntaine* /erein an* in an1 a**en*u0 anne:e* t! t/is a""#icati!n are fu##, c!0"#ete an* true an* 8in* a## "arties in interest un*er t/e A4ree0ent /erein a""#ie* f!r, t/at t/ere s/a## 8e n! c!ntract !f /ea#t/ care c! era4e un#ess an* unti# an A4ree0ent is issue* !n t/is a""#icati!n an* t/e fu## 7e08ers/i" Fee acc!r*in4 t! t/e 0!*e !f "a10ent a""#ie* f!r is actua##1 "ai* *urin4 t/e #ifeti0e an* 4!!* /ea#t/ !f "r!"!se* 7e08ers$ t/at n! inf!r0ati!n ac?uire* 81 an1 'e"resentati e !f P/i#a0Care s/a## 8e 8in*in4 u"!n P/i#a0Care un#ess set !ut in >ritin4 in t/e a""#icati!n$ t/at an1 "/1sician is, 81 t/ese "resents, e:"ress#1 aut/!riNe* t! *isc#!se !r 4i e testi0!n1 at an1ti0e re#ati e t! an1 inf!r0ati!n ac?uire* 81 /i0 in /is "r!fessi!na# ca"acit1 u"!n an1 ?uesti!n affectin4 t/e e#i4i8i#it1 f!r /ea#t/ care c! era4e !f t/e Pr!"!se* 7e08ers an* t/at t/e acce"tance !f an1 A4ree0ent issue* !n t/is a""#icati!n s/a## 8e a ratificati!n !f an1 c!rrecti!n in !r a**iti!n t! t/is a""#icati!n as state* in t/e s"ace f!r H!0e Office En*!rse0ent.11 (;n*ersc!rin4 !urs) In a**iti!n t! t/e a8! e c!n*iti!n, "etiti!ner a**iti!na##1 re?uire* t/e a""#icant f!r aut/!riNati!n t! in?uire a8!ut t/e a""#icantQs 0e*ica# /ist!r1, t/usA I /ere81 aut/!riNe an1 "ers!n, !r4aniNati!n, !r entit1 t/at /as an1 rec!r* !r 9n!>#e*4e !f 01 /ea#t/ an*O!r t/at !f HHHHHHHHHH t! 4i e t! t/e P/i#a0Care Hea#t/ S1ste0s, Inc. an1 an* a## inf!r0ati!n re#ati e t! an1 /!s"ita#iNati!n, c!nsu#tati!n, treat0ent !r an1 !t/er 0e*ica# a* ice !r e:a0inati!n. T/is aut/!riNati!n is in c!nnecti!n >it/ t/e a""#icati!n f!r /ea#t/ care c! era4e !n#1. A "/!t!4ra"/ic c!"1 !f t/is

aut/!riNati!n s/a## 8e as (;n*ersc!rin4 !urs)

a#i* as t/e !ri4ina#.12

Petiti!ner cann!t re#1 !n t/e sti"u#ati!n re4ar*in4 MIn a#i*ati!n !f a4ree0entM >/ic/ rea*sA Fai#ure t! *isc#!se !r 0isre"resentati!n !f an1 0ateria# inf!r0ati!n 81 t/e 0e08er in t/e a""#icati!n !r 0e*ica# e:a0inati!n, >/et/er intenti!na# !r unintenti!na#, s/a## aut!0atica##1 in a#i*ate t/e A4ree0ent fr!0 t/e er1 8e4innin4 an* #ia8i#it1 !f P/i#a0care s/a## 8e #i0ite* t! return !f a## 7e08ers/i" Fees "ai*. An un*isc#!se* !r 0isre"resente* inf!r0ati!n is *ee0e* 0ateria# if its re e#ati!n >!u#* /a e resu#te* in t/e *ec#inati!n !f t/e a""#icant 81 P/i#a0care !r t/e assess0ent !f a /i4/er 7e08ers/i" Fee f!r t/e 8enefit !r 8enefits a""#ie* f!r.1% T/e ans>er assai#e* 81 "etiti!ner >as in res"!nse t! t/e ?uesti!n re#atin4 t! t/e 0e*ica# /ist!r1 !f t/e a""#icant. T/is #ar4e#1 *e"en*s !n !"ini!n rat/er t/an fact, es"ecia##1 c!0in4 fr!0 res"!n*entQs /us8an* >/! >as n!t a 0e*ica# *!ct!r. =/ere 0atters !f !"ini!n !r Bu*40ent are ca##e* f!r, ans>ers 0a*e in 4!!* fait/ an* >it/!ut intent t! *ecei e >i## n!t a !i* a "!#ic1 e en t/!u4/ t/e1 are untrue.12 T/us, (A)#t/!u4/ fa#se, a re"resentati!n !f t/e e:"ectati!n, intenti!n, 8e#ief, !"ini!n, !r Bu*40ent !f t/e insure* >i## n!t a !i* t/e "!#ic1 if t/ere is n! actua# frau* in in*ucin4 t/e acce"tance !f t/e ris9, !r its acce"tance at a #!>er rate !f "re0iu0, an* t/is is #i9e>ise t/e ru#e a#t/!u4/ t/e state0ent is 0ateria# t! t/e ris9, if t/e state0ent is !8 i!us#1 !f t/e f!re4!in4 c/aracter, since in suc/ case t/e insurer is n!t Bustifie* in re#1in4 u"!n suc/ state0ent, 8ut is !8#i4ate* t! 0a9e furt/er

in?uir1. T/ere is a c#ear *istincti!n 8et>een suc/ a case an* !ne in >/ic/ t/e insure* is frau*u#ent#1 an* intenti!na##1 states t! 8e true, as a 0atter !f e:"ectati!n !r 8e#ief, t/at >/ic/ /e t/en 9n!>s, t! 8e actua##1 untrue, !r t/e i0"!ssi8i#it1 !f >/ic/ is s/!>n 81 t/e facts >it/in /is 9n!>#e*4e, since in suc/ case t/e intent t! *ecei e t/e insurer is !8 i!us an* a0!unts t! actua# frau*.1. (;n*ersc!rin4 !urs) T/e frau*u#ent intent !n t/e "art !f t/e insure* 0ust 8e esta8#is/e* t! >arrant rescissi!n !f t/e insurance c!ntract.1& C!ncea#0ent as a *efense f!r t/e /ea#t/ care "r! i*er !r insurer t! a !i* #ia8i#it1 is an affir0ati e *efense an* t/e *ut1 t! esta8#is/ suc/ *efense 81 satisfact!r1 an* c!n incin4 e i*ence rests u"!n t/e "r! i*er !r insurer. In an1 case, >it/ !r >it/!ut t/e aut/!rit1 t! in esti4ate, "etiti!ner is #ia8#e f!r c#ai0s 0a*e un*er t/e c!ntract. Ha in4 assu0e* a res"!nsi8i#it1 un*er t/e a4ree0ent, "etiti!ner is 8!un* t! ans>er t/e sa0e t! t/e e:tent a4ree* u"!n. In t/e en*, t/e #ia8i#it1 !f t/e /ea#t/ care "r! i*er attac/es !nce t/e 0e08er is /!s"ita#iNe* f!r t/e *isease !r inBur1 c! ere* 81 t/e a4ree0ent !r >/ene er /e a ai#s !f t/e c! ere* 8enefits >/ic/ /e /as "re"ai*. ;n*er Secti!n 2( !f t/e Insurance C!*e, Ma c!ncea#0ent entit#es t/e inBure* "art1 t! rescin* a c!ntract !f insurance.M T/e ri4/t t! rescin* s/!u#* 8e e:ercise* "re i!us t! t/e c!00ence0ent !f an acti!n !n t/e c!ntract.1( In t/is case, n! rescissi!n >as 0a*e. Besi*es, t/e cance##ati!n !f /ea#t/ care a4ree0ents as in insurance "!#icies re?uire t/e c!ncurrence !f t/e f!##!>in4 c!n*iti!nsA 1. Pri!r n!tice !f cance##ati!n t! insure*$

2. N!tice 0ust 8e 8ase* !n t/e !ccurrence after effecti e *ate !f t/e "!#ic1 !f !ne !r 0!re !f t/e 4r!un*s 0enti!ne*$ %. 7ust 8e in >ritin4, 0ai#e* !r *e#i ere* t! t/e insure* at t/e a**ress s/!>n in t/e "!#ic1$ 2. 7ust state t/e 4r!un*s re#ie* u"!n "r! i*e* in Secti!n &2 !f t/e Insurance C!*e an* u"!n re?uest !f insure*, t! furnis/ facts !n >/ic/ cance##ati!n is 8ase*.1) N!ne !f t/e a8! e "re5c!n*iti!ns >as fu#fi##e* in t/is case. =/en t/e ter0s !f insurance c!ntract c!ntain #i0itati!ns !n #ia8i#it1, c!urts s/!u#* c!nstrue t/e0 in suc/ a >a1 as t! "rec#u*e t/e insurer fr!0 n!n5 c!0"#iance >it/ /is !8#i4ati!n.1- Bein4 a c!ntract !f a*/esi!n, t/e ter0s !f an insurance c!ntract are t! 8e c!nstrue* strict#1 a4ainst t/e "art1 >/ic/ "re"are* t/e c!ntract R t/e insurer.26 B1 reas!n !f t/e e:c#usi e c!ntr!# !f t/e insurance c!0"an1 ! er t/e ter0s an* "/rase!#!41 !f t/e insurance c!ntract, a08i4uit1 0ust 8e strict#1 inter"rete* a4ainst t/e insurer an* #i8era##1 in fa !r !f t/e insure*, es"ecia##1 t! a !i* f!rfeiture.21 T/is is e?ua##1 a""#ica8#e t! Hea#t/ Care A4ree0ents. T/e "/rase!#!41 use* in 0e*ica# !r /!s"ita# ser ice c!ntracts, suc/ as t/e !ne at 8ar, 0ust 8e #i8era##1 c!nstrue* in fa !r !f t/e su8scri8er, an* if *!u8tfu# !r reas!na8#1 susce"ti8#e !f t>! inter"retati!ns t/e c!nstructi!n c!nferrin4 c! era4e is t! 8e a*!"te*, an* e:c#usi!nar1 c#auses !f *!u8tfu# i0"!rt s/!u#* 8e strict#1 c!nstrue* a4ainst t/e "r! i*er.22 Anent t/e inc!ntesta8i#it1 !f t/e 0e08ers/i" !f res"!n*entQs /us8an*, >e ?u!te >it/ a""r! a# t/e f!##!>in4 fin*in4s !f t/e tria# c!urtA

(;)n*er t/e tit#e C#ai0 "r!ce*ures !f e:"enses, t/e *efen*ant P/i#a0care Hea#t/ S1ste0s Inc. /a* t>e# e 0!nt/s fr!0 t/e *ate !f issuance !f t/e A4ree0ent >it/in >/ic/ t! c!ntest t/e 0e08ers/i" !f t/e "atient if /e /a* "re i!us ai#0ent !f ast/0a, an* si: 0!nt/s fr!0 t/e issuance !f t/e a4ree0ent if t/e "atient >as sic9 !f *ia8etes !r /1"ertensi!n. T/e "eri!*s /a in4 e:"ire*, t/e *efense !f c!ncea#0ent !r 0isre"resentati!n n! #!n4er #ie.2% Fina##1, "etiti!ner a##e4es t/at res"!n*ent >as n!t t/e #e4a# >ife !f t/e *ecease* 0e08er c!nsi*erin4 t/at at t/e ti0e !f t/eir 0arria4e, t/e *ecease* >as "re i!us#1 0arrie* t! an!t/er >!0an >/! >as sti## a#i e. T/e /ea#t/ care a4ree0ent is in t/e nature !f a c!ntract !f in*e0nit1. Hence, "a10ent s/!u#* 8e 0a*e t! t/e "art1 >/! incurre* t/e e:"enses. It is n!t c!ntr! erte* t/at res"!n*ent "ai* a## t/e /!s"ita# an* 0e*ica# e:"enses. S/e is t/eref!re entit#e* t! rei08urse0ent. T/e rec!r*s a*e?uate#1 "r! e t/e e:"enses incurre* 81 res"!n*ent f!r t/e *ecease*Qs /!s"ita#iNati!n, 0e*icati!n an* t/e "r!fessi!na# fees !f t/e atten*in4 "/1sicians.22 =HE'EFO'E, in ie> !f t/e f!re4!in4, t/e "etiti!n is DENIED. T/e assai#e* *ecisi!n !f t/e C!urt !f A""ea#s *ate* Dece08er 12, 1--. is AFFI'7ED. SO O'DE'ED.

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a

THI'D DI3ISION

Dece08er 1-)% u"!n t/e 4r!un* t/at t/e insure* /a* c!ncea#e* 0ateria# inf!r0ati!n fr!0 it. Petiti!ner t/en fi#e* a c!0"#aint a4ainst Great Pacific >it/ t/e Insurance C!00issi!n f!r rec! er1 !f t/e insurance "r!cee*s. Durin4 t/e /earin4 ca##e* 81 t/e Insurance C!00issi!ner, "etiti!ner testifie* t/at s/e >as n!t a>are !f an1 seri!us i##ness suffere* 81 /er #ate /us8an* % an* t/at, as far as s/e 9ne>, /er /us8an* /a* *ie* 8ecause !f a 9i*ne1 *is!r*er. 2 A *e"!siti!n 4i en 81 Dr. =i#fre*! C#au*i! >as "resente* 81 "etiti!ner. T/ere Dr. C#au*i! state* t/at /e >as t/e fa0i#1 "/1sician !f t/e *ecease* +ai0e Cani#an4 . an* t/at /e /a* "re i!us#1 treate* /i0 f!r Msinus tac/1car*iaM an* Macute 8r!nc/itis.M & Great Pacific f!r its "art "resente* Dr. Es"eranNa @uis0!ri!, a "/1sician an* a 0e*ica# un*er>riter >!r9in4 f!r Great Pacific. ( S/e testifie* t/at t/e *ecease*Cs insurance a""#icati!n /a* 8een a""r! e* !n t/e 8asis !f /is 0e*ica# *ec#arati!n. ) S/e e:"#aine* t/at as a ru#e, 0e*ica# e:a0inati!ns are re?uire* !n#1 in cases >/ere t/e a""#icant /as in*icate* in /is a""#icati!n f!r insurance c! era4e t/at /e /as "re i!us#1 un*er4!ne 0e*ica# c!nsu#tati!n an* /!s"ita#iNati!n. In a *ecisi!n *ate* . N! e08er 1-)., Insurance C!00issi!ner Ar0an*! Ansa#*! !r*ere* Great Pacific t! "a1 P1-,(66 "#us #e4a# interest an* P2,666.66 as att!rne1Cs fees after /!#*in4 t/atA 1. t/e ai#0ent !f +ai0e Cani#an4 >as n!t s! seri!us t/at, e en if it /a* 8een *isc#!se*, it >!u#* n!t /a e affecte* Great PacificCs *ecisi!n t! insure /i0$

G.'. N!. -22-2

+une 1(, 1--%

THEL7A 3DA. DE CANILANG, "etiti!ner, s. HON. CO;'T OF APPEALS an* G'EAT PACIFIC LIFE ASS;'ANCE CO'PO'ATION, res"!n*ents. Si0e!n C. Sat! f!r "etiti!ner. FELICIANO, +.A On 1) +une 1-)2, +ai0e Cani#an4 c!nsu#te* Dr. =i#fre*! B. C#au*i! an* >as *ia4n!se* as sufferin4 fr!0 Msinus tac/1car*ia.M T/e *!ct!r "rescri8e* t/e f!##!>in4 fr! /i0A TraNe"a0, a tran?ui#iNer$ an* A"tin, a 8eta58#!c9er *ru4. 7r. Cani#an4 c!nsu#te* t/e sa0e *!ct!r a4ain !n % Au4ust 1-)2 an* t/is ti0e >as f!un* t! /a e Macute 8r!nc/itis.M On ne:t *a1, 2 Au4ust 1-)2, +ai0e Cani#an4 a""#ie* f!r a Mn!n50e*ica#M insurance "!#ic1 >it/ res"!n*ent Great Pacific Life Assurance C!0"an1 (MGreat PacificM) na0in4 /is >ife, T/e#0a Cani#an4, as /is 8eneficiar1. 1 +ai0e Cani#an4 >as issue* !r*inar1 #ife insurance P!#ic1 N!. %2.1&%, >it/ t/e face a#ue !f P1-,(66, effecti e as !f - Au4ust 1-)2. On . Au4ust 1-)%, +ai0e Cani#an4 *ie* !f Mc!n4esti /eart fai#ure,M Mane0ia,M an* Mc/r!nic ane0ia.M Petiti!ner, >i*!> an* 8eneficiar1 !f t/e insure*, fi#e* c#ai0 >it/ Great Pacific >/ic/ t/e insurer *enie* !n e 2 a .

2. Great Pacific /a* >ai e* its ri4/t t! in?uire int! t/e /ea#t/ c!n*iti!n !f t/e a""#icant 81 t/e issuance !f t/e "!#ic1 *es"ite t/e #ac9 !f ans>ers t! Ms!0e !f t/e "ertinent ?uesti!nsM in t/e insurance a""#icati!n$ %. t/ere >as n! intenti!na# c!ncea#0ent !n t/e "art !f t/e insure* +ai0e Cani#an4 as /e /a* t/!u4/t t/at /e >as 0ere#1 sufferin4 fr!0 a 0in!r ai#0ent an* si0"#e c!#*$ 16 an* 2. Batas Pa08ansa B#4. )2( >/ic/ !i*s an insurance c!ntract, >/et/er !r n!t c!ncea#0ent >as intenti!na##1 0a*e, >as n!t a""#ica8#e t! Cani#an4Cs case as t/at #a> 8eca0e effecti e !n#1 !n 1 +une 1-).. On a""ea# 81 Great Pacific, t/e C!urt !f A""ea#s re erse* an* set asi*e t/e *ecisi!n !f t/e Insurance C!00issi!ner an* *is0isse* T/e#0a Cani#an4Cs c!0"#aint an* Great PacificCs c!unterc#ai0. T/e C!urt !f A""ea#e* f!un* t/at t/e use !f t/e >!r* Mintenti!na##1M 81 t/e Insurance C!00issi!ner in *efinin4 an* res!# in4 t/e issue a4ree* u"!n 81 t/e "arties at "re5tria# 8ef!re t/e Insurance C!00issi!ner >as n!t su""!rte* 81 t/e e i*ence$ t/at t/e issue a4ree* u"!n 81 t/e "arties /a* 8een >/et/er t/e *ecease* insure*, +ai0e Cani#an4, 0a*e a 0ateria# c!ncea#0ent as t/e state !f /is /ea#t/ at t/e ti0e !f t/e fi#in4 !f insurance a""#icati!n, Bustif1in4 res"!n*entCs *enia# !f t/e c#ai0. T/e C!urt !f A""ea#s a#s! f!un* t/at t/e fai#ure !f +ai0e Cani#an4 t! *isc#!se "re i!us 0e*ica# c!nsu#tati!n an* treat0ent c!nstitute* 0ateria# inf!r0ati!n >/ic/ s/!u#* /a e 8een c!00unicate* t! Great Pacific t! ena8#e t/e #atter t! 0a9e "r!"er in?uiries. T/e C!urt !f A""ea#s fina##1 /e#* t/at t/e N4 Gan See case >/ic/ /a*

in !# e* 0isre"resentati!n >as n!t a""#ica8#e in res"ect !f t/e case at 8ar >/ic/ in !# es c!ncea#0ent. Petiti!ner T/e#0a Cani#an4 is n!> 8ef!re t/is C!urt !n a Petiti!n f!r 'e ie> !n Certi!rari a##e4in4 t/atA 1. . . . t/e H!n!ra8#e C!urt !f A""ea#s, s"ea9in4 >it/ *ue res"ect, erre* in n!t /!#*in4 t/at t/e issue in t/e case a4ree* u"!n 8et>een t/e "arties 8ef!re t/e Insurance C!00issi!n is >/et/er !r n!t +ai0e Cani#an4 Mintenti!na##1M 0a*e 0ateria# c!ncea#0ent in statin4 /is state !f /ea#t/$ 2. . . . at an1 rate, t/e n!n5*isc#!sure !f certain facts a8!ut /is "re i!us /ea#t/ c!n*iti!ns *!es n!t a0!unt t! frau* an* "ri ate res"!n*ent is *ee0e* t! /a e >ai e* in?uir1 t/eret!. 11 T/e 0e*ica# *ec#arati!n >/ic/ >as set !ut in t/e a""#icati!n f!r insurance e:ecute* 81 +ai0e Cani#an4 rea* as f!##!>sA 7EDICAL DECLA'ATION I /ere81 *ec#are t/atA (1) I /a e n!t 8een c!nfine* in an1 /!s"ita#, sanitariu0 !r infir0ar1, n!r recei e an1 0e*ica# !r sur4ica# a* iceOattenti!n >it/in t/e #ast fi e (.) 1ears. (2) I /a e ne er 8een treate* n!r c!nsu#te* a "/1sician f!r a /eart c!n*iti!n, /i4/ 8#!!* "ressure, cancer, *ia8etes, #un4, 9i*ne1, st!0ac/ *is!r*er, !r an1 !t/er "/1sica# i0"air0ent.

(%) I a0, t! t/e 8est !f 01 9n!>#e*4e, in 4!!* /ea#t/. EFCEPTIONSA HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH HHHHHHHHHHHHHHHHHHHHHHHHH GENE'AL DECLA'ATION I /ere81 *ec#are t/at a## t/e f!re4!in4 ans>ers an* state0ents are c!0"#ete, true an* c!rrect. I /ere81 a4ree t/at if t/ere 8e an1 frau* !r 0isre"resentati!n in t/e a8! e state0ents 0ateria# t! t/e ris9, t/e INS;'ANCE CO7PANE u"!n *isc! er1 >it/in t>! (2) 1ears fr!0 t/e effecti e *ate !f insurance s/a## /a e t/e ri4/t t! *ec#are suc/ insurance nu## an* !i*. T/at t/e #ia8i#ities !f t/e C!0"an1 un*er t/e sai* P!#ic1OTAOCertificate s/a## accrue an* 8e4in !n#1 fr!0 t/e *ate !f c!00ence0ent !f ris9 state* in t/e P!#ic1OTAOCertificate, "r! i*e* t/at t/e first "re0iu0 is "ai* an* t/e P!#ic1OTAOCertificate is *e#i ere* t!, an* acce"te* 81 0e in "ers!n, >/en I a0 in actua# 4!!* /ea#t/. Si4ne* at 7ani#a /is 2t/ *a1 !f Au4ust, 1--2. I##e4i8#e TTTTTTTTTT Si4nature !f A""#icant. 12 =e n!te t/at in a**iti!n t! t/e ne4ati e state0ents 0a*e 81 7r. Cani#an4 in "ara4ra"/ 1 an* 2 !f t/e 0e*ica# *ec#arati!n, /e fai#e* t! *isc#!se in t/e a""r!"riate s"ace, un*er t/e ca"ti!n ME:ce"ti!ns,M t/at /e /a* t>ice c!nsu#te* Dr. =i#fre*! B. C#au*i!

>/! /a* f!un* /i0 t! 8e sufferin4 fr!0 Msinus tac/1car*iaM an* Macute 8r!nc/itis.M T/e re#e ant statut!r1 "r! isi!ns as t/e1 st!!* at t/e ti0e Great Pacific issue* t/e c!ntract !f insurance an* at t/e ti0e +ai0e Cani#an4 *ie*, are set !ut in P.D. N!. 12&6, a#s! 9n!>n as t/e Insurance C!*e !f 1-(), >/ic/ >ent int! effect !n 11 +une 1-(). T/ese "r! isi!ns rea* as f!##!>sA Sec. 2&. A ne4#ect t! c!00unicate t/at >/ic/ a "art1 9n!>s an* !u4/t t! c!00unicate, is ca##e* a c!ncea#0ent. ::: ::: :::

Sec. 2). Eac/ "art1 t! a c!ntract !f insurance 0ust c!00unicate t! t/e !t/er, in 4!!* fait/, a## fact!rs >it/in /is 9n!>#e*4e >/ic/ are 0ateria# t! t/e c!ntract an* as t! >/ic/ /e 0a9es n! >arrant1, an* >/ic/ t/e !t/er /as n!t t/e 0eans !f ascertainin4. (E0"/asis su""#ie*) ;n*er t/e f!re4!in4 "r! isi!ns, t/e inf!r0ati!n c!ncea#e* 0ust 8e inf!r0ati!n >/ic/ t/e c!ncea#in4 "art1 9ne> an* M!u4/t t! I/a eJ c!00unicateI*J,M t/at is t! sa1, inf!r0ati!n >/ic/ >as M0ateria# t! t/e c!ntract.M T/e test !f 0ateria#it1 is c!ntaine* in Secti!n %1 !f t/e Insurance C!*e !f 1-() >/ic/ rea*sA Sec. %1. 7ateria##1 is t! 8e *eter0ine* n!t 81 t/e e ent, 8ut s!#e#1 81 t/e "r!8a8#e an* reas!na8#e inf#uence !f t/e facts u"!n t/e "art1 t! >/!0 t/e c!00unicati!n is *ue, in f!r0in4 /is esti0ate !f t/e *isa* anta4es !f t/e "r!"!se* c!ntract, !r in 0a9in4 /is in?uiries. (E0"/asis su""#ie*)

MSinus tac/1car*iaM is c!nsi*ere* "resent M>/en t/e /eart rate e:cee*s 166 8eats "er 0inute.M 1% T/e s10"t!0s !f t/is c!n*iti!n inc#u*e "!un*in4 in t/e c/est an* s!0eti0es faintness an* >ea9ness !f t/e "ers!n affecte*. T/e f!##!>in4 e#a8!rati!n >as !ffere* 81 Great Pacific an* set !ut 81 t/e C!urt !f A""ea#s in its Decisi!nA Sinus tac/1car*ia is *efine* as sinus5initiate*$ /eart rate faster t/an 166 8eats "er 0inute. (Harris!nC s Princi"#es !f Interna# 7e*icine, )t/ e*. I1-()J, ". 11-%.) It is, a0!n4 !t/ers, a c!00!n reacti!n t! /eart *isease, inc#u*in4 01!car*ia# infarcti!n, an* /eart fai#ure "er se. (Henr1 +.L. 7arri!t, 7.D., E#ectr!car*i!4ra"/1, &t/ e*., I1-((J, ". 12(.) T/e 0e*icati!n "rescri8e* 81 Dr. C#au*i! f!r treat0ent !f Cani#an4Cs ai#0ent !n +une 1), 1-)2, in*icates t/e c!n*iti!n t/at sai* "/1sician >as tr1in4 t! 0ana4e. T/us, /e "rescri8e* TraNe"a0, (P/i#i""ine In*e: !f 7e*ica# S"ecia#ties (PI7S), 3!#. 12, N!. %, Dec. 1-)., ". 112) >/ic/ is anti5an:iet1, anti5c!n u#sant, 0usc#e5 re#a:ant$ an* A"tin, (I*e0, ". %&) a car*iac *ru4, f!r "a#"itati!ns an* ner !us /eart. Suc/ treat0ent c!u#* /a e 8een a er1 0ateria# inf!r0ati!n t! t/e insurer in *eter0inin4 t/e acti!n t! 8e ta9e !n Cani#an4Cs a""#icati!n f!r #ife insurance c! era4e. 12 =e a4ree >it/ t/e C!urt !f A""ea#s t/at t/e inf!r0ati!n >/ic/ +ai0e Cani#an4 fai#e* t! *isc#!se >as 0ateria# t! t/e a8i#it1 !f Great Pacific t! esti0ate t/e "r!8a8#e ris9 /e "resente* as a su8Bect !f #ife insurance. Ha* Cani#an4 *isc#!se* /is isits t! /is *!ct!r, t/e *ia4n!sis 0a*e an* 0e*icines "rescri8e* 81 suc/ *!ct!r, in t/e insurance a""#icati!n, it 0a1 8e reas!na8#1 assu0e* t/at Great Pacific >!u#* /a e

0a*e furt/er in?uiries an* >!u#* /a e "r!8a8#1 refuse* t! issue a n!n50e*ica# insurance "!#ic1 !r, at t/e er1 #east, re?uire* a /i4/er "re0iu0 f!r t/e sa0e c! era4e. 1. T/e 0ateria#it1 !f t/e inf!r0ati!n >it//e#* 81 Great Pacific *i* n!t *e"en* u"!n t/e state !f 0in* !f +ai0e Cani#an4. A 0anCs state !f 0in* !r su8Becti e 8e#ief is n!t ca"a8#e !f "r!!f in !ur Bu*icia# "r!cess, e:ce"t t/r!u4/ "r!!f !f e:terna# acts !r fai#ure t! act fr!0 >/ic/ inferences as t! /is su8Becti e 8e#ief 0a1 8e reas!na8#1 *ra>n. Neit/er *!es 0ateria#it1 *e"en* u"!n t/e actua# !r "/1sica# e ents >/ic/ ensue. 7ateria#it1 re#ates rat/er t! t/e M"r!8a8#e an* reas!na8#e inf#uence !f t/e factsM u"!n t/e "art1 t! >/!0 t/e c!00unicati!n s/!u#* /a e 8een 0a*e, in assessin4 t/e ris9 in !# e* in 0a9in4 !r !0ittin4 t! 0a9e furt/er in?uiries an* in acce"tin4 t/e a""#icati!n f!r insurance$ t/at M"r!8a8#e an* reas!na8#e inf#uence !f t/e factsM c!ncea#e* 0ust, !f c!urse, 8e *eter0ine* !8Becti e#1, 81 t/e Bu*4e u#ti0ate#1. T/e insurance Great Pacific a""#ie* f!r >as a Mn!n5 0e*ica#M insurance "!#ic1. In Saturnin! . P/i#i""ine5 A0erican Life Insurance C!0"an1, 1& t/is C!urt /e#* t/atA . . . if an1t/in4, t/e >ai er !f 0e*ica# e:a0inati!n Iin a n!n50e*ica# insurance c!ntractJ ren*ers e en 0!re 0ateria# t/e inf!r0ati!n re?uire* !f t/e a""#icant c!ncernin4 "re i!us c!n*iti!n !f /ea#t/ an* *iseases suffere*, f!r suc/ inf!r0ati!n necessari#1 c!nstitutes an i0"!rtant fact!r >/ic/ t/e insurer ta9es int! c!nsi*erati!n in *eci*in4 >/et/er t! issue t/e "!#ic1 !r n!t . . . . 1( (E0"/asis su""#ie*)

T/e Insurance C!00issi!ner /a* a#s! ru#e* t/at t/e fai#ure !f Great Pacific t! c!n e1 certain inf!r0ati!n t! t/e insurer >as n!t Mintenti!na#M in nature, f!r t/e reas!n t/at +ai0e Cani#an4 8e#ie e* t/at /e >as sufferin4 fr!0 0in!r ai#0ent #i9e a c!00!n c!#*. Secti!n 2( !f t/e Insurance C!*e !f 1-() as it e:iste* fr!0 1-(2 u" t! 1-)., t/at is, t/r!u4/!ut t/e ti0e ran4e 0ateria# f!r "resent "ur"!ses, "r! i*e* t/atA Sec. 2(. A c!ncea#0ent entit#es t/e inBure* "art1 t! rescin* a c!ntract !f insurance. T/e "rece*in4 statute, Act N!. 222(, as it st!!* fr!0 1-12 u" t! 1-(2, /a* "r! i*e*A Sec. 2&. A c!ncea#0ent, >/et/er intenti!na# !r unintenti!na#, entit#es t/e inBure* "art1 t! rescin* a c!ntract !f insurance. (E0"/asis su""#ie*) ;"!n t/e !t/er /an*, in 1-)., t/e Insurance C!*e !f 1-() >as a0en*e* 81 B.P. B#4. )(2. T/is su8se?uent statute 0!*ifie* Secti!n 2( !f t/e Insurance C!*e !f 1-() s! as t! rea* as f!##!>sA Sec. 2(. A c!ncea#0ent >/et/er intenti!na# !r unintenti!na# entit#es t/e inBure* "art1 t! rescin* a c!ntract !f insurance. (E0"/asis su""#ie*) T/e uns"!9en t/e!r1 !f t/e Insurance C!00issi!ner a""ears t! /a e 8een t/at 81 *e#etin4 t/e "/rase Mintenti!na# !r unintenti!na#,M t/e Insurance C!*e !f 1-() ("ri!r t! its a0en*0ent 81 B.P. B#4. )(2) inten*e* t! #i0it t/e 9in*s !f c!ncea#0ent >/ic/ 4enerate a ri4/t t! rescin* !n t/e "art !f t/e inBure* "art1 t! Mintenti!na# c!ncea#0ents.M T/is ar4u0ent is

n!t "ersuasi e. As a si0"#e 0atter !f 4ra00ar, it 0a1 8e n!te* t/at Mintenti!na#M an* Munintenti!na#M cance# eac/ !t/er !ut. T/e net resu#t t/eref!re !f t/e "/rase M>/et/er intenti!na# !r unitenti!na#M is "recise#1 t! #ea e un?ua#ifie* t/e ter0 Mc!ncea#0ent.M T/us, Secti!n 2( !f t/e Insurance C!*e !f 1-() is "r!"er#1 rea* as referrin4 t! Man1 c!ncea#0entM >it/!ut re4ar* t! >/et/er suc/ c!ncea#0ent is intenti!na# !r unintenti!na#. T/e "/rase M>/et/er intenti!na# !r unintenti!na#M >as in fact su"erf#u!us. T/e *e#eti!n !f t/e "/rase M>/et/er intenti!na# !r unintenti!na#M c!u#* n!t /a e /a* t/e effect !f i0"!sin4 an affir0ati e re?uire0ent t/at a c!ncea#0ent 0ust 8e intenti!na# if it is t! entit#e t/e inBure* "art1 t! rescin* a c!ntract !f insurance. T/e rest!rati!n in 1-). 81 B.P. B#4. )(2 !f t/e "/rase M>/et/er intenti!na# !r unintenti!na#M 0ere#1 un*ersc!re* t/e fact t/at a## t/r!u4/!ut (fr!0 1-12 t! 1-).), t/e statute *i* n!t re?uire "r!!f t/at c!ncea#0ent 0ust 8e Mintenti!na#M in !r*er t! aut/!riNe rescissi!n 81 t/e inBure* "art1. In an1 case, in t/e case at 8ar, t/e nature !f t/e facts n!t c!n e1e* t! t/e insurer >as suc/ t/at t/e fai#ure t! c!00unicate 0ust /a e 8een intenti!na# rat/er t/an 0ere#1 ina* ertent. F!r +ai0e Cani#an4 c!u#* n!t /a e 8een una>are t/at /is /eart 8eat >!u#* at ti0es rise t! /i4/ an* a#ar0in4 #e e#s an* t/at /e /a* c!nsu#te* a *!ct!r t>ice in t/e t>! (2) 0!nt/s 8ef!re a""#1in4 f!r n!n50e*ica# insurance. In*ee*, t/e #ast 0e*ica# c!nsu#tati!n t!!9 "#ace Bust t/e *a1 8ef!re t/e insurance a""#icati!n >as fi#e*. In a## "r!8a8i#it1, +ai0e Cani#an4 >ent t! isit /is *!ct!r "recise#1 8ecause !f t/e *isc!0f!rt an* c!ncern 8r!u4/t a8!ut 81 /is e:"eriencin4 Msinus tac/1car*ia.M

=e fin* it *ifficu#t t! ta9e seri!us#1 t/e ar4u0ent t/at Great Pacific /a* >ai e* in?uir1 int! t/e c!ncea#0ent 81 issuin4 t/e insurance "!#ic1 n!t>it/stan*in4 Cani#an4Cs fai#ure t! set !ut ans>ers t! s!0e !f t/e ?uesti!ns in t/e insurance a""#icati!n. Suc/ fai#ure "recise#1 c!nstitute* c!ncea#0ent !n t/e "art !f Cani#an4. Petiti!nerCs ar4u0ent, if acce"te*, >!u#* !8 i!us#1 erase Secti!n 2( fr!0 t/e Insurance C!*e !f 1-(). It re0ains !n#1 t! n!te t/at t/e C!urt !f A""ea#s fin*in4 t/at t/e "arties /a* n!t a4ree* in t/e "retria# 8ef!re t/e Insurance C!00issi!n t/at t/e re#e ant issue >as >/et/er !r n!t +ai0e Cani#an4 /a* intenti!na##1 c!ncea#e* 0ateria# inf!r0ati!n fr!0 t/e insurer, >as su""!rte* 81 t/e e i*ence !f rec!r*, i.e., t/e Pre5tria# Or*er itse#f *ate* 1( Oct!8er 1-)2 an* t/e 7inutes !f t/e Pre5tria# C!nference *ate* 1. Oct!8er 1-)2, >/ic/ Mrea*i#1 s/!>s t/at t/e >!r* Mintenti!na#M *!es n!t a""ear in t/e state0ent !r *efiniti!n !f t/e issue in t/e sai* Or*er an* 7inutes.M 1) =HE'EFO'E, t/e Petiti!n f!r 'e ie> is DENIED f!r #ac9 !f 0erit an* t/e Decisi!n !f t/e C!urt !f A""ea#s *ate* 1& Oct!8er 1-)- in C.A.5G.'. SP N!. 6)&-& is /ere81 AFFI'7ED. N! "r!n!unce0ent as t! t/e c!sts. SO O'DE'ED.

THI'D DI3ISION G.'. N!. 2)62+une 2-, 1-)-

E7ILIO TAN, +;ANITO TAN, ALBE'TO TAN an* A'T;'O TAN, "etiti!ners, s. THE CO;'T OF APPEALS an* THE PHILIPPINE A7E'ICAN LIFE INS;'ANCE CO7PANE, res"!n*ents. O.F. Sant!s < P.C. N!#asc! f!r "etiti!ners. Ferr1, De #a res"!n*ent. '!sa an* Ass!ciates f!r "ri ate

G;TIE''ES, +'., +.A T/is is a "etiti!n f!r re ie> !n certi!rari !f t/e C!urt !f A""ea#sC *ecisi!n affir0in4 t/e *ecisi!n !f t/e Insurance C!00issi!ner >/ic/ *is0isse* t/e "etiti!nersC c!0"#aint a4ainst res"!n*ent P/i#i""ine A0erican Life Insurance C!0"an1 f!r t/e rec! er1 !f t/e "r!cee*s fr!0 t/eir #ate fat/erCs "!#ic1. T/e facts !f t/e case as f!un* 81 t/e C!urt !f A""ea#s areA Petiti!ners a""ea# fr!0 t/e Decisi!n !f t/e Insurance C!00issi!ner *is0issin4 /erein "etiti!nersC c!0"#aint a4ainst res"!n*ent P/i#i""ine A0erican Life Insurance C!0"an1 f!r t/e rec! er1 !f t/e "r!cee*s !f P!#ic1 N!. 16)22&( in t/e a0!unt !f P )6,666.66. On Se"te08er 2%,1-(%, Tan Lee Si!n4, fat/er !f /erein "etiti!ners, a""#ie* f!r #ife insurance in t/e a0!unt !f P )6,666.66 >it/ res"!n*ent c!0"an1. Sai*

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a

a""#icati!n >as a""r! e* an* P!#ic1 N!. 16)22&( >as issue* effecti e N! e08er &,1-(%, >it/ "etiti!ners t/e 8eneficiaries t/ere!f (E:/i8it A). On A"ri# 2&,1-(., Tan Lee Si!n4 *ie* !f /e"at!0a (E:/i8it B). Petiti!ners t/en fi#e* >it/ res"!n*ent c!0"an1 t/eir c#ai0 f!r t/e "r!cee*s !f t/e #ife insurance "!#ic1. H!>e er, in a #etter *ate* Se"te08er 11, 1-(., res"!n*ent c!0"an1 *enie* "etiti!nersC c#ai0 an* rescin*e* t/e "!#ic1 81 reas!n !f t/e a##e4e* 0isre"resentati!n an* c!ncea#0ent !f 0ateria# facts 0a*e 81 t/e *ecease* Tan Lee Si!n4 in /is a""#icati!n f!r insurance (E:/i8it %). T/e "re0iu0s "ai* !n t/e "!#ic1 >ere t/ereu"!n refun*e* . A##e4in4 t/at res"!n*ent c!0"an1Cs refusa# t! "a1 t/e0 t/e "r!cee*s !f t/e "!#ic1 >as unBustifie* an* unreas!na8#e, "etiti!ners fi#e* !n N! e08er 2(, 1-(., a c!0"#aint a4ainst t/e f!r0er >it/ t/e Office !f t/e Insurance C!00issi!ner, *!c9ete* as I.C. Case N!. 21). After /earin4 t/e e i*ence !f 8!t/ "arties, t/e Insurance C!00issi!ner ren*ere* Bu*40ent !n Au4ust -, 1-((, *is0issin4 "etiti!nersC c!0"#aint. ('!##!, "". -15-2) T/e C!urt !f A""ea#s *is0isse* C t/e "etiti!nersC a""ea# fr!0 t/e Insurance C!00issi!nerCs *ecisi!n f!r #ac9 !f 0erit Hence, t/is "etiti!n. T/e "etiti!ners raise t/e f!##!>in4 issues in t/eir assi4n0ent !f err!rs, t! >itA

A. T/e c!nc#usi!n in #a> !f res"!n*ent res"!n*ent insurer /as t/e ri4/t t! rescin* c!ntract >/en insure* is a#rea*1 *ea* acc!r*ance >it/ e:istin4 #a> an* Buris"ru*ence.

C!urt t/at t/e "!#ic1 is n!t in a""#ica8#e

B. T/e c!nc#usi!n in #a> !f res"!n*ent C!urt t/at res"!n*ent insurer 0a1 8e a##!>e* t! a !i* t/e "!#ic1 !n 4r!un*s !f c!ncea#0ent 81 t/e *ecease* assure*, is c!ntrar1 t! t/e "r! isi!ns !f t/e "!#ic1 c!ntract itse#f, as >e## as, !f a""#ica8#e #e4a# "r! isi!ns an* esta8#is/e* Buris"ru*ence. C. T/e inference !f res"!n*ent C!urt t/at res"!n*ent insurer >as 0is#e* in issuin4 t/e "!#ic1 are 0anifest#1 0ista9en an* c!ntrar1 t! a*0itte* e i*ence. ('!##!, ". () T/e "etiti!ners c!nten* t/at t/e res"!n*ent c!0"an1 n! #!n4er /a* t/e ri4/t t! rescin* t/e c!ntract !f insurance as rescissi!n 0ust a##e4e*#1 8e *!ne *urin4 t/e #ifeti0e !f t/e insure* >it/in t>! 1ears an* "ri!r t! t/e c!00ence0ent !f acti!n. T/e c!ntenti!n is >it/!ut 0erit. T/e "ertinent secti!n in t/e Insurance C!*e "r! i*esA Secti!n 2). =/ene er a ri4/t t! rescin* a c!ntract !f insurance is 4i en t! t/e insurer 81 an1 "r! isi!n !f t/is c/a"ter, suc/ ri4/t 0ust 8e e:ercise* "re i!us t! t/e c!00ence0ent !f an acti!n !n t/e c!ntract. After a "!#ic1 !f #ife insurance 0a*e "a1a8#e !n t/e *eat/ !f t/e insure* s/a## /a e 8een in f!rce *urin4 t/e #ifeti0e !f t/e insure* f!r a "eri!* !f t>! 1ears

fr!0 t/e *ate !f its issue !r !f its #ast reinstate0ent, t/e insurer cann!t "r! e t/at t/e "!#ic1 is !i* a8 initi! !r is rescin*a8#e 81 reas!n !f t/e frau*u#ent c!ncea#0ent !r 0isre"resentati!n !f t/e insure* !r /is a4ent. Acc!r*in4 t! t/e "etiti!ners, t/e Insurance La> >as a0en*e* an* t/e sec!n* "ara4ra"/ !f Secti!n 2) a**e* t! "re ent t/e insurance c!0"an1 fr!0 e:ercisin4 a ri4/t t! rescin* after t/e *eat/ !f t/e insure*. T/e s!5ca##e* Minc!ntesta8i#it1 c#auseM "rec#u*es t/e insurer fr!0 raisin4 t/e *efenses !f fa#se re"resentati!ns !r c!ncea#0ent !f 0ateria# facts ins!far as /ea#t/ an* "re i!us *iseases are c!ncerne* if t/e insurance /as 8een in f!rce f!r at #east t>! 1ears *urin4 t/e insure*Cs #ifeti0e. T/e "/rase M*urin4 t/e #ifeti0eM f!un* in Secti!n 2) si0"#1 0eans t/at t/e "!#ic1 is n! #!n4er c!nsi*ere* in f!rce after t/e insure* /as *ie*. T/e 9e1 "/rase in t/e sec!n* "ara4ra"/ !f Secti!n 2) is Mf!r a "eri!* !f t>! 1ears.M As n!te* 81 t/e C!urt !f A""ea#s, t! >itA T/e "!#ic1 >as issue* !n N! e08er &,1-(% an* t/e insure* *ie* !n A"ri# 2&,1-(.. T/e "!#ic1 >as t/us in f!rce f!r a "eri!* !f !n#1 !ne 1ear an* fi e 0!nt/s. C!nsi*erin4 t/at t/e insure* *ie* 8ef!re t/e t>!51ear "eri!* /a* #a"se*, res"!n*ent c!0"an1 is n!t, t/eref!re, 8arre* fr!0 "r! in4 t/at t/e "!#ic1 is !i* a8 initi! 81 reas!n !f t/e insure*Cs frau*u#ent c!ncea#0ent !r 0isre"resentati!n. 7!re! er, res"!n*ent c!0"an1 rescin*e* t/e c!ntract !f insurance an* refun*e* t/e "re0iu0s "ai* !n Se"te08er 11, 1-(., "re i!us t! t/e c!00ence0ent

!f t/is acti!n !n N! e08er 2(,1-(.. ('!##!, "". --5 166) ::: ::: :::

T/e "etiti!ners c!nten* t/at t/ere c!u#* /a e 8een n! c!ncea#0ent !r 0isre"resentati!n 81 t/eir #ate fat/er 8ecause Tan Lee Si!n4 *i* n!t /a e t! 8u1 insurance. He >as !n#1 "ressure* 81 insistent sa#es0en t! *! s!. T/e "etiti!ners stateA Here t/en is a case !f an assure* >/!se a""#icati!n >as su80itte* 8ecause !f re"eate* isits an* s!#icitati!ns 81 t/e insurerCs a4ent. Assure* *i* n!t 9n!c9 at t/e *!!r !f t/e insurer t! 8u1 insurance. He >as t/e !8Bect !f s!#icitati!ns an* isits. Assure* >as a 0an !f 0eans. He c!u#* /a e !8taine* a 8i44er insurance, n!t Bust P )6,666.66. If /is "ur"!se >ere t! 0isre"resent an* t! c!ncea# /is ai#0ents in antici"ati!n !f *eat/ *urin4 t/e t>!51ear "eri!*, /e certain#1 c!u#* /a e 4!tten a 8i44er insurance. He *i* n!t. Insurer P/i#a0#ife c!u#* /a e "resente* as >itness its 7e*ica# E:a0iner Dr. ;r8an! Guint!. It >as /e >/! acc!0"#is/e* t/e a""#icati!n, Part II, 0e*ica#. P/i#a0#ife *i* n!t. P/i#a0#ife c!u#* /a e "ut t! t/e >itness stan* its A4ent Bien eni*! S. Guint!, a re#ati e t! Dr. Guint!, A4ain P/i#a0#ife *i* n!t. ("". 1%)1%-, '!##!) ::: ::: :::

T/is H!n!ra8#e Su"re0e C!urt /as /a* !ccasi!n t! *en!unce t/e "ressure an* "ractice in*u#4e* in 81 a4ents in se##in4 insurance. At !ne ti0e !r an!t/er 0!st !f us /a e 8een su8Becte* t! t/at "ressure, t/at "ractice. T/is c!urt t!!9 Bu*icia# c!4niNance !f t/e >/ir#>in* "ressure !f insurance se##in45es"ecia##1 !f t/e a4entCs "ractice !f Csu""#1in4 t/e inf!r0ati!n, "re"arin4 an* ans>erin4 t/e a""#icati!n, su80ittin4 t/e a""#icati!n t! t/eir c!0"anies, c!nc#u*in4 t/e transacti!ns an* !t/er>ise s0!!t/in4 !ut a## *ifficu#ties. =e ca## attenti!n t! >/at t/is H!n!ra8#e C!urt sai* in Insu#ar Life . Fe#ician!, et a#., (% P/i#. 261$ at "a4e 26.A It is !f c!00!n 9n!>#e*4e t/at t/e se##in4 !f insurance t!*a1 is su8Becte* t! t/e >/ir#>in* "ressure !f 0!*ern sa#es0ans/i". Insurance c!0"anies sen* *etai#e* instructi!ns t! t/eir a4ents t! s!#icit an* "r!cure a""#icati!ns. T/ese a4ents are t! 8e f!un* a## ! er t/e #en4t/ an* 8rea*t/ !f t/e #an*. T/e1 are sti0u#ate* t! 0!re acti e eff!rts 81 c!ntests an* 81 t/e 9een c!0"etiti!n !ffere* 81 t/e !t/er ri a# insurance c!0"anies. T/e1 su""#1 a## t/e inf!r0ati!n, "re"are an* ans>er t/e a""#icati!ns, su80it t/e a""#icati!ns t! t/eir c!0"anies, c!nc#u*e t/e transacti!ns, an* !t/er>ise s0!!t/ !ut a## *ifficu#ties. T/e a4ents in s/!rt *! >/at t/e c!0"an1 set t/e0 !ut t! *!.

T/e Insu#ar Life case >as *eci*e* s!0e f!rt1 1ears a4! >/en t/e "ressure !f insurance sa#es0ans/i" >as n!t ! er>/e#0in4 as it is n!>$ >/en t/e "!"u#ati!n !f t/is c!untr1 >as #ess t/an !ne5f!urt/ !f >/at it is n!>$ >/en t/e insurance c!0"anies c!0"etin4 >it/ !ne an!t/er c!u#* 8e c!unte* 81 t/e fin4ers. ("". 1265122, '!##!) ::: ::: :::

In t/e face !f a## t/e a8! e, it >!u#* 8e unBust if, /a in4 8een su8Becte* t! t/e >/ir#>in* "ressure !f insurance sa#es0ans/i" t/is C!urt itse#f /as #!n4 *en!unce*, t/e assure* >/! *ies >it/in t/e t>!51ear "eri!*, s/!u#* stan* c/ar4e* !f frau*u#ent c!ncea#0ent an* 0isre"resentati!n.M (". 122, '!##!) T/e #e4is#ati e ans>er t! t/e ar4u0ents "!se* 81 t/e "etiti!ners is t/e Minc!ntesta8i#it1 c#auseM a**e* 81 t/e sec!n* "ara4ra"/ !f Secti!n 2). T/e insurer /as t>! 1ears fr!0 t/e *ate !f issuance !f t/e insurance c!ntract !r !f its #ast reinstate0ent >it/in >/ic/ t! c!ntest t/e "!#ic1, >/et/er !r n!t, t/e insure* sti## #i es >it/in suc/ "eri!*. After t>! 1ears, t/e *efenses !f c!ncea#0ent !r 0isre"resentati!n, n! 0atter /!> "atent !r >e## f!un*e*, n! #!n4er #ie. C!n4ress fe#t t/is >as a sufficient ans>er t! t/e ari!us tactics e0"#!1e* 81 insurance c!0"anies t! a !i* #ia8i#it1. T/e "etiti!nersC inter"retati!n >!u#* 4i e rise t! t/e inc!n4ru!us situati!n >/ere t/e 8eneficiaries !f an insure* >/! *ies ri4/t after ta9in4 !ut an* "a1in4 f!r a #ife insurance "!#ic1, >!u#* 8e a##!>e* t! c!##ect !n t/e "!#ic1 e en if t/e insure* frau*u#ent#1 c!ncea#e* 0ateria# facts.

T/e "etiti!ners ar4ue t/at n! e i*ence >as "resente* t! s/!> t/at t/e 0e*ica# ter0s >ere e:"#aine* in a #a10anCs #an4ua4e t! t/e insure*. T/e1 state t/at t/e insurer s/!u#* /a e "resente* its t>! 0e*ica# fie#* e:a0iners as >itnesses. 7!re! er, t/e "etiti!ners a##e4e t/at t/e "!#ic1 inten*s t/at t/e 0e*ica# e:a0inati!n 0ust 8e c!n*ucte* 8ef!re its issuance !t/er>ise t/e insurer M>ai es >/ate er i0"erfecti!n 81 ratificati!n.M =e a4ree >it/ t/e C!urt !f A""ea#s >/ic/ ru#e*A On t/e !t/er /an*, "etiti!ners ar4ue t/at n! e i*ence >as "resente* 81 res"!n*ent c!0"an1 t! s/!> t/at t/e ?uesti!ns a""earin4 in Part II !f t/e a""#icati!n f!r insurance >ere as9e*, e:"#aine* t! an* un*erst!!* 81 t/e *ecease* s! as t! "r! e c!ncea#0ent !n /is "art. T/e sa0e is n!t >e## ta9en. T/e *ecease*, 81 affi:in4 /is si4nature !n t/e a""#icati!n f!r0, affir0e* t/e c!rrectness !f a## t/e entries an* ans>ers a""earin4 t/erein. It is 8ut t! 8e e:"ecte* t/at /e, a 8usiness0an, >!u#* n!t /a e affi:e* /is si4nature !n t/e a""#icati!n f!r0 un#ess /e c#ear#1 un*erst!!* its si4nificance. F!r, t/e "resu0"ti!n is t/at a "ers!n inten*s t/e !r*inar1 c!nse?uence !f /is !#untar1 act an* ta9es !r*inar1 care !f /is c!ncerns. ISec. .(c) an* (*), 'u#e 1%1, 'u#es !f C!urtJ. T/e e i*ence f!r res"!n*ent c!0"an1 s/!>s t/at !n Se"te08er 1-,1-(2, t/e *ecease* >as e:a0ine* 81 Dr. 3ict!rian! Li0 an* >as f!un* t! 8e *ia8etic an* /1"ertensi e$ t/at 81 +anuar1, 1-(%, t/e *ecease* >as c!0"#ainin4 !f "r!4ressi e >ei4/t #!ss an* a8*!0ina# "ain an* >as *ia4n!se* t! 8e sufferin4 fr!0 /e"at!0a, (t.s.n. Au4ust 2%, 1-(&, "". )516$ E:/i8it 2). An!t/er "/1sician, Dr. =ences#a! 3itu4, testifie* t/at

t/e *ecease* ca0e t! see /i0 !n Dece08er 12, 1-(% f!r c!ns!#ati!n an* c#ai0e* t! /a e 8een *ia8etic f!r fi e 1ears. (t.s.n., Au4. 2%,1-(&, ". .$ E:/i8it &) Because !f t/e c!ncea#0ent 0a*e 81 t/e *ecease* !f /is c!nsu#tati!ns an* treat0ents f!r /1"ertensi!n, *ia8etes an* #i er *is!r*ers, res"!n*ent c!0"an1 >as t/us 0is#e* int! acce"tin4 t/e ris9 an* a""r! in4 /is a""#icati!n as 0e*ica##1 stan*ar* (E:/i8it .5 C) an* *is"ensin4 >it/ furt/er 0e*ica# in esti4ati!n an* e:a0inati!n (E:/i8it .5A). F!r as #!n4 as n! a* erse 0e*ica# /ist!r1 is re ea#e* in t/e a""#icati!n f!r0, an a""#icant f!r insurance is "resu0e* t! 8e /ea#t/1 an* "/1sica##1 fit an* n! furt/er 0e*ica# in esti4ati!n !r e:a0inati!n is c!n*ucte* 81 res"!n*ent c!0"an1. (t.s.n., A"ri# ),1-(&, "". &5)). ('!##!, "". -&5-)) T/ere is n! str!n4 s/!>in4 t/at >e s/!u#* a""#1 t/e Mfine "rintM !r Mc!ntract !f a*/esi!nM ru#e in t/is case. (S>eet Lines, Inc. . Te es, )% SC'A %&1 I1-()J). T/e "etiti!ners citeA It is a 0atter !f c!00!n 9n!>#e*4e t/at #ar4e a0!unts !f 0!ne1 are c!##ecte* fr!0 i4n!rant "ers!ns 81 c!0"anies an* ass!ciati!ns >/ic/ a*!"t /i4/ s!un*in4 tit#es an* "rint t/e a0!unt !f 8enefits t/e1 a4ree t! "a1 in #ar4e 8#ac95face* t1"e, f!##!>in4 suc/ un*erta9in4s 81 fine "rint c!n*iti!ns >/ic/ *estr!1 t/e su8stance !f t/e "r!0ise. A## "r! isi!ns, c!n*iti!ns, !r e:ce"ti!ns >/ic/ in an1 >a1 ten* t! >!r9 a f!rfeiture !f t/e "!#ic1 s/!u#* 8e c!nstrue* 0!st str!n4#1 a4ainst t/!se f!r >/!se 8enefit t/e1 are inserte*, an* 0!st fa !ra8#1 t!>ar* t/!se a4ainst >/!0 t/e1 are 0eant t! !"erate. (Trini*a* . Orient Pr!tecti e Assurance Assn., &( P/i#. 1)2)

T/ere is n! s/!>in4 t/at t/e ?uesti!ns in t/e a""#icati!n f!r0 f!r insurance re4ar*in4 t/e insure*Cs 0e*ica# /ist!r1 are in s0a##er "rint t/an t/e rest !f t/e "rinte* f!r0 !r t/at t/e1 are *esi4ne* in suc/ a >a1 as t! c!ncea# fr!0 t/e a""#icant t/eir i0"!rtance. If a >arnin4 in 8!#* re* #etters !r a 8!:e* >arnin4 si0i#ar t! t/at re?uire* f!r ci4arette a* ertise0ents 81 t/e Sur4e!n Genera# !f t/e ;nite* States is necessar1, t/at is f!r C!n4ress !r t/e Insurance C!00issi!n t! "r! i*e as "r!tecti!n a4ainst /i4/ "ressure insurance sa#es0ans/i". =e are #i0ite* in t/is "etiti!n t! ascertainin4 >/et/er !r n!t t/e res"!n*ent C!urt !f A""ea#s c!00itte* re ersi8#e err!r. It is t/e "etiti!nersC 8ur*en t! s/!> t/at t/e factua# fin*in4s !f t/e res"!n*ent c!urt are n!t 8ase* !n su8stantia# e i*ence !r t/at its c!nc#usi!ns are c!ntrar1 t! a""#ica8#e #a> an* Buris"ru*ence. T/e1 /a e fai#e* t! *isc/ar4e t/at 8ur*en. =HE'EFO'E, t/e "etiti!n is /ere81 DENIED f!r #ac9 !f 0erit. T/e ?uesti!ne* *ecisi!n !f t/e C!urt !f A""ea#s is AFFI'7ED. SO O'DE'ED.

P';DENTIAL G;A'ANTEE an* ASS;'ANCE "etiti!ner, s. T'ANS5ASIA SHIPPING LINES, INC., 'es"!n*ent. :5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 : G.'. N!. 1.1--1 +une 26, 266&

INC.,

T'ANS5ASIA SHIPPING LINES, INC., "etiti!ner, s. P';DENTIAL G;A'ANTEE an* ASS;'ANCE 'es"!n*ent. DECISION CHICO5NASA'IO, +A

INC.,

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. 1.1)-6 +une 26, 266&

T/is is a c!ns!#i*ati!n !f t>! se"arate Petiti!ns f!r 'e ie> !n Certi!rari fi#e* 81 "etiti!ner Pru*entia# Guarantee an* Assurance, Inc. (P';DENTIAL) in G.'. N!. 1.1)-6 an* Trans5Asia S/i""in4 Lines, Inc. (T'ANS5ASIA) in G.'. N!. 1.1--1, assai#in4 t/e Decisi!n1 *ate* & N! e08er 2661 !f t/e C!urt !f A""ea#s in CA G.'. C3 N!. &)2(), >/ic/ re erse* t/e +u*40ent2 *ate* & +une 2666 !f t/e 'e4i!na# Tria# C!urt ('TC), Branc/ 1%, Ce8u Cit1 in Ci i# Case N!. CEB526(6-. T/e 2- +anuar1 2662 'es!#uti!n% !f t/e C!urt !f A""ea#s, *en1in4 P';DENTIALQs 7!ti!n f!r 'ec!nsi*erati!n an* T'ANS5ASIAQs Partia# 7!ti!n f!r 'ec!nsi*erati!n !f t/e & N! e08er 2661 Decisi!n, is #i9e>ise s!u4/t t! 8e annu##e* an* set asi*e. T/e Facts

T/e 0ateria# antece*ents as f!un* 81 t/e c!urt a ?u! an* a*!"te* 81 t/e a""e##ate c!urt are as f!##!>sA P#aintiff IT'ANS5ASIAJ is t/e !>ner !f t/e esse# 7O3 Asia D!rea. In c!nsi*erati!n !f "a10ent !f "re0iu0s, *efen*ant IP';DENTIALJ insure* 7O3 Asia D!rea f!r #!ssO*a0a4e !f t/e /u## an* 0ac/iner1 arisin4 fr!0 "eri#s, inter a#ia, !f fire an* e:"#!si!n f!r t/e su0 !f P26 7i##i!n, 8e4innin4 Ifr!0J t/e "eri!* I!fJ +u#1 1, 1--% u" t! +u#1 1, 1--2. T/is is e i*ence* 81 7arine P!#ic1 N!. 7H-%O1%&% (E:/i8its MAM t! MA511M). On Oct!8er 2., 1--%, >/i#e t/e "!#ic1 >as in f!rce, a fire 8r!9e !ut >/i#e I7O3 Asia D!rea >asJ un*er4!in4 re"airs at t/e "!rt !f Ce8u. On Oct!8er 2&, 1--% "#aintiff IT'ANS5ASIAJ fi#e* its n!tice !f c#ai0 f!r *a0a4e sustaine* 81 t/e esse#. T/is is e i*ence* 81 a #etterOf!r0a# c#ai0 !f e en *ate (E:/i8it MBM). P#aintiff IT'ANS5ASIAJ reser e* its ri4/t t! su8se?uent#1 n!tif1 *efen*ant IP';DENTIALJ as t! t/e fu## a0!unt !f t/e c#ai0 u"!n fina# sur e1 an* *eter0inati!n 81 a era4e a*Buster 'ic/ar* H!44 Internati!na# (P/i#.) !f t/e *a0a4e sustaine* 81 reas!n !f fire. An a*BusterQs re"!rt !n t/e fire in ?uesti!n >as su80itte* 81 'ic/ar* H!44 Internati!na# t!4et/er >it/ t/e ;57arine Sur e1!r 'e"!rt (E:/i8its M2M t! M2511.M). On 7a1 2-, 1--.I,J "#aintiff IT'ANS5ASIAJ e:ecute* a *!cu0ent *en!0inate* ML!an an* Trust recei"tM, a "!rti!n !f >/ic/ rea* (sic)A M'ecei e* fr!0 Pru*entia# Guarantee an* Assurance, Inc., t/e su0 !f PESOS TH'EE 7ILLION ONLE (P%,666,666.66) as a #!an >it/!ut interest un*er P!#ic1 N!. 7H -%O1%.% IsicJ, re"a1a8#e !n#1 in t/e e ent an* t! t/e e:tent t/at an1 net rec! er1 is 0a*e 81 Trans5 Asia S/i""in4 C!r"!rati!n, fr!0 an1 "ers!n !r

"ers!ns, c!r"!rati!n !r c!r"!rati!ns, !r !t/er "arties, !n acc!unt !f #!ss 81 an1 casua#t1 f!r >/ic/ t/e1 0a1 8e #ia8#e !ccasi!ne* 81 t/e 2. Oct!8er 1--%A Fire !n B!ar*.M (E:/i8it M2M) In a #etter *ate* 21 A"ri# 1--( *efen*ant IP';DENTIALJ *enie* "#aintiffQs c#ai0 (E:/i8it M.M). T/e #etter rea*sA MAfter a carefu# re ie> an* e a#uati!n !f 1!ur c#ai0 arisin4 fr!0 t/e a8! e5ca"ti!ne* inci*ent, it /as 8een ascertaine* t/at 1!u are in 8reac/ !f "!#ic1 c!n*iti!ns, a0!n4 t/e0 M=A''ANTED 3ESSEL CLASSED AND CLASS 7AINTAINEDM. Acc!r*in4#1, >e re4ret t! a* ise t/at 1!ur c#ai0 is n!t c!0"ensa8#e an* /ere81 DENIED.M T/is >as f!##!>e* 81 *efen*antQs #etter *ate* 21 +u#1 1--( re?uestin4 t/e return !r "a10ent !f t/e P%,666,666.66 >it/in a "eri!* !f ten (16) *a1s fr!0 recei"t !f t/e #etter (E:/i8it M&M).2 F!##!>in4 t/is *e e#!"0ent, !n 1% Au4ust 1--(, T'ANS5ASIA fi#e* a C!0"#aint. f!r Su0 !f 7!ne1 a4ainst P';DENTIAL >it/ t/e 'TC !f Ce8u Cit1, *!c9ete* as Ci i# Case N!. CEB526(6-, >/erein T'ANS5ASIA s!u4/t t/e a0!unt !f P),%-.,6(2.2& fr!0 P';DENTIAL, a##e4in4 t/at t/e sa0e re"resents t/e 8a#ance !f t/e in*e0nit1 *ue u"!n t/e insurance "!#ic1 in t/e t!ta# a0!unt !f P11,%-.,6(2.2&. T'ANS5 ASIA si0i#ar#1 s!u4/t interest at 22U "er annu0 citin4 Secti!n 22%& !f Presi*entia# Decreee N!. 12&6, !t/er>ise 9n!>n as t/e MInsurance C!*e,M as a0en*e*.

In its Ans>er,( P';DENTIAL *enie* t/e 0ateria# a##e4ati!ns !f t/e C!0"#aint an* inter"!se* t/e *efense t/at T'ANS5ASIA 8reac/e* insurance "!#ic1 c!n*iti!ns, in "articu#arA M=A''ANTED 3ESSEL CLASSED AND CLASS 7AINTAINED.M P';DENTIAL furt/er a##e4e* t/at it acte* as facts an* #a> re?uire an* incurre* n! #ia8i#it1 t! T'ANS5ASIA$ t/at T'ANS5 ASIA /as n! cause !f acti!n$ an*, t/at its c#ai0 /as 8een effecti e#1 >ai e* an*O!r a8an*!ne*, !r it is est!""e* fr!0 "ursuin4 t/e sa0e. B1 >a1 !f a c!unterc#ai0, P';DENTIAL s!u4/t a refun* !f P%,666,666.66, >/ic/ it a##e4e*#1 a* ance* t! T'ANS5 ASIA 81 >a1 !f a #!an >it/!ut interest an* >it/!ut "reBu*ice t! t/e fina# e a#uati!n !f t/e c#ai0, inc#u*in4 t/e a0!unts !f P.66,666.66, f!r sur e1 fees an* P266,666.66, re"resentin4 att!rne1Qs fees. T/e 'u#in4 !f t/e Tria# C!urt On & +une 2666, t/e c!urt a ?u! ren*ere* +u*40ent) fin*in4 f!r (t/erein *efen*ant) P';DENTIAL. It ru#e* t/at a *eter0inati!n !f t/e "artiesQ #ia8i#ities /in4e* !n >/et/er T'ANS5ASIA i!#ate* an* 8reac/e* t/e "!#ic1 c!n*iti!ns !n =A''ANTED 3ESSEL CLASSED AND CLASS 7AINTAINED. It inter"rete* t/e "r! isi!n t! 0ean t/at T'ANS5ASIA is re?uire* t! 0aintain t/e esse# at a certain c#ass at a## ti0es "ertinent *urin4 t/e #ife !f t/e "!#ic1. Acc!r*in4 t! t/e c!urt a ?u!, T'ANS5ASIA fai#e* t! "r! e c!0"#iance !f t/e ter0s !f t/e >arrant1, t/e i!#ati!n t/ere!f entit#e* P';DENTIAL, t/e insure* "art1, t! rescin* t/e c!ntract.Furt/er, citin4 Secti!n 16(16 !f t/e Insurance C!*e, t/e c!urt a ?u! rati!cinate* t/at t/e c!ncea#0ent 0a*e 81 T'ANS5ASIA t/at t/e esse# >as n!t

a*e?uate#1 0aintaine* t! "reser e its c#ass >as a 0ateria# c!ncea#0ent sufficient t! a !i* t/e "!#ic1 an*, t/us, entit#e* t/e inBure* "art1 t! rescin* t/e c!ntract. T/e c!urt a ?u! f!un* 0erit in P';DENTIALQs c!ntenti!n t/at t/ere >as n!t/in4 in t/e a*Bust0ent !f t/e "articu#ar a era4e su80itte* 81 t/e a*Buster t/at >!u#* s/!> t/at T'ANS5ASIA >as n!t in 8reac/ !f t/e "!#ic1. 'u#in4 !n t/e *en!0inate* #!an an* trust recei"t, t/e c!urt a ?u! sai* t/at in su8stance an* in f!r0, t/e sa0e is a recei"t f!r a #!an. It /e#* t/at if T'ANS5ASIA inten*e* t! recei e t/e a0!unt !f P%,666,666.66 as a* ance "a10ent, it s/!u#* /a e s! c#ear#1 state* as suc/. T/e c!urt a ?u! *i* n!t a>ar* P';DENTIALQs c#ai0 f!r P.66,666.66, re"resentin4 e:"ert sur e1 fees !n t/e 4r!un* !f #ac9 !f sufficient 8asis in su""!rt t/ere!f. Neit/er *i* it a>ar* att!rne1Qs fees !n t/e rati!na#iNati!n t/at t/e instant case *!es n!t fa## un*er t/e e:ce"ti!ns state* in Artic#e 226)11 !f t/e Ci i# C!*e. H!>e er, t/e c!urt a ?u! 4rante* P';DENTIALQs c!unterc#ai0 statin4 t/at t/ere is factua# an* #e4a# 8asis f!r T'ANS5ASIA t! return t/e a0!unt !f P%,666,666.66 81 >a1 !f #!an >it/!ut interest. T/e *ecreta# "!rti!n !f t/e +u*40ent !f t/e 'TC rea*sA =HE'EFO'E, Bu*40ent is /ere81 ren*ere* DIS7ISSING t/e c!0"#aint f!r its fai#ure t! "r! e a cause !f acti!n. On *efen*antQs c!unterc#ai0, "#aintiff is *irecte* t! return t/e su0 !f P%,666,666.66 re"resentin4 t/e #!an e:ten*e* t! it 81 t/e *efen*ant, >it/in a "eri!* !f ten

(16) *a1s fr!0 an* after t/is Bu*40ent s/a## /a e 8ec!0e fina# an* e:ecut!r1.12 T/e 'u#in4 !f t/e C!urt !f A""ea#s On a""ea# 81 T'ANS5ASIA, t/e C!urt !f A""ea#s, in its assai#e* Decisi!n !f & N! e08er 2661, re erse* t/e & +une 2666 +u*40ent !f t/e 'TC. On t/e issue !f T'ANS5ASIAQs a##e4e* 8reac/ !f >arrant1 !f t/e "!#ic1 c!n*iti!n CLASSED AND CLASS 7AINTAINED, t/e C!urt !f A""ea#s ru#e* t/at P';DENTIAL, as t/e "art1 assertin4 t/e n!n5 c!0"ensa8i#it1 !f t/e #!ss /a* t/e 8ur*en !f "r!!f t! s/!> t/at T'ANS5ASIA 8reac/e* t/e >arrant1, >/ic/ 8ur*en it fai#e* t! *isc/ar4e. P';DENTIAL cann!t re#1 !n t/e #ac9 !f certificati!n t! t/e effect t/at T'ANS5 ASIA >as CLASSED AND CLASS 7AINTAINED as its s!#e 8asis f!r reac/in4 t/e c!nc#usi!n t/at t/e >arrant1 >as 8reac/e*. T/e C!urt !f A""ea#s !"ine* t/at t/e #ac9 !f a certificati!n *!es n!t necessari#1 0ean t/at t/e >arrant1 >as 8reac/e* 81 T'ANS5ASIA. Instea*, t/e C!urt !f A""ea#s c!nsi*ere* P';DENTIALQs a*0issi!n t/at at t/e ti0e t/e insurance c!ntract >as entere* int! 8et>een t/e "arties, t/e esse# >as "r!"er#1 c#asse* 81 Bureau 3eritas, a c#assificati!n s!ciet1 rec!4niNe* 81 t/e in*ustr1. T/e C!urt !f A""ea#s si0i#ar#1 4a e >ei4/t t! t/e fact t/at it >as t/e res"!nsi8i#it1 !f 'ic/ar*s H!44 Internati!na# (P/i#s.) Inc., t/e a era4e a*Buster /ire* 81 P';DENTIAL, t! secure a c!"1 !f suc/ certificati!n t! su""!rt its c!nc#usi!n t/at 0ere a8sence !f a certificati!n *!es n!t >arrant *enia# !f T'ANS5ASIAQs c#ai0 un*er t/e insurance "!#ic1.

In t/e sa0e t!9en, t/e C!urt !f A""ea#s f!un* t/e su8Bect >arrant1 a##e4e*#1 8reac/e* 81 T'ANS5ASIA t! 8e a ri*er >/ic/, >/i#e c!ntaine* in t/e "!#ic1, >as inserte* 81 P';DENTIAL >it/!ut t/e inter enti!n !f T'ANS5ASIA. As suc/, it "arta9es !f a nature !f a c!ntract *Qa*/esi!n >/ic/ s/!u#* 8e c!nstrue* a4ainst P';DENTIAL, t/e "art1 >/ic/ *rafte* t/e c!ntract. Li9e>ise, acc!r*in4 t! t/e C!urt !f A""ea#s, P';DENTIALQs rene>a# !f t/e insurance "!#ic1 fr!0 n!!n !f 1 +u#1 1--2 t! n!!n !f 1 +u#1 1--., an* t/en a4ain, unti# n!!n !f 1 +u#1 1--& 0ust 8e *ee0e* a >ai er 81 P';DENTIAL !f an1 8reac/ !f >arrant1 c!00itte* 81 T'ANS5ASIA. Furt/er, t/e C!urt !f A""ea#s, c!ntrar1 t! t/e ru#in4 !f t/e c!urt a ?u!, inter"rete* t/e transacti!n 8et>een P';DENTIAL an* T'ANS5ASIA as !ne !f su8r!4ati!n, instea* !f a #!an. T/e C!urt !f A""ea#s c!nc#u*e* t/at T'ANS5ASIA /as n! !8#i4ati!n t! "a1 8ac9 t/e a0!unt !f P%,666.666.66 t! P';DENTIAL 8ase* !n its fin*in4 t/at t/e af!resai* a0!unt >as P';DENTIALQs "artia# "a10ent t! T'ANS5ASIAQs c#ai0 un*er t/e "!#ic1. Fina##1, t/e C!urt !f A""ea#s *enie* T'ANS5ASIAQs "ra1er f!r att!rne1Qs fees, 8ut /e#* T'ANS5ASIA entit#e* t! *!u8#e interest !n t/e "!#ic1 f!r t/e *urati!n !f t/e *e#a1 !f "a10ent !f t/e un"ai* 8a#ance, citin4 Secti!n 2221% !f t/e Insurance C!*e. Fin*in4 f!r t/erein a""e##ant T'ANS5ASIA, t/e C!urt !f A""ea#s ru#e* in t/is >iseA =HE'EFO'E, t/e f!re4!in4 c!nsi*erati!n, =e fin* f!r A""e##ant. T/e instant a""ea# is ALLO=ED an* t/e +u*40ent a""ea#e* fr!0 'E3E'SED. T/e P%,666,666.66 initia##1 "ai* 81 a""e##ee Pru*entia# Guarantee Assurance Inc!r"!rate* t! a""e##ant Trans5

Asia an* c! ere* 81 a ML!an an* Trust 'ecei"tM *ate* 2- 7a1 1--. is HELD t! 8e in "artia# sett#e0ent !f t/e #!ss suffere* 81 a""e##ant an* c! ere* 81 7arine P!#ic1 N!. 7H-%O1%&% issue* 81 a""e##ee. Furt/er, a""e##ee is /ere81 O'DE'ED t! "a1 a""e##ant t/e a**iti!na# a0!unt !f P),%-.,6(2.2& re"resentin4 t/e 8a#ance !f t/e #!ss suffere* 81 t/e #atter as rec!00en*e* 81 t/e a era4e a*Buster 'ic/ar* H!44 Internati!na# (P/i#i""ines) in its 'e"!rt, >it/ *!u8#e interest startin4 fr!0 t/e ti0e 'ic/ar* H!44Qs Sur e1 'e"!rt >as c!0"#ete*, !r !n 1% Au4ust 1--&, unti# t/e sa0e is fu##1 "ai*. A## !t/er c#ai0s DIS7ISSED. an* c!unterc#ai0s are /ere81

THE CO;'T OF APPEALS E''ED IN HOLDING THAT THE'E =AS NO 3IOLATION BE T'ANS5ASIA OF A 7ATE'IAL =A''ANTE, NA7ELE, =A''ANTE CLA;SE NO. ., OF THE INS;'ANCE POLICE. III. THE CO;'T OF APPEALS E''ED IN HOLDING THAT P';DENTIAL, AS INS;'E' HAD THE B;'DEN OF P'O3ING THAT THE ASS;'ED, T'ANS5ASIA, 3IOLATED A 7ATE'IAL =A''ANTE. I3. THE CO;'T OF APPEALS E''ED IN HOLDING THAT THE =A''ANTE CLA;SE E7BODIED IN THE INS;'ANCE POLICE CONT'ACT =AS A 7E'E 'IDE'. 3. THE CO;'T OF APPEALS E''ED IN HOLDING THAT THE ALLEGED 'ENE=ALS OF THE POLICE CONSTIT;TED A =AI3E' ON THE PA'T OF P';DENTIAL OF THE B'EACH OF THE =A''ANTE BE T'ANS5ASIA. 3I.

A## c!sts a4ainst a""e##ee.12 N!t satisfie* >it/ t/e Bu*40ent, P';DENTIAL an* T'ANS5ASIA fi#e* a 7!ti!n f!r 'ec!nsi*erati!n an* Partia# 7!ti!n f!r 'ec!nsi*erati!n t/ere!n, res"ecti e#1, >/ic/ 0!ti!ns >ere *enie* 81 t/e C!urt !f A""ea#s in t/e 'es!#uti!n *ate* 2- +anuar1 2662. T/e Issues A44rie e*, P';DENTIAL fi#e* 8ef!re t/is C!urt a Petiti!n f!r 'e ie>, *!c9ete* as G.'. N!. 1.1)-6, re#1in4 !n t/e f!##!>in4 4r!un*s, iNA I. THE A=A'D IS G'OSSLE ;NCONSCIONABLE. II.

THE CO;'T OF APPEALS E''ED IN HOLDING THAT THE MLOAN AND T';ST 'ECEIPTM EFEC;TED BE T'ANS5 ASIA IS AN AD3ANCE ON THE POLICE, TH;S CONSTIT;TING PA'TIAL PAE7ENT THE'EOF. 3II. THE CO;'T OF APPEALS E''ED IN HOLDING THAT THE ACCEPTANCE BE P';DENTIAL OF THE FINDINGS OF

'ICHA'DS HOGG IS INDICATI3E OF A =AI3E' ON THE PA'T OF P';DENTIAL OF ANE 3IOLATION BE T'ANS5 ASIA OF THE =A''ANTE. 3III. THE CO;'T OF APPEALS E'''ED (sic) IN 'E3E'SING THE T'IAL CO;'T, IN FINDING THAT P';DENTIAL M;N+;STIFIABLE 'EF;SEDM TO PAE THE CLAI7 AND IN O'DE'ING P';DENTIAL TO PAE T'ANS5ASIA P),%-.,6(2.2& PL;S DO;BLE INTE'EST F'O7 1% A;G;ST 1--&, ;NTIL ITHEJ SA7E IS F;LLE PAID.1. Si0i#ar#1, T'ANS5ASIA, *isa4reein4 in t/e ru#in4 !f t/e C!urt !f A""ea#s fi#e* a Petiti!n f!r 'e ie> *!c9ete* as G.'. N!. 1.1--1, raisin4 t/e f!##!>in4 4r!un*s f!r t/e a##!>ance !f t/e "etiti!n, t! >itA I. THE HONO'ABLE CO;'T OF APPEALS E''ED IN NOT A=A'DING ATTO'NEEQS FEES TO PETITIONE' T'ANS5 ASIA ON THE G'O;ND THAT S;CH CAN ONLE BE A=A'DED IN THE CASES EN;7E'ATED IN A'TICLE 226) OF THE CI3IL CODE, AND THE'E BEING NO BAD FAITH ON THE PA'T OF 'ESPONDENT P';DENTIAL IN DENEING HE'EIN PETITIONE' T'ANS5ASIAQS INS;'ANCE CLAI7. II. THE MDO;BLE INTE'ESTM 'EFE''ED TO IN THE DECISION DATED 6& NO3E7BE' 2661 SHO;LD BE CONST';ED TO 7EAN DO;BLE INTE'EST BASED ON THE LEGAL INTE'EST OF 12U, O' INTE'EST AT THE 'ATE OF 22U PE' ANN;7.1&

In !ur 'es!#uti!n !f 2 Dece08er 2662, >e 4rante* T'ANS5ASIAQs 7!ti!n f!r C!ns!#i*ati!n1( !f G.'. N!s. 1.1)-6 an* 1.1--1$1) /ence, t/e instant c!ns!#i*ate* "etiti!ns. In su0, f!r !ur 0ain res!#uti!n areA (1) t/e #ia8i#it1, if an1, !f P';DENTIAL t! T'ANS5ASIA arisin4 fr!0 t/e su8Bect insurance c!ntract$ (2) t/e #ia8i#it1, if an1, !f T'ANS5ASIA t! P';DENTIAL arisin4 fr!0 t/e transacti!n 8et>een t/e "arties as e i*ence* 81 a *!cu0ent *en!0inate* as ML!an an* Trust 'ecei"t,M *ate* 2- 7a1 1--.$ an* (%) t/e a0!unt !f interest t! 8e i0"!se* !n t/e #ia8i#it1, if an1, !f eit/er !r 8!t/ "arties. 'u#in4 !f t/e C!urt Prefat!ri#1, it 0ust 8e e0"/asiNe* t/at in a "etiti!n f!r re ie>, !n#1 ?uesti!ns !f #a>, an* n!t ?uesti!ns !f fact, 0a1 8e raise*.1- T/is ru#e 0a1 8e *isre4ar*e* !n#1 >/en t/e fin*in4s !f fact !f t/e C!urt !f A""ea#s are c!ntrar1 t! t/e fin*in4s an* c!nc#usi!ns !f t/e tria# c!urt, !r are n!t su""!rte* 81 t/e e i*ence !n rec!r*.26 In t/e case at 8ar, >e fin* an inc!n4ruence 8et>een t/e fin*in4s !f fact !f t/e C!urt !f A""ea#s an* t/e c!urt a ?u!, t/us, in !ur *eter0inati!n !f t/e issues, >e are c!nstraine* t! assess t/e e i*ence a**uce* 81 t/e "arties t! 0a9e a""r!"riate fin*in4s !f facts as are necessar1. I. A. P';DENTIAL fai#e* t! esta8#is/ t/at T'ANS5ASIA i!#ate* an* 8reac/e* t/e "!#ic1 c!n*iti!n !n =A''ANTED 3ESSEL CLASSED AND CLASS

7AINTAINED, as c!ntaine* in t/e su8Bect insurance c!ntract. In resistin4 t/e c#ai0 !f T'ANS5ASIA, P';DENTIAL "!sits t/at T'ANS5ASIA i!#ate* an e:"ress an* 0ateria# >arrant1 in t/e su8Bect insurance c!ntract, i.e., 7arine Insurance P!#ic1 N!. 7H-%O1%&%, s"ecifica##1 =arrant1 C#ause N!. . t/ere!f, >/ic/ sti"u#ates t/at t/e insure* esse#, M7O3 ASIA DO'EAM is re?uire* t! 8e CLASSED AND CLASS 7AINTAINED. Acc!r*in4 t! P';DENTIAL, !n 2. Oct!8er 1--%, !r at t/e ti0e !f t/e !ccurrence !f t/e fire, M7O3 ASIA DO'EAM >as in i!#ati!n !f t/e >arrant1 as it >as n!t CLASSED AND CLASS 7AINTAINED. P';DENTIAL su80its t/at =arrant1 C#ause N!. . >as a c!n*iti!n "rece*ent t! t/e rec! er1 !f T'ANS5ASIA un*er t/e "!#ic1, t/e i!#ati!n !f >/ic/ entit#e* P';DENTIAL t! rescin* t/e c!ntract un*er Sec. (221 !f t/e Insurance C!*e. T/e >arrant1 c!n*iti!n CLASSED AND CLASS 7AINTAINED >as e:"#aine* 81 P';DENTIALQs Seni!r 7ana4er !f t/e 7arine an* A iati!n Di isi!n, Luci! Fernan*eN. T/e "ertinent "!rti!ns !f /is testi0!n1 !n *irect e:a0inati!n is re"r!*uce* /ereun*er, iNA ATTE. LI7 @ P#ease te## t/e c!urt, 7r. =itness, t/e resu#t !f t/e e a#uati!n !f t/is c#ai0, >/at fina# acti!n >as ta9enG A It >as e entua##1 *eter0ine* t/at t/ere >as a 8reac/ !f t/e "!#ic1 c!n*iti!n, an* 8asica##1 t/ere is a 8reac/ !f "!#ic1 >arrant1 c!n*iti!n an* !n t/at 8asis t/e c#ai0 >as *enie*.

