G.R. No.

175773

June 17, 2013 (DOUBLE INSURANCE)

MITSUBISHI
MOTORS
PHILIPPINES
SALARIED
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.

EMPLOYEES

UNION

(MMPSEU), Petitioner,

DECISION
DEL CASTILLO, J.:
The Collective Bargaining Agreement (CBA) of the parties in this case provides that the company shoulder the hospitalization expenses
of the dependents of covered employees subject to certain limitations and restrictions. Accordingly, covered employees pay part of the
hospitalization insurance premium through monthly salary deduction while the company, upon hospitalization of the covered employees'
dependents, shall pay the hospitalization expenses incurred for the same. The conflict arose when a portion of the hospitalization
expenses of the covered employees' dependents were paid/shouldered by the dependent's own health insurance. While the company
refused to pay the portion of the hospital expenses already shouldered by the dependents' own health insurance, the union insists that
the covered employees are entitled to the whole and undiminished amount of said hospital expenses.
By this Petition for Review on Certiorari,1 petitioner Mitsubishi Motors Philippines Salaried Employees Union (MMPSEU) assails the
March 31, 2006 Decision2 and December 5, 2006 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 75630, which reversed
and set aside the Voluntary Arbitrators December 3, 2002 Decision4 and declared respondent Mitsubishi Motors Philippines
Corporation (MMPC) to be under no legal obligation to pay its covered employees dependents hospitalization expenses which were
already shouldered by other health insurance companies.
Factual Antecedents
The parties CBA5 covering the period August 1, 1996 to July 31, 1999 provides for the hospitalization insurance benefits for the
covered dependents, thus:
SECTION 4. DEPENDENTS GROUP HOSPITALIZATION INSURANCE The COMPANY shall obtain group hospitalization insurance
coverage or assume under a self-insurance basis hospitalization for the dependents of regular employees up to a maximum amount of
forty thousand pesos (P40,000.00) per confinement subject to the following:
a. The room and board must not exceed three hundred pesos (P300.00) per day up to a maximum of thirty-one (31) days.
Similarly, Doctors Call fees must not exceed three hundred pesos (P300.00) per day for a maximum of thirty-one (31) days.
Any excess of this amount shall be borne by the employee.
b. Confinement must be in a hospital designated by the COMPANY. For this purpose, the COMPANY shall designate hospitals
in different convenient places to be availed of by the dependents of employees. In cases of emergency where the dependent
is confined without the recommendation of the company doctor or in a hospital not designated by the COMPANY, the
COMPANY shall look into the circumstances of such confinement and arrange for the payment of the amount to the extent of
the hospitalization benefit.
c. The limitations and restrictions listed in Annex "B" must be observed.
d. Payment shall be direct to the hospital and doctor and must be covered by actual billings.
Each employee shall pay one hundred pesos (P100.00) per month through salary deduction as his share in the payment of the
insurance premium for the above coverage with the balance of the premium to be paid by the COMPANY. If the COMPANY is selfinsured the one hundred pesos (P100.00) per employee monthly contribution shall be given to the COMPANY which shall shoulder the
expenses subject to the above level of benefits and subject to the same limitations and restrictions provided for in Annex "B" hereof.
The hospitalization expenses must be covered by actual hospital and doctors bills and any amount in excess of the above mentioned
level of benefits will be for the account of the employee.
For purposes of this provision, eligible dependents are the covered employees natural parents, legal spouse and legitimate or legally
adopted or step children who are unmarried, unemployed who have not attained twenty-one (21) years of age and wholly dependent
upon the employee for support.
This provision applies only in cases of actual confinement in the hospital for at least six (6) hours.
Maternity cases are not covered by this section but will be under the next succeeding section on maternity benefits.6
When the CBA expired on July 31, 1999, the parties executed another CBA 7 effective August 1, 1999 to July 31, 2002 incorporating the
same provisions on dependents hospitalization insurance benefits but in the increased amount of P50,000.00. The room and board
expenses, as well as the doctors call fees, were also increased toP375.00.
On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida), Hermie Juan Oabel (Oabel) and Jocelyn Martin
(Martin), filed claims for reimbursement of hospitalization expenses of their dependents.

MMPC paid only a portion of their hospitalization insurance claims, not the full amount. In the case of Calida, his wife, Lanie, was
confined at Sto. Tomas University Hospital from September 4 to 9, 1998 due to Thyroidectomy. The medical expenses incurred
totalled P29,967.10. Of this amount, P9,000.00 representing professional fees was paid by MEDICard Philippines, Inc. (MEDICard)
which provides health maintenance to Lanie.8 MMPC only paidP12,148.63.9 It did not pay the P9,000.00 already paid by MEDICard and
the P6,278.47 not covered by official receipts. It refused to give to Calida the difference between the amount of medical expenses
of P27,427.1010 which he claimed to be entitled to under the CBA and the P12,148.63 which MMPC directly paid to the hospital.
In the case of Martin, his father, Jose, was admitted at The Medical City from March 26 to 27, 2000 due to Acid Peptic Disease and
incurred medical expenses amounting to P9,101.30.14 MEDICard paid P8,496.00.15Consequently, MMPC only paid P288.40,16 after
deducting from the total medical expenses the amount paid by MEDICard and the P316.90 discount given by the hospital.
Claiming that under the CBA, they are entitled to hospital benefits amounting to P27,427.10, P6,769.35 andP8,123.80, respectively,
which should not be reduced by the amounts paid by MEDICard and by Prosper, Calida, Oabel and Martin asked for reimbursement
from MMPC. However, MMPC denied the claims contending that double insurance would result if the said employees would receive
from the company the full amount of hospitalization expenses despite having already received payment of portions thereof from other
health insurance providers.
This prompted the MMPSEU President to write the MMPC President17 demanding full payment of the hospitalization benefits. Alleging
discrimination against MMPSEU union members, she pointed out that full reimbursement was given in a similar claim filed by Luisito
Cruz (Cruz), a member of the Hourly Union. In a letter-reply,18 MMPC, through its Vice-President for Industrial Relations Division,
clarified that the claims of the said MMPSEU members have already been paid on the basis of official receipts submitted. It also denied
the charge of discrimination and explained that the case of Cruz involved an entirely different matter since it concerned the admissibility
of certified true copies of documents for reimbursement purposes, which case had been settled through voluntary arbitration.
On August 28, 2000, MMPSEU referred the dispute to the National Conciliation and Mediation Board and requested for preventive
mediation.19
Proceedings before the Voluntary Arbitrator
On October 3, 2000, the case was referred to Voluntary Arbitrator Rolando Capocyan for resolution of the issue involving the
interpretation of the subject CBA provision.20
MMPSEU alleged that there is nothing in the CBA which prohibits an employee from obtaining other insurance or declares that medical
expenses can be reimbursed only upon presentation of original official receipts. It stressed that the hospitalization benefits should be
computed based on the formula indicated in the CBA without deducting the benefits derived from other insurance providers. Besides, if
reduction is permitted, MMPC would be unjustly benefited from the monthly premium contributed by the employees through salary
deduction. MMPSEU added that its members had legitimate claims under the CBA and that any doubt as to any of its provisions should
be resolved in favor of its members. Moreover, any ambiguity should be resolved in favor of labor.21
On the other hand, MMPC argued that the reimbursement of the entire amounts being claimed by the covered employees, including
those already paid by other insurance companies, would constitute double indemnity or double insurance, which is circumscribed under
the Insurance Code. Moreover, a contract of insurance is a contract of indemnity and the employees cannot be allowed to profit from
their dependents loss.22
Meanwhile, the parties separately sought for a legal opinion from the Insurance Commission relative to the issue at hand. In its
letter23 to the Insurance Commission, MMPC requested for confirmation of its position that the covered employees cannot claim
insurance benefits for a loss that had already been covered or paid by another insurance company. However, the Office of the
Insurance Commission opted not to render an opinion on the matter as the same may become the subject of a formal complaint before
it.24 On the other hand, when queried by MMPSEU, 25the Insurance Commission, through Atty. Richard David C. Funk II (Atty. Funk) of
the Claims Adjudication Division, rendered an opinion contained in a letter,26 viz:
Ms.
Mitsubishi Motors Phils.
[Salaried]
Ortigas
Cainta, Rizal

