G.R. No.

L-20853

May 29, 1967

BONIFACIO BROS., INC., ET AL., plaintiffs-appellants,

vs.
ENRIQUE MORA, ET AL., defendants-appellees.
G. Magsaysay for plaintiffs-appellants.
Abad Santos and Pablo for defendant-appellee H. E. Reyes, Inc.
J. P. Santilla and A. D. Hidalgo, Jr. for other defendant-appellee.
CASTRO, J.:
This is an appeal from the decision of the Court of First Instance of Manila,
Branch XV, in civil case 48823, affirming the decision of the Municipal Court
of Manila, declaring the H.S. Reyes, Inc. as having a better right than the
Bonifacio Bros., Inc. and the Ayala Auto Parts Company, appellants herein,
to the proceeds of motor insurance policy A-0615, in the sum of P2,002.73,
issued by the State Bonding & Insurance Co. Inc., and directing payment of
the said amount to the H. Reyes, Inc.
Enrique Mora, owner of Oldsmobile sedan model 1956, bearing plate No.
QC- mortgaged the same to the H.S. Reyes, Inc., with the condition that the
former would insure the automobile with the latter as beneficiary. The
automobile was thereafter insured on June 23, 1959 with the State Bonding
& Insurance Co., Inc., and motor car insurance policy A-0615 was issued to
Enrique Mora, the pertinent provisions of which read:
1. The Company (referring to the State Bonding & Insurance Co.,
Inc.) will, subject to the Limits of Liability, indemnify the Insured
against loss of or damages to the Motor Vehicle and its accessories
and spare parts whilst thereon; (a) by accidental collision or
overturning or collision or overturning consequent upon
mechanical breakdown or consequent upon wear and tear,
xxx

xxx

xxx

2. At its own option the Company may pay in cash the amount of
the loss or damage or may repair, reinstate, or replace the Motor
Vehicle or any part thereof or its accessories or spare parts. The
liability of the Company shall not exceed the value of the parts

whichever is the less. The Insured's estimate of value stated in the

schedule will be the maximum amount payable by the Company in
respect of any claim for loss or damage.
1wph1.t

xxx

xxx

xxx

4. The Insured may authorize the repair of the Motor Vehicle

necessitated by damage for which the Company may be liable
under this Policy provided that: (a) The estimated cost of such
repair does not exceed the Authorized Repair Limit, (b) A detailed
estimate of the cost is forwarded to the Company without delay,
subject to the condition that "Loss, if any is payable to H.S. Reyes,
Inc.," by virtue of the fact that said Oldsmobile sedan was
mortgaged in favor of the said H.S. Reyes, Inc. and that under a
clause in said insurance policy, any loss was made payable to the
H.S. Reyes, Inc. as Mortgagee;
xxx

xxx

xxx

During the effectivity of the insurance contract, the car met with an
accident. The insurance company then assigned the accident to the Bayne
Adjustment Co. for investigation and appraisal of the damage. Enrique
Mora, without the knowledge and consent of the H.S. Reyes, Inc.,
authorized the Bonifacio Bros. Inc. to furnish the labor and materials, some
of which were supplied by the Ayala Auto Parts Co. For the cost of labor and
materials, Enrique Mora was billed at P2,102.73 through the H.H. Bayne
Adjustment Co. The insurance company after claiming a franchise in the
amount of P100, drew a check in the amount of P2,002.73, as proceeds of
the insurance policy, payable to the order of Enrique Mora or H.S. Reyes,.
Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for
disposition and delivery to the proper party. In the meantime, the car was
delivered to Enrique Mora without the consent of the H.S. Reyes, Inc., and
without payment to the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. of
the cost of repairs and materials.
Upon the theory that the insurance proceeds should be paid directly to
them, the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. filed on May 8,
1961 a complaint with the Municipal Court of Manila against Enrique Mora
and the State Bonding & Insurance Co., Inc. for the collection of the sum of
P2,002.73 The insurance company filed its answer with a counterclaim for
interpleader, requiring the Bonifacio Bros. Inc. and the H.S. Reyes, Inc. to
interplead in order to determine who has better right to the insurance

proceeds in question. Enrique Mora was declared in default for failure to

appear at the hearing, and evidence against him was received ex parte.
However, the counsel for the Bonifacio Bros. Inc., Ayala Auto Parts Co. and
State Bonding & Insurance Co. Inc. submitted a stipulation of facts, on the
basis of which are Municipal Court rendered a decision declaring the H.S.
Reyes, Inc. as having a better right to the disputed amount and ordering
State Bonding & Insurance Co. Inc. to pay to the H. S. Reyes, Inc. the said
sum of P2,002.73. From this decision, the appellants elevated the case to
the Court of First Instance of Manila which the stipulation of facts was
reproduced. On October 19, 1962 the latter court rendered a decision,
affirming the decision of the Municipal Court. The Bonifacio Bros. Inc. and
the Ayala Auto Parts Co. moved for reconsideration of the decision, but the
trial court denied the motion. Hence, this appeal.
The main issue raised is whether there is privity of contract between the
Bonifacio Bros. Inc. and the Ayala Auto Parts Co. on the one hand and the
insurance company on the other. The appellants argue that the insurance
company and Enrique Mora are parties to the repair of the car as well as
the towage thereof performed. The authority for this assertion is to be
found, it is alleged, in paragraph 4 of the insurance contract which provides
that "the insured may authorize the repair of the Motor Vehicle necessitated
by damage for which the company may be liable under the policy provided
that (a) the estimated cost of such repair does not exceed the Authorized
Repair Limit, and (b) a detailed estimate of the cost is forwarded to the
company without delay." It is stressed that the H.H. Bayne Adjustment
Company's recommendation of payment of the appellants' bill for materials
and repairs for which the latter drew a check for P2,002.73 indicates that
Mora and the H.H. Bayne Adjustment Co. acted for and in representation of
the insurance company.
This argument is, in our view, beside the point, because from the
undisputed facts and from the pleadings it will be seen that the appellants'
alleged cause of action rests exclusively upon the terms of the insurance
contract. The appellants seek to recover the insurance proceeds, and for
this purpose, they rely upon paragraph 4 of the insurance contract
document executed by and between the State Bonding & Insurance
Company, Inc. and Enrique Mora. The appellants are not mentioned in the
contract as parties thereto nor is there any clause or provision thereof from
which we can infer that there is an obligation on the part of the insurance
company to pay the cost of repairs directly to them. It is fundamental that
contracts take effect only between the parties thereto, except in some
specific instances provided by law where the contract contains some
stipulation in favor of a third person.1 Such stipulation is known as
stipulation pour autrui or a provision in favor of a third person not a pay to
the contract. Under this doctrine, a third person is allowed to avail himself

of a benefit granted to him by the terms of the contract, provided that the
contracting parties have clearly and deliberately conferred a favor upon
such person.2Consequently, a third person not a party to the contract has
no action against the parties thereto, and cannot generally demand the
enforcement of the same.3 The question of whether a third person has an
enforcible interest in a contract, must be settled by determining whether
the contracting parties intended to tender him such an interest by
deliberately inserting terms in their agreement with the avowed purpose of
conferring a favor upon such third person. In this connection, this Court has
laid down the rule that the fairest test to determine whether the interest of
a third person in a contract is a stipulation pour autrui or merely an
incidental interest, is to rely upon the intention of the parties as disclosed
by their contract.4 In the instant case the insurance contract does not
contain any words or clauses to disclose an intent to give any benefit to any
repairmen or materialmen in case of repair of the car in question. The
parties to the insurance contract omitted such stipulation, which is a
circumstance that supports the said conclusion. On the other hand, the
"loss payable" clause of the insurance policy stipulates that "Loss, if any, is
payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc.
which they intended to benefit.
We likewise observe from the brief of the State Bonding & Insurance
Company that it has vehemently opposed the assertion or pretension of the
appellants that they are privy to the contract. If it were the intention of the
insurance company to make itself liable to the repair shop or materialmen,
it could have easily inserted in the contract a stipulation to that effect. To
hold now that the original parties to the insurance contract intended to
confer upon the appellants the benefit claimed by them would require us to
ignore the indespensable requisite that a stipulation pour autrui must be
clearly expressed by the parties, which we cannot do.
As regards paragraph 4 of the insurance contract, a perusal thereof would
show that instead of establishing privity between the appellants and the
insurance company, such stipulation merely establishes the procedure that
the insured has to follow in order to be entitled to indemnity for repair. This
paragraph therefore should not be construed as bringing into existence in
favor of the appellants a right of action against the insurance company as
such intention can never be inferred therefrom.
Another cogent reason for not recognizing a right of action by the
appellants against the insurance company is that "a policy of insurance is a
distinct and independent contract between the insured and insurer, and
third persons have no right either in a court of equity, or in a court of law,
to the proceeds of it, unless there be some contract of trust, expressed or

implied between the insured and third person."5 In this case, no contract of
trust, expressed or implied exists. We, therefore, agree with the trial court
that no cause of action exists in favor of the appellants in so far as the
proceeds of insurance are concerned. The appellants' claim, if at all, is
merely equitable in nature and must be made effective through Enrique
Mora who entered into a contract with the Bonifacio Bros. Inc. This
conclusion is deducible not only from the principle governing the operation
and effect of insurance contracts in general, but is clearly covered by the
express provisions of section 50 of the Insurance Act which read:
The insurance shall be applied exclusively to the proper interests
of the person in whose name it is made unless otherwise specified
in the policy.
The policy in question has been so framed that "Loss, if any, is payable to
H.S. Reyes, Inc.," which unmistakably shows the intention of the parties.
The final contention of the appellants is that the right of the H.S. Reyes, Inc.
to the insurance proceeds arises only if there was loss and not where there
is mere damage as in the instant case. Suffice it to say that any attempt to
draw a distinction between "loss" and "damage" is uncalled for, because
the word "loss" in insurance law embraces injury or damage.
Loss in insurance, defined. The injury or damage sustained by
the insured in consequence of the happening of one or more of the
accidents or misfortune against which the insurer, in consideration
of the premium, has undertaken to indemnify the insured. (1 Bouv.
Ins. No. 1215; Black's Law Dictionary; Cyclopedic Law Dictionary,
cited in Martin's Phil. Commercial Laws, Vol. 1, 1961 ed. p. 608).
Indeed, according to sec. 120 of the Insurance Act, a loss may be either
total or partial.
Accordingly, the judgment appealed from is hereby affirmed, at appellants'
cost.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P.,
Zaldivar, Sanchez and Castro, JJ., concur.
G.R. No. L-10126