@ T! refer 1!u (sic) t/e M"!#ic1 >arrant1 c!n*iti!n,M I a0 s/!>in4 t! 1!u a "!#ic1 /ere 0ar9e* as E:/i8its M1M, M15AM series, "#ease "!int t! t/e >arrant1 in t/e "!#ic1 >/ic/ 1!u sai* >as 8reac/e* !r i!#ate* 81 t/e "#aintiff >/ic/ c!nstitute* 1!ur 8asis f!r *en1in4 t/e c#ai0 as 1!u testifie*. A =arrante* 3esse# C#asse* an* C#ass 7aintaine*. ATTE. LI7 =itness "!intin4, E!ur H!n!r, t! t/at "!rti!n in E:/i8it M15AM >/ic/ is t/e sec!n* "a4e !f t/e "!#ic1 8e#!> t/e "rinte* >!r*sA MC#auses, En*!rse0ents, S"ecia# C!n*iti!ns an* =arranties,M 8e#!> t/is are se era# t1"e>ritten c#auses an* t/e >itness "!inte* !ut in "articu#ar t/e c#ause rea*in4A M=arrante* 3esse# C#asse* an* C#ass 7aintaine*.M CO;'T @ =i## 1!u e:"#ain t/at "articu#ar "/raseG A Ees, a >arrant1 is a c!n*iti!n t/at /as t! 8e c!0"#ie* >it/ 81 t/e insure*. =/en >e sa1 a c#ass >arrant1, it 0ust 8e entere* in t/e c#assificati!n s!ciet1. CO;'T S#!>#1. =ITNESS (c!ntinue*)

A A c#assificati!n s!ciet1 is an !r4aniNati!n >/ic/ sets certain stan*ar*s f!r a esse# t! 0aintain in !r*er t! 0aintain t/eir 0e08ers/i" in t/e c#assificati!n s!ciet1. S!, if t/e1 fai#e* t! 0eet t/at stan*ar*, t/e1 are c!nsi*ere* n!t 0e08ers !f t/at c#ass, an* t/us 8reac/in4 t/e >arrant1, t/at re?uires t/e0 t! 0aintain 0e08ers/i" !r t! 0aintain t/eir c#ass !n t/at c#assificati!n s!ciet1. An* it is n!t sufficient t/at t/e 0e08er !f t/is c#assificati!n s!ciet1 at t/e ti0e !f a #!ss, t/eir 0e08ers/i" 0ust 8e c!ntinu!us f!r t/e >/!#e #en4t/ !f t/e "!#ic1 suc/ t/at *urin4 t/e effecti it1 !f t/e "!#ic1, t/eir c#assificati!n is sus"en*e*, an* t/en t/ereafter, t/e1 4et reinstate*, t/at a4ain sti## a 8reac/ !f t/e >arrant1 t/at t/e1 0aintaine* t/eir c#ass (sic). Our 0aintainin4 tea0 0e08ers/i" in t/e c#assificati!n s!ciet1 t/ere81 0aintainin4 t/e stan*ar*s !f t/e esse# (sic). ATTE. LI7 @ Can 1!u 0enti!n s!0e c#assificati!n s!cieties t/at 1!u 9n!>G A =e## >e /a e t/e Bureau 3eritas, A0erican Bureau !f S/i""in4, D<3 L!ca# C#assificati!n S!ciet1, T/e P/i#i""ine 'e4istrati!n !f S/i"s S!ciet1, C/ina C#assificati!n, NDD an* C!0"an1 C#assificati!n S!ciet1, an* 0an1 !t/ers, >e /a e a0!n4 !t/ers, t/ere are ! er 26 >!r#*>i*e. 22 At t/e !utset, it 0ust 8e e0"/asiNe* t/at t/e "art1 >/ic/ a##e4es a fact as a 0atter !f *efense /as t/e 8ur*en !f "r! in4 it. P';DENTIAL, as t/e "art1 >/ic/ asserte* t/e c#ai0 t/at T'ANS5ASIA 8reac/e* t/e >arrant1 in t/e "!#ic1, /as t/e 8ur*en !f e i*ence t! esta8#is/ t/e sa0e. Hence, !n t/e "art !f P';DENTIAL

#ies t/e initiati e t! s/!> "r!!f in su""!rt !f its *efense$ !t/er>ise, fai#in4 t! esta8#is/ t/e sa0e, it re0ains se#f5ser in4. C#ear#1, if n! e i*ence !n t/e a##e4e* 8reac/ !f T'ANS5ASIA !f t/e su8Bect >arrant1 is s/!>n, a f!rti!ri, T'ANS5ASIA >!u#* 8e successfu# in c#ai0in4 !n t/e "!#ic1. It f!##!>s t/at P';DENTIAL 8ears t/e 8ur*en !f e i*ence t! esta8#is/ t/e fact !f 8reac/. In !ur ru#e !n e i*ence, T'ANS5ASIA, as t/e "#aintiff 8e#!>, necessari#1 /as t/e 8ur*en !f "r!!f t! s/!> "r!!f !f #!ss, an* t/e c! era4e t/ere!f, in t/e su8Bect insurance "!#ic1. H!>e er, in t/e c!urse !f tria# in a ci i# case, !nce "#aintiff 0a9es !ut a "ri0a facie case in /is fa !r, t/e *ut1 !r t/e 8ur*en !f e i*ence s/ifts t! *efen*ant t! c!ntr! ert "#aintiffQs "ri0a facie case, !t/er>ise, a er*ict 0ust 8e returne* in fa !r !f "#aintiff.2% T'ANS5ASIA >as a8#e t! esta8#is/ "r!!f !f #!ss an* t/e c! era4e !f t/e #!ss, i.e., 2. Oct!8er 1--%A Fire !n B!ar*. T/ereafter, t/e 8ur*en !f e i*ence s/ifte* t! P';DENTIAL t! c!unter T'ANS5 ASIAQs case, an* t! "r! e its s"ecia# an* affir0ati e *efense t/at T'ANS5ASIA >as in i!#ati!n !f t/e "articu#ar c!n*iti!n !n CLASSED AND CLASS 7AINTAINED. =e sustain t/e fin*in4s !f t/e C!urt !f A""ea#s t/at P';DENTIAL >as n!t successfu# in *isc/ar4in4 t/e 8ur*en !f e i*ence t/at T'ANS5ASIA 8reac/e* t/e su8Bect "!#ic1 c!n*iti!n !n CLASSED AND CLASS 7AINTAINED. F!re0!st, P';DENTIAL, t/r!u4/ t/e Seni!r 7ana4er !f its 7arine an* A iati!n Di isi!n, Luci! Fernan*eN, 0a*e a cate4!rica# a*0issi!n t/at at t/e ti0e !f t/e "r!cure0ent !f t/e insurance c!ntract in +u#1 1--%,

T'ANS5ASIAQs esse#, M7O3 Asia D!reaM >as "r!"er#1 c#asse* 81 Bureau 3eritas, t/usA @ Din*#1 e:a0ine t/e rec!r*s "articu#ar#1 t/e "!#ic1, "#ease te## us if 1!u 9n!> >/et/er 7O3 Asia D!rea >as c#asse* at t/e ti0e (sic) "!#ic1 >as "r!cure* "ert/e (sic) insurance >as "r!cure* t/at E:/i8it M1M !n 1st +u#1 1--% (sic). =ITNESS A I reca## t/at t/e1 >ere c#asse*. ATTE. LI7 @ =it/ >/at c#assificati!n s!ciet1G A I 8e#ie e >it/ Bureau 3eritas.22 As f!un* 81 t/e C!urt !f A""ea#s an* as su""!rte* 81 t/e rec!r*s, Bureau 3eritas is a c#assificati!n s!ciet1 rec!4niNe* in t/e 0arine in*ustr1. As it is un*is"ute* t/at T'ANS5ASIA >as "r!"er#1 c#asse* at t/e ti0e t/e c!ntract !f insurance >as entere* int!, t/us, it 8ec!0es incu08ent u"!n P';DENTIAL t! s/!> e i*ence t/at t/e status !f T'ANS5ASIA as 8ein4 "r!"er#1 CLASSED 81 Bureau 3eritas /a* s/ifte* in i!#ati!n !f t/e >arrant1. ;nf!rtunate#1, P';DENTIAL fai#e* t! su""!rt t/e a##e4ati!n. =e are in acc!r* >it/ t/e ru#in4 !f t/e C!urt !f A""ea#s t/at t/e #ac9 !f a certificati!n in P';DENTIALQs rec!r*s t! t/e effect t/at T'ANS5ASIAQs M7O3 Asia D!reaM >as CLASSED AND CLASS 7AINTAINED at t/e ti0e !f t/e !ccurrence !f t/e fire cann!t 8e tanta0!unt t! t/e c!nc#usi!n t/at T'ANS5

ASIA in fact 8reac/e* t/e >arrant1 c!ntaine* in t/e "!#ic1. =it/ 0!re reas!n 0ust >e sustain t/e fin*in4s !f t/e C!urt !f A""ea#s !n t/e 4r!un* t/at as a*0itte* 81 P';DENTIAL, it >as #i9e>ise t/e res"!nsi8i#it1 !f t/e a era4e a*Buster, 'ic/ar*s H!44 Internati!na# (P/i#s.), Inc., t! secure a c!"1 !f suc/ certificati!n, an* t/e a##e4e* 8reac/ !f T'ANS5ASIA cann!t 8e 4#eane* fr!0 t/e a era4e a*BusterQs sur e1 re"!rt, !r a*Bust0ent !f "articu#ar a era4e "er M7O3 Asia D!reaM !f t/e 2. Oct!8er 1--% fire !n 8!ar*. =e are n!t un0in*fu# !f t/e c#ear #an4ua4e !f Sec. (2 !f t/e Insurance C!*e >/ic/ "r! i*es t/at, Mt/e i!#ati!n !f a 0ateria# >arrant1, !r !t/er 0ateria# "r! isi!n !f a "!#ic1 !n t/e "art !f eit/er "art1 t/eret!, entit#es t/e !t/er t! rescin*.M It is 4enera##1 acce"te* t/at MIaJ >arrant1 is a state0ent !r "r!0ise set f!rt/ in t/e "!#ic1, !r 81 reference inc!r"!rate* t/erein, t/e untrut/ !r n!n5fu#fi##0ent !f >/ic/ in an1 res"ect, an* >it/!ut reference t! >/et/er t/e insurer >as in fact "reBu*ice* 81 suc/ untrut/ !r n!n5fu#fi##0ent, ren*ers t/e "!#ic1 !i*a8#e 81 t/e insurer.M2. H!>e er, it is si0i#ar#1 in*u8ita8#e t/at f!r t/e 8reac/ !f a >arrant1 t! a !i* a "!#ic1, t/e sa0e 0ust 8e *u#1 s/!>n 81 t/e "art1 a##e4in4 t/e sa0e. =e cann!t sustain an a##e4ati!n t/at is unf!un*e*. C!nse?uent#1, P';DENTIAL, n!t /a in4 s/!>n t/at T'ANS5ASIA 8reac/e* t/e >arrant1 c!n*iti!n, CLASSED AND CLASS 7AINTAINED, it re0ains t/at T'ANS5ASIA 0ust 8e a##!>e* t! rec! er its ri4/tfu# c#ai0s !n t/e "!#ic1. B. Assu0in4 ar4uen*! t/at T'ANS5ASIA i!#ate* t/e "!#ic1 c!n*iti!n !n =A''ANTED 3ESSEL CLASSED AND CLASS 7AINTAINED, P';DENTIAL 0a*e a a#i* >ai er !f t/e sa0e.

T/e C!urt !f A""ea#s, in re ersin4 t/e +u*40ent !f t/e 'TC >/ic/ /e#* t/at T'ANS5ASIA 8reac/e* t/e >arrant1 "r! isi!n !n CLASSED AND CLASS 7AINTAINED, un*ersc!re* t/at P';DENTIAL can 8e *ee0e* t! /a e 0a*e a a#i* >ai er !f T'ANS5ASIAQs 8reac/ !f >arrant1 as a##e4e*, rati!cinatin4, t/usA T/ir*, after t/e #!ss, Pru*entia# rene>e* t/e insurance "!#ic1 !f Trans5Asia f!r t>! (2) c!nsecuti e 1ears, fr!0 n!!n !f 61 +u#1 1--2 t! n!!n !f 61 +u#1 1--., an* t/en a4ain unti# n!!n !f 61 +u#1 1--&. T/is rene>a# is *ee0e* a >ai er !f an1 8reac/ !f >arrant1.2& P';DENTIAL fin*s fau#t >it/ t/e ru#in4 !f t/e a""e##ate c!urt >/en it ru#e* t/at t/e rene>a# "!#icies are *ee0e* a >ai er !f T'ANS5ASIAQs a##e4e* 8reac/, a errin4 /erein t/at t/e su8se?uent "!#icies, *esi4nate* as 7H-2O1.-. an* 7H-.O1()) s/!> t/at t/e1 >ere issue* !n#1 !n 1 +u#1 1--2 an* % +u#1 1--., res"ecti e#1, "ri!r t! t/e ti0e it 0a*e a re?uest t! T'ANS5ASIA t/at it 8e furnis/e* a c!"1 !f t/e certificati!n s"ecif1in4 t/at t/e insure* esse# M7O3 Asia D!reaM >as CLASSED AND CLASS 7AINTAINED. P';DENTIAL "!sits t/at it ca0e t! 9n!> !f t/e 8reac/ 81 T'ANS5ASIA !f t/e su8Bect >arrant1 c#ause !n#1 !n 21 A"ri# 1--(. On e en *ate, P';DENTIAL sent T'ANS5 ASIA a #etter !f *enia#, a* isin4 t/e #atter t/at t/eir c#ai0 is n!t c!0"ensa8#e. In fine, P';DENTIAL >!u#* /a e t/is C!urt 8e#ie e t/at t/e issuance !f t/e rene>a# "!#icies cann!t 8e a >ai er 8ecause t/e1 >ere issue* >it/!ut 9n!>#e*4e !f t/e a##e4e* 8reac/ !f >arrant1 c!00itte* 81 T'ANS5ASIA.2( =e are n!t i0"resse*. =e *! n!t fin* t/at t/e C!urt !f A""ea#s >as in err!r >/en it /e#* t/at P';DENTIAL, in rene>in4 T'ANS5ASIAQs insurance "!#ic1 f!r t>!

c!nsecuti e 1ears after t/e #!ss c! ere* 81 P!#ic1 N!. 7H-%O1%&%, >as c!nsi*ere* t! /a e >ai e* T'ANS5 ASIAQs 8reac/ !f t/e su8Bect >arrant1, if an1. Breac/ !f a >arrant1 !r !f a c!n*iti!n ren*ers t/e c!ntract *efeasi8#e at t/e !"ti!n !f t/e insurer$ 8ut if /e s! e#ects, /e 0a1 >ai e /is "ri i#e4e an* "!>er t! rescin* 81 t/e 0ere e:"ressi!n !f an intenti!n s! t! *!. In t/at e ent /is #ia8i#it1 un*er t/e "!#ic1 c!ntinues as 8ef!re.2) T/ere can 8e n! c#earer intenti!n !f t/e >ai er !f t/e a##e4e* 8reac/ t/an t/e rene>a# !f t/e "!#ic1 insurance 4rante* 81 P';DENTIAL t! T'ANS5 ASIA in 7H-2O1.-. an* 7H-.O1()), issue* in t/e 1ears 1--2 an* 1--., res"ecti e#1. T! !ur 0in*, t/e ar4u0ent is 0a*e e en 0!re cre*u#!us 81 P';DENTIALQs #ac9 !f "r!!f t! su""!rt its a##e4ati!n t/at t/e rene>a#s !f t/e "!#icies >ere ta9en !n#1 after a re?uest >as 0a*e t! T'ANS5ASIA t! furnis/ t/e0 a c!"1 !f t/e certificate attestin4 t/at M7O3 Asia D!reaM >as CLASSED AND CLASS 7AINTAINED. N!t>it/stan*in4 P';DENTIALQs c#ai0 t/at n! certificati!n >as issue* t! t/at effect, it rene>e* t/e "!#ic1, t/ere81, e i*encin4 an intenti!n t! >ai e T'ANS5ASIAQs a##e4e* 8reac/. C#ear#1, 81 4rantin4 t/e rene>a# "!#icies t>ice an* successi e#1 after t/e #!ss, t/e intent >as t! 8enefit t/e insure*, T'ANS5ASIA, as >e## as t! >ai e c!0"#iance !f t/e >arrant1. T/e f!re4!in4 fin*in4 ren*ers a *eter0inati!n !f >/et/er t/e su8Bect >arrant1 is a ri*er, 0!!t, as raise* 81 t/e P';DENTIAL in its assi4n0ent !f err!rs. =/et/er it is a ri*er >i## n!t effecti e#1 a#ter t/e resu#t f!r t/e reas!ns t/atA (1) P';DENTIAL >as n!t a8#e t! *isc/ar4e t/e 8ur*en !f e i*ence t! s/!> t/at T'ANS5 ASIA c!00itte* a 8reac/, t/ere!f$ an* (2) assu0in4

ar4uen*! t/e c!00issi!n !f a 8reac/ 81 T'ANS5ASIA, t/e sa0e >as s/!>n t! /a e 8een >ai e* 81 P';DENTIAL. II. A. T/e a0!unt !f P%,666,666.66 4rante* 81 P';DENTIAL t! T'ANS5 ASIA ia a transacti!n 8et>een t/e "arties e i*ence* 81 a *!cu0ent *en!0inate* as ML!an an* Trust 'ecei"t,M *ate* 2- 7a1 1--. c!nstitute* "artia# "a10ent !n t/e "!#ic1. It is un*is"ute* t/at T'ANS5ASIA recei e* fr!0 P';DENTIAL t/e a0!unt !f P%,666,666.66. T/e sa0e >as e i*ence* 81 a transacti!n recei"t *en!0inate* as a ML!an an* Trust 'ecei"t,M *ate* 2- 7a1 1--., re"r!*uce* /ereun*erA LOAN AND T';ST 'ECEIPT C#ai0 Fi#e N!. 7H5-%562. P%,666,666.66 C/ec9 N!. PCIB6&&(.. 7a1 2-, 1--.

As securit1 f!r suc/ re"a10ent, >e /ere81 "#e*4e t! P';DENTIAL G;A'ANTEE AND ASS;'ANCE INC. >/ate er rec! er1 >e 0a1 0a9e an* *e#i er t! it a## *!cu0ents necessar1 t! "r! e !ur interest in sai* "r!"ert1. =e a#s! /ere81 a4ree t! "r!0"t#1 "r!secute suit a4ainst suc/ "ers!ns, c!r"!rati!n !r c!r"!rati!ns t/r!u4/ >/!se ne4#i4ence t/e af!resai* #!ss >as cause* !r >/! 0a1 !t/er>ise 8e res"!nsi8#e t/eref!re, >it/ a## *ue *i#i4ence, in !ur !>n na0e, 8ut at t/e e:"ense !f an* un*er t/e e:c#usi e *irecti!n an* c!ntr!# !f P';DENTIAL G;A'ANTEE AND ASS;'ANCE INC. T'ANS5ASIA SHIPPING CO'PO'ATION2P';DENTIAL #ar4e#1 c!nten*s t/at t/e ML!an an* Trust 'ecei"tM e:ecute* 81 t/e "arties e i*ence* a #!an !f P%,666,666.66 >/ic/ it 4rante* t! T'ANS5ASIA, an* n!t an a* ance "a10ent !n t/e "!#ic1 !r a "artia# "a10ent f!r t/e #!ss. It furt/er su80its t/at it is a cust!0ar1 "ractice f!r insurance c!0"anies in t/is c!untr1 t! e:ten* #!ans 4ratuit!us#1 as "art !f 4!!* 8usiness *ea#in4 >it/ t/eir assure*, in !r*er t! aff!r* t/eir assure* t/e c/ance t! c!ntinue 8usiness >it/!ut e08arrass0ent >/i#e a>aitin4 !utc!0e !f t/e sett#e0ent !f t/eir c#ai0s.%6 Acc!r*in4 t! P';DENTIAL, t/e MTrust an* L!an A4ree0entM *i* n!t su8r!4ate t! it >/ate er ri4/ts an*O!r acti!ns T'ANS5 ASIA 0a1 /a e a4ainst t/ir* "ers!ns, an* it cann!t 81 n! 0eans 8e ta9en t/at 81 irtue t/ere!f, P';DENTIAL >as 4rante* irre !ca8#e "!>er !f att!rne1 81 T'ANS5 ASIA, as t/e s!#e "!>er t! "r!secute #ies s!#e#1 >it/ t/e #atter. T/e C!urt !f A""ea#s /e#* t/at t/e rea# c/aracter !f t/e transacti!n 8et>een t/e "arties as e i*ence* 81

'ecei e* F'O7 P';DENTIAL G;A'ANTEE AND ASS;'ANCE INC., t/e su0 !f PESOS TH'EE 7ILLION ONLE (P%,666,666.66) as a #!an >it/!ut interest, un*er P!#ic1 N!. 7H-%O1%.%, re"a1a8#e !n#1 in t/e e ent an* t! t/e e:tent t/at an1 net rec! er1 is 0a*e 81 T'ANS ASIA SHIPPING CO'P., fr!0 an1 "ers!n !r "ers!ns, c!r"!rati!n !r c!r"!rati!ns, !r !t/er "arties, !n acc!unt !f #!ss 81 an1 casua#t1 f!r >/ic/ t/e1 0a1 8e #ia8#e, !ccasi!ne* 81 t/e 2. Oct!8er 1--%A Fire !n B!ar*.

t/e ML!an an* Trust 'ecei"tM is t/at !f an a* ance "a10ent 81 P';DENTIAL !f T'ANS5ASIAQs c#ai0 !n t/e insurance, t/usA T/e P/i#i""ine Insurance C!*e (PD 12&6 as a0en*e*) >as *eri e* fr!0 t/e !#* Insurance La> Act N!. 222( !f t/e P/i#i""ine Le4is#ature *urin4 t/e A0erican 'e4i0e. T/e Insurance Act >as #ifte* er8ati0 fr!0 t/e #a> !f Ca#if!rnia, e:ce"t C/a"ter 3 t/ere!f, >/ic/ >as ta9en #ar4e#1 fr!0 t/e insurance #a> !f Ne> E!r9. T/eref!re, ru#in4 case #a> in t/at Buris*icti!n is t! ;s "ersuasi e in inter"retin4 "r! isi!ns !f !ur !>n Insurance C!*e. In a**iti!n, t/e a""#icati!n !f t/e a*!"te* statute s/!u#* c!rres"!n* in fun*a0enta# "!ints >it/ t/e a""#icati!n in its c!untr1 !f !ri4in : : :. :::: Li9e>ise, it is sett#e* in t/at Buris*icti!n t/at t/e (sic) n!t>it/stan*in4 recita#s in t/e L!an 'ecei"t t/at t/e 0!ne1 >as inten*e* as a #!an *!es n!t *etract fr!0 its rea# c/aracter as "a10ent !f c#ai0, t/usA MT/e recei"t !f 0!ne1 81 t/e insure* e0"#!1ers fr!0 a suret1 c!0"an1 f!r #!sses !n acc!unt !f f!r4er1 !f *rafts 81 an e0"#!1ee >/ere n! "r! isi!n !r re"a10ent !f t/e 0!ne1 >as 0a*e e:ce"t u"!n c!n*iti!n t/at it 8e rec! ere* fr!0 !t/er "arties an* neit/er interest n!r securit1 f!r t/e asserte* *e8ts >as "r! i*e* f!r, t/e 0!ne1 c!nstitute* t/e "a10ent !f a #ia8i#it1 an* n!t a 0ere #!an, n!t>it/stan*in4 recita#s in t/e >ritten recei"t t/at t/e 0!ne1 >as inten*e* as a 0ere #!an.M =/at is c#ear fr!0 t/e >!r*in4s !f t/e s!5ca##e* ML!an an* Trust 'ecei"t A4ree0entM is t/at a""e##ant is

!8#i4ate* t! /an* ! er t! a""e##ee M>/ate er rec! er1 (Trans Asia) 0a1 0a9e an* *e#i er t! (Pru*entia#) a## *!cu0ents necessar1 t! "r! e its interest in t/e sai* "r!"ert1.M F!r a## intents an* "ur"!ses t/eref!re, t/e 0!ne1 recei"te* is "a10ent un*er t/e "!#ic1, >it/ Pru*entia# /a in4 t/e ri4/t !f su8r!4ati!n t! >/ate er net rec! er1 Trans5Asia 0a1 !8tain fr!0 t/ir* "arties resu#tin4 fr!0 t/e fire. In t/e #a> !n insurance, su8r!4ati!n is an e?uita8#e assi4n0ent t! t/e insurer !f a## re0e*ies >/ic/ t/e insure* 0a1 /a e a4ainst t/ir* "ers!n >/!se ne4#i4ence !r >r!n4fu# act cause* t/e #!ss c! ere* 81 t/e insurance "!#ic1, >/ic/ is create* as t/e #e4a# effect !f "a10ent 81 t/e insurer as an assi4nee in e?uit1. T/e #!ss in t/e first instance is t/at !f t/e insure* 8ut after rei08urse0ent !r c!0"ensati!n, it 8ec!0es t/e #!ss !f t/e insurer. It /as 8een referre* t! as t/e *!ctrine !f su8stituti!n an* rests !n t/e "rinci"#e t/at su8stantia# Bustice s/!u#* 8e attaine* re4ar*#ess !f f!r0, t/at is, its 8asis is t/e *!in4 !f c!0"#ete, essentia#, an* "erfect Bustice 8et>een a## t/e "arties >it/!ut re4ar* t! f!r0.%1 =e a4ree. N!t>it/stan*in4 its *esi4nati!n, t/e ten!r !f t/e ML!an an* Trust 'ecei"tM e i*ences t/at t/e rea# nature !f t/e transacti!n 8et>een t/e "arties >as t/at t/e a0!unt !f P%,666,666.66 >as n!t inten*e* as a #!an >/ere81 T'ANS5ASIA is !8#i4ate* t! "a1 P';DENTIAL, 8ut rat/er, t/e sa0e >as a "artia# "a10ent !r an a* ance !n t/e "!#ic1 !f t/e c#ai0s *ue t! T'ANS5ASIA. First, t/e a0!unt !f P%,666,666.66 c!nstitutes an a* ance "a10ent t! T'ANS5ASIA 81 P';DENTIAL, su8r!4atin4 t/e f!r0er t! t/e e:tent !f Man1 net rec! er1 0a*e 81 T'ANS ASIA SHIPPING CO'P., fr!0 an1 "ers!n !r "ers!ns, c!r"!rati!n !r c!r"!rati!ns, !r

!t/er "arties, !n acc!unt !f #!ss 81 an1 casua#t1 f!r >/ic/ t/e1 0a1 8e #ia8#e, !ccasi!ne* 81 t/e 2. Oct!8er 1--%A Fire !n B!ar*.M%2 Sec!n*, >e fin* t/at "er t/e ML!an an* Trust 'ecei"t,M e en as T'ANS5ASIA a4ree* t! M"r!0"t#1 "r!secute suit a4ainst suc/ "ers!ns, c!r"!rati!n !r c!r"!rati!ns t/r!u4/ >/!se ne4#i4ence t/e af!resai* #!ss >as cause* !r >/! 0a1 !t/er>ise 8e res"!nsi8#e t/eref!re, >it/ a## *ue *i#i4enceM in its na0e, t/e "r!secuti!n !f t/e c#ai0s a4ainst suc/ t/ir* "ers!ns are t! 8e carrie* !n Mat t/e e:"ense !f an* un*er t/e e:c#usi e *irecti!n an* c!ntr!# !f P';DENTIAL G;A'ANTEE AND ASS;'ANCE INC.M%% T/e c#ear i0"!rt !f t/e "/rase Mat t/e e:"ense !f an* un*er t/e e:c#usi e *irecti!n an* c!ntr!#M as use* in t/e ML!an an* Trust 'ecei"tM 4rants s!#e#1 t! P';DENTIAL t/e "!>er t! "r!secute, e en as t/e sa0e is carrie* in t/e na0e !f T'ANS5ASIA, t/ere81 0a9in4 T'ANS5ASIA 0ere#1 an a4ent !f P';DENTIAL, t/e "rinci"a#, in t/e "r!secuti!n !f t/e suit a4ainst "arties >/! 0a1 /a e !ccasi!ne* t/e #!ss. T/ir*, "er t/e su8Bect ML!an an* Trust 'ecei"t,M t/e !8#i4ati!n !f T'ANS5ASIA t! re"a1 P';DENTIAL is /i4/#1 s"ecu#ati e an* c!ntin4ent, i.e., !n#1 in t/e e ent an* t! t/e e:tent t/at an1 net rec! er1 is 0a*e 81 T'ANS5ASIA fr!0 an1 "ers!n !n acc!unt !f #!ss !ccasi!ne* 81 t/e fire !f 2. Oct!8er 1--%. T/e transacti!n, t/eref!re, >as 0a*e t! 8enefit T'ANS5 ASIA, suc/ t/at, if n! rec! er1 fr!0 t/ir* "arties is 0a*e, P';DENTIAL cann!t 8e re"ai* t/e a0!unt. 3eri#1, >e *! n!t t/in9 t/at t/is is c!nstituti e !f a #!an.%2 T/e #i8era#it1 in t/e ten!r !f t/e ML!an an* Trust 'ecei"tM in fa !r !f T'ANS5ASIA #ea*s t! t/e c!nc#usi!n t/at t/e a0!unt !f P%,666,666.66 >as a

f!r0 !f an a* ance "a10ent !n T'ANS5ASIAQs c#ai0 !n 7H-%O1%.%. III. A. P';DENTIAL is *irecte* t! "a1 T'ANS5ASIA t/e a0!unt !f P),%-.,6(2.2&, re"resentin4 t/e 8a#ance !f t/e #!ss suffere* 81 T'ANS5ASIA an* c! ere* 81 7arine P!#ic1 N!. 7H-%O1%&%. Our f!re4!in4 *iscussi!n su""!rts t/e c!nc#usi!n t/at T'ANS5ASIA is entit#e* t! t/e un"ai* c#ai0s c! ere* 81 7arine P!#ic1 N!. 7H-%O1%&%, !r a t!ta# a0!unt !f P),%-.,6(2.2&. B. Li9e>ise, P';DENTIAL is *irecte* t! "a1 T'ANS5 ASIA, *a0a4es in t/e f!r0 !f att!rne1Qs fees e?ui a#ent t! 16U !f P),%-.,6(2.2&. T/e C!urt !f A""ea#s *enie* t/e 4rant !f att!rne1Qs fees. It /e#* t/at att!rne1Qs fees cann!t 8e a>ar*e* a8sent a s/!>in4 !f 8a* fait/ !n t/e "art !f P';DENTIAL in reBectin4 T'ANS5ASIAQs c#ai0, n!t>it/stan*in4 t/at t/e reBecti!n >as err!ne!us. Acc!r*in4 t! t/e C!urt !f A""ea#s, att!rne1Qs fees can 8e a>ar*e* !n#1 in t/e cases enu0erate* in Artic#e 226) !f t/e Ci i# C!*e >/ic/ fin*s n! a""#icati!n in t/e instant case. =e *isa4ree. Sec. 222 !f t/e Insurance C!*e 4rants *a0a4es c!nsistin4 !f att!rne1Qs fees an* !t/er e:"enses incurre* 81 t/e insure* after a fin*in4 81 t/e Insurance C!00issi!ner !r t/e C!urt, as t/e case 0a1 8e, !f an unreas!na8#e *enia# !r >it//!#*in4 !f t/e "a10ent !f t/e c#ai0s *ue. 7!re! er, t/e #a> i0"!ses an interest !f t>ice t/e cei#in4 "rescri8e* 81 t/e

7!netar1 B!ar* !n t/e a0!unt !f t/e c#ai0 *ue t/e insure* fr!0 t/e *ate f!##!>in4 t/e ti0e "rescri8e* in Secti!n 222%. !r in Secti!n 22%,%& as t/e case 0a1 8e, unti# t/e c#ai0 is fu##1 satisfie*. Fina##1, Secti!n 222 c!nsi*ers t/e fai#ure t! "a1 t/e c#ai0s >it/in t/e ti0e "rescri8e* in Secti!ns 222 !r 22%, >/en a""#ica8#e, as "ri0a facie e i*ence !f unreas!na8#e *e#a1 in "a10ent. T! t/e 0in* !f t/is C!urt, Secti!n 222 *!es n!t re?uire a s/!>in4 !f 8a* fait/ in !r*er t/at att!rne1Qs fees 8e 4rante*. As ear#ier state*, un*er Secti!n 222, a "ri0a facie e i*ence !f unreas!na8#e *e#a1 in "a10ent !f t/e c#ai0 is create* 81 fai#ure !f t/e insurer t! "a1 t/e c#ai0 >it/in t/e ti0e fi:e* in 8!t/ Secti!ns 222 an* 22% !f t/e Insurance C!*e. As esta8#is/e* in Secti!n 222, 81 reas!n !f t/e *e#a1 an* t/e c!nse?uent fi#in4 !f t/e suit 81 t/e insure*, t/e insurers s/a## 8e a*Bu*4e* t! "a1 *a0a4es >/ic/ s/a## c!nsist !f att!rne1Qs fees an* !t/er e:"enses incurre* 81 t/e insure*.%( Secti!n 222 rea*sA In case !f an1 #iti4ati!n f!r t/e enf!rce0ent !f an1 "!#ic1 !r c!ntract !f insurance, it s/a## 8e t/e *ut1 !f t/e C!00issi!ner !r t/e C!urt, as t/e case 0a1 8e, t! 0a9e a fin*in4 as t! >/et/er t/e "a10ent !f t/e c#ai0 !f t/e insure* /as 8een unreas!na8#1 *enie* !r >it//e#*$ an* in t/e affir0ati e case, t/e insurance c!0"an1 s/a## 8e a*Bu*4e* t! "a1 *a0a4es >/ic/ s/a## c!nsist !f att!rne1Qs fees an* !t/er e:"enses incurre* 81 t/e insure* "ers!n 81 reas!n !f suc/ unreas!na8#e *enia# !r >it//!#*in4 !f "a10ent "#us interest !f t>ice t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar* !f t/e a0!unt !f t/e c#ai0 *ue t/e

insure*, fr!0 t/e *ate f!##!>in4 t/e ti0e "rescri8e* in secti!n t>! /un*re* f!rt15t>! !r in secti!n t>! /un*re* f!rt15t/ree, as t/e case 0a1 8e, unti# t/e c#ai0 is fu##1 satisfie*$ Pr! i*e*, T/at t/e fai#ure t! "a1 an1 suc/ c#ai0 >it/in t/e ti0e "rescri8e* in sai* secti!ns s/a## 8e c!nsi*ere* "ri0a facie e i*ence !f unreas!na8#e *e#a1 in "a10ent. Secti!ns 22% an* 222 !f t/e Insurance C!*e a""#1 >/en t/e c!urt fin*s an unreas!na8#e *e#a1 !r refusa# in t/e "a10ent !f t/e insurance c#ai0s. In t/e case at 8ar, t/e facts as f!un* 81 t/e C!urt !f A""ea#s, an* c!nfir0e* 81 t/e rec!r*s s/!> t/at t/ere >as an unreas!na8#e *e#a1 81 P';DENTIAL in t/e "a10ent !f t/e un"ai* 8a#ance !f P),%-.,6(2.2& t! T'ANS5ASIA. On 2& Oct!8er 1--%, a *a1 after t/e !ccurrence !f t/e fire in M7O3 Asia D!reaM, T'ANS5ASIA fi#e* its n!tice !f c#ai0. On 1% Au4ust 1--&, t/e a*Buster, 'ic/ar*s H!44 Internati!na# (P/i#s.), Inc., c!0"#ete* its sur e1 re"!rt rec!00en*in4 t/e a0!unt !f P11,%-.,6(2.2& as t/e t!ta# in*e0nit1 *ue t! T'ANS5ASIA.%) On 21 A"ri# 1--(, P';DENTIAL, in a #etter%- a**resse* t! T'ANS5ASIA *enie* t/e #atterQs c#ai0 f!r t/e a0!unt !f P),%-.,6(2.2& re"resentin4 t/e 8a#ance !f t/e t!ta# in*e0nit1. On 21 +u#1 1--(, P';DENTIAL sent a sec!n* #etter26 t! T'ANS5ASIA see9in4 a return !f t/e a0!unt !f P%,666,666.66. On 1% Au4ust 1--(, T'ANS5ASIA >as c!nstraine* t! fi#e a c!0"#aint f!r su0 !f 0!ne1 a4ainst P';DENTIAL "ra1in4, inter a#ia, f!r t/e su0 !f P),%-.,6(2.2& re"resentin4 t/e 8a#ance !f t/e "r!cee*s !f t/e insurance c#ai0. As can 8e 4#eane* fr!0 t/e f!re4!in4, t/ere >as an unreas!na8#e *e#a1 !n t/e "art !f P';DENTIAL t! "a1

T'ANS5ASIA, as in fact, it refute* t/e #atterQs ri4/t t! t/e insurance c#ai0s, fr!0 t/e ti0e "r!!f !f #!ss >as s/!>n an* t/e ascertain0ent !f t/e #!ss >as 0a*e 81 t/e insurance a*Buster. E i*ent#1, P';DENTIALQs unreas!na8#e *e#a1 in satisf1in4 T'ANS5ASIAQs un"ai* c#ai0s c!0"e##e* t/e #atter t! fi#e a suit f!r c!##ecti!n. Succinct#1, an a>ar* e?ui a#ent t! ten "ercent (16U) !f t/e un"ai* "r!cee*s !f t/e "!#ic1 as att!rne1Qs fees t! T'ANS5ASIA is reas!na8#e un*er t/e circu0stances, !r !t/er>ise state*, ten "ercent (16U) !f P),%-.,6(2.2&. In t/e case !f Cat/a1 Insurance, C!., Inc. . C!urt !f A""ea#s,21 >/ere a fin*in4 !f an unreas!na8#e *e#a1 un*er Secti!n 222 !f t/e Insurance C!*e >as 0a*e 81 t/is C!urt, >e 4rant an a>ar* !f att!rne1Qs fees e?ui a#ent t! ten "ercent (16U) !f t/e t!ta# "r!cee*s. =e fin* n! reas!n t! *e iate fr!0 t/is Bu*icia# "rece*ent in t/e case at 8ar. C. Furt/er, t/e a44re4ate a0!unt (P),%-.,6(2.2& "#us 16U t/ere!f as att!rne1Qs fees) s/a## 8e i0"!se* *!u8#e interest in acc!r*ance >it/ Secti!n 222 !f t/e Insurance C!*e. Secti!n 222 !f t/e Insurance C!*e is cate4!rica# in i0"!sin4 an interest t>ice t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar* *ue t/e insure*, fr!0 t/e *ate f!##!>in4 t/e ti0e "rescri8e* in Secti!n 222 !r in Secti!n 22%, as t/e case 0a1 8e, unti# t/e c#ai0 is fu##1 satisfie*. In t/e case at 8ar, >e fin* Secti!n 22% t! 8e a""#ica8#e as >/at is in !# e* /erein is a 0arine insurance, c#ear#1, a "!#ic1 !t/er t/an #ife insurance. Secti!n 22% is /ereun*er re"r!*uce*A

SEC. 22%. T/e a0!unt !f an1 #!ss !r *a0a4e f!r >/ic/ an insurer 0a1 8e #ia8#e, un*er an1 "!#ic1 !t/er t/an #ife insurance "!#ic1, s/a## 8e "ai* >it/in t/irt1 *a1s after "r!!f !f #!ss is recei e* 81 t/e insurer an* ascertain0ent !f t/e #!ss !r *a0a4e is 0a*e eit/er 81 a4ree0ent 8et>een t/e insure* an* t/e insurer !r 81 ar8itrati!n$ 8ut if suc/ ascertain0ent is n!t /a* !r 0a*e >it/in si:t1 *a1s after suc/ recei"t 81 t/e insurer !f t/e "r!!f !f #!ss, t/en t/e #!ss !r *a0a4e s/a## 8e "ai* >it/in ninet1 *a1s after suc/ recei"t. 'efusa# !r fai#ure t! "a1 t/e #!ss !r *a0a4e >it/in t/e ti0e "rescri8e* /erein >i## entit#e t/e assure* t! c!##ect interest !n t/e "r!cee*s !f t/e "!#ic1 f!r t/e *urati!n !f t/e *e#a1 at t/e rate !f t>ice t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar*, un#ess suc/ fai#ure !r refusa# t! "a1 is 8ase* !n t/e 4r!un* t/at t/e c#ai0 is frau*u#ent. As s"ecifie*, t/e assure* is entit#e* t! interest !n t/e "r!cee*s f!r t/e *urati!n !f t/e *e#a1 at t/e rate !f t>ice t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar* e:ce"t >/en t/e fai#ure !r refusa# !f t/e insurer t! "a1 >as f!un*e* !n t/e 4r!un* t/at t/e c#ai0 is frau*u#ent. D. T/e ter0 M*!u8#e interestM as use* in t/e Decisi!n !f t/e C!urt !f A""ea#s 0ust 8e inter"rete* t! 0ean 22U "er annu0. P';DENTIAL assai#s t/e a>ar* !f interest, 4rante* 81 t/e C!urt !f A""ea#s, in fa !r !f T'ANS5ASIA in t/e assai#e* Decisi!n !f & N! e08er 2661. It is P';DENTIALQs stance t/at t/e a>ar* is e:t!rti!nate an* 4r!ss#1 unsc!nsci!na8#e. In su""!rt t/eret!, P';DENTIAL 0a9es a reference t! T'ANS5ASIAQs "ra1er in t/e C!0"#aint fi#e* >it/ t/e c!urt a ?u!

>/erein t/e #atter s!u4/t, Minterest *!u8#e t/e "re ai#in4 rate !f interest !f 21U "er annu0 n!> !8tainin4 in t/e 8an9in4 8usiness !r "#us 22U "er annu0 "ursuant t! Artic#e 22% !f t/e Insurance C!*e : : :.M22 T/e c!ntenti!n fai#s t! "ersua*e. It is sett#e* t/at an a>ar* !f *!u8#e interest is #a>fu# an* Bustifie* un*er Secti!ns 22% an* 222 !f t/e Insurance C!*e.2% In Fin0an Genera# Assurance C!r"!rati!n . C!urt !f A""ea#s,22 t/is C!urt /e#* t/at t/e "a10ent !f 22U interest "er annu0 is aut/!riNe* 81 t/e Insurance C!*e.2. T/ere is n! 4ainsa1in4 t/at t/e ter0 M*!u8#e interestM as use* in Secti!ns 22% an* 222 can !n#1 8e inter"rete* t! 0ean t>ice 12U "er annu0 !r 22U "er annu0 interest, t/usA T/e ter0 Mcei#in4 "rescri8e* 81 t/e 7!netar1 B!ar*M 0eans t/e #e4a# rate !f interest !f t>e# e "er centu0 "er annu0 (12U) as "rescri8e* 81 t/e 7!netar1 B!ar* in C.B. Circu#ar N!. 21&, "ursuant t! P.D. N!. 11&, a0en*in4 t/e ;sur1 La>$ s! t/at >/en Secti!ns 222, 22% an* 222 !f t/e Insurance C!*e "r! i*e t/at t/e insurer s/a## 8e #ia8#e t! "a1 interest Mt>ice t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar*M, it 0eans t>ice 12U "er annu0 !r 22U "er annu0 interest !n t/e "r!cee*s !f t/e insurance.2& E. T/e "a10ent !f *!u8#e interest s/!u#* 8e c!unte* fr!0 1% Se"te08er 1--&. T/e C!urt !f A""ea#s, in i0"!sin4 *!u8#e interest f!r t/e *urati!n !f t/e *e#a1 !f t/e "a10ent !f t/e un"ai* 8a#ance *ue T'ANS5ASIA, c!0"ute* t/e sa0e fr!0 1% Au4ust 1--& unti# suc/ ti0e >/en t/e a0!unt is fu##1 "ai*. A#t/!u4/ n!t raise* 81 t/e "arties, >e fin* t/e

c!0"utati!n !f t/e *urati!n !f t/e *e#a1 0a*e 81 t/e a""e##ate c!urt t! 8e "atent#1 err!ne!us. T! 8e sure, Secti!n 22% i0"!ses interest !n t/e "r!cee*s !f t/e "!#ic1 f!r t/e *urati!n !f t/e *e#a1 at t/e rate !f t>ice t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar*. Si4nificant#1, Secti!n 22% 0an*ates t/e "a10ent !f an1 #!ss !r *a0a4e f!r >/ic/ an insurer 0a1 8e #ia8#e, un*er an1 "!#ic1 !t/er t/an #ife insurance "!#ic1, >it/in t/irt1 *a1s after "r!!f !f #!ss is recei e* 81 t/e insurer an* ascertain0ent !f t/e #!ss !r *a0a4e is 0a*e eit/er 81 a4ree0ent 8et>een t/e insure* an* t/e insurer !r 81 ar8itrati!n. It is c#ear t/at un*er Secti!n 22%, t/e insurer /as unti# t/e %6t/ *a1 after "r!!f !f #!ss an* ascertain0ent !f t/e #!ss !r *a0a4e t! "a1 its #ia8i#it1 un*er t/e insurance, an* !n#1 after suc/ ti0e can t/e insurer 8e /e#* t! 8e in *e#a1, t/ere81 necessitatin4 t/e i0"!siti!n !f *!u8#e interest. In t/e case at 8ar, it >as n!t *is"ute* t/at t/e sur e1 re"!rt !n t/e ascertain0ent !f t/e #!ss >as c!0"#ete* 81 t/e a*Buster, 'ic/ar* H!44s Internati!na# (P/i#s.), Inc. !n 1% Au4ust 1--&. P';DENTIAL /a* t/irt1 *a1s fr!0 1% Au4ust 1--& >it/in >/ic/ t! "a1 its #ia8i#it1 t! T'ANS5ASIA un*er t/e insurance "!#ic1, !r unti# 1% Se"te08er 1--&. T/eref!re, t/e *!u8#e interest can 8e4in t! run fr!0 1% Se"te08er 1--& !n#1. I3. A. An interest !f 12U "er annu0 is si0i#ar#1 i0"!se* !n t/e TOTAL a0!unt !f #ia8i#it1 a*Bu*4e* in secti!n III /erein, c!0"ute* fr!0 t/e ti0e !f fina#it1 !f Bu*40ent unti# t/e fu## satisfacti!n t/ere!f in c!nf!r0it1 >it/ t/is

C!urtQs ru#in4 in Eastern S/i""in4 Lines, Inc. . C!urt !f A""ea#s. T/is C!urt in Eastern S/i""in4 Lines, Inc. . C!urt !f A""ea#s,2( inscri8e* t/e ru#e !f t/u082) in t/e a""#icati!n !f interest t! 8e i0"!se* !n !8#i4ati!ns, re4ar*#ess !f t/eir s!urce. Eastern e0"/asiNe* 8e1!n* ca i# t/at >/en t/e Bu*40ent !f t/e c!urt a>ar*in4 a su0 !f 0!ne1 8ec!0es fina# an* e:ecut!r1, t/e rate !f #e4a# interest, re4ar*#ess !f >/et/er t/e !8#i4ati!n in !# es a #!an !r f!r8earance !f 0!ne1, s/a## 8e 12U "er annu0 fr!0 suc/ fina#it1 unti# its satisfacti!n, t/is interi0 "eri!* 8ein4 *ee0e* t! 8e 81 t/en an e?ui a#ent t! a f!r8earance2- !f cre*it. =e fin* a""#icati!n !f t/e ru#e in t/e case at 8ar "r!"er, t/us, a rate !f 12U "er annu0 fr!0 t/e fina#it1 !f Bu*40ent unti# t/e fu## satisfacti!n t/ere!f 0ust 8e i0"!se* !n t/e t!ta# a0!unt !f #ia8i#it1 a*Bu*4e* t! P';DENTIAL. It is c#ear t/at t/e interi0 "eri!* fr!0 t/e fina#it1 !f Bu*40ent unti# t/e satisfacti!n !f t/e sa0e is *ee0e* e?ui a#ent t! a f!r8earance !f cre*it, /ence, t/e i0"!siti!n !f t/e af!resai* interest. Fa##! =HE'EFO'E, t/e Petiti!n in G.'. N!. 1.1)-6 is DENIED. H!>e er, t/e Petiti!n in G.'. N!. 1.1--1 is G'ANTED, t/us, >e a>ar* t/e 4rant !f att!rne1Qs fees an* 0a9e a c#arificati!n t/at t/e ter0 M*!u8#e interestM as use* in t/e & N! e08er 2661 Decisi!n !f t/e C!urt !f A""ea#s in CA G' C3 N!. &)2() s/!u#* 8e c!nstrue* t! 0ean interest at t/e rate !f 22U "er annu0, >it/ a furt/er c#arificati!n, t/at t/e sa0e s/!u#* 8e c!0"ute* fr!0 1% Se"te08er 1--& unti# fu##1 "ai*. T/e Decisi!n an* 'es!#uti!n !f t/e C!urt !f

A""ea#s, in CA5G.'. C3 N!. &)2(), *ate* & N! e08er 2661 an* 2- +anuar1 2662, res"ecti e#1, are, t/us, 7ODIFIED in t/e f!##!>in4 0anner, t! >itA 1. P';DENTIAL is DI'ECTED t! PAE T'ANS5ASIA t/e a0!unt !f P),%-.,6(2.2&, re"resentin4 t/e 8a#ance !f t/e #!ss suffere* 81 T'ANS5ASIA an* c! ere* 81 7arine P!#ic1 N!. 7H-%O1%&%$ 2. P';DENTIAL is DI'ECTED furt/er t! PAE T'ANS5ASIA *a0a4es in t/e f!r0 !f att!rne1Qs fees e?ui a#ent t! 16U !f t/e a0!unt !f P),%-.,6(2.2&$ %. T/e a44re4ate a0!unt (P),%-.,6(2.2& "#us 16U t/ere!f as att!rne1Qs fees) s/a## 8e i0"!se* *!u8#e interest at t/e rate !f 22U "er annu0 t! 8e c!0"ute* fr!0 1% Se"te08er 1--& unti# fu##1 "ai*$ an* 2. An interest !f 12U "er annu0 is si0i#ar#1 i0"!se* !n t/e TOTAL a0!unt !f #ia8i#it1 a*Bu*4e* as a8! estate* in "ara4ra"/s (1), (2), an* (%) /erein, c!0"ute* fr!0 t/e ti0e !f fina#it1 !f Bu*40ent unti# t/e fu## satisfacti!n t/ere!f. N! c!sts. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a EN BANC G.'. N!. L526).% 7a1 2-, 1-&(

BONIFACIO B'OS., INC., ET AL., "#aintiffs5a""e##ants, s. EN'I@;E 7O'A, ET AL., *efen*ants5a""e##ees. G. 7a4sa1sa1 f!r "#aintiffs5a""e##ants. A8a* Sant!s an* Pa8#! f!r *efen*ant5a""e##ee H. E. 'e1es, Inc. +. P. Santi##a an* A. D. Hi*a#4!, +r. f!r !t/er *efen*ant5 a""e##ee. CAST'O, +.A T/is is an a""ea# fr!0 t/e *ecisi!n !f t/e C!urt !f First Instance !f 7ani#a, Branc/ F3, in ci i# case 2))2%, affir0in4 t/e *ecisi!n !f t/e 7unici"a# C!urt !f 7ani#a, *ec#arin4 t/e H.S. 'e1es, Inc. as /a in4 a 8etter ri4/t t/an t/e B!nifaci! Br!s., Inc. an* t/e A1a#a Aut! Parts C!0"an1, a""e##ants /erein, t! t/e "r!cee*s !f 0!t!r insurance "!#ic1 A56&1., in t/e su0 !f P2,662.(%, issue* 81 t/e State B!n*in4 < Insurance C!. Inc., an* *irectin4 "a10ent !f t/e sai* a0!unt t! t/e H. 'e1es, Inc. Enri?ue 7!ra, !>ner !f O#*s0!8i#e se*an 0!*e# 1-.&, 8earin4 "#ate N!. @C5 0!rt4a4e* t/e sa0e t! t/e H.S. 'e1es, Inc., >it/ t/e c!n*iti!n t/at t/e f!r0er >!u#* insure t/e aut!0!8i#e >it/ t/e #atter as 8eneficiar1. T/e aut!0!8i#e >as t/ereafter insure* !n +une 2%, 1-.- >it/ t/e State B!n*in4 < Insurance C!., Inc., an* 0!t!r car insurance "!#ic1 A56&1. >as issue* t! Enri?ue 7!ra, t/e "ertinent "r! isi!ns !f >/ic/ rea*A 1. T/e C!0"an1 (referrin4 t! t/e State B!n*in4 < Insurance C!., Inc.) >i##, su8Bect t! t/e Li0its !f Lia8i#it1, in*e0nif1 t/e Insure* a4ainst #!ss !f !r

*a0a4es t! t/e 7!t!r 3e/ic#e an* its access!ries an* s"are "arts >/i#st t/ere!n$ (a) 81 acci*enta# c!##isi!n !r ! erturnin4 !r c!##isi!n !r ! erturnin4 c!nse?uent u"!n 0ec/anica# 8rea9*!>n !r c!nse?uent u"!n >ear an* tear, ::: ::: :::

2. At its !>n !"ti!n t/e C!0"an1 0a1 "a1 in cas/ t/e a0!unt !f t/e #!ss !r *a0a4e !r 0a1 re"air, reinstate, !r re"#ace t/e 7!t!r 3e/ic#e !r an1 "art t/ere!f !r its access!ries !r s"are "arts. T/e #ia8i#it1 !f t/e C!0"an1 s/a## n!t e:cee* t/e a#ue !f t/e "arts >/ic/e er is t/e #ess. T/e Insure*Cs esti0ate !f a#ue state* in t/e sc/e*u#e >i## 8e t/e 0a:i0u0 a0!unt "a1a8#e 81 t/e C!0"an1 in res"ect !f an1 c#ai0 f!r #!ss !r *a0a4e.1V>"/W1.XYt ::: ::: :::

2. T/e Insure* 0a1 aut/!riNe t/e re"air !f t/e 7!t!r 3e/ic#e necessitate* 81 *a0a4e f!r >/ic/ t/e C!0"an1 0a1 8e #ia8#e un*er t/is P!#ic1 "r! i*e* t/atA T (a) T/e esti0ate* c!st !f suc/ re"air *!es n!t e:cee* t/e Aut/!riNe* 'e"air Li0it, (8) A *etai#e* esti0ate !f t/e c!st is f!r>ar*e* t! t/e C!0"an1 >it/!ut *e#a1, su8Bect t! t/e c!n*iti!n t/at ML!ss, if an1 is "a1a8#e t! H.S. 'e1es, Inc.,M 81 irtue !f t/e fact t/at sai* O#*s0!8i#e se*an >as 0!rt4a4e* in fa !r !f t/e sai* H.S. 'e1es, Inc. an* t/at un*er a c#ause in sai* insurance "!#ic1, an1 #!ss >as 0a*e "a1a8#e t! t/e H.S. 'e1es, Inc. as 7!rt4a4ee$ ::: ::: :::

Durin4 t/e effecti it1 !f t/e insurance c!ntract, t/e car 0et >it/ an acci*ent. T/e insurance c!0"an1 t/en assi4ne* t/e acci*ent t! t/e Ba1ne A*Bust0ent C!. f!r in esti4ati!n an* a""raisa# !f t/e *a0a4e. Enri?ue 7!ra, >it/!ut t/e 9n!>#e*4e an* c!nsent !f t/e H.S. 'e1es, Inc., aut/!riNe* t/e B!nifaci! Br!s. Inc. t! furnis/ t/e #a8!r an* 0ateria#s, s!0e !f >/ic/ >ere su""#ie* 81 t/e A1a#a Aut! Parts C!. F!r t/e c!st !f #a8!r an* 0ateria#s, Enri?ue 7!ra >as 8i##e* at P2,162.(% t/r!u4/ t/e H.H. Ba1ne A*Bust0ent C!. T/e insurance c!0"an1 after c#ai0in4 a franc/ise in t/e a0!unt !f P166, *re> a c/ec9 in t/e a0!unt !f P2,662.(%, as "r!cee*s !f t/e insurance "!#ic1, "a1a8#e t! t/e !r*er !f Enri?ue 7!ra !r H.S. 'e1es,. Inc., an* entruste* t/e c/ec9 t! t/e H.H. Ba1ne A*Bust0ent C!. f!r *is"!siti!n an* *e#i er1 t! t/e "r!"er "art1. In t/e 0eanti0e, t/e car >as *e#i ere* t! Enri?ue 7!ra >it/!ut t/e c!nsent !f t/e H.S. 'e1es, Inc., an* >it/!ut "a10ent t! t/e B!nifaci! Br!s. Inc. an* t/e A1a#a Aut! Parts C!. !f t/e c!st !f re"airs an* 0ateria#s. ;"!n t/e t/e!r1 t/at t/e insurance "r!cee*s s/!u#* 8e "ai* *irect#1 t! t/e0, t/e B!nifaci! Br!s. Inc. an* t/e A1a#a Aut! Parts C!. fi#e* !n 7a1 ), 1-&1 a c!0"#aint >it/ t/e 7unici"a# C!urt !f 7ani#a a4ainst Enri?ue 7!ra an* t/e State B!n*in4 < Insurance C!., Inc. f!r t/e c!##ecti!n !f t/e su0 !f P2,662.(% T/e insurance c!0"an1 fi#e* its ans>er >it/ a c!unterc#ai0 f!r inter"#ea*er, re?uirin4 t/e B!nifaci! Br!s. Inc. an* t/e H.S. 'e1es, Inc. t! inter"#ea* in !r*er t! *eter0ine >/! /as 8etter ri4/t t! t/e insurance "r!cee*s in ?uesti!n. Enri?ue 7!ra >as *ec#are* in *efau#t f!r fai#ure t! a""ear at t/e /earin4, an* e i*ence a4ainst /i0 >as recei e* e: "arte. H!>e er, t/e c!unse# f!r t/e B!nifaci! Br!s. Inc., A1a#a Aut! Parts C!. an* State

B!n*in4 < Insurance C!. Inc. su80itte* a sti"u#ati!n !f facts, !n t/e 8asis !f >/ic/ are 7unici"a# C!urt ren*ere* a *ecisi!n *ec#arin4 t/e H.S. 'e1es, Inc. as /a in4 a 8etter ri4/t t! t/e *is"ute* a0!unt an* !r*erin4 State B!n*in4 < Insurance C!. Inc. t! "a1 t! t/e H. S. 'e1es, Inc. t/e sai* su0 !f P2,662.(%. Fr!0 t/is *ecisi!n, t/e a""e##ants e#e ate* t/e case t! t/e C!urt !f First Instance !f 7ani#a >/ic/ t/e sti"u#ati!n !f facts >as re"r!*uce*. On Oct!8er 1-, 1-&2 t/e #atter c!urt ren*ere* a *ecisi!n, affir0in4 t/e *ecisi!n !f t/e 7unici"a# C!urt. T/e B!nifaci! Br!s. Inc. an* t/e A1a#a Aut! Parts C!. 0! e* f!r rec!nsi*erati!n !f t/e *ecisi!n, 8ut t/e tria# c!urt *enie* t/e 0!ti!n. Hence, t/is a""ea#. T/e 0ain issue raise* is >/et/er t/ere is "ri it1 !f c!ntract 8et>een t/e B!nifaci! Br!s. Inc. an* t/e A1a#a Aut! Parts C!. !n t/e !ne /an* an* t/e insurance c!0"an1 !n t/e !t/er. T/e a""e##ants ar4ue t/at t/e insurance c!0"an1 an* Enri?ue 7!ra are "arties t! t/e re"air !f t/e car as >e## as t/e t!>a4e t/ere!f "erf!r0e*. T/e aut/!rit1 f!r t/is asserti!n is t! 8e f!un*, it is a##e4e*, in "ara4ra"/ 2 !f t/e insurance c!ntract >/ic/ "r! i*es t/at Mt/e insure* 0a1 aut/!riNe t/e re"air !f t/e 7!t!r 3e/ic#e necessitate* 81 *a0a4e f!r >/ic/ t/e c!0"an1 0a1 8e #ia8#e un*er t/e "!#ic1 "r! i*e* t/at (a) t/e esti0ate* c!st !f suc/ re"air *!es n!t e:cee* t/e Aut/!riNe* 'e"air Li0it, an* (8) a *etai#e* esti0ate !f t/e c!st is f!r>ar*e* t! t/e c!0"an1 >it/!ut *e#a1.M It is stresse* t/at t/e H.H. Ba1ne A*Bust0ent C!0"an1Cs rec!00en*ati!n !f "a10ent !f t/e a""e##antsC 8i## f!r 0ateria#s an* re"airs f!r >/ic/ t/e #atter *re> a c/ec9 f!r P2,662.(% in*icates t/at 7!ra an* t/e H.H. Ba1ne A*Bust0ent C!. acte* f!r an* in re"resentati!n !f t/e insurance c!0"an1.

T/is ar4u0ent is, in !ur ie>, 8esi*e t/e "!int, 8ecause fr!0 t/e un*is"ute* facts an* fr!0 t/e "#ea*in4s it >i## 8e seen t/at t/e a""e##antsC a##e4e* cause !f acti!n rests e:c#usi e#1 u"!n t/e ter0s !f t/e insurance c!ntract. T/e a""e##ants see9 t! rec! er t/e insurance "r!cee*s, an* f!r t/is "ur"!se, t/e1 re#1 u"!n "ara4ra"/ 2 !f t/e insurance c!ntract *!cu0ent e:ecute* 81 an* 8et>een t/e State B!n*in4 < Insurance C!0"an1, Inc. an* Enri?ue 7!ra. T/e a""e##ants are n!t 0enti!ne* in t/e c!ntract as "arties t/eret! n!r is t/ere an1 c#ause !r "r! isi!n t/ere!f fr!0 >/ic/ >e can infer t/at t/ere is an !8#i4ati!n !n t/e "art !f t/e insurance c!0"an1 t! "a1 t/e c!st !f re"airs *irect#1 t! t/e0. It is fun*a0enta# t/at c!ntracts ta9e effect !n#1 8et>een t/e "arties t/eret!, e:ce"t in s!0e s"ecific instances "r! i*e* 81 #a> >/ere t/e c!ntract c!ntains s!0e sti"u#ati!n in fa !r !f a t/ir* "ers!n.1 Suc/ sti"u#ati!n is 9n!>n as sti"u#ati!n "!ur autrui !r a "r! isi!n in fa !r !f a t/ir* "ers!n n!t a "a1 t! t/e c!ntract. ;n*er t/is *!ctrine, a t/ir* "ers!n is a##!>e* t! a ai# /i0se#f !f a 8enefit 4rante* t! /i0 81 t/e ter0s !f t/e c!ntract, "r! i*e* t/at t/e c!ntractin4 "arties /a e c#ear#1 an* *e#i8erate#1 c!nferre* a fa !r u"!n suc/ "ers!n.2 C!nse?uent#1, a t/ir* "ers!n n!t a "art1 t! t/e c!ntract /as n! acti!n a4ainst t/e "arties t/eret!, an* cann!t 4enera##1 *e0an* t/e enf!rce0ent !f t/e sa0e.% T/e ?uesti!n !f >/et/er a t/ir* "ers!n /as an enf!rci8#e interest in a c!ntract, 0ust 8e sett#e* 81 *eter0inin4 >/et/er t/e c!ntractin4 "arties inten*e* t! ten*er /i0 suc/ an interest 81 *e#i8erate#1 insertin4 ter0s in t/eir a4ree0ent >it/ t/e a !>e* "ur"!se !f c!nferrin4 a fa !r u"!n suc/ t/ir* "ers!n. In t/is c!nnecti!n, t/is C!urt /as #ai* *!>n t/e ru#e t/at t/e fairest test t! *eter0ine >/et/er t/e interest !f a t/ir*

"ers!n in a c!ntract is a sti"u#ati!n "!ur autrui !r 0ere#1 an inci*enta# interest, is t! re#1 u"!n t/e intenti!n !f t/e "arties as *isc#!se* 81 t/eir c!ntract.2 In t/e instant case t/e insurance c!ntract *!es n!t c!ntain an1 >!r*s !r c#auses t! *isc#!se an intent t! 4i e an1 8enefit t! an1 re"air0en !r 0ateria#0en in case !f re"air !f t/e car in ?uesti!n. T/e "arties t! t/e insurance c!ntract !0itte* suc/ sti"u#ati!n, >/ic/ is a circu0stance t/at su""!rts t/e sai* c!nc#usi!n. On t/e !t/er /an*, t/e M#!ss "a1a8#eM c#ause !f t/e insurance "!#ic1 sti"u#ates t/at ML!ss, if an1, is "a1a8#e t! H.S. 'e1es, Inc.M in*icatin4 t/at it >as !n#1 t/e H.S. 'e1es, Inc. >/ic/ t/e1 inten*e* t! 8enefit. =e #i9e>ise !8ser e fr!0 t/e 8rief !f t/e State B!n*in4 < Insurance C!0"an1 t/at it /as e/e0ent#1 !""!se* t/e asserti!n !r "retensi!n !f t/e a""e##ants t/at t/e1 are "ri 1 t! t/e c!ntract. If it >ere t/e intenti!n !f t/e insurance c!0"an1 t! 0a9e itse#f #ia8#e t! t/e re"air s/!" !r 0ateria#0en, it c!u#* /a e easi#1 inserte* in t/e c!ntract a sti"u#ati!n t! t/at effect. T! /!#* n!> t/at t/e !ri4ina# "arties t! t/e insurance c!ntract inten*e* t! c!nfer u"!n t/e a""e##ants t/e 8enefit c#ai0e* 81 t/e0 >!u#* re?uire us t! i4n!re t/e in*es"ensa8#e re?uisite t/at a sti"u#ati!n "!ur autrui 0ust 8e c#ear#1 e:"resse* 81 t/e "arties, >/ic/ >e cann!t *!. As re4ar*s "ara4ra"/ 2 !f t/e insurance c!ntract, a "erusa# t/ere!f >!u#* s/!> t/at instea* !f esta8#is/in4 "ri it1 8et>een t/e a""e##ants an* t/e insurance c!0"an1, suc/ sti"u#ati!n 0ere#1 esta8#is/es t/e "r!ce*ure t/at t/e insure* /as t! f!##!> in !r*er t! 8e entit#e* t! in*e0nit1 f!r re"air. T/is "ara4ra"/ t/eref!re s/!u#* n!t 8e c!nstrue* as 8rin4in4 int! e:istence in fa !r !f t/e a""e##ants a

ri4/t !f acti!n a4ainst t/e insurance c!0"an1 as suc/ intenti!n can ne er 8e inferre* t/erefr!0. An!t/er c!4ent reas!n f!r n!t rec!4niNin4 a ri4/t !f acti!n 81 t/e a""e##ants a4ainst t/e insurance c!0"an1 is t/at Ma "!#ic1 !f insurance is a *istinct an* in*e"en*ent c!ntract 8et>een t/e insure* an* insurer, an* t/ir* "ers!ns /a e n! ri4/t eit/er in a c!urt !f e?uit1, !r in a c!urt !f #a>, t! t/e "r!cee*s !f it, un#ess t/ere 8e s!0e c!ntract !f trust, e:"resse* !r i0"#ie* 8et>een t/e insure* an* t/ir* "ers!n.M. In t/is case, n! c!ntract !f trust, e:"resse* !r i0"#ie* e:ists. =e, t/eref!re, a4ree >it/ t/e tria# c!urt t/at n! cause !f acti!n e:ists in fa !r !f t/e a""e##ants in s! far as t/e "r!cee*s !f insurance are c!ncerne*. T/e a""e##antsC c#ai0, if at a##, is 0ere#1 e?uita8#e in nature an* 0ust 8e 0a*e effecti e t/r!u4/ Enri?ue 7!ra >/! entere* int! a c!ntract >it/ t/e B!nifaci! Br!s. Inc. T/is c!nc#usi!n is *e*uci8#e n!t !n#1 fr!0 t/e "rinci"#e 4! ernin4 t/e !"erati!n an* effect !f insurance c!ntracts in 4enera#, 8ut is c#ear#1 c! ere* 81 t/e e:"ress "r! isi!ns !f secti!n .6 !f t/e Insurance Act >/ic/ rea*A T/e insurance s/a## 8e a""#ie* e:c#usi e#1 t! t/e "r!"er interests !f t/e "ers!n in >/!se na0e it is 0a*e un#ess !t/er>ise s"ecifie* in t/e "!#ic1. T/e "!#ic1 in ?uesti!n /as 8een s! fra0e* t/at ML!ss, if an1, is "a1a8#e t! H.S. 'e1es, Inc.,M >/ic/ un0ista9a8#1 s/!>s t/e intenti!n !f t/e "arties. T/e fina# c!ntenti!n !f t/e a""e##ants is t/at t/e ri4/t !f t/e H.S. 'e1es, Inc. t! t/e insurance "r!cee*s arises !n#1 if t/ere >as #!ss an* n!t >/ere t/ere is 0ere *a0a4e as in t/e instant case. Suffice it t! sa1 t/at

an1 atte0"t t! *ra> a *istincti!n 8et>een M#!ssM an* M*a0a4eM is unca##e* f!r, 8ecause t/e >!r* M#!ssM in insurance #a> e08races inBur1 !r *a0a4e. L!ss in insurance, *efine*. T T/e inBur1 !r *a0a4e sustaine* 81 t/e insure* in c!nse?uence !f t/e /a""enin4 !f !ne !r 0!re !f t/e acci*ents !r 0isf!rtune a4ainst >/ic/ t/e insurer, in c!nsi*erati!n !f t/e "re0iu0, /as un*erta9en t! in*e0nif1 t/e insure*. (1 B!u . Ins. N!. 121.$ B#ac9Cs La> Dicti!nar1$ C1c#!"e*ic La> Dicti!nar1, cite* in 7artinCs P/i#. C!00ercia# La>s, 3!#. 1, 1-&1 e*. ". &6)). In*ee*, acc!r*in4 t! sec. 126 !f t/e Insurance Act, a #!ss 0a1 8e eit/er t!ta# !r "artia#. Acc!r*in4#1, t/e Bu*40ent a""ea#e* fr!0 is /ere81 affir0e*, at a""e##antsC c!st.

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. L5226.Oct!8er 2), 1-((

THE INS;LA' LIFE ASS;'ANCE CO7PANE, LTD., "#aintiff5a""e##ee, s. CA'PONIA T. EB'ADO an* PASC;ALA 3DA. DE EB'ADO, *efen*ants5a""e##ants.