Cecilia

L.

Employees
Avenue

ParasPresident

Union
Extension,

Madam:
We acknowledge receipt of your letter which, to our impression, basically poses the question of whether or not recovery of medical
expenses from a Health Maintenance Organization bars recovery of the same reimbursable amount of medical expenses under a
contract of health or medical insurance.
We wish to opine that in cases of claims for reimbursement of medical expenses where there are two contracts providing benefits to
that effect, recovery may be had on both simultaneously. In the absence of an Other Insurance provision in these coverages, the courts
have uniformly held that an insured is entitled to receive the insurance benefits without regard to the amount of total benefits provided
by other insurance. (INSURANCE LAW, A Guide to Fundamental Principles, Legal Doctrines, and Commercial Practices; Robert E.
Keeton, Alau I. Widiss, p. 261). The result is consistent with the public policy underlying the collateral source rule that is, x x x the

courts have usually concluded that the liability of a health or accident insurer is not reduced by other possible sources of
indemnification or compensation. (ibid).
Very truly yours,
RICHARD
Officer-in-Charge
Claims Adjudication Division

DAVID

C.

FUNK

II

(SGD.)
Attorney IV
On December 3, 2002, the Voluntary Arbitrator rendered a Decision 27 finding MMPC liable to pay or reimburse the amount of
hospitalization expenses already paid by other health insurance companies. The Voluntary Arbitrator held that the employees may
demand simultaneous payment from both the CBA and their dependents separate health insurance without resulting to double
insurance, since separate premiums were paid for each contract. He also noted that the CBA does not prohibit reimbursement in case
there are other health insurers.
Proceedings before the Court of Appeals
MMPC filed a Petition for Review with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction28 before the CA. It claimed that the Voluntary Arbitrator committed grave abuse of discretion in not finding that recovery under
both insurance policies constitutes double insurance as both had the same subject matter, interest insured and risk or peril insured
against; in relying solely on the unauthorized legal opinion of Atty. Funk; and in not finding that the employees will be benefited twice for
the same loss. In its Comment,29 MMPSEU countered that MMPC will unjustly enrich itself and profit from the monthly premiums paid if
full reimbursement is not made.
On March 31, 2006, the CA found merit in MMPCs Petition. It ruled that despite the lack of a provision which bars recovery in case of
payment by other insurers, the wordings of the subject provision of the CBA showed that the parties intended to make MMPC liable only
for expenses actually incurred by an employees qualified dependent. In particular, the provision stipulates that payment should be
made directly to the hospital and that the claim should be supported by actual hospital and doctors bills. These mean that the
employees shall only be paid amounts not covered by other health insurance and is more in keeping with the principle of indemnity in
insurance contracts. Besides, a contrary interpretation would "allow unscrupulous employees to unduly profit from the x x x benefits"
and shall "open the floodgates to questionable claims x x x."30
The dispositive portion of the CA Decision31 reads:
WHEREFORE, the instant petition is GRANTED. The decision of the voluntary arbitrator dated December 3, 2002 is REVERSED and
SET ASIDE and judgment is rendered declaring that under Art. XI, Sec. 4 of the Collective Bargaining Agreement between petitioner
and respondent effective August 1, 1999 to July 31, 2002, the formers obligation to reimburse the Union members for the
hospitalization expenses incurred by their dependents is exclusive of those paid by the Union members to the hospital.
SO ORDERED.32
In its Motion for Reconsideration,33 MMPSEU pointed out that the alleged oppression that may be committed by abusive employees is a
mere possibility whereas the resulting losses to the employees are real. MMPSEU cited Samsel v. Allstate Insurance Co., 34 wherein the
Arizona Supreme Court explicitly ruled that an insured may recover from separate health insurance providers, regardless of whether
one of them has already paid the medical expenses incurred. On the other hand, MMPC argued in its Comment 35 that the cited foreign
case involves a different set of facts.
The CA, in its Resolution36 dated December 5, 2006, denied MMPSEUs motion.
Hence, this Petition.
Issues
MMPSEU presented the following grounds in support of its Petition:
A.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT REVERSED THE DECISION DATED 03 [DECEMBER] 2002 OF THE
VOLUNTARY ARBITRATOR BELOW WHEN THE SAME WAS SUPPORTED BY SUBSTANTIAL EVIDENCE, INCLUDING THE
OPINION OF THE INSURANCE COMMISSION THAT RECOVERY FROM BOTH THE CBA AND SEPARATE HEALTH CARDS IS NOT
PROHIBITED IN THE ABSENCE OF ANY SPECIFIC PROVISION IN THE CBA.
B.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN OVERTURNING THE DECISION OF THE VOLUNTARY
ARBITRATOR WITHOUT EVEN GIVING ANY LEGAL OR JUSTIFIABLE BASIS FOR SUCH REVERSAL.