October 22, 1957

SALUD VILLANUEVA VDA. DE BATACLAN and the minors NORMA,

LUZVIMINDA, ELENITA, OSCAR and ALFREDO BATACLAN,
represented by their Natural guardian, SALUD VILLANUEVA VDA.
DE BATACLAN, plaintiffs-appellants,
vs.
MARIANO MEDINA, defendant-appellant.
Lope E. Adriano, Emmanuel Andamo and Jose R. Francisco for plaintiffsappellants.
Fortunato Jose for defendant and appellant.
MONTEMAYOR, J.:
Shortly after midnight, on September 13, 1952 bus no. 30 of the Medina
Transportation, operated by its owner defendant Mariano Medina under a
certificate of public convenience, left the town of Amadeo, Cavite, on its
way to Pasay City, driven by its regular chauffeur, Conrado Saylon. There
were about eighteen passengers, including the driver and conductor.
Among the passengers were Juan Bataclan, seated beside and to the right
of the driver, Felipe Lara, sated to the right of Bataclan, another passenger
apparently from the Visayan Islands whom the witnesses just called Visaya,
apparently not knowing his name, seated in the left side of the driver, and a
woman named Natalia Villanueva, seated just behind the four last
mentioned. At about 2:00 o'clock that same morning, while the bus was
running within the jurisdiction of Imus, Cavite, one of the front tires burst
and the vehicle began to zig-zag until it fell into a canal or ditch on the right
side of the road and turned turtle. Some of the passengers managed to
leave the bus the best way they could, others had to be helped or pulled
out, while the three passengers seated beside the driver, named Bataclan,
Lara and the Visayan and the woman behind them named Natalia
Villanueva, could not get out of the overturned bus. Some of the
passengers, after they had clambered up to the road, heard groans and
moans from inside the bus, particularly, shouts for help from Bataclan and
Lara, who said they could not get out of the bus. There is nothing in the
evidence to show whether or not the passengers already free from the
wreck, including the driver and the conductor, made any attempt to pull out
or extricate and rescue the four passengers trapped inside the vehicle, but
calls or shouts for help were made to the houses in the neighborhood. After
half an hour, came about ten men, one of them carrying a lighted torch
made of bamboo with a wick on one end, evidently fueled with petroleum.
These men presumably approach the overturned bus, and almost
immediately, a fierce fire started, burning and all but consuming the bus,
including the four passengers trapped inside it. It would appear that as the
bus overturned, gasoline began to leak and escape from the gasoline tank

on the side of the chassis, spreading over and permeating the body of the
bus and the ground under and around it, and that the lighted torch brought
by one of the men who answered the call for help set it on fire.
That same day, the charred bodies of the four deemed passengers inside
the bus were removed and duly identified that of Juan Bataclan. By reason
of his death, his widow, Salud Villanueva, in her name and in behalf of her
five minor children, brought the present suit to recover from Mariano
Medina compensatory, moral, and exemplary damages and attorney's fees
in the total amount of P87,150. After trial, the Court of First Instance of
Cavite awarded P1,000 to the plaintiffs plus P600 as attorney's fee, plus
P100, the value of the merchandise being carried by Bataclan to Pasay City
for sale and which was lost in the fire. The plaintiffs and the defendants
appealed the decision to the Court of Appeals, but the latter endorsed the
appeal to us because of the value involved in the claim in the complaint.
Our new Civil Code amply provides for the responsibility of common carrier
to its passengers and their goods. For purposes of reference, we are
reproducing the pertinent codal provisions:
ART. 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and
7, while the extra ordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
ART. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all
the circumstances.
ART. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755

ART. 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the
scope of their authority or in violation of the order of the common
carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
ART. 1763. A common carrier responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.
We agree with the trial court that the case involves a breach of contract of
transportation for hire, the Medina Transportation having undertaken to
carry Bataclan safely to his destination, Pasay City. We also agree with the
trial court that there was negligence on the part of the defendant, through
his agent, the driver Saylon. There is evidence to show that at the time of
the blow out, the bus was speeding, as testified to by one of the
passengers, and as shown by the fact that according to the testimony of
the witnesses, including that of the defense, from the point where one of
the front tires burst up to the canal where the bus overturned after zigzaging, there was a distance of about 150 meters. The chauffeur, after the
blow-out, must have applied the brakes in order to stop the bus, but
because of the velocity at which the bus must have been running, its
momentum carried it over a distance of 150 meters before it fell into the
canal and turned turtle.
There is no question that under the circumstances, the defendant carrier is
liable. The only question is to what degree. The trial court was of the
opinion that the proximate cause of the death of Bataclan was not the
overturning of the bus, but rather, the fire that burned the bus, including
himself and his co-passengers who were unable to leave it; that at the time
the fire started, Bataclan, though he must have suffered physical injuries,
perhaps serious, was still alive, and so damages were awarded, not for his
death, but for the physical injuries suffered by him. We disagree. A
satisfactory definition of proximate cause is found in Volume 38, pages 695696 of American jurisprudence, cited by plaintiffs-appellants in their brief. It
is as follows:

. . . 'that cause, which, in natural and continuous sequence,

unbroken by any efficient intervening cause, produces the injury,
and without which the result would not have occurred.' And more
comprehensively, 'the proximate legal cause is that acting first
and producing the injury, either immediately or by setting other
events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate
predecessor, the final event in the chain immediately effecting the
injury as a natural and probable result of the cause which first
acted, under such circumstances that the person responsible for
the first event should, as an ordinary prudent and intelligent
person, have reasonable ground to expect at the moment of his
act or default that an injury to some person might probably result
therefrom.
It may be that ordinarily, when a passenger bus overturns, and pins down a
passenger, merely causing him physical injuries, if through some event,
unexpected and extraordinary, the overturned bus is set on fire, say, by
lightning, or if some highwaymen after looting the vehicle sets it on fire,
and the passenger is burned to death, one might still contend that the
proximate cause of his death was the fire and not the overturning of the
vehicle. But in the present case under the circumstances obtaining in the
same, we do not hesitate to hold that the proximate cause was the
overturning of the bus, this for the reason that when the vehicle turned not
only on its side but completely on its back, the leaking of the gasoline from
the tank was not unnatural or unexpected; that the coming of the men with
a lighted torch was in response to the call for help, made not only by the
passengers, but most probably, by the driver and the conductor
themselves, and that because it was dark (about 2:30 in the morning), the
rescuers had to carry a light with them, and coming as they did from a rural
area where lanterns and flashlights were not available; and what was more
natural than that said rescuers should innocently approach the vehicle to
extend the aid and effect the rescue requested from them. In other words,
the coming of the men with a torch was to be expected and was a natural
sequence of the overturning of the bus, the trapping of some of its
passengers and the call for outside help. What is more, the burning of the
bus can also in part be attributed to the negligence of the carrier, through
is driver and its conductor. According to the witness, the driver and the
conductor were on the road walking back and forth. They, or at least, the
driver should and must have known that in the position in which the
overturned bus was, gasoline could and must have leaked from the gasoline
tank and soaked the area in and around the bus, this aside from the fact
that gasoline when spilled, specially over a large area, can be smelt and
directed even from a distance, and yet neither the driver nor the conductor
would appear to have cautioned or taken steps to warn the rescuers not to

bring the lighted torch too near the bus. Said negligence on the part of the
agents of the carrier come under the codal provisions above-reproduced,
particularly, Articles 1733, 1759 and 1763.
As regard the damages to which plaintiffs are entitled, considering the
earning capacity of the deceased, as well as the other elements entering
into a damage award, we are satisfied that the amount of SIX THOUSAND
(P6,000) PESOS would constitute satisfactory compensation, this to include
compensatory, moral, and other damages. We also believe that plaintiffs
are entitled to attorney's fees, and assessing the legal services rendered by
plaintiffs' attorneys not only in the trial court, but also in the course of the
appeal, and not losing sight of the able briefs prepared by them, the
attorney's fees may well be fixed at EIGHT HUNDRED (P800) PESOS for the
loss of merchandise carried by the deceased in the bus, is adequate and
will not be disturbed.
There is one phase of this case which disturbs if it does not shock us.
According to the evidence, one of the passengers who, because of the
injuries suffered by her, was hospitalized, and while in the hospital, she was
visited by the defendant Mariano Medina, and in the course of his visit, she
overheard him speaking to one of his bus inspectors, telling said inspector
to have the tires of the bus changed immediately because they were
already old, and that as a matter of fact, he had been telling the driver to
change the said tires, but that the driver did not follow his instructions. If
this be true, it goes to prove that the driver had not been diligent and had
not taken the necessary precautions to insure the safety of his passengers.
Had he changed the tires, specially those in front, with new ones, as he had
been instructed to do, probably, despite his speeding, as we have already
stated, the blow out would not have occurred. All in all, there is reason to
believe that the driver operated and drove his vehicle negligently, resulting
in the death of four of his passengers, physical injuries to others, and the
complete loss and destruction of their goods, and yet the criminal case
against him, on motion of the fiscal and with his consent, was provisionally
dismissed, because according to the fiscal, the witnesses on whose
testimony he was banking to support the complaint, either failed or appear
or were reluctant to testify. But the record of the case before us shows the
several witnesses, passengers, in that bus, willingly and unhesitatingly
testified in court to the effect of the said driver was negligent. In the public
interest the prosecution of said erring driver should be pursued, this, not
only as a matter of justice, but for the promotion of the safety of
passengers on public utility buses. Let a copy of this decision be furnished
the Department of Justice and the Provincial Fiscal of Cavite.

In view of the foregoing, with the modification that the damages awarded
by the trial court are increased from ONE THOUSAND (P1,000) PESOS TO
SIX THOUSAND (P6,000) PESOS, and from SIX HUNDRED PESOS TO EIGHT
HUNDRED (P800) PESOS, for the death of Bataclan and for the attorney's
fees, respectively, the decision appealed is from hereby affirmed, with
costs.

"WHEREFORE, the petition for review is hereby DENIED." 4

Paras, C. J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador,

Concepcion, Reyes, J. B. L., Endencia, and Felix, JJ., concur.

"Sun Life is a mutual life insurance company organized and existing under
the laws of Canada. It is registered and authorized by the Securities and
Exchange Commission and the Insurance Commission to engage in
business in the Philippines as a mutual life insurance company with
principal office at Paseo de Roxas, Legaspi Village, Makati City.