7A'TIN, +.A T/is is a n! e# ?uesti!n in insurance #a>A Can a c!00!n5#a> >ife na0e* as 8eneficiar1 in t/e #ife insurance "!#ic1 !f a #e4a##1 0arrie* 0an c#ai0 t/e "r!cee*s t/ere!f in case !f *eat/ !f t/e #atterG On Se"te08er 1, 1-&), Buena entura Crist!r E8ra*! >as issue* 81 T/e Life Assurance C!., Lt*., P!#ic1 N!. 66--2- !n a >/!#e5#ife f!r P.,))2.66 >it/ a, ri*er f!r Acci*enta# Deat/ f!r t/e sa0e a0!unt Buena entura C. E8ra*! *esi4nate* T. E8ra*! as t/e re !ca8#e 8eneficiar1 in /is "!#ic1. He t! /er as /is >ife. On Oct!8er 21, 1-&-, Buena entura C. E8ra*! *ie* as a resu#t !f an t >/en /e >as /it 81 a fai#in4 8ranc/ !f a tree. As t/e "!#ic1 >as in f!rce, T/e Insu#ar Life Assurance C!., Lt*. #ia8#e t! "a1 t/e c! era4e in t/e t!ta# a0!unt !f P11,(2..(%, re"resentin4 t/e face a#ue !f t/e "!#ic1 in t/e a0!unt !f P.,))2.66 "#us t/e a**iti!na# 8enefits f!r acci*enta# *eat/ a#s! in t/e a0!unt !f P.,))2.66 an* t/e refun* !f P1).66 "ai* f!r t/e "re0iu0 *ue N! e08er, 1-&-, 0inus t/e un"ai* "re0iu0s an* interest t/ere!n *ue f!r +anuar1 an* Fe8ruar1, 1-&-, in t/e su0 !f P%&.2(. Car"!nia T. E8ra*! fi#e* >it/ t/e insurer a c#ai0 f!r t/e "r!cee*s !f t/e P!#ic1 as t/e *esi4nate* 8eneficiar1 t/erein, a#t/!u4/ s/e a*0its t/at s/e an* t/e insure* Buena entura C. E8ra*! >ere 0ere#1 #i in4 as /us8an* an* >ife >it/!ut t/e 8enefit !f 0arria4e. Pascua#a 3*a. *e E8ra*! a#s! fi#e* /er c#ai0 as t/e >i*!> !f t/e *ecease* insure*. S/e asserts t/at s/e is

t/e !ne entit#e* t! t/e insurance "r!cee*s, n!t t/e c!00!n5#a> >ife, Car"!nia T. E8ra*!. In *!u8t as t! >/!0 t/e insurance "r!cee*s s/a## 8e "ai*, t/e insurer, T/e Insu#ar Life Assurance C!., Lt*. c!00ence* an acti!n f!r Inter"#ea*er 8ef!re t/e C!urt !f First Instance !f 'iNa# !n A"ri# 2-, 1-(6. After t/e issues /a e 8een B!ine*, a "re5tria# c!nference >as /e#* !n +u#1 ), 1-(2, after >/ic/, a "re5tria# !r*er >as entere* rea*in4 as f!##!>sA XZ[. \]>"/^1 Durin4 t/e "re5tria# c!nference, t/e "arties 0anifeste* t! t/e c!urt. t/at t/ere is n! "!ssi8i#it1 !f a0ica8#e sett#e0ent. Hence, t/e C!urt "r!cee*e* t! /a e t/e "arties su80it t/eir e i*ence f!r t/e "ur"!se !f t/e "re5tria# an* 0a9e a*0issi!ns f!r t/e "ur"!se !f "retria#. Durin4 t/is c!nference, "arties Car"!nia T. E8ra*! an* Pascua#a E8ra*! a4ree* an* sti"u#ate*A 1) t/at t/e *ecease* Buena entura E8ra*! >as 0arrie* t! Pascua#a E8ra*! >it/ >/!0 s/e /as si: T (#e4iti0ate) na0e#1$ Hernan*!, Cresenci!, E#sa, Er#in*a, Fe#iNar*! an* He#en, a## surna0e* E8ra*!$ 2) t/at *urin4 t/e #ifeti0e !f t/e *ecease*, /e >as insure* >it/ Insu#ar Life Assurance C!. ;n*er P!#ic1 N!. 66--2- >/!#e #ife "#an, *ate* Se"te08er 1, 1-&) f!r t/e su0 !f P.,))2.66 >it/ t/e ri*er f!r acci*enta# *eat/ 8enefit as e i*ence* 81 E:/i8its A f!r "#aintiffs an* E:/i8it 1 f!r t/e *efen*ant Pascua#a an* E:/i8it ( f!r Car"!nia E8ra*!$ %) t/at *urin4 t/e #ifeti0e !f Buena entura E8ra*!, /e >as #i in4 >it/ /is c!00!n5 >ife, Car"!nia E8ra*!, >it/ >/!0 s/e /a* 2 c/i#*ren a#t/!u4/ /e >as n!t #e4a##1 se"arate* fr!0 /is #e4a# >ife$ 2) t/at Buena entura in acci*ent !n Oct!8er 21, 1-&- as e i*ence* 81 t/e *eat/ E:/i8it % an* affi*a it

!f t/e "!#ice re"!rt !f /is *eat/ E:/i8it .$ .) t/at c!0"#ainant Car"!nia E8ra*! fi#e* c#ai0 >it/ t/e Insu#ar Life Assurance C!. >/ic/ >as c!nteste* 81 Pascua#a E8ra*! >/! a#s! fi#e* c#ai0 f!r t/e "r!cee*s !f sai* "!#ic1 &) t/at in ie> !ft/e a* erse c#ai0s t/e insurance c!0"an1 fi#e* t/is acti!n a4ainst t/e t>! /erein c#ai0ants Car"!nia an* Pascua#a E8ra*!$ () t/at t/ere is n!> *ue fr!0 t/e Insu#ar Life Assurance C!. as "r!cee*s !f t/e "!#ic1 P11,(2..(%$ )) t/at t/e 8eneficiar1 *esi4nate* 81 t/e insure* in t/e "!#ic1 is Car"!nia E8ra*! an* t/e insure* 0a*e reser ati!n t! c/an4e t/e 8eneficiar1 8ut a#t/!u4/ t/e insure* 0a*e t/e !"ti!n t! c/an4e t/e 8eneficiar1, sa0e >as ne er c/an4e* u" t! t/e ti0e !f /is *eat/ an* t/e >ife *i* n!t /a e an1 !""!rtunit1 t! >rite t/e c!0"an1 t/at t/ere >as reser ati!n t! c/an4e t/e *esi4nati!n !f t/e "arties a4ree* t/at a *ecisi!n 8e ren*ere* 8ase* !n an* sti"u#ati!n !f facts as t! >/! a0!n4 t/e t>! c#ai0ants is entit#e* t! t/e "!#ic1. ;"!n 0!ti!n !f t/e "arties, t/e1 are 4i en ten (16) *a1s t! fi#e t/eir si0u#tane!us 0e0!ran*a fr!0 t/e recei"t !f t/is !r*er. SO O'DE'ED. On Se"te08er 2., 1-(2, t/e tria# c!urt ren*ere* Bu*40ent *ec#arin4 a0!n4 !t/ers, Car"!nia T. E8ra*! *is?ua#ifie* fr!0 8ec!0in4 8eneficiar1 !f t/e insure* Buena entura Crist!r E8ra*! an* *irectin4 t/e "a10ent !f t/e insurance "r!cee*s t! t/e estate !f t/e *ecease* insure*. T/e tria# c!urt /e#*A XZ[.\]>"/^1 It is "atent fr!0 t/e #ast "ara4ra"/ !f Art. (%- !f t/e Ci i# C!*e t/at a cri0ina# c!n icti!n f!r a*u#ter1 !r c!ncu8ina4e is n!t essentia# in !r*er t! esta8#is/ t/e

*is?ua#ificati!n 0enti!ne* t/erein. Neit/er is it a#s! necessar1 t/at a fin*in4 !f suc/ 4ui#t !r c!00issi!n !f t/!se acts 8e 0a*e in a se"arate in*e"en*ent acti!n 8r!u4/t f!r t/e "ur"!se. T/e 4ui#t !f t/e *!nee (8eneficiar1) 0a1 8e "r! e* 81 "re"!n*erance !f e i*ence in t/e sa0e "r!cee*in4 (t/e acti!n 8r!u4/t t! *ec#are t/e nu##it1 !f t/e *!nati!n). It is, /!>e er, essentia# t/at suc/ a*u#ter1 !r c!ncu8ina4e e:ists at t/e ti0e *efen*ant Car"!nia T. E8ra*! >as 0a*e 8eneficiar1 in t/e "!#ic1 in ?uesti!n f!r t/e *is?ua#ificati!n an* inca"acit1 t! e:ist an* t/at it is !n#1 necessar1 t/at suc/ fact 8e esta8#is/e* 81 "re"!n*erance !f e i*ence in t/e tria#. Since it is a4ree* in t/eir sti"u#ati!n a8! e5?u!te* t/at t/e *ecease* insure* an* *efen*ant Car"!nia T. E8ra*! >ere #i in4 t!4et/er as /us8an* an* >ife >it/!ut 8ein4 #e4a##1 0arrie* an* t/at t/e 0arria4e !f t/e insure* >it/ t/e !t/er *efen*ant Pascua#a 3*a. *e E8ra*! >as a#i* an* sti## e:istin4 at t/e ti0e t/e insurance in ?uesti!n >as "urc/ase* t/ere is n! ?uesti!n t/at *efen*ant Car"!nia T. E8ra*! is *is?ua#ifie* fr!0 8ec!0in4 t/e 8eneficiar1 !f t/e "!#ic1 in ?uesti!n an* as suc/ s/e is n!t entit#e* t! t/e "r!cee*s !f t/e insurance u"!n t/e *eat/ !f t/e insure*. Fr!0 t/is Bu*40ent, Car"!nia T. E8ra*! a""ea#e* t! t/e C!urt !f A""ea#s, 8ut !n +u#1 11, 1-(&, t/e A""e##ate C!urt certifie* t/e case t! ;s as in !# in4 !n#1 ?uesti!ns !f #a>. =e affir0 t/e Bu*40ent !f t/e #!>er c!urt. 1. It is ?uite unf!rtunate t/at t/e Insurance Act ('A 2%2(, as a0en*e*) !r e en t/e ne> Insurance C!*e

(PD N!. &12, as a0en*e*) *!es n!t c!ntain an1 s"ecific "r! isi!n 4r!ss#1 res!#ut!r1 !f t/e "ri0e ?uesti!n at /an*. Secti!n .6 !f t/e Insurance Act >/ic/ "r! i*es t/at M(t)/e insurance s/a4 8e a""#ie* e:c#usi e#1 t! t/e "r!"er interest !f t/e "ers!n in >/!se na0e it is 0a*eM 1 cann!t 8e a#i*#1 seiNe* u"!n t! /!#* t/at t/e 00 inc#u*es t/e 8eneficiar1. T/e >!r* MinterestM /i4/#1 su44ests t/at t/e "r! isi!n refers !n#1 t! t/e Minsure*M an* n!t t! t/e 8eneficiar1, since a c!ntract !f insurance is "ers!na# in c/aracter. 2 Ot/er>ise, t/e "r!/i8it!r1 #a>s a4ainst i##icit re#ati!ns/i"s es"ecia##1 !n "r!"ert1 an* *escent >i## 8e ren*ere* nu4at!r1, as t/e sa0e c!u#* easi#1 8e circu0 ente* 81 0!*es !f insurance. 'at/er, t/e 4enera# ru#es !f ci i# #a> s/!u#* 8e a""#ie* t! res!# e t/is !i* in t/e Insurance La>. Artic#e 2611 !f t/e Ne> Ci i# C!*e statesA MT/e c!ntract !f insurance is 4! erne* 81 s"ecia# #a>s. 7atters n!t e:"ress#1 "r! i*e* f!r in suc/ s"ecia# #a>s s/a## 8e re4u#ate* 81 t/is C!*e.M =/en n!t !t/er>ise s"ecifica##1 "r! i*e* f!r 81 t/e Insurance La>, t/e c!ntract !f #ife insurance is 4! erne* 81 t/e 4enera# ru#es !f t/e ci i# #a> re4u#atin4 c!ntracts. % An* un*er Artic#e 2612 !f t/e sa0e C!*e, Man1 "ers!n >/! is f!r8i**en fr!0 recei in4 an1 *!nati!n un*er Artic#e (%- cann!t 8e na0e* 8eneficiar1 !f a fife insurance "!#ic1 81 t/e "ers!n >/! cann!t 0a9e a *!nati!n t! /i0. 2 C!00!n5#a> s"!uses are, *efinite#1, 8arre* fr!0 recei in4 *!nati!ns fr!0 eac/ !t/er. Artic#e (%- !f t/e ne> Ci i# C!*e "r! i*esA XZ[.\]>"/^1 T/e f!##!>in4 *!nati!ns s/a## 8e !i*A 1. T/!se 0a*e 8et>een "ers!ns >/! >ere 4ui#t1 !f a*u#ter1 !r c!ncu8ina4e at t/e ti0e !f *!nati!n$

T/!se 0a*e 8et>een "ers!ns f!un* 4ui#t1 !f t/e sa0e cri0ina# !ffense, in c!nsi*erati!n t/ere!f$ %. T/!se 0a*e t! a "u8#ic !fficer !r /is >ife, *escen*ants !r ascen*ants 81 reas!n !f /is !ffice. In t/e case referre* t! in N!. 1, t/e acti!n f!r *ec#arati!n !f nu##it1 0a1 8e 8r!u4/t 81 t/e s"!use !f t/e *!n!r !r *!nee$ an* t/e 4ui#t !f t/e *!nee 0a1 8e "r! e* 81 "re"!n*erance !f e i*ence in t/e sa0e acti!n. 2. In essence, a #ife insurance "!#ic1 is n! *ifferent fr!0 a ci i# *!nati!n ins!far as t/e 8eneficiar1 is c!ncerne*. B!t/ are f!un*e* u"!n t/e sa0e c!nsi*erati!nA #i8era#it1. A 8eneficiar1 is #i9e a *!nee, 8ecause fr!0 t/e "re0iu0s !f t/e "!#ic1 >/ic/ t/e insure* "a1s !ut !f #i8era#it1, t/e 8eneficiar1 >i## recei e t/e "r!cee*s !r "r!fits !f sai* insurance. As a c!nse?uence, t/e "r!scri"ti!n in Artic#e (%- !f t/e ne> Ci i# C!*e s/!u#* e?ua##1 !"erate in #ife insurance c!ntracts. T/e 0an*ate !f Artic#e 2612 cann!t 8e #ai* asi*eA an1 "ers!n >/! cann!t recei e a *!nati!n cann!t 8e na0e* as 8eneficiar1 in t/e #ife insurance "!#ic1 !f t/e "ers!n >/! cann!t 0a9e t/e *!nati!n. . ;n*er A0erican #a>, a "!#ic1 !f #ife insurance is c!nsi*ere* as a testa0ent an* in c!nstruin4 it, t/e c!urts >i##, s! far as "!ssi8#e treat it as a >i## an* *eter0ine t/e effect !f a c#ause *esi4natin4 t/e 8eneficiar1 81 ru#es un*er >/ic/ >ins are inter"rete*. & %. P!#ic1 c!nsi*erati!ns an* *ictates !f 0!ra#it1 ri4/t#1 Bustif1 t/e instituti!n !f a 8arrier 8et>een c!00!n #a> s"!uses in rec!r* t! Pr!"ert1 re#ati!ns since suc/ /i" u#ti0ate#1 encr!ac/es u"!n t/e nu"tia#

an* fi#ia# ri4/ts !f t/e #e4iti0ate fa0i#1 T/ere is e er1 reas!n t! /!#* t/at t/e 8ar in *!nati!ns 8et>een #e4iti0ate s"!uses an* t/!se 8et>een i##e4iti0ate !nes s/!u#* 8e enf!rce* in #ife insurance "!#icies since t/e sa0e are 8ase* !n si0i#ar c!nsi*erati!n As a8! e "!inte* !ut, a 8eneficiar1 in a fife insurance "!#ic1 is n! *ifferent fr!0 a *!nee. B!t/ are reci"ients !f "ure 8eneficence. S! #!n4 as 0ana4e re0ains t/e t/res/!#* !f fa0i#1 #a>s, reas!n an* 0!ra#it1 *ictate t/at t/e i0"e*i0ents i0"!se* u"!n 0arrie* c!u"#e s/!u#* #i9e>ise 8e i0"!se* u"!n e:tra50arita# re#ati!ns/i". If #e4iti0ate re#ati!ns/i" is circu0scri8e* 81 t/ese #e4a# *isa8i#ities, >it/ 0!re reas!n s/!u#* an i##icit re#ati!ns/i" 8e restricte* 81 t/ese *isa8i#ities. T/us, in 7ata8uena . Cer antes, ( t/is C!urt, t/r!u4/ +ustice Fernan*!, sai*A XZ[.\]>"/^1 If t/e "!#ic1 !f t/e #a> is, in t/e #an4ua4e !f t/e !"ini!n !f t/e t/en +ustice +.B.L. 'e1es !f t/at c!urt (C!urt !f A""ea#s), Ct! "r!/i8it *!nati!ns in fa !r !f t/e !t/er c!ns!rt an* /is *escen*ants 8ecause !f an* un*ue an* i0"r!"er "ressure an* inf#uence u"!n t/e *!n!r, a "reBu*ice *ee"#1 r!!te* in !ur ancient #a>$M "!r5?ue n! se en4anen *es"!nBan*!se e# un! a# !tr! "!r a0!r ?ue /an *e c!nsun!C (Acc!r*in4 t!) t/e Parti*as (Part I3, Tit. FI, LA= I3), reiteratin4 t/e rati!na#e CN! 7utuat! a0!re in ice0 s"!#iarenturC t/e Pan*ects (B9, 22, Tit#. 1, De *!nat, inter iru0 et u:!re0)$ t/en t/ere is er1 reas!n t! a""#1 t/e sa0e "r!/i8iti e "!#ic1 t! "ers!ns #i in4 t!4et/er as /us8an* an* >ife >it/!ut t/e 8enefit !f nu"tia#s. F!r it is n!t t! 8e *!u8te* t/at assent t! suc/ irre4u#ar c!nnecti!n f!r t/irt1 1ears 8es"ea9s 4reater inf#uence !f !ne "art1 ! er t/e !t/er, s! t/at t/e *an4er t/at t/e #a> see9s t! a !i* is c!rres"!n*in4#1 increase*. 7!re! er, as a#rea*1 "!inte* !ut 81 ;#"ian (in /is #i8.

%2 a* Sa8inu0, fr. 1), Cit >!u#* n!t 8e Bust t/at suc/ *!nati!ns s/!u#* su8sist, #est t/e c!n*iti!n &f t/!se >/! incurre* 4ui#t s/!u#* turn !ut t! 8e 8etter.C S! #!n4 as 0arria4e re0ains t/e c!rnerst!ne !f !ur fa0i#1 #a>, reas!n an* 0!ra#it1 a#i9e *e0an* t/at t/e *isa8i#ities attac/e* t! 0arria4e s/!u#* #i9e>ise attac/ t! c!ncu8ina4e. It is /ar*#1 necessar1 t! a** t/at e en in t/e a8sence !f t/e a8! e "r!n!unce0ent, an1 !t/er c!nc#usi!n cann!t stan* t/e test !f scrutin1. It >!u#* 8e t! in*ict t/e fra0e !f t/e Ci i# C!*e f!r a fai#ure t! a""#1 a #au*a8#e ru#e t! a situati!n >/ic/ in its essentia#s cann!t 8e *istin4uis/e*. 7!re! er, if it is at a## t! 8e *ifferentiate* t/e "!#ic1 !f t/e #a> >/ic/ e08!*ies a *ee"#1 r!!te* n!ti!n !f >/at is Bust an* >/at is ri4/t >!u#* 8e nu##ifie* if suc/ irre4u#ar re#ati!ns/i" instea* !f 8ein4 isite* >it/ *isa8i#ities >!u#* 8e atten*e* >it/ 8enefits. Certain#1 a #e4a# n!r0 s/!u#* n!t 8e susce"ti8#e t! suc/ a re"r!ac/. If t/ere is e er1 an1 !ccasi!n >/ere t/e "rinci"#e !f statut!r1 c!nstructi!n t/at >/at is >it/in t/e s"irit !f t/e #a> is as 0uc/ a "art !f it as >/at is >ritten, t/is is it. Ot/er>ise t/e 8asic "ur"!se *iscerni8#e in suc/ c!*a# "r! isi!n >!u#* n!t 8e attaine*. =/ate er !0issi!n 0a1 8e a""arent in an inter"retati!n "ure#1 #itera# !f t/e #an4ua4e use* 0ust 8e re0e*ie* 81 an a*/erence t! its a !>e* !8Becti e. 2. =e *! n!t t/in9 t/at a c!n icti!n f!r a*u#ter1 !r c!ncu8ina4e is e:acte* 8ef!re t/e *isa8i#ities 0enti!ne* in Artic#e (%- 0a1 effectuate. 7!re s"ecifica##1, >it/ rec!r* t! t/e *isa8i#it1 !n M"ers!ns >/! >ere 4ui#t1 !f a*u#ter1 !r c!ncu8ina4e at t/e ti0e !f t/e *!nati!n,M Artic#e (%- itse#f "r! i*esA XZ[. \]>"/^1

In t/e case referre* t! in N!. 1, t/e acti!n f!r *ec#arati!n !f nu##it1 0a1 8e 8r!u4/t 81 t/e s"!use !f t/e *!n!r !r *!nee$ an* t/e 4ui#t1 !f t/e *!nee 0a1 8e "r! e* 81 "re"!n*erance !f e i*ence in t/e sa0e acti!n. T/e un*ersc!re* c#ause neat#1 c!n e1s t/at n! cri0ina# c!n icti!n f!r t/e !ffense is a c!n*iti!n "rece*ent. In fact, it cann!t e en 8e fr!0 t/e af!re?u!te* "r! isi!n t/at a "r!secuti!n is nee*e*. On t/e c!ntrar1, t/e #a> "#ain#1 states t/at t/e 4ui#t !f t/e "art1 0a1 8e "r! e* Min t/e sa0e actin4 f!r *ec#arati!n !f nu##it1 !f *!nati!n. An*, it >!u#* 8e sufficient if e i*ence "re"!n*erates u"!n t/e 4ui#t !f t/e c!ns!rt f!r t/e !ffense in*icate*. T/e ?uantu0 !f "r!!f in cri0ina# cases is n!t *e0an*e*. In t/e ca> 8ef!re ;s, t/e re?uisite "r!!f !f c!00!n5 #a> re#ati!ns/i" 8et>een t/e insure* an* t/e 8eneficiar1 /as 8een c!n enient#1 su""#ie* 81 t/e sti"u#ati!ns 8et>een t/e "arties in t/e "re5tria# c!nference !f t/e case. It case a4ree* u"!n an* sti"u#ate* t/erein t/at t/e *ecease* insure* Buena entura C. E8ra*! >as 0arrie* t! Pascua#a E8ra*! >it/ >/!0 s/e /as si: #e4iti0ate c/i#*ren$ t/at *urin4 /is #ifeti0e, t/e *ecease* insure* >as #i in4 >it/ /is c!00!n5#a> >ife, Car"!nia E8ra*!, >it/ >/!0 /e /as t>! c/i#*ren. T/ese sti"u#ati!ns are n!t/in4 #ess t/an Bu*icia# a*0issi!ns >/ic/, as a c!nse?uence, n! #!n4er re?uire "r!!f an* cann!t 8e c!ntra*icte*. ) A f!rti!ri, !n t/e 8asis !f t/ese a*0issi!ns, a Bu*40ent 0a1 8e a#i*#1 ren*ere* >it/!ut 4!in4 t/r!u4/ t/e ri4!rs !f a tria# f!r t/e s!#e "ur"!se !f "r! in4 t/e i##icit #iais!n 8et>een t/e insure* an* t/e 8eneficiar1. In fact, in t/at "retria#, t/e

"arties e en a4ree* Mt/at a *ecisi!n 8e ren*ere* 8ase* !n t/is a4ree0ent an* sti"u#ati!n !f facts as t! >/! a0!n4 t/e t>! c#ai0ants is entit#e* t! t/e "!#ic1.M ACCO'DINGLE, t/e a""ea#e* Bu*40ent !f t/e #!>er c!urt is /ere81 affir0e*. Car"!nia T. E8ra*! is /ere81 *ec#are* *is?ua#ifie* t! 8e t/e 8eneficiar1 !f t/e #ate Buena entura C. E8ra*! in /is #ife insurance "!#ic1. As a c!nse?uence, t/e "r!cee*s !f t/e "!#ic1 are /ere81 /e#* "a1a8#e t! t/e estate !f t/e *ecease* insure*. C!sts a4ainst Car"!nia T. E8ra*!. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a EN BANC

G.'. N!. L52)6-%

+anuar1 %6, 1-(1

BASILIA BE'DIN 3DA. DE CONS;EG'A$ +;LIANA, PACITA, 7A'IA LO;'DES, +OSE, +'., 'OD'IGO, LINEDA an* L;IS, a## surna0e* CONS;EG'A, "etiti!ners5 a""e##ants, s. GO3E'N7ENT SE'3ICE INS;'ANCE SESTE7, CO77ISSIONE' OF P;BLIC HIGH=AES, HIGH=AE DIST'ICT ENGINEE' OF S;'IGAO DEL NO'TE, CO77ISSIONE' OF CI3IL SE'3ICE, an* 'OSA'IO DIAS, res"!n*ents5a""e##ees.

Bernar*in! O. A#0e*a f!r "etiti!ners5a""e##ants. Bina4 an* Are a#!, +r. f!r res"!n*ent5a""e##ee G! ern0ent Ser ice Insurance S1ste0. Office !f t/e S!#icit!r Genera# f!r !t/er res"!n*ents5 a""e##ees.

SALDI3A', +.A A""ea# !n "ure#1 ?uesti!ns !f #a> fr!0 t/e *ecisi!n !f t/e C!urt !f First Instance !f Suri4a! *e# N!rte, *ate* 7arc/ (, 1-&(, in its S"ecia# Pr!cee*in4 N!. 1(26. T/e "ertinent facts, cu##e* fr!0 t/e sti"u#ati!n !f facts su80itte* 81 t/e "arties, are t/e f!##!>in4A T/e #ate +!se C!nsue4ra, at t/e ti0e !f /is *eat/, >as e0"#!1e* as a s/!" f!re0an !f t/e !ffice !f t/e District En4ineer in t/e "r! ince !f Suri4a! *e# N!rte. In /is #ifeti0e, C!nsue4ra c!ntracte* t>! 0arria4es, t/e first >it/ /erein res"!n*ent '!sari! DiaN, s!#e0niNe* in t/e "aris/ c/urc/ !f San Nic!#as *e T!#entin!, Suri4a!, Suri4a!, !n +u#1 1., 1-%(, !ut !f >/ic/ 0arria4e >ere 8!rn t>! c/i#*ren, na0e#1, +!se C!nsue4ra, +r. an* Pe*r! C!nsue4ra, 8ut 8!t/ "re*ecease* t/eir fat/er$ an* t/e sec!n*, >/ic/ >as c!ntracte* in 4!!* fait/ >/i#e t/e first 0arria4e >as su8sistin4, >it/ /erein "etiti!ner Basi#ia Ber*in, !n 7a1 1, 1-.( in t/e sa0e "aris/ an* 0unici"a#it1, !ut !f >/ic/ 0arria4e >ere 8!rn se en c/i#*ren, na0e#1, +u#iana, Pacita, 7aria L!ur*es, +!se, '!*ri4!, Leni*a an* LuN, a## surna0e* C!nsue4ra.

Bein4 a 0e08er !f t/e G! ern0ent Ser ice Insurance S1ste0 (GSIS, f!r s/!rt) >/en C!nsue4ra *ie* !n Se"te08er 2&, 1-&., t/e "r!cee*s !f /is #ife insurance un*er "!#ic1 N!. &61)61 >ere "ai* 81 t/e GSIS t! "etiti!ner Basi#ia Ber*in an* /er c/i#*ren >/! >ere t/e 8eneficiaries na0e* in t/e "!#ic1. Ha in4 8een in t/e ser ice !f t/e 4! ern0ent f!r 22..62) 1ears, C!nsue4ra >as entit#e* t! retire0ent insurance 8enefits in t/e su0 !f P&,%62.2( "ursuant t! Secti!n 12(c) !f C!00!n>ea#t/ Act 1)& as a0en*e* 81 'e"u8#ic Acts 1&1& an* %)%&. C!nsue4ra *i* n!t *esi4nate an1 8eneficiar1 >/! >!u#* recei e t/e retire0ent insurance 8enefits *ue t! /i0. 'es"!n*ent '!sari! DiaN, t/e >i*!> 81 t/e first 0arria4e, fi#e* a c#ai0 >it/ t/e GSIS as9in4 t/at t/e retire0ent insurance 8enefits 8e "ai* t! /er as t/e !n#1 #e4a# /eir !f C!nsue4ra, c!nsi*erin4 t/at t/e *ecease* *i* n!t *esi4nate an1 8eneficiar1 >it/ res"ect t! /is retire0ent insurance 8enefits. Petiti!ner Basi#ia Ber*in an* /er c/i#*ren, #i9e>ise, fi#e* a si0i#ar c#ai0 >it/ t/e GSIS, assertin4 t/at 8ein4 t/e 8eneficiaries na0e* in t/e #ife insurance "!#ic1 !f C!nsue4ra, t/e1 are t/e !n#1 !nes entit#e* t! recei e t/e retire0ent insurance 8enefits *ue t/e *ecease* C!nsue4ra. 'es!# in4 t/e c!nf#ictin4 c#ai0s, t/e GSIS ru#e* t/at t/e #e4a# /eirs !f t/e #ate +!se C!nsue4ra >ere '!sari! DiaN, /is >i*!> 81 /is first 0arria4e >/! is entit#e* t! !ne5/a#f, !r )O1&, !f t/e retire0ent insurance 8enefits, !n t/e !ne /an*$ an* Basi#ia Ber*in, /is >i*!> 81 t/e sec!n* 0arria4e an* t/eir se en c/i#*ren, !n t/e !t/er /an*, >/! are entit#e* t! t/e re0ainin4 !ne5/a#f, !r )O1&, eac/ !f t/e0 t! recei e an e?ua# s/are !f 1O1&. Dissatisfie* >it/ t/e f!re4!in4 ru#in4 an* a""!rti!n0ent 0a*e 81 t/e GSIS, Basi#ia Ber*in an* /er c/i#*ren1 fi#e* !n Oct!8er 16, 1-&& a "etiti!n f!r

0an*a0us >it/ "re#i0inar1 inBuncti!n in t/e C!urt !f First Instance !f Suri4a!, na0in4 as res"!n*ents t/e GSIS, t/e C!00issi!ner !f Pu8#ic Hi4/>a1s, t/e Hi4/>a1 District En4ineer !f Suri4a! *e# N!rte, t/e C!00issi!ner !f Ci i# Ser ice, an* '!sari! DiaN, "ra1in4 t/at t/e1 ("etiti!ners t/erein) 8e *ec#are* t/e #e4a# /eirs an* e:c#usi e 8eneficiaries !f t/e retire0ent insurance !f t/e #ate +!se C!nsue4ra, an* t/at a >rit !f "re#i0inar1 inBuncti!n 8e issue* restrainin4 t/e i0"#e0entati!n !f t/e a*Bu*icati!n 0a*e 81 t/e GSIS. On Oct!8er 2&, 1-&&, t/e tria# c!urt issue* an !r*er re?uirin4 t/erein res"!n*ents t! fi#e t/eir res"ecti e ans>ers, 8ut refraine* fr!0 issuin4 t/e >rit !f "re#i0inar1 inBuncti!n "ra1e* f!r. On Fe8ruar1 11, 1-&(, t/e "arties su80itte* a sti"u#ati!n !f facts, "ra1e* t/at t/e sa0e 8e a*0itte* an* a""r! e* an* t/at Bu*40ent 8e ren*ere* !n t/e 8asis !f t/e sti"u#ati!n !f facts. On 7arc/ (, 1-&(, t/e c!urt 8e#!> ren*ere* Bu*40ent, t/e "ertinent "!rti!ns !f >/ic/ are ?u!te* /ereun*erA T/is C!urt, in c!nf!r0it1 >it/ t/e f!re4!in4 sti"u#ati!n !f facts, #i9e>ise is in fu## acc!r* >it/ t/e "arties >it/ res"ect t! t/e aut/!rit1 cite* 81 t/e0 in su""!rt !f sai* sti"u#ati!n an* >/ic/ is /erein58e#!> cite* f!r "ur"!ses !f t/is Bu*40ent, t! >itA M=/en t>! >!0en inn!cent#1 an* in 4!!* fait/ are #e4a##1 unite* in /!#1 0atri0!n1 t! t/e sa0e 0an, t/e1 an* t/eir c/i#*ren, 8!rn !f sai* >e*#!c9, >i## 8e re4ar*e* as #e4iti0ate c/i#*ren an* eac/ fa0i#1 8e entit#e* t! !ne /a#f !f t/e estate. La! < La! s. Dee Ti0, 2. P/i#. (%-$ Estre##a s. La!n4 7asa, Inc., (CA) %OG (-$ Pisa#8!n s. BeBec, (2 P/i#. )).

=HE'EFO'E, in ie> !f t/e a8! e "re0ises, t/is C!urt is !f t/e !"ini!n t/at t/e f!re4!in4 sti"u#ati!n !f facts is in !r*er an* in acc!r*ance >it/ #a> an* t/e sa0e is /ere81 a""r! e*. +u*40ent, t/eref!re, is /ere81 ren*ere* *ec#arin4 t/e "etiti!ner Basi#ia Ber*in 3*a. *e C!nsue4ra an* /er c!5"etiti!ners +u#iana, Pacita, 7aria L!ur*es, +!se, +r., '!*ri4!, Leni*a an* Luis, a## surna0e* C!nsue4ra, 8eneficiar1 an* entit#e* t! !ne5 /a#f (1O2) !f t/e retire0ent 8enefit in t/e a0!unt !f Si: T/!usan* T/ree Hun*re* F!ur Pes!s an* F!urt15Se en Centa !s (P&,%62.2() *ue t! t/e *ecease* +!se C!nsue4ra fr!0 t/e G! ern0ent Ser ice Insurance S1ste0 !r t/e a0!unt !f P%,1.2.2%. t! 8e *i i*e* e?ua##1 a0!n4 t/e0 in t/e "r!"!rti!na# a0!unt !f 1O1& eac/. Li9e>ise, t/e res"!n*ent '!sari! DiaN 3*a. *e C!nsue4ra is /ere81 *ec#are* 8eneficiar1 an* entit#e* t! t/e !t/er /a#f !f t/e retire0ent 8enefit !f t/e #ate +!se C!nsue4ra !r t/e a0!unt !f P%,1.2.2%.. T/e case >it/ res"ect t! t/e Hi4/>a1 District En4ineer !f Suri4a! *e# N!rte is /ere81 !r*ere* *is0isse*. Hence t/e "resent a""ea# 81 /erein "etiti!ners5 a""e##ants, Basi#ia Ber*in an* /er c/i#*ren. It is t/e c!ntenti!n !f a""e##ants t/at t/e #!>er c!urt erre* in n!t /!#*in4 t/at t/e *esi4nate* 8eneficiaries in t/e #ife insurance !f t/e #ate +!se C!nsue4ra are a#s! t/e e:c#usi e 8eneficiaries in t/e retire0ent insurance !f sai* *ecease*. In !t/er >!r*s, it is t/e su80issi!n !f a""e##ants t/at 8ecause t/e *ecease* +!se C!nsue4ra fai#e* t! *esi4nate t/e 8eneficiaries in /is retire0ent insurance, t/e a""e##ants >/! >ere t/e 8eneficiaries na0e* in t/e #ife insurance s/!u#* aut!0atica##1 8e c!nsi*ere* t/e 8eneficiaries t! recei e t/e retire0ent insurance 8enefits, t! t/e e:c#usi!n !f res"!n*ent '!sari! DiaN. Fr!0 t/e

ar4u0ents a**uce* 81 a""e##ants in t/eir 8rief =e 4at/er t/at it is t/eir stan* t/at t/e s1ste0 !f #ife insurance an* t/e s1ste0 !f retire0ent insurance, t/at are "r! i*e* f!r in C!00!n>ea#t/ Act 1)& as a0en*e*, are si0"#1 c!0"#e0entar1 t! eac/ !t/er, !r t/at !ne is a "art !r an e:tensi!n !f t/e !t/er, suc/ t/at >/!e er is na0e* t/e 8eneficiar1 in t/e #ife insurance is a#s! t/e 8eneficiar1 in t/e retire0ent insurance >/en n! suc/ 8eneficiar1 is na0e* in t/e retire0ent insurance. T/e c!ntenti!n !f a""e##ants is untena8#e. It s/!u#* 8e n!te* t/at t/e #a> creatin4 t/e G! ern0ent Ser ice Insurance S1ste0 is C!00!n>ea#t/ Act 1)& >/ic/ >as enacte* 81 t/e Nati!na# Asse08#1 !n N! e08er 12, 1-%&. As !ri4ina##1 a""r! e*, C!00!n>ea#t/ Act 1)& "r! i*e* f!r t/e c!0"u#s!r1 0e08ers/i" in t/e G! ern0ent Ser ice Insurance S1ste0 !f a## re4u#ar#1 an* "er0anent#1 a""!inte* !fficia#s an* e0"#!1ees !f t/e 4! ern0ent, c!nsi*erin4 as aut!0atica##1 insure* !n #ife a## suc/ !fficia#s an* e0"#!1ees, an* issuin4 t! t/e0 t/e c!rres"!n*in4 0e08ers/i" "!#ic1 un*er t/e ter0s an* c!n*iti!ns as "r! i*e* in t/e Act.2 Ori4ina##1, C!00!n>ea#t/ Act 1)& "r! i*e* f!r #ife insurance !n#1. C!00!n>ea#t/ Act 1)& >as a0en*e* 81 'e"u8#ic Act &&6 >/ic/ >as enacte* 81 t/e C!n4ress !f t/e P/i#i""ines !n +une 1&, 1-.1, an*, a0!n4 !t/ers, t/e a0en*at!r1 Act "r! i*e* t/at asi*e fr!0 t/e s1ste0 !f #ife insurance un*er t/e G! ern0ent Ser ice Insurance S1ste0 t/ere >as a#s! esta8#is/e* t/e s1ste0 !f retire0ent insurance. T/us, =e >i## n!te in 'e"u8#ic Act &&6 t/at t/ere is a c/a"ter !n #ife insurance an* an!t/er c/a"ter !n retire0ent

insurance. % ;n*er t/e c/a"ter !n #ife insurance are secti!ns ), - an* 16 !f C!00!n>ea#t/ Act 1)&, as a0en*e*$ an* un*er t/e c/a"ter !n retire0ent insurance are secti!ns 11, 12, 1% an* 1%5A. On 7a1 %1, 1-.(, 'e"u8#ic Act 1&1& >as enacte* 81 C!n4ress, a0en*in4 secti!n 12 !f C!00!n>ea#t/ Act 1)& as a0en*e* 81 'e"u8#ic Act &&6, 81 a**in4 t/eret! t>! ne> su8secti!ns, *esi4nate* as su8secti!ns (8) an* (c). T/is su8secti!n (c) !f secti!n 12 !f C!00!n>ea#t/ Act 1)&, as a0en*e* 81 'e"u8#ic Acts &&6, 1&1& an* %6-&, >as a4ain a0en*e* 81 'e"u8#ic Act %)%& >/ic/ >as enacte* !n +une 22, 1-&%.#K>"/_1.X`t T/e "ertinent "r! isi!ns !f su8secti!n (c) !f Secti!n 12 !f C!00!n>ea#t/ Act 1)&, as t/us a0en*e* an* rea0en*e*, rea* as f!##!>sA (c) 'etire0ent is #i9e>ise a##!>e* t! a 0e08er, re4ar*#ess !f a4e, >/! /as ren*ere* at #east t>ent1 1ears !f ser ice. T/e 8enefit s/a##, in a**iti!n t! t/e return !f /is "ers!na# c!ntri8uti!ns "#us interest an* t/e "a10ent !f t/e c!rres"!n*in4 e0"#!1erCs "re0iu0s *escri8e* in su8secti!n (a) !f Secti!n . /ere!f, >it/!ut interest, 8e !n#1 a 4ratuit1 e?ui a#ent t! !ne 0!nt/Cs sa#ar1 f!r e er1 1ear !f ser ice, 8ase* !n t/e /i4/est rate recei e*, 8ut n!t t! e:cee* t>ent15f!ur 0!nt/s$ Pr! i*e*, T/at t/e retirin4 !fficer !r e0"#!1ee /as 8een in t/e ser ice !f t/e sai* e0"#!1er !r !ffice f!r at #east f!ur 1ears, i00e*iate#1 "rece*in4 /is retire0ent. ::: ::: :::

T/e 4ratuit1 is "a1a8#e 81 t/e e0"#!1er !r !ffice c!ncerne* >/ic/ is /ere81 aut/!riNe* t! "r! i*e t/e necessar1 a""r!"riati!n t! "a1 t/e sa0e fr!0 an1 une:"en*e* ite0s !f a""r!"riati!ns.

E#ecti e !r a""!inti e !fficia#s an* e0"#!1ees "ai* 4ratuit1 un*er t/is su8secti!n s/a## 8e entit#e* t! t/e c!00utati!n !f t/e unuse* acati!n an* sic9 #ea e, 8ase* !n t/e /i4/est rate recei e*, >/ic/ t/e1 0a1 /a e t! t/eir cre*it at t/e ti0e !f retire0ent. +!se C!nsue4ra *ie* !n Se"te08er 2&, 1-&., an* s! at t/e ti0e !f /is *eat/ /e /a* ac?uire* ri4/ts un*er t/e a8! e5?u!te* "r! isi!ns !f su8secti!n (c) !f Secti!n 12 !f C!0. Act 1)&, as fina##1 a0en*e* 81 'e". Act %)%& !n +une 22, 1-&%. =/en C!nsue4ra *ie* !n Se"te08er 2&, 1-&., /e /a* t! /is cre*it 22..62) 1ears !f ser ice in t/e 4! ern0ent, an* "ursuant t! t/e a8! e5?u!te* "r! isi!ns !f su8secti!n (c) !f Secti!n 12 !f C!0. Act 1)&, as a0en*e*, !n t/e 8asis !f t/e /i4/est rate !f sa#ar1 recei e* 81 /i0 >/ic/ >as P2)2.)% "er 0!nt/, /e >as entit#e* t! recei e retire0ent insurance 8enefits in t/e a0!unt !f P&,%62.2(. T/is is t/e retire0ent 8enefits t/at are t/e su8Bect !f *is"ute 8et>een t/e a""e##ants, !n t/e !ne /an*, an* t/e a""e##ee '!sari! DiaN, !n t/e !t/er, in t/e "resent case. T/e ?uesti!n "!se* isA t! >/!0 s/!u#* t/is retire0ent insurance 8enefits !f +!se C!nsue4ra 8e "ai*, 8ecause /e *i* n!t, !r fai#e* t!, *esi4nate t/e 8eneficiar1 !f /is retire0ent insuranceG If C!nsue4ra /a* 22..62) 1ears !f ser ice in t/e 4! ern0ent >/en /e *ie* !n Se"te08er 2&, 1-&., it f!##!>s t/at /e starte* in t/e 4! ern0ent ser ice s!0eti0e *urin4 t/e ear#1 "art !f 1-2%, !r 8ef!re 1-2%. In 1-2% C!0. Act 1)& >as n!t 1et a0en*e*, an* t/e !n#1 8enefits t/en "r! i*e* f!r in sai* C!0. Act 1)& >ere t/!se t/at "r!cee* fr!0 a #ife insurance. ;"!n enterin4 t/e 4! ern0ent ser ice C!nsue4ra 8eca0e a c!0"u#s!r1 0e08er !f t/e GSIS, 8ein4

aut!0atica##1 insure* !n /is #ife, "ursuant t! t/e "r! isi!ns !f C!0. Act 1)& >/ic/ >as in f!rce at t/e ti0e. Durin4 1-2% t/e !"erati!n !f t/e G! ern0ent Ser ice Insurance S1ste0 >as sus"en*e* 8ecause !f t/e >ar, an* t/e !"erati!n >as resu0e* s!0eti0e in 1-2&. =/en C!nsue4ra *esi4nate* /is 8eneficiaries in /is #ife insurance /e c!u#* n!t /a e inten*e* t/!se 8eneficiaries !f /is #ife insurance as a#s! t/e 8eneficiaries !f /is retire0ent insurance 8ecause t/e "r! isi!ns !n retire0ent insurance un*er t/e GSIS ca0e a8!ut !n#1 >/en C!0. Act 1)& >as a0en*e* 81 'e". Act &&6 !n +une 1&, 1-.1. Hence, it cann!t 8e sai* t/at 8ecause /erein a""e##ants >ere *esi4nate* 8eneficiaries in C!nsue4raCs #ife insurance t/e1 aut!0atica##1 8eca0e t/e 8eneficiaries a#s! !f /is retire0ent insurance. 'e". Act &&6 a**e* t! C!0. Act 1)& "r! isi!ns re4ar*in4 retire0ent insurance, >/ic/ are Secti!ns 11, 12, an* 1% !f C!0. Act 1)&, as a0en*e*. Su8secti!n (8) !f Secti!n 11 !f C!0. Act 1)&, as a0en*e* 81 'e". Act &&6, "r! i*es as f!##!>sA (8) Sur i !rs 8enefit. T ;"!n *eat/ 8ef!re /e 8ec!0es e#i4i8#e f!r retire0ent, /is 8eneficiaries as rec!r*e* in t/e a""#icati!n f!r retire0ent annuit1 fi#e* >it/ t/e S1ste0 s/a## 8e "ai* /is !>n "re0iu0s >it/ interest !f t/ree "er centu0 "er annu0, c!0"!un*e* 0!nt/#1. If !n /is *eat/ /e is e#i4i8#e f!r retire0ent, t/en t/e aut!0atic retire0ent annuit1 !r t/e annuit1 c/!sen 81 /i0 "re i!us#1 s/a## 8e "ai* acc!r*in4#1. T/e a8! e5?u!te* "r! isi!ns !f su8secti!n (8) !f Secti!n 11 !f C!00!n>ea#t/ Act 1)&, as a0en*e* 81 'e". Act &&6, c#ear#1 in*icate t/at t/ere is nee* f!r t/e e0"#!1ee t! fi#e an a""#icati!n f!r retire0ent insurance 8enefits >/en /e 8ec!0es a 0e08er !f t/e GSIS, an* /e s/!u#* state in /is a""#icati!n t/e

8eneficiar1 !f /is retire0ent insurance. Hence, t/e 8eneficiar1 na0e* in t/e #ife insurance *!es n!t aut!0atica##1 8ec!0e t/e 8eneficiar1 in t/e retire0ent insurance un#ess t/e sa0e 8eneficiar1 in t/e #ife insurance is s! *esi4nate* in t/e a""#icati!n f!r retire0ent insurance. Secti!n 22 !f C!00!n>ea#t/ Act 1)&, as a0en*e* 81 'e". Act &&6, "r! i*es f!r a #ife insurance fun* an* f!r a retire0ent insurance fun*. T/ere >as n! suc/ "r! isi!n in C!0. Act 1)& 8ef!re it >as a0en*e* 81 'e". Act &&6. T/us, su8secti!ns (a) an* (8) !f Secti!n 22 !f C!00!n>ea#t/ Act 1)&, as a0en*e* 81 'e". Act &&6, "art#1 rea* as f!##!>sA (a) Life insurance fun*. T T/is s/a## c!nsist !f a## "re0iu0s f!r #ife insurance 8enefit an*O!r earnin4s an* sa in4s t/erefr!0. It s/a## 0eet *eat/ c#ai0s as t/e1 0a1 arise !r suc/ e?uities as an1 0e08er 0a1 8e entit#e* t!, un*er t/e c!n*iti!ns !f /is "!#ic1, an* s/a## 0aintain t/e re?uire* reser es t! t/e en* !f 4uaranteein4 t/e fu#fi##0ent !f t/e #ife insurance c!ntracts issue* 81 t/e S1ste0 ... (8) 'etire0ent insurance fun*. T T/is s/a## c!nsist !f a## c!ntri8uti!ns f!r retire0ent insurance 8enefit an* !f earnin4s an* sa in4s t/erefr!0. It s/a## 0eet annuit1 "a10ents an* esta8#is/ t/e re?uire* reser es t! t/e en* !f 4uaranteein4 t/e fu#fi##0ent !f t/e c!ntracts issue* 81 t/e S1ste0. ... T/us, =e see t/at t/e GSIS !ffers t>! se"arate an* *istinct s1ste0s !f 8enefits t! its 0e08ers T !ne is t/e #ife insurance an* t/e !t/er is t/e retire0ent insurance. T/ese t>! *istinct s1ste0s !f 8enefits are

"ai* !ut fr!0 t>! *istinct an* se"arate fun*s t/at are 0aintaine* 81 t/e GSIS. In t/e case !f t/e "r!cee*s !f a #ife insurance, t/e sa0e are "ai* t! >/!e er is na0e* t/e 8eneficiar1 in t/e #ife insurance "!#ic1. As in t/e case !f a #ife insurance "r! i*e* f!r in t/e Insurance Act (Act 222(, as a0en*e*), t/e 8eneficiar1 in a #ife insurance un*er t/e GSIS 0a1 n!t necessari#1 8e a /eir !f t/e insure*. T/e insure* in a #ife insurance 0a1 *esi4nate an1 "ers!n as 8eneficiar1 un#ess *is?ua#ifie* t! 8e s! un*er t/e "r! isi!ns !f t/e Ci i# C!*e.2 An* in t/e a8sence !f an1 8eneficiar1 na0e* in t/e #ife insurance "!#ic1, t/e "r!cee*s !f t/e insurance >i## 4! t! t/e estate !f t/e insure*. 'etire0ent insurance is "ri0ari#1 inten*e* f!r t/e 8enefit !f t/e e0"#!1ee T t! "r! i*e f!r /is !#* a4e, !r inca"acit1, after ren*erin4 ser ice in t/e 4! ern0ent f!r a re?uire* nu08er !f 1ears. If t/e e0"#!1ee reac/es t/e a4e !f retire0ent, /e 4ets t/e retire0ent 8enefits e en t! t/e e:c#usi!n !f t/e 8eneficiar1 !r 8eneficiaries na0e* in /is a""#icati!n f!r retire0ent insurance. T/e 8eneficiar1 !f t/e retire0ent insurance can !n#1 c#ai0 t/e "r!cee*s !f t/e retire0ent insurance if t/e e0"#!1ee *ies 8ef!re retire0ent. If t/e e0"#!1ee fai#e* !r ! er#!!9e* t! state t/e 8eneficiar1 !f /is retire0ent insurance, t/e retire0ent 8enefits >i## accrue t! /is estate an* >i## 8e 4i en t! /is #e4a# /eirs in acc!r*ance >it/ #a>, as in t/e case !f a #ife insurance if n! 8eneficiar1 is na0e* in t/e insurance "!#ic1. It is Our ie>, t/eref!re, t/at t/e res"!n*ent GSIS /a* c!rrect#1 acte* >/en it ru#e* t/at t/e "r!cee*s !f t/e retire0ent insurance !f t/e #ate +!se C!nsue4ra s/!u#*

8e *i i*e* e?ua##1 8et>een /is first #i in4 >ife '!sari! DiaN, !n t/e !ne /an*, an* /is sec!n* >ife Basi#ia Ber*in an* /is c/i#*ren 81 /er, !n t/e !t/er$ an* t/e #!>er c!urt *i* n!t c!00it err!r >/en it c!nfir0e* t/e acti!n !f t/e GSIS, it 8ein4 acce"te* as a fact t/at t/e sec!n* 0arria4e !f +!se C!nsue4ra t! Basi#ia Ber*in >as c!ntracte* in 4!!* fait/. T/e #!>er c!urt /as c!rrect#1 a""#ie* t/e ru#in4 !f t/is C!urt in t/e case !f La!, et a#. s. Dee Ti0, et a#., 2. P/i#. (%- as cite* in t/e sti"u#ati!n !f facts an* in t/e *ecisi!n a""ea#e* fr!0.. In t/e recent case !f G!0eN s. Li"ana, L5 2%212, +une %6, 1-(6, & t/is C!urt, in c!nstruin4 t/e ri4/ts !f t>! >!0en >/! >ere 0arrie* t! t/e sa0e 0an T a situati!n 0!re !r #ess si0i#ar t! t/e case !f a""e##ant Basi#ia Ber*in an* a""e##ee '!sari! DiaN T /e#* Mt/at since t/e *efen*antCs first 0arria4e /as n!t 8een *iss!# e* !r *ec#are* !i* t/e c!nBu4a# "artners/i" esta8#is/e* 81 t/at 0arria4e /as n!t cease*. N!r /as t/e first >ife #!st !r re#in?uis/e* /er status as "utati e /eir !f /er /us8an* un*er t/e ne> Ci i# C!*e, entit#e* t! s/are in /is estate u"!n /is *eat/ s/!u#* s/e sur i e /i0. C!nse?uent#1, >/et/er as c!nBu4a# "artner in a sti## su8sistin4 0arria4e !r as suc/ "utati e /eir s/e /as an interest in t/e /us8an*Cs s/are in t/e "r!"ert1 /ere in *is"ute.... M An* >it/ res"ect t! t/e ri4/t !f t/e sec!n* >ife, t/is C!urt !8ser e* t/at a#t/!u4/ t/e sec!n* 0arria4e can 8e "resu0e* t! 8e !i* a8 initi! as it >as ce#e8rate* >/i#e t/e first 0arria4e >as sti## su8sistin4, sti## t/ere is nee* f!r Bu*icia# *ec#arati!n !f suc/ nu##it1. An* inas0uc/ as t/e c!nBu4a# "artners/i" f!r0e* 81 t/e sec!n* 0arria4e >as *iss!# e* 8ef!re Bu*icia# *ec#arati!n !f its nu##it1, MItJ/e !n#1 #ust an* e?uita8#e s!#uti!n in t/is case >!u#* 8e t! rec!4niNe t/e ri4/t !f t/e sec!n* >ife t! /er s/are !f !ne5/a#f in t/e "r!"ert1 ac?uire* 81 /er an* /er /us8an* an*

c!nsi*er t/e !t/er /a#f as "ertainin4 t! t/e c!nBu4a# "artners/i" !f t/e first 0arria4e.M =HE'EFO'E, t/e *ecisi!n a""ea#e* fr!0 is affir0e*, >it/ c!sts a4ainst "etiti!ners5a""e##ants. It is s! !r*ere*. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a EN BANC G' N!. L52((6. A"ri# 2., 1-21 CONCO'DIA GO, recurrent s. ANGELA 'EDFE'N an* THE ASS;'ANCE CO., LTD., a""ea#e*. INTE'NATIONAL

7r. B!ncan an* Gar*e an* D. Le!n T. Sa a##a in re"resentati!n !f t/e a""e##ant. D!n CA S!8ra# c!nteste* re"resentati!n !f 'e*fern. N!8!*1 a""eare* !n 8e/a#f !f t/e !t/er a""ea#. HO''ILLENO, +. A T/is ?uesti!n c!0es fr!0 t/e C!urt !f A""ea#s. It /as 8een e#e ate* t! t/is su"eri!rit1, 81 certi!rari, f!r t/e a""e##ant C!nc!r*ia G!. T/e case c!ncerns an insurance "!#ic1 f!r acci*ents. T/e "r! en facts an* >/ic/ a""ear in t/e Bu*40ent un*er a""ea#, are su8stantia##1 as f!##!>sA In Oct!8er 1-%(, E*>ar* D. 'e*fern !8taine* an insurance "!#ic1 a4ainst acci*ents (E:/i8it B) !f t/e

Internati!na# Assurance C!., Lt*. On Au4ust %1, 1-%), sai* 'e*fern *ie* as a resu#t !f an acci*ent. T/e a""ea#, 0!t/er !f t/e *ecease*, su80itte* t/e re?uire* "r!!f !f t/e *eat/ !f 'e*fern, an* tr1 t! c!##ect fr!0 t/e Internati!na# Assurance C!., Lt*., t/e a0!unt !f t/e "!#ic1 (E:/i8it B), 8ut t/is entit1 refuse* t! 0a9e fu## "a10ent !f t/is "!#ic1, an* t/at it /a* 8een a0en*e*, !n N! e08er 22, 1-%(, t/r!u4/ t/e a**iti!n !f c!8eneficiaria, >/ic/ is t/e a""e##ant C!nc!r*ia G!. Hence t/e "resent acti!n t! *eter0ine >/et/er t/e res"!n*ent /as a ri4/t t! fu## "a10ent !f t/e a0!unt !f t/e insurance "!#ic1 !f t/e #ate E*>ar* D. 'e*fern. T/e res"!n*ent ar4ues t/at t/e a**iti!n !f suc/ c!8eneficiaria is i##e4a#. T/e a""e##ant, 0ean>/i#e, c#ai0s !t/er>ise. T/e "!int, t/eref!re, t! 8e res!# e* is >/et/er t/e a**iti!n 0a*e is a#i* !r n!t. In Case !f =a##ace a4ainst 7utua# Benefit Life Insurance C!. sat t/e f!##!>in4 *!ctrineA ;"!n t/e issuance !f a "!#ic1, t/e 8eneficiar1 !r t/e 8eneficiar1 !f it ac?uires a ri4/t >/ic/ can n!t 8e *e"ri e* >it/!ut /is c!nsent, un#ess reser e* e:"ress#1 4uarantee* t/e ri4/t t! 0!*if1 t/e "!#ic1. +ust enunciate *!ctrine 81 t/is C!urt in t/e case !f Sun Life Asurance Gerci!c!ntra C!. !f Cana*a (2) P/i#., ..) an* Insu#ar Life a4ainst Su a (%2 Off. GaN. )&1) =e, t/eref!re, t/at un#ess t/e insure* e:"ress#1 reser es t/e ri4/t t! c/an4e !r 0!*if1 t/e "!#ic1, re4ar*in4 t/e 8eneficiar1 !f it, t/is insurance "!#ic1 is an entit#e0ent !f t/e 8eneficiar1 can n!t 8e c/an4e* >it/!ut t/e c!nsent !f t/e sa0e. An* suc/ is t/e case >e /a e 8ef!re N!s. is a*0itte* t/at t/e insure* E*>ar* D. 'e*fern n!t e:"ress#1 reser e t/e ri4/t t!

c/an4e !r 0!*if1 t/e "!#ic1. T/e a""e##ant c!nten*s, /!>e er, t/at t/e a**iti!n !f /is na0e as a 8eneficiar1 !f t/e "!#ic1 is n!t c/an4e. C/an4e in !# es t/e i*ea !f a#terati!n. An* e er1 a**iti!n is a#terati!n. After /a in4 a**e* !n 8e/a#f !f t/e a""e##ant >as a#tere*, ie t/e "!#ic1 c/an4e, 8!t/ in f!r0, in t/at, >it/ t/e a**iti!n !f t/e na0e !f t/e a""e##ant, t/at a#rea*1 /as t>! 8eneficiaries, instea* !f !ne as in t/e 8ac94r!un*, as t/e !ri4ina# n!n 8enefeciaria >!u#* recei e t/e fu## a0!unt !f t/e "!#ic1. S! t/e a##e4ati!n !f t/e a""e##ant #ac9s 0erit. S/!u#*, t/eref!re, c!nfir0, an* >e /ere81 c!nfir0 in its entiret1, t/e Bu*40ent a""ea#e* fr!0, >it/ c!sts in 8!t/ instances 81 t/e a""e##ant. S! !r*ere*. I0"eria#, DiaN, Laure# an* 7!ran, 77., are satisfie*. e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a SECOND DI3ISION G.'. N!. 1%&-12 +anuar1 2., 2662 CO'PO'ATION, 7;LTI5P;'POSE

CO;NT'E BANDE'S INS;'ANCE "etiti!ner, s. LIANGA BAE AND CO77;NITE COOPE'ATI3E, INC., res"!n*ent. DE LEON, +'., +.A

Bef!re us is a "etiti!n f!r re ie> !n certi!rari !f t/e Decisi!n1 !f t/e C!urt !f A""ea#s2 *ate* Dece08er 2-, 1--) in CA5G.'. C3 Case N!. %&-62 affir0in4 in t!t! t/e Decisi!n% *ate* Dece08er 2&, 1--1 !f t/e 'e4i!na# Tria# C!urt !f Lian4a, Suri4a! *e# Sur, Branc/ 2), in Ci i# Case N!. L5.1) >/ic/ !r*ere* "etiti!ner C!untr1 Ban9ers Insurance C!r"!rati!n t! fu##1 "a1 t/e insurance c#ai0 !f res"!n*ent Lian4a Ba1 an* C!00unit1 7u#ti5Pur"!se C!!"erati e, Inc., un*er Fire Insurance P!#ic1 N!. F51%-(, f!r #!ss sustaine* as a resu#t !f t/e fire t/at !ccurre* !n +u#1 1, 1-)- in t/e a0!unt !f T>! Hun*re* T/!usan* Pes!s (P266,666.66), >it/ interest at t>e# e "ercent (12U) "er annu0 fr!0 t/e *ate !f fi#in4 !f t/e c!0"#aint unti# fu##1 "ai*, as >e## as Fift1 T/!usan* Pes!s (P.6,666.66) as actua# *a0a4es, Fift1 T/!usan* Pes!s (P.6,666.66) as e:e0"#ar1 *a0a4es, Fi e T/!usan* Pes!s (P.,666.66) as #iti4ati!n e:"enses, Ten T/!usan* Pes!s (P16,666.66) as att!rne1Qs fees, an* t/e c!sts !f suit. T/e facts are un*is"ute*A T/e "etiti!ner is a *!0estic c!r"!rati!n "rinci"a##1 en4a4e* in t/e insurance 8usiness >/erein it un*erta9es, f!r a c!nsi*erati!n, t! in*e0nif1 an!t/er a4ainst #!ss, *a0a4e !r #ia8i#it1 fr!0 an un9n!>n !r c!ntin4ent e ent inc#u*in4 fire >/i#e t/e res"!n*ent is a *u#1 re4istere* c!!"erati e Bu*icia##1 *ec#are* ins!# ent an* re"resente* 81 t/e e#ecte* assi4nee, C!rne#i! +a0er!. It a""ears t/at s!0eti0e in 1-)-, t/e "etiti!ner an* t/e res"!n*ent entere* int! a c!ntract !f fire insurance. ;n*er Fire Insurance P!#ic1 N!. F51%-(, t/e "etiti!ner insure* t/e res"!n*entQs st!c9s5in5tra*e

a4ainst fire #!ss, *a0a4e !r #ia8i#it1 *urin4 t/e "eri!* startin4 fr!0 +une 26, 1-)- at 2A66 ".0. t! +une 26, 1--6 at 2A66 ".0., f!r t/e su0 !f T>! Hun*re* T/!usan* Pes!s (P266,666.66). On +u#1 1, 1-)-, at !r a8!ut 12A26 a.0., t/e res"!n*entQs 8ui#*in4 #!cate* at Baran4a1 Diata4!n, Lian4a, Suri4a! *e# Sur >as 4utte* 81 fire an* re*uce* t! as/es, resu#tin4 in t/e t!ta# #!ss !f t/e res"!n*entQs st!c9s5in5tra*e, "ieces !f furnitures an* fi:tures, e?ui"0ents an* rec!r*s. Due t! t/e #!ss, t/e res"!n*ent fi#e* an insurance c#ai0 >it/ t/e "etiti!ner un*er its Fire Insurance P!#ic1 N!. F51%-(, su80ittin4A (a) t/e S"!t 'e"!rt !f Pfc. Artur! 3. +uar8a#, INP In esti4at!r, *ate* +u#1 1, 1-)-$ (8) t/e S>!rn State0ent !f +!se L!0!cs!$ an* (c) t/e S>!rn State0ent !f Ernest! ;r8iNt!n*!. T/e "etiti!ner, /!>e er, *enie* t/e insurance c#ai0 !n t/e 4r!un* t/at, 8ase* !n t/e su80itte* *!cu0ents, t/e 8ui#*in4 >as set !n fire 81 t>! (2) NPA re8e#s >/! >ante* t! !8tain canne* 4!!*s, rice an* 0e*icines as "r! isi!ns f!r t/eir c!0ra*es in t/e f!rest, an* t/at suc/ #!ss >as an e:ce"te* ris9 un*er "ara4ra"/ N!. & !f t/e "!#ic1 c!n*iti!ns !f Fire Insurance P!#ic1 N!. F5 1%-(, >/ic/ "r! i*esA T/is insurance *!es n!t c! er an1 #!ss !r *a0a4e !ccasi!ne* 81 !r t/r!u4/ !r in c!nse?uence, *irect#1 !r in*irect#1, !f an1 !f t/e f!##!>in4 !ccurrences, na0e#1A ::: ::: :::

(*) 7utin1, ri!t, 0i#itar1 !r "!"u#ar u"risin4, insurrecti!n, re8e##i!n, re !#uti!n, 0i#itar1 !r usur"e* "!>er. An1 #!ss !r *a0a4e /a""enin4 *urin4 t/e e:istence !f a8n!r0a# c!n*iti!ns (>/et/er "/1sica# !r !t/er>ise) >/ic/ are !ccasi!ne* 81 !r t/r!u4/ !r in c!nse?uence, *irect#1 !r in*irect#1, !f an1 !f sai* !ccurrences s/a## 8e *ee0e* t! 8e #!ss !r *a0a4e >/ic/ is n!t c! ere* 81 t/is insurance, e:ce"t t! t/e e:tent t/at t/e Insure* s/a## "r! e t/at suc/ #!ss !r *a0a4e /a""ene* in*e"en*ent#1 !f t/e e:istence !f suc/ a8n!r0a# c!n*iti!ns. Fin*in4 t/e *enia# !f its c#ai0 unacce"ta8#e, t/e res"!n*ent t/en institute* in t/e tria# c!urt t/e c!0"#aint f!r rec! er1 !f M#!ss, *a0a4e !r #ia8i#it1M a4ainst "etiti!ner. T/e "etiti!ner ans>ere* t/e c!0"#aint an* reiterate* t/e 4r!un* it ear#ier cite* t! *en1 t/e insurance c#ai0, t/at is, t/at t/e #!ss >as *ue t! NPA re8e#s, an e:ce"te* ris9 un*er t/e fire insurance "!#ic1. In *ue ti0e, t/e tria# c!urt ren*ere* its Decisi!n *ate* Dece08er 2&, 1--1 in fa !r !f t/e res"!n*ent, *ec#arin4 t/atA Base* !n its fin*in4s, it is t/eref!re t/e c!nsi*ere* !"ini!n !f t/is C!urt, as it s! /!#*s, t/at t/e *efenses raise* 81 *efen*ant5C!untr1 Ban9ers /as utter#1 cru08#e* !n acc!unt !f its in/erent >ea9ness, incre*i8i#it1 an* unre#ia8i#it1, an* after a""#1in4 t/!se /e#"fu# t!!#s #i9e c!00!n sense, #!4ic an* t/e C!urtQs /!nest a""raisa# !f t/e rea# an* actua# situati!n !8tainin4 in t/is area, suc/ *efenses re0ains (sic) uni0"ressi e an* unc!n incin4, an* t/eref!re, t/e

*efen*ant5C!untr1 Ban9ers /as t! 8e irre ersi8#1 a*Bu*4e* #ia8#e, as it s/!u#* 8e, t! "#aintiff5Ins!# ent C!!"erati e, re"resente* in t/is acti!n 81 its Assi4nee, C!rne#i! +a0er!, an* t/us, !r*erin4 sai* *efen*ant5 C!untr1 Ban9ers t! "a1 t/e "#aintiff5Ins!# ent C!!"erati e, as f!##!>sA 1. T! fu##1 "a1 t/e insurance c#ai0 f!r t/e #!ss t/e insure*5"#aintiff sustaine* as a resu#t !f t/e fire un*er its Fire Insurance P!#ic1 N!. F51%-( in its fu## face a#ue !f P266,666.66 >it/ interest !f 12U "er annu0 fr!0 *ate !f fi#in4 !f t/e c!0"#aint unti# t/e sa0e is fu##1 "ai*$ 2. T! "a1 as an* in t/e c!nce"t !f actua# !r c!0"ensat!r1 *a0a4es in t/e t!ta# su0 !f P.6,666.66$ %. T! "a1 as an* in t/e c!nce"t !f e:e0"#ar1 *a0a4es in t/e t!ta# su0 !f P.6,666.66$ 2. T! "a1 in t/e c!nce"t !f #iti4ati!n e:"enses t/e su0 !f P.,666.66$ .. T! "a1 81 >a1 !f rei08urse0ent t/e att!rne1Qs fees in t/e su0 !f P16,666.66$ an* &. T! "a1 t/e c!sts !f t/e suit. F!r 8ein4 unsu8stantiate* >it/ cre*i8#e an* "!siti e e i*ence, t/e Mc!unterc#ai0M is *is0isse*. IT IS SO O'DE'ED. Petiti!ner inter"!se* an a""ea# t! t/e C!urt !f A""ea#s. On Dece08er 2-, 1--), t/e a""e##ate c!urt

affir0e* t/e c/a##en4e* *ecisi!n !f t/e tria# c!urt in its entiret1. Petiti!ner n!> c!0es 8ef!re us ia t/e instant "etiti!n anc/!re* !n t/ree (%) assi4ne* err!rs,2 t! >itA 1. THE HONO'ABLE CO;'T OF APPEALS FAILED TO APP'ECIATE AND GI3E C'EDENCE TO THE SPOT 'EPO'T OF PFC. A'T;'O +;A'BAL (EFH. %) AND THE S=O'N STATE7ENT OF +OSE LO7OCSO (EFH. 2) THAT THE 'ESPONDENTQS STOCD5IN5T'ADE =AS B;'NED BE THE NPA 'EBELS, HENCE AN EFCEPTED 'ISD ;NDE' THE FI'E INS;'ANCE POLICE. 2. THE HONO'ABLE CO;'T OF APPEALS E''ED IN HOLDING PETITIONE' LIABLE FO' 12U INTE'EST PE' ANN;7 ON THE FACE 3AL;E OF THE POLICE F'O7 THE FILING OF THE CO7PLAINT ;NTIL F;LLE PAID. %. THE HONO'ABLE CO;'T OF APPEALS E''ED IN HOLDING THE PETITIONE' LIABLE FO' ACT;AL AND EFE7PLA'E DA7AGES, LITIGATION EFPENSES, ATTO'NEES FEES AND COST OF S;IT. A "art1 is 8!un* 81 /is !>n affir0ati e a##e4ati!ns. T/is is a >e##59n!>n "!stu#ate ec/!e* in Secti!n 1 !f 'u#e 1%1 !f t/e 'e ise* 'u#es !f C!urt. Eac/ "art1 0ust "r! e /is !>n affir0ati e a##e4ati!ns 81 t/e a0!unt !f e i*ence re?uire* 81 #a> >/ic/ in ci i# cases, as in t/is case, is "re"!n*erance !f e i*ence, t! !8tain a fa !ra8#e Bu*40ent.. In t/e instant case, t/e "etiti!ner *!es n!t *is"ute t/at t/e res"!n*entQs st!c9s5in5tra*e >ere insure* a4ainst fire #!ss, *a0a4e !r #ia8i#it1 un*er Fire Insurance P!#ic1 N!. F5 1%-( an* t/at t/e res"!n*ent #!st its st!c9s5in5 tra*e in a fire t/at !ccurre* !n +u#1 1, 1-)-, >it/in t/e

*urati!n !f sai* fire insurance. T/e "etiti!ner, /!>e er, "!sits t/e ie> t/at t/e cause !f t/e #!ss >as an e:ce"te* ris9 un*er t/e ter0s !f t/e fire insurance "!#ic1. =/ere a ris9 is e:ce"te* 81 t/e ter0s !f a "!#ic1 >/ic/ insures a4ainst !t/er "eri#s !r /aNar*s, #!ss fr!0 suc/ a ris9 c!nstitutes a *efense >/ic/ t/e insurer 0a1 ur4e, since it /as n!t assu0e* t/at ris9, an* fr!0 t/is it f!##!>s t/at an insurer see9in4 t! *efeat a c#ai0 8ecause !f an e:ce"ti!n !r #i0itati!n in t/e "!#ic1 /as t/e 8ur*en !f "r! in4 t/at t/e #!ss c!0es >it/in t/e "ur ie> !f t/e e:ce"ti!n !r #i0itati!n set u". If a "r!!f is 0a*e !f a #!ss a""arent#1 >it/in a c!ntract !f insurance, t/e 8ur*en is u"!n t/e insurer t! "r! e t/at t/e #!ss ar!se fr!0 a cause !f #!ss >/ic/ is e:ce"te* !r f!r >/ic/ it is n!t #ia8#e, !r fr!0 a cause >/ic/ #i0its its #ia8i#it1.& State* e#se >ise, since t/e "etiti!ner in t/is case is *efen*in4 !n t/e 4r!un* !f n!n5c! era4e an* re#1in4 u"!n an e:e0"ti!n !r e:ce"ti!n c#ause in t/e fire insurance "!#ic1, it /as t/e 8ur*en !f "r! in4 t/e facts u"!n >/ic/ suc/ e:ce"te* ris9 is 8ase*, 81 a "re"!n*erance !f e i*ence.( But "etiti!ner fai#e* t! *! s!. T/e "etiti!ner re#ies !n t/e S>!rn State0ents !f +!se L!0!cs! an* Ernest! ;r8iNt!n*! as >e## as !n t/e S"!t 'e"!rt !f Pfc. Artur! 3. +uar8a# *ate* +u#1 1, 1-)-, 0!re "articu#ar#1 t/e f!##!>in4 state0ent t/ereinA ::: in esti4ati!n re ea#e* 81 +!se L!0!cs! t/at t/!se ar0e* 0en >ante* t! 4et can 4!!*s an* rice f!r t/eir c!nsu0"ti!n in t/e f!rest PD in esti4ati!n furt/er *isc#!se* t/at t/e "er"etrat!r are 0e08er (sic) !f t/e NPA PD en*a : : :

A >itness can testif1 !n#1 t! t/!se facts >/ic/ /e 9n!>s !f /is "ers!na# 9n!>#e*4e, >/ic/ 0eans t/!se facts >/ic/ are *eri e* fr!0 /is "erce"ti!n.) C!nse?uent#1, a >itness 0a1 n!t testif1 as t! >/at /e 0ere#1 #earne* fr!0 !t/ers eit/er 8ecause /e >as t!#* !r rea* !r /ear* t/e sa0e. Suc/ testi0!n1 is c!nsi*ere* /earsa1 an* 0a1 n!t 8e recei e* as "r!!f !f t/e trut/ !f >/at /e /as #earne*. Suc/ is t/e /earsa1 ru#e >/ic/ a""#ies n!t !n#1 t! !ra# testi0!n1 !r state0ents 8ut a#s! t! >ritten e i*ence as >e##.T/e /earsa1 ru#e is 8ase* u"!n seri!us c!ncerns a8!ut t/e trust>!rt/iness an* re#ia8i#it1 !f /earsa1 e i*ence inas0uc/ as suc/ e i*ence are n!t 4i en un*er !at/ !r s!#e0n affir0ati!n an*, 0!re i0"!rtant#1, /a e n!t 8een su8Becte* t! cr!ss5e:a0inati!n 81 !""!sin4 c!unse# t! test t/e "erce"ti!n, 0e0!r1, eracit1 an* articu#ateness !f t/e !ut5!f5c!urt *ec#arant !r act!r u"!n >/!se re#ia8i#it1 !n >/ic/ t/e >!rt/ !f t/e !ut5 !f5c!urt state0ent *e"en*s.16 T/us, t/e S>!rn State0ents !f +!se L!0!cs! an* Ernest! ;r8iNt!n*! are ina*0issi8#e in e i*ence, f!r 8ein4 /earsa1, inas0uc/ as t/e1 *i* n!t ta9e t/e >itness stan* an* c!u#* n!t t/eref!re 8e cr!ss5 e:a0ine*. T/ere are e:ce"ti!ns t! t/e /earsa1 ru#e, a0!n4 >/ic/ are entries in !fficia# rec!r*s.11 T! 8e a*0issi8#e in e i*ence, /!>e er, t/ree (%) re?uisites 0ust c!ncur, t! >itA (a) t/at t/e entr1 >as 0a*e 81 a "u8#ic !fficer, !r 81 an!t/er "ers!n s"ecia##1 enB!ine* 81 #a> t! *! s!$

(8) t/at it >as 0a*e 81 t/e "u8#ic !fficer in t/e "erf!r0ance !f /is *uties, !r 81 suc/ !t/er "ers!n in t/e "erf!r0ance !f a *ut1 s"ecia##1 enB!ine* 81 #a>$ an* (c) t/at t/e "u8#ic !fficer !r !t/er "ers!n /a* sufficient 9n!>#e*4e !f t/e facts 81 /i0 state*, >/ic/ 0ust /a e 8een ac?uire* 81 /i0 "ers!na##1 !r t/r!u4/ !fficia# inf!r0ati!n.12 T/e t/ir* re?uisite >as n!t 0et in t/is case since n! in esti4ati!n, in*e"en*ent !f t/e state0ents 4at/ere* fr!0 +!se L!0!cs!, >as c!n*ucte* 81 Pfc. Artur! 3. +uar8a#. In fact, as t/e "etiti!ner itse#f "!inte* !ut, citin4 t/e testi0!n1 !f Pfc. Artur! +uar8a#,1% t/e #atterQs S"!t 'e"!rt M>as 8ase* !n t/e "ers!na# 9n!>#e*4e !f t/e careta9er +!se L!0!cs! >/! >itnesse* e er1 sin4#e inci*ent surr!un*in4 t/e facts an* circu0stances !f t/e case.M T/is ar4u0ent un*enia8#1 >ea9ens t/e "etiti!nerQs *efense, f!r t/e S"!t 'e"!rt !f Pfc. Artur! +uar8a# re#ati e t! t/e state0ent !f +!se L!0!cs! t! t/e effect t/at NPA re8e#s a##e4e*#1 set fire t! t/e res"!n*entQs 8ui#*in4 is ina*0issi8#e in e i*ence, f!r t/e "ur"!se !f "r! in4 t/e trut/ !f t/e state0ents c!ntaine* in t/e sai* re"!rt, f!r 8ein4 /earsa1. T/e sai* S"!t 'e"!rt is a*0issi8#e !n#1 ins!far as it c!nstitutes "art !f t/e testi0!n1 !f Pfc. Artur! 3. +uar8a# since /e /i0se#f t!!9 t/e >itness stan* an* >as a ai#a8#e f!r cr!ss5e:a0inati!n. T/e "!rti!ns !f /is S"!t 'e"!rt >/ic/ >ere !f /is "ers!na# 9n!>#e*4e !r >/ic/ c!nsiste* !f /is "erce"ti!ns an* c!nc#usi!ns are n!t /earsa1. T/e rest !f t/e sai* re"!rt re#ati e t! t/e state0ent !f +!se L!0!cs! 0a1 8e c!nsi*ere* as in*e"en*ent#1 re#e ant state0ents 4at/ere* in t/e

c!urse !f +uar8a#Qs in esti4ati!n an* 0a1 8e a*0itte* as suc/ 8ut n!t necessari#1 t! "r! e t/e trut/ t/ere!f.12 T/e "etiti!nerQs e i*ence t! "r! e its *efense is sa*#1 >antin4 an* t/us, 4i es rise t! its #ia8i#it1 t! t/e res"!n*ent un*er Fire Insurance P!#ic1 N!. F51%-(. N!net/e#ess, >e *! n!t sustain t/e tria# c!urtQs i0"!siti!n !f t>e# e "ercent (12U) interest !n t/e insurance c#ai0 as >e## as t/e 0!netar1 a>ar* f!r actua# an* e:e0"#ar1 *a0a4es, #iti4ati!n e:"enses an* att!rne1Qs fees f!r #ac9 !f #e4a# an* a#i* 8asis. C!ncernin4 t/e a""#icati!n !f t/e "r!"er interest rates, t/e f!##!>in4 4ui*e#ines >ere set in Eastern S/i""in4 Lines, Inc. . C!urt !f A""ea#s an* 7ercanti#e Insurance C!., Inc.A1. I. =/en an !8#i4ati!n, re4ar*#ess !f its s!urce, i.e., #a>, c!ntracts, ?uasi5c!ntracts, *e#icts !r ?uasi5*e#icts, is 8reac/e*, t/e c!ntra en!r can 8e /e#* #ia8#e f!r *a0a4es. T/e "r! isi!ns un*er Tit#e F3III !n MDa0a4esM !f t/e Ci i# C!*e 4! ern in *eter0inin4 t/e 0easure !f rec! era8#e *a0a4es. II. =it/ re4ar* "articu#ar#1 t! an a>ar* !f interest in t/e c!nce"t !f actua# an* c!0"ensat!r1 *a0a4es, t/e rate !f interest, as >e## as t/e accrua# t/ere!f, is i0"!se*, as f!##!>sA 1. =/en t/e !8#i4ati!n is 8reac/e*, an* it c!nsists in t/e "a10ent !f a su0 !f 0!ne1, i.e., a #!an !r f!r8earance !f 0!ne1, t/e interest *ue s/!u#* 8e t/at >/ic/ 0a1 /a e 8een sti"u#ate* in >ritin4. Furt/er0!re, t/e interest *ue s/a## itse#f earn #e4a# interest fr!0 t/e ti0e it is Bu*icia##1 *e0an*e*. In t/e

a8sence !f sti"u#ati!n, t/e rate !f interest s/a## 8e 12U "er annu0 t! 8e c!0"ute* fr!0 *efau#t, i.e., fr!0 Bu*icia# !r e:traBu*icia# *e0an* un*er an* su8Bect t! t/e "r! isi!ns !f Artic#e 11&- !f t/e Ci i# C!*e. 2. =/en an !8#i4ati!n, n!t c!nstitutin4 a #!an !r f!r8earance !f 0!ne1, is 8reac/e*, an interest !n t/e a0!unt !f *a0a4es a>ar*e* 0a1 8e i0"!se* at t/e *iscreti!n !f t/e c!urt at t/e rate !f &U "er annu0. N! interest, /!>e er, s/a## 8e a*Bu*4e* !n un#i?ui*ate* c#ai0s !r *a0a4es e:ce"t >/en !r unti# t/e *e0an* can 8e esta8#is/e* >it/ reas!na8#e certaint1. Acc!r*in4#1, >/ere t/e *e0an* is esta8#is/e* >it/ reas!na8#e certaint1, t/e interest s/a## 8e4in t! run fr!0 t/e ti0e t/e c#ai0 is 0a*e Bu*icia##1 !r e:traBu*icia##1 (Art. 11&-, Ci i# C!*e) 8ut >/en suc/ certaint1 cann!t 8e s! reas!na8#1 esta8#is/e* at t/e ti0e t/e *e0an* is 0a*e, t/e interest s/a## 8e4in t! run !n#1 fr!0 t/e *ate t/e Bu*40ent !f t/e c!urt is 0a*e (at >/ic/ ti0e t/e ?uantificati!n !f *a0a4es 0a1 8e *ee0e* t! /a e 8een reas!na8#1 ascertaine*). T/e actua# 8ase f!r t/e c!0"utati!n !f #e4a# interest s/a##, in an1 case, 8e !n t/e a0!unt fina##1 a*Bu*4e*. %. =/en t/e Bu*40ent !f t/e c!urt a>ar*in4 a su0 !f 0!ne1 8ec!0es fina# an* e:ecut!r1, t/e rate !f #e4a# interest, >/et/er t/e case fa##s un*er "ara4ra"/ 1 !r "ara4ra"/ 2, a8! e, s/a## 8e 12U "er annu0 fr!0 suc/ fina#it1 unti# its satisfacti!n, t/is interi0 "eri!* 8ein4 *ee0e* t! 8e 81 t/en an e?ui a#ent t! a f!r8earance !f cre*it. In t/e sai* case !f Eastern S/i""in4, t/e C!urt furt/er !8ser e* t/at a Mf!r8earanceM in t/e c!nte:t !f t/e usur1 #a> is a Mc!ntractua# !8#i4ati!n !f #en*er !r

cre*it!r t! refrain, *urin4 a 4i en "eri!* !f ti0e, fr!0 re?uirin4 t/e 8!rr!>er !r *e8t!r t! re"a1 a #!an !r *e8t t/en *ue an* "a1a8#e.M C!nsi*erin4 t/e f!re4!in4, t/e insurance c#ai0 in t/is case is e i*ent#1 n!t a f!r8earance !f 0!ne1, 4!!*s !r cre*it, an* t/us t/e interest rate s/!u#* 8e as it is /ere81 fi:e* at si: "ercent (&U) c!0"ute* fr!0 t/e *ate !f fi#in4 !f t/e c!0"#aint. =e fin* n! Bustificati!n f!r t/e a>ar* !f actua# *a0a4es !f Fift1 T/!usan* Pes!s (P.6,666.66). =e##5 entrenc/e* is t/e *!ctrine t/at actua#, c!0"ensat!r1 an* c!nse?uentia# *a0a4es 0ust 8e "r! e*, an* cann!t 8e "resu0e*.1& T/at "art !f t/e *is"!siti e "!rti!n !f t/e Decisi!n !f t/e tria# c!urt !r*erin4 t/e "etiti!ner t! "a1 actua# *a0a4es !f Fift1 T/!usan* Pes!s (P.6,666.66) /as n! 8asis at a##. T/e Bustificati!n, if an1, f!r suc/ an a>ar* !f actua# *a0a4es *!es n!t a""ear in t/e 8!*1 !f t/e *ecisi!n !f t/e tria# c!urt. Neit/er is t/ere an1 testi0!nia# an* *!cu0entar1 e i*ence !n t/e a##e4e* actua# *a0a4es !f Fift1 T/!usan* Pes!s (P.6,666.66) t! >arrant suc/ an a>ar*. T/us, t/e sa0e 0ust 8e *e#ete*. C!ncernin4 t/e a>ar* !f e:e0"#ar1 *a0a4es f!r Fift1 T/!usan* Pes!s (P.6,666.66), >e #i9e>ise fin* n! #e4a# an* a#i* 8asis f!r 4rantin4 t/e sa0e. Artic#e 222- !f t/e Ne> Ci i# C!*e "r! i*es t/at e:e0"#ar1 *a0a4es 0a1 8e i0"!se* 81 >a1 !f e:a0"#e !r c!rrecti!n f!r t/e "u8#ic 4!!*. E:e0"#ar1 *a0a4es are i0"!se* n!t t! enric/ !ne "art1 !r i0"! eris/ an!t/er 8ut t! ser e as a *eterrent a4ainst !r as a ne4ati e incenti e t! cur8 s!cia##1 *e#eteri!us acti!ns. T/e1 are *esi4ne* t! "er0it t/e c!urts t! 0!u#* 8e/a i!r t/at /as s!cia##1 *e#eteri!us c!nse?uences, an* its i0"!siti!n is

re?uire* 81 "u8#ic "!#ic1 t! su""ress t/e >ant!n acts !f an !ffen*er. H!>e er, it cann!t 8e rec! ere* as a 0atter !f ri4/t. It is 8ase* entire#1 !n t/e *iscreti!n !f t/e c!urt. =e fin* n! c!4ent an* a#i* reas!n t! a>ar* t/e sa0e in t/e case at 8ar. =it/ res"ect t! t/e a>ar* !f #iti4ati!n e:"enses an* att!rne1Qs fees, Artic#e 226) !f t/e Ne> Ci i# C!*e1( enu0erates t/e instances >/ere suc/ 0a1 8e a>ar*e* an*, in a## cases, it 0ust 8e reas!na8#e, Bust an* e?uita8#e if t/e sa0e >ere t! 8e 4rante*. Att!rne1Qs fees as "art !f *a0a4es are n!t 0eant t! enric/ t/e >innin4 "art1 at t/e e:"ense !f t/e #!sin4 #iti4ant. T/e1 are n!t a>ar*e* e er1 ti0e a "art1 "re ai#s in a suit 8ecause !f t/e "!#ic1 t/at n! "re0iu0 s/!u#* 8e "#ace* !n t/e ri4/t t! #iti4ate.1) T/e a>ar* !f att!rne1Qs fees is t/e e:ce"ti!n rat/er t/an t/e 4enera# ru#e. As suc/, it is necessar1 f!r t/e c!urt t! 0a9e fin*in4s !f facts an* #a> t/at >!u#* 8rin4 t/e case >it/in t/e e:ce"ti!n an* Bustif1 t/e 4rant !f suc/ a>ar*. =e fin* n!ne in t/is case t! >arrant t/e a>ar* 81 t/e tria# c!urt !f #iti4ati!n e:"enses an* att!rne1Qs fees in t/e a0!unts !f Fi e T/!usan* Pes!s (P.,666.66) an* Ten T/!usan* Pes!s (P16,666.66), res"ecti e#1, an* t/eref!re, t/e sa0e 0ust a#s! 8e *e#ete*. =HE'EFO'E, t/e a""ea#e* Decisi!n is 7ODIFIED. T/e rate !f interest !n t/e a*Bu*4e* "rinci"a# a0!unt !f T>! Hun*re* T/!usan* Pes!s (P266,666.66) s/a## 8e si: "ercent (&U) "er annu0 c!0"ute* fr!0 t/e *ate !f fi#in4 !f t/e C!0"#aint in t/e tria# c!urt. T/e a>ar*s in t/e a0!unts !f Fift1 T/!usan* Pes!s (P.6,666.66) as actua# *a0a4es, Fift1 T/!usan* Pes!s (P.6,666.66) as e:e0"#ar1 *a0a4es, Fi e T/!usan* Pes!s (P.,666.66) as #iti4ati!n e:"enses, an* Ten T/!usan*

Pes!s (P16,666.66) as att!rne1Qs fees are /ere81 DELETED. C!sts a4ainst t/e "etiti!ner. SO O'DE'ED. S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. L5%)&1% Fe8ruar1 2., 1-)2

fin*in4 /a in4 8een *is"ute*, t/ere81 raisin4 a ?uesti!n !f #a> re ie>a8#e 81 t/is C!urt % are as f!##!>sA 7arc/ 1-, #-&%, t/e "#aintiff secure* te0"!rar1 insurance fr!0 t/e *efen*ant f!r its e:"!rtati!n !f 1,2.6,666 8!ar* feet !f P/i#i""ine Lauan an* A"it!n4 #!4s t! 8e s/i""e* fr!0 t/e Dia"itan. Ba1, @ueN!n Pr! ince t! O9ina>a an* T!91!, +a"an. T/e *efen*ant issue* !n sai* *ate C! er N!te N!. 1616, insurin4 t/e sai* car4! !f t/e "#aintiff MSu8Bect t! t/e Ter0s an* C!n*iti!ns !f t/e =O'D7ENCS INS;'ANCE CO7PANE, INC. "rinte* 7arine P!#ic1 f!r0 as fi#e* >it/ an* a""r! e* 81 t/e Office !f t/e Insurance C!00issi!ner (E:/i8it A). T/e re4u#ar 0arine car4! "!#icies >ere issue* 81 t/e *efen*ant in fa !r !f t/e "#aintiff !n A"ri# 2, 1-&%. T/e t>! 0arine "!#icies 8!re t/e nu08ers .% HO 16%2 an* .% HO 16%% (E:/i8its B an* C, res"ecti e#1). P!#ic1 N!. .% H6 16%% (E:/i8it B) >as f!r .22 "ieces !f #!4s e?ui a#ent t! 2--,-.6 8!ar* feet. P!#ic1 N!. .% H6 16%% >as f!r ).% "ieces !f #!4s e?ui a#ent t! &-.,.2) 8!ar* feet (E:/i8it C). T/e t!ta# car4! insure* un*er t/e t>! 0arine "!#icies acc!r*in4#1 c!nsiste* !f 1,%-. #!4s, !r t/e e?ui a#ent !f 1,1-..2-) 8*. ft. After t/e issuance !f C! er N!te N!. 1616 (E:/i8it A), 8ut 8ef!re t/e issuance !f t/e t>! 0arine "!#icies N!s. .% HO 16%2 an* .% HO 16%%, s!0e !f t/e #!4s inten*e* t! 8e e:"!rte* >ere #!st *urin4 #!a*in4 !"erati!ns in t/e Dia"itan Ba1. T/e #!4s >ere t! 8e #!a*e* !n t/e CSS =!!*#!c9C >/ic/ *!c9e* a8!ut .66 0eters fr!0 t/e s/!re#ine !f t/e Dia"itan Ba1. T/e #!4s >ere ta9en fr!0 t/e #!4 "!n* !f t/e "#aintiff an* fr!0 >/ic/ t/e1 >ere t!>e* in rafts t! t/e esse#. At

PACIFIC TI7BE' EFPO'T CO'PO'ATION, "etiti!ner, s. THE HONO'ABLE CO;'T OF APPEALS an* =O'D7ENCS INS;'ANCE CO7PANE, INC., res"!n*ents.