C.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN REFUSING TO CONSIDER OR EVEN MENTION ANYTHING ABOUT
THE AMERICAN AUTHORITIES CITED IN THE RECORDS THAT DO NOT PROHIBIT, BUT IN FACT ALLOW, RECOVERY FROM
TWO SEPARATE HEALTH PLANS.
D.
THE COURT OF APPEALS GRAVELY ERRED IN GIVING MORE IMPORTANCE TO A POSSIBLE, HENCE MERELY SPECULATIVE,
ABUSE BY EMPLOYEES OF THE BENEFITS IF DOUBLE RECOVERY WERE ALLOWED INSTEAD OF THE REAL INJURY TO THE
EMPLOYEES WHO ARE PAYING FOR THE CBA HOSPITALIZATION BENEFITS THROUGH MONTHLY SALARY DEDUCTIONS BUT
WHO MAY NOT BE ABLE TO AVAIL OF THE SAME IF THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH INSURANCE. 37
MMPSEU avers that the Decision of the Voluntary Arbitrator deserves utmost respect and finality because it is supported by substantial
evidence and is in accordance with the opinion rendered by the Insurance Commission, an agency equipped with vast knowledge
concerning insurance contracts. It maintains that under the CBA, member-employees are entitled to full reimbursement of medical
expenses incurred by their dependents regardless of any amounts paid by the latters health insurance provider. Otherwise, nonrecovery will constitute unjust enrichment on the part of MMPC. It avers that recovery from both the CBA and other insurance
companies is allowed under their CBA and not prohibited by law nor by jurisprudence.
Our Ruling
The Petition has no merit.
Atty.
collateral source rule.

Funk

erred

in

applying

the

The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the employees may recover benefits from different insurance
providers without regard to the amount of benefits paid by each. According to him, this view is consistent with the theory of the collateral
source rule.
As part of American personal injury law, the collateral source rule was originally applied to tort cases wherein the defendant is
prevented from benefiting from the plaintiffs receipt of money from other sources. 38 Under this rule, if an injured person receives
compensation for his injuries from a source wholly independent of the tortfeasor, the payment should not be deducted from the
damages which he would otherwise collect from the tortfeasor.39 In a recent Decision40 by the Illinois Supreme Court, the rule has been
described as "an established exception to the general rule that damages in negligence actions must be compensatory." The Court went
on to explain that although the rule appears to allow a double recovery, the collateral source will have a lien or subrogation right to
prevent such a double recovery.41 In Mitchell v. Haldar,42 the collateral source rule was rationalized by the Supreme Court of Delaware:
The collateral source rule is predicated on the theory that a tortfeasor has no interest in, and therefore no right to benefit from monies
received by the injured person from sources unconnected with the defendant. According to the collateral source rule, a tortfeasor has
no right to any mitigation of damages because of payments or compensation received by the injured person from an independent
source. The rationale for the collateral source rule is based upon the quasi-punitive nature of tort law liability. It has been explained as
follows:
The collateral source rule is designed to strike a balance between two competing principles of tort law: (1) a plaintiff is entitled to
compensation sufficient to make him whole, but no more; and (2) a defendant is liable for all damages that proximately result from his
wrong. A plaintiff who receives a double recovery for a single tort enjoys a windfall; a defendant who escapes, in whole or in part,
liability for his wrong enjoys a windfall. Because the law must sanction one windfall and deny the other, it favors the victim of the wrong
rather than the wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full value of his or her negligent conduct even if it results in a windfall for the
innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the responsibility for losses on the party causing them. 43Its application is
justified so that "'the wrongdoer should not benefit from the expenditures made by the injured party or take advantage of contracts or
other relations that may exist between the injured party and third persons." 44Thus, it finds no application to cases involving no-fault
insurances under which the insured is indemnified for losses by insurance companies, regardless of who was at fault in the incident
generating the losses.45 Here, it is clear that MMPC is a no-fault insurer. Hence, it cannot be obliged to pay the hospitalization expenses
of the dependents of its employees which had already been paid by separate health insurance providers of said dependents.
The Voluntary Arbitrator therefore erred in adopting Atty. Funks view that the covered employees are entitled to full payment of the
hospital expenses incurred by their dependents, including the amounts already paid by other health insurance companies based on the
theory of collateral source rule.
The conditions set forth in the CBA provision indicate an intention to limit MMPCs liability only to actual expenses incurred by the
employees dependents, that is, excluding the amounts paid by dependents other health insurance providers.

The Voluntary Arbitrator ruled that the CBA has no express provision barring claims for hospitalization expenses already paid by other
insurers. Hence, the covered employees can recover from both. The CA did not agree, saying that the conditions set forth in the CBA
implied an intention of the parties to limit MMPCs liability only to the extent of the expenses actually incurred by their dependents which
excludes the amounts shouldered by other health insurance companies.
We agree with the CA. The condition that payment should be direct to the hospital and doctor implies that MMPC is only liable to pay
medical expenses actually shouldered by the employees dependents. It follows that MMPCs liability is limited, that is, it does not
include the amounts paid by other health insurance providers. This condition is obviously intended to thwart not only fraudulent claims
but also double claims for the same loss of the dependents of covered employees.
It is well to note at this point that the CBA constitutes a contract between the parties and as such, it should be strictly construed for the
purpose of limiting the amount of the employers liability.46 The terms of the subject provision are clear and provide no room for any
other interpretation. As there is no ambiguity, the terms must be taken in their plain, ordinary and popular sense. 47 Consequently,
MMPSEU cannot rely on the rule that a contract of insurance is to be liberally construed in favor of the insured. Neither can it rely on
the theory that any doubt must be resolved in favor of labor.
Samsel
v.
on all fours with the case at bar.

Allstate

Insurance

Co.

is

not

MMPSEU cannot rely on Samsel v. Allstate Insurance Co. where the Supreme Court of Arizona allowed the insured to enjoy medical
benefits under an automobile policy insurance despite being able to also recover from a separate health insurer. In that case, the
Allstate automobile policy does not contain any clause restricting medical payment coverage to expenses actually paid by the insured
nor does it specifically provide for reduction of medical payments benefits by a coordination of benefits. 48 However, in the case before
us, the dependents group hospitalization insurance provision in the CBA specifically contains a condition which limits MMPCs liability
only up to the extent of the expenses that should be paid by the covered employees dependent to the hospital and doctor. This is
evident from the portion which states that "payment by MMPC shall be direct to the hospital and doctor." 49 In contrast, the Allstate
automobile policy expressly gives Allstate the authority to pay directly to the insured person or on the latters behalf all reasonable
expenses actually incurred. Therefore, reliance on Samsel is unavailing because the facts therein are different and not decisive of the
issues in the present case.
To
under
constitute
sanctioned by law.

allow

reimbursement
other
double

insurance
recovery

of
which

amounts
policies
is

paid
shall
not

MMPSEU insists that MMPC is also liable for the amounts covered under other insurance policies; otherwise, MMPC will unjustly profit
from the premiums the employees contribute through monthly salary deductions.
This contention is unmeritorious.
To constitute unjust enrichment, it must be shown that a party was unjustly enriched in the sense that the term unjustly could mean
illegally or unlawfully.50 A claim for unjust enrichment fails when the person who will benefit has a valid claim to such benefit.51
The CBA has provided for MMPCs limited liability which extends only up to the amount to be paid to the hospital and doctor by the
employees dependents, excluding those paid by other insurers. Consequently, the covered employees will not receive more than what
is due them; neither is MMPC under any obligation to give more than what is due under the CBA.
Moreover, since the subject CBA provision is an insurance contract, the rights and obligations of the parties must be determined in
accordance with the general principles of insurance law.52 Being in the nature of a non-life insurance contract and essentially a contract
of indemnity, the CBA provision obligates MMPC to indemnify the covered employees medical expenses incurred by their dependents
but only up to the extent of the expenses actually incurred. 53 This is consistent with the principle of indemnity which proscribes the
insured from recovering greater than the loss. 54 Indeed, to profit from a loss will lead to unjust enrichment and therefore should not be
countenanced. As aptly ruled by the CA, to grant the claims of MMPSEU will permit possible abuse by employees.
WHEREFORE, the Petition is DENIED. The Decision dated March 31, 2006 and Resolution dated December 5, 2006 of the Court of
Appeals in CA-G.R. SP No. 75630, are AFFIRMED.
SO ORDERED.