G.R. No. 158085 October 14, 2005

REPUBLIC OF THE PHILIPPINES, Represented by the
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
SUNLIFE ASSURANCE COMPANY OF CANADA, Respondent.
DECISION
PANGANIBAN, J.:
aving satisfactorily proven to the Court of Tax Appeals, to the Court of
Appeals and to this Court that it is a bona fide cooperative, respondent is
entitled to exemption from the payment of taxes on life insurance
premiums and documentary stamps. Not being governed by the
Cooperative Code of the Philippines, it is not required to be registered with
the Cooperative Development Authority in order to avail itself of the tax
exemptions. Significantly, neither the Tax Code nor the Insurance Code
mandates this administrative registration.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court,
seeking to nullify the January 23, 2003 Decision2 and the April 21, 2003
Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 69125. The
dispositive portion of the Decision reads as follows:

The Facts
The antecedents, as narrated by the CA, are as follows:

"On October 20, 1997, Sun Life filed with the [Commissioner of Internal
Revenue] (CIR) its insurance premium tax return for the third quarter of
1997 and paid the premium tax in the amount of P31,485,834.51. For the
period covering August 21 to December 18, 1997, petitioner filed with the
CIR its [documentary stamp tax (DST)] declaration returns and paid the
total amount of P30,000,000.00.
"On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its
decision in Insular Life Assurance Co. Ltd. v. [CIR], which held that mutual
life insurance companies are purely cooperative companies and are exempt
from the payment of premium tax and DST. This pronouncement was later
affirmed by this court in [CIR] v. Insular Life Assurance Company, Ltd. Sun
Life surmised that[,] being a mutual life insurance company, it was likewise
exempt from the payment of premium tax and DST. Hence, on August 20,
1999, Sun Life filed with the CIR an administrative claim for tax credit of its
alleged erroneously paid premium tax and DST for the aforestated tax
periods.
"For failure of the CIR to act upon the administrative claim for tax credit and
with the 2-year period to file a claim for tax credit or refund dwindling away
and about to expire, Sun Life filed with the CTA a petition for review on
August 23, 1999. In its petition, it prayed for the issuance of a tax credit
certificate in the amount of P61,485,834.51 representing P31,485,834.51 of
erroneously paid premium tax for the third quarter of 1997
and P30,000[,000].00 of DST on policies of insurance from August 21 to
December 18, 1997. Sun Life stood firm on its contention that it is a mutual
life insurance company vested with all the characteristic features and
elements of a cooperative company or association as defined in [S]ection
121 of the Tax Code. Primarily, the management and affairs of Sun Life
were conducted by its members; secondly, it is operated with money

collected from its members; and, lastly, it has for its purpose the mutual
protection of its members and not for profit or gain.
"In its answer, the CIR, then respondent, raised as special and affirmative
defenses the following:
7. Petitioners (Sun Lifes) alleged claim for refund is subject to
administrative routinary investigation/examination by respondents (CIRs)
Bureau.
8. Petitioner must prove that it falls under the exception provided for under
Section 121 (now 123) of the Tax Code to be exempted from premium tax
and be entitled to the refund sought.
9. Claims for tax refund/credit are construed strictly against the claimants
thereof as they are in the nature of exemption from payment of tax.
10. In an action for tax credit/refund, the burden is upon the taxpayer to
establish its right thereto, and failure to sustain this burden is fatal to said
claim x x x.
11. It is incumbent upon petitioner to show that it has complied with the
provisions of Section 204[,] in relation to Section 229, both in the 1997 Tax
Code.
"On November 12, 2002, the CTA found in favor of Sun Life. Quoting largely
from its earlier findings in Insular Life Assurance Company, Ltd. v. [CIR],
which it found to be on all fours with the present action, the CTA ruled:
The [CA] has already spoken. It ruled that a mutual life insurance company
is a purely cooperative company[;] thus, exempted from the payment of
premium and documentary stamp taxes. Petitioner Sun Life is without
doubt a mutual life insurance company. x x x.
xxxxxxxxx
Being similarly situated with Insular, Petitioner at bar is entitled to the
same interpretation given by this Court in the earlier cases of The Insular
Life Assurance Company, Ltd. vs. [CIR] (CTA Case Nos. 5336 and 5601) and
by the [CA] in the case entitled [CIR] vs. The Insular Life Assurance
Company, Ltd., C.A. G.R. SP No. 46516, September 29, 1998. Petitioner Sun

Life as a mutual life insurance company is[,] therefore[,] a cooperative

company or association and is exempted from the payment of premium tax
and [DST] on policies of insurance pursuant to Section 121 (now Section
123) and Section 199[1]) (now Section 199[a]) of the Tax Code.
"Seeking reconsideration of the decision of the CTA, the CIR argued that
Sun Life ought to have registered, foremost, with the Cooperative
Development Authority before it could enjoy the exemptions from premium
tax and DST extended to purely cooperative companies or associations
under [S]ections 121 and 199 of the Tax Code. For its failure to register, it
could not avail of the exemptions prayed for. Moreover, the CIR alleged that
Sun Life failed to prove that ownership of the company was vested in its
members who are entitled to vote and elect the Board of Trustees among
[them]. The CIR further claimed that change in the 1997 Tax Code
subjecting mutual life insurance companies to the regular corporate income
tax rate reflected the legislatures recognition that these companies must
be earning profits.
"Notwithstanding these arguments, the CTA denied the CIRs motion for
reconsideration.
"Thwarted anew but nonetheless undaunted, the CIR comes to this
court via this petition on the sole ground that:
The Tax Court erred in granting the refund[,] because respondent does not
fall under the exception provided for under Section 121 (now 123) of the
Tax Code to be exempted from premium tax and DST and be entitled to the
refund.
"The CIR repleads the arguments it raised with the CTA and proposes
further that the [CA] decision in [CIR] v. Insular Life Assurance Company,
Ltd. is not controlling and cannot constitute res judicata in the present
action. At best, the pronouncements are merely persuasive as the decisions
of the Supreme Court alone have a universal and mandatory effect." 5
Ruling of the Court of Appeals
In upholding the CTA, the CA reasoned that respondent was a purely
cooperative corporation duly licensed to engage in mutual life insurance
business in the Philippines. Thus, respondent was deemed exempt from
premium and documentary stamp taxes, because its affairs are managed
and conducted by its members with money collected from among

themselves, solely for their own protection, and not for profit. Its members
or policyholders constituted both insurer and insured who contribute, by a
system of premiums or assessments, to the creation of a fund from which
all losses and liabilities were paid. The dividends it distributed to them were
not profits, but returns of amounts that had been overcharged them for
insurance.

The Petition has no merit.

For having satisfactorily shown with substantial evidence that it had

erroneously paid and seasonably filed its claim for premium and
documentary stamp taxes, respondent was entitled to a refund, the CA
ruled.

The Tax Code defines a cooperative as an association "conducted by the

members thereof with the money collected from among themselves and
solely for their own protection and not for profit."8 Without a doubt,
respondent is a cooperative engaged in a mutual life insurance business.

Hence, this Petition.6

First, it is managed by its members. Both the CA and the CTA found that the
management and affairs of respondent were conducted by its memberpolicyholders.9

The Issues
Petitioner raises the following issues for our consideration:
"I.
"Whether or not respondent is a purely cooperative company or association
under Section 121 of the National Internal Revenue Code and a fraternal or
beneficiary society, order or cooperative company on the lodge system or
local cooperation plan and organized and conducted solely by the members
thereof for the exclusive benefit of each member and not for profit under
Section 199 of the National Internal Revenue Code.
"II.
"Whether or not registration with the Cooperative Development Authority is
a sine qua non requirement to be entitled to tax exemption.
"III.
"Whether or not respondent is exempted from payment of tax on life
insurance premiums and documentary stamp tax." 7
We shall tackle the issues seriatim.

First Issue:
Whether Respondent Is a Cooperative

A stock insurance company doing business in the Philippines may "alter its
organization and transform itself into a mutual insurance
company."10 Respondent has been mutualized or converted from a stock life
insurance company to a nonstock mutual life insurance
corporation11 pursuant to Section 266 of the Insurance Code of 1978. 12 On
the basis of its bylaws, its ownership has been vested in its memberpolicyholders who are each entitled to one vote;13and who, in turn, elect
from among themselves the members of its board of trustees. 14 Being the
governing body of a nonstock corporation, the board exercises corporate
powers, lays down all corporate business policies, and assumes
responsibility for the efficiency of management.15
Second, it is operated with money collected from its members. Since
respondent is composed entirely of members who are also its policyholders,
all premiums collected obviously come only from them.16
The member-policyholders constitute "both insurer and insured" 17 who
"contribute, by a system of premiums or assessments, to the creation of a
fund from which all losses and liabilities are paid."18 The premiums19 pooled
into this fund are earmarked for the payment of their indemnity and benefit
claims.
Third, it is licensed for the mutual protection of its members, not for the
profit of anyone.

The Courts Ruling

As early as October 30, 1947, the director of commerce had already issued
a license to respondent -- a corporation organized and existing under the
laws of Canada -- to engage in business in the Philippines. 20 Pursuant to
Section 225 of Canadas Insurance Companies Act, the Canadian minister of
state (for finance and privatization) also declared in its Amending Letters
Patent that respondent would be a mutual company effective June 1,
1992.21 In the Philippines, the insurance commissioner also granted it
annual Certificates of Authority to transact life insurance business, the most
relevant of which were dated July 1, 1997 and July 1, 1998. 22
A mutual life insurance company is conducted for the benefit of its
member-policyholders,23 who pay into its capital by way of premiums. To
that extent, they are responsible for the payment of all its losses. 24 "The
cash paid in for premiums and the premium notes constitute their assets x
x x."25 In the event that the company itself fails before the terms of the
policies expire, the member-policyholders do not acquire the status of
creditors.26 Rather, they simply become debtors for whatever premiums that
they have originally agreed to pay the company, if they have not yet paid
those amounts in full, for "[m]utual companies x x x depend solely upon x x
x premiums."27 Only when the premiums will have accumulated to a sum
larger than that required to pay for company losses will the memberpolicyholders be entitled to a "pro rata division thereof as profits."28
Contributing to its capital, the member-policyholders of a mutual company
are obviously also its owners.29Sustaining a dual relationship inter se, they
not only contribute to the payment of its losses, but are also entitled to a
proportionate share30 and participate alike31 in its profits and surplus.
Where the insurance is taken at cost, it is important that the rates of
premium charged by a mutual company be larger than might reasonably be
expected to carry the insurance, in order to constitute a margin of safety.
The table of mortality used will show an admittedly higher death rate than
will probably prevail; the assumed interest rate on the investments of the
company is made lower than is expected to be realized; and the provision
for contingencies and expenses, made greater than would ordinarily be
necessary.32 This course of action is taken, because a mutual company has
no capital stock and relies solely upon its premiums to meet unexpected
losses, contingencies and expenses.
Certainly, many factors are considered in calculating the insurance
premium. Since they vary with the kind of insurance taken and with the
group of policyholders insured, any excess in the amount anticipated by a
mutual company to cover the cost of providing for the insurance over its
actual realized cost will also vary. If a member-policyholder receives an