DE CAST'O, PP +.A T/is "etiti!n see9s t/e re ie> !f t/e *ecisi!n !f t/e C!urt !f A""ea#s re ersin4 t/e *ecisi!n !f t/e C!urt !f First Instance !f 7ani#a in fa !r !f "etiti!ner an* a4ainst "ri ate res"!n*ent >/ic/ !r*ere* t/e #atter t! "a1 t/e su0 !f P##,622.62 >it/ interest at t/e rate !f 12U interest fr!0 recei"t !f n!tice !f #!ss !n A"ri# 1., 1-&% u" t! t/e c!0"#ete "a10ent, t/e su0 !f P%,666.66 as att!rne1Cs fees an* t/e c!sts 1 t/ere81 *is0issin4 "etiti!ner s c!0"#aint >it/ c!sts. 2 T/e fin*in4s !f t/e !f fact !f t/e C!urt !f A""ea#s, >/ic/ are 4enera##1 8in*in4 u"!n t/is C!urt, E:ce"t as s/a## 8e in*icate* in t/e *iscussi!n !f t/e !"ini!n !f t/is C!urt t/e su8stantia# c!rrectness !f sti## "articu#ar

a8!ut 16A66 !Cc#!c9 a. 0. !n 7arc/ 2-, 1-&%, >/i#e t/e #!4s >ere a#!n4si*e t/e esse#, 8a* >eat/er *e e#!"e* resu#tin4 in (. "ieces !f #!4s >/ic/ >ere rafte* t!4et/er c! 8rea9 #!!se fr!0 eac/ !t/er. 2. "ieces !f #!4s >ere sa# a4e*, 8ut %6 "ieces >ere erifie* t! /a e 8een #!st !r >as/e* a>a1 as a resu#t !f t/e acci*ent. In a #etter *ate* A"ri# 2, 1-&%, t/e "#aintiff inf!r0e* t/e *efen*ant a8!ut t/e #!ss !f Ca""r!"riate#1 %2 "ieces !f #!4Cs *urin4 #!a*in4 !f t/e CSS =!!*#!c9C. T/e sai* #etter (E:/i8it F) rea*s as f!##!>sA A"ri# 2, 1-&% =!r90enCs P/i#i""ines Gent#e0enA T/is /as reference t! Insurance C! er N!te N!. 1616 f!r s/i"0ent !f 1,2.6,666 8*. ft. P/i#i""ine Lauan an* A"it!n4 L!4s. =e >!u#* #i9e t! inf!r0 1!u t/at >e /a e recei e* a* ance "re#i0inar1 re"!rt fr!0 !ur Office in Dia"itan, @ueN!n t/at >e /a e #!st a""r!:i0ate#1 %2 "ieces !f #!4s *urin4 #!a*in4 !f t/e SS =!!*#!c9. =e >i## sen* 1!u an accurate re"!rt a## t/e *etai#s inc#u*in4 a#ues as s!!n as sa0e >i## 8e re"!rte* t! us. T/an9 1!u f!r 1!ur attenti!n, >e >is/ t! re0ain. 3er1 res"ectfu##1 1!urs, Insurance C!0"an1, Inc. 7ani#a,

PACIFIC TI7BE' EFPO'T CO'PO'ATION (S4*.) E77AN;EL S. ATILANO Asst. Genera# 7ana4er. A#t/!u4/ *ate* A"ri# 2, 1-&%, t/e #etter >as recei e* in t/e !ffice !f t/e *efen*ant !n#1 !n A"ri# 1., 1-&%, as s/!>n 81 t/e sta0" i0"ressi!n a""earin4 !n t/e #eft 8!tt!0 c!rner !f sai* #etter. T/e "#aintiff su8se?uent#1 su80itte* a CC#ai0 State0ent *e0an*in4 "a10ent !f t/e #!ss un*er P!#icies N!s. .% HO 16%2 an* .% HO 16%%, in t/e t!ta# a0!unt !f P1-,2)&.(- (E:/i8it G). On +u#1 1(, 1-&%, t/e *efen*ant re?ueste* t/e First P/i#i""ine A*Bust0ent C!r"!rati!n t! ins"ect t/e #!ss an* assess t/e *a0a4e. T/e a*Bust0ent c!0"an1 su80itte* its C'e"!rt !n Au4ust 2%, 1-&% (E:/i8it H). In sai* re"!rt, t/e a*Buster f!un* t/at Ct/e #!ss !f %6 "ieces !f #!4s is n!t c! ere* 81 P!#icies N!s. .% HO 16%2 an* 16%% inas0uc/ as sai* "!#icies c! ere* t/e actua# nu08er !f #!4s #!a*e* !n 8!ar* t/e CSS =!!*#!c9C H!>e er, t/e #!ss !f %6 "ieces !f #!4s is >it/in t/e 1,2.6,666 8*. ft. c! ere* 81 C! er N!te 1616 insure* f!r b(6,666.66. On Se"te08er 12, 1-&%, t/e a*Bust0ent c!0"an1 su80itte* a c!0"utati!n !f t/e *efen*antCs "r!8a8#e #ia8i#it1 !n t/e #!ss sustaine* 81 t/e s/i"0ent, in t/e t!ta# a0!unt !f P#1,622.62 (E:/i8it 2). On +anuar1 1%, 1-&2, t/e *efen*ant >r!te t/e "#aintiff *en1in4 t/e #atterCs c#ai0, !n t/e 4r!un* t/e1 *efen*antCs in esti4ati!n re ea#e* t/at t/e entire s/i"0ent !f #!4s c! ere* 81 t/e t>! 0arines "!#icies N!. .% 116 16%2 an* (1% HO 16%% >ere recei e* in 4!!* !r*er at t/eir "!int !f *estinati!n. It >as furt/er state* t/at t/e sai* #!ss 0a1 8e c!nsi*ere* as c! ere*

un*er C! er N!te N!. 1616 8ecause t/e sai* N!te /a* 8ec!0e Cnu## an* !i* 81 irtue !f t/e issuance !f 7arine P!#ic1 N!s. .% HO 16%2 an* 16%%C(E:/i8it +51). T/e *enia# !f t/e c#ai0 81 t/e *efen*ant >as 8r!u4/t 81 t/e "#aintiff t! t/e attenti!n !f t/e Insurance C!00issi!ner 81 0eans !f a #etter *ate* 7arc/ 21, 1-&2 (E:/i8it D). In a re"#1 #etter *ate* 7arc/ %6, 1-&2, Insurance C!00issi!ner Francisc! E. 7an*anas !8ser e* t/at Cit is !n#1 fair an* e?uita8#e t! in*e0nif1 t/e insure* un*er C! er N!te N!. 1616C, an* a* ise* ear#1 sett#e0ent !f t/e sai* 0arine #!ss an* sa# a4e c#ai0 (E:/i8it L). On +une 2&, 1-&2, t/e *efen*ant inf!r0e* t/e Insurance C!00issi!ner t/at, !n a* ice !f t/eir att!rne1s, t/e c#ai0 !f t/e "#aintiff is 8ein4 *enie* !n t/e 4r!un* t/at t/e c! er n!te is nu## an* !i* f!r #ac9 !f a#ua8#e c!nsi*erati!n (E:/i8it 7). 2 Petiti!ner assi4ne* as err!rs !f t/e C!urt !f A""ea#s, t/e f!##!>in4A I THE CO;'T OF APPEALS E''ED IN HOLDING THAT THE CO3E' NOTE =AS N;LL AND 3OID FO' LACD OF 3AL;ABLE CONSIDE'ATION BECA;SE THE CO;'T DIS'EGA'DED THE P'O3EN FACTS THAT P'E7I;7S FO' THE CO7P'EHENSI3E INS;'ANCE CO3E'AGE THAT INCL;DED THE CO3E' NOTE =AS PAID BE PETITIONE' AND THAT INCL;DED THE CO3E' NOTE =AS PAID BE PETITIONE' AND THAT NO SEPA'ATE P'E7I;7S A'E COLLECTED BE P'I3ATE 'ESPONDENT ON ALL ITS CO3E' NOTES. II

THE CO;'T OF APPEALS E''ED IN HOLDING THAT P'I3ATE 'ESPONDENT =AS 'ELEASED F'O7 LIABILITE ;NDE' THE CO3E' NOTE D;E TO ;N'EASONABLE DELAE IN GI3ING NOTICE OF LOSS BECA;SE THE CO;'T DIS'EGA'DED THE P'O3EN FACT THAT P'I3ATE 'ESPONDENT DID NOT P'O7PTLE AND SPECIFICALLE OB+ECT TO THE CLAI7 ON THE G'O;ND OF DELAE IN GI3ING NOTICE OF LOSS AND, CONSE@;ENTLE, OB+ECTIONS ON THAT G'O;ND A'E =AI3ED ;NDE' SECTION )2 OF THE INS;'ANCE ACT. . 1. Petiti!ner c!nten*s t/at t/e C! er N!te >as issue* >it/ a c!nsi*erati!n >/en, 81 e:"ress sti"u#ati!n, t/e c! er n!te is 0a*e su8Bect t! t/e ter0s an* c!n*iti!ns !f t/e 0arine "!#icies, an* t/e "a10ent !f "re0iu0s is !ne !f t/e ter0s !f t/e "!#icies. Fr!0 t/is un*is"ute* fact, =e u"/!#* "etiti!nerCs su80issi!n t/at t/e C! er N!te >as n!t >it/!ut c!nsi*erati!n f!r >/ic/ t/e res"!n*ent c!urt /e#* t/e C! er N!te as nu## an* !i*, an* *enie* rec! er1 t/erefr!0. T/e fact t/at n! se"arate "re0iu0 >as "ai* !n t/e C! er N!te 8ef!re t/e #!ss insure* a4ainst !ccurre*, *!es n!t 0i#itate a4ainst t/e a#i*it1 !f "etiti!nerCs c!ntenti!n, f!r n! suc/ "re0iu0 c!u#* /a e 8een "ai*, since 81 t/e nature !f t/e C! er N!te, it *i* n!t c!ntain, as a## C! er N!tes *! n!t c!ntain "articu#ars !f t/e s/i"0ent t/at >!u#* ser e as 8asis f!r t/e c!0"utati!n !f t/e "re0iu0s. As a #!4ica# c!nse?uence, n! se"arate "re0iu0s are inten*e* !r re?uire* t! 8e "ai* !n a C! er N!te. T/is is a fact a*0itte* 81 an !fficia# !f res"!n*ent c!0"an1, +uan +!se Ca0ac/!, in c/ar4e !f issuin4 c! er n!tes !f t/e res"!n*ent c!0"an1 (". %%, tsn, Se"te08er 22, 1-&.).

At an1 rate, it is n!t *is"ute* t/at "etiti!ner "ai* in fu## a## t/e "re0iu0s as ca##e* f!r 81 t/e state0ent issue* 81 "ri ate res"!n*ent after t/e issuance !f t/e t>! re4u#ar 0arine insurance "!#icies, t/ere81 #ea in4 n! acc!unt un"ai* 81 "etiti!ner *ue !n t/e insurance c! era4e, >/ic/ 0ust 8e *ee0e* t! inc#u*e t/e C! er N!te. If t/e N!te is t! 8e treate* as a se"arate "!#ic1 instea* !f inte4ratin4 it t! t/e re4u#ar "!#icies su8se?uent#1 issue*, t/e "ur"!se an* functi!n !f t/e C! er N!te >!u#* 8e set at nau4/t !r ren*ere* 0eanin4#ess, f!r it is in a rea# sense a c!ntract, n!t a 0ere a""#icati!n f!r insurance >/ic/ is a 0ere !ffer. & It 0a1 8e true t/at t/e 0arine insurance "!#icies issue* >ere f!r #!4s n! #!n4er inc#u*in4 t/!se >/ic/ /a* 8een #!st *urin4 #!a*in4 !"erati!ns. T/is /a* t! 8e s! 8ecause t/e ris9 insure* a4ainst is n!t f!r #!ss *urin4 !"erati!ns an10!re, 8ut f!r #!ss *urin4 transit, t/e #!4s /a in4 a#rea*1 8een safe#1 "#ace* a8!ar*. T/is >!u#* 0a9e n! *ifference, /!>e er, ins!far as t/e #ia8i#it1 !n t/e c! er n!te is c!ncerne*, f!r t/e nu08er !r !#u0e !f #!4s #!st can 8e *eter0ine* in*e"en*ent#1 as in fact it /a* 8een s! ascertaine* at t/e instance !f "ri ate res"!n*ent itse#f >/en it sent its !>n a*Buster t! in esti4ate an* assess t/e #!ss, after t/e issuance !f t/e 0arine insurance "!#icies. T/e a*Buster >ent as far as su80ittin4 /is re"!rt t! res"!n*ent, as >e## as its c!0"utati!n !f res"!n*entCs #ia8i#it1 !n t/e insurance c! era4e. T/is c! era4e c!u#* n!t /a e 8een n! !t/er t/an >/at >as sti"u#ate* in t/e C! er N!te, f!r n! #!ss !r *a0a4e /a* t! 8e assesse* !n t/e c! era4e arisin4 fr!0 t/e 0arine insurance "!#icies. F!r !8 i!us reas!ns, it >as n!t necessar1 t! as9 "etiti!ner t! "a1 "re0iu0 !n t/e C! er N!te, f!r t/e #!ss insure* a4ainst /a in4 a#rea*1

!ccurre*, t/e 0!re "ractica# "r!ce*ure is si0"#1 t! *e*uct t/e "re0iu0 fr!0 t/e a0!unt *ue t/e "etiti!ner !n t/e C! er N!te. T/e n!n5"a10ent !f "re0iu0 !n t/e C! er N!te is, t/eref!re, n! cause f!r t/e "etiti!ner t! #!se >/at is *ue it as if t/ere /a* 8een "a10ent !f "re0iu0, f!r n!n5"a10ent 81 it >as n!t c/ar4ea8#e a4ainst its fau#t. Ha* a## t/e #!4s 8een #!st *urin4 t/e #!a*in4 !"erati!ns, 8ut after t/e issuance !f t/e C! er N!te, #ia8i#it1 !n t/e n!te >!u#* /a e a#rea*1 arisen e en 8ef!re "a10ent !f "re0iu0. T/is is /!> t/e c! er n!te as a M8in*erM s/!u#* #e4a##1 !"erate !t/er>ise, it >!u#* ser e n! "ractica# "ur"!se in t/e rea#0 !f c!00erce, an* is su""!rte* 81 t/e *!ctrine t/at >/ere a "!#ic1 is *e#i ere* >it/!ut re?uirin4 "a10ent !f t/e "re0iu0, t/e "resu0"ti!n is t/at a cre*it >as inten*e* an* "!#ic1 is a#i*. ( 2. T/e *efense !f *e#a1 as raise* 81 "ri ate res"!n*ent in resistin4 t/e c#ai0 cann!t 8e sustaine*. T/e #a> re?uires t/is 4r!un* !f *e#a1 t! 8e "r!0"t#1 an* s"ecifica##1 asserte* >/en a c#ai0 !n t/e insurance a4ree0ent is 0a*e. T/e un*is"ute* facts s/!> t/at instea* !f in !9in4 t/e 4r!un* !f *e#a1 in !8Bectin4 t! "etiti!nerCs c#ai0 !f rec! er1 !n t/e c! er n!te, it t!!9 ste"s c#ear#1 in*icati e t/at t/is "articu#ar 4r!un* f!r !8Becti!n t! t/e c#ai0 >as ne er in its 0in*. T/e nature !f t/is s"ecific 4r!un* f!r resistin4 a c#ai0 "#aces t/e insurer !n *ut1 t! in?uire >/en t/e #!ss t!!9 "#ace, s! t/at it c!u#* *eter0ine >/et/er *e#a1 >!u#* 8e a a#i* 4r!un* u"!n >/ic/ t! !8Bect t! a c#ai0 a4ainst it. As a#rea*1 state* ear#ier, "ri ate res"!n*entCs reacti!n u"!n recei"t !f t/e n!tice !f #!ss, >/ic/ >as !n A"ri# 1., 1-&%, >as t! set in 0!ti!n fr!0 +u#1 1-&% >/at >!u#* 8e necessar1 t! *eter0ine t/e cause an* e:tent

!f t/e #!ss, >it/ a ie> t! t/e "a10ent t/ere!f !n t/e insurance a4ree0ent. T/us it sent its a*Buster t! in esti4ate an* assess t/e #!ss in +u#1, 1-&%. T/e a*Buster su80itte* /is re"!rt !n Au4ust 2%, 1-&% an* its c!0"utati!n !f res"!n*entCs #ia8i#it1 !n Se"te08er 12, 1-&%. Fr!0 A"ri# 1-&% t! +u#1, 1-&%, en!u4/ ti0e >as a ai#a8#e f!r "ri ate res"!n*ent t! *eter0ine if "etiti!ner >as 4ui#t1 !f *e#a1 in c!00unicatin4 t/e #!ss t! res"!n*ent c!0"an1. In t/e "r!cee*in4s t/at t!!9 "#ace #ater in t/e Office !f t/e Insurance C!00issi!ner, "ri ate res"!n*ent s/!u#* t/en /a e raise* t/is 4r!un* !f *e#a1 t! a !i* #ia8i#it1. It *i* n!t *! s!. It 0ust 8e 8ecause it *i* n!t fin* an1 *e#a1, as t/is C!urt fai#s t! fin* a rea# an* su8stantia# si4n t/ere!f. But e en !n t/e assu0"ti!n t/at t/ere >as *e#a1, t/is C!urt is satisfie* an* c!n ince* t/at as e:"ress#1 "r! i*e* 81 #a>, >ai er can successfu##1 8e raise* a4ainst "ri ate res"!n*ent. T/us Secti!n )2 !f t/e Insurance Act "r! i*esA Secti!n )2.TDe#a1 in t/e "resentati!n t! an insurer !f n!tice !r "r!!f !f #!ss is >ai e* if cause* 81 an1 act !f /is !r if /e !0its t! ta9e !8Becti!n "r!0"t#1 an* s"ecifica##1 u"!n t/at 4r!un*. Fr!0 >/at /as 8een sai*, =e fin* *u#1 su8stantiate* "etiti!nerCs assi4n0ents !f err!r.

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. L5%1)2. A"ri# %6, 1-(-

G'EAT PACIFIC LIFE ASS;'ANCE CO7PANE, "etiti!ner, s. HONO'ABLE CO;'T OF APPEALS, res"!n*ents. G.'. N!. L5%1)() A"ri# %6, 1-(-

LAP;LAP; D. 7OND'AGON, "etiti!ner, s. HON. CO;'T OF APPEALS an* NGO HING, res"!n*ents. Si4ui!n 'e1na, 7!nteci##! < On4sia9! an* S1ci", Sa#aNar, Luna < 7ana#! f!r "etiti!ner C!0"an1. 3!#taire Garcia f!r "etiti!ner 7!n*ra4!n. Pe#aeN, Pe#aeN < Pe#aeN f!r res"!n*ent N4! Hin4.

DE CAST'O, +.A ACCO'DINGLE, t/e a""ea#e* *ecisi!n is set asi*e an* t/e *ecisi!n !f t/e C!urt !f First Instance is reinstate* in t!t! >it/ t/e affir0ance !f t/is C!urt. N! s"ecia# "r!n!unce0ent as t! c!sts. SO O'DE'ED. T/e t>! a8! e5entit#e* cases >ere !r*ere* c!ns!#i*ate* 81 t/e 'es!#uti!n !f t/is C!urt *ate* A"ri# 2-, 1-(6, ('!##!, N!. L5%1)(), ". .)), 8ecause t/e "etiti!ners in 8!t/ cases see9 si0i#ar re#ief, t/r!u4/ t/ese "etiti!ns f!r certi!rari 81 >a1 !f a""ea#, fr!0 t/e a0en*e* *ecisi!n !f res"!n*ent C!urt !f A""ea#s >/ic/ affir0e* in t!t! t/e *ecisi!n !f t/e C!urt !f First

Instance !f Ce8u, !r*erin4 Mt/e *efen*ants (/erein "etiti!ners Great Pacific Li4fe Assurance C!0"an1 an* 7!n*ra4!n) B!int#1 an* se era##1 t! "a1 "#aintiff (/erein "ri ate res"!n*ent N4! Hin4) t/e a0!unt !f P.6,666.66 >it/ interest at &U fr!0 t/e *ate !f t/e fi#in4 !f t/e c!0"#aint, an* t/e su0 !f P1,6((.(., >it/!ut interest. It a""ears t/at !n 7arc/ 12, 1-.(, "ri ate res"!n*ent N4! Hin4 fi#e* an a""#icati!n >it/ t/e Great Pacific Life Assurance C!0"an1 (/ereinafter referre* t! as Pacific Life) f!r a t>ent151ear en*!>n0ent "!#ic1 in t/e a0!unt !f P.6,666.66 !n t/e #ife !f /is !ne51ear !#* *au4/ter He#en G!. Sai* res"!n*ent su""#ie* t/e essentia# *ata >/ic/ "etiti!ner La"u#a"u D. 7!n*ra4!n, Branc/ 7ana4er !f t/e Pacific Life in Ce8u Cit1 >r!te !n t/e c!rres"!n*in4 f!r0 in /is !>n /an*>ritin4 (E:/i8it I57). 7!n*ra4!n fina##1 t1"e5>r!te t/e *ata !n t/e a""#icati!n f!r0 >/ic/ >as si4ne* 81 "ri ate res"!n*ent N4! Hin4. T/e #atter "ai* t/e annua# "re0ui0 t/e su0 !f P1,6((.(. 4!in4 ! er t! t/e C!0"an1, 8ut /e reatine* t/e a0!unt !f P1,%1(.66 as /is c!00issi!n f!r 8ein4 a *u#1 aut/!riNe* a4e8t !f Pacific Life. ;"!n t/e "a10ent !f t/e insurance "re0ui0, t/e 8in*in4 *e"!sit recei"t (E:/i8it E) >as issue* t! "ri ate res"!n*ent N4! Hin4. Li9e>ise, "etiti!ner 7!n*ra4!n /an*>r!te at t/e 8!tt!0 !f t/e 8ac9 "a4e !f t/e a""#icati!n f!r0 /is str!n4 rec!00en*ati!n f!r t/e a""r! a# !f t/e insurance a""#icati!n. T/en !n A"ri# %6, 1-.(, 7!n*ra4!n recei e* a #etter fr!0 Pacific Life *isa""r! in4 t/e insurance a""#icati!n (E:/i8it %57). T/e #etter state* t/at t/e sai* #ife insurance a""#icati!n f!r 2651ear en*!>0ent "#an is n!t a ai#a8#e f!r 0in!rs 8e#!> se en 1ears !#*, 8ut Pacific Life can c!nsi*er t/e sa0e un*er t/e +u eni#e Tri"#e

Acti!n P#an, an* a* ise* t/at if t/e !ffer is acce"ta8#e, t/e +u eni#e N!n57e*ica# Dec#arati!n 8e sent t! t/e c!0"an1. T/e n!n5acce"tance !f t/e insurance "#an 81 Pacific Life >as a##e4e*#1 n!t c!00unicate* 81 "etiti!ner 7!n*ra4!n t! "ri ate res"!n*ent N4! Hin4. Instea*, !n 7a1 &, 1-.(, 7!n*ra4!n >r!te 8ac9 Pacific Life a4ain str!n4#1 rec!00en*in4 t/e a""r! a# !f t/e 265 1ear en*!>0ent insurance "#an t! c/i#*ren, "!intin4 !ut t/at since 1-.2 t/e cust!0ers, es"ecia##1 t/e C/inese, >ere as9in4 f!r suc/ c! era4e (E:/i8it 257). It >as >/en t/in4s >ere in suc/ state t/at !n 7a1 2), 1-.( He#en G! *ie* !f inf#uenNa >it/ c!0"#icati!n !f 8r!nc/!"neu0!nia. T/ereu"!n, "ri ate res"!n*ent s!u4/t t/e "a10ent !f t/e "r!cee*s !f t/e insurance, 8ut /a in4 fai#e* in /is eff!rt, /e fi#e* t/e acti!n f!r t/e rec! er1 !f t/e sa0e 8ef!re t/e C!urt !f First Instance !f Ce8u, >/ic/ ren*ere* t/e a* erse *ecisi!n as ear#ier refere* t! a4ainst 8!t/ "etiti!ners. T/e *ecisi e issues in t/ese cases areA (1) >/et/er t/e 8in*in4 *e"!sit recei"t (E:/i8it E) c!nstitute* a te0"!rar1 c!ntract !f t/e #ife insurance in ?uesti!n$ an* (2) >/et/er "ri ate res"!n*ent N4! Hin4 c!ncea#e* t/e state !f /ea#t/ an* "/1sica# c!n*iti!n !f He#en G!, >/ic/ ren*ere* !i* t/e af!resai* E:/i8it E. 1. At t/e 8ac9 !f E:/i8it E are c!n*iti!n "rece*ents re?uire* 8ef!re a *e"!sit is c!nsi*ere* a BINDING 'ECEIPT. T/ese c!n*iti!ns state t/atA A. If t/e C!0"an1 !r its a4ent, s/an /a e recei e* t/e "re0iu0 *e"!sit ... an* t/e insurance a""#icati!n, ON !r P'IO' t! t/e *ate !f 0e*ica# e:a0inati!n ...

sai* insurance s/an 8e in f!rce an* in effect fr!0 t/e *ate !f suc/ 0e*ica# e:a0inati!n, f!r suc/ "eri!* as is c! ere* 81 t/e *e"!sit ..., P'O3IDED t/e c!0"an1 s/a## 8e satisfie* t/at !n sai* *ate t/e a""#icant >as insura8#e !n stan*ar* rates un*er its ru#e f!r t/e a0!unt !f insurance an* t/e 9in* !f "!#ic1 re?ueste* in t/e a""#icati!n. D. If t/e C!0"an1 *!es n!t acce"t t/e a""#icati!n !n stan*ar* rate f!r t/e a0!unt !f insurance an*O!r t/e 9in* !f "!#ic1 re?ueste* in t/e a""#icati!n 8ut issue, !r !ffers t! issue a "!#ic1 f!r a *ifferent "#an an*O!r a0!unt ..., t/e insurance s/a## n!t 8e in f!rce an* in effect unti# t/e a""#icant s/a## /a e acce"te* t/e "!#ic1 as issue* !r !ffere* 81 t/e C!0"an1 an* s/a## /a e "ai* t/e fu## "re0iu0 t/ere!f. If t/e a""#icant *!es n!t acce"t t/e "!#ic1, t/e *e"!sit s/a## 8e refun*e*. E. If t/e a""#icant s/a## n!t /a e 8een insura8#e un*er C!n*iti!n A a8! e, an* t/e C!0"an1 *ec#ines t! a""r! e t/e a""#icati!n t/e insurance a""#ie* f!r s/a## n!t /a e 8een in f!rce at an1 ti0e an* t/e su0 "ai* 8e returne* t! t/e a""#icant u"!n t/e surren*er !f t/is recei"t. (E0"/asis Ours). T/e af!re?u!te* "r! isi!ns "rinte* !n E:/i8it E s/!> t/at t/e 8in*in4 *e"!sit recei"t is inten*e* t! 8e 0ere#1 a "r! isi!na# !r te0"!rar1 insurance c!ntract an* !n#1 u"!n c!0"#iance !f t/e f!##!>in4 c!n*iti!nsA (1) t/at t/e c!0"an1 s/a## 8e satisfie* t/at t/e a""#icant >as insura8#e !n stan*ar* rates$ (2) t/at if t/e c!0"an1 *!es n!t acce"t t/e a""#icati!n an* !ffers t! issue a "!#ic1 f!r a *ifferent "#an, t/e insurance c!ntract s/a## n!t 8e 8in*in4 unti# t/e a""#icant acce"ts t/e "!#ic1 !ffere*$ !t/er>ise, t/e

*e"!sit s/a## 8e reft0*e*$ an* (%) t/at if t/e a""#icant is n!t 8#e acc!r*in4 t! t/e stan*ar* rates, an* t/e c!0"an1 *isa""r! es t/e a""#icati!n, t/e insurance a""#ie* f!r s/a## n!t 8e in f!rce at an1 ti0e, an* t/e "re0iu0 "ai* s/a## 8e returne* t! t/e a""#icant. C#ear#1 i0"#ie* fr!0 t/e af!resai* c!n*iti!ns is t/at t/e 8in*in4 *e"!sit recei"t in ?uesti!n is 0ere#1 an ac9n!>#e*40ent, !n 8e/a#f !f t/e c!0"an1, t/at t/e #atterCs 8ranc/ !ffice /a* recei e* fr!0 t/e a""#icant t/e insurance "re0iu0 an* /a* acce"te* t/e a""#icati!n su8Bect f!r "r!cessin4 81 t/e insurance c!0"an1$ an* t/at t/e #atter >i## eit/er a""r! e !r reBect t/e sa0e !n t/e 8asis !f >/et/er !r n!t t/e a""#icant is Minsura8#e !n stan*ar* rates.M Since "etiti!ner Pacific Life *isa""r! e* t/e insurance a""#icati!n !f res"!n*ent N4! Hin4, t/e 8in*in4 *e"!sit recei"t in ?uesti!n /a* ne er 8ec!0e in f!rce at an1 ti0e. ;"!n t/is "re0ise, t/e 8in*in4 *e"!sit recei"t (E:/i8it E) is, 0anifest#1, 0ere#1 c!n*iti!na# an* *!es n!t insure !utri4/t. As /e#* 81 t/is C!urt, >/ere an a4ree0ent is 0a*e 8et>een t/e a""#icant an* t/e a4ent, n! #ia8i#it1 s/a## attac/ unti# t/e "rinci"a# a""r! es t/e ris9 an* a recei"t is 4i en 81 t/e a4ent. T/e acce"tance is 0ere#1 c!n*iti!na# an* is su8!r*inate* t! t/e act !f t/e c!0"an1 in a""r! in4 !r reBectin4 t/e a""#icati!n. T/us, in #ife insurance, a M8in*in4 s#i"M !r M8in*in4 recei"tM *!es n!t insure 81 itse#f (De Li0 s. Sun Life Assurance C!0"an1 !f Cana*a, 21 P/i#. 2&2). It 8ears re"eatin4 t/at t/r!u4/ t/e intra5c!0"an1 c!00unicati!n !f A"ri# %6, 1-.( (E:/i8it %57), Pacific Life *isa""r! e* t/e insurance a""#icati!n in ?uesti!n

!n t/e 4r!un* t/at it is n!t !fferin4 t/e t>ent151ear en*!>0ent insurance "!#ic1 t! c/i#*ren #ess t/an se en 1ears !f a4e. =/at it !ffere* instea* is an!t/er "#an 9n!>n as t/e +u eni#e Tri"#e Acti!n, >/ic/ "ri ate res"!n*ent fai#e* t! acce"t. In t/e a8sence !f a 0eetin4 !f t/e 0in*s 8et>een "etiti!ner Pacific Life an* "ri ate res"!n*ent N4! Hin4 ! er t/e 2651ear en*!>0ent #ife insurance in t/e a0!unt !f P.6,666.66 in fa !r !f t/e #atterCs !ne51ear !#* *au4/ter, an* >it/ t/e n!n5c!0"#iance !f t/e a8! e?u!te* c!n*iti!ns state* in t/e *is"ute* 8in*in4 *e"!sit recei"t, t/ere c!u#* /a e 8een n! insurance c!ntract *u#1 "erfecte* 8et>een t/en# Acc!r*in4#1, t/e *e"!sit "ai* 81 "ri ate res"!n*ent s/a## /a e t! 8e refun*e* 81 Pacific Life. As /e#* in De Li0 s. Sun Life Assurance C!0"an1 !f Cana*a, su"ra, Ma c!ntract !f insurance, #i9e !t/er c!ntracts, 0ust 8e assente* t! 81 8!t/ "arties eit/er in "ers!n !r 81 t/eir a4ents ... T/e c!ntract, t! 8e 8in*in4 fr!0 t/e *ate !f t/e a""#icati!n, 0ust /a e 8een a c!0"#ete* c!ntract, !ne t/at #ea es n!t/in4 t! 8e *i!ne, n!t/in4 t! 8e c!0"#ete*, n!t/in4 t! 8e "asse* u"!n, !r *eter0ine*, 8ef!re it s/a## ta9e effect. T/ere can 8e n! c!ntract !f insurance un#ess t/e 0in*s !f t/e "arties /a e 0et in a4ree0ent.M =e are n!t i0"resse* >it/ "ri ate res"!n*entCs c!ntenti!n t/at fai#ure !f "etiti!ner 7!n*ra4!n t! c!00unicate t! /i0 t/e reBecti!n !f t/e insurance a""#icati!n >!u#* n!t /a e an1 a* erse effect !n t/e a##e4e*#1 "erfecte* te0"!rar1 c!ntract ('es"!n*entCs Brief, "". 1%512). In t/is first "#ace, t/ere >as n! c!ntract "erfecte* 8et>een t/e "arties >/! /a* n! 0eetin4 !f t/eir 0in*s. Pri ate res"!n*et, 8ein4 an aut/!riNe* insurance a4ent !f Pacific Life at Ce8u 8ranc/ !ffice, is in*u8ita8#1 a>are t/at sai* c!0"an1

*!es n!t !ffer t/e #ife insurance a""#ie* f!r. =/en /e fi#e* t/e insurance a""#icati!n in *is"ute, "ri ate res"!n*ent >as, t/eref!re, !n#1 ta9in4 t/e c/ance t/at Pacific Life >i## a""r! e t/e rec!00en*ati!n !f 7!n*ra4!n f!r t/e acce"tance an* a""r! a# !f t/e a""#icati!n in ?uesti!n a#!n4 >it/ /is "r!"!sa# t/at t/e insurance c!0"an1 starts t! !ffer t/e 2651ear en*!>0ent insurance "#an f!r c/i#*ren #ess t/an se en 1ears. N!net/e#ess, t/e rec!r* *isc#!ses t/at Pacific Life /a* reBecte* t/e "r!"!sa# an* rec!00en*ati!n. Sec!n*#1, /a in4 an insura8#e interest !n t/e #ife !f /is !ne51ear !#* *au4/ter, asi*e fr!0 8ein4 an insurance a4ent an* an !ffense ass!ciate !f "etiti!ner 7!n*ra4!n, "ri ate res"!n*ent N4! Hin4 0ust /a e 9n!>n an* f!##!>e* t/e "r!4ress !n t/e "r!cessin4 !f suc/ a""#icati!n an* c!u#* n!t "reten* i4n!rance !f t/e C!0"an1Cs reBecti!n !f t/e 2651ear en*!>0ent #ife insurance a""#icati!n. At t/is Buncture, =e fin* it fit t! ?u!te >it/ a""r! a#, t/e er1 a"t !8ser ati!n !f t/en A""e##ate Ass!ciate +ustice 'u"ert! G. 7artin >/! #ater ca0e u" t! t/is C!urt, fr!0 /is *issentin4 !"ini!n t! t/e a0en*e* *ecisi!n !f t/e res"!n*ent c!urt >/ic/ c!0"#ete#1 re erse* t/e !ri4ina# *ecisi!n, t/e f!##!>in4A Of c!urse, t/ere is t/e insinuati!n t/at neit/er t/e 0e0!ran*u0 !f reBecti!n (E:/i8it %57) n!r t/e re"#1 t/eret! !f a""e##ant 7!n*ra4!n reiteratin4 t/e *esire f!r a""#icantCs fat/er t! /a e t/e a""#icati!n c!nsi*ere* as !ne f!r a 2651ear en*!>0ent "#an >as e er *u#1 c!00unicate* t! N4!$ Hin4, fat/er !f t/e 0in!r a""#icant. I a0 n!t ?uite c!nnince* t/at t/is >as s!. N4! Hin4, as fat/er !f t/e a""#icant /erse#f, >as "recise#1 t/e Mun*er>riter >/! >r!te t/is caseM (E:/i8it H51). T/e unc/a##en4e* state0ent !f a""e##ant

7!n*ra4!n in /is #etter !f 7a1 &, 1-.() (E:/i8it 257), s"ecifica##1 a*0its t/at sai* N4! Hin4 >as M!ur ass!ciateM an* t/at it >as t/e #atter >/! Minsiste* t/at t/e "#an 8e "#ace* !n t/e 2651ear en*!>0ent "#an.M ;n*er t/ese circu0stances, it is inc!ncei a8#e t/at t/e "r!4ress in t/e "r!cessin4 !f t/e a""#icati!n >as n!t 8r!u4/t /!0e t! /is 9n!>#e*4e. He 0ust /a e 8een *u#1 a""rise* !f t/e reBecti!n !f t/e a""#icati!n f!r a 2651ear en*!>0ent "#an !t/er>ise 7!n*ra4!n >!u#* n!t /a e asserte* t/at it >as N4! Hin4 /i0se#f >/! insiste* !n t/e a""#icati!n as !ri4ina##1 fi#e*, t/ere81 i0"#ict#1 *ec#inin4 t/e !ffer t! c!nsi*er t/e a""#icati!n un*er t/e +u eni#e Tri"#e Acti!n P#an. Besi*es, t/e ass!ciate !f 7!n*ra4!n t/at /e >as, N4! Hin4 s/!u#* !n#1 8e "resu0e* t! 9n!> >/at 9in* !f "!#icies are a ai#a8#e in t/e c!0"an1 f!r 0in!rs 8e#!> ( 1ears !#*. =/at /e an* 7!n*ra4!n >ere a""arent#1 tr1in4 t! *! in t/e "re0ises >as 0ere#1 t! "r!* t/e c!0"an1 int! 4!in4 int! t/e 8usiness !f issuin4 en*!>0ent "!#icies f!r 0in!rs Bust as !t/er insurance c!0"anies a##e4e*#1 *!. ;nti# suc/ a *efinite "!#ic1 is /!>e er, a*!"te* 81 t/e c!0"an1, it can /ar*#1 8e sai* t/at it c!u#* /a e 8een 8!un* at a## un*er t/e 8in*in4 s#i" f!r a "#an !f insurance t/at it c!u#* n!t /a e, 81 t/en issue* at a##. (A0en*e* Decisi!n, '!##!, ""5 .25.%). 2. 'e#ati e t! t/e sec!n* issue !f a##e4e* c!ncea#0ent. t/is C!urt is !f t/e fir0 8e#ief t/at "ri ate res"!n*ent /a* *e#i8erate#1 c!ncea#e* t/e state !f /ea#t/ an* "i1sica# c!n*iti!n !f /is *au4/ter He#en G!. =/er "ri ate re4"!n*eit su""#ie* t/e re?uire* essentia# *ata f!r t/e insurance a""#icati!n f!r0, /e >as fu##1 a>are t/at /is !ne51ear !#* *au4/ter is t1"ica##1 a 0!n4!#!i* c/i#*. Suc/ a c!n4enita# "/1sica# *efect c!u#* ne er 8e ensc!nce* n!r *is4uis/e*. N!net/e#ess, "ri ate res"!n*ent, in

a""arent 8a* fait/, >it//e#* t/e fact 0atera# t! t/e ris9 t! 8e assu0e* 81 t/e insurance c!0"ar1. As an insurance a4ent !f Pacific Life, /e !u4/t t! 9n!>, as /e sure#1 0ust /a e 9n!>n. /is *ut1 an* res"!nsi8i#it1 t! suc/ a 0ateria# fact. Ha* /e *ia0!n* sai* si4nificant fact in t/e insurance a""#icati!n f!0 Pacific Life >!u#* /a e erifie* t/e sa0e an* >!u#* /a e /a* n! c/!ice 8ut t! *isa""r! e t/e a""#icati!n !utri4/t. T/e c!ntract !f insurance is !ne !f "erfect 4!!* fait/ u8erri0a fi*es 0eanin4 4!!* fait/, a8s!#ute an* "erfect can*!r !r !"enness an* /!nest1$ t/e a8sence !f an1 c!ncea#0ent !r *e0!ti!n, /!>e er s#i4/t IB#ac9Cs La> Dicti!nar1, 2n* E*iti!nJ, n!t f!r t/e a#!ne 8ut e?ua##1 s! f!r t/e insurer (Fie#* 0anCs Insurance C!., Inc. s. 3*a *e S!n4c!, 2. SC'A (6). C!ncea#0ent is a ne4#ect t! c!00unicate t/at >/ic/ a "artE 9n!>s aD* Ou4/t t! c!00unicate (Secti!n 2., Act N!. 222(). =/et/er intenti!na# !r unintenti!na# t/e c!ncea#0ent entit#es t/e insurer t! rescin* t/e c!ntract !f insurance (Secti!n 2&, I*.A Eu Pan4 C/en4 s. C!urt !f A""ea#s, et a#, 16. P/i# -%6$ Satu0in! s. P/i#i""ine A0erican Life Insurance C!0"an1, ( SC'A %1&). Pri ate res"!n*ent a""ears 4ui#t1 t/ere!f. =e are t/us c!nstraine* t! /!#* t/at n! insurance c!ntract >as "erfecte* 8et>een t/e "arties >it/ t/e n!nc!0"#iance !f t/e c!n*iti!ns "r! i*e* in t/e 8in*in4 recei"t, an* c!ncea#0ent, as #e4a##1 *efine*, /a in4 8een c!0raitte* 81 /erein "ri ate res"!n*ent. =HE'EFO'E, t/e *ecisi!n a""ea#e* fr!0 is /ere81 set asi*e, an* in #ieu t/ere!f, !ne is /ere81 entere* a8s!# in4 "etiti!ners La"u#a"u D. 7!n*ra4!n an* Great Pacific Life Assurance C!0"an1 fr!0 t/eir ci i# #ia8i#ities as f!un* 81 res"!n*ent C!urt an* !r*erin4

t/e af!resai* insurance c!0"an1 t! rei08urse t/e a0!unt !f P1,6((.(., >it/!ut interest, t! "ri ate res"!n*ent, N4! Hin4. C!sts a4ainst "ri ate res"!n*ent. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. 1%-((& Au4ust 1, 2662

Ca0arines Sur, *!c9ete* as Ci i# Case N!. L5()( 8e !r*ere* *is0isse* !n 4r!un* !f "rescri"ti!n !f acti!n. T/e facts !f t/e caseA On +une 26, 1--., "ri ate res"!n*ents, as #e4iti0ate c/i#*ren an* f!rce* /eirs !f t/eir #ate fat/er, Faustin! Lu0ani!4, fi#e* >it/ t/e af!resai* 'TC, a c!0"#aint f!r rec! er1 !f su0 !f 0!ne1 a4ainst "etiti!ner a##e4in4 t/atA t/eir fat/er >as insure* 81 "etiti!ner un*er Life Insurance P!#ic1 N!. 1%6.2)& >it/ a face a#ue !f P.6,666.66$ t/eir fat/er *ie* !f Mc!r!nar1 t/r!08!sisM !n N! e08er 2., 1-)6$ !n +une 22, 1-)1, t/e1 c#ai0e* an* c!ntinu!us#1 c#ai0e* f!r a## t/e "r!cee*s an* interests un*er t/e #ife insurance "!#ic1 in t/e a0!unt !f P&21,666.66, *es"ite re"eate* *e0an*s f!r "a10ent an*O!r sett#e0ent !f t/e c#ai0 *ue fr!0 "etiti!ner, t/e #ast !f >/ic/ is !n Dece08er 1, 1--2, "etiti!ner fina##1 refuse* !r *isa##!>e* sai* c#ai0 !n Fe8ruar1 12, 1--.$1 an* s!, t/e1 fi#e* t/eir c!0"#aint !n +une 26, 1--.. Petiti!ner fi#e* an Ans>er >it/ C!unterc#ai0 an* 7!ti!n t! Dis0iss, c!nten*in4 t/atA t/e cause !f acti!n !f "ri ate res"!n*ents /a* "rescri8e* an* t/e1 are 4ui#t1 !f #ac/es$ it /a* *enie* "ri ate res"!n*entsQ c#ai0 in a #etter *ate* 7arc/ 12, 1-)2, si4ne* 81 its t/en Assistant 3ice Presi*ent, A0a*! Di0a#anta, !n 4r!un* !f c!ncea#0ent !n t/e "art !f t/e *ecease* insure* Faustin! >/en /e asserte* in /is a""#icati!n f!r insurance c! era4e t/at /e /a* n!t 8een treate* f!r in*icati!n !f Mc/est "ain, "a#"itati!n, /i4/ 8#!!* "ressure, r/eu0atic fe er, /eart 0ur0ur, /eart attac9 !r !t/er *is!r*er !f t/e /eart !r 8#!!* esse#M >/en in fact /e >as a 9n!>n /1"ertensi e since 1-(2$ "ri ate res"!n*ents sent a #etter *ate* 7a1 2., 1-)%2

PHILIPPINE A7E'ICAN LIFE AND GENE'AL INS;'ANCE CO7PANE, "etiti!ner, s. +;DGE LO'E '. 3ALENCIA5BAGALACSA, 'e4i!na# Tria# C!urt !f Li80anan, Ca0arines Sur, Branc/ .&, an* ED;A'DO S. L;7ANIOG, CELSO S. L;7ANIOG an* ';BEN S. L;7ANIOG, res"!n*ents. DECISION A;ST'IA57A'TINES, +.A Bef!re us is a "etiti!n f!r re ie> !n certi!rari un*er 'u#e 2. !f t/e 'u#es !f C!urt. Petiti!ner P/i#i""ine A0erican Life an* Genera# Insurance C!0"an1 "ra1s t/at t/e *ecisi!n !f t/e C!urt !f A""ea#s "r!0u#4ate* !n A"ri# %6, 1--- 8e re erse* an* set asi*e an* t/at t/e C!0"#aint fi#e* a4ainst it 81 "ri ate res"!n*ents E*uar*! S. Lu0ani!4, Ce#s! S. Lu0ani!4 an* 'u8en S. Lu0ani!4 8ef!re t/e 'e4i!na# Tria# C!urt !f Li80anan,

re?uestin4 f!r rec!nsi*erati!n !f t/e *enia#$ in a #etter *ate* +u#1 11, 1-)%, it reiterate* its *ecisi!n t! *en1 t/e c#ai0 f!r "a10ent !f t/e "r!cee*s$% 0!re t/an ten (16) 1ears #ater, !r !n Dece08er 1, 1--2, it recei e* a #etter fr!0 +!se C. C#ar!, a "r! incia# 8!ar* 0e08er !f t/e "r! ince !f Ca0arines Sur, reiteratin4 t/e ear#1 re?uest f!r rec!nsi*erati!n >/ic/ it *enie* in a #etter *ate* Fe8ruar1 12, 1--..2 Pri ate res"!n*ents !""!se* t/e 0!ti!n t! *is0iss.. On +une (, 1--&, t/e 'TC issue* an Or*er >/ic/ rea*sA MAfter a "erusa# !f t/e 0!ti!n t! *is0iss fi#e* 81 *efen*antsQ c!unse# an* t/e !8Becti!n su80itte* 81 "#aintiffQs c!unse#, t/e C!urt fin*s t/at t/e 0atters treate* in t/eir res"ecti e "#ea*in4s are e i*entiar1 in nature, /ence, t/e necessit1 !f a tria# !n t/e 0erits. MSet t/eref!re t/e /earin4 in t/is case !n Au4ust 1, 1--& at )A%6 a.0., c!nsi*erin4 t/at t/e ca#en*ar !f t/e C!urt is a#rea*1 fi##e* u" unti# t/e en* !f +u#1. N!tif1 "arties an* c!unse#s. MSO O'DE'ED.M& Petiti!nerQs 0!ti!n f!r rec!nsi*erati!n >as *enie* 81 t/e 'TC in its Or*er *ate* Dece08er 12, 1--( u"/!#*in4 /!>e er in t/e sa0e Or*er t/e c#ai0 !f "ri ate res"!n*entsQ c!unse# t/at t/e runnin4 !f t/e 1651ear "eri!* >as Mst!""e*M !n 7a1 2., 1-)% >/en "ri ate res"!n*ents re?ueste* f!r a rec!nsi*erati!n !f t/e *enia# an* it >as !n#1 !n Fe8ruar1 12, 1--. >/en "etiti!ner fina##1 *eci*e* t! *en1 t/eir c#ai0 t/at t/e 1651ear "eri!* 8e4an t! run.(

Petiti!ner fi#e* a "etiti!n f!r certi!rari (*!c9ete* as CA5G.'. SP N!. 2()).) un*er 'u#e &. !f t/e 'u#es !f C!urt in t/e C!urt !f A""ea#s an* after t/e c!00ent !f t/e "ri ate res"!n*ents an* re"#1 !f "etiti!ner, t/e a""e##ate c!urt ren*ere* its Decisi!n, *ate* A"ri# %6, 1---, "!rti!ns !f >/ic/ rea* as f!##!>sA MT/us, t/is C!urt !f t/e !"ini!n an* s! /!#*s t/at t/e "rescri"ti e "eri!* t! 8rin4 t/e "resent acti!n c!00ences t! run !n#1 !n Fe8ruar1 12, 1--. ('!##!, "". 2.52&), t/e *ate >/en t/e "etiti!ner fina##1 reBecte* t/e c#ai0 !f "ri ate res"!n*ents an* n!t in 1-)%. T/e ten 1ear "eri!* s/!u#* instea* 8e c!unte* fr!0 t/e *ate !f reBecti!n 81 t/e insurer in t/is case Fe8ruar1 12, 1--. Rsince t/is is t/e ti0e >/en t/e cause !f acti!n accrues. MT/is fact >as su""!rte* furt/er 81 t/e #etter !f t/e "etiti!ner t! Att1. C#ar! *ate* Dece08er 26, 1--2, statin4 t/at t/e1 >ere re ie>in4 t/e c#ai0 an* s/a## a* ise Att1. C#ar! !f t/eir acti!n re4ar*in4 /is re?uest f!r rec!nsi*erati!n (I*., ". .%). MIn t/e case !f Su00it Guarant1 an* Insurance C!., Inc. 3s. De GuN0an (1.1 SC'A %)-, %-(5%-)), citin4 t/e case !f Ea4#e Star Insurance C!., Lt*., et a#. s. C/ia Eu, t/e Su"re0e C!urt /e#* t/atA cT/e "#aintiffQs cause !f acti!n *i* n!t accrue unti# /is c#ai0 >as fina##1 reBecte* 81 t/e insurance c!0"an1. T/is is 8ecause, 8ef!re suc/ fina# reBecti!n, t/ere >as n! rea# necessit1 f!r 8rin4in4 suit.Q MIn t/e sa0e case, t/e case !f ACCFA s. A#"/a Insurance an* Suret1 C!., >as #i9e>ise cite* >/ere t/e Su"re0e C!urt ru#e* in t/is >iseA

cSince a ccause !f acti!nQ re?uires, as essentia# e#e0ents, n!t !n#1 a #e4a# ri4/t !f t/e "#aintiff an* a c!rre#ati e !f t/e *efen*ant 8ut a#s! can act !r !0issi!n !f t/e *efen*ant in i!#ati!n !f sai* #e4a# ri4/tQ, t/e cause !f acti!n *!es n!t accrue unti# t/e "art1 !8#i4ate* refuses, e:"ress#1 !r i0"#ie*#1, t! c!0"#1 >it/ its *ut1.Q MHence, =e fin* n! 4ra e a8use !f *iscreti!n c!00itte* 81 t/e c!urt a ?u! >/en it issue* t/e Or*ers *ate* +une (, 1--& an* *ate* Dece08er 12, 1--(. M=HE'EFO'E, t/e instant "etiti!n f!r certi!rari >it/ "ra1er f!r issuance !f te0"!rar1 restrainin4 !r*er an*O!r "re#i0inar1 inBuncti!n is DENIED D;E CO;'SE an* is acc!r*in4#1 DIS7ISSED 81 t/is C!urt f!r #ac9 !f 0erit. MC!sts a4ainst t/e "etiti!ner. MSO O'DE'ED.M) Hence, t/e "resent "etiti!n f!r re ie>. Petiti!ner "!sits t/e f!##!>in4 issuesA MA. =/et/er !r n!t t/e c!0"#aint fi#e* 81 "ri ate res"!n*ents f!r "a10ent !f #ife insurance "r!cee*s is a#rea*1 8arre* 81 "rescri"ti!n !f acti!n. MB. =/et/er !r n!t an e:traBu*icia# *e0an* 0a*e after an acti!n /as "rescri8e* s/a## cause t/e re i a# !f t/e acti!n.M-

Pri ate res"!n*ents fi#e* "etiti!ners, t/eir 'e"#1.

t/eir

C!00ent

an*

Bef!re >e *eter0ine >/et/er t/e C!urt !f A""ea#s /a* c!00itte* an1 re ersi8#e err!r, >e 0ust necessari#1 first ascertain >/et/er !r n!t t/e 'TC c!00itte* 4ra e a8use !f *iscreti!n in issuin4 t/e Or*ers *ate* +une (, 1--& an* Dece08er 12, 1--(. N!ta8#1, t/e 'TC >as initia##1 c!rrect in issuin4 t/e Or*er *ate* +une (, 1--& >/en it set t/e case 8e#!> f!r /earin4 as t/ere are 0atters in t/e res"ecti e "#ea*in4s !f t/e "arties Mt/at are e i*entiar1 in nature, /ence t/e necessit1 !f a tria# !n t/e 0eritsM16, in effect, *en1in4 t/e 0!ti!n t! *is0iss, "ursuant t! t/e t/en "re ai#in4 Secti!n %, 'u#e 1&, !f t/e 'u#es !f C!urt, t! >itA MSec. %. Hearin4 an* !r*er. 5 After /earin4 t/e c!urt 0a1 *en1 !r 4rant t/e 0!ti!n !r a##!> a0en*0ent !f "#ea*in4, !r 0a1 *efer t/e /earin4 an* *eter0inati!n !f t/e 0!ti!n unti# t/e tria# if t/e 4r!un* a##e4e* t/erein *!es n!t a""ear t! 8e in*u8ita8#e.M 8ef!re it >as a0en*e* 81 t/e 1--( 'u#es !f Ci i# Pr!ce*ure, effecti e +u#1 1, 1--(.11 It 0ust 8e e0"/asiNe* t/at "etiti!ner /a* s"ecifica##1 a##e4e* in t/e Ans>er t/at it /a* *enie* "ri ate res"!n*entsQ c#ai0 "er its #etter *ate* +u#1 11, 1-)%.12 Hence, *ue "r!cess *e0an*s t/at it 8e 4i en t/e !""!rtunit1 t! "r! e t/at "ri ate res"!n*ents /a* recei e* sai* #etter, *ate* +u#1 11, 1-)%. Sai* #etter is crucia# t! "etiti!nerQs *efense t/at t/e fi#in4 !f t/e c!0"#aint f!r rec! er1 !f su0 !f 0!ne1 in +une, 1--. is 8e1!n* t/e 1651ear "rescri"ti e "eri!*1%.

It is f!r t/e a8! e reas!n t/at t/e 'TC c!00itte* a 4ra e a8use !f *iscreti!n >/en, in res!# in4 t/e 0!ti!n f!r rec!nsi*erati!n !f "etiti!ner, it ar8itrari#1 ru#e* in its Or*er *ate* Dece08er 12, 1--(, t/at t/e "eri!* !f ten (16) 1ears /a* n!t 1et #a"se*. It 8ase* its fin*in4 !n a 0ere e:"#anati!n !f t/e "ri ate res"!n*entsQ c!unse# an* n!t !n e i*ence "resente* 81 t/e "arties as t! t/e *ate >/en t! rec9!n t/e "rescri"ti e "eri!*. P!rti!ns !f t/e Or*er *ate* Dece08er 12, 1--( rea*A MA "erusa# !f t/e rec!r* >i## #i9e>ise re ea# t/at "#aintiffsQ c!unse# e:"#aine* t/at t/e runnin4 !f t/e ten (16) 1ear "eri!* >as st!""e* !n 7a1 2., 1-)%, u"!n *e0an* !f Ce#s! L!0ani!4 f!r t/e c!0"#iance !f t/e c!ntract an* rec!nsi*erati!n !f t/e *ecisi!n. C!unse# a#s! >r!te t/e Presi*ent !f t/e C!0"an1 !n Dece08er 1, 1--2, as9in4 f!r rec!nsi*erati!n. T/e #etter >as ans>ere* 81 t/e Assistant 3ice Presi*ent !f t/e C#ai0s De"art0ent !f P/i#a0#ife, >it/ t/e a* ise ct/at t/e c!0"an1 is re ie>in4 t/e c#ai0.Q On Fe8ruar1 12, 1--., Att1. A8is sent a #etter t! c!unse#, fina##1 *eci*in4 t/e "#aintiffsQ c#ai0. T/us, t/e "eri!* !f "rescri"ti!n s/!u#* c!00ence t! run !n#1 fr!0 Fe8ruar1 12, 1--., >/en Att1. A8is fina##1 *eci*e* "#aintiffsQ c#ai0.1K>"/i1 MIt is e i*ent fr!0 t/e f!re4!in4 t/at t/e ten (16) 1ear "eri!* f!r "#aintiffs t! c#ai0 t/e insurance "r!cee*s /as n!t 1et "rescri8e*. T/e fina# *eter0inati!n *en1in4 t/e c#ai0 >as 0a*e !n#1 !n Fe8ruar1 12, 1--.. Hence, >/en t/e instant case >as fi#e* !n +une 26, 1--., t/e ten 1ear "eri!* /as n!t 1et #a"se*. 7!re! er, *efen*antQs c!unse# fai#e* t! c!0"#1 >it/

t/e re?uire0ents !f t/e 'u#es in fi#in4 /is 0!ti!n f!r rec!nsi*erati!n.M12 (e0"/asis su""#ie*) T/e ru#in4 !f t/e 'TC t/at t/e cause !f acti!n !f "ri ate res"!n*ents /a* n!t "rescri8e*, is ar8itrar1 an* "atent#1 err!ne!us f!r n!t 8ein4 f!un*e* !n e i*ence !n rec!r*, an* t/eref!re, t/e sa0e is !i*.1. C!nse?uent#1, >/i#e t/e C!urt !f A""ea#s *i* n!t err in u"/!#*in4 t/e +une (, 1-)& Or*er !f t/e 'TC, it c!00itte* a re ersi8#e err!r >/en it *ec#are* t/at t/e 'TC *i* n!t c!00it an1 4ra e a8use !f *iscreti!n in issuin4 t/e Or*er *ate* Dece08er 12, 1--(. T/e a""e##ate c!urt s/!u#* /a e 4rante* t/e "etiti!n f!r certi!rari assai#in4 sai* Or*er !f Dece08er 12, 1--(. Certi!rari is an a""r!"riate re0e*1 t! assai# an inter#!cut!r1 !r*er (1) >/en t/e tri8una# issue* suc/ !r*er >it/!ut !r in e:cess !f Buris*icti!n !r >it/ 4ra e a8use !f *iscreti!n an* (2) >/en t/e assai#e* inter#!cut!r1 !r*er is "atent#1 err!ne!us an* t/e re0e*1 !f a""ea# >!u#* n!t aff!r* a*e?uate an* e:"e*iti!us re#ief.1& Sai* Or*er >as issue* >it/ 4ra e a8use !f *iscreti!n f!r 8ein4 "atent#1 err!ne!us an* ar8itrar1, t/us, *e"ri in4 "etiti!ner !f *ue "r!cess, as *iscusse* ear#ier. =HE'EFO'E, t/e "etiti!n is "art#1 G'ANTED. T/e assai#e* *ecisi!n !f t/e C!urt !f A""ea#s *ate* A"ri# %6, 1--- ins!far !n#1 as it u"/e#* t/e Or*er *ate* Dece08er 12, 1--( is 'E3E'SED an* SET ASIDE. A ne> Bu*40ent is entere* re ersin4 an* settin4 asi*e t/e Or*er *ate* Dece08er 12, 1--( !f t/e 'e4i!na# Tria# C!urt !f Li80anan, Ca0arines Sur (Branc/ .&) an* affir0in4 its Or*er *ate* +une 26, 1--.. Sai* 'TC

is *irecte* t! "r!cee* >it/ *is"atc/ >it/ Ci i# Case N!. L5()(. N! c!sts. SO O'DE'ED. S;P'E7E CO;'T 7ani#a FI'ST DI3ISION

Sec. ((. An insurer is entit#e* t! t/e "a10ent !f t/e "re0iu0 as s!!n as t/e t/in4 is e:"!se* t! t/e "eri# insure* a4ainst. N!t>it/stan*in4 an1 a4ree0ent t! t/e c!ntrar1, n! "!#ic1 !r c!ntract !f insurance issue* 81 an insurance c!0"an1 is a#i* an* 8in*in4 un#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*, e:ce"t in t/e case !f a #ife !r an in*ustria# #ife "!#ic1 >/ene er t/e 4race "eri!* "r! isi!n a""#ies. S!0eti0e in ear#1 1-)2, "ri ate res"!n*ent A0erican H!0e Assurance C!. (AHAC), re"resente* 81 A0erican Internati!na# ;n*er>riters (P/i#s.), Inc., issue* in fa !r !f "etiti!ner 7a9ati Tuscan1 C!n*!0iniu0 C!r"!rati!n (T;SCANE) Insurance P!#ic1 N!. AH5CPP5-2162.2 !n t/e #atterCs 8ui#*in4 an* "re0ises, f!r a "eri!* 8e4innin4 1 7arc/ 1-)2 an* en*in4 1 7arc/ 1-)%, >it/ a t!ta# "re0iu0 !f P2&&,16%.6.. T/e "re0iu0 >as "ai* !n insta##0ents !n 12 7arc/ 1-)2, 26 7a1 1-)2, 21 +une 1-)2 an* 1& N! e08er 1-)2, a## !f >/ic/ >ere acce"te* 81 "ri ate res"!n*ent. On 16 Fe8ruar1 1-)%, "ri ate res"!n*ent issue* t! "etiti!ner Insurance P!#ic1 N!. AH5CPP5-216.-&, >/ic/ re"#ace* an* rene>e* t/e "re i!us "!#ic1, f!r a ter0 c! erin4 1 7arc/ 1-)% t! 1 7arc/ 1-)2. T/e "re0iu0 in t/e a0!unt !f P2&&,16%.6. >as a4ain "ai* !n insta##0ents !n 1% A"ri# 1-)%, 1% +u#1 1-)%, % Au4ust 1-)%, - Se"te08er 1-)%, an* 21 N! e08er 1-)%. A## "a10ents >ere #i9e>ise acce"te* 81 "ri ate res"!n*ent. On 26 +anuar1 1-)2, t/e "!#ic1 >as a4ain rene>e* an* "ri ate res"!n*ent issue* t! "etiti!ner Insurance P!#ic1 N!. AH5CPP5-216&.1 f!r t/e "eri!* 1 7arc/ 1-)2 t! 1 7arc/ 1-).. On t/is rene>e* "!#ic1, "etiti!ner 0a*e t>! insta##0ent "a10ents, 8!t/

G.'. N!. -..2&

N! e08er &, 1--2

7ADATI T;SCANE CONDO7INI;7 CO'PO'ATION, "etiti!ner, s. THE CO;'T OF APPEALS, A7E'ICAN HO7E ASS;'ANCE CO., re"resente* 81 A0erican Internati!na# ;n*er>riters (P/i#s.), Inc., res"!n*ent.

BELLOSILLO, +.A T/is case in !# es a "ure#1 #e4a# ?uesti!nA >/et/er "a10ent 81 insta##0ent !f t/e "re0iu0s *ue !n an insurance "!#ic1 in a#i*ates t/e c!ntract !f insurance, in ie> !f Sec. (( !f P.D. &12, !t/er>ise 9n!>n as t/e Insurance C!*e, as a0en*e*, >/ic/ "r! i*esA

acce"te* 81 "ri ate res"!n*ent, t/e first !n & Fe8ruar1 1-)2 f!r P.2,666.66 an* t/e sec!n*, !n & +une 1-)2 f!r P166,666.66. T/ereafter, "etiti!ner refuse* t! "a1 t/e 8a#ance !f t/e "re0iu0. C!nse?uent#1, "ri ate res"!n*ent fi#e* an acti!n t! rec! er t/e un"ai* 8a#ance !f P%12,16%.6. f!r Insurance P!#ic1 N!. AH5CPP5-216&.1. In its ans>er >it/ c!unterc#ai0, "etiti!ner a*0itte* t/e issuance !f Insurance P!#ic1 N!. AH5CPP5-216&.1. It e:"#aine* t/at it *isc!ntinue* t/e "a10ent !f "re0iu0s 8ecause t/e "!#ic1 *i* n!t c!ntain a cre*it c#ause in its fa !r an* t/e recei"ts f!r t/e insta##0ent "a10ents c! erin4 t/e "!#ic1 f!r 1-)25)., as >e## as t/e t>! (2) "re i!us "!#icies, state* t/e f!##!>in4 reser ati!nsA 2. Acce"tance !f t/is "a10ent s/a## n!t >ai e an1 !f t/e c!0"an1 ri4/ts t! *en1 #ia8i#it1 !n an1 c#ai0 un*er t/e "!#ic1 arisin4 8ef!re suc/ "a10ents !r after t/e e:"irati!n !f t/e cre*it c#ause !f t/e "!#ic1$ an* %. Su8Bect t! n! #!ss "ri!r t! "re0iu0 "a10ent. If t/ere 8e an1 #!ss suc/ is n!t c! ere*. Petiti!ner furt/er c#ai0e* t/at t/e "!#ic1 >as ne er 8in*in4 an* a#i*, an* n! ris9 attac/e* t! t/e "!#ic1. It t/en "#ea*e* a c!unterc#ai0 f!r P1.2,666.66 f!r t/e "re0iu0s a#rea*1 "ai* f!r 1-)25)., an* in its ans>er >it/ a0en*e* c!unterc#ai0, s!u4/t t/e refun* !f P-22,26&.16 re"resentin4 t/e "re0iu0 "a10ents f!r 1-)25).. After s!0e inci*ents, "etiti!ner an* res"!n*ent 0! e* f!r su00ar1 Bu*40ent. "ri ate

On ) Oct!8er 1-)(, t/e tria# c!urt *is0isse* t/e c!0"#aint an* t/e c!unterc#ai0 u"!n t/e f!##!>in4 fin*in4sA =/i#e it is true t/at t/e recei"ts issue* t! t/e *efen*ant c!ntaine* t/e af!re0enti!ne* reser ati!ns, it is e?ua##1 true t/at "a10ent !f t/e "re0iu0s !f t/e t/ree af!re0enti!ne* "!#icies (8ein4 s!u4/t t! 8e refun*e*) >ere 0a*e *urin4 t/e #ifeti0e !r ter0 !f sai* "!#icies, /ence, it c!u#* n!t 8e sai*, ins"ite !f t/e reser ati!ns, t/at n! ris9 attac/e* un*er t/e "!#icies. C!nse?uent#1, *efen*antCs c!unterc#ai0 f!r refun* is n!t Bustifie*. As re4ar*s t/e un"ai* "re0iu0s !n Insurance P!#ic1 N!. AH5CPP5-216&.1, in ie> !f t/e reser ati!n in t/e recei"ts !r*inari#1 issue* 81 t/e "#aintiff !n "re0iu0 "a10ents t/e !n#1 "#ausi8#e c!nc#usi!n is t/at "#aintiff /as n! ri4/t t! *e0an* t/eir "a10ent after t/e #a"se !f t/e ter0 !f sai* "!#ic1 !n 7arc/ 1, 1-).. T/eref!re, t/e *efen*ant >as Bustifie* in refusin4 t! "a1 t/e sa0e. 1 B!t/ "arties a""ea#e* fr!0 t/e Bu*40ent !f t/e tria# c!urt. T/ereafter, t/e C!urt !f A""ea#s ren*ere* a *ecisi!n 2 0!*if1in4 t/at !f t/e tria# c!urt 81 !r*erin4 /erein "etiti!ner t! "a1 t/e 8a#ance !f t/e "re0iu0s *ue !n P!#ic1 N!. AH5CPP5-215&.1, !r P%12,16%.6. "#us #e4a# interest unti# fu##1 "ai*, an* affir0in4 t/e *enia# !f t/e c!unterc#ai0. T/e a""e##ate c!urt t/us e:"#aine* T T/e !8#i4ati!n t! "a1 "re0iu0s >/en *ue is !r*inari#1 as in*i isi8#e !8#i4ati!n t! "a1 t/e entire "re0iu0. Here, t/e "arties /erein a4ree* t! 0a9e t/e "re0iu0s

"a1a8#e in insta##0ents, an* t/ere is n! "retense t/at t/e "arties ne er en isi!ne* t! 0a9e t/e insurance c!ntract 8in*in4 8et>een t/e0. It >as rene>e* f!r t>! succee*in4 1ears, t/e sec!n* an* t/ir* "!#icies 8ein4 a rene>a#Ore"#ace0ent f!r t/e "re i!us !ne. An* t/e insure* ne er inf!r0e* t/e insurer t/at it >as ter0inatin4 t/e "!#ic1 8ecause t/e ter0s >ere unacce"ta8#e. =/i#e it 0a1 8e true t/at un*er Secti!n (( !f t/e Insurance C!*e, t/e "arties 0a1 n!t a4ree t! 0a9e t/e insurance c!ntract a#i* an* 8in*in4 >it/!ut "a10ent !f "re0iu0s, t/ere is n!t/in4 in sai* secti!n >/ic/ su44ests t/at t/e "arties 0a1 n!t a4ree t! a##!> "a10ent !f t/e "re0iu0s in insta##0ent, !r t! c!nsi*er t/e c!ntract as a#i* an* 8in*in4 u"!n "a10ent !f t/e first "re0iu0. Ot/er>ise, >e >!u#* a##!> t/e insurer t! rene4e !n its #ia8i#it1 un*er t/e c!ntract, /a* a #!ss incurre* (sic) 8ef!re c!0"#eti!n !f "a10ent !f t/e entire "re0iu0, *es"ite its !#untar1 acce"tance !f "artia# "a10ents, a resu#t esc/e>e* 81 a 8asic c!nsi*erati!ns !f fairness an* e?uit1. T! !ur 0in*, t/e insurance c!ntract 8eca0e a#i* an* 8in*in4 u"!n "a10ent !f t/e first "re0iu0, an* t/e "#aintiff c!u#* n!t /a e *enie* #ia8i#it1 !n t/e 4r!un* t/at "a10ent >as n!t 0a*e in fu##, f!r t/e reas!n t/at it a4ree* t! acce"t insta##0ent "a10ent. . . . % Petiti!ner n!> asserts t/at its "a10ent 81 insta##0ent !f t/e "re0iu0s f!r t/e insurance "!#icies f!r 1-)2, 1-)% an* 1-)2 in a#i*ate* sai* "!#icies 8ecause !f t/e "r! isi!ns !f Sec. (( !f t/e Insurance C!*e, as a0en*e*, an* 81 t/e c!n*iti!ns sti"u#ate* 81 t/e insurer in its recei"ts, *isc#ai0in4 #ia8i#it1 f!r #!ss f!r !ccurrin4 8ef!re "a10ent !f "re0iu0s.

It ar4ues t/at >/ere t/e "re0iu0s is n!t actua##1 "ai* in fu##, t/e "!#ic1 >!u#* !n#1 8e effecti e if t/ere is an ac9n!>#e*40ent in t/e "!#ic1 !f t/e recei"t !f "re0iu0 "ursuant t! Sec. () !f t/e Insurance C!*e. T/e a8sence !f an e:"ress ac9n!>#e*40ent in t/e "!#icies !f suc/ recei"t !f t/e c!rres"!n*in4 "re0iu0 "a10ents, an* "etiti!nerCs fai#ure t! "a1 sai* "re0iu0s !n !r 8ef!re t/e effecti e *ates !f sai* "!#icies ren*ere* t/e0 in a#i*. Petiti!ner t/us c!nc#u*es t/at t/ere cann!t 8e a "erfecte* c!ntract !f insurance u"!n 0ere "artia# "a10ent !f t/e "re0iu0s 8ecause un*er Sec. (( !f t/e Insurance C!*e, n! c!ntract !f insurance is a#i* an* 8in*in4 un#ess t/e "re0iu0 t/ere!f /as 8een "ai*, n!t>it/stan*in4 an1 a4ree0ent t! t/e c!ntrar1. As a c!nse?uence, "etiti!ner see9s a refun* !f a## "re0iu0 "a10ents 0a*e !n t/e a##e4e* in a#i* insurance "!#icies. =e /!#* t/at t/e su8Bect "!#icies are a#i* e en if t/e "re0iu0s >ere "ai* !n insta##0ents. T/e rec!r*s c#ear#1 s/!> t/at "etiti!ner an* "ri ate res"!n*ent inten*e* su8Bect insurance "!#icies t! 8e 8in*in4 an* effecti e n!t>it/stan*in4 t/e sta44ere* "a10ent !f t/e "re0iu0s. T/e initia# insurance c!ntract entere* int! in 1-)2 >as rene>e* in 1-)%, t/en in 1-)2. In t/!se t/ree (%) 1ears, t/e insurer acce"te* a## t/e insta##0ent "a10ents. Suc/ acce"tance !f "a10ents s"ea9s #!u*#1 !f t/e insurerCs intenti!n t! /!n!r t/e "!#icies it issue* t! "etiti!ner. Certain#1, 8asic "rinci"#es !f e?uit1 an* fairness >!u#* n!t a##!> t/e insurer t! c!ntinue c!##ectin4 an* acce"tin4 t/e "re0iu0s, a#t/!u4/ "ai* !n insta##0ents, an* #ater *en1 #ia8i#it1 !n t/e #a0e e:cuse t/at t/e "re0iu0s >ere n!t "re"are* in fu##.

=e t/eref!re sustain t/e C!urt !f A""ea#s. =e ?u!te >it/ a""r! a# t/e >e##5reas!ne* fin*in4s an* c!nc#usi!n !f t/e a""e##ate c!urt c!ntaine* in its 'es!#uti!n *en1in4 t/e 0!ti!n t! rec!nsi*er its Decisi!n T =/i#e t/e i0"!rt !f Secti!n (( is t/at "re"a10ent !f "re0iu0s is strict#1 re?uire* as a c!n*iti!n t! t/e a#i*it1 !f t/e c!ntract, =e are n!t "re"are* t! ru#e t/at t/e re?uest t! 0a9e insta##0ent "a10ents *u#1 a""r! e* 81 t/e insurer, >!u#* "re ent t/e entire c!ntract !f insurance fr!0 4!in4 int! effect *es"ite "a10ent an* acce"tance !f t/e initia# "re0iu0 !r first insta##0ent. Secti!n () !f t/e Insurance C!*e in effect a##!>s >ai er 81 t/e insurer !f t/e c!n*iti!n !f "re"a10ent 81 0a9in4 an ac9n!>#e*40ent in t/e insurance "!#ic1 !f recei"t !f "re0iu0 as c!nc#usi e e i*ence !f "a10ent s! far as t! 0a9e t/e "!#ic1 8in*in4 *es"ite t/e fact t/at "re0iu0 is actua##1 un"ai*. Secti!n (( 0ere#1 "rec#u*es t/e "arties fr!0 sti"u#atin4 t/at t/e "!#ic1 is a#i* e en if "re0iu0s are n!t "ai*, 8ut *!es n!t e:"ress#1 "r!/i8it an a4ree0ent 4rantin4 cre*it e:tensi!n, an* suc/ an a4ree0ent is n!t c!ntrar1 t! 0!ra#s, 4!!* cust!0s, "u8#ic !r*er !r "u8#ic "!#ic1 (De Le!n, t/e Insurance C!*e, at ". 1(.). S! is an un*erstan*in4 t! a##!> insure* t! "a1 "re0iu0s in insta##0ents n!t s! "r!scri8e*. At t/e er1 #east, 8!t/ "arties s/!u#* 8e *ee0e* in est!""e# t! ?uesti!n t/e arran4e0ent t/e1 /a e !#untari#1 acce"te*. 2 T/e re#iance 81 "etiti!ner !n Arce s. Ca"ita# Suret1 an* Insurance C!. . is una ai#in4 8ecause t/e facts t/erein are su8stantia##1 *ifferent fr!0 t/!se in t/e case at 8ar. In Arce, n! "a10ent >as 0a*e 81 t/e insure* at a##

*es"ite t/e 4race "eri!* 4i en. In t/e case 8ef!re ;s, "etiti!ner "ai* t/e initia# insta##0ent an* t/ereafter 0a*e sta44ere* "a10ents resu#tin4 in fu## "a10ent !f t/e 1-)2 an* 1-)% insurance "!#icies. F!r t/e 1-)2 "!#ic1, "etiti!ner "ai* t>! (2) insta##0ents a#t/!u4/ it refuse* t! "a1 t/e 8a#ance. It a""earin4 fr!0 t/e "ecu#iar circu0stances t/at t/e "arties actua##1 inten*e* t! 0a9e t/ree (%) insurance c!ntracts a#i*, effecti e an* 8in*in4, "etiti!ner 0a1 n!t 8e a##!>e* t! rene4e !n its !8#i4ati!n t! "a1 t/e 8a#ance !f t/e "re0iu0 after t/e e:"irati!n !f t/e >/!#e ter0 !f t/e t/ir* "!#ic1 (N!. AH5CPP5-216&.1) in 7arc/ 1-).. 7!re! er, as c!rrect#1 !8ser e* 81 t/e a""e##ate c!urt, >/ere t/e ris9 is entire an* t/e c!ntract is in*i isi8#e, t/e insure* is n!t entit#e* t! a refun* !f t/e "re0iu0s "ai* if t/e insurer >as e:"!se* t! t/e ris9 insure* f!r an1 "eri!*, /!>e er 8rief !r 0!0entar1. =HE'EFO'E, fin*in4 n! re ersi8#e err!r in t/e Bu*40ent a""ea#e* fr!0, t/e sa0e is AFFI'7ED. C!sts a4ainst "etiti!ner. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION

G.'. N!. 1%(1(2

+une 1., 1---

;CPB GENE'AL INS;'ANCE CO., INC., "etiti!ner, s. 7ASAGANA TELA7A'T, INC., res"!n*ent.

On +une 1%, 1--2, fire raNe* res"!n*entCs "r!"ert1 c! ere* 81 t/ree !f t/e insurance "!#icies "etiti!ner issue*. On +u#1 1%, 1--2, res"!n*ent "resente* t! "etiti!nerCs cas/ier at its /ea* !ffice fi e (.) 0ana4erCs c/ec9s in t/e t!ta# a0!unt !f P22.,(.%.-., re"resentin4 "re0iu0 f!r t/e rene>a# !f t/e "!#icies fr!0 7a1 22, 1--2 t! 7a1 22, 1--%. N! n!tice !f #!ss >as fi#e* 81 res"!n*ent un*er t/e "!#icies "ri!r t! +u#1 12, 1--2. On +u#1 12, 1--2, res"!n*ent fi#e* >it/ "etiti!ner its f!r0a# c#ai0 f!r in*e0nificati!n !f t/e insure* "r!"ert1 raNe* 81 fire. On t/e sa0e *a1, +u#1 12, 1--2, "etiti!ner returne* t! res"!n*ent t/e fi e (.) 0ana4erCs c/ec9s t/at it ten*ere*, an* at t/e sa0e ti0e reBecte* res"!n*entCs c#ai0 f!r t/e reas!ns (a) t/at t/e "!#icies /a* e:"ire* an* >ere n!t rene>e*, an* (8) t/at t/e fire !ccurre* !n +une 1%, 1--2, 8ef!re res"!n*entCs ten*er !f "re0iu0 "a10ent. On +u#1 21, 1--2, res"!n*ent fi#e* >it/ t/e 'e4i!na# Tria# C!urt, Branc/ .), 7a9ati Cit1, a ci i# c!0"#aint a4ainst "etiti!ner f!r rec! er1 !f P1),&2.,666.66, re"resentin4 t/e face a#ue !f t/e "!#icies c! erin4 res"!n*entCs insure* "r!"ert1 raNe* 81 fire, an* f!r att!rne1Cs fees. 2 On Oct!8er 2%, 1--2, after its 0!ti!n t! *is0iss /a* 8een *enie*, "etiti!ner fi#e* an ans>er t! t/e c!0"#aint. It a##e4e* t/at t/e c!0"#aint Mfai#s t! state a cause !f acti!nM$ t/at "etiti!ner >as n!t #ia8#e t! res"!n*ent f!r insurance "r!cee*s un*er t/e "!#icies

PA'DO, +.A T/e case is an a""ea# ia certi!rari see9in4 t! set asi*e t/e *ecisi!n !f t/e C!urt !f A""ea#s, 1 affir0in4 >it/ 0!*ificati!n t/at !f t/e 'e4i!na# Tria# C!urt, Branc/ .), 7a9ati, !r*erin4 "etiti!ner t! "a1 res"!n*ent t/e su0 !f P1),&2.,666.66, as t/e "r!cee*s !f t/e insurance c! era4e !f res"!n*entCs "r!"ert1 raNe* 81 fire$ 2.U !f t/e t!ta# a0!unt *ue as att!rne1Cs fees an* P2.,666.66 as #iti4ati!n e:"enses, an* c!sts. T/e facts are un*is"ute* an* 0a1 8e re#ate* as f!##!>sA On A"ri# 1., 1--1, "etiti!ner issue* fi e (.) insurance "!#icies c! erin4 res"!n*entCs ari!us "r!"ert1 *escri8e* t/erein a4ainst fire, f!r t/e "eri!* fr!0 7a1 22, 1--1 t! 7a1 22, 1--2. In 7arc/ 1--2, "etiti!ner e a#uate* t/e "!#icies an* *eci*e* n!t t! rene> t/e0 u"!n e:"irati!n !f t/eir ter0s !n 7a1 22, 1--2. Petiti!ner a* ise* res"!n*entCs 8r!9er, Sue##i4 Insurance Br!9ers, Inc. !f its intenti!n n!t t! rene> t/e "!#icies. On A"ri# &, 1--2, "etiti!ner 4a e >ritten n!tice t! res"!n*ent !f t/e n!n5rene>a# !f t/e "!#icies at t/e a**ress state* in t/e "!#icies.