(OVER INSURANCE)
G.R. No. 184300

July 11, 2012

MALAYAN INSURANCE CO., INC., Petitioner,

vs.
PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE FORWARDER SERVICES, INC., Respondents.

DECISION
REYES, J.:
Before the Court is a petitiOn for review on certiorari filed by petitioner Malayan Insurance Co., lnc. (Malayan) assailing the
Decision1 dated February 29, 2008 and Resolution2 dated August 28, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 71204
which affirmed with modification the decision of the Regional Trial Court (RTC), Branch 38 of Manila.
Antecedent Facts
Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services, Inc. (Reputable) had been annually
executing a contract of carriage, whereby the latter undertook to transport and deliver the formers products to its customers, dealers or
salesmen.3
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from respondent Philippines First Insurance
Co., Inc. (Philippines First) to secure its interest over its own products. Philippines First thereby insured Wyeths nutritional,
pharmaceutical and other products usual or incidental to the insureds business while the same were being transported or shipped in
the Philippines. The policy covers all risks of direct physical loss or damage from any external cause, if by land, and provides a limit of
P6,000,000.00 per any one land vehicle.
On December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned out, however, that the contract was not
signed by Wyeths representative/s.4 Nevertheless, it was admittedly signed by Reputables representatives, the terms thereof faithfully
observed by the parties and, as previously stated, the same contract of carriage had been annually executed by the parties every year
since 1989.5
Under the contract, Reputable undertook to answer for "all risks with respect to the goods and shall be liable to the COMPANY (Wyeth),
for the loss, destruction, or damage of the goods/products due to any and all causes whatsoever, including theft, robbery, flood, storm,
earthquakes, lightning, and other force majeure while the goods/products are in transit and until actual delivery to the customers,
salesmen, and dealers of the COMPANY".6
The contract also required Reputable to secure an insurance policy on Wyeths goods.7 Thus, on February 11, 1994, Reputable signed
a Special Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount of P1,000,000.00.
On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable received from Wyeth 1,000 boxes of Promil
infant formula worth P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation in Libis, Quezon City. Unfortunately, on
the same date, the truck carrying Wyeths products was hijacked by about 10 armed men. They threatened to kill the truck driver and
two of his helpers should they refuse to turn over the truck and its contents to the said highway robbers. The hijacked truck was
recovered two weeks later without its cargo.
On March 8, 1995, Philippines First, after due investigation and adjustment, and pursuant to the Marine Policy, paid Wyeth
P2,133,257.00 as indemnity. Philippines First then demanded reimbursement from Reputable, having been subrogated to the rights of
Wyeth by virtue of the payment. The latter, however, ignored the demand.
Consequently, Philippines First instituted an action for sum of money against Reputable on August 12, 1996.8 In its complaint,
Philippines First stated that Reputable is a "private corporation engaged in the business of a common carrier." In its answer,9 Reputable
claimed that it is a private carrier. It also claimed that it cannot be made liable under the contract of carriage with Wyeth since the
contract was not signed by Wyeths representative and that the cause of the loss was force majeure, i.e., the hijacking incident.
Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to collect the amount covered in the SR Policy.
According to Reputable, "it was validly insured with Malayan for P1,000,000.00 with respect to the lost products under the latters
Insurance Policy No. SR-0001-02577 effective February 1, 1994 to February 1, 1995" and that the SR Policy covered the risk of
robbery or hijacking.10
Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy, the insurance does not cover any loss or
damage to property which at the time of the happening of such loss or damage is insured by any marine policy and that the SR Policy
expressly excluded third-party liability.
After trial, the RTC rendered its Decision11 finding Reputable liable to Philippines First for the amount of indemnity it paid to Wyeth,
among others. In turn, Malayan was found by the RTC to be liable to Reputable to the extent of the policy coverage. The dispositive
portion of the RTC decision provides:
WHEREFORE, on the main Complaint, judgment is hereby rendered finding [Reputable] liable for the loss of the Wyeth products and
orders it to pay Philippines First the following:
1. the amount of P2,133,257.00 representing the amount paid by Philippines First to Wyeth for the loss of the products in
question;
2. the amount of P15,650.00 representing the adjustment fees paid by Philippines First to hired adjusters/surveyors;

3. the amount of P50,000.00 as attorneys fees; and

4. the costs of suit.
On the third-party Complaint, judgment is hereby rendered finding
Malayan liable to indemnify [Reputable] the following:
1. the amount of P1,000,000.00 representing the proceeds of the insurance policy;
2. the amount of P50,000.00 as attorneys fees; and
3. the costs of suit.
SO ORDERED.12
Dissatisfied, both Reputable and Malayan filed their respective appeals from the RTC decision.
Reputable asserted that the RTC erred in holding that its contract of carriage with Wyeth was binding despite Wyeths failure to sign the
same. Reputable further contended that the provisions of the contract are unreasonable, unjust, and contrary to law and public policy.
For its part, Malayan invoked Section 5 of its SR Policy, which provides:
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does not cover any loss or damage to property which at the time
of the happening of such loss or damage is insured by or would but for the existence of this policy, be insured by any Fire or Marine
policy or policies except in respect of any excess beyond the amount which would have been payable under the Fire or Marine policy or
policies had this insurance not been effected.
Malayan argued that inasmuch as there was already a marine policy issued by Philippines First securing the same subject matter
against loss and that since the monetary coverage/value of the Marine Policy is more than enough to indemnify the hijacked cargo,
Philippines First alone must bear the loss.
Malayan sought the dismissal of the third-party complaint against it. In the alternative, it prayed that it be held liable for no more than
P468,766.70, its alleged pro-rata share of the loss based on the amount covered by the policy, subject to the provision of Section 12 of
the SR Policy, which states:
12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage happening to any property hereby insured, there be any other
subsisting insurance or insurances, whether effected by the insured or by any other person or persons, covering the same property, the
company shall not be liable to pay or contribute more than its ratable proportion of such loss or damage.
On February 29, 2008, the CA rendered the assailed decision sustaining the ruling of the RTC, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, the assailed Decision dated 29 September 2000, as modified in the Order dated 21 July 2001,
is AFFIRMED with MODIFICATION in that the award of attorneys fees in favor of Reputable is DELETED.
SO ORDERED.13
The CA ruled, among others, that: (1) Reputable is estopped from assailing the validity of the contract of carriage on the ground of lack
of signature of Wyeths representative/s; (2) Reputable is liable under the contract for the value of the goods even if the same was lost
due to fortuitous event; and (3) Section 12 of the SR Policy prevails over Section 5, it being the latter provision; however, since the
ratable proportion provision of Section 12 applies only in case of double insurance, which is not present, then it should not be applied
and Malayan should be held liable for the full amount of the policy coverage, that is, P1,000,000.00.14
On March 14, 2008, Malayan moved for reconsideration of the assailed decision but it was denied by the CA in its Resolution dated
August 28, 2008.15
Hence, this petition.
Malayan insists that the CA failed to properly resolve the issue on the "statutory limitations on the liability of common carriers" and the
"difference between an other insurance clause and an over insurance clause."
Malayan also contends that the CA erred when it held that Reputable is a private carrier and should be bound by the contractual
stipulations in the contract of carriage. This argument is based on its assertion that Philippines First judicially admitted in its complaint
that Reputable is a common carrier and as such, Reputable should not be held liable pursuant to Article 1745(6) of the Civil
Code.16 Necessarily, if Reputable is not liable for the loss, then there is no reason to hold Malayan liable to Reputable.