excess payment, then the apportionment must have been based upon a
calculation of the actual cost of insurance that the company has provided
for that particular member-policyholder. Accordingly, in apportioning
divisible surpluses, any mutual company uses a contribution method that
aims to distribute those surpluses among its member-policyholders, in the
same proportion as they have contributed to the surpluses by their
payments.33
Sharing in the common fund, any member-policyholder may choose to
withdraw dividends in cash or to apply them in order to reduce a
subsequent premium, purchase additional insurance, or accelerate the
payment period. Although the premium made at the beginning of a year is
more than necessary to provide for the cost of carrying the insurance, the
member-policyholder will nevertheless receive the benefit of the
overcharge by way of dividends, at the end of the year when the cost is
actually ascertained. "The declaration of a dividend upon a policy
reduces pro tanto the cost of insurance to the holder of the policy. That is
its purpose and effect."34
A stipulated insurance premium "cannot be increased, but may be lessened
annually by so much as the experience of the preceding year has
determined it to have been greater than the cost of carrying the insurance
x x x."35 The difference between that premium and the cost of carrying the
risk of loss constitutes the so-called "dividend" which, however, "is not in
any real sense a dividend."36 It is a technical term that is well understood in
the insurance business to be widely different from that to which it is
ordinarily attached.
The so-called "dividend" that is received by member-policyholders is not a
portion of profits set aside for distribution to the stockholders in proportion
to their subscription to the capital stock of a corporation. 37 One, a mutual
company has no capital stock
to which subscription is necessary; there are no stockholders to speak of,
but only members. And, two, the amount they receive does not partake of
the nature of a profit or income. The quasi-appearance of profit will not
change its character. It remains an overpayment, a benefit to which the
member-policyholder is equitably entitled.38
Verily, a mutual life insurance corporation is a cooperative that promotes
the welfare of its own members. It does not operate for profit, but for the
mutual benefit of its member-policyholders. They receive their insurance at
cost, while reasonably and properly guarding and maintaining the stability
and solvency of the company.39 "The economic benefits filter to the
cooperative members. Either equally or proportionally, they are distributed

among members in correlation with the resources of the association

utilized."40
It does not follow that because respondent is registered as a nonstock
corporation and thus exists for a purpose other than profit, the company
can no longer make any profits.41 Earning profits is merely its secondary, not
primary, purpose. In fact, it may not lawfully engage in any business
activity for profit, for to do so would change or contradict its nature 42 as a
non-profit entity.43 It may, however, invest its corporate funds in order to
earn additional income for paying its operating expenses and meeting
benefit claims. Any excess profit it obtains as an incident to its operations
can only be used, whenever necessary or proper, for the furtherance of the
purpose for which it was organized.44
Second Issue:
Whether CDA Registration Is Necessary
Under the Tax Code although respondent is a cooperative, registration with
the Cooperative Development Authority (CDA)45 is not necessary in order for
it to be exempt from the payment of both percentage taxes on insurance
premiums, under Section 121; and documentary stamp taxes on policies of
insurance or annuities it grants, under Section 199.
First, the Tax Code does not require registration with the CDA. No tax
provision requires a mutual life insurance company to register with that
agency in order to enjoy exemption from both percentage and documentary
stamp taxes.
A provision of Section 8 of Revenue Memorandum Circular (RMC) No. 48-91
requires the submission of the Certificate of Registration with the
CDA,46 before the issuance of a tax exemption certificate. That provision
cannot prevail over the clear absence of an equivalent requirement under
the Tax Code. One, as we will explain below, the Circular does not apply to
respondent, but only to cooperatives that need to be registered under the
Cooperative Code. Two, it is a mere issuance directing all internal revenue
officers to publicize a new tax legislation. Although the Circular does not
derogate from their authority to implement the law, it cannot add a
registration requirement,47when there is none under the law to begin with.
Second, the provisions of the Cooperative Code of the Philippines 48 do not
apply. Let us trace the Codes development in our history.

As early as 1917, a cooperative company or association was already

defined as one "conducted by the members thereof with money collected
from among themselves and solely for their own protection and not
profit."49 In 1990, it was further defined by the Cooperative Code as a "duly
registered association of persons, with a common bond of interest, who
have voluntarily joined together to achieve a lawful common social or
economic end, making equitable contributions to the capital required and
accepting a fair share of the risks and benefits of the undertaking in
accordance with universally accepted cooperative principles." 50
The Cooperative Code was actually an offshoot of the old law on
cooperatives. In 1973, Presidential Decree (PD) No. 175 was
signed into law by then President Ferdinand E. Marcos in order to
strengthen the cooperative movement.51 The promotion of cooperative
development was one of the major programs of the "New Society" under his
administration. It sought to improve the countrys trade and commerce by
enhancing agricultural production, cottage industries, community
development, and agrarian reform through cooperatives.52
The whole cooperative system, with its vertical and horizontal linkages -from the market cooperative of agricultural products to cooperative rural
banks, consumer cooperatives and cooperative insurance -- was envisioned
to offer considerable economic opportunities to people who joined
cooperatives.53 As an effective instrument in redistributing income and
wealth,54 cooperatives were promoted primarily to support the agrarian
reform program of the government.55
Notably, the cooperative under PD 175 referred only to an organization
composed primarily of small producers and consumers who voluntarily
joined to form a business enterprise that they themselves owned,
controlled, and patronized.56 The Bureau of Cooperatives Development -under the Department of Local Government and Community Development
(later Ministry of Agriculture)57 -- had the authority to register, regulate and
supervise only the following cooperatives: (1) barrio associations involved
in the issuance of certificates of land transfer; (2) local or primary
cooperatives composed of natural persons and/or barrio associations; (3)
federations composed of cooperatives that may or may not perform
business activities; and (4) unions of cooperatives that did not perform any
business activities.58 Respondent does not fall under any of the abovementioned types of cooperatives required to be registered under PD 175.
When the Cooperative Code was enacted years later, all cooperatives that
were registered under PD 175 and previous laws were also deemed
registered with the CDA.59 Since respondent was not required to be

10

registered under the old law on cooperatives, it followed that it was not
required to be registered even under the new law.

Third Issue:
Whether Respondent Is Exempted

Furthermore, only cooperatives to be formed or organized under the

Cooperative Code needed registration with the CDA.60 Respondent already
existed before the passage of the new law on cooperatives. It was not even
required to organize under the Cooperative Code, not only because it
performed a different set of functions, but also because it did not operate to
serve the same objectives under the new law -- particularly on productivity,
marketing and credit extension.61

Having determined that respondent is a cooperative that does not have to

be registered with the CDA, we hold that it is entitled to exemption from
both premium taxes and documentary stamp taxes (DST).

The insurance against losses of the members of a cooperative referred to in

Article 6(7) of the Cooperative Code is not the same as the life insurance
provided by respondent to member-policyholders. The former is a function
of a service cooperative,62 the latter is not. Cooperative insurance under the
Code is limited in scope and local in character. It is not the same as mutual
life insurance.

The Tax Code is clear. On the one hand, Section 121 of the Code exempts
cooperative companies from the 5 percent percentage tax on insurance
premiums. On the other hand, Section 199 also exempts from the DST,
policies of insurance or annuities made or granted by cooperative
companies. Being a cooperative, respondent is thus exempt from both
types of taxes.

We have already determined that respondent is a cooperative. The

distinguishing feature of a cooperative enterprise63 is the mutuality of
cooperation among its member-policyholders united for that purpose. 64 So
long as respondent meets this essential feature, it does not even have to
use65 and carry the name of a cooperative to operate its mutual life
insurance business. Gratia argumenti that registration is mandatory, it
cannot deprive respondent of its tax exemption privilege merely because it
failed to register. The nature of its operations is clear; its purpose welldefined. Exemption when granted cannot prevail over administrative
convenience.

It is worthy to note that while RA 8424 amending the Tax Code has deleted
the income tax of 10 percent imposed upon the gross investment income of
mutual life insurance companies -- domestic68 and foreign69 -- the provisions
of Section 121 and 199 remain unchanged.70

Third, not even the Insurance Code requires registration with the CDA. The
provisions of this Code primarily govern insurance contracts; only if a
particular matter in question is not specifically provided for shall the
provisions of the Civil Code on contracts and special laws govern.66
True, the provisions of the Insurance Code relative to the organization and
operation of an insurance company also apply to cooperative insurance
entities organized under the Cooperative Code. 67 The latter law, however,
does not apply to respondent, which already existed as a cooperative
company engaged in mutual life insurance prior to the laws passage of that
law. The statutes prevailing at the time of its organization and
mutualization were the Insurance Code and the Corporation Code, which
imposed no registration requirement with the CDA.

from Premium Taxes and DST

Having been seasonably filed and amply substantiated, the claim for
exemption in the amount of P61,485,834.51, representing percentage taxes
on insurance premiums and documentary stamp taxes on policies of
insurance or annuities that were paid by respondent in 1997, is in order.
Thus, the grant of a tax credit certificate to respondent as ordered by the
appellate court was correct.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution are AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 100970 September 2, 1992
FINMAN GENERAL ASSURANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JULIA
SURPOSA, respondents.

11

Aquino and Associates for petitioner.

submitted to prove the claim for mortuary aid in the sum

of P1,000.00, the same cannot be entertained.

Public Attorney's Office for private respondent.

WHEREFORE, judgment is hereby rendered ordering
respondent to pay complainant the sum of P15,000.00
with legal interest from the date of the filing of the
complaint until fully satisfied. With costs.4

NOCON, J.:
This is a petition for certiorari with a prayer for the issuance of a restraining
order and preliminary mandatory injunction to annul and set aside the
decision of the Court of Appeals dated July 11, 1991, 1 affirming the decision
dated March 20, 1990 of the Insurance Commission 2 in ordering petitioner Finman
General Assurance Corporation to pay private respondent Julia Surposa the proceeds
of the personal accident Insurance policy with interest.

It appears on record that on October 22, 1986, deceased, Carlie Surposa

was insured with petitioner Finman General Assurance Corporation under
Finman General Teachers Protection Plan Master Policy No. 2005 and
Individual Policy No. 08924 with his parents, spouses Julia and Carlos
Surposa, and brothers Christopher, Charles, Chester and Clifton, all
surnamed, Surposa, as beneficiaries. 3
While said insurance policy was in full force and effect, the insured, Carlie
Surposa, died on October 18, 1988 as a result of a stab wound inflicted by
one of the three (3) unidentified men without provocation and warning on
the part of the former as he and his cousin, Winston Surposa, were waiting
for a ride on their way home along Rizal-Locsin Streets, Bacolod City after
attending the celebration of the "Maskarra Annual Festival."
Thereafter, private respondent and the other beneficiaries of said insurance
policy filed a written notice of claim with the petitioner insurance company
which denied said claim contending that murder and assault are not within
the scope of the coverage of the insurance policy.
On February 24, 1989, private respondent filed a complaint with the
Insurance Commission which subsequently rendered a decision, the
pertinent portion of which reads:
In the light of the foregoing. we find respondent liable to
pay complainant the sum of P15,000.00 representing the
proceeds of the policy with interest. As no evidence was

On July 11, 1991, the appellate court affirmed said decision.