8ecause at t/e ti0e !f t/e #!ss !f res"!n*entCs "r!"ert1 *ue t! fire, t/e "!#icies /a* #!n4 e:"ire* an* >ere n!t rene>e*. % After *ue tria#, !n 7arc/ 16, 1--%, t/e 'e4i!na# Tria# C!urt, Branc/ .), 7a9ati, ren*ere* *ecisi!n, t/e *is"!siti e "!rti!n !f >/ic/ rea*sA =HE'EFO'E, "re0ises c!nsi*ere*, Bu*40ent is /ere81 ren*ere* in fa !r !f t/e "#aintiff an* a4ainst t/e *efen*ant, as f!##!>sA (1) Aut/!riNin4 an* a##!>in4 t/e "#aintiff t! c!nsi4nO*e"!sit >it/ t/is C!urt t/e su0 !f P22.,(.%.-. (refuse* 81 t/e *efen*ant) as fu## "a10ent !f t/e c!rres"!n*in4 "re0iu0s f!r t/e re"#ace0ent5rene>a# "!#icies f!r E:/i8its A, B, C, D an* E$ (2) Dec#arin4 "#aintiff t! /a e fu##1 c!0"#ie* >it/ its !8#i4ati!n t! "a1 t/e "re0iu0 t/ere81 ren*erin4 t/e re"#ace0ent5rene>a# "!#ic1 !f E:/i8its A, B, C, D an* E effecti e an* 8in*in4 f!r t/e *urati!n 7a1 22, 1--2 unti# 7a1 22, 1--%$ an*, !r*erin4 *efen*ant t! *e#i er f!rt/>it/ t! "#aintiff t/e sai* re"#ace0ent5rene>a# "!#icies$ (%) Dec#arin4 E:/i8its A < B, in f!rce fr!0 Au4ust 22, 1--1 u" t! Au4ust 2%, 1--2 an* Au4ust -, 1--1 t! Au4ust -, 1--2, res"ecti e#1$ an* (2) Or*erin4 t/e *efen*ant t! "a1 "#aintiff t/e su0s !fA (a) P1),&2.,666.66 re"resentin4 t/e #atterCs c#ai0 f!r in*e0nit1 un*er E:/i8its A, B < C an*O!r its re"#ace0ent5rene>a# "!#icies$ (8) 2.U !f t/e t!ta# a0!unt *ue as an* f!r att!rne1Cs fees$ (c) P2.,666.66

as necessar1 #iti4ati!n e:"enses$ an*, (*) t/e c!sts !f suit. A## !t/er c#ai0s an* c!unterc#ai0s asserte* 81 t/e "arties are *enie* an*O!r *is0isse*, inc#u*in4 "#aintiffCs c#ai0 f!r interests. SO O'DE'ED. 7a9ati, 7etr!57ani#a, 7arc/ 16, 1--%. SOSI7O S. ANGELES. +u*4e. 2 In *ue ti0e, "etiti!ner a""ea#e* t! t/e C!urt !f A""ea#s. . On Se"te08er (, 1--), t/e C!urt !f A""ea#s "r!0u#4ate* its *ecisi!n & affir0in4 t/at !f t/e 'e4i!na# Tria# C!urt >it/ t/e 0!*ificati!n t/at ite0 N!. % !f t/e *is"!siti e "!rti!n >as *e#ete*, an* t/e a>ar* !f att!rne1Cs fees >as re*uce* t! 16U !f t/e t!ta# a0!unt *ue. ( T/e C!urt !f A""ea#s /e#* t/at f!##!>in4 "re i!us "ractise, res"!n*ent >as a##!>e* a si:t1 (&6) t! ninet1 (-6) *a1 cre*it ter0 f!r t/e rene>a# !f its "!#icies, an* t/at t/e acce"tance !f t/e #ate "re0iu0 "a10ent su44este* an un*erstan*in4 t/at "a10ent c!u#* 8e 0a*e #ater. Hence, t/is a""ea#. B1 res!#uti!n a*!"te* !n 7arc/ 22, 1---, >e re?uire* res"!n*ent t! c!00ent !n t/e "etiti!n, n!t t! fi#e a

0!ti!n t! *is0iss >it/in ten (16) *a1s fr!0 n!tice. ) On A"ri# 22, 1---, res"!n*ent fi#e* its c!00ent. 'es"!n*ent su80its t/at t/e C!urt !f A""ea#s c!rrect#1 ru#e* t/at n! ti0e#1 n!tice !f n!n5rene>a# >as sent. T/e n!tice !f n!n5rene>a# sent t! 8r!9er Sue##i4 >/ic/ c#ai0e* t/at it er8a##1 n!tifie* t/e insurance a4enc1 8ut n!t res"!n*ent itse#f *i* n!t suffice. 'es"!n*ent su80its furt/er t/at t/e C!urt !f A""ea#s *i* n!t err in fin*in4 t/at t/ere e:iste* a si:t1 (&6) t! ninet1 (-6) *a1s cre*it a4ree0ent 8et>een ;CPB an* 7asa4ana, an* t/at, fina##1, t/e Su"re0e C!urt c!u#* n!t re ie> factua# fin*in4s !f t/e #!>er c!urt affir0e* 81 t/e C!urt !f A""ea#s. 16 =e 4i e *ue c!urse t! t/e a""ea#. T/e 8asic issue raise* is >/et/er t/e fire insurance "!#icies issue* 81 "etiti!ner t! t/e res"!n*ent c! erin4 t/e "eri!* 7a1 22, 1--1 t! 7a1 22, 1--2, /a* e:"ire* !n t/e #atter *ate !r /a* 8een e:ten*e* !r rene>e* 81 an i0"#ie* cre*it arran4e0ent t/!u4/ actua# "a10ent !f "re0iu0 >as ten*ere* !n a #ater *ate after t/e !ccurrence !f t/e ris9 (fire) insure* a4ainst. T/e ans>er is easi#1 f!un* in t/e Insurance C!*e. N!, an insurance "!#ic1, !t/er t/an #ife, issue* !ri4ina##1 !r !n rene>a#, is n!t a#i* an* 8in*in4 unti# actua# "a10ent !f t/e "re0iu0. An1 a4ree0ent t! t/e c!ntrar1 is !i*. 11 T/e "arties 0a1 n!t a4ree e:"ress#1 !r i0"#ie*#1 !n t/e e:tensi!n !f cre*it!r ti0e t! "a1 t/e "re0iu0 an* c!nsi*er t/e "!#ic1 8in*in4 8ef!re actua# "a10ent.

T/e case !f 7a#a1an Insurance C!., Inc. s. CruN5 Arna#*!, 12 cite* 81 t/e C!urt !f A""ea#s, is n!t a""#ica8#e. In t/at case, "a10ent !f t/e "re0iu0 >as in fact actua##1 0a*e !n Dece08er 22, 1-)1, an* t/e fire !ccurre* !n +anuar1 1), 1-)2. Here, t/e "a10ent !f t/e "re0iu0 f!r rene>a# !f t/e "!#icies >as ten*ere* !n +u#1 1%, 1--2, a 0!nt/ after t/e fire !ccurre* !n +une 1%, 1--2. T/e assure* *i* n!t e en 4i e t/e insurer a n!tice !f #!ss >it/in a reas!na8#e ti0e after !ccurrence !f t/e fire. =HE'EFO'E, t/e C!urt /ere81 'E3E'SES an* SETS ASIDE t/e *ecisi!n !f t/e C!urt !f A""ea#s in CA5G.'. C3 N!. 22%21. In #ieu t/ere!f t/e C!urt ren*ers Bu*40ent *is0issin4 res"!n*entCs c!0"#aint an* "etiti!nerCs c!unterc#ai0s t/eret! fi#e* >it/ t/e 'e4i!na# Tria# C!urt, Branc/ .), 7a9ati Cit1, in Ci i# Case N!. -25262%. =it/!ut c!sts.1K>"/i1.nLt SO O'DE'ED.

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a EN BANC G.'. N!. 1%(1(2 A"ri# 2, 2661

;CPB GENE'AL INS;'ANCE CO., INC., "etiti!ner, s. 7ASAGANA TELA7A'T, INC., res"!n*ent. 'ESOL;TION

DA3IDE, +'., C.+.A In !ur *ecisi!n !f 1. +une 1--- in t/is case, >e re erse* an* set asi*e t/e assai#e* *ecisi!n 1 !f t/e C!urt !f A""ea#s, >/ic/ affir0e* >it/ 0!*ificati!n t/e Bu*40ent !f t/e tria# c!urt (a) a##!>in4 'es"!n*ent t! c!nsi4n t/e su0 !f P22.,(.%.-. as fu## "a10ent !f t/e "re0iu0s f!r t/e rene>a# !f t/e fi e insurance "!#icies !n 'es"!n*entCs "r!"erties$ (8) *ec#arin4 t/e re"#ace0ent5rene>a# "!#icies effecti e an* 8in*in4 fr!0 22 7a1 1--2 unti# 22 7a1 1--%$ an* (c) !r*erin4 Petiti!ner t! "a1 'es"!n*ent P1),&2.,666.66 as in*e0nit1 f!r t/e 8urne* "r!"erties c! ere* 81 t/e rene>a#5re"#ace0ent "!#icies. T/e 0!*ificati!n c!nsiste* in t/e (1) *e#eti!n !f t/e tria# c!urtCs *ec#arati!n t/at t/ree !f t/e "!#icies >ere in f!rce fr!0 Au4ust 1--1 t! Au4ust 1--2$ an* (2) re*ucti!n !f t/e a>ar* !f t/e att!rne1Cs fees fr!0 2.U t! 16U !f t/e t!ta# a0!unt *ue t/e 'es"!n*ent. T/e 0ateria# !"erati e facts u"!n >/ic/ t/e a""ea#e* Bu*40ent >as 8ase* are su00ariNe* 81 t/e C!urt !f A""ea#s in its assai#e* *ecisi!n as f!##!>sA P#aintiff I/erein 'es"!n*entJ !8taine* fr!0 *efen*ant I/erein Petiti!nerJ fi e (.) insurance "!#icies (E:/i8its MAM t! MEM, 'ec!r*, "". 1.)51(.) !n its "r!"erties Iin Pasa1 Cit1 an* 7ani#aJ . . . . A## fi e (.) "!#icies ref#ect !n t/eir face t/e effecti it1 ter0A Mfr!0 2A66 P.7. !f 22 7a1 1--1 t! 2A66 P.7. !f 22 7a1 1--2.M On +une 1%, 1--2, "#aintiffs "r!"erties #!cate* at 2216522%2 an* 2222522.6 Taft A enue, Pasa1 Cit1 >ere raNe* 81 fire. On +u#1 1%, 1--2, "#aintiff ten*ere*, an* *efen*ant acce"te*, fi e (.)

E?uita8#e Ban9 7ana4erCs C/ec9s in t/e t!ta# a0!unt !f P22.,(.%.2. as rene>a# "re0iu0 "a10ents f!r >/ic/ Officia# 'ecei"t Direct Pre0iu0 N!. &2-2& (E:/i8it M@M, 'ec!r*, ". 1-1) >as issue* 81 *efen*ant. On +u#1 12, 1--2, 7asa4ana 0a*e its f!r0a# *e0an* f!r in*e0nificati!n f!r t/e 8urne* insure* "r!"erties. On t/e sa0e *a1, *efen*ant returne* t/e fi e (.) 0ana4erCs c/ec9s statin4 in its #etter (E:/i8it M'M O M)M, 'ec!r*, ". 1-2) t/at it >as reBectin4 7asa4anaCs c#ai0 !n t/e f!##!>in4 4r!un*sA Ma) Sai* "!#icies e:"ire* #ast 7a1 22, 1--2 an* >ere n!t rene>e* f!r an!t/er ter0$ 8) Defen*ant /a* "ut "#aintiff an* its a##e4e* 8r!9er !n n!tice !f n!n5rene>a# ear#ier$ an* c) T/e "r!"erties c! ere* 81 t/e sai* "!#icies >ere 8urne* in a fire t/at t!!9 "#ace #ast +une 1%, 1--2, !r 8ef!re ten*er !f "re0iu0 "a10ent.M ('ec!r*, ". .) Hence 7asa4ana fi#e* t/is case. T/e C!urt !f A""ea#s *isa4ree* >it/ Petiti!nerCs stan* t/at 'es"!n*entCs ten*er !f "a10ent !f t/e "re0iu0s !n 1% +u#1 1--2 *i* n!t resu#t in t/e rene>a# !f t/e "!#icies, /a in4 8een 0a*e 8e1!n* t/e effecti e *ate !f rene>a# as "r! i*e* un*er P!#ic1 C!n*iti!n N!. 2&, >/ic/ statesA 2&. 'ene>a# C#ause. T ;n#ess t/e c!0"an1 at #east f!rt1 fi e *a1s in a* ance !f t/e en* !f t/e "!#ic1 "eri!* 0ai#s !r *e#i ers t! t/e assure* at t/e a**ress s/!>n in t/e "!#ic1 n!tice !f its intenti!n n!t t! rene>

t/e "!#ic1 !r t! c!n*iti!n its rene>a# u"!n re*ucti!n !f #i0its !r e#i0inati!n !f c! era4es, t/e assure* s/a## 8e entit#e* t! rene> t/e "!#ic1 u"!n "a10ent !f t/e "re0iu0 *ue !n t/e effecti e *ate !f rene>a#. B!t/ t/e C!urt !f A""ea#s an* t/e tria# c!urt f!un* t/at sufficient "r!!f e:ists t/at 'es"!n*ent, >/ic/ /a* "r!cure* insurance c! era4e fr!0 Petiti!ner f!r a nu08er !f 1ears, /a* 8een 4rante* a &6 t! -65*a1 cre*it ter0 f!r t/e rene>a# !f t/e "!#icies. Suc/ a "ractice /a* e:iste* u" t! t/e ti0e t/e c#ai0s >ere fi#e*. T/usA Fire Insurance P!#ic1 N!. %2&.) c! erin4 7a1 22, 1--6 t! 7a1 22, 1--1 >as issue* !n 7a1 (, 1--6 8ut "re0iu0 >as "ai* 0!re t/an -6 *a1s #ater !n Au4ust %1, 1--6 un*er O.'. N!. 2((1 (E:/s. MTM an* MT51M). Fire Insurance P!#ic1 N!. %2&&6 f!r Insurance 'is9 C! era4e fr!0 7a1 22, 1--6 t! 7a1 22, 1--1 >as issue* 81 ;CPB !n 7a1 2, 1--6 8ut "re0iu0 >as c!##ecte* 81 ;CPB !n#1 !n +u#1 1%, 1--6 !r 0!re t/an &6 *a1s #ater un*er O.'. N!. 2&2)( (E:/s. M3M an* M35 1M). An* s! >ere as !t/er "!#iciesA Fire Insurance P!#ic1 N!. %2&.( c! erin4 ris9s fr!0 7a1 22, 1--6 t! 7a1 22, 1--1 >as issue* !n 7a1 (, 1--6 8ut "re0iu0 t/eref!r >as "ai* !n#1 !n +u#1 1-, 1--6 un*er O.'. N!. 2&.)% (E:/s. M=M an* M=51M). Fire Insurance P!#ic1 N!. %2&&1 c! erin4 ris9s fr!0 7a1 22, 1--6 t! 7a1 22, 1--1 >as issue* !n 7a1 %, 1--6 8ut "re0iu0 >as "ai* !n#1 !n +u#1 1-, 1--6 un*er O.'. N!. 2&.)2 (E:/s. MFM an* MF51M). Fire Insurance P!#ic1 N!. %2&)) f!r insurance c! era4e fr!0 7a1 22, 1--6 t! 7a1 22, 1--1 >as issue* !n 7a1 (, 1--6 8ut "re0iu0 >as "ai* !n#1 !n +u#1 1-, 1--6 un*er O.'. N!. 2&.). (E:/s. MEM an* ME51M). Fire Insurance P!#ic1 N!. 2-12& t! c! er insurance ris9s fr!0 7a1 22, 1-)- t! 7a1 22,

1--6 >as issue* !n 7a1 22, 1-)- 8ut "re0iu0 t/eref!r >as c!##ecte* !n#1 !n +u#1 2., 1--6IsicJ un*er O.'. N!. 26(-- (E:/s. MAAM an* MAA51M). Fire Insurance P!#ic1 N!. HOOF52&26) c! erin4 ris9s fr!0 +anuar1 12, 1-)- t! +anuar1 12, 1--6 >as issue* t! Intratra*e P/i#s. (7asa4anaCs sister c!0"an1) *ate* Dece08er 16, 1-)) 8ut "re0iu0 t/eref!r >as "ai* !n#1 !n Fe8ruar1 1., 1-)- un*er O.'. N!. %)6(. (E:/s. MBBM an* MBB51M). Fire Insurance P!#ic1 N!. 2-12) >as issue* !n 7a1 22, 1-)- 8ut "re0iu0 >as "ai* !n#1 !n +u#1 2., 1-)- un*er O.'. N!. 26)66 f!r insurance c! era4e fr!0 7a1 22, 1-)- t! 7a1 22, 1--6 (E:/s. MCCM an* MCC51M). Fire Insurance P!#ic1 N!. 2-12( >as issue* !n 7a1 22, 1-)- 8ut "re0iu0 >as "ai* !n#1 !n +u#1 1(, 1-)- un*er O.'. N!. 26&)2 f!r insurance ris9 c! era4e fr!0 7a1 22, 1-)- t! 7a1 22, 1--6 (E:/s. MDDM an* MDD51M). Fire Insurance P!#ic1 N!. HOOF5 2-%&2 >as issue* !n +une 1., 1-)- 8ut "re0iu0 >as "ai* !n#1 !n Fe8ruar1 1%, 1--6 un*er O.'. N!. %-2%% f!r insurance c! era4e fr!0 7a1 22, 1-)- t! 7a1 22, 1--6 (E:/s. MEEM an* MEE51M). Fire Insurance P!#ic1 N!. 2&%6% >as issue* !n N! e08er 22, 1-)) 8ut "re0iu0 t/eref!r >as c!##ecte* !n#1 !n 7arc/ 1., 1-)- un*er O.'. NO. %).(% f!r insurance ris9s c! era4e fr!0 Dece08er 1., 1-)) t! Dece08er 1., 1-)- (E:/s. MFFM an* MFF51M). 7!re! er, acc!r*in4 t! t/e C!urt !f A""ea#s t/e f!##!>in4 circu0stances c!nstitute "re"!n*erant "r!!f t/at n! ti0e#1 n!tice !f n!n5rene>a# >as 0a*e 81 Petiti!nerA (1) Defen*ant5a""e##ant recei e* t/e c!nfir0ati!n (E:/i8it M11M, 'ec!r*, ". %.6) fr!0 ;#tra0ar 'einsurance Br!9ers t/at "#aintiffCs reinsurance faci#it1 /a* 8een c!nfir0e* u" t! &(..U !n#1 !n A"ri# 1.,

1--2 as in*icate* !n E:/i8it M11M. A""arent#1, t/e n!tice !f n!n5rene>a# (E:/i8it M(,M 'ec!r*, ". %26) >as sent n!t ear#ier t/an sai* *ate, !r >it/in 2. *a1s fr!0 t/e e:"ir1 *ates !f t/e "!#icies as "r! i*e* un*er P!#ic1 C!n*iti!n N!. 2&$ (2) Defen*ant insurer unc!n*iti!na##1 acce"te*, an* issue* an !fficia# recei"t f!r, t/e "re0iu0 "a10ent !n +u#1 1I%J, 1--2 >/ic/ in*icates *efen*antCs >i##in4ness t! assu0e t/e ris9 *es"ite !n#1 a &(..U reinsurance c! erIa4eJ$ an* (%) Defen*ant insurer a""!inte* Este8an A*Busters an* 3a#uers t! in esti4ate "#aintiffCs c#ai0 as s/!>n 81 t/e #etter *ate* +u#1 1(, 1--2 (E:/i8it M11M, 'ec!r*, ". 2.2). In !ur *ecisi!n !f 1. +une 1---, >e *efine* t/e 0ain issue t! 8e M>/et/er t/e fire insurance "!#icies issue* 81 "etiti!ner t! t/e res"!n*ent c! erin4 t/e "eri!* fr!0 7a1 22, 1--1 t! 7a1 22, 1--2 . . . /a* 8een e:ten*e* !r rene>e* 81 an i0"#ie* cre*it arran4e0ent t/!u4/ actua# "a10ent !f "re0iu0 >as ten*ere* !n a #ater *ate an* after t/e !ccurrence !f t/e (fire) ris9 insure* a4ainst.M =e res!# e* t/is issue in t/e ne4ati e in ie> !f Secti!n (( !f t/e Insurance C!*e an* !ur *ecisi!ns in 3a#enNue#a . C!urt !f A""ea#s$ 2 S!ut/ Sea Suret1 an* Insurance C!., Inc. . C!urt !f A""ea#s$ % an* Ti8a1 . C!urt !f A""ea#s. 2 Acc!r*in4#1, >e re erse* an* set asi*e t/e *ecisi!n !f t/e C!urt !f A""ea#s. 'es"!n*ent seas!na8#1 fi#e* a 0!ti!n f!r t/e rec!nsi*erati!n !f t/e a* erse er*ict. It a##e4es in t/e 0!ti!n t/at >e /a* 0a*e in t/e *ecisi!n !ur !>n fin*in4s !f facts, >/ic/ are n!t in acc!r* >it/ t/!se !f t/e tria# c!urt an* t/e C!urt !f A""ea#s. T/e c!urts 8e#!> c!rrect#1 f!un* t/at n! n!tice !f n!n5rene>a# >as 0a*e >it/in 2. *a1s 8ef!re 22 7a1 1--2, !r

8ef!re t/e e:"irati!n *ate !f t/e fire insurance "!#icies. T/us, t/e "!#icies in ?uesti!n >ere rene>e* 81 !"erati!n !f #a> an* >ere effecti e an* a#i* !n %6 +une 1--2 >/en t/e fire !ccurre*, since t/e "re0iu0s >ere "ai* >it/in t/e &65 t! -65*a1 cre*it ter0. 'es"!n*ent #i9e>ise *isa4rees >it/ !ur ru#in4 t/at "arties 0a1 neit/er a4ree e:"ress#1 !r i0"#ie*#1 !n t/e e:tensi!n !f cre*it !r ti0e t! "a1 t/e "re0iu0 n!r c!nsi*er a "!#ic1 8in*in4 8ef!re actua# "a10ent. It ur4es t/e C!urt t! ta9e Bu*icia# n!tice !f t/e fact t/at *es"ite t/e e:"ress "r! isi!n !f Secti!n (( !f t/e Insurance C!*e, e:tensi!n !f cre*it ter0s in "re0iu0 "a10ent /as 8een t/e "re a#ent "ractice in t/e insurance in*ustr1. 7!st insurance c!0"anies, inc#u*in4 Petiti!ner, e:ten* cre*it ter0s 8ecause Secti!n (( !f t/e Insurance C!*e is n!t a "r!/i8iti e inBuncti!n 8ut is 0ere#1 *esi4ne* f!r t/e "r!tecti!n !f t/e "arties t! an insurance c!ntract. T/e C!*e itse#f, in Secti!n (), aut/!riNes t/e a#i*it1 !f a "!#ic1 n!t>it/stan*in4 n!n5"a10ent !f "re0iu0s. 'es"!n*ent a#s! asserts t/at t/e "rinci"#e !f est!""e# a""#ies t! Petiti!ner. Des"ite its a>areness !f Secti!n (( Petiti!ner "ersua*e* an* in*uce* 'es"!n*ent t! 8e#ie e t/at "a10ent !f "re0iu0 !n t/e &65 t! -65*a1 cre*it ter0 >as "erfect#1 a#ri4/t$ in fact it acce"te* "a10ents >it/in &6 t! -6 *a1s after t/e *ue *ates. B1 e:ten*in4 cre*it an* /a8itua##1 acce"tin4 "a10ents &6 t! -6 *a1s fr!0 t/e effecti e *ates !f t/e "!#icies, it /as i0"#icit#1 a4ree* t! 0!*if1 t/e ten!r !f t/e insurance "!#ic1 an* in effect >ai e* t/e "r! isi!n t/erein t/at it >!u#* "a1 !n#1 f!r t/e #!ss !r *a0a4e in case t/e sa0e !ccurre* after "a10ent !f t/e "re0iu0.

Petiti!ner fi#e* an !""!siti!n t! t/e 'es"!n*entCs 0!ti!n f!r rec!nsi*erati!n. It ar4ues t/at 8!t/ t/e tria# c!urt an* t/e C!urt !f A""ea#s ! er#!!9e* t/e fact t/at !n & A"ri# 1--2 Petiti!ner sent 81 !r*inar1 0ai# t! 'es"!n*ent a n!tice !f n!n5rene>a# an* sent 81 "ers!na# *e#i er1 a c!"1 t/ere!f t! 'es"!n*entCs 8r!9er, Sue##i4. B!t/ c!urts #i9e>ise i4n!re* t/e fact t/at 'es"!n*ent >as fu##1 a>are !f t/e n!tice !f n!n5 rene>a#. A rea*in4 !f Secti!n && !f t/e Insurance C!*e rea*i#1 s/!>s t/at in !r*er f!r an insure* t! 8e entit#e* t! a rene>a# !f a n!n5#ife "!#ic1, "a10ent !f t/e "re0iu0 *ue !n t/e effecti e *ate !f rene>a# s/!u#* first 8e 0a*e. 'es"!n*entCs ar4u0ent t/at Secti!n (( is n!t a "r!/i8iti e "r! isi!n fin*s n! aut/!ritati e su""!rt. ;"!n a 0eticu#!us re ie> !f t/e rec!r*s an* ree a#uati!n !f t/e issues raise* in t/e 0!ti!n f!r rec!nsi*erati!n an* t/e "#ea*in4s fi#e* t/ereafter 81 t/e "arties, >e res!# e* t! 4rant t/e 0!ti!n f!r rec!nsi*erati!n. T/e f!##!>in4 facts, as f!un* 81 t/e tria# c!urt an* t/e C!urt !f A""ea#s, are in*ee* *u#1 esta8#is/e*A 1. F!r 1ears, Petiti!ner /a* 8een issuin4 fire "!#icies t! t/e 'es"!n*ent, an* t/ese "!#icies >ere annua##1 rene>e*. 2. Petiti!ner /a* 8een 4rantin4 'es"!n*ent a &65 t! -65*a1 cre*it ter0 >it/in >/ic/ t! "a1 t/e "re0iu0s !n t/e rene>e* "!#icies. %. T/ere >as n! a#i* n!tice !f n!n5rene>a# !f t/e "!#icies in ?uesti!n, as t/ere is n! "r!!f at a## t/at t/e n!tice sent 81 !r*inar1 0ai# >as recei e* 81

'es"!n*ent, an* t/e c!"1 t/ere!f a##e4e*#1 sent t! Sue##i4 >as e er trans0itte* t! 'es"!n*ent. 2. T/e "re0iu0s f!r t/e "!#icies in ?uesti!n in t/e a44re4ate a0!unt !f P22.,(.%.-. >ere "ai* 81 'es"!n*ent >it/in t/e &65 t! -65*a1 cre*it ter0 an* >ere *u#1 acce"te* an* recei e* 81 Petiti!nerCs cas/ier. T/e instant case /as t! rise !r fa## !n t/e c!re issue !f >/et/er Secti!n (( !f t/e Insurance C!*e !f 1-() (P.D. N!. 12&6) 0ust 8e strict#1 a""#ie* t! Petiti!nerCs a* anta4e *es"ite its "ractice !f 4rantin4 a &65 t! -65 *a1 cre*it ter0 f!r t/e "a10ent !f "re0iu0s. Secti!n (( !f t/e Insurance C!*e !f 1-() "r! i*esA SECTION ((. An insurer is entit#e* t! "a10ent !f t/e "re0iu0 as s!!n as t/e t/in4 insure* is e:"!se* t! t/e "eri# insure* a4ainst. N!t>it/stan*in4 an1 a4ree0ent t! t/e c!ntrar1, n! "!#ic1 !r c!ntract !f insurance issue* 81 an insurance c!0"an1 is a#i* an* 8in*in4 un#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*, e:ce"t in t/e case !f a #ife !r an in*ustria# #ife "!#ic1 >/ene er t/e 4race "eri!* "r! isi!n a""#ies. T/is Secti!n is a re"r!*ucti!n !f Secti!n (( !f P.D. N!. &12 (T/e Insurance C!*e) "r!0u#4ate* !n 1) Dece08er 1-(2. In turn, t/is Secti!n /as its s!urce in Secti!n (2 !f Act N!. 222( !t/er>ise 9n!>n as t/e Insurance Act as a0en*e* 81 '.A. N!. %.26, a""r! e* !n 21 +une 1-&%, >/ic/ rea*A SECTION (2. An insurer is entit#e* t! "a10ent !f "re0iu0 as s!!n as t/e t/in4 insure* is e:"!se* t! t/e "eri# insure* a4ainst, un#ess t/ere is c#ear

a4ree0ent t! 4rant t/e insure* cre*it e:tensi!n !f t/e "re0iu0 *ue. N! "!#ic1 issue* 81 an insurance c!0"an1 is a#i* an* 8in*in4 un#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*. (Ita#ic su""#ie*) It can 8e seen at !nce t/at Secti!n (( *!es n!t restate t/e "!rti!n !f Secti!n (2 e:"ress#1 "er0ittin4 an a4ree0ent t! e:ten* t/e "eri!* t! "a1 t/e "re0iu0. But are t/ere e:ce"ti!ns t! Secti!n ((G T/e ans>er is in t/e affir0ati e. T/e first e:ce"ti!n is "r! i*e* 81 Secti!n (( itse#f, an* t/at is, in case !f a #ife !r in*ustria# #ife "!#ic1 >/ene er t/e 4race "eri!* "r! isi!n a""#ies. T/e sec!n* is t/at c! ere* 81 Secti!n () !f t/e Insurance C!*e, >/ic/ "r! i*esA SECTION (). An1 ac9n!>#e*40ent in a "!#ic1 !r c!ntract !f insurance !f t/e recei"t !f "re0iu0 is c!nc#usi e e i*ence !f its "a10ent, s! far as t! 0a9e t/e "!#ic1 8in*in4, n!t>it/stan*in4 an1 sti"u#ati!n t/erein t/at it s/a## n!t 8e 8in*in4 unti# "re0iu0 is actua##1 "ai*. A t/ir* e:ce"ti!n >as #ai* *!>n in 7a9ati Tuscan1 C!n*!0iniu0 C!r"!rati!n s. C!urt !f A""ea#s, . >/erein >e ru#e* t/at Secti!n (( 0a1 n!t a""#1 if t/e "arties /a e a4ree* t! t/e "a10ent in insta##0ents !f t/e "re0iu0 an* "artia# "a10ent /as 8een 0a*e at t/e ti0e !f #!ss. =e sai* t/erein, t/usA =e /!#* t/at t/e su8Bect "!#icies are a#i* e en if t/e "re0iu0s >ere "ai* !n insta##0ents. T/e rec!r*s c#ear#1 s/!> t/at t/e "etiti!ners an* "ri ate

res"!n*ent inten*e* su8Bect insurance "!#icies t! 8e 8in*in4 an* effecti e n!t>it/stan*in4 t/e sta44ere* "a10ent !f t/e "re0iu0s. T/e initia# insurance c!ntract entere* int! in 1-)2 >as rene>e* in 1-)%, t/en in 1-)2. In t/!se t/ree 1ears, t/e insurer acce"te* a## t/e insta##0ent "a10ents. Suc/ acce"tance !f "a10ents s"ea9s #!u*#1 !f t/e insurerCs intenti!n t! /!n!r t/e "!#icies it issue* t! "etiti!ner. Certain#1, 8asic "rinci"#es !f e?uit1 an* fairness >!u#* n!t a##!> t/e insurer t! c!ntinue c!##ectin4 an* acce"tin4 t/e "re0iu0s, a#t/!u4/ "ai* !n insta##0ents, an* #ater *en1 #ia8i#it1 !n t/e #a0e e:cuse t/at t/e "re0iu0s >ere n!t "re"ai* in fu##. N!t !n#1 t/at. In Tuscan1, >e a#s! ?u!te* >it/ a""r! a# t/e f!##!>in4 "r!n!unce0ent !f t/e C!urt !f A""ea#s in its 'es!#uti!n *en1in4 t/e 0!ti!n f!r rec!nsi*erati!n !f its *ecisi!nA =/i#e t/e i0"!rt !f Secti!n (( is t/at "re"a10ent !f "re0iu0s is strict#1 re?uire* as a c!n*iti!n t! t/e a#i*it1 !f t/e c!ntract, =e are n!t "re"are* t! ru#e t/at t/e re?uest t! 0a9e insta##0ent "a10ents *u#1 a""r! e* 81 t/e insurer >!u#* "re ent t/e entire c!ntract !f insurance fr!0 4!in4 int! effect *es"ite "a10ent an* acce"tance !f t/e initia# "re0iu0 !r first insta##0ent. Secti!n () !f t/e Insurance C!*e in effect a##!>s >ai er 81 t/e insurer !f t/e c!n*iti!n !f "re"a10ent 81 0a9in4 an ac9n!>#e*40ent in t/e insurance "!#ic1 !f recei"t !f "re0iu0 as c!nc#usi e e i*ence !f "a10ent s! far as t! 0a9e t/e "!#ic1 8in*in4 *es"ite t/e fact t/at "re0iu0 is actua##1 un"ai*. Secti!n (( 0ere#1 "rec#u*es t/e "arties fr!0 sti"u#atin4 t/at t/e "!#ic1 is a#i* e en if "re0iu0s are n!t "ai*, 8ut *!es n!t e:"ress#1 "r!/i8it an a4ree0ent 4rantin4 cre*it e:tensi!n, an* suc/ an a4ree0ent is

n!t c!ntrar1 t! 0!ra#s, 4!!* cust!0s, "u8#ic !r*er !r "u8#ic "!#ic1 (De Le!n, T/e Insurance C!*e, ". 1(.). S! is an un*erstan*in4 t! a##!> insure* t! "a1 "re0iu0s in insta##0ents n!t s! "rescri8e*. At t/e er1 #east, 8!t/ "arties s/!u#* 8e *ee0e* in est!""e# t! ?uesti!n t/e arran4e0ent t/e1 /a e !#untari#1 acce"te*. B1 t/e a""r! a# !f t/e af!re?u!te* fin*in4s an* c!nc#usi!n !f t/e C!urt !f A""ea#s, Tuscan1 /as "r! i*e* a f!urt/ e:ce"ti!n t! Secti!n ((, na0e#1, t/at t/e insurer 0a1 4rant cre*it e:tensi!n f!r t/e "a10ent !f t/e "re0iu0. T/is si0"#1 0eans t/at if t/e insurer /as 4rante* t/e insure* a cre*it ter0 f!r t/e "a10ent !f t/e "re0iu0 an* #!ss !ccurs 8ef!re t/e e:"irati!n !f t/e ter0, rec! er1 !n t/e "!#ic1 s/!u#* 8e a##!>e* e en t/!u4/ t/e "re0iu0 is "ai* after t/e #!ss 8ut >it/in t/e cre*it ter0. 7!re! er, t/ere is n!t/in4 in Secti!n (( >/ic/ "r!/i8its t/e "arties in an insurance c!ntract t! "r! i*e a cre*it ter0 >it/in >/ic/ t! "a1 t/e "re0iu0s. T/at a4ree0ent is n!t a4ainst t/e #a>, 0!ra#s, 4!!* cust!0s, "u8#ic !r*er !r "u8#ic "!#ic1. T/e a4ree0ent 8in*s t/e "arties. Artic#e 1%6& !f t/e Ci i# C!*e "r! i*esA A'TICLE 1%6&. T/e c!ntractin4 "arties 0a1 esta8#is/ suc/ sti"u#ati!ns c#auses, ter0s an* c!n*iti!ns as t/e1 0a1 *ee0 c!n enient, "r! i*e* t/e1 are n!t c!ntrar1 t! #a>, 0!ra#s, 4!!* cust!0s, "u8#ic !r*er, !r "u8#ic "!#ic1. Fina##1 in t/e instant case, it >!u#* 8e unBust an* ine?uita8#e if rec! er1 !n t/e "!#ic1 >!u#* n!t 8e "er0itte* a4ainst Petiti!ner, >/ic/ /a* c!nsistent#1 4rante* a &65 t! -65*a1 cre*it ter0 f!r t/e "a10ent !f

"re0iu0s *es"ite its fu## a>areness !f Secti!n ((. Est!""e# 8ars it fr!0 ta9in4 refu4e un*er sai* Secti!n, since 'es"!n*ent re#ie* in 4!!* fait/ !n suc/ "ractice. Est!""e# t/en is t/e fift/ e:ce"ti!n t! Secti!n ((. =HE'EFO'E, t/e Decisi!n in t/is case !f 1. +une 1--is 'ECONSIDE'ED an* SET ASIDE, an* a ne> !ne is /ere81 entere* DENEING t/e instant "etiti!n f!r fai#ure !f Petiti!ner t! sufficient#1 s/!> t/at a re ersi8#e err!r >as c!00itte* 81 t/e C!urt !f A""ea#s in its c/a##en4e* *ecisi!n, >/ic/ is /ere81 AFFI'7ED in t!t!. N! "r!n!unce0ent as t! c!st. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION

G.'. N!. 1%6221

+une 2), 1---

A7E'ICAN HO7E ASS;'ANCE CO7PANE, "etiti!ner, s. ANTONIO CH;A, res"!n*ent.

DA3IDE, +'. C.+.A

In t/is "etiti!n f!r re ie> !n certi!rari un*er 'u#e 2. !f t/e 1--( 'u#es !f Ci i# Pr!ce*ure, "etiti!ner see9s t/e re ersa# !f t/e *ecisi!n 1 !f t/e C!urt !f A""ea#s in CA5G.'. C3 N!. 26(.1, >/ic/ affir0e* in t!t! t/e *ecisi!n !f t/e 'e4i!na# Tria# C!urt, 7a9ati Cit1, Branc/ 1.6 (/ereafter tria# c!urt), in Ci i# Case N!. -15 166-. Petiti!ner is a *!0estic c!r"!rati!n en4a4e* in t/e insurance 8usiness. S!0eti0e in 1--6, res"!n*ent !8taine* fr!0 "etiti!ner a fire insurance c! erin4 t/e st!c95in5tra*e !f /is 8usiness, 7!!n#i4/t Enter"rises, #!cate* at 3a#encia, Bu9i*n!n. T/e insurance >as *ue t! e:"ire !n 2. 7arc/ 1--6. On . A"ri# 1--6 res"!n*ent issue* PCIBan9 C/ec9 N!. %.212% in t/e a0!unt !f P2,-)%..6 t! "etiti!nerCs a4ent, +a0es ;1, as "a10ent f!r t/e rene>a# !f t/e "!#ic1. In turn, t/e #atter *e#i ere* 'ene>a# Certificate N!. 666--62( t! res"!n*ent. T/e c/ec9 >as *ra>n a4ainst a 7ani#a 8an9 an* *e"!site* in "etiti!nerCs 8an9 acc!unt in Ca4a1an *e Or! Cit1. T/e c!rres"!n*in4 !fficia# recei"t >as issue* !n 16 A"ri#. Su8se?uent#1, a ne> insurance "!#ic1, P!#ic1 N!. 26&5 22%22-)5(, >as issue*, >/ere81 "etiti!ner un*ert!!9 t! in*e0nif1 res"!n*ent f!r an1 *a0a4e !r #!ss arisin4 fr!0 fire u" t! P266,666 f!r t/e "eri!* 2. 7arc/ 1--6 t! 2. 7arc/ 1--1. On & A"ri# 1--6 7!!n#i4/t Enter"rises >as c!0"#ete#1 raNe* 81 fire. T!ta# #!ss >as esti0ate* 8et>een P2,666,666 an* P.,666,666. 'es"!n*ent fi#e* an insurance c#ai0 >it/ "etiti!ner an* f!ur !t/er c!5 insurers, na0e#1, Pi!neer Insurance an* Suret1 C!r"!rati!n, Pru*entia# Guarantee an* Assurance, Inc., Fi#i"in! 7erc/ants Insurance C!. an* D!0estic

Insurance C!0"an1 !f t/e P/i#i""ines. Petiti!ner refuse* t! /!n!r t/e c#ai0 n!t>it/stan*in4 se era# *e0an*s 81 res"!n*ent, t/us, t/e #atter fi#e* an acti!n a4ainst "etiti!ner 8ef!re t/e tria# c!urt. In its *efense, "etiti!ner c#ai0e* t/ere >as n! e:istin4 insurance c!ntract >/en t/e fire !ccurre* since res"!n*ent *i* n!t "a1 t/e "re0iu0. It a#s! a##e4e* t/at e en assu0in4 t/ere >as a c!ntract, res"!n*ent i!#ate* se era# c!n*iti!ns !f t/e "!#ic1, "articu#ar#1A (1) /is su80issi!n !f frau*u#ent inc!0e ta: return an* financia# state0ents$ (2) /is fai#ure t! esta8#is/ t/e actua# #!ss, >/ic/ "etiti!ner assesse* at P(6,666$ an* (%) /is fai#ure t! n!tif1 t! "etiti!ner !f an1 insurance a#rea*1 effecte* t! c! er t/e insure* 4!!*s. T/ese i!#ati!ns, "etiti!ner insiste*, Bustifie* t/e *enia# !f t/e c#ai0. T/e tria# c!urt ru#e* in fa !r !f res"!n*ent. It f!un* t/at res"!n*ent "ai* 81 >a1 !f c/ec9 a *a1 8ef!re t/e fire !ccurre*. T/e c/ec9, >/ic/ >as *e"!site* in "etiti!nerCs 8an9 acc!unt, >as e en ac9n!>#e*4e* in t/e rene>a# certificate issue* 81 "etiti!nerCs a4ent. It *ec#are* t/at t/e a##e4e* frau*u#ent *!cu0ents >ere #i0ite* t! t/e *is"arit1 8et>een t/e !fficia# recei"ts issue* 81 t/e Bureau !f Interna# 'e enue (BI') an* t/e inc!0e ta: returns f!r t/e 1ears 1-)( t! 1-)-. A## t/e !t/er *!cu0ents >ere f!un* t! 8e 4enuine. N!net/e#ess, it 4a e cre*ence t! t/e BI' certificati!n t/at res"!n*ent "ai* t/e c!rres"!n*in4 ta:es *ue f!r t/e ?uesti!ne* 1ears. As t! res"!n*entCs fai#ure t! n!tif1 "etiti!ner !f t/e !t/er insurance c!ntracts c! erin4 t/e sa0e 4!!*s, t/e tria# c!urt /e#* t/at "etiti!ner fai#e* t! s/!> t/at suc/ !0issi!n >as intenti!na# an* frau*u#ent. Fina##1,

it n!te* t/at "etiti!nerCs in esti4ati!n !f res"!n*entCs c#ai0 >as *!ne in c!##a8!rati!n >it/ t/e re"resentati es !f !t/er insurance c!0"anies >/! f!un* n! irre4u#arit1 t/erein. In fact, Pi!neer Insurance an* Suret1 C!r"!rati!n an* Pru*entia# Guarantee an* Assurance, Inc. "r!0"t#1 "ai* t/e c#ai0s fi#e* 81 res"!n*ent. T/e tria# c!urt *ecree* as f!##!>sA =HE'EFO'E, Bu*40ent is /ere81 ren*ere* in fa !r !f Ires"!n*entJ an* a4ainst t/e I"etiti!nerJ !r*erin4 t/e #atter t! "a1 t/e f!r0er t/e f!##!>in4A 1. P266,666.66, re"resentin4 t/e a0!unt !f t/e insurance, "#us #e4a# interest fr!0 t/e *ate !f fi#in4 !f t/is case$ 2. %. 2. .. &. P266,666.66 as 0!ra# *a0a4es$ P266,666.66 as #!ss !f "r!fit$ P166,666.66 as e:e0"#ar1 *a0a4es$ P.6,666.66 as att!rne1Cs fees$ an* C!st !f suit.

Petiti!ner reiterates its stan* t/at t/ere >as n! e:istin4 insurance c!ntract 8et>een t/e "arties. It in !9es Secti!n (( !f t/e Insurance C!*e, >/ic/ "r! i*esA An insurer is entit#e* t! "a10ent !f t/e "re0iu0 as s!!n as t/e t/in4 insure* is e:"!se* t! t/e "eri# insure* a4ainst. N!t>it/stan*in4 an1 a4ree0ent t! t/e c!ntrar1, n! "!#ic1 !r c!ntract !f insurance issue* 81 an insurance c!0"an1 is a#i* an* 8in*in4 un#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*, e:ce"t in t/e case !f #ife !r an in*ustria# #ife "!#ic1 >/ene er t/e 4race "eri!* "r! isi!n a""#ies. an* cites t/e case !f Arce . Ca"ita# Insurance < Suret1 C!., Inc., 2 >/ere >e ru#e* t/at un#ess an* unti# t/e "re0iu0 is "ai* t/ere is n! insurance. Petiti!ner e0"/asiNes t/at >/en t/e fire !ccurre* !n & A"ri# 1--6 t/e insurance c!ntract >as n!t 1et su8sistin4 "ursuant t! Artic#e 122- % !f t/e Ci i# C!*e, >/ic/ rec!4niNes t/at a c/ec9 can !n#1 effect "a10ent !nce it /as 8een cas/e*. A#t/!u4/ res"!n*ent testifie* t/at /e 4a e t/e c/ec9 !n . A"ri# t! a certain +a0es ;1, t/e c/ec9, *ra>n a4ainst a 7ani#a 8an9 an* *e"!site* in a Ca4a1an *e Or! Cit1 8an9, c!u#* n!t /a e 8een c#eare* 81 & A"ri#, t/e *ate !f t/e fire. In fact, t/e !fficia# recei"t issue* f!r res"!n*entCs c/ec9 "a10ent >as *ate* 16 A"ri# 1--6, f!ur *a1s after t/e fire !ccurre*. Citin4 Buris"ru*ence, 2 "etiti!ner a#s! c!nten*s t/at res"!n*entCs n!n5*isc#!sure !f t/e !t/er insurance c!ntracts ren*ere* t/e "!#ic1 !i*. It un*ersc!res t/e tria# c!urtCs ne4#ect in c!nsi*erin4 t/e C!00issi!n !n Au*itCs certificati!n t/at t/e BI' recei"ts su80itte* 81

On a""ea#, t/e assai#e* *ecisi!n >as affir0e* in t!t! 81 t/e C!urt !f A""ea#s. T/e C!urt !f A""ea#s f!un* t/at res"!n*entCs c#ai0 >as su8stantia##1 "r! e* an* "etiti!nerCs unBustifie* refusa# t! "a1 t/e c#ai0 entit#e* res"!n*ent t! t/e a>ar* !f *a0a4es. Its 0!ti!n f!r rec!nsi*erati!n !f t/e Bu*40ent /a in4 8een *enie*, "etiti!ner fi#e* t/e "etiti!n in t/is case.

res"!n*ent >ere, in effect, fa9e since t/e1 >ere issue* t! !t/er "ers!ns. Fina##1, "etiti!ner ar4ues t/at t/e a>ar* !f *a0a4es >as e:cessi e an* unreas!na8#e c!nsi*erin4 t/at it *i* n!t act in 8a* fait/ in *en1in4 res"!n*entCs c#ai0. 'es"!n*ent c!unters t/at t/e issue !f n!n5"a10ent !f "re0iu0 is a ?uesti!n !f fact >/ic/ can n! #!n4er 8e assai#e*. T/e tria# c!urtCs fin*in4 !n t/e 0atter, >/ic/ >as affir0e* 81 t/e C!urt !f A""ea#s, is c!nc#usi e. 'es"!n*ent refutes t/e reas!n f!r "etiti!nerCs *enia# !f /is c#ai0. As f!un* 81 t/e tria# c!urt, "etiti!nerCs #!ss a*Buster a*0itte* "ri!r 9n!>#e*4e !f res"!n*entCs e:istin4 insurance c!ntracts >it/ t/e !t/er insurance c!0"anies. N!net/e#ess, t/e #!ss a*Buster rec!00en*e* t/e *enia# !f t/e c#ai0, n!t 8ecause !f t/e sai* c!ntracts, 8ut 8ecause /e >as sus"ici!us !f t/e aut/enticit1 !f certain *!cu0ents >/ic/ res"!n*ent su80itte* in fi#in4 /is c#ai0. T! 8!#ster /is ar4u0ent, res"!n*ent cites Secti!n && !f t/e Insurance C!*e, . >/ic/ re?uires t/e insurer t! 4i e a n!tice t! t/e insure* !f its intenti!n t! ter0inate t/e "!#ic1 f!rt15fi e *a1s 8ef!re t/e "!#ic1 "eri!* en*s. In t/e instant case, "etiti!ner !"te* n!t t! ter0inate t/e "!#ic1. Instea*, it rene>e* t/e "!#ic1 81 sen*in4 its a4ent t! res"!n*ent, >/! >as issue* a rene>a# certificate u"!n *e#i er1 !f /is c/ec9 "a10ent f!r t/e rene>a# !f "re0iu0. At t/is "recise 0!0ent t/e c!ntract !f insurance >as e:ecute* an* a#rea*1 in effect. 'es"!n*ent a#s! c#ai0s t/at it is stan*ar* !"eratin4 "r!ce*ure in t/e "r! inces t! "a1 insurance "re0iu0s 81 c/ec9 >/en c!##ecte* 81 insurance a4ents.

On t/e issue !f *a0a4es, res"!n*ent 0aintains t/at t/e a0!unts a>ar*e* >ere reas!na8#e. He cites nu0er!us tri"s /e /a* t! 0a9e fr!0 Ca4a1an *e Or! Cit1 t! 7ani#a t! f!##!> u" /is ri4/tfu# c#ai0. He i0"utes 8a* fait/ !n "etiti!ner >/! 0a*e enf!rce0ent !f /is c#ai0 *ifficu#t in t/e /!"e t/at /e >!u#* e entua##1 a8an*!n it. He furt/er e0"/asiNes t/at t/e a*Busters !f t/e !t/er insurance c!0"anies rec!00en*e* "a10ent !f /is c#ai0, an* t/e1 c!0"#ie* t/ere>it/. In its re"#1, "etiti!ner a##e4es t/at t/e "etiti!n ?uesti!ns t/e c!nc#usi!ns !f #a> 0a*e 81 t/e tria# c!urt an* t/e C!urt !f A""ea#s. Petiti!ner in !9es res"!n*entCs a*0issi!n t/at /is c/ec9 f!r t/e rene>a# !f t/e "!#ic1 >as recei e* !n#1 !n 16 A"ri# 1--6, ta9in4 int! acc!unt t/at t/e "!#ic1 "eri!* >as 2. 7arc/ 1--6 t! 2. 7arc/ 1--1. T/e !fficia# recei"t >as *ate* 16 A"ri# 1--6. Anent res"!n*entCs testi0!n1 t/at t/e c/ec9 >as 4i en t! "etiti!nerCs a4ent, a certain +a0es ;1, t/e #atter "!ints !ut t/at e en res"!n*ent >as n!t sure if ;1 >as in*ee* its a4ent. It fau#ts res"!n*ent f!r n!t "r!*ucin4 ;1 as /is >itness an* n!t ta9in4 an1 recei"t fr!0 /i0 u"!n "resent0ent !f t/e c/ec9. E en assu0in4 t/at t/e c/ec9 >as recei e* a *a1 8ef!re t/e c!ncurrence !f t/e fire, t/ere sti## c!u#* n!t /a e 8een "a10ent unti# t/e c/ec9 >as c#eare*. 7!re! er, "etiti!ner *enies res"!n*entCs a##e4ati!n t/at it inten*e* a rene>a# !f t/e c!ntract f!r t/e rene>a# certificate c#ear#1 s"ecifie* t/e f!##!>in4 c!n*iti!nsA

Su8Bect t! t/e "a10ent 81 t/e assure* !f t/e a0!unt *ue "ri!r t! rene>a# *ate, t/e "!#ic1 s/a## 8e rene>e* f!r t/e "eri!* state*. An1 "a10ent ten*ere* !t/er t/an in cas/ is recei e* su8Bect t! actua# cas/ c!##ecti!n. Su8Bect t! n! #!ss "ri!r t! "re0iu0 an* "a10ent. If t/ere 8e an1 #!ss, is n!t c! ere* IsicJ. Petiti!ner asserts t/at an insurance c!ntract can !n#1 8e enf!rce* u"!n t/e "a10ent !f t/e "re0iu0, >/ic/ s/!u#* /a e 8een 0a*e 8ef!re t/e rene>a# "eri!*. Fina##1, in assai#in4 t/e e:cessi e *a0a4es a>ar*e* t! res"!n*ent "etiti!ner stresses t/at t/e "!#ic1 in issue >as #i0ite* t! a #ia8i#it1 !f P266,666$ 8ut t/e tria# c!urt 4rante* t/e f!##!>in4 0!netar1 a>ar*sA P266,666 as actua# *a0a4es$ P266,666 as 0!ra# *a0a4es$ P166,666 as e:e0"#ar1 *a0a4es$ an* P.6,666 as att!rne1Cs fees. T/e f!##!>in4 issues 0ust 8e res!# e*A first, >/et/er t/ere >as a a#i* "a10ent !f "re0iu0, c!nsi*erin4 t/at res"!n*entCs c/ec9 >as cas/e* after t/e !ccurrence !f t/e fire$ sec!n*, >/et/er res"!n*ent i!#ate* t/e "!#ic1 81 /is su80issi!n !f frau*u#ent *!cu0ents an* n!n5*isc#!sure !f t/e !t/er e:istin4 insurance c!ntracts$ an* fina##1, >/et/er res"!n*ent is entit#e* t! t/e a>ar* !f *a0a4es. T/e 4enera# ru#e in insurance #a>s is t/at un#ess t/e "re0iu0 is "ai* t/e insurance "!#ic1 is n!t a#i* an* 8in*in4. T/e !n#1 e:ce"ti!ns are #ife an* in*ustria# #ife insurance. & =/et/er "a10ent >as in*ee* 0a*e is a ?uesti!n !f fact >/ic/ is 8est *eter0ine* 81 t/e tria#

c!urt. T/e tria# c!urt f!un*, as affir0e* 81 t/e C!urt !f A""ea#s, t/at t/ere >as a a#i* c/ec9 "a10ent 81 res"!n*ent t! "etiti!ner. =e##5sett#e* is t/e ru#e t/at t/e factua# fin*in4s an* c!nc#usi!ns !f t/e tria# c!urt an* t/e C!urt !f A""ea#s are entit#e* t! 4reat >ei4/t an* res"ect, an* >i## n!t 8e *istur8e* !n a""ea# in t/e a8sence !f an1 c#ear s/!>in4 t/at t/e tria# c!urt ! er#!!9e* certain facts !r circu0stances >/ic/ >!u#* su8stantia##1 affect t/e *is"!siti!n !f t/e case. ( =e see n! reas!n t! *e"art fr!0 t/is ru#in4. Acc!r*in4 t! t/e tria# c!urt t/e rene>a# certificate issue* t! res"!n*ent c!ntaine* t/e ac9n!>#e*40ent t/at "re0iu0 /a* 8een "ai*. It is n!t *is"ute* t/at t/e c/ec9 *ra>n 81 res"!n*ent in fa !r !f "etiti!ner an* *e#i ere* t! its a4ent >as /!n!re* >/en "resente* an* "etiti!ner f!rt/>it/ issue* its !fficia# recei"t t! res"!n*ent !n 16 A"ri# 1--6. Secti!n %6& !f t/e Insurance C!*e "r! i*es t/at an1 insurance c!0"an1 >/ic/ *e#i ers a "!#ic1 !r c!ntract !f insurance t! an insurance a4ent !r insurance 8r!9er s/a## 8e *ee0e* t! /a e aut/!riNe* suc/ a4ent !r 8r!9er t! recei e !n its 8e/a#f "a10ent !f an1 "re0iu0 >/ic/ is *ue !n suc/ "!#ic1 !r c!ntract !f insurance at t/e ti0e !f its issuance !r *e#i er1 !r >/ic/ 8ec!0es *ue t/ere!n. ) In t/e instant case, t/e 8est e i*ence !f suc/ aut/!rit1 is t/e fact t/at "etiti!ner acce"te* t/e c/ec9 an* issue* t/e !fficia# recei"t f!r t/e "a10ent. It is, as >e##, 8!un* 81 its a4entCs ac9n!>#e*40ent !f recei"t !f "a10ent. Sec. () !f t/e Insurance C!*e e:"#icit#1 "r! i*esA An ac9n!>#e*40ent in a "!#ic1 !r c!ntract !f insurance !f t/e recei"t !f "re0iu0 is c!nc#usi e e i*ence !f its "a10ent, s! far as t! 0a9e t/e "!#ic1

8in*in4, n!t>it/stan*in4 an1 sti"u#ati!n t/erein t/at it s/a## n!t 8e 8in*in4 unti# t/e "re0iu0 is actua##1 "ai*. T/is Secti!n esta8#is/es a #e4a# ficti!n !f "a10ent an* s/!u#* 8e inter"rete* as an e:ce"ti!n t! Secti!n ((. Is res"!n*ent 4ui#t1 !f t/e "!#ic1 i!#ati!ns i0"ute* a4ainst /i0G =e are n!t c!n ince* 81 "etiti!nerCs ar4u0ents. T/e su80issi!n !f t/e a##e4e* frau*u#ent *!cu0ents "ertaine* t! res"!n*entCs inc!0e ta: returns f!r 1-)( t! 1-)-. 'es"!n*ent, /!>e er, "resente* a BI' certificati!n t/at /e /a* "ai* t/e "r!"er ta:es f!r t/e sai* 1ears. T/e tria# c!urt an* t/e C!urt !f A""ea#s 4a e cre*ence t! t/e certificati!n an* it 8ein4 a ?uesti!n !f fact, >e /!#* t/at sai* fin*in4 is c!nc#usi e. Or*inari#1, >/ere t/e insurance "!#ic1 s"ecifies as a c!n*iti!n t/e *isc#!sure !f e:istin4 c!5insurers, n!n5 *isc#!sure t/ere!f is a i!#ati!n t/at entit#es t/e insurer t! a !i* t/e "!#ic1. T/is c!n*iti!n is c!00!n in fire insurance "!#icies an* is 9n!>n as t/e M!t/er insurance c#ause.M T/e "ur"!se f!r t/e inc#usi!n !f t/is c#ause is t! "re ent an increase in t/e 0!ra# /aNar*. =e /a e ru#e* !n its a#i*it1 an* t/e case !f Gea4!nia . C!urt !f A""ea#s 16 c#ear#1 i##ustrates suc/ "rinci"#e. H!>e er, >e see an e:ce"ti!n in t/e instant case. Citin4 Secti!n 2- 11 !f t/e Insurance C!*e, t/e tria# c!urt reas!ne* t/at res"!n*entCs fai#ure t! *isc#!se >as n!t intenti!na# an* frau*u#ent. T/e a""#icati!n !f Secti!n 2- is 0is"#ace*. Secti!n 2- c!ncerns c!ncea#0ent >/ic/ is intenti!na#. T/e re#e ant "r! isi!n is Secti!n (., >/ic/ "r! i*es t/atA

A "!#ic1 0a1 *ec#are t/at a i!#ati!n !f s"ecifie* "r! isi!ns t/ere!f s/a## a !i* it, !t/er>ise t/e 8reac/ !f an i00ateria# "r! isi!n *!es n!t a !i* t/e "!#ic1. T! c!nstitute a i!#ati!n t/e !t/er e:istin4 insurance c!ntracts 0ust 8e u"!n t/e sa0e su8Bect 0atter an* >it/ t/e sa0e interest an* ris9. 12 In*ee*, res"!n*ent ac?uire* se era# c!5insurers an* /e fai#e* t! *isc#!se t/is inf!r0ati!n t! "etiti!ner. N!net/e#ess, "etiti!ner is est!""e* fr!0 0ust in !9in4 t/is ar4u0ent. T/e tria# c!urt cite* t/e testi0!n1 !f "etiti!nerCs #!ss a*Buster >/! a*0itte* "re i!us 9n!>#e*4e !f t/e c!5 insurers. T/us, CO;'TA @ T/e 0atter !f a**iti!na# insurance !f !t/er c!0"anies, >as t/at e er *iscusse* in 1!ur in esti4ati!nG A Ees, sir.

@ In !t/er >!r*s, fr!0 t/e start, 1!u >ere a>are t/e insure* >as insure* >it/ !t/er c!0"anies #i9e Pi!neer an* s! !nG A Ees, E!ur H!n!r.

@ But in 1!ur re"!rt 1!u ne er rec!00en*e* t/e *enia# !f t/e c#ai0 si0"#1 8ecause !f t/e n!n5 *isc#!sure !f !t/er insuranceG IsicJ A Ees, E!ur H!n!r.

@ In !t/er >!r*s, t! 8e e0"/atic a8!ut t/is, t/e !n#1 reas!n 1!u rec!00en*e* t/e *enia# !f t/e c#ai0,

1!u f!un* t/ree *!cu0ents t! 8e s"uri!us. T/at is 1!ur !n#1 8asisG A Ees, E!ur H!n!r. 1% IE0"/asis su""#ie*J

In*u8ita8#1, it cann!t 8e sai* t/at "etiti!ner >as *ecei e* 81 res"!n*ent 81 t/e #atterCs n!n5*isc#!sure !f t/e !t/er insurance c!ntracts >/en "etiti!ner actua##1 /a* "ri!r 9n!>#e*4e t/ere!f. Petiti!nerCs #!ss a*Buster /a* 9n!>n a## a#!n4 !f t/e !t/er e:istin4 insurance c!ntracts, 1et, /e *i* n!t use t/at as 8asis f!r /is rec!00en*ati!n !f *enia#. T/e #!ss a*Buster, 8ein4 an e0"#!1ee !f "etiti!ner, is *ee0e* a re"resentati e !f t/e #atter >/!se a>areness !f t/e !t/er insurance c!ntracts 8in*s "etiti!ner. =e, t/eref!re, /!#* t/at t/ere >as n! i!#ati!n !f t/e M!t/er insuranceM c#ause 81 res"!n*ent. Petiti!ner is #ia8#e t! "a1 its s/are !f t/e #!ss. T/e tria# c!urt an* t/e C!urt !f A""ea#s >ere c!rrect in a>ar*in4 P266,666 f!r t/is. T/ere is, /!>e er, 0erit in "etiti!nerCs 4rie ance a4ainst t/e *a0a4es an* att!rne1Cs fees a>ar*e*. T/ere is n! #e4a# an* factua# 8asis f!r t/e a>ar* !f P266,666 f!r #!ss !f "r!fit. It cann!t 8e *enie* t/at t/e fire t!ta##1 4utte* res"!n*entCs 8usiness$ t/us, res"!n*ent n! #!n4er /a* an1 8usiness t! !"erate. His #!ss !f "r!fit cann!t 8e s/!u#*ere* 81 "etiti!ner >/!se !8#i4ati!n is #i0ite* t! t/e !8Bect !f insurance, >/ic/ >as t/e st!c95in5tra*e, an* n!t t/e e:"ecte* #!ss in inc!0e !r "r!fit. Neit/er can >e a""r! e t/e a>ar* !f 0!ra# an* e:e0"#ar1 *a0a4es. At t/e c!re !f t/is case is "etiti!nerCs a##e4e* 8reac/ !f its !8#i4ati!n un*er a

c!ntract !f insurance. ;n*er Artic#e 2226 !f t/e Ci i# C!*e, 0!ra# *a0a4es 0a1 8e a>ar*e* in 8reac/es !f c!ntracts >/ere t/e *efen*ant acte* frau*u#ent#1 !r in 8a* fait/. =e fin* n! suc/ frau* !r 8a* fait/. It 0ust a4ain 8e stresse* t/at 0!ra# *a0a4es are e0"/atica##1 n!t inten*e* t! enric/ a "#aintiff at t/e e:"ense !f t/e *efen*ant. Suc/ *a0a4es are a>ar*e* !n#1 t! ena8#e t/e inBure* "art1 t! !8tain 0eans, *i ersi!n !r a0use0ents t/at >i## ser e t! !8 iate t/e 0!ra# sufferin4 /e /as un*er4!ne, 81 reas!n !f t/e *efen*antCs cu#"a8#e acti!n. Its a>ar* is ai0e* at t/e rest!rati!n, >it/in t/e #i0its !f t/e "!ssi8#e, !f t/e s"iritua# status ?u! ante, an* it 0ust 8e "r!"!rti!na# t! t/e sufferin4 inf#icte*. 12 =/en a>ar*e*, 0!ra# *a0a4es 0ust n!t 8e "a#"a8#1 an* scan*a#!us#1 e:cessi e as t! in*icate t/at it >as t/e resu#t !f "assi!n, "reBu*ice !r c!rru"ti!n !n t/e "art !f t/e tria# c!urt Bu*4e. 1. T/e #a> 1& is #i9e>ise c#ear t/at in c!ntracts an* ?uasi5 c!ntracts t/e c!urt 0a1 a>ar* e:e0"#ar1 *a0a4es if t/e *efen*ant acte* in a >ant!n, frau*u#ent, rec9#ess, !""ressi e, !r 0a#e !#ent 0anner. N!t/in4 t/ere!f can 8e attri8ute* t! "etiti!ner >/ic/ 0ere#1 trie* t! resist >/at it c#ai0e* t! 8e an unf!un*e* c#ai0 f!r enf!rce0ent !f t/e fire insurance "!#ic1. As t! att!rne1Cs fees, t/e 4enera# ru#e is t/at att!rne1Cs fees cann!t 8e rec! ere* as "art !f *a0a4es 8ecause !f t/e "!#ic1 t/at n! "re0iu0 s/!u#* 8e "#ace* !n t/e ri4/t t! #iti4ate. 1( In s/!rt, t/e 4rant !f att!rne1Cs fees as "art !f *a0a4es is t/e e:ce"ti!n rat/er t/an t/e ru#e$ c!unse#Cs fees are n!t a>ar*e* e er1 ti0e a "art1 "re ai#s in a suit. It can 8e a>ar*e* !n#1 in t/e cases enu0erate* in Artic#e 226) !f t/e Ci i# C!*e, an* in a## cases it 0ust 8e

reas!na8#e. 1) T/ereun*er, t/e tria# c!urt 0a1 a>ar* att!rne1Cs fees >/ere it *ee0s Bust an* e?uita8#e t/at it 8e s! 4rante*. =/i#e >e res"ect t/e tria# c!urtCs e:ercise !f its *iscreti!n in t/is case, t/e a>ar* !f P.6,666 is unreas!na8#e an* e:cessi e. It s/!u#* 8e re*uce* t! P16,666. =HE'EFO'E, t/e instant "etiti!n is "art#1 G'ANTED. T/e c/a##en4e* *ecisi!n !f t/e C!urt !f A""ea#s in CA5 G.'. N!. 26(.1 is /ere81 7ODIFIED 81 a) *e#etin4 t/e a>ar*s !f P266,666 f!r #!ss !f "r!fit, P266,666 as 0!ra# *a0a4es an* P166,666 as e:e0"#ar1 *a0a4es, an* 8) re*ucin4 t/e a>ar* !f att!rne1Cs fees fr!0 P.6,666 t! P16,666. N! "r!n!unce0ent as t! c!sts. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION

BELLOSILLO, +.A" 7a1 a fire insurance "!#ic1 8e a#i*, 8in*in4 an* enf!rcea8#e u"!n 0ere "artia# "a10ent !f "re0iu0G On 22 +anuar1 1-)( "ri ate res"!n*ent F!rtune Life an* Genera# Insurance C!., Inc. (FO'T;NE) issue* Fire Insurance P!#ic1 N!. 1%&1(1 in fa !r !f 3i!#eta '. Ti8a1 an*O!r Nic!#as '!ra#*! !n t/eir t>!5st!re1 resi*entia# 8ui#*in4 #!cate* at .).. S!8e# Street, 7a9ati Cit1, t!4et/er >it/ a## t/eir "ers!na# effects t/erein. T/e insurance >as f!r P&66,666.66 c! erin4 t/e "eri!* fr!0 2% +anuar1 1-)( t! 2% +anuar1 1-)). On 2% +anuar1 1-)(, !f t/e t!ta# "re0iu0 !f P2,-)%..6, "etiti!ner 3i!#eta Ti8a1 !n#1 "ai* P&66.66 t/us #ea in4 a c!nsi*era8#e 8a#ance un"ai*. On ) 7arc/ 1-)( t/e insure* 8ui#*in4 >as c!0"#ete#1 *estr!1e* 81 fire. T>! *a1s #ater !r !n 16 7arc/ 1-)( 3i!#eta Ti8a1 "ai* t/e 8a#ance !f t/e "re0iu0. On t/e sa0e *a1, s/e fi#e* >it/ FO'T;NE a c#ai0 !n t/e fire insurance "!#ic1. Her c#ai0 >as acc!r*in4#1 referre* t! its a*Buster, G!!*>i## A*Bust0ent Ser ices, Inc. (GASI), >/ic/ i00e*iate#1 >r!te 3i!#eta re?uestin4 /er t! furnis/ it >it/ t/e necessar1 *!cu0ents f!r t/e in esti4ati!n an* "r!cessin4 !f /er c#ai0. Petiti!ner f!rt/>it/ c!0"#ie*. On 2) 7arc/ 1-)( s/e si4ne* a n!n5>ai er a4ree0ent >it/ GASI t! t/e effect t/at an1 acti!n ta9en 81 t/e c!0"anies !r t/eir re"resentati es in in esti4atin4 t/e c#ai0 0a*e 81 t/e c#ai0ant f!r /is #!ss >/ic/ !ccurre* at .).. S!8e# '!:as, 7a9ati !n 7arc/ ), 1-)(, !r in t/e in esti4atin4 !r ascertain0ent !f t/e a0!unt !f actua# cas/ a#ue an* #!ss, s/a## n!t >ai e !r in a#i*ate an1 c!n*iti!n !f t/e "!#icies !f

G.'. N!. 11-&..

7a1 22, 1--&

SPS. ANTONIO A. TIBAE an* 3IOLETA '. TIBAE an* OFELIA 7. 'O'ALDO, 3ICTO'INA 7. 'O'ALDO, 3I'GILIO 7. 'O'ALDO, 7E'NA 7. 'O'ALDO an* 'OSABELLA 7. 'O'ALDO, "etiti!ners, s. CO;'T OF APPEALS an* FO'T;NE LIFE AND GENE'AL INS;'ANCE CO., INC., res"!n*ents.

suc/ c!0"anies /e#* 81 sai* c#ai0ant, n!r t/e ri4/ts !f eit/er !r an1 !f t/e "arties t! t/is a4ree0ent, an* suc/ acti!n s/a## n!t 8e, !r 8e c#ai0e* t! 8e, an a*0issi!n !f #ia8i#it1 !n t/e "art !f sai* c!0"anies !r an1 !f t/e0. 1 In a #etter *ate* 11 +une 1-)( FO'T;NE *enie* t/e c#ai0 !f 3i!#eta f!r i!#ati!n !f P!#ic1 C!n*iti!n N!. 2 an* !f Sec. (( !f t/e Insurance C!*e. Eff!rts t! sett#e t/e case 8ef!re t/e Insurance C!00issi!n "r! e* futi#e. On % 7arc/ 1-)) 3i!#ets an* t/e !t/er "etiti!ners sue* FO'T;NE f!r *a0a4es in t/e a0!unt !f P&66,666.66 re"resentin4 t/e t!ta# c! era4e !f t/e fire insurance "!#ic1 "#us 12U interest "er annu0, P166,666.66 0!ra# *a0a4es, an* att!rne1Cs fees e?ui a#ent t! 26U !f t/e t!ta# c#ai0. On 1- +u#1 1--6 t/e tria# c!urt ru#e* f!r "etiti!ners an* a*Bu*4e* FO'T;NE #ia8#e f!r t/e t!ta# a#ue !f t/e insure* 8ui#*in4 an* "ers!na# "r!"erties in t/e a0!unt !f P&66,666.66 "#us interest at t/e #e4a# rate !f &U "er annu0 fr!0 t/e fi#in4 !f t/e c!0"#aint unti# fu## "a10ent, an* att!rne1Cs fees e?ui a#ent t! 26U !f t/e t!ta# a0!unt c#ai0e* "#us c!sts !f suit. 2 On 22 7arc/ 1--. t/e C!urt !f A""ea#s re erse* t/e c!urt a ?u! 81 *ec#arin4 FO'T;NE n!t t! 8e #ia8#e t! "#aintiff5a""e##ees t/erein 8ut !r*erin4 *efen*ant5 a""e##ant t! return t! t/e f!r0er t/e "re0iu0 !f P2,-)%..6 "#us 12U interest fr!0 16 7arc/ 1-)( unti# fu## "a10ent. % Hence t/is "etiti!n f!r re ie> >it/ "etiti!ners c!nten*in4 0ain#1 t/at c!ntrar1 t! t/e c!nc#usi!n !f t/e a""e##ate c!urt, FO'T;NE re0ains #ia8#e un*er t/e

su8Bect fire insurance "!#ic1 in s"ite !f t/e fai#ure !f "etiti!ners t! "a1 t/eir "re0iu0 in fu##. =e fin* n! 0erit in t/e "etiti!n$ /ence, >e affir0 t/e C!urt !f A""ea#s. Insurance is a c!ntract >/ere81 !ne un*erta9es f!r a c!nsi*erati!n t! in*e0nif1 an!t/er a4ainst #!ss, *a0a4e !r #ia8i#it1 arisin4 fr!0 an un9n!>n !r c!ntin4ent e ent. 2 T/e c!nsi*erati!n is t/e "re0iu0, >/ic/ 0ust 8e "ai* at t/e ti0e an* in t/e >a1 an* 0anner s"ecifie* in t/e "!#ic1, an* if n!t s! "ai*, t/e "!#ic1 >i## #a"se an* 8e f!rfeite* 81 its !>n ter0s. . T/e "ertinent "r! isi!ns in t/e P!#ic1 !n "re0iu0 rea* T THIS POLICE OF INS;'ANCE =ITNISSETH THAT !n#1 after "a10ent t! t/e C!0"an1 in acc!r*ance >it/ P!#ic1 C!n*iti!n N!. 2 !f t/e t!ta# "re0iu0s 81 t/e insure* as sti"u#ate* a8! e f!r t/e "eri!* af!re0enti!ne* f!r insurin4 a4ainst L!ss !r Da0a4e 81 Fire !r Li4/tnin4 as /erein a""ears, t/e Pr!"ert1 /erein *escri8e* . . . 2. T/is "!#ic1 inc#u*in4 an1 rene>a# t/ere!f an*O!r an1 en*!rse0ent t/ere!n is n!t in f!rce unti# t/e "re0iu0 /as 8een fu##1 "ai* t! an* *u#1 recei"te* 81 t/e C!0"an1 in t/e 0anner "r! i*e* /erein. An1 su""#e0entar1 a4ree0ent see9in4 t! a0en* t/is c!n*iti!n "re"are* 81 a4ent, 8r!9er !r C!0"an1 !fficia#, s/a## 8e *ee0e* in a#i* an* !f n! effect. ::: ::: :::

E:ce"t !n#1 in t/!se s"ecific cases >/ere c!rres"!n*in4 ru#es an* re4u#ati!ns >/ic/ are !r 0a1 /ereafter 8e in f!rce "r! i*e f!r t/e "a10ent !f t/e sti"u#ate* "re0iu0s in "eri!*ic insta##0ents at fi:e* "ercenta4e, it is /ere81 *ec#are*, a4ree* an* >arrante* t/at t/is "!#ic1 s/a## 8e *ee0e* effecti e, a#i* an* 8in*in4 u"!n t/e C!0"an1 !n#1 >/en t/e "re0iu0s t/eref!r /a e actua##1 8een "ai* in fu## an* *u#1 ac9n!>#e*4e* in a recei"t si4ne* 81 an1 aut/!riNe* !fficia# !r re"resentati eOa4ent !f t/e C!0"an1 in suc/ 0anner as "r! i*e* /erein. (e0"/asis su""#ie*). & C#ear#1 t/e P!#ic1 "r! i*es f!r "a10ent !f "re0iu0 in fu##. Acc!r*in4#1, >/ere t/e "re0iu0 /as !n#1 8een "artia##1 "ai* an* t/e 8a#ance "ai* !n#1 after t/e "eri# insure* a4ainst /as !ccurre*, t/e insurance c!ntract *i* n!t ta9e effect an* t/e insure* cann!t c!##ect at a## !n t/e "!#ic1. T/is is fu##1 su""!rte* 81 Sec. (( !f t/e Insurance C!*e >/ic/ "r! i*es T Sec. ((. An insurer is entit#e* t! "a10ent !f t/e "re0iu0 as s!!n as t/e t/in4 insure* is e:"!se* t! t/e "eri# insure* a4ainst. N!t>it/stan*in4 an1 a4ree0ent t! t/e c!ntrar1, n! "!#ic1 !r c!ntract !f insurance issue* 81 an insurance c!0"an1 is a#i* an* 8in*in4 un#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*, e:ce"t in t/e case !f a #ife !r an in*ustria# #ife "!#ic1 >/ene er t/e 4race "eri!* "r! isi!n a""#ies (e0"/asis su""#ie*). A""arent#1 t/e cru: !f t/e c!ntr! ers1 #ies in t/e "/rase Mun#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*.M T/is #ea*s us t! t/e 0anner !f "a10ent en isi!ne* 81 t/e #a> t! 0a9e t/e insurance "!#ic1 !"erati e an* 8in*in4. F!r >/ate er Bu*icia#

c!nstructi!n 0a1 8e acc!r*e* t/e *is"ute* "/rase 0ust u#ti0ate#1 1ie#* t! t/e c#ear 0an*ate !f t/e #a>. T/e "rinci"#e t/at >/ere t/e #a> *!es n!t *istin4uis/ t/e c!urt s/!u#* neit/er *istin4uis/ assu0es t/at t/e #e4is#ature 0a*e n! ?ua#ificati!n !n t/e use !f a 4enera# >!r* !r e:"ressi!n. In Esc!sura . San 7i4ue# Bre>er1, Inc., ( t/e C!urt t/r!u4/ 7r. +ustice +esus G. Barrera, inter"retin4 t/e "/rase M>it/ "a1M use* in c!nnecti!n >it/ #ea es !f a8sence >it/ "a1 4rante* t! e0"#!1ees, ru#e* T . . . t/e #e4is#ati e "ractice see0s t! 8e t/at >/en t/e intenti!n is t! *istin4uis/ 8et>een fu## an* "artia# "a10ent, t/e 0!*if1in4 ter0 is use* . . . Citin4 C.A. N!. &2( 4! ernin4 0aternit1 #ea es !f 0arrie* >!0en in 4! ern0ent, '. A. N!. &(re4u#atin4 e0"#!10ent !f >!0en an* c/i#*ren, '.A. N!. )2% 4rantin4 acati!n an* sic9 #ea es t! Bu*4es !f 0unici"a# c!urts an* Bustices !f t/e "eace, an* fina##1, Art. 1&-. !f t/e Ne> Ci i# C!*e "r! i*in4 t/at e er1 /!use/e#" s/a## 8e a##!>e* f!ur (2) *a1s acati!n eac/ 0!nt/, >/ic/ #a>s si0"#1 state* M>it/ "a1,M t/e C!urt c!nc#u*e* t/at it >as un*is"ute* t/at in a## t/ese #a>s t/e "/rase M>it/ "a1M use* >it/!ut an1 ?ua#if1in4 a*Becti e 0eant t/at t/e e0"#!1ee >as entit#e* t! fu## c!0"ensati!n *urin4 /is #ea e !f a8sence. Petiti!ners 0aintain !t/er>ise. Insistin4 t/at FO'T;NE is #ia8#e !n t/e "!#ic1 *es"ite "artia# "a10ent !f t/e "re0iu0 *ue an* t/e e:"ress sti"u#ati!n t/ere!f t! t/e c!ntrar1, "etiti!ners re#1 /ea i#1 !n t/e 1-&( case !f P/i#i""ine P/!eni: an* Insurance C!., Inc. . =!!*>!r9s, Inc. ) >/ere t/e C!urt t/r!u4/ 7r. +ustice Arseni! P. DiN!n sustaine* t/e ru#in4 !f t/e tria# c!urt t/at "artia# "a10ent !f t/e "re0iu0 0a*e t/e "!#ic1

effecti e *urin4 t/e >/!#e "eri!* !f t/e "!#ic1. In t/at case, t/e insurance c!0"an1 c!00ence* acti!n a4ainst t/e insure* f!r t/e un"ai* 8a#ance !n a fire insurance "!#ic1. In its *efense t/e insure* c#ai0e* t/at n!n"a10ent !f "re0iu0 "r!*uce* t/e cance##ati!n !f t/e insurance c!ntract. 'u#in4 !t/er>ise t/e C!urt /e#* T It is c#ear . . . t/at !n A"ri# 1, 1-&6, Fire Insurance P!#ic1 N!. -&.2 >as issue* 81 a""e##ee an* *e#i ere* t! a""e##ant, an* t/at !n Se"te08er 22 !f t/e sa0e 1ear, t/e #atter "ai* t! t/e f!r0er t/e su0 !f P%,666.66 !n acc!unt !f t/e t!ta# "re0iu0 !f P&,6.1.-. *ue t/ere!n. T/ere is, c!nse?uent#1, n! *!u8t at a## t/at, as 8et>een t/e insurer an* t/e insure*, t/ere >as n!t !n#1 a "erfecte* c!ntract !f insurance 8ut a "artia##1 "erf!r0e* !ne as far as t/e "a10ent !f t/e a4ree* "re0iu0 >as c!ncerne*. T/ereafter t/e !8#i4ati!n !f t/e insurer t! "a1 t/e insure* t/e a0!unt, f!r >/ic/ t/e "!#ic1 >as issue* in case t/e c!n*iti!ns t/eref!r /a* 8een c!0"#ie* >it/, ar!se an* 8eca0e 8in*in4 u"!n it, >/i#e t/e !8#i4ati!n !f t/e insure* t! "a1 t/e re0ain*er !f t/e t!ta# a0!unt !f t/e "re0iu0 *ue 8eca0e *e0an*a8#e. T/e 1-&( P/!eni: case is n!t "ersuasi e$ neit/er is it *ecisi e !f t/e instant *is"ute. F!r !ne, t/e factua# scenari! is *ifferent. In P/!eni: it >as t/e insurance c!0"an1 t/at sue* f!r t/e 8a#ance !f t/e "re0iu0, i.e., it rec!4niNe* an* a*0itte* t/e e:istence !f an insurance c!ntract >it/ t/e insure*. In t/e case 8ef!re us, t/ere is, ?uite un#i9e in P/!eni:, a s"ecific sti"u#ati!n t/at (t)/is "!#ic1 . . . is n!t in f!rce unti# t/e "re0iu0 /as 8een fu##1 "ai* an* *u#1 recei"te* 81 t/e C!0"an1 . . . 'esu#tant#1, it is c!rrect t! sa1 t/at in P/!eni: a c!ntract >as "erfecte* u"!n "artia#

"a10ent !f t/e "re0iu0 since t/e "arties /a* n!t !t/er>ise sti"u#ate* t/at "re"a10ent !f t/e "re0iu0 in fu## >as a c!n*iti!n "rece*ent t! t/e e:istence !f a c!ntract. In P/!eni:, 81 acce"tin4 t/e initia# "a10ent !f P%,666.66 an* t/en #ater *e0an*in4 t/e re0ain*er !f t/e "re0iu0 >it/!ut an1 !t/er "rec!n*iti!n t! its enf!rcea8i#it1 as in t/e instant case, t/e insurer in effect /a* s/!>n its intenti!n t! c!ntinue >it/ t/e e:istin4 c!ntract !f insurance, as in fact it >as enf!rcin4 its ri4/t t! c!##ect "re0iu0, !r e:act s"ecific "erf!r0ance fr!0 t/e insure*. T/is is n!t s! /ere. B1 e:"ress a4ree0ent !f t/e "arties, n! incu#u0 Buris !r 8!n* !f #a> >as t! 8e esta8#is/e* unti# fu## "a10ent >as effecte* "ri!r t! t/e !ccurrence !f t/e ris9 insure* a4ainst. In 7a9ati Tuscan1 C!n*!0iniu0 C!r". . C!urt !f A""ea#s - t/e "arties 0utua##1 a4ree* t/at t/e "re0iu0s c!u#* 8e "ai* in insta##0ents, >/ic/ in fact t/e1 *i* f!r t/ree (%) 1ears, /ence, t/is C!urt refuse* t! in a#i*ate t/e insurance "!#ic1. In 4i in4 effect t! t/e "!#ic1, t/e C!urt ?u!te* >it/ a""r! a# t/e C!urt !f A""ea#s T T/e !8#i4ati!n t! "a1 "re0iu0s >/en *ue is !r*inari#1 an in*i isi8#e !8#i4ati!n t! "a1 t/e entire "re0iu0. Here, t/e "arties . . . a4ree* t! 0a9e t/e "re0iu0s "a1a8#e in insta##0ents, an* t/ere is n! "retense t/at t/e "arties ne er en isi!ne* t! 0a9e t/e insurance c!ntract 8in*in4 8et>een t/e0. It >as rene>e* f!r t>! succee*in4 1ears, t/e sec!n* an* t/ir* "!#icies 8ein4 a rene>a#Ore"#ace0ent f!r t/e "re i!us !ne. An* t/e insure* ne er inf!r0e* t/e insurer t/at it >as

ter0inatin4 t/e unacce"ta8#e.