Further, Malayan posits that there resulted in an impairment of contract when the CA failed to apply the express provisions of Section 5
(referred to by Malayan as over insurance clause) and Section 12 (referred to by Malayan as other insurance clause) of its SR Policy as
these provisions could have been read together there being no actual conflict between them.
Reputable, meanwhile, contends that it is exempt from liability for acts committed by thieves/robbers who act with grave or irresistible
threat whether it is a common carrier or a private/special carrier. It, however, maintains the correctness of the CA ruling that Malayan is
liable to Philippines First for the full amount of its policy coverage and not merely a ratable portion thereof under Section 12 of the SR
Policy.
Finally, Philippines First contends that the factual finding that Reputable is a private carrier should be accorded the highest degree of
respect and must be considered conclusive between the parties, and that a review of such finding by the Court is not warranted under
the circumstances. As to its alleged judicial admission that Reputable is a common carrier, Philippines First proffered the declaration
made by Reputable that it is a private carrier. Said declaration was allegedly reiterated by Reputable in its third party complaint, which
in turn was duly admitted by Malayan in its answer to the said third-party complaint. In addition, Reputable even presented evidence to
prove that it is a private carrier.
As to the applicability of Sections 5 and 12 in the SR Policy, Philippines First reiterated the ruling of the CA. Philippines First, however,
prayed for a slight modification of the assailed decision, praying that Reputable and Malayan be rendered solidarily liable to it in the
amount of P998,000.00, which represents the balance from the P1,000.000.00 coverage of the SR Policy after deducting P2,000.00
under Section 10 of the said SR Policy.17
Issues
The liability of Malayan under the SR Policy hinges on the following issues for resolution:
1) Whether Reputable is a private carrier;
2) Whether Reputable is strictly bound by the stipulations in its contract of carriage with Wyeth, such that it should be liable for
any risk of loss or damage, for any cause whatsoever, including that due to theft or robbery and other force majeure;
3) Whether the RTC and CA erred in rendering "nugatory" Sections 5 and Section 12 of the SR Policy; and
4) Whether Reputable should be held solidarily liable with Malayan for the amount of P998,000.00 due to Philippines First.
The Courts Ruling
On the first issue Reputable is a private carrier.
The Court agrees with the RTC and CA that Reputable is a private carrier. Well-entrenched in jurisprudence is the rule that factual
findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and considered
conclusive between the parties, save for certain exceptional and meritorious circumstances, none of which are present in this case.18
Malayan relies on the alleged judicial admission of Philippines First in its complaint that Reputable is a common carrier.19 Invoking
Section 4, Rule 129 of the Rules on Evidence that "an admission verbal or written, made by a party in the course of the proceeding in
the same case, does not require proof," it is Malayans position that the RTC and CA should have ruled that
Reputable is a common carrier. Consequently, pursuant to Article 1745(6) of the Civil Code, the liability of Reputable for the loss of
Wyeths goods should be dispensed with, or at least diminished.
It is true that judicial admissions, such as matters alleged in the pleadings do not require proof, and need not be offered to be
considered by the court. "The court, for the proper decision of the case, may and should consider, without the introduction of evidence,
the facts admitted by the parties."20 The rule on judicial admission, however, also states that such allegation, statement, or admission is
conclusive as against the pleader,21 and that the facts alleged in the complaint are deemed admissions of the plaintiff and binding upon
him.22 In this case, the pleader or the plaintiff who alleged that Reputable is a common carrier was Philippines First. It cannot, by any
stretch of imagination, be made conclusive as against Reputable whose nature of business is in question.
It should be stressed that Philippines First is not privy to the SR Policy between Wyeth and Reputable; rather, it is a mere subrogee to
the right of Wyeth to collect from Reputable under the terms of the contract of carriage. Philippines First is not in any position to make
any admission, much more a definitive pronouncement, as to the nature of Reputables business and there appears no other
connection between Philippines First and Reputable which suggests mutual familiarity between them.
Moreover, records show that the alleged judicial admission of Philippines First was essentially disputed by Reputable when it stated in
paragraphs 2, 4, and 11 of its answer that it is actually a private or special carrier.23 In addition, Reputable stated in paragraph 2 of its
third-party complaint that it is "a private carrier engaged in the carriage of goods."24 Such allegation was, in turn, admitted by Malayan in
paragraph 2 of its answer to the third-party complaint.25 There is also nothing in the records which show that Philippines First
persistently maintained its stance that Reputable is a common carrier or that it even contested or proved otherwise Reputables position
that it is a private or special carrier.