Hence, petitioner filed this petition alleging grove abuse of discretion on the
part of the appellate court in applying the principle of "expresso unius
exclusio alterius" in a personal accident insurance policy since death
resulting from murder and/or assault are impliedly excluded in said
insurance policy considering that the cause of death of the insured was not
accidental but rather a deliberate and intentional act of the assailant in
killing the former as indicated by the location of the lone stab wound on the
insured. Therefore, said death was committed with deliberate intent which,
by the very nature of a personal accident insurance policy, cannot be
indemnified.
We do not agree.
The terms "accident" and "accidental" as used in
insurance contracts have not acquired any technical
meaning, and are construed by the courts in their
ordinary and common acceptation. Thus, the terms have
been taken to mean that which happen by chance or
fortuitously, without intention and design, and which is
unexpected, unusual, and unforeseen. An accident is an
event that takes place without one's foresight or
expectation an event that proceeds from an unknown
cause, or is an unusual effect of a known cause and,
therefore, not expected.
. . . The generally accepted rule is that, death or injury
does not result from accident or accidental means within
the terms of an accident-policy if it is the natural result of
the insured's voluntary act, unaccompanied by anything
unforeseen except the death or injury. There is no
accident when a deliberate act is performed unless some
additional, unexpected, independent, and unforeseen
happening occurs which produces or brings about the

12

result of injury or death. In other words, where the death

or injury is not the natural or probable result of the
insured's voluntary act, or if something unforeseen occurs
in the doing of the act which produces the injury, the
resulting death is within the protection of the policies
insuring against death or injury from accident. 5
As correctly pointed out by the respondent appellate court in its decision:
In the case at bar, it cannot be pretended that Carlie
Surposa died in the course of an assault or murder as a
result of his voluntary act considering the very nature of
these crimes. In the first place, the insured and his
companion were on their way home from attending a
festival. They were confronted by unidentified persons.
The record is barren of any circumstance showing how
the stab wound was inflicted. Nor can it be pretended that
the malefactor aimed at the insured precisely because
the killer wanted to take his life. In any event, while the
act may not exempt the unknown perpetrator from
criminal liability, the fact remains that the happening was
a pure accident on the part of the victim. The insured
died from an event that took place without his foresight
or expectation, an event that proceeded from an unusual
effect of a known cause and, therefore, not expected.
Neither can it be said that where was a capricious desire
on the part of the accused to expose his life to danger
considering that he was just going home after attending a
festival. 6
Furthermore, the personal accident insurance policy involved herein
specifically enumerated only ten (10) circumstances wherein no liability
attaches to petitioner insurance company for any injury, disability or loss
suffered by the insured as a result of any of the stimulated causes. The
principle of " expresso unius exclusio alterius" the mention of one thing
implies the exclusion of another thing is therefore applicable in the
instant case since murder and assault, not having been expressly included
in the enumeration of the circumstances that would negate liability in said
insurance policy cannot be considered by implication to discharge the
petitioner insurance company from liability for, any injury, disability or loss
suffered by the insured. Thus, the failure of the petitioner insurance
company to include death resulting from murder or assault among the
prohibited risks leads inevitably to the conclusion that it did not intend to
limit or exempt itself from liability for such death.

Article 1377 of the Civil Code of the Philippines provides that:

The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity.
Moreover,
it is well settled that contracts of insurance are to be
construed liberally in favor of the insured and strictly
against the insurer. Thus ambiguity in the words of an
insurance contract should be interpreted in favor of its
beneficiary. 7
WHEREFORE, finding no irreversible error in the decision of the respondent
Court of Appeals, the petition forcertiorari with restraining order and
preliminary injunction is hereby DENIED for lack of merit.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.
G.R. No. L-8151

December 16, 1955

VIRGINIA CALANOC, petitioner,

vs.
COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE
INSURANCE CO., respondents.
Lucio Javillonar for petitioner.
J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo A. Reyes for
respondents.

BAUTISTA ANGELO, J.:

This suit involves the collection of P2,000 representing the value of a
supplemental policy covering accidental death which was secured by one
Melencio Basilio from the Philippine American Life Insurance Company. The

13

case originated in the Municipal Court of Manila and judgment being

favorable to the plaintiff it was appealed to the court of first instance. The
latter court affirmed the judgment but on appeal to the Court of Appeals
the judgment was reversed and the case is now before us on a petition for
review.
Melencio Basilio was a watchman of the Manila Auto Supply located at the
corner of Avenida Rizal and Zurbaran. He secured a life insurance policy
from the Philippine American Life Insurance Company in the amount of
P2,000 to which was attached a supplementary contract covering death by
accident. On January 25, 1951, he died of a gunshot wound on the occasion
of a robbery committed in the house of Atty. Ojeda at the corner of
Oroquieta and Zurbaan streets. Virginia Calanoc, the widow, was paid the
sum of P2,000, face value of the policy, but when she demanded the
payment of the additional sum of P2,000 representing the value of the
supplemental policy, the company refused alleging, as main defense, that
the deceased died because he was murdered by a person who took part in
the commission of the robbery and while making an arrest as an officer of
the law which contingencies were expressly excluded in the contract and
have the effect of exempting the company from liability.
The pertinent facts which need to be considered for the determination of
the questions raised are those reproduced in the decision of the Court of
Appeals as follows:
The circumstances surrounding the death of Melencio Basilio show
that when he was killed at about seven o'clock in the night of
January 25, 1951, he was on duty as watchman of the Manila Auto
Supply at the corner of Avenida Rizal and Zurbaran; that it turned
out that Atty. Antonio Ojeda who had his residence at the corner of
Zurbaran and Oroquieta, a block away from Basilio's station, had
come home that night and found that his house was well-lighted,
but with the windows closed; that getting suspicious that there
were culprits in his house, Atty. Ojeda retreated to look for a
policeman and finding Basilio in khaki uniform, asked him to
accompany him to the house with the latter refusing on the ground
that he was not a policeman, but suggesting that Atty. Ojeda
should ask the traffic policeman on duty at the corner of Rizal
Avenue and Zurbaran; that Atty. Ojeda went to the traffic
policeman at said corner and reported the matter, asking the
policeman to come along with him, to which the policeman
agreed; that on the way to the Ojeda residence, the policeman and
Atty. Ojeda passed by Basilio and somehow or other invited the
latter to come along; that as the tree approached the Ojeda

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

14

the latter's residence to see what happened thereat. Certainly,

when Basilio joined Patrolman Magsanoc and Atty. Ojeda, he
should have realized the danger to which he was exposing himself,
yet, instead of remaining in his place, he went with Atty. Ojeda and
Patrolman Magsanoc to see what was the trouble in Atty. Ojeda's
house and thus he was fatally shot.
We dissent from the above findings of the Court of Appeals. For one thing,
Basilio was a watchman of the Manila Auto Supply which was a block away
from the house of Atty. Ojeda where something suspicious was happening
which caused the latter to ask for help. While at first he declied the
invitation of Atty. Ojeda to go with him to his residence to inquire into what
was going on because he was not a regular policeman, he later agreed to
come along when prompted by the traffic policeman, and upon approaching
the gate of the residence he was shot and died. The circumstance that he
was a mere watchman and had no duty to heed the call of Atty. Ojeda
should not be taken as a capricious desire on his part to expose his life to
danger considering the fact that the place he was in duty-bound to guard
was only a block away. In volunteering to extend help under the situation,
he might have thought, rightly or wrongly, that to know the truth was in the
interest of his employer it being a matter that affects the security of the
neighborhood. No doubt there was some risk coming to him in pursuing
that errand, but that risk always existed it being inherent in the position he
was holding. He cannot therefore be blamed solely for doing what he
believed was in keeping with his duty as a watchman and as a citizen. And
he cannot be considered as making an arrest as an officer of the law, as
contended, simply because he went with the traffic policeman, for certainly
he did not go there for that purpose nor was he asked to do so by the
policeman.
Much less can it be pretended that Basilio died in the course of an assault
or murder considering the very nature of these crimes. In the first place,
there is no proof that the death of Basilio is the result of either crime for the
record is barren of any circumstance showing how the fatal shot was fired.
Perhaps this may be clarified in the criminal case now pending in court as
regards the incident but before that is done anything that might be said on
the point would be a mere conjecture. Nor can it be said that the killing was
intentional for there is the possibility that the malefactor had fired the shot
merely to scare away the people around for his own protection and not
necessarily to kill or hit the victim. In any event, while the act may not
excempt the triggerman from liability for the damage done, the fact
remains that the happening was a pure accident on the part of the victim.
The victim could have been either the policeman or Atty. Ojeda for it cannot
be pretended that the malefactor aimed at the deceased precisely because
he wanted to take his life.

We take note that these defenses are included among the risks exluded in
the supplementary contract which enumerates the cases which may
exempt the company from liability. While as a general rule "the parties may
limit the coverage of the policy to certain particular accidents and risks or
causes of loss, and may expressly except other risks or causes of loss
therefrom" (45 C. J. S. 781-782), however, it is to be desired that the terms
and phraseology of the exception clause be clearly expressed so as to be
within the easy grasp and understanding of the insured, for if the terms are
doubtful or obscure the same must of necessity be interpreted or resolved
aganst the one who has caused the obscurity. (Article 1377, new Civil Code)
And so it has bene generally held that the "terms in an insurance policy,
which are ambiguous, equivacal, or uncertain . . . are to be construed
strictly and most strongly against the insurer, and liberally in favor of the
insured so as to effect the dominant purpose of indemnity or payment to
the insured, especially where a forfeiture is involved" (29 Am. Jur., 181),
and the reason for this rule is that he "insured usually has no voice in the
selection or arrangement of the words employed and that the language of
the contract is selected with great care and deliberation by experts and
legal advisers employed by, and acting exclusively in the interest of, the
insurance company." (44 C. J. S., p. 1174.)
Insurance is, in its nature, complex and difficult for the layman to
understand. Policies are prepared by experts who know and can
anticipate the bearings and possible complications of every
contingency. So long as insurance companies insist upon the use
of ambiguous, intricate and technical provisions, which conceal
rather than frankly disclose, their own intentions, the courts must,
in fairness to those who purchase insurance, construe every
ambiguity in favor of the insured. (Algoe vs. Pacific Mut. L. Ins. Co.,
91 Wash. 324, LRA 1917A, 1237.)lawphi1.net
An insurer should not be allowed, by the use of obscure phrases
and exceptions, to defeat the very purpose for which the policy
was procured. (Moore vs. Aetna Life Insurance Co., LRA 1915D,
264.)
We are therefore persuaded to conclude that the circumstances unfolded in
the present case do not warrant the finding that the death of the
unfortunate victim comes within the purview of the exception clause of the
supplementary policy and, hence, do not exempt the company from liability.
Wherefore, reversing the decision appealed from, we hereby order the
company to pay petitioner-appellant the amount of P2,000, with legal
interest from January 26, 1951 until fully paid, with costs.

15

Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Labrador,

Concepcion, and Reyes, J. B. L., JJ., concur.