"!#ic1

8ecause

t/e

ter0s

>ere

=/i#e it 0a1 8e true t/at un*er Secti!n (( !f t/e Insurance C!*e, t/e "arties 0a1 n!t a4ree t! 0a9e t/e insurance c!ntract a#i* an* 8in*in4 >it/!ut "a10ent !f "re0iu0s, t/ere is n!t/in4 in sai* secti!n >/ic/ su44ests t/at t/e "arties 0a1 n!t a4ree t! a##!> "a10ent !f t/e "re0iu0s in insta##0ent, !r t! c!nsi*er t/e c!ntract as a#i* an* 8in*in4 u"!n "a10ent !f t/e first "re0iu0. Ot/er>ise >e >!u#* a##!> t/e insurer t! rene4e !n its #ia8i#it1 un*er t/e c!ntract, /a* a #!ss incurre* (sic) 8ef!re c!0"#eti!n !f "a10ent !f t/e entire "re0iu0, *es"ite its !#untar1 acce"tance !f "artia# "a10ents, a resu#t esc/e>e* 81 8asic c!nsi*erati!ns !f fairness an* e?uit1 . . . T/ese t>! (2) cases, P/!eni: an* Tuscan1, a*e?uate#1 *e0!nstrate t/e >ai er, eit/er e:"ress !r i0"#ie*, !f "re"a10ent in fu## 81 t/e insurerA i0"#ie*#1, 81 suin4 f!r t/e 8a#ance !f t/e "re0iu0 as in P/!eni:, an* e:"ress#1, 81 a4reein4 t! 0a9e "re0iu0s "a1a8#e in insta##0ents as in Tuscan1. But c!ntrar1 t! t/e stance ta9en 81 "etiti!ners, t/ere is n! >ai er e:"ress !r i0"#ie* in t/e case at 8enc/. Precise#1, t/e insurer an* t/e insure* e:"ress#1 sti"u#ate* t/at (t)/is "!#ic1 inc#u*in4 an1 rene>a# t/ere!f an*O!r an1 in*!rse0ent t/ere!n is n!t in f!rce unti# t/e "re0iu0 /as 8een fu##1 "ai* t! an* *u#1 recei"te* 81 t/e C!0"an1 . . . an* t/at t/is "!#ic1 s/a## 8e *ee0e* effecti e, a#i* an* 8in*in4 u"!n t/e C!0"an1 !n#1 >/en t/e "re0iu0s t/eref!r /a e actua##1 8een "ai* in fu## an* *u#1 ac9n!>#e*4e*. C!nf!r0a8#1 >it/ t/e af!resai* sti"u#ati!ns e:"#icit#1 >!r*e* an* ta9en in c!nBuncti!n >it/ Sec. (( !f t/e

Insurance C!*e t/e "a10ent !f "artia# "re0iu0 81 t/e assure* in t/is "articu#ar instance s/!u#* n!t 8e c!nsi*ere* t/e "a10ent re?uire* 81 t/e #a> an* t/e sti"u#ati!n !f t/e "arties. 'at/er, it 0ust 8e ta9en in t/e c!nce"t !f a *e"!sit t! 8e /e#* in trust 81 t/e insurer unti# suc/ ti0e t/at t/e fu## a0!unt /as 8een ten*ere* an* *u#1 recei"te* f!r. In !t/er >!r*s, as e:"ress#1 a4ree* u"!n in t/e c!ntract, fu## "a10ent 0ust 8e 0a*e 8ef!re t/e ris9 !ccurs f!r t/e "!#ic1 t! 8e c!nsi*ere* effecti e an* in f!rce. T/us, n! incu#u0 Buris >/ere81 t/e insurer 8!un* itse#f t! in*e0nif1 t/e assure* acc!r*in4 t! #a> e er resu#te* fr!0 t/e fracti!na# "a10ent !f "re0iu0. T/e insurance c!ntract itse#f e:"ress#1 "r! i*e* t/at t/e "!#ic1 >!u#* 8e effecti e !n#1 >/en t/e "re0iu0 >as "ai* in fu##. It >!u#* /a e 8een a#t!4et/er *ifferent >ere it n!t s! sti"u#ate*. Er4!, "etiti!ners /a* a8s!#ute free*!0 !f c/!ice >/et/er !r n!t t! 8e insure* 81 FO'T;NE un*er t/e ter0s !f its "!#ic1 an* t/e1 free#1 !"te* t! a*/ere t/eret!. In*ee*, an* far 0!re i0"!rtant#1, t/e car*ina# "!#estar in t/e c!nstructi!n !f an insurance c!ntract is t/e intenti!n !f t/e "arties as e:"resse* in t/e "!#ic1. 16 C!urts /a e n! !t/er functi!n 8ut t! enf!rce t/e sa0e. T/e ru#e t/at c!ntracts !f insurance >i## 8e c!nstrue* in fa !r !f t/e insure* an* 0!st str!n4#1 a4ainst t/e insurer s/!u#* n!t 8e "er0itte* t! /a e t/e effect !f 0a9in4 a "#ain a4ree0ent a08i4u!us an* t/en c!nstrue it in fa !r !f t/e insure*. 11 3eri#1, it is e#e0enta# #a> t/at t/e "a10ent !f "re0iu0 is re?uisite t! 9ee" t/e "!#ic1 !f insurance in f!rce. If t/e "re0iu0 is n!t "ai* in t/e 0anner "rescri8e* in t/e "!#ic1 as inten*e* 81 t/e "arties t/e "!#ic1 is ineffecti e. Partia# "a10ent e en >/en acce"te* as a

"artia# "a10ent >i## n!t 9ee" t/e "!#ic1 a#i e e en f!r suc/ fracti!na# "art !f t/e 1ear as t/e "art "a10ent 8ears t! t/e >/!#e "a10ent. 12 A""#1in4 furt/er t/e ru#es !f statut!r1 c!nstructi!n, t/e "!siti!n 0aintaine* 81 "etiti!ners 8ec!0es e en 0!re untena8#e. T/e case !f S!ut/ Sea Suret1 an* Insurance C!0"an1, Inc. . C!urt Of A""ea#s, 1% s"ea9s !n#1 !f t>! (2) statut!r1 e:ce"ti!ns t! t/e re?uire0ent !f "a10ent !f t/e entire "re0iu0 as a "rere?uisite t! t/e a#i*it1 !f t/e insurance c!ntract. T/ese e:ce"ti!ns areA (a) in case t/e insurance c! era4e re#ates t! #ife !r in*ustria# #ife (/ea#t/) insurance >/en a 4race "eri!* a""#ies, an* (8) >/en t/e insurer 0a9es a >ritten ac9n!>#e*40ent !f t/e recei"t !f "re0iu0, t/is ac9n!>#e*40ent 8ein4 *ec#are* 81 #a> t! 8e t/en c!nc#usi e e i*ence !f t/e "re0iu0 "a10ent. 12 A 0a:i0 !f rec!4niNe* "ractica#it1 is t/e ru#e t/at t/e e:"resse* e:ce"ti!n !r e:e0"ti!n e:c#u*es !t/ers. E:ce"ti! fir0at re4u#i0 in casi8us n!n e:ce"tis. T/e e:"ress 0enti!n !f e:ce"ti!ns !"erates t! e:c#u*e !t/er e:ce"ti!ns$ c!n erse#1, t/!se >/ic/ are n!t >it/in t/e enu0erate* e:ce"ti!ns are *ee0e* inc#u*e* in t/e 4enera# ru#e. T/us, un*er Sec. ((, as >e## as Sec. (), unti# t/e "re0iu0 is "ai*, an* t/e #a> /as n!t e:"ress#1 e:ce"te* "artia# "a10ents, t/ere is n! a#i* an* 8in*in4 c!ntract. Hence, in t/e a8sence !f c#ear >ai er !f "re"a10ent in fu## 81 t/e insurer, t/e insure* cann!t c!##ect !n t/e "r!cee*s !f t/e "!#ic1. In t/e *esire t! safe4uar* t/e interest !f t/e assure*, it 0ust n!t 8e i4n!re* t/at t/e c!ntract !f insurance is "ri0ari#1 a ris9 *istri8utin4 *e ice, a 0ec/anis0 81

>/ic/ a## 0e08ers !f a 4r!u" e:"!se* t! a "articu#ar ris9 c!ntri8ute "re0iu0s t! an insurer. Fr!0 t/ese c!ntri8ut!r1 fun*s are "ai* >/ate er #!sses !ccur *ue t! e:"!sure t! t/e "eri# insure* a4ainst. Eac/ "art1 t/eref!re ta9es a ris9A t/e insurer, t/at !f 8ein4 c!0"e##e* u"!n t/e /a""enin4 !f t/e c!ntin4enc1 t! "a1 t/e entire su0 a4ree* u"!n, an* t/e insure*, t/at !f "artin4 >it/ t/e a0!unt re?uire* as "re0iu0, >it/!ut recei in4 an1t/in4 t/eref!r in case t/e c!ntin4enc1 *!es n!t /a""en. T! ensure "a10ent f!r t/ese #!sses, t/e #a> 0an*ates a## insurance c!0"anies t! 0aintain a #e4a# reser e fun* in fa !r !f t/!se c#ai0in4 un*er t/eir "!#icies. 1. It s/!u#* 8e un*erst!!* t/at t/e inte4rit1 !f t/is fun* cann!t 8e secure* an* 0aintaine* if 81 Bu*icia# fiat "artia# !fferin4s !f "re0iu0s >ere t! 8e c!nstrue* as a #e4a# ne:us 8et>een t/e a""#icant an* t/e insurer *es"ite an e:"ress a4ree0ent t! t/e c!ntrar1. F!r >/at c!u#* "re ent t/e insurance a""#icant fr!0 *e#i8erate#1 !r >i#fu##1 /!#*in4 8ac9 fu## "re0iu0 "a10ent an* >ait f!r t/e ris9 insure* a4ainst t! trans"ire an* t/en c!n enient#1 "ass !n t/e 8a#ance !f t/e "re0iu0 t! 8e *e*ucte* fr!0 t/e "r!cee*s !f t/e insuranceG =!rse, >/at if t/e insure* 0a9es an initia# "a10ent !f !n#1 16U, !r e en 1U, !f t/e re?uire* "re0iu0, an* >/en t/e ris9 !ccurs si0"#1 "!ints t! t/e "r!cee*s fr!0 >/ere t! s!urce t/e 8a#anceG Can an insurance c!0"an1 t/en e:ist an* sur i e u"!n t/e "a10ent !f 1U, !r e en 16U, !f t/e "re0iu0 sti"u#ate* in t/e "!#ic1 !n t/e 8asis t/at, after a##, t/e insurer can *e*uct fr!0 t/e "r!cee*s !f t/e insurance s/!u#* t/e ris9 insure* a4ainst !ccurG Inter"retin4 t/e c!ntract !f insurance strin4ent#1 a4ainst t/e insurer 8ut #i8era##1 in fa !r !f t/e insure* *es"ite c#ear#1 *efine* !8#i4ati!ns !f t/e "arties t! t/e

"!#ic1 can 8e carrie* !ut t! e:tre0es t/at t/ere is t/e *an4er t/at >e 0a1, s! t! s"ea9, M9i## t/e 4!!se t/at #a1s t/e 4!#*en e44.M =e are >e## a>are !f insurance c!0"anies fa##in4 int! t/e *es"ica8#e /a8it !f c!##ectin4 "re0iu0s "r!0"t#1 1et res!rtin4 t! a## 9in*s !f e:cuses t! *en1 !r *e#a1 "a10ent !f Bust insurance c#ai0s. But, in t/is case, t/e #a> is 0anifest#1 !n t/e si*e !f t/e insurer. F!r as #!n4 as t/e current Insurance C!*e re0ains unc/an4e* an* "artia# "a10ent !f "re0iu0s is n!t 0enti!ne* at a## as a0!n4 t/e e:ce"ti!ns "r! i*e* in Sees. (( an* (), n! "!#ic1 !f insurance can e er "reten* t! 8e efficaci!us !r effecti e unti# "re0iu0 /as 8een fu##1 "ai*. An* s! it 0ust 8e. F!r it cann!t 8e *is"ute* t/at "re0iu0 is t/e e#i:ir itae !f t/e insurance 8usiness 8ecause 81 #a> t/e insurer 0ust 0aintain a #e4a# reser e fun* t! 0eet its c!ntin4ent !8#i4ati!ns t! t/e "u8#ic, /ence, t/e i0"erati e nee* f!r its "r!0"t "a10ent an* fu## satisfacti!n. 1& It 0ust 8e e0"/asiNe* /ere t/at a## actuaria# ca#cu#ati!ns an* ari!us ta8u#ati!ns !f "r!8a8i#ities !f #!sses un*er t/e ris9s insure* a4ainst are 8ase* !n t/e s!un* /1"!t/esis !f "r!0"t "a10ent !f "re0iu0s. ;"!n t/is 8e*r!c9 insurance fir0s are ena8#e* t! !ffer t/e assurance !f securit1 t! t/e "u8#ic at fa !ra8#e rates. But !nce "a10ent !f "re0iu0 is #eft t! t/e >/i0 an* ca"rice !f t/e insure*, as >/en t/e c!urts t!#erate t/e "a10ent !f a 0ere P&66.66 as "artia# un*erta9in4 !ut !f t/e sti"u#ate* t!ta# "re0iu0 !f P2,-)%..6 an* t/e 8a#ance t! 8e "ai* e en after t/e ris9 insure* a4ainst /as !ccurre*, as "etiti!ners /a e *!ne in t/is case, !n t/e "rinci"#e t/at t/e stren4t/ !f t/e incu#u0 Buris is n!t 0easure* 81 an1 s"ecific a0!unt !f "re0iu0 "a10ent, >e >i## sure#1 >rea9 /a !c !n t/e 8usiness an* set t! nau4/t >/at /as ta9en actuarians centuries

t! *e ise t! arri e at a fair an* e?uita8#e *istri8uti!n !f ris9s an* 8enefits 8et>een t/e insurer an* t/e insure*. T/e ter0s !f t/e insurance "!#ic1 c!nstitute t/e 0easure !f t/e insurerCs #ia8i#it1. In t/e a8sence !f statut!r1 "r!/i8iti!n t! t/e c!ntrar1, insurance c!0"anies /a e t/e sa0e ri4/ts as in*i i*ua#s t! #i0it t/eir #ia8i#it1 an* t! i0"!se >/ate er c!n*iti!ns t/e1 *ee0 8est u"!n t/eir !8#i4ati!ns n!t inc!nsistent >it/ "u8#ic "!#ic1. 1( T/e a#i*it1 !f t/ese #i0itati!ns is 81 #a> "asse* u"!n 81 t/e Insurance C!00issi!ner >/! is e0"!>ere* t! a""r! e a## f!r0s !f "!#icies, certificates !r c!ntracts !f insurance >/ic/ insurers inten* t! issue !r *e#i er. T/at t/e "!#ic1 c!ntract in t/e case at 8enc/ >as a""r! e* an* a##!>e* issuance si0"#1 reaffir0s t/e a#i*it1 !f suc/ "!#ic1, "articu#ar#1 t/e "r! isi!n in ?uesti!n. =HE'EFO'E, t/e "etiti!n is DENIED an* t/e assai#e* Decisi!n !f t/e C!urt !f A""ea#s *ate* 22 7arc/ 1--. is AFFI'7ED. SO O'DE'ED.

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION G.'. N!. L52.%1( Au4ust &, 1-(-

PHILIPPINE PHOENIF S;'ETE < INS;'ANCE CO7PANE, "#aintiff5a""e##ee, s. =OOD=O'DS, INC., *efen*ant5a""e##ant. S!si0! 'i as f!r a""e##ant. 7anue# O. C/an f!r a""e##ee.

a4ainst #!ss 81 fire. T/e "re0iu0 an* !t/er c/ar4es inc#u*in4 t/e 0ar4in fee surc/ar4e !f P.-6.(& an* t/e *!cu0entar1 sta0"s in t/e a0!unt !f P1.&.&6 affi:e* !n t/e P!#ic1, a0!unte* t! P16,.-%.%&. It is un*is"ute* t/at *efen*ant *i* n!t "a1 t/e "re0iu0 sti"u#ate* in t/e P!#ic1 >/en it >as issue* n!r at an1 ti0e t/ereafter. On A"ri# 1-, 1-&1, !r 8ef!re t/e e:"irati!n !f t/e !ne5 1ear ter0, "#aintiff n!tifie* *efen*ant, t/r!u4/ its In*!rse0ent N!. F5&-&%O&1, !f t/e cance##ati!n !f t/e P!#ic1 a##e4e*#1 u"!n re?uest !f *efen*ant. 1 T/e #atter /as *enie* /a in4 0a*e suc/ a re?uest. In sai* In*!rse0ent, "#aintiff cre*ite* *efen*ant >it/ t/e a0!unt !f P%,116.2. f!r t/e une:"ire* "eri!* !f -2 *a1s, an* c#ai0e* t/e 8a#ance !f P(,2)%.11 re"resentin4 ,#earne* "re0iu0 fr!0 +u#1 21, 1-&6 t! 1)t/ A"ri# 1-&1 !r, sa1 2(1 *a1s.M On +u#1 &, 1-&1, "#aintiff *e0an*e* in >ritin4 f!r t/e "a10ent !f sai* a0!unt. 2 Defen*ant, t/r!u4/ c!unse#, *isc#ai0e* an1 #ia8i#it1 in its re"#15 #etter !f Au4ust 1., 1-&1, c!nten*in4, in essence, t/at it nee* n!t "a1 "re0iu0 M8ecause t/e Insurer *i* n!t stan* #ia8#e f!r an1 in*e0nit1 *urin4 t/e "eri!* t/e "re0iu0s >ere n!t "ai*.M % On +anuar1 %6, 1-&2, "#aintiff c!00ence* acti!n in t/e C!urt !f First Instance !f 7ani#a, Branc/ I3 (Ci i# Case N!. 2-2&)), t! rec! er t/e a0!unt !f P(,2)%.11 as Mearne* "re0iu0.M Defen*ant c!ntr! erte* 8asica##1 !n t/e t/e!r1 t/at its fai#ure Mt! "a1 t/e "re0iu0 after t/e issuance !f t/e "!#ic1 "ut an en* t! t/e insurance c!ntract an* ren*ere* t/e "!#ic1 unenf!rcea8#e.M 2

7ELENCIO5HE''E'A, +.A T/is case >as certifie* t! t/is Tri8una# 81 t/e C!urt !f A""ea#s in its 'es!#uti!n !f Oct!8er 2, 1-&. !n a "ure ?uesti!n !f #a> an* M8ecause t/e issues raise* are "ractica##1 t/e sa0e as t/!se in CA5G.'. N!. %261(5'M 8et>een t/e sa0e "arties, >/ic/ case /a* 8een f!r>ar*e* t! us !n A"ri# 1, 1-&2. T/e #atter case, MP/i#i""ine P/!eni: Suret1 < Insurance Inc. s. =!!*>!r9s, Inc.,M *!c9ete* in t/is C!urt as L522&)2, >as *eci*e* !n Au4ust %1, 1-&( an* /as 8een re"!rte* in 26 SC'A 12(6. S"ecifica##1, t/is acti!n is f!r rec! er1 !f un"ai* "re0iu0 !n a fire insurance "!#ic1 issue* 81 "#aintiff, P/i#i""ine P/!eni: Suret1 < Insurance C!0"an1, in fa !r !f *efen*ant =!!*>!r9s, Inc. T/e f!##!>in4 are t/e esta8#is/e* factsA On +u#1 21, 1-&6, u"!n *efen*antCs a""#icati!n, "#aintiff issue* in its fa !r Fire Insurance P!#ic1 N!. -(2- f!r P.66,666.66 >/ere81 "#aintiff insure* *efen*antCs 8ui#*in4, 0ac/iner1 an* e?ui"0ent f!r a ter0 !f !ne 1ear fr!0 +u#1 21, 1-&6 t! +u#1 21, 1-&1

On Se"te08er 1%, 1-&2, Bu*40ent >as ren*ere* in "#aintiffCs fa !r M!r*erin4 *efen*ant t! "a1 "#aintiff t/e su0 !f P(,2)%.11, >it/ interest t/ere!n at t/e rate !f &U, "er annu0 fr!0 +anuar1 %6, 1-&2, unti# t/e "rinci"a# s/a## /a e 8een fu##1 "ai*, "#us t/e su0 !f P(66.66 as att!rne1Cs fees !f t/e "#aintiff, an* t/e c!sts !f t/e suit.M Fr!0 t/is a* erse Decisi!n, *efen*ant a""ea#e* t! t/e C!urt !f A""ea#s >/ic/, as /eret!f!re state*, certifie* t/e case t! us !n a ?uesti!n !f #a>. T/e err!rs assi4ne* rea*A 1. T/e #!>er c!urt erre* in sustainin4 t/at Fire Insurance P!#ic1, E:/i8it A, >as a 8in*in4 c!ntract e en if t/e "re0iu0 state* in t/e "!#ic1 /as n!t 8een "ai*. 2. T/at t/e #!>er c!urt erre* in sustainin4 t/at t/e "re0iu0 in Insurance P!#ic1, E:/i8it B, 8eca0e an !8#i4ati!n >/ic/ >as *e0an*a8#e e en after t/e "eri!* in t/e P!#ic1 /as e:"ire*. %. T/e #!>er c!urt erre* in n!t *eci*in4 t/at a "re0iu0 n!t "ai* is n!t a *e8t enf!rcea8#e 81 acti!n !f t/e insurer. =e fin* t/e a""ea# 0erit!ri!us. Insurance is Ma c!ntract >/ere81 !ne un*erta9es f!r a c!nsi*erati!n t! in*e0nif1 an!t/er a4ainst #!ss, *a0a4e !r #ia8i#it1 arisin4 fr!0 an un9n!>n !r c!ntin4ent e ent.M . T/e c!nsi*erati!n is t/e M"re0iu0M. MT/e "re0iu0 0ust 8e "ai* at t/e ti0e an* in t/e >a1 an* 0anner s"ecifie* in t/e "!#ic1 an*,

if n!t s! "ai*, t/e "!#ic1 >i## #a"se an* 8e f!rfeite* 81 its !>n ter0s.M & T/e "r! isi!ns !n "re0iu0 in t/e su8Bect P!#ic1 rea*A THIS POLICE OF INS;'ANCE =ITNESSETH, THAT in c!nsi*erati!n !f T 7ESS'S. =OOD=O'DS, INC. T /ereinafter ca##e* t/e Insure*, "a1in4 t! t/e PHILIPPINE PHOENIF S;'ETE AND INS;'ANCE, INC., /ereinafter ca##e* t/e C!0"an1, t/e su0 !f T PESOS NINE THO;SAND EIGHT H;ND'ED FO'TE SIF ONLE T t/e Pre0iu0 f!r t/e first "eri!* /ereinafter 0enti!ne*. ... ::: ::: :::

THE CO7PANE HE'EBE AG'EES >it/ t/e Insure* ... t/at if t/e Pr!"ert1 a8! e *escri8e*, !r an1 "art t/ere!f, s/a## 8e *estr!1e* !r *a0a4e* 81 Fire !r Li4/tnin4 after "a10ent !f Pre0iu0, at an1 ti0e 8et>een 2A66 !Cc#!c9 in t/e aftern!!n !f t/e T=ENTE FI'ST *a1 !f +;LE One T/!usan* Nine Hun*re* an* SIFTE an* 2A66 !Cc#!c9 in t/e aftern!!n !f t/e T=ENTE FI'ST *a1 !f +;LE One T/!usan* Nine Hun*re* an* SIFTE ONE. ... (E0"/asis su""#ie*) Para4ra"/ M2M !f t/e P!#ic1 furt/er c!ntaine* t/e f!##!>in4 c!n*iti!nA 2. N! "a10ent in res"ect !f an1 "re0iu0 s/a## 8e *ee0e* t! 8e "a10ent t! t/e C!0"an1 un#ess a "rinte* f!r0 !f recei"t f!r t/e sa0e si4ne* 81 an Officia# !r *u#15a""!inte* A4ent !f t/e C!0"an1 s/a## /a e 8een 4i en t! t/e Insure*. Para4ra"/ M16M !f t/e P!#ic1 a#s! "r! i*e*A

16. T/is insurance 0a1 8e ter0inate* at an1 ti0e at t/e re?uest !f t/e Insure*, in >/ic/ case t/e C!0"an1 >i## retain t/e cust!0ar1 s/!rt "eri!* rate f!r t/e ti0e t/e "!#ic1 /as 8een in f!rce. T/is insurance 0a1 a#s! at an1 ti0e 8e ter0inate* at t/e !"ti!n !f t/e C!0"an1, !n n!tice t! t/at effect 8ein4 4i en t! t/e Insure*, in >/ic/ case t/e C!0"an1 s/a## 8e #ia8#e t! re"a1 !n *e0an* a rata8#e "r!"!rti!n !f t/e "re0iu0 f!r t/e une:"ire* ter0 fr!0 t/e *ate !f t/e cance#0ent. C#ear#1, t/e P!#ic1 "r! i*es f!r "re5"a10ent !f "re0iu0. Acc!r*in4#1$ M>/en t/e "!#ic1 is ten*ere* t/e insure* 0ust "a1 t/e "re0iu0 un#ess cre*it is 4i en !r t/ere is a >ai er, !r s!0e a4ree0ent !8 iatin4 t/e necessit1 f!r "re"a10ent.M ( T! c!nstitute an e:tensi!n !f cre*it t/ere 0ust 8e a c#ear an* e:"ress a4ree0ent t/eref!r.M ) Fr!0 t/e P!#ic1 "r! isi!ns, >e fai# t! fin* an1 c#ear a4ree0ent t/at a cre*it e:tensi!n >as acc!r*e* *efen*ant. An* e en if it >ere t! 8e "resu0e* t/at "#aintiff /a* e:ten*e* cre*it fr!0 t/e circu0stances !f t/e unc!n*iti!na# *e#i er1 !f t/e P!#ic1 >it/!ut "re"a10ent !f t/e "re0iu0, 1et it is !8 i!us t/at *efen*ant /a* n!t acce"te* t/e insurerCs !ffer t! e:ten* cre*it, >/ic/ is essentia# f!r t/e a#i*it1 !f suc/ a4ree0ent. An acce"tance !f an !ffer t! a##!> cre*it, if !ne >as 0a*e, is as essentia# t! 0a9e a a#i* a4ree0ent f!r cre*it, t! c/an4e a c!n*iti!na# *e#i er1 !f an insurance "!#ic1 t! an unc!n*iti!na# *e#i er1, as it is t! 0a9e an1 !t/er c!ntract. Suc/ an acce"tance c!u#* n!t 8e 0ere#1 a 0enta# act !r state !f 0in*, 8ut >!u#*

re?uire a "r!0ise t! "a1 0a*e 9n!>n in s!0e 0anner t! *efen*ant. In t/is res"ect, t/e instant case *iffers fr!0 t/at in !# in4 t/e sa0e "arties entit#e* P/i#i""ine P/!eni: Suret1 < Insurance Inc. s. =!!*>!r9s, Inc., 16 >/ere rec! er1 !f t/e 8a#ance !f t/e un"ai* "re0iu0 >as a##!>e* inas0uc/ as in t/at case Mt/ere >as n!t !n#1 a "erfecte* c!ntract !f insurance 8ut a "artia##1 "erf!r0e* !ne as far as t/e "a10ent !f t/e a4ree* "re0iu0 >as c!ncerne*.M T/is is n!t t/e situati!n !8tainin4 /ere >/ere n! "artia# "a10ent !f "re0iu0s /as 8een 0a*e >/ats!e er. Since t/e "re0iu0 /a* n!t 8een "ai*, t/e "!#ic1 0ust 8e *ee0e* t! /a e #a"se*. T/e n!n5"a10ent !f "re0iu0s *!es n!t 0ere#1 sus"en* 8ut "ut, an en* t! an insurance c!ntract, since t/e ti0e !f t/e "a10ent is "ecu#iar#1 !f t/e essence !f t/e c!ntract. 11 ... t/e ru#e is t/at un*er "!#ic1 "r! isi!ns t/at u"!n t/e fai#ure t! 0a9e a "a10ent !f a "re0iu0 !r assess0ent at t/e ti0e "r! i*e* f!r, t/e "!#ic1 s/a## 8ec!0e !i* !r f!rfeite*, !r t/e !8#i4ati!n !f t/e insurer s/a## cease, !r >!r*s t! #i9e effect, 8ecause t/e c!ntract s! "rescri8es an* 8ecause suc/ a sti"u#ati!n is a 0ateria# an* essentia# "art !f t/e c!ntract. T/is is true, f!r instance, in t/e case !f #ife, /ea#t/ an* acci*ent, fire an* /ai# insurance "!#icies. 12 In fact, if t/e "eri# insure* a4ainst /a* !ccurre*, "#aintiff, as insurer, >!u#* /a e /a* a a#i* *efense a4ainst rec! er1 un*er t/e P!#ic1 it /a* issue*. E:"#icit in t/e P!#ic1 itse#f is "#aintiffCs a4ree0ent t!

in*e0nif1 *efen*ant f!r #!ss 81 fire !n#1 Mafter "a10ent !f "re0iu0,M su"ra. C!0"#iance 81 t/e insure* >it/ t/e ter0s !f t/e c!ntract is a c!n*iti!n "rece*ent t! t/e ri4/t !f rec! er1. T/e 8ur*en is !n an insure* t! 9ee" a "!#ic1 in f!rce 81 t/e "a10ent !f "re0iu0s, rat/er t/an !n t/e insurer t! e:ert e er1 eff!rt t! "re ent t/e insure* fr!0 a##!>in4 a "!#ic1 t! e#a"se t/r!u4/ a fai#ure t! 0a9e "re0iu0 "a10ents. T/e c!ntinuance !f t/e insurerCs !8#i4ati!n is c!n*iti!na# u"!n t/e "a10ent !f "re0iu0s, s! t/at n! rec! er1 can 8e /a* u"!n a #a"se* "!#ic1, t/e c!ntractua# re#ati!n 8et>een t/e "arties /a in4 cease*. 1% 7!re! er, Man insurer cann!t treat a c!ntract as a#i* f!r t/e "ur"!se !f c!##ectin4 "re0iu0s an* in a#i* f!r t/e "ur"!se !f in*e0nit1.M 12 T/e f!re4!in4 fin*in4s are 8uttresse* 81 secti!n (( !f t/e Insurance C!*e (Presi*entia# Decree N!. &12, "r!0u#4ate* !n Dece08er 1), 1-(2), >/ic/ n!> "r! i*es t/at n! c!ntract !f insurance issue* 81 an insurance c!0"an1 is a#i* an* 8in*in4 un#ess an* unti# t/e "re0iu0 t/ere!f /as 8een "ai*, n!t>it/stan*in4 an1 a4ree0ent t! t/e c!ntrar1. =HE'EFO'E, t/e Bu*40ent a""ea#e* fr!0 is re erse*, an* "#aintiffCs c!0"#aint /ere81 *is0isse*.

FI'ST DI3ISION G.'. N!. L5&&-%. N! e08er 11, 1-).

ISABELA 'O@;E, *!in4 8usines un*er t/e na0e an* st1#e !f Isa8e#a '!?ue Ti08er Enter"rises an* ONG CHIONG, "etiti!ners, s. HON. INTE'7EDIATE APPELATE CO;'T an* PIONEE' INS;'ANCE AND S;'ETE CO'PO'ATION, res"!n*ent.

G;TIE''ES, +'., +.A T/is "etiti!n f!r certi!rari as9s f!r t/e re ie> !f t/e *ecisi!n !f t/e Inter0e*iate A""e##ate C!urt >/ic/ a8s!# e* t/e res"!n*ent insurance c!0"an1 fr!0 #ia8i#it1 !n t/e 4r!un*s t/at t/e esse# carr1in4 t/e insure* car4! >as unsea>!rt/1 an* t/e #!ss !f sai* car4! >as cause* n!t 81 t/e "eri#s !f t/e sea 8ut 81 t/e "eri#s !f t/e s/i". On Fe8ruar1 1-, 1-(2, t/e 7ani#a Ba1 Li4/tera4e C!r"!rati!n (7ani#a Ba1), a c!00!n carrier, entere* int! a c!ntract >it/ t/e "etiti!ners >/ere81 t/e f!r0er >!u#* #!a* an* carr1 !n 8!ar* its 8ar4e 7a8#e 16 a8!ut 222.1) cu8ic 0eters !f #!4s fr!0 7a#a0"a1a S!un*, Pa#a>an t! N!rt/ Har8!r, 7ani#a. T/e "etiti!ners insure* t/e #!4s a4ainst #!ss f!r P166,666.66 >it/ res"!n*ent Pi!neer Insurance an* Suret1 C!r"!rati!n (Pi!neer). On Fe8ruar1 2-, 1-(2, t/e "etiti!ners #!a*e* !n t/e 8ar4e, )11 "ieces !f #!4s at 7a#a0"a1a S!un*, Pa#a>an f!r carria4e an* *e#i er1 t! N!rt/ Har8!r, P!rt

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a

!f 7ani#a, 8ut t/e s/i"0ent ne er reac/e* its *estinati!n 8ecause 7a8#e 16 san9 >it/ t/e )11 "ieces !f #!4s s!0e>/ere !ff Ca8u#i P!int in Pa#a>an !n its >a1 t! 7ani#a. As a##e4e* 81 t/e "etiti!ners in t/eir c!0"#aint an* as f!un* 81 8!t/ t/e tria# an* a""e##ate c!urts, t/e 8ar4e >/ere t/e #!4s >ere #!a*e* >as n!t sea>!rt/1 suc/ t/at it *e e#!"e* a #ea9. T/e a""e##ate c!urt furt/er f!un* t/at !ne !f t/e /atc/es >as #eft !"en causin4 >ater t! enter t/e 8ar4e an* 8ecause t/e 8ar4e >as n!t "r! i*e* >it/ t/e necessar1 c! er !r tar"au#in, t/e !r*inar1 s"#as/ !f sea >a es 8r!u4/t 0!re >ater insi*e t/e 8ar4e. On 7arc/ ), 1-(2, t/e "etiti!ners >r!te a #etter t! 7ani#a Ba1 *e0an*in4 "a10ent !f P1.6,666.66 f!r t/e #!ss !f t/e s/i"0ent "#us P166,666.66 as unrea#iNe* "r!fits 8ut t/e #atter i4n!re* t/e *e0an*. An!t/er #etter >as sent t! res"!n*ent Pi!neer c#ai0in4 t/e fu## a0!unt !f P166,666.66 un*er t/e insurance "!#ic1 8ut res"!n*ent refuse* t! "a1 !n t/e 4r!un* t/at its /a8i#it1 *e"en*e* u"!n t/e MT!ta# #!ss 81 T!ta# L!ss !f 3esse# !n#1M. Hence, "etiti!ners c!00ence* Ci i# Case N!. )&.-- a4ainst 7ani#a Ba1 an* res"!n*ent Pi!neer. After /earin4, t/e tria# c!urt f!un* in fa !r !f t/e "etiti!ners. T/e *is"!siti e "!rti!n !f t/e *ecisi!n rea*sA FO' ALL THE FO'EGOING, t/e C!urt /ere81 ren*ere* Bu*40ent as f!##!>sA (a) C!n*e0nin4 *efen*ants 7ani#a Ba1 Li4/tera4e C!r"!rati!n an* Pi!neer Insurance an* Suret1 C!r"!rati!n t! "a1 "#aintiffs, B!int#1 an* se era##1, t/e su0 !f P166,666.66$

(8) Sentencin4 *efen*ant 7ani#a Ba1 Li4/tera4e C!r"!rati!n t! "a1 "#aintiff, in a**iti!n, t/e su0 !f P.6,666.66, "#us P12,.66.66, t/at t/e #atter a* ance* t! t/e f!r0er as *!>n "a10ent f!r trans"!rtin4 t/e #!4s in ?uesti!n$ (c) Or*erin4 t/e c!unterc#ai0 !f *efen*ant Insurance a4ainst "#aintiffs, *is0isse*, f!r #ac9 !f 0erit, 8ut as t! its cr!ss5c#ai0 a4ainst its c!5*efen*ant 7ani#a Ba1 Li4/tera4e C!r"!rati!n, t/e #atter is !r*ere* t! rei08urse t/e f!r0er f!r >/ate er a0!unt it 0a1 "a1 t/e "#aintiffs as suc/ suret1$ (*) Or*erin4 t/e c!unterc#ai0 !f *efen*ant Li4/tera4e a4ainst "#aintiffs, *is0isse* f!r #ac9 !f 0erit$ (e) P#aintiffsC c#ai0 !f n!t #ess t/an P166,666.66 an* P(.,666.66 as e:e0"#ar1 *a0a4es are !r*ere* *is0isse*, f!r #ac9 !f 0erits$ "#aintiffsC c#ai0 f!r att!rne1Cs fees in t/e su0 !f P16,666.66 is /ere81 4rante*, a4ainst 8!t/ *efen*ants, >/! are, 0!re! er !r*ere* t! "a1 t/e c!sts$ an* (f) T/e su0 !f P1.6,666.66 a>ar* t! "#aintiffs, s/a## 8ear interest !f si: "er cent (&U) fr!0 7arc/ 2., 1-(., unti# a0!unt is fu##1 "ai*. 'es"!n*ent Pi!neer a""ea#e* t! t/e Inter0e*iate A""e##ate C!urt. 7ani#a Ba1 *i* n!t a""ea#. Acc!r*in4 t! t/e "etiti!ners, t/e trans"!rtati!n c!0"an1 is n! #!n4er *!in4 8usiness an* is >it/!ut fun*s. Durin4 t/e initia# sta4es !f t/e /earin4, 7ani#a Ba1 inf!r0e* t/e tria# c!urt t/at it /a* sa# a4e* "art !f t/e #!4s. T/e c!urt !r*ere* t/e0 t! 8e s!#* t! t/e /i4/est

8i**er >it/ t/e fun*s t! 8e *e"!site* in a 8an9 in t/e na0e !f Ci i# Case N!. )&.--. On +anuar1 %6, 1-)2, t/e a""e##ate c!urt 0!*ifie* t/e tria# c!urtCs *ecisi!n an* a8s!# e* Pi!neer fr!0 #ia8i#it1 after fin*in4 t/at t/ere >as a 8reac/ !f i0"#ie* >arrant1 !f sea>!rt/iness !n t/e "art !f t/e "etiti!ners an* t/at t/e #!ss !f t/e insure* car4! >as cause* 81 t/e M"eri#s !f t/e s/i"M an* n!t 81 t/e M"eri#s !f t/e seaM. It ru#e* t/at t/e #!ss is n!t c! ere* 81 t/e 0arine insurance "!#ic1. After t/e a""e##ate c!urt *enie* t/eir 0!ti!n f!r rec!nsi*erati!n, t/e "etiti!ners fi#e* t/is "etiti!n >it/ t/e f!##!>in4 assi4n0ents !f err!rsA I THE INTE'7EDIATE APPELLATE CO;'T E''ED IN HOLDING THAT IN CASES OF 7A'INE CA'GO INS;'ANCE, THE'E IS A =A''ANTE OF SEA=O'THINESS BE THE CA'GO O=NE'. II THE INTE'7EDIATE APPELLATE CO;'T E''ED IN HOLDING THAT THE LOSS OF THE CA'GO IN THIS CASE =AS CA;SED BE MPE'ILS OF THE SHIPM AND NOT BE MPE'ILS OF THE SEA.M III THE INTE'7EDIATE APPELLATE CO;'T E''ED IN NOT O'DE'ING THE 'ET;'N TO PETITIONE' OF THE A7O;NT OF P),666.66 =HICH =AS DEPOSITED IN THE

T'IAL CO;'T AS SAL3AGE 3AL;E OF THE LOGS THAT =E'E 'ECO3E'ED. In t/eir first assi4n0ent !f err!r, t/e "etiti!ners c!nten* t/at t/e i0"#ie* >arrant1 !f sea>!rt/iness "r! i*e* f!r in t/e Insurance C!*e refers !n#1 t! t/e res"!nsi8i#it1 !f t/e s/i"!>ner >/! 0ust see t! it t/at /is s/i" is reas!na8#1 fit t! 0a9e in safet1 t/e c!nte0"#ate* !1a4e. T/e "etiti!ners state t/at a 0ere s/i""er !f car4!, /a in4 n! c!ntr!# ! er t/e s/i", /as n!t/in4 t! *! >it/ its sea>!rt/iness. T/e1 ar4ue t/at a car4! !>ner /as n! c!ntr!# ! er t/e structure !f t/e s/i", its ca8#es, anc/!rs, fue# an* "r! isi!ns, t/e 0anner !f #!a*in4 /is car4! an* t/e car4! !f !t/er s/i""ers, an* t/e /irin4 !f a sufficient nu08er !f c!0"etent !fficers an* sea0en. T/e "etiti!nersC ar4u0ents /a e n! 0erit. T/ere is n! *is"ute ! er t/e #ia8i#it1 !f t/e c!00!n carrier 7ani#a Ba1. In fact, it *i* n!t 8!t/er t! a""ea# t/e ?uesti!ne* *ecisi!n. H!>e er, t/e "etiti!ners state t/at 7ani#a Ba1 /as cease* !"eratin4 as a fir0 an* n!t/in4 0a1 8e rec! ere* fr!0 it. T/e1 are, t/eref!re, tr1in4 t! rec! er t/eir #!sses fr!0 t/e insurer. T/e #ia8i#it1 !f t/e insurance c!0"an1 is 4! erne* 81 #a>. Secti!n 11% !f t/e Insurance C!*e "r! i*esA In e er1 0arine insurance u"!n a s/i" !r frei4/t, !r frei4/ta4e, !r u"!n an1 t/in4 >/ic/ is t/e su8Bect !f 0arine insurance, a >arrant1 is i0"#ie* t/at t/e s/i" is sea>!rt/1. Secti!n -- !f t/e sa0e C!*e a#s! "r! i*es in "art.

7arine insurance inc#u*esA (1) Insurance a4ainst #!ss !f !r *a0a4e t!A e/ic#es, 4!!*s, frei4/ts,

(a) 3esse#s, craft, aircraft, car4!es, 0erc/an*ise, ...

T/ere >as n! #!!95!ut, an* 8!t/ t/at an* t/e rate !f s"ee* >ere c!ntrar1 t! t/e Cana*ian Statute. T/e e:ce"ti!n !f #!sses !ccasi!ne* 81 unsea>!rt/iness >as in effect a >arrant1 t/at a #!ss s/!u#* n!t 8e s! !ccasi!ne*, an* >/et/er t/e fact !f unsea>!rt/iness >ere 9n!>n !r un9n!>n >!u#* 8e i00ateria#. Since t/e #a> "r! i*es f!r an i0"#ie* >arrant1 !f sea>!rt/iness in e er1 c!ntract !f !r*inar1 0arine insurance, it 8ec!0es t/e !8#i4ati!n !f a car4! !>ner t! #!!9 f!r a re#ia8#e c!00!n carrier >/ic/ 9ee"s its esse#s in sea>!rt/1 c!n*iti!n. T/e s/i""er !f car4! 0a1 /a e n! c!ntr!# ! er t/e esse# 8ut /e /as fu## c!ntr!# in t/e c/!ice !f t/e c!00!n carrier t/at >i## trans"!rt /is 4!!*s. Or t/e car4! !>ner 0a1 enter int! a c!ntract !f insurance >/ic/ s"ecifica##1 "r! i*es t/at t/e insurer ans>ers n!t !n#1 f!r t/e "eri#s !f t/e sea 8ut a#s! "r! i*es f!r c! era4e !f "eri#s !f t/e s/i". =e are c!nstraine* t! a""#1 Secti!n 11% !f t/e Insurance C!*e t! t/e facts !f t/is case. As state* 81 t/e "ri ate res"!n*entsA In 0arine cases, t/e ris9s insure* a4ainst are M"eri#s !f t/e seaM (C/ute . N!rt/ 'i er Ins. C!., 7innT212 N= 2(2, .. AL' -%%). T/e "ur"!se !f suc/ insurance is "r!tecti!n a4ainst c!ntin4encies an* a4ainst "!ssi8#e *a0a4es an* suc/ a "!#ic1 *!es n!t c! er a #!ss !r inBur1 >/ic/ 0ust ine ita8#1 ta9e "#ace in t/e !r*inar1 c!urse !f t/in4s. T/ere is n! *!u8t t/at t/e ter0 C"eri#s !f t/e seaC e:ten*s !n#1 t! #!sses cause* 81 sea *a0a4e, !r 81 t/e i!#ence !f t/e e#e0ents, an* *!es n!t e08race a## #!sses /a""enin4 at sea. T/e1 insure a4ainst #!sses fr!0 e:tra!r*inar1 !ccurrences !n#1, suc/ as stress !f >eat/er, >in*s an* >a es, #i4/tnin4, te0"ests, r!c9s an* t/e #i9e. T/ese are un*erst!!* t!

Fr!0 t/e a8! e5?u!te* "r! isi!ns, t/ere can 8e n! 0ista9in4 t/e fact t/at t/e ter0 Mcar4!M can 8e t/e su8Bect !f 0arine insurance an* t/at !nce it is s! 0a*e, t/e i0"#ie* >arrant1 !f sea>!rt/iness i00e*iate#1 attac/es t! >/!e er is insurin4 t/e car4! >/et/er /e 8e t/e s/i"!>ner !r n!t. As >e /a e ru#e* in t/e case !f G! Tia!c! 1 Her0an!s . ;ni!n Insurance S!ciet1 !f Cant!n (26 P/i#. 26)A T/e sa0e c!nc#usi!n 0ust 8e reac/e* if t/e ?uesti!n 8e *iscusse* >it/ reference t! t/e sea>!rt/iness !f t/e s/i". It is uni ersa##1 acce"te* t/at in e er1 c!ntract !f insurance u"!n an1t/in4 >/ic/ is t/e su8Bect !f 0arine insurance, a >arrant1 is i0"#ie* t/at t/e s/i" s/a## 8e sea>!rt/1 at t/e ti0e !f t/e ince"ti!n !f t/e !1a4e. T/is ru#e is acce"te* in !ur !>n Insurance La> (Act N!. 222(, sec. 16&). ... 7!re! er, t/e fact t/at t/e unsea>!rt/iness !f t/e s/i" >as un9n!>n t! t/e insure* is i00ateria# in !r*inar1 0arine insurance an* 0a1 n!t 8e use* 81 /i0 as a *efense in !r*er t! rec! er !n t/e 0arine insurance "!#ic1. As >as /e#* in 'ic/e#ieu an* Ontari! Na . C!. B!st!n 7arine, Inc., C!. (1%& ;.S. 26&)A .

8e t/e M"eri#s !f t/e seaM referre* in t/e "!#ic1, an* n!t t/!se !r*inar1 "eri#s >/ic/ e er1 esse# 0ust enc!unter. MPeri#s !f t/e seaM /as 8een sai* t! inc#u*e !n#1 suc/ #!sses as are !f e:tra!r*inar1 nature, !r arise fr!0 s!0e ! er>/e#0in4 "!>er, >/ic/ cann!t 8e 4uar*e* a4ainst 81 t/e !r*inar1 e:erti!n !f /u0an s9i## an* "ru*ence. Da0a4e *!ne t! a esse# 81 "eri#s !f t/e sea inc#u*es e er1 s"ecies !f *a0a4es *!ne t! a esse# at sea, as *istin4uis/e* fr!0 t/e !r*inar1 >ear an* tear !f t/e !1a4e, an* *istinct fr!0 inBuries suffere* 81 t/e esse# in c!nse?uence !f /er n!t 8ein4 sea>!rt/1 at t/e !utset !f /er !1a4e (as in t/is case). It is a#s! t/e 4enera# ru#e t/at e er1t/in4 >/ic/ /a""ens t/ru t/e in/erent ice !f t/e t/in4, !r 81 t/e act !f t/e !>ners, 0aster !r s/i""er, s/a## n!t 8e re"ute* a "eri#, if n!t !t/er>ise 8!rne in t/e "!#ic1. (12 'CL !n Insurance, Sec. %)2, "". 126%5 1262$ Cia. *e Na e4aci!n . Fire0enCs Fun* Ins. C!., 2(( ;S &&, (2 L. e*. ()(, 2) S. Ct. 2.-). =it/ re4ar* t! t/e sec!n* assi4n0ent !f err!r, "etiti!ners 0aintain, t/at t/e #!ss !f t/e car4! >as cause* 81 t/e "eri#s !f t/e sea, n!t 81 t/e "eri#s !f t/e s/i" 8ecause as f!un* 81 t/e tria# c!urt, t/e 8ar4e >as turne* #!!se fr!0 t/e tu48!at east !f Ca8u#i P!int M>/ere it >as 8uffete* 81 st!r0 an* >a es.M 7!re! er, "etiti!ners a#s! 0aintain t/at 8arratr1, a4ainst >/ic/ t/e car4! >as a#s! insure*, e:iste* >/en t/e "ers!nne# !f t/e tu48!at an* t/e 8ar4e c!00itte* a 0ista9e 81 turnin4 #!!se t/e 8ar4e fr!0 t/e tu48!at east !f Ca8u#i P!int. T/e tria# c!urt a#s! f!un* t/at t/e stran*in4 an* f!un*erin4 !f 7a8#e 16 >as *ue t! i0"r!"er #!a*in4 !f t/e #!4s as >e## as t! a #ea9 in t/e 8ar4e >/ic/ c!nstitute* ne4#i4ence.

On t/e c!ntenti!n !f t/e "etiti!ners t/at t/e tria# c!urt f!un* t/at t/e #!ss >as !ccasi!ne* 81 t/e "eri#s !f t/e sea c/aracteriNe* 81 t/e Mst!r0 an* >a esM >/ic/ 8uffete* t/e esse#, t/e rec!r*s s/!> t/at t/e c!urt ru#e* !t/er>ise. It state*A ::: ::: :::

... T/e !t/er affir0ati e *efense !f *efen*ant Li4/tera4e, CT/at t/e su""!se* #!ss !f t/e #!4s >as !ccasi!ne* 81 f!rce 0aBeure... M>as n!t su""!rte* 81 t/e e i*ence. At t/e ti0e 7a8#e 16 san9, t/ere >as n! t1"/!!n 8ut !r*inar1 str!n4 >in* an* >a es, a c!n*iti!n >/ic/ is natura# an* n!r0a# in t/e !"en sea. T/e e i*ence s/!>s t/at t/e sin9in4 !f 7a8#e 16 >as *ue t! i0"r!"er #!a*in4 !f t/e #!4s !n !ne si*e s! t/at t/e 8ar4e >as ti#tin4 !n !ne si*e an* f!r t/at it *i* n!t na i4ate !n e en 9ee#$ t/at it >as n! #!n4er sea>!rt/1 t/at >as >/1 it *e e#!"e* #ea9$ t/at t/e "ers!nne# !f t/e tu48!at an* t/e 8ar4e c!00itte* a 0ista9e >/en it turne* #!!se t/e 8ar4e fr!0 t/e tu48!at east !f Ca8u#i "!int >/ere it >as 8uffete* 81 st!r0 an* >a es, >/i#e t/e tu48!at "r!cee*e* t! >est !f Ca8u#i "!int >/ere it >as "r!tecte* 81 t/e 0!untain si*e fr!0 t/e st!r0 an* >a es c!0in4 fr!0 t/e east *irecti!n. ...M In fact, in t/e "etiti!nersC c!0"#aint, it is a##e4e* t/at Mt/e 8ar4e 7a8#e 16 !f *efen*ant carrier *e e#!"e* a #ea9 >/ic/ a##!>e* >ater t! c!0e in an* t/at !ne !f t/e /atc/es !f sai* 8ar4e >as ne4#i4ent#1 #eft !"en 81 t/e "ers!n in c/ar4e t/ere!f causin4 0!re >ater t! c!0e in an* t/at Mt/e #!ss !f sai* "#aintiffsC car4! >as *ue t! t/e fau#t, ne4#i4ence, an*O!r #ac9 !f s9i## !f *efen*ant carrier an*O!r *efen*ant carrierCs re"resentati es !n 8ar4e 7a8#e 16.M

It is ?uite un0ista9a8#e t/at t/e #!ss !f t/e car4! >as *ue t! t/e "eri#s !f t/e s/i" rat/er t/an t/e "eri#s !f t/e sea. T/e facts c#ear#1 ne4ate t/e "etiti!nersC c#ai0 un*er t/e insurance "!#ic1. In t/e case !f G! Tia!c! 1 Her0an!s . ;ni!n Ins. S!ciet1 !f Cant!n, su"ra, >e /a* !ccasi!n t! e#a8!rate !n t/e ter0 M"eri#s !f t/e s/i".M =e ru#e*A It 0ust 8e c!nsi*ere* t! 8e sett#e*, furt/er0!re, t/at a #!ss >/ic/, in t/e !r*inar1 c!urse !f e ents, resu#ts fr!0 t/e natura# an* ine ita8#e acti!n !f t/e sea, fr!0 t/e !r*inar1 >ear an* tear !f t/e s/i", !r fr!0 t/e ne4#i4ent fai#ure !f t/e s/i"Cs !>ner t! "r! i*e t/e esse# >it/ "r!"er e?ui"0ent t! c!n e1 t/e car4! un*er !r*inar1 c!n*iti!ns, is n!t a "eri# !f t/e sea. Suc/ a #!ss is rat/er *ue t! >/at /as 8een a"t#1 ca##e* t/e M"eri# !f t/e s/i".M T/e insurer un*erta9es t! insure a4ainst "eri#s !f t/e sea an* si0i#ar "eri#s, n!t a4ainst "eri#s !f t/e s/i". As >as >e## sai* 81 L!r* Hersc/e## in =i#s!n, S!ns < C!. . O>ners !f Car4! "er t/e Fant/! (I1))(J, 12 A. C., .6%, .6-), t/ere 0ust, in !r*er t! 0a9e t/e insurer #ia8#e, 8e s!0e casua#t1, s!0et/in4 >/ic/ c!u#* n!t 8e f!reseen as !ne !f t/e necessar1 inci*ents !f t/e a* enture. T/e "ur"!se !f t/e "!#ic1 is t! secure an in*e0nit1 a4ainst acci*ents >/ic/ 0a1 /a""en, n!t a4ainst e ents >/ic/ 0ust /a""en. In t/e "resent case t/e entrance !f t/e sea >ater int! t/e s/i"Cs /!#* t/r!u4/ t/e *efecti e "i"e a#rea*1 *escri8e* >as n!t *ue t! an1 acci*ent >/ic/ /a""ene* *urin4 t/e !1a4e, 8ut t! t/e fai#ure !f t/e s/i"Cs !>ner "r!"er#1 t! re"air a *efect !f t/e e:istence !f >/ic/ /e >as a""rise*. T/e #!ss >as t/eref!re 0!re ana#!4!us t! t/at >/ic/ *irect#1 resu#ts

fr!0 si0"#e unsea>!rt/iness t/an t! t/at >/ic/ resu#t fr!0 t/e "eri#s !f t/e sea. ::: ::: :::

Suffice it t! sa1 t/at u"!n t/e aut/!rit1 !f t/!se cases t/ere is n! r!!0 t! *!u8t t/e #ia8i#it1 !f t/e s/i"!>ner f!r suc/ a #!ss as !ccurre* in t/is case. B1 "arit1 !f reas!nin4 t/e insurer is n!t #ia8#e$ f!r 4enera##1 s"ea9in4, t/e s/i"!>ner e:ce"ts t/e "eri#s !f t/e sea fr!0 /is en4a4e0ent un*er t/e 8i## !f #a*in4, >/i#e t/is is t/e er1 "eri#s a4ainst >/ic/ t/e insurer inten*s t! 4i e "r!tecti!n. As a""#ie* t! t/e "resent case it resu#ts t/at t/e !>ners !f t/e *a0a4e* rice 0ust #!!9 t! t/e s/i"!>ner f!r re*ress an* n!t t! t/e insurer. Neit/er can "etiti!ners a##e4e 8arratr1 !n t/e 8asis !f t/e fin*in4s s/!>in4 ne4#i4ence !n t/e "art !f t/e esse#Cs cre>. Barratr1 as *efine* in A0erican Insurance La> is Man1 >i##fu# 0isc!n*uct !n t/e "art !f 0aster !r cre> in "ursuance !f s!0e un#a>fu# !r frau*u#ent "ur"!se >it/!ut t/e c!nsent !f t/e !>ners, an* t! t/e "reBu*ice !f t/e !>nerCs interest.M (Sec. 1(1, ;.S. Insurance La>, ?u!te* in 3ance, Han*8!!9 !n La> !f Insurance, 1-.1, ". -2-.) Barratr1 necessari#1 re?uires a >i##fu# an* intenti!na# act in its c!00issi!n. N! /!nest err!r !f Bu*40ent !r 0ere ne4#i4ence, un#ess cri0ina##1 4r!ss, can 8e 8arratr1. (See 3ance !n La> !f Insurance, ". -2- an* cases cite* t/erein.) In t/e case at 8ar, t/ere is n! fin*in4 t/at t/e #!ss >as !ccasi!ne* 81 t/e >i##fu# !r frau*u#ent acts !f t/e

esse#Cs cre>. T/ere >as !n#1 si0"#e ne4#i4ence !r #ac9 !f s9i##. Hence, t/e sec!n* assi4n0ent !f err!r 0ust #i9e>ise 8e *is0isse*. Anent t/e t/ir* assi4n0ent !f err!r, >e a4ree >it/ t/e "etiti!ners t/at t/e a0!unt !f P),666.66 re"resentin4 t/e a0!unt !f t/e sa# a4e* #!4s s/!u#* /a e 8een a>ar*e* t! t/e0. H!>e er, t/is s/!u#* 8e *e*ucte* fr!0 t/e a0!unts >/ic/ /a e 8een a*Bu*icate* a4ainst 7ani#a Ba1 Li4/tera4e C!r"!rati!n 81 t/e tria# c!urt. =HE'EFO'E, t/e *ecisi!n a""ea#e* fr!0 is AFFI'7ED >it/ t/e 0!*ificati!n t/at t/e a0!unt !f P),666.66 re"resentin4 t/e a#ue !f t/e sa# a4e* #!4s >/ic/ >as !r*ere* t! 8e *e"!site* in t/e 7ani#a Ban9in4 C!r"!rati!n in t/e na0e !f Ci i# Case N!. )&.-- is /ere81 a>ar*e* an* !r*ere* "ai* t! t/e "etiti!ners. T/e #ia8i#it1 a*Bu*4e* a4ainst 7ani#a Ba1 Li4/tera4e C!r"!rati!n in t/e *ecisi!n !f t/e tria# c!urt is acc!r*in4#1 re*uce* 81 t/e sa0e a0!unt. SO O'DE'ED.

LA 'ASON SOCIAL MGO TIAOCO E HE'7ANOS,M "#aintiff5a""e##ant, s. ;NION INS;'ANCE SOCIETE OF CANTON, LTD., *efen*ant5a""e##ee. P. E. *e# '!sari! an* =. F. 7ue##er f!r a""e##ant. Cr!ssfie#* an* OCBrien f!r a""e##ee. ST'EET, +.A T/is is an acti!n !n a "!#ic1 !f 0arine insurance issue* 81 t/e ;ni!n Insurance S!ciet1 !f Cant!n, Lt*., u"!n a car4! !f rice 8e#!n4in4 t! t/e "#aintiffs, G! Tia!c! Br!t/ers, >/ic/ >as trans"!rte* in t/e ear#1 *a1s !f 7a1, 1-1., !n t/e stea0s/i" H!n*a4ua fr!0 t/e "!rt !f Sai4!n t! Ce8u. On *isc/ar4in4 t/e rice fr!0 !ne !f t/e c!0"art0ents in t/e after /!#*, u"!n arri a# at Ce8u, it >as *isc! ere* t/at !ne t/!usan* f!ur /un*re* se ent15t/ree sac9s an* 8een *a0a4es 81 sea >ater. T/e #!ss s! resu#tin4 t! t/e !>ners !f rice, after "r!"er *e*ucti!n /a* 8een 0a*e f!r t/e "!rti!n sa e*, >as t/ree t/!usan* ei4/t /un*re* se ent1 fi e "es!s an* t>ent15fi e centa !s (P%,)(..2.). T/e tria# c!urt f!un* t/at t/e inf#!> !f t/e sea >ater *urin4 t/e !1a4e >as *ue t! a *efect in !ne !f t/e *rain "i"es !f t/e s/i" an* c!nc#u*e* t/at t/e #!ss >as n!t c! ere* 81 t/e "!#ic1 !f insurance. +u*40ent >as acc!r*in4#1 entere* in fa !r !f t/e *efen*ant an* t/e "#aintiffs a""ea#e*. T/e facts >it/ reference t! t/e 0anner in >/ic/ t/e sea >ater effecte* entrance int! t/e /!#* 0a1 8e su00ariNe* as f!##!>s, su8stantia##1 in acc!r*ance >it/ t/e fin*in4s !f t/e tria# c!urtA

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a EN BANC G.'. N!. 1%-)% Se"te08er 1, 1-1-

T/e *rain "i"e >/ic/ ser e* as a *isc/ar4e fr!0 t/e >ater c#!set "asse* *!>n t/r!u4/ t/e c!0"art0ent >/ere t/e rice in ?uesti!n >as st!>e* an* t/ence !ut t! sea t/r!u4/ t/e >a## !f t/e c!0"art0ent, >/ic/ >as a "art !f t/e >a## !f t/e s/i". T/e B!int !r e#8!> >/ere t/e "i"e c/an4e* its *irecti!n >as !f cast ir!n$ an* in c!urse !f ti0e it /a* 8ec!0e c!rr!*e* an* a8ra*e* unti# a #!n4itu*ina# !"enin4 /a* a""eare* in t/e "i"e a8!ut !ne inc/ in #en4t/. T/is /!#e /a* 8een in e:istence 8ef!re t/e !1a4e >as 8e4un, an* an atte0"t /a* 8een 0a*e t! re"air it 81 fi##in4 >it/ ce0ent an* 8!#tin4 ! er it a stri" !f ir!n. T/e effect !f #!a*in4 t/e 8!at >as t! su80er4e t/e ent, !r !rifice, !f t/e "i"e unti# it >as a8!ut 1) inc/es !r 2 feet 8e#!> t/e #e e# !f t/e sea. As a c!nse?uence t/e sea >ater r!se in t/e "i"e. Na i4ati!n un*er t/ese c!n*iti!ns resu#te* in t/e >as/in4 !ut !f t/e ce0ent5fi##in4 fr!0 t/e acti!n !f t/e sea >ater, t/us "er0ittin4 t/e c!ntinue* f#!> !f t/e sa#t >ater int! t/e c!0"art0ent !f rice. T/e c!urt f!un* in effect t/at t/e !"enin4 a8! e *escri8e* /a* resu#te* in c!urse !f ti0e fr!0 !r*inar1 >ear an* tear an* n!t fr!0 t/e strainin4 !f t/e s/i" in r!u4/ >eat/er !n t/at !1a4e. T/e c!urt a#s! f!un* t/at t/e re"airs t/at /a* 8een 0a*e !n t/e "i"e >ere s#! en#1 an* *efecti e an* t/at, 81 reas!n !f t/e c!n*iti!n !f t/is "i"e, t/e s/i" >as n!t "r!"er#1 e?ui""e* t! recei e t/e rice at t/e ti0e t/e !1a4e >as 8e4un. F!r t/is reas!n t/e c!urt /e#* t/at t/e s/i" >as unsea>!rt/1. T/e "!#ic1 !f insurance >as si4ne* u"!n a f!r0 #!n4 in use a0!n4 c!0"anies en4a4e* in 0ariti0e insurance. It "ur"!rts t! insure t/e car4! fr!0 t/e f!##!>in4 a0!n4 !t/er ris9sA MPeri#s . . . !f t/e seas, 0en !f >ar,

fire, ene0ies, "irates, r! ers, t/ie es, Bettis!ns, . . . 8arratr1 !f t/e 0aster an* 0ariners, an* !f a## !t/er "eri#s, #!sses, an* 0isf!rtunes t/at /a e !r s/a## c!0e t! t/e /urt, *etri0ent, !r *a0a4e !f t/e sai* 4!!*s an* 0erc/an*ise !r an1 "art t/ere!f.M T/e ?uesti!n >/et/er t/e insurer is #ia8#e !n t/is "!#ic1 f!r t/e #!ss cause* in t/e 0anner a8! e state* "resents t>! "/ases >/ic/ are in a 0anner in !# e* >it/ eac/ !t/er. One /as reference t! t/e 0eanin4 !f t/e e:"ressi!n M"eri#s !f t/e seas an* a## !t/er "eri#s, #!sses, an* 0isf!rtunes,M as use* in t/e "!#ic1$ t/e !t/er /as reference t! t/e i0"#ie* >arrant1, !n t/e "art !f t/e insure*, as t! t/e sea>!rt/iness !f t/e s/i". T/e 0eanin4 !f t/e e:"ressi!n M"eri#s . . . !f t/e seas . . . an* a## !t/er "eri#s, #!sses, an* 0isf!rtunes,M use* in *escri8in4 t/e ris9s c! ere* 81 "!#icies !f 0arine insurance, /as 8een t/e su8Bect !f fre?uent *iscussi!n$ an* certain "r!"!siti!ns re#ati e t/eret! are n!> s! 4enera##1 acce"te* as t! 8e c!nsi*ere* *efinite#1 sett#e*. In t/e first "#ace it is *eter0ine* t/at t/e >!r*s Ma## !t/er "eri#s, #!sses, an* 0isf!rtunesM are t! 8e inter"rete* as c! erin4 ris9s >/ic/ are !f #i9e 9in* (eBus*e0 4eneris) >it/ t/e "articu#ar ris9s >/ic/ are enu0erate* in t/e "rece*in4 "art !f t/e sa0e c#ause !f t/e c!ntract. MAcc!r*in4 t! t/e !r*inar1 ru#es !f c!nstructi!n,M sai* L!r* 7acna4/ten in T/a0es an* 7erse1 7arine Insurance C!. s. Ha0i#t!n, Fraser < C!. (I1))(J), 12 A. C., 2)2, .61), Mt/ese >!r*s 0ust 8e inter"rete* >it/ reference t! t/e >!r*s >/ic/ i00e*iate#1 "rece*e t/e0. T/e1 >ere n! *!u8t inserte* in !r*er t! "re ent *is"utes f!un*e* !n nice

*istincti!ns. T/eir !ffice is t! c! er in ter0s >/ate er 0a1 8e >it/in t/e s"irit !f t/e cases "re i!us#1 enu0erate*, an* s! t/e1 /a e a 4reater !r #ess effect as a narr!>er !r 8r!a*er ie> is ta9en !f t/!se cases. F!r e:a0"#e, if t/e e:"ressi!n C"eri#s !f t/e seasC is 4i en its >i*est sense t/e 4enera# >!r*s /a e #itt#e !r n! effect as a""#ie* t! t/at case. If n! t/e !t/er /an* t/at e:"ressi!n is t! recei e a #i0ite* c!nstructi!n, as a""arent#1 it *i* in Cu##en s. But#er (. 7. < S., 2&1), an* #!ss 81 "eri#s !f t/e seas is t! 8e c!nfine* t! #!ss e: 0arinae te0"estatis *iscri0ine, t/e 4enera# >!r*s 8ec!0e 0!st i0"!rtant. But sti##, e er since t/e case !f Cu##en s. But#er, >/en t/e1 first 8eca0e t/e su8Bect !f Bu*icia# c!nstructi!n, t/e1 /a e a#>a1s 8een /e#* !r assu0e* t! 8e restricte* t! cases Ca9in t!C !r rese08#in4C !r C!f t/e sa0e 9in* asC t/!se s"ecia##1 0enti!ne*. I see n! reas!n f!r *e"artin4 fr!0 t/is sett#e* ru#e. In 0arine insurance it is a8! e a## t/in4s necessar1 t! a8i*e 81 sett#e* ru#es an* t! a !i* an1t/in4 #i9e n! e# refine0ents !r a ne> *e"arture.M It 0ust 8e c!nsi*ere* t! 8e sett#e*, furt/er0!re, t/at a #!ss >/ic/, in t/e !r*inar1 c!urse !f e ents, resu#ts fr!0 t/e natura# an* ine ita8#e acti!n !f t/e sea, fr!0 t/e !r*inar1 >ear an* tear !f t/e s/i", !r fr!0 t/e ne4#i4ent fai#ure !f t/e s/i"Cs !>ner t! "r! i*e t/e esse# >it/ "r!"er e?ui"0ent t! c!n e1 t/e car4! un*er !r*inar1 c!n*iti!ns, is n!t a "eri# !f t/e sea. Suc/ a #!ss is rat/er *ue t! >/at /as 8een a"t#1 ca##e* t/e M"eri# !f t/e s/i".M T/e insurer un*erta9es t! insure a4ainst "eri#s !f t/e sea an* si0i#ar "eri#s, n!t a4ainst "eri#s !f t/e s/i". As >as >e## sai* 81 L!r* Hersc/e## in =i#s!n, S!ns < C!. s. O>ners !f Car4! "er t/e Fant/! (I1))(J, 12 A. C., .6%,.6-), t/ere 0ust, in !r*er t! 0a9e t/e insurer #ia8#e, 8e Ms!0e casua#t1, s!0et/in4 >/ic/ c!u#* n!t 8e f!reseen as !ne !f t/e necessar1

inci*ents !f t/e a* enture. T/e "ur"!se !f t/e "!#ic1 is t! secure an in*e0nit1 a4ainst acci*ents >/ic/ 0a1 /a""en, n!t a4ainst e ents >/ic/ 0ust /a""en.M In t/e "resent case t/e entrance !f t/e sea >ater int! t/e s/i"Cs /!#* t/r!u4/ t/e *efecti e "i"e a#rea*1 *escri8e* >as n!t *ue t! an1 acci*ent >/ic/ /a""ene* *urin4 t/e !1a4e, 8ut t! t/e fai#ure !f t/e s/i"Cs !>ner "r!"er#1 t! re"air a *efect !f t/e e:istence !f >/ic/ /e >as a""rise*. T/e #!ss >as t/eref!re 0!re ana#!4!us t! t/at >/ic/ *irect#1 resu#ts fr!0 si0"#e unsea>!rt/iness t/an t! t/at >/ic/ resu#ts fr!0 "eri#s !f t/e sea. T/e first !f t/e t>! *ecisi!ns !f t/e H!use !f L!r*s fr!0 >/ic/ >e /a e ?u!te* (T/a0es an* 7erse1 7arine Insurance C!. s. Ha0i#t!n, Fraser < C!. I1))(J, 12 A. C., 2)2) ar!se u"!n t/e f!##!>in4 state !f factsA In 7arc/, 1))2, t/e Inc/0aree >as #1in4 at anc/!r !ff Dia0!n* Is#an* an* >as a8!ut t! start u"!n /er !1a4e. T! t/is en* it 8eca0e necessar1 t! fi## u" /er 8!i#ers. T/ere >as a *!n9e15en4ine >it/ a *!n9e15 "u0" !n 8!ar*, an* t/e *!n9e15en4ine >as set t! "u0" u" >ater fr!0 t/e sea int! t/e 8!i#ers. T/!se in c/ar4e !f t/e !"erati!n *i* n!t ta9e t/e "recauti!n !f 0a9in4 sure t/at t/e a# e !f t/e a"erture #ea*in4 int! !ne !f t/e 8!i#ers >as !"en. T/is a# e /a""ene* t! 8e c#!se*. T/e resu#t >as t/at t/e >ater 8ein4 una8#e t! 0a9e its >a1 int! t/e 8!i#er >as f!rce* 8ac9 an* s"#it t/e air5c/a08er an* s! *isa8#e* t/e "u0". It >as /e#* t/at >/et/er t/e inBur1 !ccurre* t/r!u4/ ne4#i4ence !r acci*enta##1 >it/!ut ne4#i4ence, it >as n!t c! ere* 81 t/e "!#ic1, since t/e #!ss *i* n!t fa## eit/er un*er t/e >!r*s M"eri#s !f t/e seasM !r un*er t/e 0!re 4enera# >!r*s Ma## !t/er "eri#s, #!sses, an* 0isf!rtunes.M L!r* Bra0>e##, in t/e c!urse !f /is !"ini!n ?u!te* >it/

a""r!8ati!n as *efiniti!n 4i en 81 L!"es L.+. in Pan*!rf s. Ha0i#t!n (1& @. B. D., &2-), >/ic/ is as f!##!>sA In a sea5>!rt/1 s/i" *a0a4e t! 4!!*s cause* 81 t/e acti!n !f t/e sea *urin4 transit n!t attri8uta8#e t! t/e fau#t !f an18!*1, is a *a0a4e fr!0 a "eri# !f t/e sea. T/e sec!n* !f t/e *ecisi!n fr!0 t/e H!use !f L!r*s fr!0 >/ic/ >e /a e ?u!te* (=i#s!n, S!n < C!. s. !>ners !f Car4! "er t/e Fant/! I1))(J, 12 A. C., .6%) ar!se u"!n t/e f!##!>in4 factsA T/e !>ners !f certain car4! e08ar9e* t/e sa0e u"!n t/e stea0s/i" Fant/!. A c!##isi!n t!!9 "#ace in a f!4 8et>een t/is esse# an* an!t/er s/i", 3a#uta. An acti!n >as t/ereu"!n institute* 81 t/e !>ners !f t/e car4! a4ainst t/e !>ners !f t/e Fant/!. It >as /e#* t/at if t/e c!##isi!n !ccurre* >it/!ut fau#t !n t/e "art !f t/e carr1in4 s/i", t/e !>ners >ere n!t #ia8#e f!r t/e a#ue !f t/e car4! #!st 81 suc/ c!##isi!n. Sti## an!t/er case >as *eci*e* in t/e H!use !f L!r*s u"!n t/e sa0e *ate as t/e "rece*in4 t>!, >/ic/ is e?ua##1 instructi e as t/e !t/ers u"!n t/e ?uesti!n n!> un*er c!nsi*erati!n. =e refer t! Ha0i#t!n, Fraser < C!. s. Pan*!rf < C!. (I1))(J, 12 A. C., .1)), >/ere it a""eare* t/at rice >as s/i""e* un*er a c/arter "art1 an* 8i##s !f #a*in4 >/ic/ e:"ecte* M*an4ers an* acci*ent !f t/e sea.M Durin4 t/e !1a4e rats 4na>e* a /!#e in a "i"e !n 8!ar* t/e s/i", >/ere81 sea >ater effecte* an entrance int! t/e s/i"Cs /!#* an* *a0a4e* t/e rice. It a""eare* t/at t/ere >as n! ne4#ect !r *efau#t !n t/e "art !f t/e s/i"!>ners !r t/eir ser ants in t/e 0atter !f atten*in4 t! t/e car4!. It >as /e#* t/at t/is #!ss resu#te* fr!0 an acci*ent !r "eri# !f t/e sea an* t/at t/e s/i"!>ners >ere n!t res"!nsi8#e. Sai* Bra0>e##A MN! ?uesti!n !f ne4#i4ence e:ists in t/is case. T/e *a0a4e >as cause* 81 t/e sea in t/e

c!urse !f na i4ati!n >it/ n! *efau#t in an1 !ne. I a0, t/eref!re, !f !"ini!n t/at t/e *a0a4e >as cause* 81 "eri# !f t/e sea >it/in t/e 0eanin4 !f t/e 8i## !f #a*in4.M T/e "!int >/ic/ *iscri0inates t/is *ecisi!n fr!0 t/at n!> 8ef!re us is t/at in t/e "resent case t/e ne4#i4ence !f t/e s/i"!>ners 0ust 8e acce"te* as esta8#is/e*. ;n*!u8te*#1, if in Ha0i#t!n, Fraser < C!. s. Pan*!rf < C!. I1))(J, 12 A. C., .1)), it /a* a""eare* t/at t/is /!#* /a* 8een 4na>e* 81 t/e rats "ri!r t! t/is !1a4e an* t/e !>ners, after /a in4 t/eir attenti!n *irecte* t! it, /a* fai#e* t! 0a9e a*e?uate re"airs, t/e s/i" >!u#* /a e 8een #ia8#e. T/e t/ree *ecisi!ns in t/e H!use !f L!r*s a8! e referre* t! c!ntain e#a8!rate *iscussi!ns c!ncernin4 t/e #ia8i#it1 !f s/i"!>ners an* insurers, res"ecti e#1, f!r *a0a4e /a""enin4 t! car4! in t/e c!urse !f a sea !1a4e$ an* it >!u#* 8e "resu0"tu!us f!r us t! un*erta9e t! a** t! >/at /as 8een t/ere sai* 81 t/e #earne* Bu*4es !f t/at /i4/ c!urt. Suffice it t! sa1 t/at u"!n t/e aut/!rit1 !f t/!se cases t/ere is n! r!!0 t! *!u8t t/e #ia8i#it1 !f t/e s/i"!>ner f!r suc/ a #!ss as !ccurre* in t/is case. B1 "arit1 !f reas!nin4 t/e insurer is n!t #ia8#e$ f!r, 4enera##1 s"ea9in4, t/e s/i"!>ner e:ce"ts t/e "eri#s !f t/e sea fr!0 /is en4a4e0ent un*er t/e 8i## !f #a*in4, >/i#e t/is is t/e er1 "eri# a4ainst >/ic/ t/e insurer inten*s t! 4i e "r!tecti!n. As a""#ie* t! t/e "resent case it resu#ts t/at t/e !>ners !f t/e *a0a4es rice 0ust #!!9 t! t/e s/i"!>ner f!r re*ress an* n!t t! t/e insurer. T/e sa0e c!nc#usi!n 0ust 8e reac/e* if t/e ?uesti!n 8e *iscusse* >it/ reference t! t/e sea>!rt/iness !f t/e s/i". It is uni ersa##1 acce"te* t/at in e er1 c!ntract !f insurance u"!n an1t/in4 >/ic/ is t/e su8Bect !f 0arine insurance, a >arrant1 is i0"#ie* t/at

t/e s/i" s/a## 8e sea>!rt/1 at t/e ti0e !f t/e ince"ti!n !f t/e !1a4e. T/is ru#e is acce"te* in !ur !>n Insurance La> (Act N!. 222(, sec. 16&). It is a#s! >e## sett#e* t/at a s/i" >/ic/ is sea>!rt/1 f!r t/e "ur"!se !f insurance u"!n t/e s/i" 0a1 1et 8e unsea>!rt/1 f!r t/e "ur"!se !f insurance u"!n t/e car4! (Act N!. 222(, sec. 16&). In Stee# s. State Line Stea0s/i" C!. (I1)((J, L. '. % A. C., (2), a car4! !f >/eat >as #a*en u"!n a s/i" >/ic/ /a* a "!rt5/!#e insecure#1 fastene* at t/e ti0e !f t/e #a*in4. T/is "!rt5/!#e >as a8!ut !ne f!!t a8! e t/e >ater #ine$ an* in t/e c!urse !f t/e !1a4e sea >ater entere* t/e c!0"art0ent >/ere t/e >/eat >as st!res an* *a0a4e* t/e car4!. It >as /e#* t/at t/e s/i" >as unsea>!rt/1 >it/ reference t! t/e car4! in ?uesti!n. In Gi#r!1, S!ns < C!. s. Price < C!. (I1)-%J, 1) A. C., .&), a car4! !f Bute >as s/i""e*. Durin4 t/e !1a4e t/e esse# enc!untere* st!r01 >eat/er, as a c!nse?uence !f >/ic/ t/e car4! s/ifte* its "!siti!n an* 8r!9e a "i"e #ea*in4 *!>n t/r!u4/ t/e /!#* fr!0 t/e >ater c#!set, >it/ resu#t t/at >ater entere* t/e esse# an* t/e Bute >as *a0a4e*. It >as f!un* t/at t/e car4! >as i0"r!"er#1 st!>e* an* t/at t/e !>ners !f t/e s/i" >ere c/ar4ea8#e >it/ ne4#i4ence f!r fai#ure t! "r!tect t/e "i"e 81 "uttin4 a case ! er it. It >as acc!r*in4#1 /e#* t/at t/e s/i" >as unsea>!rt/1. Fr!0 >/at /as 8een sai* it f!##!>s t/at t/e tria# c!urt c!00itte* n! err!r in a8s!# in4 t/e *efen*ant fr!0 t/e c!0"#aint. T/e Bu*40ent 0ust t/eref!re 8e affir0e*, an* it is s! !r*ere*, >it/ c!sts.