Hence, in the face of Reputables contrary admission as to the nature of its own business, what was stated by Philippines First in its
complaint is reduced to nothing more than mere allegation, which must be proved for it to be given any weight or value. The settled rule
is that mere allegation is not proof.26
More importantly, the finding of the RTC and CA that Reputable is a special or private carrier is warranted by the evidence on record,
primarily, the unrebutted testimony of Reputables Vice President and General Manager, Mr. William Ang Lian Suan, who expressly
stated in open court that Reputable serves only one customer, Wyeth.27
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public. On the
other hand, a private carrier is one wherein the carriage is generally undertaken by special agreement and it does not hold itself out to
carry goods for the general public.28 A common carrier becomes a private carrier when it undertakes to carry a special cargo or
chartered to a special person only.29 For all intents and purposes, therefore, Reputable operated as a private/special carrier with regard
to its contract of carriage with Wyeth.
On the second issue Reputable is bound by the terms of the contract of carriage.
The extent of a private carriers obligation is dictated by the stipulations of a contract it entered into, provided its stipulations, clauses,
terms and conditions are not contrary to law, morals, good customs, public order, or public policy. "The Civil Code provisions on
common carriers should not be applied where the carrier is not acting as such but as a private carrier. Public policy governing common
carriers has no force where the public at large is not involved."30
Thus, being a private carrier, the extent of Reputables liability is fully governed by the stipulations of the contract of carriage, one of
which is that it shall be liable to Wyeth for the loss of the goods/products due to any and all causes whatsoever, including theft, robbery
and other force majeure while the goods/products are in transit and until actual delivery to Wyeths customers, salesmen and dealers.31
On the third issue other insurance vis--vis over insurance.
Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to Section 12 as a "modified other insurance
clause".32 In rendering inapplicable said provisions in the SR Policy, the CA ruled in this wise:
Since Sec. 5 calls for Malayans complete absolution in case the other insurance would be sufficient to cover the entire amount of the
loss, it is in direct conflict with Sec. 12 which provides only for a pro-rated contribution between the two insurers. Being the later
provision, and pursuant to the rules on interpretation of contracts, Sec. 12 should therefore prevail.
xxxx
x x x The intention of both Reputable and Malayan should be given effect as against the wordings of Sec. 12 of their contract, as it was
intended by the parties to operate only in case of double insurance, or where the benefits of the policies of both plaintiff-appellee and
Malayan should pertain to Reputable alone. But since the court a quo correctly ruled that there is no double insurance in this case
inasmuch as Reputable was not privy thereto, and therefore did not stand to benefit from the policy issued by plaintiff-appellee in favor
of Wyeth, then Malayans stand should be rejected.
To rule that Sec. 12 operates even in the absence of double insurance would work injustice to Reputable which, despite paying
premiums for a P1,000,000.00 insurance coverage, would not be entitled to recover said amount for the simple reason that the same
property is covered by another insurance policy, a policy to which it was not a party to and much less, from which it did not stand to
benefit. Plainly, this unfair situation could not have been the intention of both Reputable and Malayan in signing the insurance contract
in question.33
In questioning said ruling, Malayan posits that Sections 5 and 12 are separate provisions applicable under distinct circumstances.
Malayan argues that "it will not be completely absolved under Section 5 of its policy if it were the assured itself who obtained additional
insurance coverage on the same property and the loss incurred by Wyeths cargo was more than that insured by Philippines Firsts
marine policy. On the other hand, Section 12 will not completely absolve Malayan if additional insurance coverage on the same cargo
were obtained by someone besides Reputable, in which case Malayans SR policy will contribute or share ratable proportion of a
covered cargo loss."34
Malayans position cannot be countenanced.
Section 5 is actually the other insurance clause (also called "additional insurance" and "double insurance"), one akin to Condition No. 3
in issue in Geagonia v. CA,35 which validity was upheld by the Court as a warranty that no other insurance exists. The Court ruled that
Condition No. 336 is a condition which is not proscribed by law as its incorporation in the policy is allowed by Section 75 of the Insurance
Code. It was also the Courts finding that unlike the other insurance clauses, Condition No. 3 does not absolutely declare void any
violation thereof but expressly provides that the condition "shall not apply when the total insurance or insurances in force at the time of
the loss or damage is not more than P200,000.00."
In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for the nullity of the SR Policy but simply limits the
liability of Malayan only up to the excess of the amount that was not covered by the other insurance policy. In interpreting the "other
insurance clause" in Geagonia, the Court ruled that the prohibition applies only in case of double insurance. The Court ruled that in
order to constitute a violation of the clause, the other insurance must be upon same subject matter, the same interest therein, and the
same risk. Thus, even though the multiple insurance policies involved were all issued in the name of the same assured, over the same

subject matter and covering the same risk, it was ruled that there was no violation of the "other insurance clause" since there was no
double insurance.
Section 12 of the SR Policy, on the other hand, is the over insurance clause. More particularly, it covers the situation where there is
over insurance due to double insurance. In such case, Section 15 provides that Malayan shall "not be liable to pay or contribute more
than its ratable proportion of such loss or damage." This is in accord with the principle of contribution provided under Section 94(e) of
the Insurance Code,37 which states that "where the insured is over insured by double insurance, each insurer is bound, as between
himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract."
Clearly, both Sections 5 and 12 presuppose the existence of a double insurance. The pivotal question that now arises is whether there
is double insurance in this case such that either Section 5 or Section 12 of the SR Policy may be applied.
By the express provision of Section 93 of the Insurance Code, double insurance exists where the same person is insured by several
insurers separately in respect to the same subject and interest. The requisites in order for double insurance to arise are as follows:38
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the SR Policy were both issued over the same subject matter, i.e. goods
belonging to Wyeth, and both covered the same peril insured against, it is, however, beyond cavil that the said policies were issued to
two different persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines First under its Marine Policy, while
Reputable is the recognized insured of Malayan under the SR Policy. The fact that Reputable procured Malayans SR Policy over the
goods of Wyeth pursuant merely to the stipulated requirement under its contract of carriage with the latter does not make Reputable a
mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance contracts is also different and distinct from that of Reputables.
The policy issued by Philippines First was in consideration of the legal and/or equitable interest of Wyeth over its own goods. On the
other hand, what was issued by Malayan to Reputable was over the latters insurable interest over the safety of the goods, which may
become the basis of the latters liability in case of loss or damage to the property and falls within the contemplation of Section 15 of the
Insurance Code.39
Therefore, even though the two concerned insurance policies were issued over the same goods and cover the same risk, there arises
no double insurance since they were issued to two different persons/entities having distinct insurable interests. Necessarily, over
insurance by double insurance cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither Section 5 nor Section 12 of
the SR Policy can be applied.
Apart from the foregoing, the Court is also wont to strictly construe the controversial provisions of the SR Policy against Malayan. This
is in keeping with the rule that:
1wphi1

"Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor
of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par
excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the
insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such
a way as to preclude the insurer from noncompliance with its obligations."40
Moreover, the CA correctly ruled that:
To rule that Sec. 12 operates even in the absence of double insurance would work injustice to Reputable which, despite paying
premiums for a P1,000,000.00 insurance coverage, would not be entitled to recover said amount for the simple reason that the same
property is covered by another insurance policy, a policy to which it was not a party to and much less, from which it did not stand to
benefit. x x x41
On the fourth issue Reputable is not solidarily liable with Malayan.
There is solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so
requires.
In Heirs of George Y. Poe v. Malayan lnsurance Company., lnc.,42 the Court ruled that:
Where the insurance contract provides for indemnity against liability to third persons, the liability of the insurer is direct and such third
persons can directly sue the insurer. The direct liability of the insurer under indemnity contracts against third party[- ]liability does not
mean, however, that the insurer can be held solidarily liable with the insured and/or the other parties found at fault, since they are being

held liable under different obligations. The liability of the insured carrier or vehicle owner is based on tort, in accordance with the
provisions of the Civil Code; while that of the insurer arises from contract, particularly, the insurance policy: 43 (Citation omitted and
emphasis supplied)
Suffice it to say that Malayan's and Reputable's respective liabilities arose from different obligations- Malayan's is based on the SR
Policy while Reputable's is based on the contract of carriage.
All told, the Court finds no reversible error in the judgment sought to be reviewed.
WHEREFORE, premises considered, the petition is DENIED. The Decision dated February 29, 2008 and Resolution dated August 28,
2008 of the Court of Appeals in CA-G.R. CV No. 71204 are hereby AFFIRMED.
Cost against petitioner Malayan Insurance Co., Inc.
SO ORDERED.