G.R. No. L-25579 March 29, 1972

EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T.
BIAGTAN and GRACIA T. BIAGTAN,plaintiffs-appellees,
vs.
THE INSULAR LIFE ASSURANCE COMPANY, LTD., defendant-appellant.
Tanopo, Millora, Serafica, and Saez for plaintiff-appellees.
Araneta, Mendoza and Papa for defendant-appellant.

MAKALINTAL, J.:p
This is an appeal from the decision of the Court of First Instance of
Pangasinan in its Civil Case No. D-1700.
The facts are stipulated. Juan S. Biagtan was insured with defendant
InsularLife Assurance Company under Policy No. 398075 for the sum of
P5,000.00 and, under a supplementary contract denominated "Accidental
Death Benefit Clause, for an additional sum of P5,000.00 if "the death of
the Insured resulted directly from bodily injury effected solely through
external and violent means sustained in an accident ... and independently
of all other causes." The clause, however,expressly provided that it would
not apply where death resulted from an injury"intentionally inflicted by
another party."
On the night of May 20, 1964, or during the first hours of the following day
a band of robbers entered the house of the insured Juan S. Biagtan. What
happened then is related in the decision of the trial court as follows:
...; that on the night of May 20, 1964 or the first hours of
May 21, 1964, while the said life policy and
supplementary contract were in full force and effect, the

house of insured Juan S. Biagtan was robbed by a band of

robbers who were charged in and convicted by the Court
of First Instance of Pangasinan for robbery with homicide;
that in committing the robbery, the robbers, on reaching
the staircase landing on the second floor, rushed towards
the door of the second floor room, where they suddenly
met a person near the door of oneof the rooms who
turned out to be the insured Juan S. Biagtan who received
thrusts from their sharp-pointed instruments, causing
wounds on the body of said Juan S. Biagtan resulting in
his death at about 7 a.m. on the same day, May 21, 1964;
Plaintiffs, as beneficiaries of the insured, filed a claim under the policy. The
insurance company paid the basic amount of P5,000.00 but refused to pay
the additional sum of P5,000.00 under the accidental death benefit clause,
on the ground that the insured's death resulted from injuries intentionally
inflicted by third parties and therefore was not covered. Plaintiffs filed suit
to recover, and after due hearing the court a quo rendered judgment in
their favor. Hence the present appeal by the insurer.
The only issue here is whether under the facts are stipulated and found by
the trial court the wounds received by the insured at the hands of the
robbers nine in all, five of them mortal and four non-mortal were
inflicted intentionally. The court, in ruling negatively on the issue, stated
that since the parties presented no evidence and submitted the case upon
stipulation, there was no "proof that the act of receiving thrust (sic) from
the sharp-pointed instrument of the robbers was intended to inflict injuries
upon the person of the insured or any other person or merely to scare away
any person so as to ward off any resistance or obstacle that might be
offered in the pursuit of their main objective which was robbery."
The trial court committed a plain error in drawing the conclusion it did from
the admitted facts. Nine wounds were inflicted upon the deceased, all by
means of thrusts with sharp-pointed instruments wielded by the robbers.
This is a physical fact as to which there is no dispute. So is the fact that five
of those wounds caused the death of the insured. Whether the robbers had
the intent to kill or merely to scare the victim or to ward off any defense he
might offer, it cannot be denied that the act itself of inflicting the injuries
was intentional. It should be noted that the exception in the accidental
benefit clause invoked by the appellant does not speak of the purpose
whether homicidal or not of a third party in causing the injuries, but only
of the fact that such injuries have been "intentionally" inflicted this
obviously to distinguish them from injuries which, although received at the
hands of a third party, are purely accidental. This construction is the basic

16

idea expressed in the coverage of the clause itself, namely, that "the death
of the insured resulted directly from bodily injury effected solely through
external and violent means sustained in an accident ... and independently
of all other causes." A gun which discharges while being cleaned and kills a
bystander; a hunter who shoots at his prey and hits a person instead; an
athlete in a competitive game involving physical effort who collides with an
opponent and fatally injures him as a result: these are instances where the
infliction of the injury is unintentional and therefore would be within the
coverage of an accidental death benefit clause such as thatin question in
this case. But where a gang of robbers enter a house and coming face to
face with the owner, even if unexpectedly, stab him repeatedly, it is
contrary to all reason and logic to say that his injuries are not intentionally
inflicted, regardless of whether they prove fatal or not. As it was, in the
present case they did prove fatal, and the robbers have been accused and
convicted of the crime of robbery with homicide.
The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon by the
trial court in support of its decision. The facts in that case, however, are
different from those obtaining here. The insured there was a watchman in a
certain company, who happened to be invited by a policeman to come
along as the latter was on his way to investigate a reported robbery going
on in a private house. As the two of them, together with the owner of the
house, approached and stood in front of the main gate, a shot was fired and
it turned out afterwards that the watchman was hit in the abdomen, the
wound causing his death. Under those circumstances this Court held that it
could not be said that the killing was intentional for there was the
possibility that the malefactor had fired the shot to scare people around for
his own protection and not necessarrily to kill or hit the victim. A similar
possibility is clearly ruled out by the facts in the case now before Us. For
while a single shot fired from a distance, and by a person who was not even
seen aiming at the victim, could indeed have been fired without intent to
kill or injure, nine wounds inflicted with bladed weapons at close range
cannot conceivably be considered as innocent insofar as such intent is
concerned. The manner of execution of the crime permits no other
conclusion.
Court decisions in the American jurisdiction, where similar provisions in
accidental death benefit clauses in insurance policies have been construed,
may shed light on the issue before Us. Thus, it has been held that
"intentional" as used in an accident policy excepting intentional injuries
inflicted by the insured or any other person, etc., implies the exercise of the
reasoning faculties, consciousness and volition. 1 Where a provision of the policy

In the case of Hutchcraft's Ex'r v. Travelers' Ins. Co., 87 Ky. 300, 8 S.W. 570,
12 Am. St. Rep. 484, the insured was waylaid and assassinated for the
purpose of robbery. Two (2) defenses were interposed to the action to
recover indemnity, namely: (1) that the insured having been killed by
intentional means, his death was not accidental, and (2) that the proviso in
the policy expressly exempted the insurer from liability in case the insured
died from injuries intentionally inflicted by another person. In rendering
judgment for the insurance company the Court held that while the
assassination of the insured was as to him an unforeseen event and
therefore accidental, "the clause of the proviso that excludes the (insurer's)
liability, in case death or injury is intentionally inflicted by another person,
applies to this case."
In Butero v. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St. Rep. 61, 71 S.W.
811, the insured was shot three times by a person unknown late on a dark
and stormy night, while working in the coal shed of a railroad company. The
policy did not cover death resulting from "intentional injuries inflicted by
the insured or any other person." The inquiry was as to the question
whether the shooting that caused the insured's death was accidental or
intentional; and the Court found that under the facts, showing that the
murderer knew his victim and that he fired with intent to kill, there could be
no recovery under the policy which excepted death from intentional injuries
inflicted by any person.
WHEREFORE, the decision appealed from is reversed and the complaint
dismissed, without pronouncement as to costs.
Zaldivar, Castro, Fernando and Villamor, JJ., concur.
Makasiar, J., reserves his vote.

Separate Opinions

excludes intentional injury, it is the intention of the person inflicting the injury that is
controlling. 2 If the injuries suffered by the insured clearly resulted from the intentional
act of a third person the insurer is relieved from liability as stipulated. 3

17

BARREDO, J., concurring

During the deliberations in this case, I entertained some doubts as to the
correctness and validity of the view upheld in the main opinion penned by
Justice Makalintal. Further reflection has convinced me, however, that there
are good reasons to support it.
At first blush, one would feel that every death not suicidal should be
considered accidental, for the purposes of an accident insurance policy or a
life insurance policy with a double indemnity clause in case death results
from accident. Indeed, it is quite logical to think that any event whether
caused by fault, negligence, intent of a third party or any unavoidable
circumstance, normally unforeseen by the insured and free from any
possible connivance on his part, is an accident in the generally accepted
sense of the term. And if I were convinced that in including in the policy the
provision in question, both the insurer and the insured had in mind to
exclude thereby from the coverage of the policy only suicide whether
unhelped or helped somehow by a third party, I would disregard the
American decisions cited and quoted in the main opinion as not even
persuasive authorities. But examining the unequivocal language of the
provision in controversy and considering that the insured accepted the
policy without asking that it be made clear that the phrase "injury
intentionally inflicted by a third party" should be understood to refer only to
injuries inflicted by a third party without any wilful intervention on his part
(of the insured) or, in other words, without any connivance with him (the
insured) in order to augment the proceeds of the policy for his benificiaries,
I am inclined to agree that death caused by criminal assault is not covered
by the policies of the kind here in question, specially if the assault, as a
matter of fact, could have been more or less anticipated, as when the
insured happens to have violent enemies or is found in circumstances that
would make his life fair game of third parties.
As to the rest, I have no doubt that the killing of the insured in this case is
as intentional as any intentional act can be, hence this concurrence.
TEEHANKEE, J., dissenting:

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

18

(4) Injuries of which there is no visible contusions or

wound on the exterior of the body, drowning and internal
injuries revealed by autopsy excepted;
(5) Any injuries received (a) while on police duty in any
military, naval or police organization; (b) in anyriot, civil
commotion, insurrection or war or any act incident
thereto; (c) while travelling as a passenger or
otherwise in any form of submarine transportation, or
while engaging in submarine operations; (d) inany
violation of the law by the Insured or assault provoked by
the Insured; (e) that has been inflicted intentionally by a
third party, either with or without provocation on the part
of the Insured, and whether or not the attack or the
defense by the third party was caused by a violation of
the law by the Insured;
(6) Operating or riding in or descending from any kind of
aircraft if the Insured is a pilot, officer or member of the
crew of the aircraft or is giving or receiving any kind of
training or instruction or has any duties aboard the
aircraft or requiring descent therefrom; and
(7) Atomic energy explosion of any nature whatsoever.

(4) The policy anniversary immediately preceding the

sixtieth birthday of the Insured is reached. 2
It is undisputed that, as recited in the lower court's decision, the insured
met his death, as follows: "that on the night of May 20, 1964 or the first
hours of May 21, 1964, while the said life policy and supplementary
contract were in full force and effect, the house of insured Juan S. Biagtan
was robbed by a band of robbers who were charged in and convicted by the
Court of First Instance of Pangasinan for robbery with homicide; that in
committing the robbery, the robbers, on reaching the staircase landing of
the second floor, rushed towards the doors of the second floor room, where
they suddenly met a person near the door of one of the rooms who turned
out to be the insured Juan S. Biagtan who received thrust from their sharppointed instruments, causing wounds on the body of said Juan S. Biagtan
resulting in his death at about 7 a.m. on the same day, May 21, 1964. " 3
Defendant company, while admitting the above-recited circumstances
under which the insured met his death, disclaimed liability under its
accidental death benefit clause under paragraph 5 of its stipulated
"Exceptions" on its theory that the insured's death resulted from injuries
"intentionally inflicted by a third party," i.e. the robbers who broke into the
insured's house and inflicted fatal injuries on him.