SECOND DI3ISION G.'. N!. (&12. +une %6, 1-)(

CATHAE INS;'ANCE CO., "etiti!ner, s. HON. CO;'T OF APPEALS, an* 'E7INGTON IND;ST'IAL SALES CO'PO'ATION, res"!n*ents.

PA'AS, +.A T/is "etiti!n see9s t/e re ie> !f t/e *ecisi!n !f t/e C!urt !f A""ea#s 1 in CA5G.'. C3 N!. 6&..- affir0in4 t/e *ecisi!n !f t/e 'e4i!na# Tria# C!urt ('TC), 2 Nati!na# Ca"ita# 'e4i!n (NC') 7ani#a, Branc/ %) an* t/e 'es!#uti!n !f t/e sai* a""e##ate c!urt *en1in4 "etiti!nerCs 0!ti!n f!r rec!nsi*erati!n. Ori4ina##1, t/is >as a c!0"#aint fi#e* 81 "ri ate res"!n*ent c!r"!rati!n a4ainst "etiti!ner (t/en *efen*ant) c!0"an1 see9in4 c!##ecti!n !f t/e su0 !f P)&),%%-.1. re"resentin4 "ri ate res"!n*entCs #!sses an* *a0a4es incurre* in a s/i"0ent !f sea0#ess stee# "i"es un*er an insurance c!ntract in fa !r !f t/e sai* "ri ate res"!n*ent as t/e insure*, c!nsi4nee !r i0"!rter !f af!resai* 0erc/an*ise >/i#e in transit fr!0 +a"an t! t/e P/i#i""ines !n 8!ar* esse# SS MEastern 7ariner.M T/e t!ta# a#ue !f t/e s/i"0ent >as P2,)-2,2&%.)% at t/e "re ai#in4 rate !f P(.-. t! a *!##ar in +une an* +u#1 1-)2, >/en t/e s/i"0ent >as 0a*e.

S;P'E7E CO;'T 7ani#a

T/e tria# c!urt *eci*e* in fa !r !f "ri ate res"!n*ent c!r"!rati!n 81 !r*erin4 "etiti!ner t! "a1 it t/e su0 !f P)&&,%%-.1. as its rec! era8#e insure* #!ss e?ui a#ent t! %6U !f t/e a#ue !f t/e sea0#ess stee# "i"es$ !r*erin4 "etiti!ner t! "a1 "ri ate res"!n*ent interest !n t/e af!recite* a0!unt at t/e rate !f %2U !r *!u8#e t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar* "er annu0 fr!0 Fe8ruar1 %, 1-)2 !r -6 *a1s fr!0 "ri ate res"!n*entCs su80issi!n !f "r!!f !f #!ss t! "etiti!ner unti# "ai* as "r! i*e* in t/e sett#e0ent !f c#ai0 "r! isi!n !f t/e "!#ic1$ an* !r*erin4 "etiti!ner t! "a1 "ri ate res"!n*ent certain a0!unts f!r 0arine sur e1!rCs fee, att!rne1Cs fees an* c!sts !f t/e suit. 'es"!n*ent in its c!00ent !n t/e "etiti!n, c!nten*s t/atA 1. C! era4e !f "ri ate res"!n*entCs #!ss un*er t/e insurance "!#ic1 issue* 81 "etiti!ner is un0ista9a8#e. 2. A##e4e* c!ntractua# #i0itati!ns c!ntaine* in insurance "!#icies are re4ar*e* >it/ e:tre0e cauti!n 81 c!urts an* are t! 8e strict#1 c!nstrue* a4ainst t/e insurer$ !8scure "/rases an* e:ce"ti!ns s/!u#* n!t 8e a##!>e* t! *efeat t/e er1 "ur"!se f!r >/ic/ t/e "!#ic1 >as "r!cure*. %. 'ust is n!t an in/erent ice !f t/e sea0#ess stee# "i"es >it/!ut interference !f e:terna# fact!rs. 2. N! 0atter /!> "etiti!ner 0i4/t >ant it !t/er>ise, t/e 1.5*a1 c#ause !f t/e "!#ic1 /a* 8een f!rec#!se* in t/e "re5tria# !r*er an* it >as n!t e en raise* in "etiti!nerCs ans>er t! "ri ate res"!n*entCs c!0"#aint.

.. T/e *ecisi!n >as c!rrect in n!t /!#*in4 t/at t/e /ea 1 rustin4 !f t/e sea0#ess stee# "i"es *i* n!t !ccur *urin4 t/e !1a4e !f ( *a1s fr!0 +u#1 1 t! +u#1 (, 1-)1. &. T/e a##e4e* #ac9 !f su""!se* 8a* !r*er sur e1 fr!0 t/e arrastre ca"ita#iNe* !n 81 "etiti!ner >as 0!re t/an c#arifie* 81 n! #ess t/an 2 >itnesses. (. T/e "#acin4 !f n!tati!n Mrust1M in t/e >a1 8i##s is n!t !n#1 "ri ate res"!n*entCs ri4/t 8ut a natura# an* s"!ntane!us reacti!n !f >/!e er recei e* t/e sea0#ess stee# "i"es in a rust1 c!n*iti!n at "ri ate res"!n*entCs 8!*e4a. ). T/e C!urt !f A""ea#s *i* n!t en4a4e in an1 4uess>!r9 !r s"ecu#ati!n in c!nc#u*in4 a #!ss a##!>ance !f %6U in t/e a0!unt !f P)&),%%-.1.. -. T/e rate !f %2U "er annu0 *!u8#e t/e cei#in4 "rescri8e* 81 t/e 7!netar1 B!ar* is t/e rate !f interest fi:e* 81 t/e Insurance P!#ic1 itse#f an* t/e Insurance C!*e. T/e "etiti!ner /!>e er 0aintains t/atA (1) Pri ate res"!n*ent *!es n!t *is"ute t/e fact t/at, c!ntrar1 t! t/e fin*in4 !f t/e res"!n*ent C!urt (t/e "etiti!ner /as fai#e* Mt! "resent an1 e i*ence !f an1 ia8#e e:e"ti!n t! t/e a""#icati!n !f t/e "!#ic1M) t/ere is in fact an e:"ress e:e"ti!n t! t/e a""#icati!n !f t/e "!#ic1. (2) As a* erte* t! in t/e Petiti!n f!r 'e ie>, "ri ate res"!n*ent /as a*0itte* t/at t/e ?uesti!n s/i"0ent in n!t c! ere* 81a M s?uare "r! isi!n !f t/e c!ntract,M 8ut "ri ate res"!n*ent c#ai0s i0"#ie* c! era4e fr!0

t/e "/rase M "eri#s !f t/e seaM 0enti!ne* in t/e !"enin4 sentence* !f t/e "!#ic1. (%) T/e insistence !f "ri ate res"!n*ent rustin4 is a "eri# !f t/e sea is err!ne!us. t/at

!r c!nBectures an* t/e a0!unt !f #ess /as n!t 8een "r! en 81 c!0"etent, satisfact!r1 an* c#ear e i*ence. =e fin* n! 0erit in t/is "etiti!n. T/ere is n! ?uesti!n t/at t/e rustin4 !f stee# "i"es in t/e c!urse !f a !1a4e is a M"eri# !f t/e seaM in ie> !f t/e t!## !n t/e car4! !f >in*, >ater, an* sa#t c!n*iti!ns. At an1 rate if t/e insurer cann!t 8e /e#* acc!unta8#e t/eref!r, =e >!u#* fai# t! !8ser e a car*ina# ru#e in t/e inter"retati!n !f c!ntracts, na0e#1, t/at an1 a08i4uit1 t/erein s/!u#* 8e c!nstrue* a4ainst t/e 0a9erOissuerO*rafter t/ere!f, na0e#1, t/e insurer. Besi*es t/e "recise "ur"!se !f insurin4 car4! *urin4 a !1a4e >!u#* 8e ren*ere* fruit#ess. Be it n!te* t/at an1 attac9 !f t/e 1.5*a1 c#ause in t/e "!#ic1 >as f!rec#!se* ri4/t in t/e "re5tria# c!nference. Fina##1, it is a car*ina# ru#e t/at sa e f!r certain e:ce"ti!ns, fin*in4s !f facts !f t/e a""e##ate tri8una# are 8in*in4 !n ;s. N!t !ne !f sai* e:ce"ti!ns can a""#1 t! t/is case. =HE'EFO'E, t/is "etiti!n is /ere81 DENIED, an* t/e assai#e* *ecisi!n !f t/e C!urt !f A""ea#s is /ere81 AFFI'7ED. SO O'DE'ED.

(2) Pri ate res"!n*ent inaccurate#1 in !9es t/e ru#e !f strict c!nstructi!n a4ainst insurer un*er t/e 4uise !f c!nstructi!n in !r*er t! i0"art a n!n5e:istin4 a08i4uit1 !r *!u8t int! t/e "!#ic1 s! as t! res!# e it a4ainst t/e insurer. (.) Pri ate res"!n*ent >/i#e i0"#ie*#1 a*0ittin4 t/at a #!ss !ccasi!ne* 81 an in/erent *efect !r ice in t/e insure* artic#e is n!t >it/in t/e ter0s !f t/e "!#ic1, err!ne!us#1 insists t/at rustin4 is n!t an in/erent ice !r in t/e nature !f stee# "i"es. (&) 'ustin4 is n!t a ris9 insure* a4ainst, since a ris9 t! 8e insure* a4ainst s/!u#* 8e a casua#t1 !r s!0e casua#t1, s!0et/in4 >/ic/ c!u#* n!t 8e f!reseen as !ne !f t/e necessar1 inci*ents !f a* enture. (() A fact ca"a8#e !f un?uesti!na8#e *e0!nstrati!n !r !f "u8#ic 9n!>#e*4e nee*s n! e i*ence. T/is fact !f un?uesti!na8#e *e0!nstrati!n !r !f "u8#ic 9n!>#e*4e is t/at /ea 1 rustin4 !f stee# !r ir!n "i"es cann!t !ccur >it/in a "eri!* !f a se en (() *a1 !1a4e. Besi*es, "etiti!ner /a* intr!*uce* t/e c#ear car4! recei"ts !r ta##1 s/eets in*icatin4 t/at t/ere >as n! *a0a4e !n t/e stee# "i"es *urin4 t/e !1a4e. ()) T/e e i*ence !f "ri ate res"!n*ent 8etra1s t/e fact t/at t/e acc!unt !f P)&),%%-.1. a>ar*e* 81 t/e res"!n*ent C!urt is f!un*e* !n s"ecu#ati!n, sur0ises

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a

SECOND DI3ISION G.'. N!. ).121 N! e08er 2), 1-)T/is is an acti!n 8r!u4/t 81 t/e c!nsi4nee !f t/e s/i"0ent !f fis/0ea# #!a*e* !n 8!ar* t/e esse# SS B!u4ain i##e an* un#!a*e* at t/e P!rt !f 7ani#a !n !r a8!ut Dece08er 11, 1-(& an* see9s t! rec! er fr!0 t/e *efen*ant insurance c!0"an1 t/e a0!unt !f P.1,.&).&2 re"resentin4 *a0a4es t! sai* s/i"0ent >/ic/ /as 8een insure* 81 t/e *efen*ant insurance c!0"an1 un*er P!#ic1 N!. 752&(). T/e *efen*ant 8r!u4/t a t/ir* "art1 c!0"#aint a4ainst t/ir* "art1 *efen*ants C!0"a4nie 7ariti0e Des C/ar4eurs 'eunis an*O!r E. 'aN!n, Inc. see9in4 Bu*40ent a4ainst t/e t/ir* (sic) *efen*ants in case +u*40ent is ren*ere* a4ainst t/e t/ir* "art1 "#aintiff. It a""ears fr!0 t/e e i*ence "resente* t/at in Dece08er 1-(&, "#aintiff insure* sai* s/i"0ent >it/ *efen*ant insurance c!0"an1 un*er sai* car4! P!#ic1 N!. 752&() f!r t/e su0 !f P2&(,&.%..- f!r t/e 4!!*s *escri8e* as &66 0etric t!ns !f fis/0ea# in ne> 4unn1 8a4s !f -6 9i#!s eac/ fr!0 Ban49!9, T/ai#an* t! 7ani#a a4ainst a## ris9s un*er >are/!use t! >are/!use ter0s. Actua##1, >/at >as i0"!rte* >as .-.-26 0etric t!ns n!t &66 t!ns at b%-..22 a t!n CNF 7ani#a. T/e fis/0ea# in &&& ne> 4unn1 8a4s >ere un#!a*e* fr!0 t/e s/i" !n Dece08er 11, 1-(& at 7ani#a unt! t/e arrastre c!ntract!r E. 'aN!n, Inc. an* *efen*antCs sur e1!r ascertaine* an* certifie* t/at in suc/ *isc/ar4e 16. 8a4s >ere in 8a* !r*er c!n*iti!n as B!int#1 sur e1e* 81 t/e s/i"Cs a4ent an* t/e arrastre c!ntract!r. T/e c!n*iti!n !f t/e 8a* !r*er >as ref#ecte* in t/e turn ! er sur e1 re"!rt !f Ba* Or*er car4!es N!s. 126%26 t! 126%22, as E:/i8it C52 c!nsistin4 !f t/ree (%) "a4es >/ic/ are a#s! E:/i8its 2, . an* &5 'aN!n. T/e car4! >as a#s! sur e1e* 81 t/e arrastre c!ntract!r 8ef!re *e#i er1 !f t/e car4! t! t/e c!nsi4nee an* t/e c!n*iti!n !f t/e car4! !n suc/ *e#i er1 >as ref#ecte* in E. 'aN!nCs Ba*

FILIPINO 7E'CHANTS INS;'ANCE CO., INC., "etiti!ner, s. CO;'T OF APPEALS an* CHOA TIED SENG, res"!n*ents. Ba#4!s < PereN La> Offices f!r "etiti!ner. La"uN La> !ffice f!r "ri ate res"!n*ent.

'EGALADO, +.A T/is is a re ie> !f t/e *ecisi!n !f t/e C!urt !f A""ea#s, "r!0u#4ate* !n +u#1 1-,1-)), t/e *is"!siti e "art !f >/ic/ rea*sA =HE'EFO'E, t/e Bu*40ent a""ea#e* fr!0 is affir0e* ins!far as it !r*ers *efen*ant Fi#i"in! 7erc/ants Insurance C!0"an1 t! "a1 t/e "#aintiff t/e su0 !f P.1,.&).&2 >it/ interest at #e4a# rate fr!0 t/e *ate !f fi#in4 !f t/e c!0"#aint, an* is 0!*ifie* >it/ res"ect t! t/e t/ir* "art1 c!0"#aint in t/at (1) t/ir* "art1 *efen*ant E. 'aN!n, Inc. is !r*ere* t! rei08urse t/ir* "art1 "#aintiff t/e su0 !f P2.,2(1.)6 >it/ #e4a# interest fr!0 t/e *ate !f "a10ent unti# t/e *ate !f rei08urse0ent, an* (2) t/e t/ir*5"art1 c!0"#aint a4ainst t/ir* "art1 *efen*ant C!0"a4nie 7ariti0e Des C/ar4eurs 'eunis is *is0isse*. 1 T/e facts as f!un* 81 t/e tria# c!urt an* a*!"te* 81 t/e C!urt !f A""ea#s are as f!##!>sA

Or*er Certificate N!. 12).-, 12)&% an* 12)&c! erin4 a t!ta# !f 22( 8a4s in 8a* !r*er c!n*iti!n. Defen*antCs sur e1!r /as c!n*ucte* a fina# an* *etai#e* sur e1 !f t/e car4! in t/e >are/!use f!r >/ic/ /e "re"are* a sur e1 re"!rt E:/i8it F >it/ t/e fin*in4s !n t/e e:tent !f s/!rta4e !r #!ss !n t/e 8a* !r*er 8a4s t!ta##in4 22( 8a4s a0!untin4 t! 12,12) 9i#!s, E:/i8it F51. Base* !n sai* c!0"utati!n t/e "#aintiff 0a*e a f!r0a# c#ai0 a4ainst t/e *efen*ant Fi#i"in! 7erc/ants Insurance C!0"an1 f!r P.1,.&).&2 (E:/i8it C) t/e c!0"utati!n !f >/ic/ c#ai0 is c!ntaine* t/erein. A f!r0a# c#ai0 state0ent >as a#s! "resente* 81 t/e "#aintiff a4ainst t/e esse# *ate* Dece08er 21, 1-(&, E:/i8it B, 8ut t/e *efen*ant Fi#i"in! 7erc/ants Insurance C!0"an1 refuse* t! "a1 t/e c#ai0. C!nse?uent#1, t/e "#aintiff 8r!u4/t an acti!n a4ainst sai* *efen*ant as a* erte* t! a8! e an* *efen*ant "resente* a t/ir* "art1 c!0"#aint a4ainst t/e esse# an* t/e arrastre c!ntract!r. 2 T/e c!urt 8e#!>, after tria# !n t/e 0erits, ren*ere* Bu*40ent in fa !r !f "ri ate res"!n*ent, t/e *ecreta# "!rti!n >/ere!f rea*sA =HE'EFO'E, !n t/e 0ain c!0"#aint, Bu*40ent is /ere81 ren*ere* in fa !r !f t/e "#aintiff an* a4ainst t/e *efen*ant Fi#i"in! 7erc/antCs (sic) Insurance C!., !r*erin4 t/e *efen*ants t! "a1 t/e "#aintiff t/e f!##!>in4 a0!untA T/e su0 !f P.1,.&).&2 >it/ interest at #e4a# rate fr!0 t/e *ate !f t/e fi#in4 !f t/e c!0"#aint$ On t/e t/ir* "art1 c!0"#aint, t/e t/ir* "art1 *efen*ant C!0"a4nie 7ariti0e Des C/ar4eurs 'eunis an* t/ir* "art1 *efen*ant E. 'aN!n, Inc. are !r*ere* t! "a1 t!

t/e t/ir* "art1 "#aintiff B!int#1 an* se era##1 rei08urse0ent !f t/e a0!unts "ai* 81 t/e t/ir* "art1 "#aintiff >it/ #e4a# interest fr!0 t/e *ate !f suc/ "a10ent unti# t/e *ate !f suc/ rei08urse0ent. =it/!ut "r!n!unce0ent as t! c!sts. % On a""ea#, t/e res"!n*ent c!urt affir0e* t/e *ecisi!n !f t/e #!>er c!urt ins!far as t/e a>ar* !n t/e c!0"#aint is c!ncerne* an* 0!*ifie* t/e sa0e >it/ re4ar* t! t/e a*Bu*icati!n !f t/e t/ir*5"art1 c!0"#aint. A 0!ti!n f!r rec!nsi*erati!n !f t/e af!resai* *ecisi!n >as *enie*, /ence t/is "etiti!n >it/ t/e f!##!>in4 assi4n0ent !f err!rsA 1. T/e C!urt !f A""ea#s erre* in its inter"retati!n an* a""#icati!n !f t/e Ma## ris9sM c#ause !f t/e 0arine insurance "!#ic1 >/en it /e#* t/e "etiti!ner #ia8#e t! t/e "ri ate res"!n*ent f!r t/e "artia# #!ss !f t/e car4!, n!t>it/stan*in4 t/e c#ear a8sence !f "r!!f !f s!0e f!rtuit!us e ent, casua#t1, !r acci*enta# cause t! >/ic/ t/e #!ss is attri8uta8#e, t/ere81 c!ntra*ictin4 t/e er1 "rece*ents cite* 81 it in its *ecisi!n as >e## as a "ri!r *ecisi!n !f t/e sa0e Di isi!n !f t/e sai* c!urt (t/en c!0"!se* !f +ustices Cac*ac, Castr!5Bart!#!0e, an* Pr!n! e)$ 2. T/e C!urt !f A""ea#s erre* in n!t /!#*in4 t/at t/e "ri ate res"!n*ent /a* n! insura8#e interest in t/e su8Bect car4!, /ence, t/e 0arine insurance "!#ic1 ta9en !ut 81 "ri ate res"!n*ent is nu## an* !i*$ %. T/e C!urt !f A""ea#s erre* in n!t /!#*in4 t/at t/e "ri ate res"!n*ent >as 4ui#t1 !f frau* in n!t *isc#!sin4 t/e fact, it 8ein4 8!un* !ut !f ut0!st 4!!*

fait/ t! *! s!, t/at it /a* n! insura8#e interest in t/e su8Bect car4!, >/ic/ 8ars its rec! er1 !n t/e "!#ic1. 2 On t/e first assi4n0ent !f err!r, "etiti!ner c!nten*s t/at an Ma## ris9sM 0arine "!#ic1 /as a tec/nica# 0eanin4 in insurance in t/at 8ef!re a c#ai0 can 8e c!0"ensa8#e it is essentia# t/at t/ere 0ust 8e Ms!0e f!rtuit1, M Mcasua#t1M !r Macci*enta# causeM t! >/ic/ t/e a##e4e* #!ss is attri8uta8#e an* t/e fai#ure !f /erein "ri ate res"!n*ent, u"!n >/!0 #a1 t/e 8ur*en, t! a**uce e i*ence s/!>in4 t/at t/e a##e4e* #!ss t! t/e car4! in ?uesti!n >as *ue t! a f!rtuit!us e ent "rec#u*es /is ri4/t t! rec! er fr!0 t/e insurance "!#ic1. =e fin* sai* c!ntenti!n untena8#e. T/e Ma## ris9s c#auseM !f t/e Institute Car4! C#auses rea* as f!##!>sA .. T/is insurance is a4ainst a## ris9s !f #!ss !r *a0a4e t! t/e su8Bect50atter insure* 8ut s/a## in n! case 8e *ee0e* t! e:ten* t! c! er #!ss, *a0a4e, !r e:"ense "r!:i0ate#1 cause* 81 *e#a1 !r in/erent ice !r nature !f t/e su8Bect50atter insure*. C#ai0s rec! era8#e /ereun*er s/a## 8e "a1a8#e irres"ecti e !f "ercenta4e. . An Ma## ris9s "!#ic1M s/!u#* 8e rea* #itera##1 as 0eanin4 a## ris9s >/ats!e er an* c! erin4 a## #!sses 81 an acci*enta# cause !f an1 9in*. T/e ter0s Macci*entM an* Macci*enta#M, as use* in insurance c!ntracts, /a e n!t ac?uire* an1 tec/nica# 0eanin4. T/e1 are c!nstrue* 81 t/e c!urts in t/eir !r*inar1 an* c!00!n acce"tance. T/us, t/e ter0s /a e 8een ta9en t! 0ean t/at >/ic/ /a""ens 81 c/ance !r f!rtuit!us#1, >it/!ut intenti!n an* *esi4n, an* >/ic/ is une:"ecte*, unusua# an* unf!reseen. An acci*ent is an e ent t/at

ta9es "#ace >it/!ut !neCs f!resi4/t !r e:"ectati!n$ an e ent t/at "r!cee*s fr!0 an un9n!>n cause, !r is an unusua# effect !f a 9n!>n cause an*, t/eref!re, n!t e:"ecte*. & T/e er1 nature !f t/e ter0 Ma## ris9sM 0ust 8e 4i en a 8r!a* an* c!0"re/ensi e 0eanin4 as c! erin4 an1 #!ss !t/er t/an a >i##fu# an* frau*u#ent act !f t/e insure*. ( T/is is "ursuant t! t/e er1 "ur"!se !f an Ma## ris9sM insurance t! 4i e "r!tecti!n t! t/e insure* in t/!se cases >/ere *ifficu#ties !f #!4ica# e:"#anati!n !r s!0e 01ster1 surr!un* t/e #!ss !r *a0a4e t! "r!"ert1. ) An Ma## as9sM "!#ic1 /as 8een e !# e* t! 4rant 4reater "r!tecti!n t/an t/at aff!r*e* 81 t/e M"eri#s c#ause,M in !r*er t! assure t/at n! #!ss can /a""en t/r!u4/ t/e inci*ence !f a cause neit/er insure* a4ainst n!r creatin4 #ia8i#it1 in t/e s/i"$ it is >ritten a4ainst a## #!sses, t/at is, attri8uta8#e t! e:terna# causes. T/e ter0 Ma## ris9sM cann!t 8e 4i en a straine* tec/nica# 0eanin4, t/e #an4ua4e !f t/e c#ause un*er t/e Institute Car4! C#auses 8ein4 une?ui !ca# an* c#ear, t! t/e effect t/at it e:ten*s t! a## *a0a4esO#!sses suffere* 81 t/e insure* car4! e:ce"t (a) #!ss !r *a0a4e !r e:"ense "r!:i0ate#1 cause* 81 *e#a1, an* (8) #!ss !r *a0a4e !r e:"ense "r!:i0ate#1 cause* 81 t/e in/erent ice !r nature !f t/e su8Bect 0atter insure*. Genera##1, t/e 8ur*en !f "r!!f is u"!n t/e insure* t! s/!> t/at a #!ss ar!se fr!0 a c! ere* "eri#, 8ut un*er an Ma## ris9sM "!#ic1 t/e 8ur*en is n!t !n t/e insure* t! "r! e t/e "recise cause !f #!ss !r *a0a4e f!r >/ic/ it see9s c!0"ensati!n. T/e insure* un*er an Ma## ris9s insurance "!#ic1M /as t/e initia# 8ur*en !f "r! in4 t/at

t/e car4! >as in 4!!* c!n*iti!n >/en t/e "!#ic1 attac/e* an* t/at t/e car4! >as *a0a4e* >/en un#!a*e* fr!0 t/e esse#$ t/ereafter, t/e 8ur*en t/en s/ifts t! t/e insurer t! s/!> t/e e:ce"ti!n t! t/e c! era4e. 16 As >e /e#* in Paris57ani#a Perfu0er1 C!. s. P/!eni: Assurance C!., Lt*. 11 t/e 8asic ru#e is t/at t/e insurance c!0"an1 /as t/e 8ur*en !f "r! in4 t/at t/e #!ss is cause* 81 t/e ris9 e:ce"te* an* f!r >ant !f suc/ "r!!f, t/e c!0"an1 is #ia8#e. C! era4e un*er an Ma## ris9sM "r! isi!n !f a 0arine insurance "!#ic1 creates a s"ecia# t1"e !f insurance >/ic/ e:ten*s c! era4e t! ris9s n!t usua##1 c!nte0"#ate* an* a !i*s "uttin4 u"!n t/e insure* t/e 8ur*en !f esta8#is/in4 t/at t/e #!ss >as *ue t! t/e "eri# fa##in4 >it/in t/e "!#ic1Cs c! era4e$ t/e insurer can a !i* c! era4e u"!n *e0!nstratin4 t/at a s"ecific "r! isi!n e:"ress#1 e:c#u*es t/e #!ss fr!0 c! era4e. 12 A 0arine insurance "!#ic1 "r! i*in4 t/at t/e insurance >as t! 8e Ma4ainst a## ris9sM 0ust 8e c!nstrue* as creatin4 a s"ecia# insurance an* e:ten*in4 t! !t/er ris9s t/an are usua##1 c!nte0"#ate*, an* c! ers a## #!sses e:ce"t suc/ as arise fr!0 t/e frau* !f t/e insure*. 1% T/e 8ur*en !f t/e insure*, t/eref!re, is t! "r! e 0ere#1 t/at t/e 4!!*s /e trans"!rte* /a e 8een #!st, *estr!1e* !r *eteri!rate*. T/ereafter, t/e 8ur*en is s/ifte* t! t/e insurer t! "r! e t/at t/e #!ss >as *ue t! e:ce"te* "eri#s. T! i0"!se !n t/e insure* t/e 8ur*en !f "r! in4 t/e "recise cause !f t/e #!ss !r *a0a4e >!u#* 8e inc!nsistent >it/ t/e 8r!a* "r!tecti e "ur"!se !f Ma## ris9sM insurance. In t/e "resent case, t/ere 8ein4 n! s/!>in4 t/at t/e #!ss >as cause* 81 an1 !f t/e e:ce"te* "eri#s, t/e insurer is #ia8#e un*er t/e "!#ic1. As a"t#1 state* 81 t/e

res"!n*ent C!urt !f A""ea#s, u"!n *ue c!nsi*erati!n !f t/e aut/!rities an* Buris"ru*ence it *iscusse* T ... it is 8e#ie e* t/at in t/e a8sence !f an1 s/!>in4 t/at t/e #!ssesO*a0a4es >ere cause* 81 an e:ce"te* "eri#, i.e. *e#a1 !r t/e in/erent ice !r nature !f t/e su8Bect 0atter insure*, an* t/ere is n! suc/ s/!>in4, t/e #!>er c!urt *i* n!t err in /!#*in4 t/at t/e #!ss >as c! ere* 81 t/e "!#ic1. T/ere is n! e i*ence "resente* t! s/!> t/at t/e c!n*iti!n !f t/e 4unn1 8a4s in >/ic/ t/e fis/0ea# >as "ac9e* >as suc/ t/at t/e1 c!u#* n!t /!#* t/eir c!ntents in t/e c!urse !f t/e necessar1 transit, 0uc/ #ess an1 e i*ence t/at t/e 8a4s !f car4! /a* 8urst as t/e resu#t !f t/e >ea9ness !f t/e 8a4s t/e0se# es. Ha* t/ere 8een suc/ a s/!>in4 t/at s"i##a4e >!u#* /a e 8een a certaint1, t/ere 0a1 /a e 8een 4!!* reas!n t! "#ea* t/at t/ere >as n! ris9 c! ere* 81 t/e "!#ic1 (See Ber9 s. St1#e I1-.&J cite* in 7arine Insurance C#ai0s, I8i*, ". 12.). ;n*er an Ca## ris9sC "!#ic1, it >as sufficient t! s/!> t/at t/ere >as *a0a4e !ccasi!ne* 81 s!0e acci*enta# cause !f an1 9in*, an* t/ere is n! necessit1 t! "!int t! an1 "articu#ar cause. 12 C!ntracts !f insurance are c!ntracts !f in*e0nit1 u"!n t/e ter0s an* c!n*iti!ns s"ecifie* in t/e "!#ic1. T/e a4ree0ent /as t/e f!rce !f #a> 8et>een t/e "arties. T/e ter0s !f t/e "!#ic1 c!nstitute t/e 0easure !f t/e insurerCs #ia8i#it1. If suc/ ter0s are c#ear an* una08i4u!us, t/e1 0ust 8e ta9en an* un*erst!!* in t/eir "#ain, !r*inar1 an* "!"u#ar sense. 1. Anent t/e issue !f insura8#e interest, >e u"/!#* t/e ru#in4 !f t/e res"!n*ent c!urt t/at "ri ate res"!n*ent,

as c!nsi4nee !f t/e 4!!*s in transit un*er an in !ice c!ntainin4 t/e ter0s un*er MC < F 7ani#a,M /as insura8#e interest in sai* 4!!*s. Secti!n 1% !f t/e Insurance C!*e *efines insura8#e interest in "r!"ert1 as e er1 interest in "r!"ert1, >/et/er rea# !r "ers!na#, !r an1 re#ati!n t/eret!, !r #ia8i#it1 in res"ect t/ere!f, !f suc/ nature t/at a c!nte0"#ate* "eri# 0i4/t *irect#1 *a0nif1 t/e insure*. In "rinci"#e, an1!ne /as an insura8#e interest in "r!"ert1 >/! *eri es a 8enefit fr!0 its e:istence !r >!u#* suffer #!ss fr!0 its *estructi!n >/et/er /e /as !r /as n!t an1 tit#e in, !r #ien u"!n !r "!ssessi!n !f t/e "r!"ert1 1. 1& Insura8#e interest in "r!"ert1 0a1 c!nsist in (a) an e:istin4 interest$ (8) an inc/!ate interest f!un*e* !n an e:istin4 interest$ !r (c) an e:"ectanc1, c!u"#e* >it/ an e:istin4 interest in t/at !ut !f >/ic/ t/e e:"ectanc1 arises. 1( Herein "ri ate res"!n*ent, as en*eeOc!nsi4nee !f t/e 4!!*s in transit /as suc/ e:istin4 interest t/erein as 0a1 8e t/e su8Bect !f a a#i* c!ntract !f insurance. His interest ! er t/e 4!!*s is 8ase* !n t/e "erfecte* c!ntract !f sa#e. 1) T/e "erfecte* c!ntract !f sa#e 8et>een /i0 an* t/e s/i""er !f t/e 4!!*s !"erates t! est in /i0 an e?uita8#e tit#e e en 8ef!re *e#i er1 !r 8ef!re 8e "erf!r0e* t/e c!n*iti!ns !f t/e sa#e. 1- T/e c!ntract !f s/i"0ent, >/et/er un*er F.O.B., C.I.F., !r C. < F. as in t/is case, is i00ateria# in t/e *eter0inati!n !f >/et/er t/e en*ee /as an insura8#e interest !r n!t in t/e 4!!*s in transit. T/e "erfecte* c!ntract !f sa#e e en >it/!ut *e#i er1 ests in t/e en*ee an e?uita8#e tit#e, an e:istin4 interest ! er t/e 4!!*s sufficient t! 8e t/e su8Bect !f insurance.

Furt/er, Artic#e 1.2% !f t/e Ci i# C!*e "r! i*es t/at >/ere, in "ursuance !f a c!ntract !f sa#e, t/e se##er is aut/!riNe* !r re?uire* t! sen* t/e 4!!*s t! t/e 8u1er, *e#i er1 !f t/e 4!!*s t! a carrier, >/et/er na0e* 81 t/e 8u1er !r n!t, f!r, t/e "ur"!se !f trans0issi!n t! t/e 8u1er is *ee0e* t! 8e a *e#i er1 !f t/e 4!!*s t! t/e 8u1er, t/e e:ce"ti!ns t! sai* ru#e n!t !8tainin4 in t/e "resent case. T/e C!urt /as /eret!f!re ru#e* t/at t/e *e#i er1 !f t/e 4!!*s !n 8!ar* t/e carr1in4 esse#s "arta9e !f t/e nature !f actua# *e#i er1 since, fr!0 t/at ti0e, t/e f!rei4n 8u1ers assu0e* t/e ris9s !f #!ss !f t/e 4!!*s an* "ai* t/e insurance "re0iu0 c! erin4 t/e0. 26 C < F c!ntracts are s/i"0ent c!ntracts. T/e ter0 0eans t/at t/e "rice fi:e* inc#u*es in a #u0" su0 t/e c!st !f t/e 4!!*s an* frei4/t t! t/e na0e* *estinati!n. 21 It si0"#1 0eans t/at t/e se##er 0ust "a1 t/e c!sts an* frei4/t necessar1 t! 8rin4 t/e 4!!*s t! t/e na0e* *estinati!n 8ut t/e ris9 !f #!ss !r *a0a4e t! t/e 4!!*s is transferre* fr!0 t/e se##er t! t/e 8u1er >/en t/e 4!!*s "ass t/e s/i"Cs rai# in t/e "!rt !f s/i"0ent. 22 7!re! er, t/e issue !f #ac9 !f insura8#e interest >as n!t a0!n4 t/e *efenses a erre* in "etiti!ners ans>er. It >as neit/er an issue a4ree* u"!n 81 t/e "arties at t/e "re5tria# c!nference n!r >as it raise* *urin4 t/e tria# in t/e c!urt 8e#!>. It is a sett#e* ru#e t/at an issue >/ic/ /as n!t 8een raise* in t/e c!urt a ?u! cann!t 8e raise* f!r t/e first ti0e !n a""ea# as it >!u#* 8e !ffensi e t! t/e 8asic ru#es !f fair "#a1, Bustice an* *ue "r!cess. 2% T/is is 8ut a "er0ute* restate0ent !f t/e #!n4 sett#e* ru#e t/at >/en a "art1 *e#i8erate#1 a*!"ts a certain t/e!r1, an* t/e case is trie* an* *eci*e* u"!n t/at t/e!r1 in t/e c!urt 8e#!>, /e >i## n!t 8e "er0itte* t! c/an4e /is t/e!r1 !n a""ea# 8ecause, t!

"er0it /i0 t! *! s!, >!u#* 8e unfair t! t/e a* erse "art1. 22 If *es"ite t/e fun*a0enta# *!ctrines Bust state*, >e ne ert/e#ess *eci*e* t! in*ite a *is?uisiti!n !n t/e issue !f insura8#e interest raise* 81 "etiti!ner, it >as t! "ut at rest a## *!u8ts !n t/e 0atter un*er t/e facts in t/is case an* a#s! t! *is"!se !f "etiti!nerCs t/ir* assi4n0ent !f err!r >/ic/ c!nse?uent#1 nee*s n! furt/er *iscussi!n. =HE'EFO'E, t/e instant "etiti!n is DENIED an* t/e assai#e* *ecisi!n !f t/e res"!n*ent C!urt !f A""ea#s is AFFI'7ED in t!t!. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a SECOND DI3ISION 7ELENCIO5HE''E'A, +A" An acti!n t! rec! er !n a 0arine insurance "!#ic1, issue* 81 "etiti!ner in fa !r !f "ri ate res"!n*ent, arisin4 fr!0 t/e #!ss !f a s/i"0ent !f a"it!n4 #!4s fr!0 Pa#a>an t! 7ani#a. T/e facts re#e ant t! t/e "resent re ie> *isc#!se t/at s!0eti0e in +anuar1 1-)&, "ri ate res"!n*ent Pana0a Sa>0i## C!., Inc. (Pana0a) 8!u4/t, in Pa#a>an, 1,26) "ieces !f a"it!n4 #!4s, >it/ a t!ta# !#u0e !f 2,666 cu8ic 0eters. It /ire* Trans"acific T!>a4e, Inc., t! trans"!rt t/e #!4s 81 sea t! 7ani#a an* insure* it a4ainst #!ss f!r P157 >it/ "etiti!ner Orienta# Assurance C!r"!rati!n (Orienta# Assurance). T/ere is a c#ai0 81 Pana0a, /!>e er, t/at t/e insurance c! era4e s/!u#* /a e 8een f!r P%57 >ere it n!t f!r t/e frau*u#ent act !f !ne Benit! S1 Eee L!n4 t! >/!0 it /a* entruste* t/e a0!unt !f P&,666.66 f!r t/e "a10ent !f t/e "re0iu0 f!r a P%57 "!#ic1. Orienta# Assurance issue* 7arine Insurance P!#ic1 N!. OAC7 )&O662, >/ic/ sti"u#ate*, a0!n4 !t/ersA G.'. N!. -26.2 Au4ust -, 1--1 Na0e !f Insure*A Pana0a Sa>0i##, Inc. Daru/atan, 3a#enNue#a 7etr! 7ani#a 3esse#A A#eBan*r! P. 'uiN, +r. f!r "etiti!ner. Fe*eric! '. 'e1es f!r "ri ate res"!n*ent. 7T. CSe0in!#eC Bar4e PCT (,66651,666 cu8ic 0eter a"it!n4 L!4s O'IENTAL ASS;'ANCE CO'PO'ATION, "etiti!ner, s. CO;'T OF APPEALS AND PANA7A SA= 7ILL CO., INC., res"!n*ents.

Bar4e Trans"ac 1,66651,666 cu8ic 0eter a"it!n4 L!4s 3!1a4e !r Peri!* !f InsuranceA Fr!0 Pa#a>an5ETD +anuar1 1&, 1-)& T!A 7ani#a Su8Bect 0atter Insure*A 2,666 cu8ic 0eters a"it!n4 L!4s A4ree* 3a#ue A0!unt Insure* Hereun*erA Pes!sA One 7i##i!n On#1 (P1,666,666.66) P/i#i""ine Currenc1 Pre0iu0 T P2,.66.66 D!c. sta0"s 1)(.&6 # U POta: 2..66 TOTAL P2,(12..6 CLA;SES, ENDO'SE7ENTS, SPECIAL CONDITIONS an* =A''ANTIES =arrante* t/at t/is Insurance is a4ainst TOTAL LOSS ONLE. Su8Bect t! t/e f!##!>in4 c#ausesA T Ci i# C!*e Artic#e 12.6 =ai er c#ause T T1"/!!n >arrant1 c#ause T O0ni8us c#ause. rate T 6.2.6U In !ice N!. 1.()&2

T/e #!4s >ere #!a*e* !n t>! (2) 8ar4esA (1) !n 8ar4e PCT5(666,&16 "ieces !f #!4s >it/ a !#u0e !f 1,666 cu8ic0eters$ an* (2) !n Bar4e TPAC51666, .-) "ieces !f #!4s, a#s! >it/ a !#u0e !f 1,666 cu8ic 0eters. On 2) +anuar1 1-)&, t/e t>! 8ar4es >ere t!>e* 81 !ne tu458!at, t/e 7T CSe0in!#eC But, as fate >!u#* /a e it, *urin4 t/e !1a4e, r!u4/ seas an* str!n4 >in*s cause* *a0a4e t! Bar4e TPAC51666 resu#tin4 in t/e #!ss !f 2-( "ieces !f #!4s !ut !f t/e .-) "ieces #!a*e* t/ere!n. Pana0a *e0an*e* "a10ent f!r t/e #!ss 8ut Orienta# Assurance refuse !n t/e 4r!un* t/at its c!ntracte* #ia8i#it1 >as f!r MTOTAL LOSS ONLE.M T/e reBecti!n >as u"!n t/e rec!00en*ati!n !f t/e Tan Gatue A*Bust0ent C!0"an1. ;na8#e t! c!n ince Orienta# Assurance t! "a1 its c#ai0, Pana0a fi#e* a C!0"#aint f!r Da0a4es a4ainst E er Insurance A4enc1 (a##e4e*#1, a#s! #ia8#e), Benit! S1 Lee E!n4 an* Orienta# Assurance, 8ef!re t/e 'e4i!na# Tria# C!urt, Da#!!9an, Branc/ 12%, *!c9ete* as Ci i# Case N!. C512&61. After tria# !n t/e 0erit, t/e 'TC 1 ren*ere* its Decisi!n, >it/ t/e f!##!>in4 *is"!siti e "!rti!nA =HE'EFO'E, u"!n a## t/e Bu*40ent is /ere81 ren*ere*A f!re4!in4 "re0ises,

1. Or*erin4 t/e *efen*ant Orienta# Assurance C!r"!rati!n t! "a1 "#aintiff Pana0a Sa> 7i## Inc. t/e a0!unt !f P21.,666.66 as insurance in*e0nit1 >it/ interest at t/e rate !f 12U "er annu0 c!0"ute* fr!0 t/e *ate !f t/e fi#in4 !f t/e c!0"#aint$

2. Or*erin4 Pana0a Sa> 7i## t! "a1 *efen*ant E er Insurance A4enc1 !r Ant!ni! S1 Lee E!n4, !>ner t/ere!f, (E er 8ein4 a sin4#e "r!"riet!rs/i") f!r t/e a0!unt !f P26,666.66 as att!rne1Cs fee an* an!t/er a0!unt !f P26,666.66 as 0!ra# *a0a4es. %. Dis0issin4 t/e c!0"#aint a4ainst *efen*ant Benit! S1 Lee E!n4. SO O'DE'ED. On a""ea# 81 8!t/ "arties, res"!n*ent A""e##ate C!urt 2 affir0e* t/e #!>er C!urt Bu*40ent in a## res"ects e:ce"t f!r t/e rate !f interest, >/ic/ >as re*uce fr!0 t>e# e (12U) t! si: (&U) "er annu0. B!t/ C!urts s/are* t/e ie> t/at t/e insurance c!ntract s/!u#* 8e #i8era##1 c!nstrue* in !r*er t! a !i* a *enia# !f su8stantia# Bustice$ an* t/at t/e #!4s #!a*e* in t/e t>! 8ar4es s/!u#* 8e treate* se"arate#1 suc/ t/at t/e #!ss sustaine* 81 t/e s/i"0ent in !ne !f t/e0 0a1 8e c!nsi*ere* as Mc!nstructi e t!ta# #!ssM an* c!rres"!n*in4#1 c!0"ensa8#e. In t/is Petiti!n f!r 'e ie> !n Certi!rari, Orienta# Assurance c/a##en4es t/e af!resai* *is"!siti!ns. In its C!00ent, Pana0a, in turn, 0aintains t/at t/e c!nstructi e t!ta# #!ss s/!u#* 8e 8ase* !n a "!#ic1 a#ue !f P%57 an* n!t P157, an* "ra1s t/at t/e a>ar* t! E er Insurance A4enc1 !r Ant!ni! S1 Lee E!n4 !f *a0a4es an* att!rne1Cs fees 8e set asi*e. T/e ?uesti!n f!r *eter0inati!n is >/et/er !r n!t Orienta# Assurance can 8e /e#* #ia8#e un*er its 0arine insurance "!#ic1 8ase* !n t/e t/e!r1 !f a *i isi8#e

c!ntract !f insurance c!nstructi e t!ta# #!ss.

an*,

c!nse?uent#1,

Our c!nsi*ere* !"ini!n is t/at n! #ia8i#it1 attac/es. T/e ter0s !f t/e c!ntract c!nstitute t/e 0easure !f t/e insurer #ia8i#it1 an* c!0"#iance t/ere>it/ is a c!n*iti!n "rece*ent t! t/e insure*Cs ri4/t t! rec! er1 fr!0 t/e insurer (Per#a C!0"ania *e Se4ur!s, Inc. . C!urt !f A""ea#s, G.'. N!. ())&6, 7a1 2), 1--6, 1). SC'A (21). =/et/er a c!ntract is entire !r se era8#e is a ?uesti!n !f intenti!n t! 8e *eter0ine* 81 t/e #an4ua4e e0"#!1e* 81 t/e "arties. T/e "!#ic1 in ?uesti!n s/!>s t/at t/e su8Bect 0atter insure* >as t/e entire s/i"0ent !f 2,666 cu8ic 0eters !f a"it!n4 #!4s. T/e fact t/at t/e #!4s >ere #!a*e* !n t>! *ifferent 8ar4es *i* n!t 0a9e t/e c!ntract se era# an* *i isi8#e as t! t/e ite0s insure*. T/e #!4s !n t/e t>! 8ar4es >ere n!t se"arate#1 a#ue* !r se"arate#1 insure*. On#1 !ne "re0iu0 >as "ai* f!r t/e entire s/i"0ent, 0a9in4 f!r !n#1 !ne cause !r c!nsi*erati!n. T/e insurance c!ntract 0ust, t/eref!re, 8e c!nsi*ere* in*i isi8#e. 7!re i0"!rtant#1, t/e insurerCs #ia8i#it1 >as f!r Mt!ta# #!ss !n#1.M A t!ta# #!ss 0a1 8e eit/er actua# !r c!nstructi e (Sec. 12-, Insurance C!*e). An actua# t!ta# #!ss is cause* 81A (a) A t!ta# *estructi!n !f t/e t/in4 insure*$

(8) T/e irretrie a8#e #!ss !f t/e t/in4 81 sin9in4, !r 81 8ein4 8r!9en u"$

(c) An1 *a0a4e t! t/e t/in4 >/ic/ ren*ers it a#ue#ess t! t/e !>ner f!r t/e "ur"!se f!r >/ic/ /e /e#* it$ !r (*) An1 !t/er e ent >/ic/ effecti e#1 *e"ri es t/e !>ner !f t/e "!ssessi!n, at t/e "!rt !f *estinati!n, !f t/e t/in4 insure*. (Secti!n 1%6, Insurance C!*e). A c!nstructi e t!ta# #!ss is !ne >/ic/ 4i es t! a "ers!n insure* a ri4/t t! a8an*!n, un*er Secti!n 1%- !f t/e Insurance C!*e. T/is "r! isi!n rea*sA SECTION 1%-. A "ers!n insure* 81 a c!ntract !f 0arine insurance 0a1 a8an*!n t/e t/in4 insure*, !r an1 "articu#ar "!rti!n t/ere!f se"arate#1 a#ue* 81 t/e "!#ic1, !r !t/er>ise se"arate#1 insure*, an* rec! er f!r a t!ta# #!ss t/ere!f, >/en t/e cause !f t/e #!ss is a "eri# inBure* a4ainst, (a) If 0!re t/an t/ree5f!urt/s t/ere!f in a#ue is actua##1 #!st, !r >!u#* /a e t! 8e e:"en*e* t! rec! er it fr!0 t/e "eri#$ (8) If it is inBure* t! suc/ an e:tent as t! re*uce its a#ue 0!re t/an t/ree5f!urt/s$ ::: ::: :::

1666, 0at/e0atica##1 s"ea9in4, is 0!re t/an t/ree5 f!urt/s (d) !f t/e .-) "ieces !f #!4s #!a*e* in t/at 8ar4e an* 0a1, t/eref!re, 8e c!nsi*ere* as c!nstructi e t!ta# #!ss. T/e 8asis t/us use* is, in !ur !"ini!n, re ersi8#e err!r. T/e re?uire0ents f!r t/e a""#icati!n !f Secti!n 1%- !f t/e Insurance C!*e, ?u!te* a8! e, /a e n!t 8een 0et. T/e #!4s in !# e*, a#t/!u4/ "#ace* in t>! 8ar4es, >ere n!t se"arate#1 a#ue* 81 t/e "!#ic1, n!r se"arate#1 insure*. 'esu#tant#1, t/e #!4s #!st in 8ar4e TPAC51666 in re#ati!n t! t/e t!ta# nu08er !f #!4s #!a*e* !n t/e sa0e 8ar4e can n!t 8e 0a*e t/e 8asis f!r *eter0inin4 c!nstructi e t!ta# #!ss. T/e #!4s /a in4 8een insure* as !ne inse"ara8#e unit, t/e c!rrect 8asis f!r *eter0inin4 t/e e:istence !f c!nstructi e t!ta# #!ss is t/e t!ta#it1 !f t/e s/i"0ent !f #!4s. Of t/e entiret1 !f 1,26), "ieces !f #!4s, !n#1 2-( "ieces t/ere!f >ere #!st !r 21.2.U !f t/e entire s/i"0ent. Since t/e c!st !f t/!se 2-( "ieces *!es n!t e:cee* (.U !f t/e a#ue !f a## 1,26) "ieces !f #!4s, t/e s/i"0ent can n!t 8e sai* t! /a e sustaine* a c!nstructi e t!ta# #!ss un*er Secti!n 1%-(a) !f t/e Insurance C!*e. In t/e a8sence !f eit/er actua# !r c!nstructi e t!ta# #!ss, t/ere can 8e n! rec! er1 81 t/e insure* Pana0a a4ainst t/e insurer, Orienta# Assurance. B1 reas!n !f t/e c!nc#usi!ns arri e* at, Pana0aCs asse erati!ns in its C!00ent nee* n! #!n4er 8e "asse* u"!n, 8esi*es t/e fact t/at n! re ie>, in "r!"er f!r0, /as 8een s!u4/t 81 it. =HE'EFO'E, t/e Bu*40ent un*er re ie> is /ere81 SET ASIDE an* "etiti!ner, Orienta# Assurance C!r"!rati!n,

(E0"/asis su""#ie*) 'es"!n*ent A""e##ate C!urt treate* t/e #!ss as a c!nstructi e t!ta# #!ss, an* f!r t/e "ur"!se !f c!0"utin4 t/e 0!re t/an t/ree5f!urt/s a#ue !f t/e #!4s actua##1 #!st, c!nsi*ere* t/e car4! in !ne 8ar4e as se"arate fr!0 t/e #!4s in t/e !t/er. T/us, it c!nc#u*e* t/at t/e #!ss !f 2-( "ieces !f #!4s fr!0 8ar4e TPAC5

is /ere81 ABSOL3ED fr!0 #ia8i#it1 un*er its 0arine insurance "!#ic1 N!. OAC575)&O662. N! c!sts. SO O'DE'ED. 'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a FI'ST DI3ISION

7arce#in! Ga8rie#, t/e insure*, >as e0"#!1e* 81 E0era#* C!nstructi!n < De e#!"0ent C!r"!rati!n (MECDCM) at its c!nstructi!n "r!Bect in Ira?. He >as c! ere* 81 a "ers!na# acci*ent insurance in t/e a0!unt !f P166,666.66 un*er a 4r!u" "!#ic1 2 "r!cure* fr!0 "ri ate res"!n*ent 81 ECDC f!r its ! erseas >!r9ers. T/e insure* ris9 >as f!r M(8)!*i#1 inBur1 cause* 81 i!#ent acci*enta# e:terna# an* isi8#e 0eans >/ic/ inBur1 (>!u#*) s!#e#1 an* in*e"en*ent#1 !f an1 !t/er causeM % resu#t in *eat/ !r *isa8i#it1. On 22 7a1 1-)2, >it/in t/e #ife !f t/e "!#ic1, Ga8rie# *ie* in Ira?. A 1ear #ater, !r !n 12 +u#1 1-)%, ECDC re"!rte* Ga8rie#Cs *eat/ t! "ri ate res"!n*ent 81 te#e"/!ne. 2 A0!n4 t/e *!cu0ents t/ereafter su80itte* t! "ri ate res"!n*ent >ere a c!"1 !f t/e *eat/ certificate . issue* 81 t/e 7inistr1 !f Hea#t/ !f t/e 'e"u8#ic !f Ira? T >/ic/ state* 'EASON OF DEATHA ;NDE' EFA7INATION NO= T NOT EET DNO=N & T an* an aut!"s1 re"!rt ( !f t/e Nati!na# Bureau !f In esti4ati!n (MNBIM) t! t/e effect t/at M(*)ue t! a* ance* state !f "!st0!rte0 *ec!0"!siti!n, cause !f *eat/ (c!u#*) n!t 8e *eter0ine*.M ) Pri ate res"!n*ent referre* t/e insurance c#ai0 t! 7issi!n A*Bust0ent Ser ice, Inc. F!##!>in4 a series !f c!00unicati!ns 8et>een "etiti!ner an* "ri ate res"!n*ent, t/e #atter, !n 22 Se"te08er 1-)%, u#ti0ate#1 *enie* t/e c#ai0 !f ECDC !n t/e 4r!un* !f "rescri"ti!n. - Petiti!ner >ent t! t/e 'e4i!na# Tria# C!urt !f 7ani#a. In /er c!0"#aint a4ainst ECDC an* "ri ate res"!n*ent, s/e a erre* t/at /er /us8an* *ie* !f e#ectr!cuti!n >/i#e in t/e

G.'. N!. 16%))%

N! e08er 12, 1--&

+AC@;ELINE +I7ENES 3DA. DE GAB'IEL, "etiti!ner, s. HON. CO;'T OF APPEALS an* FO'T;NE INS;'ANCE < S;'ETE CO7PANE, INC., res"!n*ents.

3IT;G, +.A T/e "etiti!n f!r re ie> !n certi!rari in t/is case see9s t/e re ersa# !f t/e *ecisi!n 1 !f t/e C!urt !f A""ea#s settin4 asi*e t/e Bu*40ent !f t/e 'e4i!na# Tria# C!urt !f 7ani#a, Branc/ .., >/ic/ /as !r*ere* "ri ate res"!n*ent F!rtune Insurance < Suret1 C!0"an1, Inc., t! "a1 "etiti!ner +ac?ue#ine +i0eneN *a. *e Ga8rie#, t/e sur i in4 s"!use an* 8eneficiar1 in an acci*ent (4r!u") insurance !f /er *ecease* /us8an*, t/e a0!unt !f P166,666.66, "#us #e4a# interest.

"erf!r0ance !f /is >!r9 an* "ra1e* f!r t/e rec! er1 !f P166,666.66 f!r insurance in*e0nificati!n an* !f ari!us !t/er su0s 81 >a1 !f actua#, 0!ra#, an* e:e0"#ar1 *a0a4es, "#us att!rne1Cs fees an* c!sts !f suit. Pri ate res"!n*ent fi#e* its ans>er, >/ic/ >as n!t erifie*, a*0ittin4 t/e 4enuineness an* *ue e:ecuti!n !f t/e insurance "!#ic1$ it a##e4e*, /!>e er, t/at since 8!t/ t/e *eat/ certificate issue* 81 t/e Ira?i 7inistr1 !f Hea#t/ an* t/e aut!"s1 re"!rt !f t/e NBI fai#e* t! *isc#!se t/e cause !f Ga8rie#Cs *eat/, it *enie* #ia8i#it1 un*er t/e "!#ic1. In a**iti!n, "ri ate res"!n*ent raise* t/e *efense !f M"rescri"ti!n,M in !9in4 Secti!n %)2 16 !f t/e Insurance C!*e. Later, "ri ate res"!n*ent fi#e* an a0en*e* ans>er, sti## un erifie*, reiteratin4 its !ri4ina# *efenses 8ut, t/is ti0e, a**iti!na##1 "uttin4 u" a c!unterc#ai0 an* a cr!ssc#ai0. T/e tria# c!urt *is0isse* t/e case a4ainst ECDC f!r t/e fai#ure !f "etiti!ner t! ta9e ste"s t! cause t/e ser ice !f t/e f!urt/ a#ias su00!ns !n ECDC. T/e *is0issa# >as >it/!ut "reBu*ice. T/e case "r!cee*e* a4ainst "ri ate res"!n*ent a#!ne. On 2) 7a1 1-)(, t/e tria# c!urt ren*ere* its *ecisi!n 11 in fa !r ("art#1) !f "etiti!nerCs c#ai0. In arri in4 at its c!nc#usi!n, t/e tria# c!urt /e#* t/at "ri ate res"!n*ent >as *ee0e* t! /a e >ai e* t/e *efense, i.e., t/at t/e cause !f Ga8rie#Cs *eat/ >as n!t c! ere* 81 t/e "!#ic1, >/en t/e #atter fai#e* t! i0"u4n 81 e i*ence "etiti!nerCs a er0ent !n t/e 0atter. =it/ re4ar* t! t/e *efense !f "rescri"ti!n, t/e c!urt c!nsi*ere* t/e c!0"#aint t! /a e 8een ti0e#1 fi#e* !r >it/in !ne (1) 1ear fr!0 "ri ate res"!n*entCs *enia# !f t/e c#ai0.

Petiti!ner an* "ri ate res"!n*ent 8!t/ a""ea#e* t! t/e C!urt !f A""ea#s. Petiti!ner c!nten*e* t/at t/e #!>er c!urt s/!u#* /a e a>ar*e* a## t/e c#ai0s s/e /a* as9e* f!r. Pri ate res"!n*ent asserte*, !n its "art, t/at t/e #!>er c!urt erre* in ru#in4 (a) t/at t/e insurer /a* >ai e* t/e *efense t/at Ga8rie#Cs *eat/ >as n!t cause* 81 t/e insure* "eri# (M i!#ent acci*enta# e:terna# an* isi8#e 0eansM) s"ecifie* in t/e "!#ic1 an* (8) t/at t/e cause !f acti!n /a* n!t "rescri8e*. T/e C!urt !f A""ea#s, !n 1) Se"te08er 1--1, re erse* t/e *ecisi!n !f t/e #!>er c!urt. T/e a""e##ate c!urt /e#* t/at "etiti!ner /a* fai#e* t! su8stantiate /er a##e4ati!n t/at /er /us8an*Cs *eat/ >as cause* 81 a ris9 insure* a4ainst. T/e a""e##ate c!urt !8ser e* t/at t/e !n#1 e i*ence "resente* 81 "etiti!ner, in /er atte0"t t! s/!> t/e circu0stances t/at #e* t! t/e *eat/ !f t/e insure*, >ere /er !>n affi*a it an* a #etter a##e4e*#1 >ritten 81 a c!5>!r9er !f t/e *ecease* in Ira? >/ic/, unf!rtunate#1 f!r /er, >ere /e#* t! 8e 8!t/ /earsa1. 12 T/e 0!ti!n f!r rec!nsi*erati!n >as *enie*. 1% Petiti!nerCs rec!urse t! t/is C!urt 0ust a#s! fai#. On t/e issue !f M"rescri"ti!n,M "ri ate res"!n*ent c!rrect#1 in !9e* Secti!n %)2 !f t/e Insurance C!*e$ iNA Sec. %)2. An1 "ers!n /a in4 an1 c#ai0 u"!n t/e "!#ic1 issue* "ursuant t! t/is c/a"ter s/a##, >it/!ut an1 unnecessar1 *e#a1, "resent t! t/e insurance c!0"an1 c!ncerne* a >ritten n!tice !f c#ai0 settin4

f!rt/ t/e nature, e:tent an* *urati!n !f t/e inBuries sustaine* as certifie* 81 a *u#1 #icense* "/1sician. N!tice !f c#ai0 0ust 8e fi#e* >it/in si: 0!nt/s fr!0 *ate !f t/e acci*ent, !t/er>ise, t/e c#ai0 s/a## 8e *ee0e* >ai e*. Acti!n !r suit f!r rec! er1 !f *a0a4e *ue t! #!ss !r inBur1 0ust 8e 8r!u4/t, in "r!"er cases, >it/ t/e C!00issi!ner !r t/e C!urts >it/in !ne 1ear fr!0 *enia# !f t/e c#ai0, !t/er>ise, t/e c#ai0antCs ri4/t !f acti!n s/a## "rescri8e. T/e n!tice !f *eat/ >as 4i en t! "ri ate res"!n*ent, c!nce*e*#1, 0!re t/an a 1ear after t/e *eat/ !f "etiti!nerCs /us8an*. Pri ate res"!n*ent, in in !9in4 "rescri"ti!n, >as n!t referrin4 t! t/e !ne51ear "eri!* fr!0 t/e *enia# !f t/e c#ai0 >it/in >/ic/ t! fi#e an acti!n a4ainst an insurer 8ut !8 i!us#1 t! t/e >ritten n!tice !f c#ai0 t/at /a* t! 8e su80itte* >it/in si: 0!nt/s fr!0 t/e ti0e !f t/e acci*ent. Petiti!ner ar4ues t/at "ri ate res"!n*ent 0ust 8e *ee0e* t! /a e >ai e* its ri4/t t! c!ntr! ert t/e c#ai0, t/at is, t! s/!> t/at t/e cause !f *eat/ is an e:ce"te* "eri#, 81 fai#in4 t! /a e its ans>ers (t! t/e 'e?uest f!r A*0issi!n sent 81 "etiti!ner) *u#1 erifie*. It is true t/at a 0atter !f >/ic/ a >ritten re?uest f!r a*0issi!n is 0a*e s/a## 8e *ee0e* i0"#ie*#1 a*0itte* Mun#ess, >it/in a "eri!* *esi4nate* in t/e re?uest, >/ic/ s/a## n!t 8e #ess t/an ten (16) *a1s after ser ice t/ere!f, !r >it/in suc/ furt/er ti0e as t/e c!urt 0a1 a##!> !n 0!ti!n an* n!tice, t/e "art1 t! >/!0 t/e re?uest is *irecte* ser es u"!n t/e "art1 re?uestin4 t/e a*0issi!n a s>!rn state0ent eit/er *en1in4 s"ecifica##1 t/e 0atters !f >/ic/ an a*0issi!n is re?ueste* !r settin4 f!rt/ in *etai# t/e reas!ns >/1 /e cann!t trut/fu##1 eit/er a*0it !r *en1 t/!se 0atters$M 12 /!>e er, t/e erificati!n, #i9e in 0!st cases

re?uire* 81 t/e ru#es !f "r!ce*ure, is a f!r0a#, n!t Buris*icti!na#, re?uire0ent, an* 0ain#1 inten*e* t! secure an assurance t/at 0atters >/ic/ are a##e4e* are *!ne in 4!!* fait/ !r are true an* c!rrect an* n!t !f 0ere s"ecu#ati!n. =/en circu0stances >arrant, t/e c!urt 0a1 si0"#1 !r*er t/e c!rrecti!n !f un erifie* "#ea*in4s !r act !n it an* >ai e strict c!0"#iance >it/ t/e ru#es in !r*er t/at t/e en*s !f Bustice 0a1 t/ere81 8e ser e*. 1. In t/e case !f ans>ers t! >ritten re?uests f!r a*0issi!n "articu#ar#1, t/e c!urt can a##!> t/e "art1 0a9in4 t/e a*0issi!n, >/et/er 0a*e e:"ress#1 !r *ee0e* t! /a e 8een 0a*e i0"#ie*#1, Mt! >it/*ra> !r a0en* it u"!n suc/ ter0s as 0a1 8e Bust.M 1& T/e a""e##ate c!urt acte* neit/er err!ne!us#1 n!r >it/ 4ra e a8use !f *iscreti!n >/en it sec!n*e* t/e c!urt a ?u! an* ru#e*A As t! t/e a##e4ati!n !f t/e "#aintiff5a""e##ant t/at t/e 0atters re?ueste* 81 /er t! 8e a*0itte* 81 t/e *efen*ant5a""e##ant un*er t/e 'e?uest f!r A*0issi!n >ere a#rea*1 *ee0e* a*0itte* 81 t/e #atter f!r its fai#ure t! ans>er it un*er !at/, /as a#rea*1 8een "r!"er#1 #ai* t! rest >/en t/e #!>er c!urt in its Or*er !f 7a1 2), 1-)( c!rrect#1 ru#e*A At t/e !utset, it 0ust 8e stresse* t/at t/e *efen*ant in*ee* fi#e* a >ritten ans>er t! t/e re?uest f!r a*0issi!n, sans erificati!n. T/e case !f 7!t!r Ser ice C!., Inc. s. Ee##!> Ta:ica8 C!., Inc., et a#. 0a1 n!t t/eref!re 8e c!ntr!##in4, !r actua##1 !""!site. In sai* case, t/ere >as an a8s!#ute fai#ure !n t/e "art !f t/e *efen*ant t! ans>er t/e re?uest f!r a*0issi!n, an* t/us t/e c!urt >as Bustifie* in ren*erin4 a su00ar1 Bu*40ent. Here, /!>e er, as c#ear#1 inti0ate*

e#se>/ere a8! e, t/e *efen*ant ans>ere* in >ritin4 "ractica##1 e er1 ?uesti!n "!se* in t/e re?uest f!r a*0issi!n. T/e C!urt 8e#ie es, un*er t/e "ecu#iar circu0stance, t/at t/e 0!re c!ntr!##in4 Buris"ru*ence !n t/e 0ater >!u#* 8e t/!se cite* 81 t/e *efen*ant in its 0e0!ran*u0, "articu#ar#1 t/e case !f @ui0"! s. *e #a 3ict!ria, 2& SC'A 1%-. Prescin*in4 fr!0 t/e f!re4!in4, t/ere is a8s!#ute#1 n! 8asis in fact an* in #a> f!r t/e #!>er c!urt t! /!#* t/at t/e a""e##ant insurance c!0"an1 >as *ee0e* t! /a e >ai e* t/e *efense, t/at t/e *eat/ !f "#aintiff5 a""e##antCs /us8an* >as n!t cause* 81 i!#ent acci*enta# e:terna# an* isi8#e 0eansC as c!nte0"#ate* in t/e insurance "!#ic1. T/e Deat/ Certificate (E:/. -) an* t/e Aut!"s1 'e"!rt (E:/. 16), 0!re t/an c!ntr! erte* t/e a##e4ati!n !f t/e "#aintiff5 a""e##ant as t! t/e cause !f *eat/ !f /er /us8an*. 1( T/e insurance "!#ic1 e:"ress#1 "r! i*e* t/at t! 8e c!0"ensa8#e, t/e inBur1 !r *eat/ s/!u#* 8e cause* 81 M i!#ent acci*enta# e:terna# an* isi8#e 0eans.M In atte0"tin4 t! "r! e t/e cause !f /er /us8an*Cs *eat/, a## t/at "etiti!ner c!u#* su80it >ere a #etter sent t! /er 81 /er /us8an*Cs c!5>!r9er, statin4 t/at Ga8rie# *ie* >/en /e trie* t! /au# >ater !ut !f a tan9 >/i#e its su80er4e* 0!t!r >as sti## functi!nin4, 1) an* "etiti!nerCs sinu0"aan4 sa#a1sa1 1- >/ic/ 0ere#1 c!nfir0e* t/e recei"t an* state* c!ntents !f t/e #etter. Sai* t/e a""e##ate c!urt in t/is re4ar*A . . . . It 0ust 8e n!te* t/at t/e !n#1 e i*ence "resente* 81 /er t! "r! e t/e circu0stances surr!un*in4 /er /us8an*Cs *eat/ >ere /er "ur"!rte*

affi*a it an* t/e #etter a##e4e*#1 >ritten 81 t/e *ecease* c!5>!r9er in Ira?. T/e sai* affi*a it /!>e er suffers fr!0 "r!ce*ura# infir0it1 as it >as n!t e en testifie* t! !r i*entifie* 81 t/e affiant ("#aintiff5 a""e##ant) /erse#f. T/is se#f5ser in4 affi*a it t/eref!re is a 0ere /earsa1 un*er t/e ru#es, . . . . ::: ::: :::

In #i9e 0anner, t/e #etter a##e4e*#1 >ritten 81 t/e *ecease*Cs c!5>!r9er >/ic/ >as ne er i*entifie* t! in c!urt 81 t/e su""!se* aut/!r, suffers fr!0 t/e sa0e *efect as t/e affi*a it !f t/e "#aintiff5a""e##ant. 26 N!t !ne !f t/e !t/er *!cu0ents su80itte*, t! >it, t/e POEA *ecisi!n, *ate* 6& +une 1-)2, 21 t/e *eat/ certificate issue* 81 t/e 7inistr1 !f Hea#t/ !f Ira? an* t/e NBI aut!"s1 re"!rt, 22 c!u#* 4i e an1 "r!8ati e a#ue t! "etiti!nerCs c#ai0. T/e POEA *ecisi!n *i* n!t 0a9e an1 cate4!rica# /!#*in4 !n t/e s"ecific cause !f Ga8rie#Cs *eat/. Neit/er *i* t/e *eat/ certificate issue* 81 t/e /ea#t/ aut/!rities in Ira? n!r t/e NBI aut!"s1 re"!rt "r! i*e an1 c#ue !n t/e cause !f *eat/. A## t/at a""eare* t! 8e c#ear >as t/e fact !f Ga8rie#Cs *e0ise !n 22 7a1 1-)2 in Ira?. E i*ence, in fine, is utter#1 >antin4 t! esta8#is/ t/at t/e insure* suffere* fr!0 an acci*enta# *eat/, t/e ris9 c! ere* 81 t/e "!#ic1. In an acci*ent insurance, t/e insure*Cs 8eneficiar1 /as t/e 8ur*en !f "r!!f in *e0!nstratin4 t/at t/e cause !f *eat/ is *ue t! t/e c! ere* "eri#. Once t/at fact is esta8#is/e*, t/e 8ur*en t/en s/ifts t! t/e insurer t! s/!> an1 e:ce"te* "eri# t/at 0a1 /a e 8een sti"u#ate* 81 t/e "arties. An Macci*ent insuranceM is n!t t/us t! 8e #i9ene* t! an !r*inar1 #ife insurance >/ere t/e insure*Cs *eat/,

re4ar*#ess !f t/e cause t/ere!f, >!u#* n!r0a##1 8e c!0"ensa8#e. T/e #atter is a9in in "r!"ert1 insurance t! an Ma## ris9M c! era4e >/ere t/e insure*, !n t/e as"ect !f 8ur*en !f "r!!f, /as 0ere#1 t! s/!> t/e c!n*iti!n !f t/e "r!"ert1 insure* >/en t/e "!#ic1 attac/es an* t/e fact !f #!ss !r *a0a4e *urin4 t/e "eri!* !f t/e "!#ic1 an* >/ere, t/ereafter, t/e 8ur*en >!u#* 8e !n t/e insurer t! s/!> an1 Me:c#u*e* "eri#.M =/en, /!>e er, t/e insure* ris9 is s"ecifie*, #i9e in t/e case 8ef!re us, it #ies >it/ t/e c#ai0ant !f t/e insurance "r!cee*s t! initia##1 "r! e t/at t/e #!ss is cause* 81 t/e c! ere* "eri#. =/i#e "etiti!ner *i* fai# in su8stantiatin4 /er a##e4ati!n t/at t/e *eat/ !f /er /us8an* >as *ue t! an acci*ent, c!nsi*erin4, /!>e er, t/e uncertaint1 !n t/e rea# cause !f *eat/, "ri ate res"!n*ent 0i4/t fin* its >a1 c#ear int! sti## ta9in4 a sec!n* #!!9 !n t/e 0atter an* "er/a"s /e#" ease t/e #!a* !f "etiti!nerCs #!ss. =HE'EFO'E, t/e *ecisi!n a""ea#e* fr!0 is AFFI'7ED. N! c!sts. SO O'DE'ED.

FIG;'ACION 3DA. DE 7AGLANA, EDITHA 7. C';S, E'LINDA 7. 7ASESA', LEONILA 7. 7ALLA'I, GILDA ANTONIO an* t/e 0in!rs LEAH, LOPE, +'., an* EL3I'A, a## surna0e* 7AGLANA, /erein re"resente* 81 t/eir 0!t/er, FIG;'ACION 3DA. DE 7AGLANA, "etiti!ners, s. HONO'ABLE F'ANCISCO S. CONSOLACION, Presi*in4 +u*4e !f Da a! Cit1, Branc/ II, an* AFISCO INS;'ANCE CO'PO'ATION, res"!n*ents. +!se B. Gu1! f!r "etiti!ners. An4e# E. Fernan*eN f!r "ri ate res"!n*ent.

'O7E'O, +.A T/e nature !f t/e #ia8i#it1 !f an insurer sue* t!4et/er >it/ t/e insure*O!"erat!r5!>ner !f a c!00!n carrier >/ic/ fi4ure* in an acci*ent causin4 t/e *eat/ !f a t/ir* "ers!n is s!u4/t t! 8e *efine* in t/is "etiti!n f!r certi!rari. T/e facts as f!un* 81 t/e tria# c!urt are as f!##!>sA

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a THI'D DI3ISION

G.'. N!. &6.6&

Au4ust &, 1--2

. . . L!"e 7a4#ana >as an e0"#!1ee !f t/e Bureau !f Cust!0s >/!se >!r9 stati!n >as at Lasa, /ere in Da a! Cit1. On Dece08er 26, 1-(), ear#1 0!rnin4, L!"e 7a4#ana >as !n /is >a1 t! /is >!r9 stati!n, *ri in4 a 0!t!rc1c#e !>ne* 81 t/e Bureau !f Cust!0s. At D0. (, Lanan4, /e 0et an acci*ent t/at resu#te* in /is *eat/. He *ie* !n t/e s"!t. T/e P;+ Bee" t/at 8u0"e* t/e *ecease* >as *ri en 81 Pe"it! Int!, !"erate* an* !>ne* 81 *efen*ant DestraB!. Fr!0 t/e

in esti4ati!n c!n*ucte* 81 t/e traffic in esti4at!r, t/e P;+ Bee" >as ! erta9in4 an!t/er "assen4er Bee" t/at >as 4!in4 t!>ar*s t/e cit1 "!8#aci!n. =/i#e ! erta9in4, t/e P;+ Bee" !f *efen*ant DestraB! runnin4 a8reast >it/ t/e ! erta9en Bee", 8u0"e* t/e 0!t!rc1c#e *ri en 81 t/e *ecease* >/! >as 4!in4 t!>ar*s t/e *irecti!n !f Lasa, Da a! Cit1. T/e "!int !f i0"act >as !n t/e #ane !f t/e 0!t!rc1c#e an* t/e *ecease* >as t/r!>n fr!0 t/e r!a* an* 0et /is unti0e#1 *eat/. 1 C!nse?uent#1, t/e /eirs !f L!"e 7a4#ana, Sr., /ere "etiti!ners, fi#e* an acti!n f!r *a0a4es an* att!rne1Cs fees a4ainst !"erat!r Patrici! DestraB! an* t/e Afisc! Insurance C!r"!rati!n (AFISCO f!r 8re it1) 8ef!re t/e t/en C!urt !f First Instance !f Da a!, Branc/ II. An inf!r0ati!n f!r /!0ici*e t/ru rec9#ess i0"ru*ence >as a#s! fi#e* a4ainst Pe"it! Int!. Durin4 t/e "en*enc1 !f t/e ci i# case, Int! >as sentence* t! suffer an in*eter0inate "ena#t1 !f !ne (1) 1ear, ei4/t ()) 0!nt/s an* !ne (1) *a1 !f "risi!n c!rrecci!na#, as 0ini0u0, t! f!ur (2) 1ears, nine (-) 0!nt/s an* e#e en (11) *a1s !f "risi!n c!rrecci!na#, as 0a:i0u0, >it/ a## t/e access!r1 "ena#ties "r! i*e* 81 #a>, an* t! in*e0nif1 t/e /eirs !f L!"e 7a4#ana, Sr. in t/e a0!unt !f t>e# e t/!usan* "es!s (P12,666.66) >it/ su8si*iar1 i0"ris!n0ent in case !f ins!# enc1, "#us fi e t/!usan* "es!s (P.,666.66) in t/e c!nce"t !f 0!ra# an* e:e0"#ar1 *a0a4es >it/ c!sts. N! a""ea# >as inter"!se* 81 accuse* >/! #ater a""#ie* f!r "r!8ati!n. 2 On Dece08er 12, 1-)1, t/e #!>er c!urt ren*ere* a *ecisi!n fin*in4 t/at DestraB! /a* n!t e:ercise*

sufficient *i#i4ence as t/e !"erat!r !f t/e Bee"ne1. T/e *is"!siti e "!rti!n !f t/e *ecisi!n rea*sA =HE'EFO'E, t/e C!urt fin*s Bu*40ent in fa !r !f t/e "#aintiffs a4ainst *efen*ant DestraB!, !r*erin4 /i0 t! "a1 "#aintiffs t/e su0 !f P2),666.66 f!r #!ss !f inc!0e$ t! "a1 "#aintiffs t/e su0 !f P12,666.66 >/ic/ a0!unt s/a## 8e *e*ucte* in t/e e ent Bu*40ent in Cri0ina# Case N!. %.2(5D a4ainst t/e *ri er, accuse* Int!, s/a## /a e 8een enf!rce*$ t! "a1 "#aintiffs t/e su0 !f P.,-61.(6 re"resentin4 funera# an* 8uria# e:"enses !f t/e *ecease*$ t! "a1 "#aintiffs t/e su0 !f P.,666.66 as 0!ra# *a0a4es >/ic/ s/a## 8e *e*ucte* in t/e e ent Bu*40ent (sic) in Cri0ina# Case N!. %.2(5D a4ainst t/e *ri er, accuse* Int!$ t! "a1 "#aintiffs t/e su0 !f P%,666.66 as att!rne1Cs fees an* t! "a1 t/e c!sts !f suit. T/e *efen*ant insurance c!0"an1 is !r*ere* t! rei08urse *efen*ant DestraB! >/ate er a0!unts t/e #atter s/a## /a e "ai* !n#1 u" t! t/e e:tent !f its insurance c! era4e. SO O'DE'ED. % Petiti!ners fi#e* a 0!ti!n f!r t/e rec!nsi*erati!n !f t/e sec!n* "ara4ra"/ !f t/e *is"!siti e "!rti!n !f t/e *ecisi!n c!nten*in4 t/at AFISCO s/!u#* n!t 0ere#1 8e /e#* sec!n*ari#1 #ia8#e 8ecause t/e Insurance C!*e "r! i*es t/at t/e insurerCs #ia8i#it1 is M*irect an* "ri0ar1 an*O!r B!int#1 an* se era##1 >it/ t/e !"erat!r !f t/e e/ic#e, a#t/!u4/ !n#1 u" t! t/e e:tent !f t/e insurance c! era4e.M 2 Hence, t/e1 ar4ue* t/at t/e P26,666.66 c! era4e !f t/e insurance "!#ic1 issue* 81 AFISCO, s/!u#* /a e 8een a>ar*e* in t/eir fa !r.