REINSURANCE
G.R. No. L-19392

April 14, 1965

ALEXANDER HOWDEN & CO., LTD., H. G. CHESTER & OTHERS, ET AL., petitioners,
vs.
THE COLLECTOR (NOW COMMISSIONER) Of INTERNAL REVENUE, respondent.
Sycip, Salazar, Luna and Associates and Lichauco, Picazo and Agcaoili for petitioners.
Office of the Solicitor General for respondent.
BENGZON, J.P., J.:
In 1950 the Commonwealth Insurance Co., a domestic corporation, entered into reinsurance contracts with 32 British insurance
companies not engaged in trade or business in the Philippines, whereby the former agreed to cede to them a portion of the premiums
on insurances on fire, marine and other risks it has underwritten in the Philippines. Alexander Howden & Co., Ltd., also a British
corporation not engaged in business in this country, represented the aforesaid British insurance companies. The reinsurance contracts
were prepared and signed by the foreign reinsurers in England and sent to Manila where Commonwealth Insurance Co. signed them.
Pursuant to the aforesaid contracts, Commonwealth Insurance Co., in 1951, remitted P798,297.47 to Alexander Howden & Co., Ltd., as
reinsurance premiums. In behalf of Alexander Howden & Co., Ltd., Commonwealth Insurance Co. filed in April 1952 an income tax
return declaring the sum of P798,297.47, with accrued interest thereon in the amount of P4,985.77, as Alexander Howden & Co., Ltd.'s
gross income for calendar year 1951. It also paid the Bureau of Internal Revenue P66,112.00 income tax thereon.
On May 12, 1954, within the two-year period provided for by law, Alexander Howden & Co., Ltd. filed with the Bureau of Internal
Revenue a claim for refund of the P66,112.00, later reduced to P65,115.00, because Alexander Howden & Co., Ltd. agreed to the
payment of P977.00 as income tax on the P4,985.77 accrued interest. A ruling of the Commissioner of Internal Revenue, dated
December 8, 1953, was invoked, stating that it exempted from withholding tax reinsurance premiums received from domestic insurance
companies by foreign insurance companies not authorized to do business in the Philippines. Subsequently, Alexander Howden & Co.,
Ltd. instituted an action in the Court of First Instance of Manila for the recovery of the aforesaid amount claimed. Pursuant to Section 22
of Republic Act 1125 the case was certified to the Court of Tax Appeals. On November 24, 1961 the Tax Court denied the claim.
Plaintiffs have appealed, thereby squarely raising the following issues: (1) Are portions of premiums earned from insurances locally
underwritten by a domestic corporation, ceded to and received by non-resident foreign reinsurance companies, thru a non-resident
foreign insurance broker, pursuant to reinsurance contracts signed by the reinsurers abroad but signed by the domestic corporation in
the Philippines, subject to income tax or not? (2) If subject thereto, may or may not the income tax on reinsurance premiums be
withheld pursuant to Sections 53 and 54 of the National Internal Revenue Code?
Section 24 of the National Internal Revenue Code subjects to tax a non-resident foreign corporation's income from sources within the
Philippines. The first issue therefore hinges on whether or not the reinsurance premiums in question came from sources within the
Philippines.
Appellants would impress upon this Court that the reinsurance premiums came from sources outside the Philippines, for these reasons:
(1) The contracts of reinsurance, out of which the reinsurance premiums were earned, were prepared and signed abroad, so that their
situs lies outside the Philippines; (2) The reinsurers, not being engaged in business in the Philippines, received the reinsurance
premiums as income from their business conducted in England and, as such, taxable in England; and, (3) Section 37 of the Tax Code,
enumerating what are income from sources within the Philippines, does not include reinsurance premiums.
The source of an income is the property, activity or service that produced the income. 1 The reinsurance premiums remitted to
appellants by virtue of the reinsurance contracts, accordingly, had for their source the undertaking to indemnify Commonwealth
Insurance Co. against liability. Said undertaking is the activity that produced the reinsurance premiums, and the same took place in the

Philippines. In the first place, the reinsured, the liabilities insured and the risks originally underwritten by Commonwealth Insurance Co.,
upon which the reinsurance premiums and indemnity were based, were all situated in the Philippines. Secondly, contrary to appellants'
view, the reinsurance contracts were perfected in the Philippines, for Commonwealth Insurance Co. signed them last in Manila. The
American cases cited are inapplicable to this case because in all of them the reinsurance contracts were signed outside the jurisdiction
of the taxing State. And, thirdly, the parties to the reinsurance contracts in question evidently intended Philippine law to govern. Article
11 thereof provided for arbitration in Manila, according to the laws of the Philippines, of any dispute arising between the parties in
regard to the interpretation of said contracts or rights in respect of any transaction involved. Furthermore, the contracts provided for the
use of Philippine currency as the medium of exchange and for the payment of Philippine taxes.
Appellants should not confuse activity that creates income with business in the course of which an income is realized. An activity may
consist of a single act; while business implies continuity of transactions. 2 An income may be earned by a corporation in the Philippines
although such corporation conducts all its businesses abroad. Precisely, Section 24 of the Tax Code does not require a foreign
corporation to be engaged in business in the Philippines in order for its income from sources within the Philippines to be taxable. It
subjects foreign corporations not doing business in the Philippines to tax for income from sources within the Philippines. If by source of
income is meant the business of the taxpayer, foreign corporations not engaged in business in the Philippines would be exempt from
taxation on their income from sources within the Philippines.
Furthermore, as used in our income tax law, "income" refers to the flow of wealth. 3 Such flow, in the instant case, proceeded from the
Philippines. Such income enjoyed the protection of the Philippine Government. As wealth flowing from within the taxing jurisdiction of
the Philippines and in consideration for protection accorded it by the Philippines, said income should properly share the burden of
maintaining the government.
Appellants further contend that reinsurance premiums not being among those mentioned in Section 37 of the Tax Code as income from
sources within the Philippines, the same should not be treated as such. Section 37, however, is not an all-inclusive enumeration. It
states that "the following items of gross income shall be treated as gross income from sources within the Philippines." It does not state
or imply that an income not listed therein is necessarily from sources outside the Philippines.
As to appellants' contention that reinsurance premiums constitute "gross receipts" instead of "gross income", not subject to income tax,
suffice it to say that, as correctly observed by the Court of Tax Appeals, "gross receipts" of amounts that do not constitute return of
capital, such as reinsurance premiums, are part of the gross income of a taxpayer. At any rate, the tax actually collected in this case
was computed not on the basis of gross premium receipts but on the net premium income, that is, after deducting general expenses,
payment of policies and taxes.
The reinsurance premiums in question being taxable, we turn to the issue whether or not they are subject to withholding tax under
Section 54 in relation to Section 53 of the Tax Code.
Subsection (b) of Section 53 subjects to withholding tax the following: interest, dividends, rents, salaries, wages,premiums, annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income of any nonresident alien individual not engaged in trade or business within the Philippines and not having any office or place of business therein.
Section 54, by reference, applies this provision toforeign corporations not engaged in trade or business in the Philippines.
Appellants maintain that reinsurance premiums are not "premiums" at all as contemplated by Subsection (b) of Section 53; that they are
not within the scope of "other fixed or determinable annual or periodical gains, profits, and income"; that, therefore, they are not items of
income subject to withholding tax.
It is urged for the applicant that no opposition has been registered against his petition on the issues above-discussed. Absence of
opposition, however, does not preclude the scanning of the whole record by the appellate court, with a view to preventing the
conferment of citizenship to persons not fully qualified therefor (Lee Ng Len vs. Republic, G.R. No. L-20151, March 31, 1965). The
applicant's complaint of unfairness could have some weight if the objections on appeal had been on points not previously passed upon.
But the deficiencies here in question are not new but well-known, having been ruled upon repeatedly by this Court, and we see no
excuse for failing to take them into account.
1wph1.t