AUTOMATIC DISCONTINUANCE. This Benefit

shall automatically terminate and the additional premium
therefor shall cease to be payable when and if:

The case was submitted for decision upon the parties' stipulation of facts
that (1) insurance companies such as the Lincoln National Life Insurance
Co. and Sun Life Assurance Co. of Canada with which the deceased insured
Juan S. Biagtan was also insured for much larger sums under similar
contracts with accidental death benefit provisions have promptly paid the
benefits thereunder to plaintiffs-beneficiaries; (2) the robbers who caused
the insured's death were charged in and convicted by the Court of First
Instance of Pangasinan for the crime of robbery with homicide; and (3) the
injuries inflicted on the insured by the robbers consisted of five mortal and
four non-mortal wounds. 4

(1) This Policy is surrendered for cash, paid-up insurance

or extended term insurance; or

The lower court thereafter rendered judgment against defendant, as

follows:

The Company, before making any payment under this

Clause, shall have the right and opportunity to examine
the body and make an autopsy thereof.

(2) The benefit under the Total and Permanent Disability

Waiver of Premium Certificate is granted to the insured;
or
(3) The Insured engages in military, naval or aeronautic
service in time of war; or

There is no doubt that the insured, Juan S. Biagtan, met

his death as a result of the wounds inflicted upon him by
the malefactors on the early morning of May 21, 1964 by
means of thrusts from sharp-pointed instruments
delivered upon his person, and there is likewise no
question that the thrusts were made on the occasion of

19

the robbery. However, it is defendants' position that the

killing of the insured was intentionally done by the
malefactors, who were charged with and convicted of the
crime of robbery with homicide by the Court of First
Instance of Pangasinan.
It must be noted here that no evidence whatsoever was
presented by the parties who submitted the case for
resolution upon the stipulation of facts presented by
them. Thus, the court does not have before it proof that
the act of receiving thrust(s) from the sharp-pointed
instrument of the robbers wasintended to inflict
injuries upon the person of the insured or any other
person or merely to scare away any person so as to ward
off any resistance or obstacle that might be offered in the
pursuit of their main objective which was robbery. It was
held that where a provision of the policy excludes
intentional injury, it is the intention of the person
inflicting the injury that is controlling ... and to come
within the exception, the act which causes the injury
must be wholly intentional, not merely partly.
The case at bar has some similarity with the case
of Virginia Calanoc vs. Court of Appeals, et al., L-8151,
promulgated December 16, 1965, where the Supreme
Court ruled that "the shot (which killed the insured) was
merely to scare away the people around for his own
protection and not necessarily to kill or hit the victim."
In the Calanoc case, one Melencio Basilio, a watchman of
a certain company, took out life insurance from the
Philippine American Life Insurance Company in the
amount of P2,000.00 to which was attached a
supplementary contract covering death by accident.
Calanoc died of gunshot wounds on the occasion of a
robbery committed in the house of a certain Atty. Ojeda in
Manila. The insured's widow was paid P2,000.00, the face
value of the policy, but when she demanded payment of
the additional sum of P2,000.00 representing the value of
the supplemental policy, the company refused alleging,
as main defense, that the deceased died because he was
murdered by a person who took part in the commission of
the robbery and while making an arrest as an officer of
the law which contingencies were (as in this case)

expressly excluded in the contract and have the effect of

exempting the company from liability.
The facts in the Calanoc case insofar as pertinent to this
case are, as found by the Court of Appeals in its decision
which findings of fact were adopted by the Supreme
Court, as follows:
"...that on the way to the Ojeda
residence (which was then being robbed
by armed men), the policeman and Atty.
Ojeda passed by Basilio (the insured)
and somehow or other invited the latter
to come along; that as the three
approached the Ojeda residence and
stood in front of the main gate which
was covered by galvanized iron, the
fence itself being partly concrete and
partly adobe stone, a shot was fired; ...
that it turned out afterwards that the
special watchman Melencio Basilio was
hit in the abdomen, the wound causing
his instantaneous death ..."
The Court of Appeals arrived at the conclusion that the
death of Basilio, although unexpected, was not caused by
an accident, being a voluntary and intentional act on the
part of the one who robbed, or one of those who robbed,
the house of Atty. Ojeda.
In reversing this conclusion of the Court of Appeals, the
Supreme Court said in part:
"... Nor can it be said that the killing
was intentional for there is the
possibility that the malefactors had
fired the shot merely to scare away the
people around for his own protection
and not necessarily to kill or hit the
victim. In any event, while the act may
not exempt the triggerman from ability
for the damage done, the fact remains

20

that the happening was a pure

accidentt on the part of the victim."
With this ruling of the Supreme Court, and the utter
absence of evidence in this case as to the real intention
of the malefactors in making a thrust with their sharppointed instrument on any person, the victim in
particular, the case falls squarely within the ruling in the
Calanoc vs. Court of Appeals case.
It is the considered view of this Court that the
insured died because of an accident which happened on
the occasion of the robbery being committed in his
house. His death was not sought (at least no evidence
was presented to show it was), and therefore was
fortuitous. "Accident" was defined as that which happens
by chance or fortuitously, without intention or design, and
which is unexpected, unusual and unforeseen, or that
which takes place without one's foresight or
expectation an event that proceeds from an unknown
cause, or is an unusual effect of a known cause, and
therefore not expected. (29 Am. Jur. 706).
There is no question that the defense set up by the
defendant company is one of those included among the
risks excluded in the supplementary contract. However,
there is no evidence here that the thrusts with sharppointed instrument (which led to the death of the
insured) was "intentional," (sic) so as to exempt the
company from liability. It could safely be assumed that it
was purely accidental considering that the principal
motive of the culprits was robbery, the thrusts being
merely intended to scare away persons who might offer
resistance or might obstruct them from pursuing their
main objective which was robbery. 5
It is respectfully submitted that the lower court committed no error in law in
holding defendant insurance company liable to plaintiffs-beneficiaries under
its accidental death benefit clause, by virtue of the following
considerations:
1. The case of Calanoc cited by the lower court is indeed controlling
here. 6 This Court, there construing a similar clause, squarely ruled that fatal injuries

inflicted upon an insured by a malefactor(s) during the latter's commission of a crime

are deemed accidental and within the coverage of such accidental death benefit
clauses and the burden of proving that the killing was intentional so as to have it fall
within the stipulated exception of having resulted from injuries "intentionally inflicted
by a third party" must be discharged by the insurance company. This Court there
clearly held that in such cases where the killing does not amount to murder, it must be
held to be a "pure accident" on the part of the victim, compensable with doubleindemnity, even though the malefactor is criminally liable for his act. This Court
rejected the insurance-company's contrary claim, thus:

Much less can it be pretended that Basilio died in the

course of an assault or murder considering the very
nature of these crimes. In the first place, there is no proof
that the death of Basilio is the result of either crime
for the record is barren of any circumstance showing how
the fatal shot was fired. Perhaps this may be clarified in
the criminal case now pending in court a regards the
incident but before that is done anything that might be
said on the point would be a mere conjecture. Nor can it
be said that the killing was intentional for there is the
possibility that the malefactor had fired the shot merely
to scare away the people around for his own protection
and not necessarily to kill or hit the victim. In any
event,while the act may not exempt the triggerman from
liability for the damage done, the fact remains thatthe
happening was a pure accident on the part of the victim.
The victim could have been either the policeman or Atty.
Ojeda for it cannot be pretended that the malefactor
aimed at the deceased precisely because he wanted to
take his life. 7
2. Defendant company patently failed to discharge its burden of proving
that the fatal injuries were inflicted upon the deceased intentionally,
i.e. deliberately. The lower court correctly held that since the case was
submitted upon the parties' stipulation of facts which did not cover the
malefactors' intent at all, there was an "utter absence of evidence in this
case as to the real intention of the malefactors in making a thrust with their
sharp-pointed instrument(s) on any person, the victim in particular." From
the undisputed facts, supra, 8 the robbers had "rushed towards the doors of the
second floor room, where they suddenly met a person ... who turned out to be the
insured Juan S. Biagtan who received thrusts from their pointed instruments." The
thrusts were indeed properly termed "purely accidental" since they seemed to be a
reflex action on the robbers' part upon their being surprised by the deceased. To
argue, as defendant does, that the robbers' intent to kill must necessarily be deduced
from the four mortal wounds inflicted upon the deceased is to beg the question.
Defendant must suffer the consequences of its failure to discharge its burden of
proving by competent evidence, e.g. the robbers' or eyewitnesses' testimony, that the

21

fatal injuries were intentionally inflicted upon the insured so as to exempt itself from
liability.

3. Furthermore, plaintiffs-appellees properly assert in their brief that the

sole error assigned by defendant company, to wit, that the fatal injuries
were not accidental as held by the lower court but should be held to have
beenintentionally inflicted, raises a question of fact which defendant is
now barred from raising, since it expressly limited its appeal to this Court
purely "on questions of law", per its noitice of appeal, 9 Defendant is therefore
confined to "raising only questions of law" and "no other questions" under Rule 42,
section 2 of the Rules of Court 10 and is deemed to have conceded the findings of fact
of the trial court, since he thereby waived all questions of facts. 11

4. It has long been an established rule of construction of so-called contracts

of adhesion such as insurance contracts, where the insured is handed a
printed insurance policy whose fine-print language has long been selected
with great care and deliberation by specialists and legal advisers employed
by and acting exclusively in the interest of the insurance company, that the
terms and phraseology of the policy, particularly of any exception clauses,
must be clearly expressed so as to be easily understood by the insured and
any "ambiguous, equivocal or uncertain terms" are to be "construed strictly
and most strongly against the insurer and liberally in favor of the insured so
as to effect the dominant purpose of indemnity or payment to the insured,
especially where a forfeiture is involved.
The Court so expressly held in Calanoc that:
... While as a general rule "the parties may limit the
coverage of the policy to certain particular accidents and
risks or causes of loss, and may expressly except other
risks or causes of loss therefrom" (45 C.J.S. 781-782),
however, it is to be desired that the terms and
phraseology of the exception clause be clearly expressed
so as to be within the easy grasp and understanding of
the insured, for if the terms are doubtful or obscure the
same must of necessity be interpreted or resolved
against the one who has caused the obscurity. (Article
1377, new Civil Code) And so it has been generally held
that the "terms in an insurance policy, which are
ambiguous, equivocal, or uncertain ...are to be construed
strictly and most strongly against the insurer, and
liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the
insured, especially where a forfeiture is involved" (29 AM.