In its c!00ent !n t/e 0!ti!n f!r rec!nsi*erati!n, AFISCO ar4ue* t/at since t/e Insurance C!*e *!es n!t e:"ress#1 "r! i*e f!r a s!#i*ar1 !8#i4ati!n, t/e "resu0"ti!n is t/at t/e !8#i4ati!n is B!int. In its Or*er !f Fe8ruar1 -, 1-)2, t/e #!>er c!urt *enie* t/e 0!ti!n f!r rec!nsi*erati!n ru#in4 t/at since t/e insurance c!ntract Mis in t/e nature !f suret1s/i", t/en t/e #ia8i#it1 !f t/e insurer is sec!n*ar1 !n#1 u" t! t/e e:tent !f t/e insurance c! era4e.M . Petiti!ners fi#e* a sec!n* 0!ti!n f!r rec!nsi*erati!n reiteratin4 t/at t/e #ia8i#it1 !f t/e insurer is *irect, "ri0ar1 an* s!#i*ar1 >it/ t/e Bee"ne1 !"erat!r 8ecause t/e "etiti!ners 8eca0e *irect 8eneficiaries un*er t/e "r! isi!n !f t/e "!#ic1 >/ic/, in effect, is a sti"u#ati!n "!ur autrui. & T/is 0!ti!n >as #i9e>ise *enie* f!r #ac9 !f 0erit. Hence, "etiti!ners fi#e* t/e instant "etiti!n f!r certi!rari >/ic/, a#t/!u4/ it *!es n!t see9 t/e re ersa# !f t/e #!>er c!urtCs *ecisi!n in its entiret1, "ra1s f!r t/e settin4 asi*e !r 0!*ificati!n !f t/e sec!n* "ara4ra"/ !f t/e *is"!siti e "!rti!n !f sai* *ecisi!n. Petiti!ners reassert t/eir "!siti!n t/at t/e insurance c!0"an1 is *irect#1 an* s!#i*ari#1 #ia8#e >it/ t/e ne4#i4ent !"erat!r u" t! t/e e:tent !f its insurance c! era4e. =e 4rant t/e "etiti!n. T/e "articu#ar "r! isi!n !f t/e insurance "!#ic1 !n >/ic/ "etiti!ners 8ase t/eir c#ai0 is as f!##!>sA

Sec. 1 T LIABILITE TO THE P;BLIC 1. T/e C!0"an1 >i##, su8Bect t! t/e Li0its !f Lia8i#it1, "a1 a## su0s necessar1 t! *isc/ar4e #ia8i#it1 !f t/e insure* in res"ect !f (a) (8) 2. *eat/ !f !r 8!*i#1 inBur1 t! an1 THI'D PA'TE .... ....

%. In t/e e ent !f t/e *eat/ !f an1 "ers!n entit#e* t! in*e0nit1 un*er t/is P!#ic1, t/e C!0"an1 >i##, in res"ect !f t/e #ia8i#it1 incurre* t! suc/ "ers!n in*e0nif1 /is "ers!na# re"resentati es in ter0s !f, an* su8Bect t! t/e ter0s an* c!n*iti!ns /ere!f. ( T/e a8! e5?u!te* "r! isi!n #ea*s t! n! !t/er c!nc#usi!n 8ut t/at AFISCO can 8e /e#* *irect#1 #ia8#e 81 "etiti!ners. As t/is C!urt ru#e* in S/afer s. +u*4e, 'TC !f O#!n4a"! Cit1, Br. (., MI>J/ere an insurance "!#ic1 insures *irect#1 a4ainst #ia8i#it1, t/e insurerCs #ia8i#it1 accrues i00e*iate#1 u"!n t/e !ccurrence !f t/e inBur1 !r e en u"!n >/ic/ t/e #ia8i#it1 *e"en*s, an* *!es n!t *e"en* !n t/e rec! er1 !f Bu*40ent 81 t/e inBure* "art1 a4ainst t/e insure*.M ) T/e un*er#1in4 reas!n 8e/in* t/e t/ir* "art1 #ia8i#it1 (TPL) !f t/e C!0"u#s!r1 7!t!r 3e/ic#e Lia8i#it1 Insurance is Mt! "r!tect inBure* "ers!ns a4ainst t/e ins!# enc1 !f t/e insure* >/! causes suc/ inBur1, an* t! 4i e suc/ inBure* "ers!n a certain 8eneficia# interest in t/e "r!cee*s !f t/e "!#ic1 . . .M - Since "etiti!ners /a* recei e* fr!0 AFISCO t/e su0 !f P.,666.66 un*er t/e

n!5fau#t c#ause, AFISCOCs #ia8i#it1 is n!> #i0ite* t! P1.,666.66. H!>e er, >e cann!t a4ree t/at AFISCO is #i9e>ise s!#i*ari#1 #ia8#e >it/ DestraB!. In 7a#a1an Insurance C!., Inc. . C!urt !f A""ea#s, 16 t/is C!urt /a* t/e !""!rtunit1 t! res!# e t/e issue as t! t/e nature !f t/e #ia8i#it1 !f t/e insurer an* t/e insure* is5a5 is t/e t/ir* "art1 inBure* in an acci*ent. =e cate4!rica##1 ru#e* t/usA =/i#e it is true t/at >/ere t/e insurance c!ntract "r! i*es f!r in*e0nit1 a4ainst #ia8i#it1 t! t/ir* "ers!ns, suc/ t/ir* "ers!ns can *irect#1 sue t/e insurer, /!>e er, t/e *irect #ia8i#it1 !f t/e insurer un*er in*e0nit1 c!ntracts a4ainst t/ir* "art1 #ia8i#it1 *!es n!t 0ean t/at t/e insurer can 8e /e#* s!#i*ari#1 #ia8#e >it/ t/e insure* an*O!r t/e !t/er "arties f!un* at fau#t. T/e #ia8i#it1 !f t/e insurer is 8ase* !n c!ntract$ t/at !f t/e insure* is 8ase* !n t!rt. In t/e case at 8ar, "etiti!ner as insurer !f Si! C/!1, is #ia8#e t! res"!n*ent 3a##eB!s (t/e inBure* t/ir* "art1), 8ut it cann!t, as inc!rrect#1 /e#* 81 t/e tria# c!urt, 8e 0a*e Ms!#i*ari#1M #ia8#e >it/ t/e t>! "rinci"a# t!rtfeas!rs, na0e#1 res"!n*ents Si! C/!1 an* San Le!n 'ice 7i##, Inc. F!r if "etiti!ner5insurer >ere s!#i*ari#1 #ia8#e >it/ sai*, t>! (2) res"!n*ents 81 reas!n !f t/e in*e0nit1 c!ntract a4ainst t/ir* "art1 #ia8i#it1 T un*er >/ic/ an insurer can 8e *irect#1 sue* 81 a t/ir* "art1 T t/is >i## resu#t in a i!#ati!n !f t/e "rinci"#es un*er#1in4 s!#i*ar1 !8#i4ati!n an* insurance c!ntracts. (e0"/asis su""#ie*) T/e C!urt t/en "r!cee*e* t! *istin4uis/ t/e e:tent !f t/e #ia8i#it1 an* 0anner !f enf!rcin4 t/e sa0e in

!r*inar1 c!ntracts fr!0 t/at !f insurance c!ntracts. =/i#e in s!#i*ar1 !8#i4ati!ns, t/e cre*it!r 0a1 enf!rce t/e entire !8#i4ati!n a4ainst !ne !f t/e s!#i*ar1 *e8t!rs, in an insurance c!ntract, t/e insurer un*erta9es f!r a c!nsi*erati!n t! in*e0nif1 t/e insure* a4ainst #!ss, *a0a4e !r #ia8i#it1 arisin4 fr!0 an un9n!>n !r c!ntin4ent e ent. 11 T/us, "etiti!ner t/erein, >/ic/, un*er t/e insurance c!ntract is #ia8#e !n#1 u" t! P26,666.66, can n!t 8e 0a*e s!#i*ari#1 #ia8#e >it/ t/e insure* f!r t/e entire !8#i4ati!n !f P2-,61%.66 !t/er>ise t/ere >!u#* resu#t Man e i*ent 8reac/ !f t/e c!nce"t !f s!#i*ar1 !8#i4ati!n.M Si0i#ar#1, "etiti!ners /erein cann!t a#i*#1 c#ai0 t/at AFISCO, >/!se #ia8i#it1 un*er t/e insurance "!#ic1 is a#s! P26,666.66, can 8e /e#* s!#i*ari#1 #ia8#e >it/ DestraB! f!r t/e t!ta# a0!unt !f P.%,-61.(6 in acc!r*ance >it/ t/e *ecisi!n !f t/e #!>er c!urt. Since un*er 8!t/ t/e #a> an* t/e insurance "!#ic1, AFISCOCs #ia8i#it1 is !n#1 u" t! P26,666.66, t/e sec!n* "ara4ra"/ !f t/e *is"!siti e "!rti!n !f t/e *ecisi!n in ?uesti!n 0a1 /a e un>ittin4#1 s!>n c!nfusi!n a0!n4 t/e "etiti!ners an* t/eir c!unse#. =/at s/!u#* /a e 8een c#ear#1 stresse* as t! #ea e n! r!!0 f!r *!u8t >as t/e #ia8i#it1 !f AFISCO un*er t/e e:"#icit ter0s !f t/e insurance c!ntract. In fine, >e c!nc#u*e t/at t/e #ia8i#it1 !f AFISCO 8ase* !n t/e insurance c!ntract is *irect, 8ut n!t s!#i*ar1 >it/ t/at !f DestraB! >/ic/ is 8ase* !n Artic#e 21)6 !f t/e Ci i# C!*e. 12 As suc/, "etiti!ners /a e t/e !"ti!n eit/er t! c#ai0 t/e P1.,666 fr!0 AFISCO an* t/e 8a#ance fr!0 DestraB! !r enf!rce t/e entire Bu*40ent fr!0 DestraB! su8Bect t! rei08urse0ent fr!0 AFISCO t! t/e e:tent !f t/e insurance c! era4e.

=/i#e t/e "etiti!n see9s a *efiniti e ru#in4 !n#1 !n t/e nature !f AFISCOCs #ia8i#it1, >e n!tice* t/at t/e #!>er c!urt erre* in t/e c!0"utati!n !f t/e "r!8a8#e #!ss !f inc!0e. ;sin4 t/e f!r0u#aA 2O% !f ()65.&) : P12,666.66, it a>ar*e* P2),)66.66. 1% ;"!n rec!0"utati!n, t/e c!rrect a0!unt is P1-2,666.66. Bein4 a M"#ain err!r,M >e !"t t! c!rrect t/e sa0e. 12 Furt/er0!re, in acc!r*ance >it/ "re ai#in4 Buris"ru*ence, t/e *eat/ in*e0nit1 is /ere81 increase* t! P.6,666.66. 1. =HE'EFO'E, "re0ises c!nsi*ere*, t/e "resent "etiti!n is /ere81 G'ANTED. T/e a>ar* !f P2),)66.66 re"resentin4 #!ss !f inc!0e is INC'EASED t! P1-2,666.66 an* t/e *eat/ in*e0nit1 !f P12,666.66 t! P.6,666.66. SO O'DE'ED.

PED'O A. A''IESGADO, BEN+A7IN CONDO', SE'GIO PED'ANO an* PHILIPPINE PHOENIF S;'ETE AND INS;'ANCE, INC., res"!n*ents. DECISION CALLE+O, S'., +.A T/is is a "etiti!n f!r re ie> !n certi!rari un*er 'u#e 2. !f t/e 'u#es !f C!urt fr!0 t/e Decisi!n1 !f t/e C!urt !f A""ea#s in CA5G.'. C3 N!. .2%.2 affir0in4 >it/ 0!*ificati!n t/e Decisi!n2 !f t/e 'e4i!na# Tria# C!urt, (t/ +u*icia# 'e4i!n, Ce8u Cit1, Branc/ 26, in Ci i# Case N!. CEB5.-&% f!r 8reac/ !f c!ntract !f carria4e, *a0a4es an* att!rne1Qs fees, an* t/e 'es!#uti!n *ate* Fe8ruar1 2&, 1--- *en1in4 t/e 0!ti!n f!r rec!nsi*erati!n t/ere!f. T/e f!##!>in4 facts are un*is"ute*A At a8!ut 16A66 ".0. !f 7arc/ 1., 1-)(, t/e car4! truc9 0ar9e* MC!n*!r H!##!> B#!c9s an* Genera# 7erc/an*iseM 8earin4 "#ate nu08er GBP5&(. >as #!a*e* >it/ fire>!!* in B!4!, Ce8u an* #eft f!r Ce8u Cit1. ;"!n reac/in4 Siti! A44ies, P!8#aci!n, C!0"!ste#a, Ce8u, Bust as t/e truc9 "asse* ! er a 8ri*4e, !ne !f its rear tires e:"#!*e*. T/e *ri er, Ser4i! Pe*ran!, t/en "ar9e* a#!n4 t/e ri4/t si*e !f t/e nati!na# /i4/>a1 an* re0! e* t/e *a0a4e* tire t! /a e it u#caniNe* at a near81 s/!", a8!ut (66 0eters a>a1.% Pe*ran! #eft /is /e#"er, +!se 7itante, +r. t! 9ee" >atc/ ! er t/e sta##e* e/ic#e, an* instructe* t/e #atter t! "#ace a s"are tire si: fat/!0s a>a12 8e/in* t/e sta##e* truc9 t! ser e as a >arnin4 f!r !nc!0in4 e/ic#es. T/e truc9Qs tai# #i4/ts >ere a#s! #eft !n. It >as a8!ut 12A66 a.0., 7arc/ 1&, 1-)(.

'e"u8#ic !f t/e P/i#i""ines S;P'E7E CO;'T 7ani#a SECOND DI3ISION G.'. N!. 1%)6&6 Se"te08er 1, 2662

=ILLIA7 TI;, *!in4 8usiness un*er t/e na0e an* st1#e !f MDQ '!u4/ 'i*ers,M an* 3I'GILIO TE LAS PIeAS "etiti!ners, s.

At a8!ut 2A2. a.0., DQ '!u4/ 'i*ers "assen4er 8us >it/ "#ate nu08er PBP5(22 *ri en 81 3ir4i#i! Te Las"iXas >as cruisin4 a#!n4 t/e nati!na# /i4/>a1 !f Siti! A44ies, P!8#aci!n, C!0"!ste#a, Ce8u. T/e "assen4er 8us >as a#s! 8!un* f!r Ce8u Cit1, an* /a* c!0e fr!0 7a1a, Daan8anta1an, Ce8u. A0!n4 its "assen4ers >ere t/e S"!uses Pe*r! A. Arries4a*! an* Fe#isa Pe"it! Arries4a*!, >/! >ere seate* at t/e ri4/t si*e !f t/e 8us, a8!ut t/ree (%) !r f!ur (2) "#aces fr!0 t/e fr!nt seat. As t/e 8us >as a""r!ac/in4 t/e 8ri*4e, Las"iXas sa> t/e sta##e* truc9, >/ic/ >as t/en a8!ut 2. 0eters a>a1.. He a""#ie* t/e 8rea9s an* trie* t! s>er e t! t/e #eft t! a !i* /ittin4 t/e truc9. But it >as t!! #ate$ t/e 8us ra00e* int! t/e truc9Qs #eft rear. T/e i0"act *a0a4e* t/e ri4/t si*e !f t/e 8us an* #eft se era# "assen4ers inBure*. Pe*r! Arries4a*! #!st c!nsci!usness an* suffere* a fracture in /is ri4/t c!##es.& His >ife, Fe#isa, >as 8r!u4/t t! t/e Dana! Cit1 H!s"ita#. S/e >as #ater transferre* t! t/e S!ut/ern Is#an* 7e*ica# Center >/ere s/e *ie* s/!rt#1 t/ereafter.( 'es"!n*ent Pe*r! A. Arries4a*! t/en fi#e* a c!0"#aint f!r 8reac/ !f c!ntract !f carria4e, *a0a4es an* att!rne1Qs fees 8ef!re t/e 'e4i!na# Tria# C!urt !f Ce8u Cit1, Branc/ 26, a4ainst t/e "etiti!ners, DQ '!u4/ 'i*ers 8us !"erat!r =i##ia0 Tiu an* /is *ri er, 3ir4i#i! Te Las"iXas !n 7a1 2(, 1-)(. T/e res"!n*ent a##e4e* t/at t/e "assen4er 8us in ?uesti!n >as cruisin4 at a fast an* /i4/ s"ee* a#!n4 t/e nati!na# r!a*, an* t/at "etiti!ner Las"iXas *i* n!t ta9e "recauti!nar1 0easures t! a !i* t/e acci*ent.) T/usA

&. T/at t/e acci*ent resu#te* t! t/e *eat/ !f t/e "#aintiffQs >ife, Fe#isa Pe"it! Arries4a*!, as e i*ence* 81 a Certificate !f Deat/, a :er!: c!"1 !f >/ic/ is /eret! attac/e* as inte4ra# "art /ere!f an* 0ar9e* as ANNEF R MAM, an* "/1sica# inBuries t! se era# !f its "assen4ers, inc#u*in4 "#aintiff /i0se#f >/! suffere* a MCOLLES F'ACT;'E 'IGHT,M "er 7e*ica# Certificate, a :er!: c!"1 !f >/ic/ is /eret! attac/e* as inte4ra# "art /ere!f an* 0ar9e* as ANNEF R MBM /ere!f. (. T/at *ue t! t/e rec9#ess an* i0"ru*ent *ri in4 81 *efen*ant 3ir4i#i! Te Las"iXas !f t/e sai* '!u4/ 'i*ers "assen4er 8us, "#aintiff an* /is >ife, Fe#isa Pe"it! Arries4a*!, fai#e* t! safe#1 reac/ t/eir *estinati!n >/ic/ >as Ce8u Cit1, t/e "r!:i0ate cause !f >/ic/ >as *efen*ant5*ri erQs fai#ure t! !8ser e ut0!st *i#i4ence re?uire* !f a er1 cauti!us "ers!n un*er a## circu0stances. ). T/at *efen*ant =i##ia0 Tiu, 8ein4 t/e !>ner an* !"erat!r !f t/e sai* '!u4/ 'i*ers "assen4er 8us >/ic/ fi4ure* in t/e sai* acci*ent, >/erein "#aintiff an* /is >ife >ere ri*in4 at t/e ti0e !f t/e acci*ent, is t/eref!re *irect#1 #ia8#e f!r t/e 8reac/ !f c!ntract !f carria4e f!r /is fai#ure t! trans"!rt "#aintiff an* /is >ife safe#1 t! t/eir "#ace !f *estinati!n >/ic/ >as Ce8u Cit1, an* >/ic/ fai#ure in /is !8#i4ati!n t! trans"!rt safe#1 /is "assen4ers >as *ue t! an* in c!nse?uence !f /is fai#ure t! e:ercise t/e *i#i4ence !f a 4!!* fat/er !f t/e fa0i#1 in t/e se#ecti!n an* su"er isi!n !f /is e0"#!1ees, "articu#ar#1 *efen*ant5*ri er 3ir4i#i! Te Las"iXas.T/e res"!n*ent "ra1e* t/at Bu*40ent 8e ren*ere* in /is fa !r an* t/at t/e "etiti!ners 8e c!n*e0ne* t! "a1 t/e f!##!>in4 *a0a4esA

1). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P%6,666.66 f!r t/e *eat/ an* unti0e#1 *e0ise !f "#aintiffQs >ife, Fe#isa Pe"it! Arries4a*!$ 2). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P%),221..6, re"resentin4 actua# e:"enses incurre* 81 t/e "#aintiff in c!nnecti!n >it/ t/e *eat/O8uria# !f "#aintiffQs >ife$ %). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P1,11%.)6, re"resentin4 0e*ica#O/!s"ita#iNati!n e:"enses incurre* 81 "#aintiff f!r t/e inBuries sustaine* 81 /i0$ 2). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P.6,666.66 f!r 0!ra# *a0a4es$ .). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P.6,666.66 81 >a1 !f e:e0"#ar1 *a0a4es$ &). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P26,666.66 f!r att!rne1Qs fees$ (). T! "a1 t! "#aintiff, B!int#1 an* se era##1, t/e a0!unt !f P.,666.66 f!r #iti4ati!n e:"enses. PLAINTIFF F;'THE' P'AES FO' S;CH OTHE' 'ELIEFS AND 'E7EDIES IN LA= AND E@;ITE.16 T/e "etiti!ners, f!r t/eir "art, fi#e* a T/ir*5Part1 C!0"#aint11 !n Au4ust 21, 1-)( a4ainst t/e f!##!>in4A res"!n*ent P/i#i""ine P/!eni: Suret1 an* Insurance, Inc. (PPSII), "etiti!ner TiuQs insurer$ res"!n*ent BenBa0in C!n*!r, t/e re4istere* !>ner !f t/e car4! truc9$ an* res"!n*ent Ser4i! Pe*ran!, t/e *ri er !f

t/e truc9. T/e1 a##e4e* t/at "etiti!ner Las"iXas >as ne4!tiatin4 t/e u"/i## c#i08 a#!n4 t/e nati!na# /i4/>a1 !f Siti! A44ies, P!8#aci!n, C!0"!ste#a, in a 0!*erate an* n!r0a# s"ee*. It >as furt/er a##e4e* t/at t/e truc9 >as "ar9e* in a s#ante* 0anner, its rear "!rti!n a#0!st in t/e 0i**#e !f t/e /i4/>a1, an* t/at n! ear#1 >arnin4 *e ice >as *is"#a1e*. Petiti!ner Las"iXas "r!0"t#1 a""#ie* t/e 8ra9es an* s>er e* t! t/e #eft t! a !i* /ittin4 t/e truc9 /ea*5!n, 8ut *es"ite /is eff!rts t! a !i* *a0a4e t! "r!"ert1 an* "/1sica# inBuries !n t/e "assen4ers, t/e ri4/t si*e "!rti!n !f t/e 8us /it t/e car4! truc9Qs #eft rear. T/e "etiti!ners furt/er a##e4e*, t/usA .. T/at t/e car4! truc9 0enti!ne* in t/e af!re?u!te* "ara4ra"/ is !>ne* an* re4istere* in t/e na0e !f t/e t/ir*5"art1 *efen*ant BenBa0in C!n*!r an* >as #eft unatten*e* 81 its *ri er Ser4i! Pe*ran!, !ne !f t/e t/ir*5"art1 *efen*ants, at t/e ti0e !f t/e inci*ent$ &. T/at t/ir*5"art1 *efen*ant Ser4i! Pe*ran!, as *ri er !f t/e car4! truc9 >it/ 0ar9e* (sic) MC!n*!r H!##!> B#!c9s < Genera# 7erc/an*ise,M >it/ P#ate N!. GBP5 &(. >/ic/ >as rec9#ess#1 an* i0"ru*ent#1 "ar9e* a#!n4 t/e nati!na# /i4/>a1 !f C!0"!ste#a, Ce8u *urin4 t/e e/icu#ar acci*ent in ?uesti!n, an* t/ir*5 "art1 *efen*ant BenBa0in C!n*!r, as t/e re4istere* !>ner !f t/e car4! truc9 >/! fai#e* t! e:ercise *ue *i#i4ence in t/e se#ecti!n an* su"er isi!n !f t/ir*5"art1 *efen*ant Ser4i! Pe*ran!, are B!int#1 an* se era##1 #ia8#e t! t/e t/ir*5"art1 "#aintiffs f!r >/ate er #ia8i#it1 t/at 0a1 8e a*Bu*4e* a4ainst sai* t/ir*5"art1 "#aintiffs !r are *irect#1 #ia8#e !f (sic) t/e a##e4e* *eat/ !f "#aintiffQs >ife$

(. T/at in a**iti!n t! a## t/at are state* a8! e an* in t/e ans>er >/ic/ are inten*e* t! s/!> rec9#ess i0"ru*ence !n t/e "art !f t/e t/ir*5"art1 *efen*ants, t/e t/ir*5"art1 "#aintiffs /ere81 *ec#are t/at *urin4 t/e e/icu#ar acci*ent in ?uesti!n, t/ir*5"art1 *efen*ant >as c#ear#1 i!#atin4 Secti!n %2, "ar. (4) !f t/e Lan* Trans"!rtati!n an* Traffic C!*ea a 16. T/at t/e af!resai* "assen4er 8us, !>ne* an* !"erate* 81 t/ir*5"art1 "#aintiff =i##ia0 Tiu, is c! ere* 81 a c!00!n carrier #ia8i#it1 insurance >it/ Certificate !f C! er N!. 6.2-26 issue* 81 P/i#i""ine P/!eni: Suret1 an* Insurance, Inc., Ce8u Cit1 Branc/, in fa !r !f t/ir*5"art1 "#aintiff =i##ia0 Tiu >/ic/ c! ers t/e "eri!* fr!0 +u#1 22, 1-)& t! +u#1 22, 1-)( an* t/at t/e sai* insurance c! era4e >as a#i*, 8in*in4 an* su8sistin4 *urin4 t/e ti0e !f t/e af!re0enti!ne* inci*ent (Anne: MAM as "art /ere!f)$ 11. T/at after t/e af!resai* a##e4e* inci*ent, t/ir*5 "art1 "#aintiff n!tifie* t/ir*5"art1 *efen*ant P/i#i""ine P/!eni: Suret1 an* Insurance, Inc., !f t/e a##e4e* inci*ent /eret! 0enti!ne*, 8ut t! n! a ai#$ 12. T/at 4rantin4, et ar4uen*! et ar4uen*i, if /erein t/ir*5"art1 "#aintiffs >i## 8e a* erse#1 a*Bu*4e*, t/e1 stan* t! "a1 *a0a4es s!u4/t 81 t/e "#aintiff an* t/eref!re c!u#* a#s! #!!9 u" t! t/e P/i#i""ine P/!eni: Suret1 an* Insurance, Inc., f!r c!ntri8uti!n, in*e0nificati!n an*O!r rei08urse0ent !f an1 #ia8i#it1 !r !8#i4ati!n t/at t/e1 0i4/t I8eJ a*Bu*4e* "er insurance c! era4e *u#1 entere* int! 81 an* 8et>een t/ir*5"art1 "#aintiff =i##ia0 Tiu an* t/ir*5"art1

*efen*ant P/i#i""ine P/!eni: Suret1 an* Insurance, Inc.$a12 T/e res"!n*ent PPSII, f!r its "art, a*0itte* t/at it /a* an e:istin4 c!ntract >it/ "etiti!ner Tiu, 8ut a erre* t/at it /a* a#rea*1 atten*e* t! an* sett#e* t/e c#ai0s !f t/!se >/! >ere inBure* *urin4 t/e inci*ent.1% It c!u#* n!t acce*e t! t/e c#ai0 !f res"!n*ent Arries4a*!, as suc/ c#ai0 >as >a1 8e1!n* t/e sc/e*u#e* in*e0nit1 as c!ntaine* in t/e c!ntract !f insurance.12 After t/e "arties "resente* t/eir res"ecti e e i*ence, t/e tria# c!urt ru#e* in fa !r !f res"!n*ent Arries4a*!. T/e *is"!siti e "!rti!n !f t/e *ecisi!n rea*sA =HE'EFO'E, in ie> !f t/e f!re4!in4, Bu*40ent is /ere81 ren*ere* in fa !r !f "#aintiff as a4ainst *efen*ant =i##ia0 Tiu !r*erin4 t/e #atter t! "a1 t/e "#aintiff t/e f!##!>in4 a0!untsA 1 5 T/e su0 !f FIFTE THO;SAND PESOS (P.6,666.66) as 0!ra# *a0a4es$ 2 5 T/e su0 !f FIFTE THO;SAND PESOS (P.6,666.66) as e:e0"#ar1 *a0a4es$ % 5 T/e su0 !f THI'TE5EIGHT THO;SAND FO;' H;ND'ED FO'TE5ONE PESOS (P%),221.66) as actua# *a0a4es$ 2 5 T/e su0 !f T=ENTE (P26,666.66) as att!rne1Qs fees$ THO;SAND PESOS

. 5 T/e su0 !f FI3E THO;SAND PESOS (P.,666.66) as c!sts !f suit$

SO O'DE'ED.1. Acc!r*in4 t! t/e tria# c!urt, t/ere >as n! *is"ute t/at "etiti!ner =i##ia0 Tiu >as en4a4e* in 8usiness as a c!00!n carrier, in ie> !f /is a*0issi!n t/at DQ '!u4/ 'i*er "assen4er 8us >/ic/ fi4ure* in t/e acci*ent >as !>ne* 81 /i0$ t/at /e /a* 8een en4a4e* in t/e trans"!rtati!n 8usiness f!r 2. 1ears >it/ a s!#e "r!"riet!rs/i"$ an* t/at /e !>ne* %2 8uses. T/e tria# c!urt ru#e* t/at if "etiti!ner Las"iXas /a* n!t 8een *ri in4 at a fast "ace, /e c!u#* /a e easi#1 s>er e* t! t/e #eft t! a !i* /ittin4 t/e truc9, t/us, a ertin4 t/e unf!rtunate inci*ent. It t/en c!nc#u*e* t/at "etiti!ner Las"iXas >as ne4#i4ent. T/e tria# c!urt a#s! ru#e* t/at t/e a8sence !f an ear#1 >arnin4 *e ice near t/e "#ace >/ere t/e truc9 >as "ar9e* >as n!t sufficient t! i0"ute ne4#i4ence !n t/e "art !f res"!n*ent Pe*ran!, since t/e tai# #i4/ts !f t/e truc9 >ere fu##1 !n, an* t/e icinit1 >as >e## #i4/te* 81 street #a0"s.1& It a#s! f!un* t/at t/e testi0!n1 !f "etiti!ner Tiu, t/at /e 8ase* t/e se#ecti!n !f /is *ri er Las"iXas !n efficienc1 an* in5ser ice trainin4, an* t/at t/e #atter /a* 8een s! far an efficient an* 4!!* *ri er f!r t/e "ast si: 1ears !f /is e0"#!10ent, >as insufficient t! "r! e t/at /e !8ser e* t/e *i#i4ence !f a 4!!* fat/er !f a fa0i#1 in t/e se#ecti!n an* su"er isi!n !f /is e0"#!1ees. After t/e "etiti!nerQs 0!ti!n f!r rec!nsi*erati!n !f t/e sai* *ecisi!n >as *enie*, t/e "etiti!ners e#e ate* t/e case t! t/e C!urt !f A""ea#s !n t/e f!##!>in4 issuesA

I =HETHE' THI'D PA'TE DEFENDANT SE'GIO PED'ANO =AS 'ECDLESS AND I7P';DENT =HEN HE PA'DED THE CA'GO T';CD IN AN OBLI@;E 7ANNE'$ II =HETHE' THE THI'D PA'TE DEFENDANTS A'E +OINTLE AND SE3E'ALLE LIABLE DI'ECTLE TO PLAINTIFF5APPELLEE O' TO DEFENDANTS5APPELLANTS FO' =HATE3E' LIABILITE THAT 7AE BE AD+;DGED TO THE SAID DEFENDANTS5APPELLANTS$ III =HETHE' DEFENDANT5APPELLANT 3I'GILIO LASPIeAS =AS G;ILTE OF G'OSS NEGLIGENCE$ TE

I3 =HETHE' DEFENDANT5APPELLANT =ILLIA7 TI; HAD EFE'CISED THE D;E DILIGENCE OF A GOOD FATHE' OF A FA7ILE IN THE SELECTION AND S;PE'3ISION OF HIS D'I3E'S$ 3 G'ANTING FO' THE SADE OF A'G;7ENT THAT DEFENDANT5APPELLANT =ILLIA7 TI; IS LIABLE TO PLAINTIFF5APPELLEE, =HETHE' THE'E IS LEGAL AND FACT;AL BASIS IN A=A'DING EFCESSI3E 7O'AL DA7AGES, EFIEJ7PLA'E DA7AGES, ATTO'NEEQS FEES AND LITIGATION EFPENSES TO PLAINTIFF5APPELLEE$ 3I =HETHE' THI'D PA'TE DEFENDANT PHILIPPINE PHOENIF S;'ETE AND INS;'ANCE, INC. IS LIABLE TO DEFENDANT5 APPELLANT =ILLIA7 TI;.1( T/e a""e##ate c!urt ren*ere* Bu*40ent affir0in4 t/e tria# c!urtQs *ecisi!n >it/ t/e 0!*ificati!n t/at t/e a>ar*s f!r 0!ra# an* e:e0"#ar1 *a0a4es >ere re*uce* t! P2.,666. T/e *is"!siti e "!rti!n rea*sA =HE'EFO'E, t/e a""ea#e* Decisi!n *ate* N! e08er &, 1--. is /ere81 7ODIFIED suc/ t/at t/e a>ar*s f!r

0!ra# an* e:e0"#ar1 *a0a4es are eac/ re*uce* t! P2.,666.66 !r a t!ta# !f P.6,666.66 f!r 8!t/. T/e Bu*40ent is AFFI'7ED in a## !t/er res"ects. SO O'DE'ED.1) Acc!r*in4 t! t/e a""e##ate c!urt, t/e acti!n !f res"!n*ent Arries4a*! >as 8ase* n!t !n ?uasi5*e#ict 8ut !n 8reac/ !f c!ntract !f carria4e. As a c!00!n carrier, it >as incu08ent u"!n "etiti!ner Tiu t! "r! e t/at e:tra!r*inar1 *i#i4ence >as !8ser e* in ensurin4 t/e safet1 !f "assen4ers *urin4 trans"!rtati!n. Since t/e #atter fai#e* t! *! s!, /e s/!u#* 8e /e#* #ia8#e f!r res"!n*ent Arries4a*!Qs c#ai0. T/e CA a#s! ru#e* t/at n! e i*ence >as "resente* a4ainst t/e res"!n*ent PPSII, an* as suc/, it c!u#* n!t 8e /e#* #ia8#e f!r res"!n*ent Arries4a*!Qs c#ai0, n!r f!r c!ntri8uti!n, in*e0nificati!n an*O!r rei08urse0ent in case t/e "etiti!ners >ere a*Bu*4e* #ia8#e. T/e "etiti!ners n!> c!0e t! t/is C!urt an* ascri8e t/e f!##!>in4 err!rs c!00itte* 81 t/e a""e##ate c!urtA I. THE HONO'ABLE CO;'T OF APPEALS E''ED IN NOT DECLA'ING 'ESPONDENTS BEN+A7IN CONDO' AND SE'GIO PED'ANO G;ILTE OF NEGLIGENCE AND HENCE, LIABLE TO 'ESPONDENT PED'O A. A''IESGADO O' TO PETITIONE'S FO' =HATE3E' LIABILITE THAT 7AE BE AD+;DGED AGAINST THE7. II. THE HONO'ABLE CO;'T OF APPEALS E''ED IN FINDING PETITIONE'S G;ILTE OF NEGLIGENCE AND HENCE, LIABLE TO 'ESPONDENT PED'O A. A''IESGADO.

III. THE HONO'ABLE CO;'T OF APPEALS E''ED IN FINDING PETITIONE' =ILLIA7 TI; LIABLE FO' EFE7PLA'E DA7AGES, ATTO'NEEQS FEES AND LITIGATION EFPENSES. I3. THE HONO'ABLE CO;'T OF APPEALS E''ED IN NOT FINDING 'ESPONDENT PHILIPPINE PHOENIF S;'ETE AND INS;'ANCE, INC. LIABLE TO 'ESPONDENT PED'O A. A''IESGADO O' TO PETITIONE' =ILLIA7 TI;.1Acc!r*in4 t! t/e "etiti!ners, t/e a""e##ate c!urt erre* in fai#in4 t! a""reciate t/e a8sence !f an ear#1 >arnin4 *e ice an*O!r 8ui#t5in ref#ect!rs at t/e fr!nt an* 8ac9 !f t/e car4! truc9, in c#ear i!#ati!n !f Secti!n %2, "ar. (4) !f t/e Lan* Trans"!rtati!n an* Traffic C!*e. T/e1 a er t/at suc/ i!#ati!n is !n#1 a "r!!f !f res"!n*ent Pe*ran!Qs ne4#i4ence, as "r! i*e* un*er Artic#e 21). !f t/e Ne> Ci i# C!*e. T/e1 a#s! ?uesti!n t/e a""e##ate c!urtQs fai#ure t! ta9e int! acc!unt t/at t/e truc9 >as "ar9e* in an !8#i?ue 0anner, its rear "!rti!n a#0!st at t/e center !f t/e r!a*. As suc/, t/e "r!:i0ate cause !f t/e inci*ent >as t/e 4r!ss rec9#essness an* i0"ru*ence !f res"!n*ent Pe*ran!, creatin4 t/e "resu0"ti!n !f ne4#i4ence !n t/e "art !f res"!n*ent C!n*!r in su"er isin4 /is e0"#!1ees, >/ic/ "resu0"ti!n >as n!t re8utte*. T/e "etiti!ners t/en c!nten* t/at res"!n*ents C!n*!r an* Pe*ran! s/!u#* 8e /e#* B!int#1 an* se era##1 #ia8#e t! res"!n*ent Arries4a*! f!r t/e "a10ent !f t/e #atterQs c#ai0. T/e "etiti!ners, #i9e>ise, a er t/at e:"ert e i*ence s/!u#* /a e 8een "resente* t! "r! e t/at "etiti!ner Las"iXas >as *ri in4 at a er1 fast s"ee*, an* t/at t/e CA c!u#* n!t reac/ suc/ c!nc#usi!n 81 0ere#1 c!nsi*erin4 t/e *a0a4es !n t/e car4! truc9. It >as

a#s! "!inte* !ut t/at "etiti!ner Tiu "resente* e i*ence t/at /e /a* e:ercise* t/e *i#i4ence !f a 4!!* fat/er !f a fa0i#1 in t/e se#ecti!n an* su"er isi!n !f /is *ri ers. T/e "etiti!ners furt/er a##e4e t/at t/ere is n! #e4a# an* factua# 8asis t! re?uire "etiti!ner Tiu t! "a1 e:e0"#ar1 *a0a4es as n! e i*ence >as "resente* t! s/!> t/at t/e #atter acte* in a frau*u#ent, rec9#ess an* !""ressi e 0anner, !r t/at /e /a* an acti e "artici"ati!n in t/e ne4#i4ent act !f "etiti!ner Las"iXas. Fina##1, t/e "etiti!ners c!nten* t/at res"!n*ent PPSII a*0itte* in its ans>er t/at >/i#e it /a* atten*e* t! an* sett#e* t/e c#ai0s !f t/e !t/er inBure* "assen4ers, res"!n*ent Arries4a*!Qs c#ai0 re0aine* unsett#e* as it >as 8e1!n* t/e sc/e*u#e* in*e0nit1 un*er t/e insurance c!ntract. T/e "etiti!ners ar4ue t/at sai* res"!n*ent PPSII s/!u#* /a e sett#e* t/e sai* c#ai0 in acc!r*ance >it/ t/e sc/e*u#e* in*e0nit1 instea* !f Bust *en1in4 t/e sa0e. On t/e !t/er /an*, res"!n*ent Arries4a*! ar4ues t/at t>! !f t/e issues raise* 81 t/e "etiti!ners in !# e* ?uesti!ns !f fact, n!t re ie>a8#e 81 t/e Su"re0e C!urtA t/e fin*in4 !f ne4#i4ence !n t/e "art !f t/e "etiti!ners an* t/eir #ia8i#it1 t! /i0$ an* t/e a>ar* !f e:e0"#ar1 *a0a4es, att!rne1Qs fees an* #iti4ati!n e:"enses in /is fa !r. In !9in4 t/e "rinci"#e !f e?uit1 an* Bustice, res"!n*ent Arries4a*! "!inte* !ut t/at if t/ere >as an err!r t! 8e re ie>e* in t/e CA *ecisi!n, it s/!u#* 8e 4eare* t!>ar*s t/e rest!rati!n !f t/e 0!ra# an* e:e0"#ar1 *a0a4es t! P.6,666 eac/, !r a t!ta# !f P166,666 >/ic/ >as re*uce* 81 t/e C!urt !f A""ea#s t! P2.,666 eac/, !r a t!ta# !f !n#1 P.6,666.

'es"!n*ent Arries4a*! a#s! a##e4e* t/at res"!n*ents C!n*!r an* Pe*ran!, an* res"!n*ent P/!eni: Suret1, are "arties >it/ >/!0 /e /a* n! c!ntract !f carria4e, an* /a* n! cause !f acti!n a4ainst. It >as "!inte* !ut t/at !n#1 t/e "etiti!ners nee*e* t! 8e sue*, as *ri er an* !"erat!r !f t/e i##5fate* 8us, !n acc!unt !f t/eir fai#ure t! 8rin4 t/e Arries4a*! S"!uses t! t/eir "#ace !f *estinati!n as a4ree* u"!n in t/e c!ntract !f carria4e, usin4 t/e ut0!st *i#i4ence !f er1 cauti!us "ers!ns >it/ *ue re4ar* f!r a## circu0stances. 'es"!n*ents C!n*!r an* Pe*ran! "!int !ut t/at, as c!rrect#1 ru#e* 81 t/e C!urt !f A""ea#s, t/e "r!:i0ate cause !f t/e unf!rtunate inci*ent >as t/e fast s"ee* at >/ic/ "etiti!ner Las"iXas >as *ri in4 t/e 8us !>ne* 81 "etiti!ner Tiu. Acc!r*in4 t! t/e res"!n*ents, t/e a##e4ati!n t/at t/e truc9 >as n!t e?ui""e* >it/ an ear#1 >arnin4 *e ice c!u#* n!t in an1 >a1 /a e "re ente* t/e inci*ent fr!0 /a""enin4. It >as a#s! "!inte* !ut t/at res"!n*ent C!n*!r /a* a#>a1s e:ercise* t/e *ue *i#i4ence re?uire* in t/e se#ecti!n an* su"er isi!n !f /is e0"#!1ees, an* t/at /e >as n!t a "art1 t! t/e c!ntract !f carria4e 8et>een t/e "etiti!ners an* res"!n*ent Arries4a*!. 'es"!n*ent PPSII, f!r its "art, a##e4es t/at c!ntrar1 t! t/e a##e4ati!n !f "etiti!ner Tiu, it sett#e* a## t/e c#ai0s !f t/!se inBure* in acc!r*ance >it/ t/e insurance c!ntract. It furt/er a ers t/at it *i* n!t *en1 res"!n*ent Arries4a*!Qs c#ai0, an* e0"/asiNes t/at its #ia8i#it1 s/!u#* 8e >it/in t/e sc/e*u#e* #i0its !f in*e0nit1 un*er t/e sai* c!ntract. T/e res"!n*ent c!nc#u*es t/at >/i#e it is true t/at insurance c!ntracts are c!ntracts !f in*e0nit1, t/e 0easure !f t/e insurerQs #ia8i#it1 is *eter0ine* 81 t/e insure*Qs c!0"#iance >it/ t/e ter0s t/ere!f.

T/e C!urtQs 'u#in4 At t/e !utset, it 0ust 8e stresse* t/at t/is C!urt is n!t a trier !f facts.26 Factua# fin*in4s !f t/e C!urt !f A""ea#s are fina# an* 0a1 n!t 8e re ie>e* !n a""ea# 81 t/is C!urt, e:ce"t >/en t/e #!>er c!urt an* t/e CA arri e* at *i erse factua# fin*in4s.21 T/e "etiti!ners in t/is case assai# t/e fin*in4 !f 8!t/ t/e tria# an* t/e a""e##ate c!urts t/at "etiti!ner Las"iXas >as *ri in4 at a er1 fast s"ee* 8ef!re t/e 8us !>ne* 81 "etiti!ner Tiu c!##i*e* >it/ res"!n*ent C!n*!rQs sta##e* truc9. T/is is c#ear#1 !ne !f fact, n!t re ie>a8#e 81 t/e C!urt in a "etiti!n f!r re ie> un*er 'u#e 2..22 On t/is 4r!un* a#!ne, t/e "etiti!n is *estine* t! fai#. H!>e er, c!nsi*erin4 t/at n! e# ?uesti!ns !f #a> are #i9e>ise in !# e*, t/e C!urt res!# es t! e:a0ine an* ru#e !n t/e 0erits !f t/e case. Petiti!ner Las"iXas =as ne4#i4ent in *ri in4 T/e I##5fate* 8us In /is testi0!n1 8ef!re t/e tria# c!urt, "etiti!ner Las"iXas c#ai0e* t/at /e >as tra ersin4 t/e t>!5#ane r!a* at C!0"!ste#a, Ce8u at a s"ee* !f !n#1 f!rt1 (26) t! fift1 (.6) 9i#!0eters "er /!ur 8ef!re t/e inci*ent !ccurre*.2% He a#s! a*0itte* t/at /e sa> t/e truc9 >/ic/ >as "ar9e* in an M!8#i?ue "!siti!nM at a8!ut 2. 0eters 8ef!re i0"act,22 an* trie* t! a !i* /ittin4 it 81 s>er in4 t! t/e #eft. H!>e er, e en in t/e a8sence !f e:"ert e i*ence, t/e *a0a4e sustaine* 81 t/e truc92. itse#f su""!rts t/e fin*in4 !f 8!t/ t/e tria# c!urt an* t/e a""e##ate c!urt, t/at t/e DQ '!u4/ 'i*er 8us *ri en

81 "etiti!ner Las"iXas >as tra e#in4 at a fast "ace. Since /e sa> t/e sta##e* truc9 at a *istance !f 2. 0eters, "etiti!ner Las"iXas /a* 0!re t/an en!u4/ ti0e t! s>er e t! /is #eft t! a !i* /ittin4 it$ t/at is, if t/e s"ee* !f t/e 8us >as !n#1 26 t! .6 9i#!0eters "er /!ur as /e c#ai0e*. As f!un* 81 t/e C!urt !f A""ea#s, it is easier t! 8e#ie e t/at "etiti!ner Las"iXas >as *ri in4 at a er1 fast s"ee*, since at 2A2. a.0., t/e /!ur !f t/e acci*ent, t/ere >ere n! !nc!0in4 e/ic#es at t/e !""!site *irecti!n. Petiti!ner Las"iXas c!u#* /a e s>er e* t! t/e #eft #ane >it/ "r!"er c#earance, an*, t/us, c!u#* /a e a !i*e* t/e truc9.2& Instinct, at t/e er1 #east, >!u#* /a e "r!0"te* /i0 t! a""#1 t/e 8rea9s t! a ert t/e i0"en*in4 *isaster >/ic/ /e 0ust /a e f!reseen >/en /e cau4/t si4/t !f t/e sta##e* truc9. As >e /a* !ccasi!n t! reiterateA A 0an 0ust use c!00!n sense, an* e:ercise *ue ref#ecti!n in a## /is acts$ it is /is *ut1 t! 8e cauti!us, carefu# an* "ru*ent, if n!t fr!0 instinct, t/en t/r!u4/ fear !f recurrin4 "unis/0ent. He is res"!nsi8#e f!r suc/ resu#ts as an1!ne 0i4/t f!resee an* f!r acts >/ic/ n! !ne >!u#* /a e "erf!r0e* e:ce"t t/r!u4/ cu#"a8#e a8an*!n. Ot/er>ise, /is !>n "ers!n, ri4/ts an* "r!"ert1, an* t/!se !f /is fe##!> 8ein4s, >!u#* e er 8e e:"!se* t! a## 0anner !f *an4er an* inBur1.2( =e a4ree >it/ t/e f!##!>in4 fin*in4s !f t/e tria# c!urt, >/ic/ >ere affir0e* 81 t/e CA !n a""ea#A A c#!se stu*1 an* e a#uati!n !f t/e testi0!nies an* t/e *!cu0entar1 "r!!fs su80itte* 81 t/e "arties >/ic/ /a e *irect 8earin4 !n t/e issue !f ne4#i4ence, t/is C!urt as s/!>n 81 "re"!n*erance !f e i*ence t/at *efen*ant 3ir4i#i! Te Las"iXas fai#e* t! !8ser e e:tra!r*inar1 *i#i4ence as a *ri er !f t/e c!00!n

carrier in t/is case. It is ?uite /ar* t! acce"t /is ersi!n !f t/e inci*ent t/at /e *i* n!t see at a reas!na8#e *istance a/ea* t/e car4! truc9 t/at >as "ar9e* >/en t/e '!u4/ 'i*er IBusJ Bust ca0e !ut !f t/e 8ri*4e >/ic/ is !n an (sic) I0!reJ e#e ate* "!siti!n t/an t/e "#ace >/ere t/e car4! truc9 >as "ar9e*. =it/ its /ea*#i4/ts fu##1 !n, *efen*ant *ri er !f t/e '!u4/ 'i*er >as in a anta4e "!siti!n t! see t/e car4! truc9 a/ea* >/ic/ >as "ar9e* an* /e c!u#* Bust easi#1 /a e a !i*e* /ittin4 an* 8u0"in4 t/e sa0e 81 0aneu erin4 t! t/e #eft >it/!ut /ittin4 t/e sai* car4! truc9. Besi*es, it is (sic) s/!>n t/at t/ere >as sti## 0uc/ r!!0 !r s"ace f!r t/e '!u4/ 'i*er t! "ass at t/e #eft #ane !f t/e sai* nati!na# /i4/>a1 e en if t/e car4! truc9 /a* !ccu"ie* t/e entire ri4/t #ane t/ere!f. It is n!t true t/at if t/e '!u4/ 'i*er >!u#* "r!cee* t! "ass t/r!u4/ t/e #eft #ane it >!u#* fa## int! a cana# c!nsi*erin4 t/at t/ere >as 0uc/ s"ace f!r it t! "ass >it/!ut /ittin4 an* 8u0"in4 t/e car4! truc9 at t/e #eft #ane !f sai* nati!na# /i4/>a1. T/e rec!r*s, furt/er, s/!>e* t/at t/ere >as n! inc!0in4 e/ic#e at t/e !""!site #ane !f t/e nati!na# /i4/>a1 >/ic/ >!u#* /a e "re ente* t/e '!u4/ 'i*er fr!0 n!t s>er in4 t! its #eft in !r*er t! a !i* /ittin4 an* 8u0"in4 t/e "ar9e* car4! truc9. But t/e e i*ence s/!>e* t/at t/e '!u4/ 'i*er instea* !f s>er in4 t! t/e sti## s"aci!us #eft #ane !f t/e nati!na# /i4/>a1 "#!>e* *irect#1 int! t/e "ar9e* car4! truc9 /ittin4 t/e #atter at its rear "!rti!n$ an* t/us, t/e (sic) causin4 *a0a4es n!t !n#1 t! /erein "#aintiff 8ut t! t/e car4! truc9 as >e##.2) In*ee*, "etiti!ner Las"iXasQ ne4#i4ence in *ri in4 t/e 8us is a""arent in t/e rec!r*s. B1 /is !>n a*0issi!n, /e /a* Bust "asse* a 8ri*4e an* >as tra ersin4 t/e /i4/>a1 !f C!0"!ste#a, Ce8u at a s"ee* !f 26 t! .6 9i#!0eters "er /!ur 8ef!re t/e c!##isi!n !ccurre*. T/e

0a:i0u0 s"ee* a##!>e* 81 #a> !n a 8ri*4e is !n#1 %6 9i#!0eters "er /!ur.2- An*, as c!rrect#1 "!inte* !ut 81 t/e tria# c!urt, "etiti!ner Las"iXas a#s! i!#ate* Secti!n %. !f t/e Lan* Trans"!rtati!n an* Traffic C!*e, 'e"u8#ic Act N!. 21%&, as a0en*e*A1a "/i#.net Sec. %.. 'estricti!n as t! s"ee*. R (a) An1 "ers!n *ri in4 a 0!t!r e/ic#e !n a /i4/>a1 s/a## *ri e t/e sa0e at a carefu# an* "ru*ent s"ee*, n!t 4reater n!r #ess t/an is reas!na8#e an* "r!"er, /a in4 *ue re4ar* f!r t/e traffic, t/e >i*t/ !f t/e /i4/>a1, an* !r an1 !t/er c!n*iti!n t/en an* t/ere e:istin4$ an* n! "ers!n s/a## *ri e an1 0!t!r e/ic#e u"!n a /i4/>a1 at suc/ s"ee* as t! en*an4er t/e #ife, #i08 an* "r!"ert1 !f an1 "ers!n, n!r at a s"ee* 4reater t/an >i## "er0it /i0 t! 8rin4 t/e e/ic#e t! a st!" >it/in t/e assure* c#ear *istance a/ea*.%6 ;n*er Artic#e 21). !f t/e Ci i# C!*e, a "ers!n *ri in4 a e/ic#e is "resu0e* ne4#i4ent if at t/e ti0e !f t/e 0is/a", /e >as i!#atin4 an1 traffic re4u#ati!n.%1 Petiti!ner Tiu fai#e* t! O erc!0e t/e "resu0"ti!n Of ne4#i4ence a4ainst /i0 as One en4a4e* in t/e 8usiness Of c!00!n carria4e T/e ru#es >/ic/ c!00!n carriers s/!u#* !8ser e as t! t/e safet1 !f t/eir "assen4ers are set f!rt/ in t/e Ci i# C!*e, Artic#es 1(%%,%2 1(..%% an* 1(.&.%2 In t/is case, res"!n*ent Arries4a*! an* /is *ecease* >ife c!ntracte* >it/ "etiti!ner Tiu, as !>ner an* !"erat!r !f DQ '!u4/ 'i*ers 8us ser ice, f!r trans"!rtati!n fr!0 7a1a, Daan8anta1an, Ce8u, t! Ce8u Cit1 f!r t/e "rice !f P1).66.%. It is un*is"ute* t/at t/e res"!n*ent an*

/is >ife >ere n!t safe#1 trans"!rte* t! t/e *estinati!n a4ree* u"!n. In acti!ns f!r 8reac/ !f c!ntract, !n#1 t/e e:istence !f suc/ c!ntract, an* t/e fact t/at t/e !8#i4!r, in t/is case t/e c!00!n carrier, fai#e* t! trans"!rt /is "assen4er safe#1 t! /is *estinati!n are t/e 0atters t/at nee* t! 8e "r! e*.%& T/is is 8ecause un*er t/e sai* c!ntract !f carria4e, t/e "etiti!ners assu0e* t/e e:"ress !8#i4ati!n t! trans"!rt t/e res"!n*ent an* /is >ife t! t/eir *estinati!n safe#1 an* t! !8ser e e:tra!r*inar1 *i#i4ence >it/ *ue re4ar* f!r a## circu0stances.%( An1 inBur1 suffere* 81 t/e "assen4ers in t/e c!urse t/ere!f is i00e*iate#1 attri8uta8#e t! t/e ne4#i4ence !f t/e carrier.%) ;"!n t/e /a""enin4 !f t/e acci*ent, t/e "resu0"ti!n !f ne4#i4ence at !nce arises, an* it 8ec!0es t/e *ut1 !f a c!00!n carrier t! "r! e t/at /e !8ser e* e:tra!r*inar1 *i#i4ence in t/e care !f /is "assen4ers.%- It 0ust 8e stresse* t/at in re?uirin4 t/e /i4/est "!ssi8#e *e4ree !f *i#i4ence fr!0 c!00!n carriers an* in creatin4 a "resu0"ti!n !f ne4#i4ence a4ainst t/e0, t/e #a> c!0"e#s t/e0 t! cur8 t/e rec9#essness !f t/eir *ri ers.26 =/i#e e i*ence 0a1 8e su80itte* t! ! erc!0e suc/ "resu0"ti!n !f ne4#i4ence, it 0ust 8e s/!>n t/at t/e carrier !8ser e* t/e re?uire* e:tra!r*inar1 *i#i4ence, >/ic/ 0eans t/at t/e carrier 0ust s/!> t/e ut0!st *i#i4ence !f er1 cauti!us "ers!ns as far as /u0an care an* f!resi4/t can "r! i*e, !r t/at t/e acci*ent >as cause* 81 f!rtuit!us e ent.21 As c!rrect#1 f!un* 81 t/e tria# c!urt, "etiti!ner Tiu fai#e* t! c!nc#usi e#1 re8ut suc/ "resu0"ti!n. T/e ne4#i4ence !f "etiti!ner Las"iXas as *ri er !f t/e "assen4er 8us is, t/us, 8in*in4 a4ainst "etiti!ner Tiu, as t/e !>ner !f t/e "assen4er 8us en4a4e* as a c!00!n carrier.22

T/e D!ctrine !f Last C#ear C/ance Is Ina""#ica8#e in t/e Case at Bar C!ntrar1 t! t/e "etiti!nerQs c!ntenti!n, t/e "rinci"#e !f #ast c#ear c/ance is ina""#ica8#e in t/e instant case, as it !n#1 a""#ies in a suit 8et>een t/e !>ners an* *ri ers !f t>! c!##i*in4 e/ic#es. It *!es n!t arise >/ere a "assen4er *e0an*s res"!nsi8i#it1 fr!0 t/e carrier t! enf!rce its c!ntractua# !8#i4ati!ns, f!r it >!u#* 8e ine?uita8#e t! e:e0"t t/e ne4#i4ent *ri er an* its !>ner !n t/e 4r!un* t/at t/e !t/er *ri er >as #i9e>ise 4ui#t1 !f ne4#i4ence.2% T/e c!00!n #a> n!ti!n !f #ast c#ear c/ance "er0itte* c!urts t! 4rant rec! er1 t! a "#aintiff >/! /as a#s! 8een ne4#i4ent "r! i*e* t/at t/e *efen*ant /a* t/e #ast c#ear c/ance t! a !i* t/e casua#t1 an* fai#e* t! *! s!. Acc!r*in4#1, it is *ifficu#t t! see >/at r!#e, if an1, t/e c!00!n #a> !f #ast c#ear c/ance *!ctrine /as t! "#a1 in a Buris*icti!n >/ere t/e c!00!n #a> c!nce"t !f c!ntri8ut!r1 ne4#i4ence as an a8s!#ute 8ar t! rec! er1 81 t/e "#aintiff, /as itse#f 8een reBecte*, as it /as 8een in Artic#e 21(- !f t/e Ci i# C!*e.22 T/us, "etiti!ner Tiu cann!t esca"e #ia8i#it1 f!r t/e *eat/ !f res"!n*ent Arries4a*!Qs >ife *ue t! t/e ne4#i4ence !f "etiti!ner Las"iXas, /is e0"#!1ee, !n t/is sc!re. 'es"!n*ents Pe*ran! an* C!n*!r >ere #i9e>ise Ne4#i4ent In P/!eni: C!nstructi!n, Inc. . Inter0e*iate A""e##ate C!urt,2. >/ere t/erein res"!n*ent Di!nisi! sustaine*

inBuries >/en /is e/ic#e ra00e* a4ainst a *u0" truc9 "ar9e* as9e>, t/e C!urt ru#e* t/at t/e i0"r!"er "ar9in4 !f a *u0" truc9 >it/!ut an1 >arnin4 #i4/ts !r ref#ect!r *e ices create* an unreas!na8#e ris9 f!r an1!ne *ri in4 >it/in t/e icinit1, an* f!r /a in4 create* suc/ ris9, t/e truc9 *ri er 0ust 8e /e#* res"!nsi8#e. In ru#in4 a4ainst t/e "etiti!ner t/erein, t/e C!urt e#uci*ate*, t/usA a In !ur ie>, Di!nisi!Qs ne4#i4ence, a#t/!u4/ #ater in "!int !f ti0e t/an t/e truc9 *ri erQs ne4#i4ence, an* t/eref!re c#!ser t! t/e acci*ent, >as n!t an efficient inter enin4 !r in*e"en*ent cause. =/at t/e "etiti!ners *escri8e as an Minter enin4 causeM >as n! 0!re t/an a f!reseea8#e c!nse?uence !f t/e ris9 create* 81 t/e ne4#i4ent 0anner in >/ic/ t/e truc9 *ri er /a* "ar9e* t/e *u0" truc9. In !t/er >!r*s, t/e "etiti!ner truc9 *ri er !>e* a *ut1 t! "ri ate res"!n*ent Di!nisi! an* !t/ers si0i#ar#1 situate* n!t t! i0"!se u"!n t/e0 t/e er1 ris9 t/e truc9 *ri er /a* create*. Di!nisi!Qs ne4#i4ence >as n!t t/at !f an in*e"en*ent an* ! er"!>erin4 nature as t! cut, as it >ere, t/e c/ain !f causati!n in fact 8et>een t/e i0"r!"er "ar9in4 !f t/e *u0" truc9 an* t/e acci*ent, n!r t! se er t/e Buris incu#u0 !f #ia8i#it1. a a =e /!#* t/at "ri ate res"!n*ent Di!nisi!Qs ne4#i4ence >as M!n#1 c!ntri8ut!r1,M t/at t/e Mi00e*iate an* "r!:i0ate causeM !f t/e inBur1 re0aine* t/e truc9 *ri erQs M#ac9 !f *ue care.Ma2& In t/is case, 8!t/ t/e tria# an* t/e a""e##ate c!urts fai#e* t! c!nsi*er t/at res"!n*ent Pe*ran! >as a#s! ne4#i4ent in #ea in4 t/e truc9 "ar9e* as9e> >it/!ut

an1 >arnin4 #i4/ts !r ref#ect!r *e ices t! a#ert !nc!0in4 e/ic#es, an* t/at suc/ fai#ure create* t/e "resu0"ti!n !f ne4#i4ence !n t/e "art !f /is e0"#!1er, res"!n*ent C!n*!r, in su"er isin4 /is e0"#!1ees "r!"er#1 an* a*e?uate#1. As >e ru#e* in P!8#ete . Fa8r!sA2( It is suc/ a fir0#1 esta8#is/e* "rinci"#e, as t! /a e irtua##1 f!r0e* "art !f t/e #a> itse#f, t/at t/e ne4#i4ence !f t/e e0"#!1ee 4i es rise t! t/e "resu0"ti!n !f ne4#i4ence !n t/e "art !f t/e e0"#!1er. T/is is t/e "resu0e* ne4#i4ence in t/e se#ecti!n an* su"er isi!n !f e0"#!1ee. T/e t/e!r1 !f "resu0e* ne4#i4ence, in c!ntrast >it/ t/e A0erican *!ctrine !f res"!n*eat su"eri!r, >/ere t/e ne4#i4ence !f t/e e0"#!1ee is c!nc#usi e#1 "resu0e* t! 8e t/e ne4#i4ence !f t/e e0"#!1er, is c#ear#1 *e*uci8#e fr!0 t/e #ast "ara4ra"/ !f Artic#e 21)6 !f t/e Ci i# C!*e >/ic/ "r! i*es t/at t/e res"!nsi8i#it1 t/erein 0enti!ne* s/a## cease if t/e e0"#!1ers "r! e t/at t/e1 !8ser e* a## t/e *i#i4ence !f a 4!!* fat/er !f a fa0i#1 t! "re ent *a0a4es. a2) T/e "etiti!ners >ere c!rrect in in !9in4 res"!n*ent Pe*ran!Qs fai#ure t! !8ser e Artic#e I3, Secti!n %2(4) !f t/e 'e". Act N!. 21%&, >/ic/ "r! i*esA1a "/i#.net (4) Li4/ts >/en "ar9e* !r *isa8#e*. R A""r!"riate "ar9in4 #i4/ts !r f#ares isi8#e !ne /un*re* 0eters a>a1 s/a## 8e *is"#a1e* at a c!rner !f t/e e/ic#e >/ene er suc/ e/ic#e is "ar9e* !n /i4/>a1s !r in "#aces t/at are n!t >e##5#i4/te* !r is "#ace* in suc/ 0anner as t! en*an4er "assin4 traffic. T/e 0anner in >/ic/ t/e truc9 >as "ar9e* c#ear#1 en*an4ere* !nc!0in4 traffic !n 8!t/ si*es,

c!nsi*erin4 t/at t/e tire 8#!>!ut >/ic/ sta##e* t/e truc9 in t/e first "#ace !ccurre* in t/e >ee /!urs !f t/e 0!rnin4. T/e C!urt can !n#1 n!> sur0ise t/at t/e unf!rtunate inci*ent c!u#* /a e 8een a erte* /a* res"!n*ent C!n*!r, t/e !>ner !f t/e truc9, e?ui""e* t/e sai* e/ic#e >it/ #i4/ts, f#ares, !r, at t/e er1 #east, an ear#1 >arnin4 *e ice.2- Hence, >e cann!t su8scri8e t! res"!n*ents C!n*!r an* Pe*ran!Qs c#ai0 t/at t/e1 s/!u#* 8e a8s!# e* fr!0 #ia8i#it1 8ecause, as f!un* 81 t/e tria# an* a""e##ate c!urts, t/e "r!:i0ate cause !f t/e c!##isi!n >as t/e fast s"ee* at >/ic/ "etiti!ner Las"iXas *r! e t/e 8us. T! acce"t t/is "r!"!siti!n >!u#* 8e t! c!0e t!! c#!se t! >i"in4 !ut t/e fun*a0enta# "rinci"#e !f #a> t/at a 0an 0ust res"!n* f!r t/e f!reseea8#e c!nse?uences !f /is !>n ne4#i4ent act !r !0issi!n. In*ee*, !ur #a> !n ?uasi5 *e#icts see9s t! re*uce t/e ris9s an* 8ur*ens !f #i in4 in s!ciet1 an* t! a##!cate t/e0 a0!n4 its 0e08ers. T! acce"t t/is "r!"!siti!n >!u#* 8e t! >ea9en t/e er1 8!n*s !f s!ciet1..6 T/e Lia8i#it1 !f 'es"!n*ent PPSII as Insurer T/e tria# c!urt in t/is case *i* n!t ru#e !n t/e #ia8i#it1 !f res"!n*ent PPSII, >/i#e t/e a""e##ate c!urt ru#e* t/at, as n! e i*ence >as "resente* a4ainst it, t/e insurance c!0"an1 is n!t #ia8#e. A "erusa# !f t/e rec!r*s >i## s/!> t/at >/en t/e "etiti!ners fi#e* t/e T/ir*5Part1 C!0"#aint a4ainst res"!n*ent PPSII, t/e1 fai#e* t! attac/ a c!"1 !f t/e ter0s !f t/e insurance c!ntract itse#f. On#1 Certificate !f C! er N!. 6.2-26.1 issue* in fa !r !f M7r. =i##ia0 Tiu, La/u4, Ce8u Cit1M si4ne* 81 C!s0e H. B!nie# >as

a""en*e* t! t/e t/ir*5"art1 c!0"#aint. T/e *ate !f issuance, +u#1 22, 1-)&, t/e "eri!* !f insurance, fr!0 +u#1 22, 1-)& t! +u#1 22, 1-)(, as >e## as t/e f!##!>in4 ite0s, >ere a#s! in*icate* t/ereinA SCHED;LED 3EHICLE 7ODEL 7ADE IsuNu F!r>ar* TEPE OF BODE Bus COLO' 8#ue 0i:e* BLT FILE NO. PLATE NO. PBP5(22 SE'IALOCHASSIS NO. SE'2.651.)2122 7OTO' NO. &(()%& A;THO'ISED CAPACITE .6 ;NLADEN =EIGHT & C1#s. D4s. SECTION 1O11 PLI7ITS OF LIABILITE P.6,666.66 P'E7I;7S PAID P.26.66.2 A. THI'D PA'TE LIABILITE B. PASSENGE' LIABILITE Per Pers!n P12,666.66 Per Acci*ent P.6,666 In its Ans>er.% t! t/e T/ir*5Part1 C!0"#aint, t/e res"!n*ent PPSII a*0itte* t/e e:istence !f t/e c!ntract !f insurance, in ie> !f its fai#ure t! s"ecifica##1 *en1 t/e sa0e as re?uire* un*er t/en Secti!n )(a), 'u#e ) !f t/e 'u#es !f C!urt,.2 >/ic/ rea*sA Sec. ). H!> t! c!ntest 4enuineness !f suc/ *!cu0ents. =/en an acti!n !r *efense is f!un*e* u"!n a >ritten instru0ent c!"ie* in !r attac/e* t! t/e c!rres"!n*in4 "#ea*in4 as "r! i*e* in t/e "rece*in4 secti!n, t/e 4enuineness an* *ue e:ecuti!n !f t/e instru0ent s/a## 8e *ee0e* a*0itte* un#ess t/e

a* erse "art1, un*er !at/, s"ecifica##1 *enies t/e0, an* sets f!rt/ >/at /e c#ai0s t! 8e t/e facts$ 8ut t/e re?uire0ent !f an !at/ *!es n!t a""#1 >/en t/e a* erse "art1 *!es n!t a""ear t! 8e a "art1 t! t/e instru0ent !r >/en c!0"#iance >it/ an !r*er f!r ins"ecti!n !f t/e !ri4ina# instru0ent is refuse*. In fact, res"!n*ent PPSII *i* n!t *is"ute t/e e:istence !f suc/ c!ntract, an* a*0itte* t/at it >as #ia8#e t/ere!n. It c#ai0e*, /!>e er, t/at it /a* atten*e* t! an* sett#e* t/e c#ai0s !f t/!se inBure* *urin4 t/e inci*ent, an* set u" t/e f!##!>in4 as s"ecia# affir0ati e *efensesA T/ir* "art1 *efen*ant P/i#i""ine P/!eni: Suret1 an* Insurance, Inc. /ere81 reiterates an* inc!r"!rates 81 >a1 !f reference t/e "rece*in4 "ara4ra"/s an* furt/er states THATA5 ). It /as atten*e* t! t/e c#ai0s !f 3incent Cana#es, Asunci!n Batianci#a an* Ne"ta#i Pa#ces >/! sustaine* inBuries *urin4 t/e inci*ent in ?uesti!n. In fact, it sett#e* financia##1 t/eir c#ai0s "er !uc/ers *u#1 si4ne* 81 t/e0 an* t/e1 *u#1 e:ecute* Affi*a itIsJ !f Desistance t! t/at effect, :er!: c!"ies !f >/ic/ are /eret! attac/e* as Anne:es 1, 2, %, 2, ., an* & res"ecti e#1$ -. =it/ res"ect t! t/e c#ai0 !f "#aintiff, /erein ans>erin4 t/ir* "art1 *efen*ant t/r!u4/ its aut/!riNe* insurance a*Buster atten*e* t! sai* c#ai0. In fact, t/ere >ere ne4!tiati!ns t! t/at effect. On#1 t/at it cann!t acce*e t! t/e *e0an* !f sai* c#ai0ant c!nsi*erin4 t/at t/e c#ai0 >as >a1 8e1!n* t/e sc/e*u#e* in*e0nit1 as "er c!ntract entere* int! >it/ t/ir* "art1 "#aintiff =i##ia0 Tiu an* t/ir* "art1

*efen*ant (P/i#i""ine P/!eni: Suret1 an* Insurance, Inc.). T/ir* "art1 P#aintiff =i##ia0 Tiu 9ne> a## a#!n4 t/e #i0itati!n as ear#ier state*, /e 8ein4 an !#* /an* in t/e trans"!rtati!n 8usiness$..a C!nsi*erin4 t/e a*0issi!ns 0a*e 81 res"!n*ent PPSII, t/e e:istence !f t/e insurance c!ntract an* t/e sa#ient ter0s t/ere!f cann!t 8e *is"atc/e*. It 0ust 8e n!te* t/at after fi#in4 its ans>er, res"!n*ent PPSII n! #!n4er !8Becte* t! t/e "resentati!n !f e i*ence 81 res"!n*ent Arries4a*! an* t/e insure* "etiti!ner Tiu. E en in its 7e0!ran*u0.& 8ef!re t/e C!urt, res"!n*ent PPSII a*0itte* t/e e:istence !f t/e c!ntract, 8ut a erre* as f!##!>sA Petiti!ner Tiu is insistin4 t/at PPSII is #ia8#e t! /i0 f!r c!ntri8uti!n, in*e0nificati!n an*O!r rei08urse0ent. T/is /as n! 8asis un*er t/e c!ntract. ;n*er t/e c!ntract, PPSII >i## "a1 a## su0s necessar1 t! *isc/ar4e #ia8i#it1 !f t/e insure* su8Bect t! t/e #i0its !f #ia8i#it1 8ut n!t t! e:cee* t/e #i0its !f #ia8i#it1 as s! state* in t/e c!ntract. A#s!, it is state* in t/e c!ntract t/at in t/e e ent !f acci*ent in !# in4 in*e0nit1 t! 0!re t/an !ne "ers!n, t/e #i0its !f #ia8i#it1 s/a## n!t e:cee* t/e a44re4ate a0!unt s! s"ecifie* 81 #a> t! a## "ers!ns t! 8e in*e0nifie*..( As can 8e 4#eane* fr!0 t/e Certificate !f C! er, suc/ insurance c!ntract >as issue* "ursuant t! t/e C!0"u#s!r1 7!t!r 3e/ic#e Lia8i#it1 Insurance La>. It >as e:"ress#1 "r! i*e* t/erein t/at t/e #i0it !f t/e insurerQs #ia8i#it1 f!r eac/ "ers!n >as P12,666, >/i#e t/e #i0it "er acci*ent >as "e44e* at P.6,666. An insurer in an in*e0nit1 c!ntract f!r t/ir* "art1 #ia8i#it1 is *irect#1 #ia8#e t! t/e inBure* "art1 u" t! t/e e:tent s"ecifie* in t/e a4ree0ent 8ut it cann!t 8e /e#*

s!#i*ari#1 #ia8#e 8e1!n* t/at a0!unt..) T/e res"!n*ent PPSII c!u#* n!t t/en Bust *en1 "etiti!ner TiuQs c#ai0$ it s/!u#* /a e "ai* P12,666 f!r t/e *eat/ !f Fe#isa Arries4a*!,.- an* res"!n*ent Arries4a*!Qs /!s"ita#iNati!n e:"enses !f P1,11%.)6, >/ic/ t/e tria# c!urt f!un* t! /a e 8een *u#1 su""!rte* 81 recei"ts. T/e t!ta# a0!unt !f t/e c#ai0s, e en >/en a**e* t! t/at !f t/e !t/er inBure* "assen4ers >/ic/ t/e res"!n*ent PPSII c#ai0e* t! /a e sett#e*,&6 >!u#* n!t e:cee* t/e P.6,666 #i0it un*er t/e insurance a4ree0ent. In*ee*, t/e nature !f C!0"u#s!r1 7!t!r 3e/ic#e Lia8i#it1 Insurance is suc/ t/at it is "ri0ari#1 inten*e* t! "r! i*e c!0"ensati!n f!r t/e *eat/ !r 8!*i#1 inBuries suffere* 81 inn!cent t/ir* "arties !r "assen4ers as a resu#t !f t/e ne4#i4ent !"erati!n an* use !f 0!t!r e/ic#es. T/e icti0s an*O!r t/eir *e"en*ents are assure* !f i00e*iate financia# assistance, re4ar*#ess !f t/e financia# ca"acit1 !f 0!t!r e/ic#e !>ners.&1 As t/e C!urt, s"ea9in4 t/r!u4/ Ass!ciate +ustice Le!nar*! A. @uisu08in4, e:"#aine* in G! ern0ent Ser ice Insurance S1ste0 . C!urt !f A""ea#sA&2 H!>e er, a#t/!u4/ t/e icti0 0a1 "r!cee* *irect#1 a4ainst t/e insurer f!r in*e0nit1, t/e t/ir* "art1 #ia8i#it1 is !n#1 u" t! t/e e:tent !f t/e insurance "!#ic1 an* t/!se re?uire* 81 #a>. =/i#e it is true t/at >/ere t/e insurance c!ntract "r! i*es f!r in*e0nit1 a4ainst #ia8i#it1 t! t/ir* "ers!ns, an* suc/ "ers!ns can *irect#1 sue t/e insurer, t/e *irect #ia8i#it1 !f t/e insurer un*er in*e0nit1 c!ntracts a4ainst t/ir* "art1 #ia8i#it1 *!es n!t 0ean t/at t/e insurer can 8e /e#* #ia8#e in s!#i*u0 >it/ t/e insure* an*O!r t/e !t/er "arties f!un* at fau#t. F!r t/e #ia8i#it1 !f t/e insurer is 8ase* !n

c!ntract$ t/at !f t/e insure* carrier !r e/ic#e !>ner is 8ase* !n t!rt. a O8 i!us#1, t/e insurer c!u#* 8e /e#* #ia8#e !n#1 u" t! t/e e:tent !f >/at >as "r! i*e* f!r 81 t/e c!ntract !f insurance, in acc!r*ance >it/ t/e C73LI #a>. At t/e ti0e !f t/e inci*ent, t/e sc/e*u#e !f in*e0nities f!r *eat/ an* 8!*i#1 inBuries, "r!fessi!na# fees an* !t/er c/ar4es "a1a8#e un*er a C73LI c! era4e >as "r! i*e* f!r un*er t/e Insurance 7e0!ran*u0 Circu#ar (I7C) N!. .5() >/ic/ >as a""r! e* !n N! e08er 16, 1-(). As t/erein "r! i*e*, t/e 0a:i0u0 in*e0nit1 f!r *eat/ >as t>e# e t/!usan* (P12,666.66) "es!s "er icti0. T/e sc/e*u#es f!r 0e*ica# e:"enses >ere a#s! "r! i*e* 81 sai* I7C, s"ecifica##1 in "ara4ra"/s (C) t! (G).&% Da0a4es t! 8e A>ar*e* T/e tria# c!urt c!rrect#1 a>ar*e* 0!ra# *a0a4es in t/e a0!unt !f P.6,666 in fa !r !f res"!n*ent Arries4a*!. T/e a>ar* !f e:e0"#ar1 *a0a4es 81 >a1 !f e:a0"#e !r c!rrecti!n !f t/e "u8#ic 4!!*,&2 is #i9e>ise in !r*er. As t/e C!urt rati!cinate* in Da"a#aran Bus Line . C!r!na*!A&. a=/i#e t/e i00e*iate 8eneficiaries !f t/e stan*ar* !f e:tra!r*inar1 *i#i4ence are, !f c!urse, t/e "assen4ers an* !>ners !f car4! carrie* 81 a c!00!n carrier, t/e1 are n!t t/e !n#1 "ers!ns t/at t/e #a> see9s t! 8enefit. F!r if c!00!n carriers carefu##1 !8ser e* t/e statut!r1 stan*ar* !f e:tra!r*inar1 *i#i4ence in res"ect !f t/eir !>n "assen4ers, t/e1 cann!t /e#" 8ut si0u#tane!us#1 8enefit "e*estrians an* t/e "assen4ers !f !t/er e/ic#es >/! are e?ua##1 entit#e* t! t/e safe an*

c!n enient use !f !ur r!a*s an* /i4/>a1s. T/e #a> see9s t! st!" an* "re ent t/e s#au4/ter an* 0ai0in4 !f "e!"#e (>/et/er "assen4ers !r n!t) !n !ur /i4/>a1s an* 8uses, t/e er1 siNe an* "!>er !f >/ic/ see0 t! inf#a0e t/e 0in*s !f t/eir *ri ers. Artic#e 22%1 !f t/e Ci i# C!*e e:"#icit#1 aut/!riNes t/e i0"!siti!n !f e:e0"#ar1 *a0a4es in cases !f ?uasi5*e#icts Mif t/e *efen*ant acte* >it/ 4r!ss ne4#i4ence.Ma&& T/e res"!n*ent Pe*r! A. Arries4a*!, as t/e sur i in4 s"!use an* /eir !f Fe#isa Arries4a*!, is entit#e* t! in*e0nit1 in t/e a0!unt !f P.6,666.66.&( T/e "etiti!ners, as >e## as t/e res"!n*ents BenBa0in C!n*!r an* Ser4i! Pe*ran! are B!int#1 an* se era##1 #ia8#e f!r sai* a0!unt, c!nf!r0a8#1 >it/ t/e f!##!>in4 "r!n!unce0ent !f t/e C!urt in Fa8re, +r. s. C!urt !f A""ea#sA&) T/e sa0e ru#e !f #ia8i#it1 >as a""#ie* in situati!ns >/ere t/e ne4#i4ence !f t/e *ri er !f t/e 8us !n >/ic/ "#aintiff >as ri*in4 c!ncurre* >it/ t/e ne4#i4ence !f a t/ir* "art1 >/! >as t/e *ri er !f an!t/er e/ic#e, t/us causin4 an acci*ent. In Anuran . BuX!, Batan4as La4una Ta1a8as Bus C!. . Inter0e*iate A""e##ate C!urt, an* 7etr! 7ani#a Transit C!r"!rati!n . C!urt !f A""ea#s, t/e 8us c!0"an1, its *ri er, t/e !"erat!r !f t/e !t/er e/ic#e an* t/e *ri er !f t/e e/ic#e >ere B!int#1 an* se era##1 /e#* #ia8#e t! t/e inBure* "assen4er !r t/e #atterQs /eirs. T/e 8asis !f t/is a##!cati!n !f #ia8i#it1 >as e:"#aine* in 3i#uan . C!urt !f A""ea#s, t/usA MN!r s/!u#* it 0a9e *ifference t/at t/e #ia8i#it1 !f "etiti!ner I8us !>nerJ s"rin4s fr!0 c!ntract >/i#e t/at !f res"!n*ents I!>ner an* *ri er !f !t/er e/ic#eJ

arises fr!0 ?uasi5*e#ict. As ear#1 as 1-1%, >e a#rea*1 ru#e* in GutierreN s. GutierreN, .& P/i#. 1((, t/at in case !f inBur1 t! a "assen4er *ue t! t/e ne4#i4ence !f t/e *ri er !f t/e 8us !n >/ic/ /e >as ri*in4 an* !f t/e *ri er !f an!t/er e/ic#e, t/e *ri ers as >e## as t/e !>ners !f t/e t>! e/ic#es are B!int#1 an* se era##1 #ia8#e f!r *a0a4es. S!0e 0e08ers !f t/e C!urt, t/!u4/, are !f t/e ie> t/at un*er t/e circu0stances t/e1 are #ia8#e !n ?uasi5*e#ict.M&IN LIGHT OF ALL THE FO'EGOING, t/e "etiti!n is PA'TIALLE G'ANTED. T/e Decisi!n !f t/e C!urt !f A""ea#s is AFFI'7ED >it/ 7ODIFICATIONSA (1) 'es"!n*ent P/i#i""ine P/!eni: Suret1 an* Insurance, Inc. an* "etiti!ner =i##ia0 Tiu are O'DE'ED t! "a1, B!int#1 an* se era##1, res"!n*ent Pe*r! A. Arries4a*! t/e t!ta# a0!unt !f P1%,11%.)6$ (2) T/e "etiti!ners an* t/e res"!n*ents BenBa0in C!n*!r an* Ser4i! Pe*ran! are O'DE'ED t! "a1, B!int#1 an* se era##1, res"!n*ent Pe*r! A. Arries4a*! P.6,666.66 as in*e0nit1$ P2&,221..6 as actua# *a0a4es$ P.6,666.66 as 0!ra# *a0a4es$ P.6,666.66 as e:e0"#ar1 *a0a4es$ an* P26,666.66 as att!rne1Qs fees. SO O'DE'ED.