The argument of appellants is that "premiums", as used in Section 53 (b), is preceded by "rents, salaries, wages" and followed by
"annuities, compensations, remunerations" which connote periodical income payable to the recipient on account of some investment or
for personal services rendered. "Premiums" should, therefore, in appellants' view, be given a meaning kindred to the other terms in the
enumeration and be understood in its broadest sense as "a reward or recompense for some act done; a bonus; compensation for the
use of money; a price for a loan; a sum in addition to interest."
We disagree with the foregoing proposition. Since Section 53 subjects to withholding tax various specified income, among them,
"premiums", the generic connotation of each and every word or phrase composing the enumeration in Subsection (b) thereof is income.
Perforce, the word "premiums", which is neither qualified nor defined by the law itself, should mean income and should include all
premiums constituting income, whether they be insurance or reinsurance premiums.
Assuming that reinsurance premiums are not within the word "premiums" in Section 53, still they may be classified as determinable and
periodical income under the same provision of law. Section 199 of the Income Tax Regulations defines fixed, determinable, annual and
periodical income:
Income is fixed when it is to be paid in amounts definitely pre-determined. On the other hand, it is determinable whenever
there is a basis of calculation by which the amount to be paid may be ascertained.

The income need not be paid annually if it is paid periodically; that is to say, from time to time, whether or not at regular
intervals. That the length of time during which the payments are to be made may be increased or diminished in accordance
with someone's will or with the happening of an event does not make the payments any the less determinable or periodical. ...
Reinsurance premiums, therefore, are determinable and periodical income: determinable, because they can be calculated accurately
on the basis of the reinsurance contracts; periodical, inasmuch as they were earned and remitted from time to time.
Appellants' claim for refund, as stated, invoked a ruling of the Commissioner of Internal Revenue dated December 8, 1953. Appellants'
brief also cited rulings of the same official, dated October 13, 1953, February 7, 1955 and February 8, 1955, as well as the decision of
the defunct Board of Tax Appeals in the case of Franklin Baker Co., 4thereby attempting to show that the prevailing administrative
interpretation of Sections 53 and 54 of the Tax Code exempted from withholding tax reinsurance premiums ceded to non-resident
foreign insurance companies. It is asserted that since Sections 53 and 54 were "substantially re-enacted" by Republic Acts 1065
(approved June 12, 1954), 1291 (approved June 15, 1955), 1505 (approved June 16, 1956) and 2343 (approved June 20, 1959) when
the said administrative rulings prevailed, the rulings should be given the force of law under the principle of legislative approval by reenactment.
The principle of legislative approval by re-enactment may briefly be stated thus: Where a statute is susceptible of the meaning placed
upon it by a ruling of the government agency charged with its enforcement and the Legislature thereafter re-enacts the provisions
without substantial change, such action is to some extent confirmatory that the ruling carries out the legislative purpose.5
The aforestated principle, however, is not applicable to this case. Firstly, Sections 53 and 54 were never reenacted. Republic Acts 1065,
1291, 1505 and 2343 were merely amendments in respect to the rate of tax imposed in Sections 53 and 54. Secondly, the
administrative rulings of the Commissioner of Internal Revenue relied upon by the taxpayers were only contained in letters to taxpayers
and never published, so that the Legislature is not presumed to know said rulings. Thirdly, in the case on which appellants
rely, Interprovincial Autobus Co., Inc. vs. Collector of Internal Revenue, L-6741, January 31, 1956, what was declared to have acquired
the force or effect of law was a regulation promulgated to implement a law; whereas, in this case, what appellants would seek to have
the force of law are opinions on queries submitted.
It may not be amiss to note that in 1963, after the Tax Court rendered judgment in this case, Congress enacted Republic Act 3825, as
an amendment to Sections 24 and 54 of the Tax Code, exempting from income taxes and withholding tax, reinsurance premiums
received by foreign corporations not engaged in business in the Philippines. Republic Act 3825 in effect took out from Sections 24 and
54 something which formed a part of the subject matter therein,6 thereby affirming the taxability of reinsurance premiums prior to the
aforestated amendment.
Finally, appellant would argue that Judge Augusto M. Luciano, who penned the decision appealed from, was disqualified to sit in this
case since he had appeared as counsel for the Commissioner of Internal Revenue and, as such, answered plaintiff's complaint before
the Court of First Instance of Manila.
The Rules of Court provides that no judge shall sit in any case in which he has been counsel without the written consent of all the
parties in interest, signed by them and entered upon the record. The party objecting to the judge's competency may file, in writing, with
such judge his objection stating therein the grounds for it. The judge shall thereupon proceed with the trial or withdraw therefrom, but
his action shall be made in writing and made part of the record.7
Appellants, instead of asking for Judge Luciano's disqualification by raising their objection in the Court of Tax Appeals, are content to
raise it for the first time before this Court. Such being the case they may not now be heard to complain on this point, when Judge
Luciano has given his opinion on the merits of the case. A litigant cannot be permitted to speculate upon the action of the court and
raise an objection of this nature after decision has been rendered. 8
WHEREFORE, the judgment appealed from is hereby affirmed with costs against appellants. It is so ordered.