Jur., 181), and the reason for this rule is that the "insured
usually has no voice in the selection or arrangement of
the words employed and that the language of the
contract is selected with great care and deliberation by
experts and legal advisers employed by, and acting
exclusively in the interest of, the insurance company." (44
C.J.S., p. 1174)
Insurance is, in its nature, complex and difficult for the
layman to understand. Policies are prepared by
experts who know and can anticipate the bearing and
possible complications of every contingency. So long as
insurance companies insist upon the use of ambiguous,
intricate and technical provisions, which conceal rather
than frankly disclose, their own intentions, the courts
must, in fairness to those who purchase insurance
construe every ambiguity in favor of the insured." (Algoe
vs. Pacific Mut. L. Ins. Co., 91 Wash. 324 LRA 1917A,
1237.)
"An insurer should not be allowed, by the use of obscure
phrases and exceptions, to defeat the very purpose for
which the policy was procured." (Moore vs. Aetna Life
Insurance Co., LRA 1915D, 164). 12
The Court has but recently reiterated this doctrine in Landicho vs.
GSIS 13 and again applied the provisions of Article 1377 of our Civil Code that "The
interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity."

5. The accidental death benefit clause assuring the insured's beneficiaries

of double indemnity, upon payment of an extra premium, in the event that
the insured meets violent accidental death is contractually stipulated as
follows in the policy: "that the death of the insured resulted directly from
bodily injury effected solely through external and violent means sustained
in an accident," supra. The policy then lists numerous exceptions, which
may be classified as follows:
Injuries effected through non-external means which are excepted: selfdestruction, bodily or mental infirmity or disease, poisoning or infection,
injuries with no visible contusions or exterior wounds (exceptions 1 to 4 of
policy clause);

22

 Injuries caused by some act of the insured which is proscribed by the

policy, and are therefore similarly exepted: injuries received while on police
duty, while travelling in any form of submarine transportation, or in any
violation of law by the insured or assault provoked by the insured, or in any
aircraft if the insured is a pilot or crew member; [exceptions 5 (a), (c) and
(d), and 6 of the policy clause]; and

I vote accordingly for the affirmance in toto of the appealed decision, with
costs against defendant-appellant.
Concepcion, C.J. and Reyes, J.B.L., J., concur.

Accidents expressly excluded: where death resulted in any riot, civil

commotion, insurrection or war or atomic energy explosion. (Exceptions
5[b] and 7 of policy clause).
Separate Opinions
The only exception which is not susceptible of classification is that provided
in paragraph 5 (e), the very exception herein involved, which would also
except injuries "inflicted intentionally by a third party, either with or without
provocation on the part of the insured, and whether or not the attack or the
defense by the third party was caused by a violation of the law by the
insured."
This ambiguous clause conflicts with all the other four exceptions in the
same paragraph 5 particularly that immediately preceding it in item (d)
which excepts injuries received where the insured has violated the law or
provoked the injury, while this clause, construed as the insurance company
now claims, would seemingly except also all other injuries, intentionally
inflicted by a third party, regardless of any violation of law or provocation
by the insured, and defeat the very purpose of the policy of giving the
insured double indemnity in case of accidental death by "external and
violent means" in the very language of the policy."
It is obvious from the very classification of the exceptions and applying the
rule of noscitus a sociis that the double-indemnity policy covers the insured
against accidental death, whether caused by fault, negligence or intent of a
third party which is unforeseen and unexpected by the insured. All the
associated words and concepts in the policy plainly exclude the accidental
death from the coverage of the policy only where the injuries are selfinflicted or attended by some proscribed act of the insured or are incurred
in some expressly excluded calamity such as riot, war or atomic explosion.
Finally, the untenability of herein defendant insurer's claim that the
insured's death fell within the exception is further heightened by the
stipulated fact that two other insurance companies which likewise covered
the insured for which larger sums under similar accidental death benefit
clauses promptly paid the benefits thereof to plaintiffs-beneficiaries.

BARREDO, J., concurring

During the deliberations in this case, I entertained some doubts as to the
correctness and validity of the view upheld in the main opinion penned by
Justice Makalintal. Further reflection has convinced me, however, that there
are good reasons to support it.
At first blush, one would feel that every death not suicidal should be
considered accidental, for the purposes of an accident insurance policy or a
life insurance policy with a double indemnity clause in case death results
from accident. Indeed, it is quite logical to think that any event whether
caused by fault, negligence, intent of a third party or any unavoidable
circumstance, normally unforeseen by the insured and free from any
possible connivance on his part, is an accident in the generally accepted
sense of the term. And if I were convinced that in including in the policy the
provision in question, both the insurer and the insured had in mind to
exclude thereby from the coverage of the policy only suicide whether
unhelped or helped somehow by a third party, I would disregard the
American decisions cited and quoted in the main opinion as not even
persuasive authorities. But examining the unequivocal language of the
provision in controversy and considering that the insured accepted the
policy without asking that it be made clear that the phrase "injury
intentionally inflicted by a third party" should be understood to refer only to
injuries inflicted by a third party without any wilful intervention on his part
(of the insured) or, in other words, without any connivance with him (the
insured) in order to augment the proceeds of the policy for his benificiaries,
I am inclined to agree that death caused by criminal assault is not covered
by the policies of the kind here in question, specially if the assault, as a
matter of fact, could have been more or less anticipated, as when the
insured happens to have violent enemies or is found in circumstances that
would make his life fair game of third parties.

23

As to the rest, I have no doubt that the killing of the insured in this case is
as intentional as any intentional act can be, hence this concurrence.
TEEHANKEE, J., dissenting:
The sole issue at bar is the correctness in law of the lower court's appealed
decision adjudging defendant insurance company liable, under its
supplementary contract denominated "Accidental Death Benefit Clause"
with the deceased insured, to plaintiffs-beneficiaries (excluding plaintiff
Emilia T. Biagtan) in an additional amount of P5,000.00 (with corresponding
legal interest) and ruling that defendant company had failed to present any
evidence to substantiate its defense that the insured's death came within
the stipulated exceptions.
Defendant's accidental death benefit clause expressly provides:
ACCIDENTAL DEATH BENEFIT. (hereinafter called the
benefit). Upon receipt and approval of due proof that the
death of the Insured resulted directly from bodily injury
effected solely through external and violent means
sustained in an accident, within ninety days after the date
of sustaining such injury, and independently of all other
causes, this Company shall pay, in addition to the sum
insured specified on the first page of this Policy, a further
sum equal to said sum insured payable at the same time
and in the same manner as said sum insured, provided,
that such death occurred during the continuance of this
Clause and of this Policy and before the sixtieth birthday
of the Insured." 1
A long list of exceptions and an Automatic Discontinuance clause
immediately follow thereafter, thus:

(3) Poisoning or infection, other than infection occurring

simultaneously with and in consequence of a cut or
wound sustained in an accident;
(4) Injuries of which there is no visible contusions or
wound on the exterior of the body, drowning and internal
injuries revealed by autopsy excepted;
(5) Any injuries received (a) while on police duty in any
military, naval or police organization; (b) in anyriot, civil
commotion, insurrection or war or any act incident
thereto; (c) while travelling as a passenger or
otherwise in any form of submarine transportation, or
while engaging in submarine operations; (d) inany
violation of the law by the Insured or assault provoked by
the Insured; (e) that has been inflicted intentionally by a
third party, either with or without provocation on the part
of the Insured, and whether or not the attack or the
defense by the third party was caused by a violation of
the law by the Insured;
(6) Operating or riding in or descending from any kind of
aircraft if the Insured is a pilot, officer or member of the
crew of the aircraft or is giving or receiving any kind of
training or instruction or has any duties aboard the
aircraft or requiring descent therefrom; and
(7) Atomic energy explosion of any nature whatsoever.
The Company, before making any payment under this
Clause, shall have the right and opportunity to examine
the body and make an autopsy thereof.

EXCEPTIONS. The Benefit shall not apply if the Insured's

death shall result, either directly or indirectly, from any
one of the following causes:

AUTOMATIC DISCONTINUANCE. This Benefit

shall automatically terminate and the additional premium
therefor shall cease to be payable when and if:

(1) Self-destruction or self-inflicted injuries, whether the

Insured be sane or insane;

(1) This Policy is surrendered for cash, paid-up insurance

or extended term insurance; or

(2) Bodily or mental infirmity or disease of any kind;

24

(2) The benefit under the Total and Permanent Disability

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

There is no doubt that the insured, Juan S. Biagtan, met

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

25

the additional sum of P2,000.00 representing the value of

the supplemental policy, the company refused alleging,
as main defense, that the deceased died because he was
murdered by a person who took part in the commission of
the robbery and while making an arrest as an officer of
the law which contingencies were (as in this case)
expressly excluded in the contract and have the effect of
exempting the company from liability.
The facts in the Calanoc case insofar as pertinent to this
case are, as found by the Court of Appeals in its decision
which findings of fact were adopted by the Supreme
Court, as follows:
"...that on the way to the Ojeda
residence (which was then being robbed
by armed men), the policeman and Atty.
Ojeda passed by Basilio (the insured)
and somehow or other invited the latter
to come along; that as the three
approached the Ojeda residence and
stood in front of the main gate which
was covered by galvanized iron, the
fence itself being partly concrete and
partly adobe stone, a shot was fired; ...
that it turned out afterwards that the
special watchman Melencio Basilio was
hit in the abdomen, the wound causing
his instantaneous death ..."
The Court of Appeals arrived at the conclusion that the
death of Basilio, although unexpected, was not caused by
an accident, being a voluntary and intentional act on the
part of the one who robbed, or one of those who robbed,
the house of Atty. Ojeda.
In reversing this conclusion of the Court of Appeals, the
Supreme Court said in part:
"... Nor can it be said that the killing
was intentional for there is the
possibility that the malefactors had
fired the shot merely to scare away the

people around for his own protection

and not necessarily to kill or hit the
victim. In any event, while the act may
not exempt the triggerman from ability
for the damage done, the fact remains
that the happening was a pure
accidentt on the part of the victim."
With this ruling of the Supreme Court, and the utter
absence of evidence in this case as to the real intention
of the malefactors in making a thrust with their sharppointed instrument on any person, the victim in
particular, the case falls squarely within the ruling in the
Calanoc vs. Court of Appeals case.
It is the considered view of this Court that the
insured died because of an accident which happened on
the occasion of the robbery being committed in his
house. His death was not sought (at least no evidence
was presented to show it was), and therefore was
fortuitous. "Accident" was defined as that which happens
by chance or fortuitously, without intention or design, and
which is unexpected, unusual and unforeseen, or that
which takes place without one's foresight or
expectation an event that proceeds from an unknown
cause, or is an unusual effect of a known cause, and
therefore not expected. (29 Am. Jur. 706).
There is no question that the defense set up by the
defendant company is one of those included among the
risks excluded in the supplementary contract. However,
there is no evidence here that the thrusts with sharppointed instrument (which led to the death of the
insured) was "intentional," (sic) so as to exempt the
company from liability. It could safely be assumed that it
was purely accidental considering that the principal
motive of the culprits was robbery, the thrusts being
merely intended to scare away persons who might offer
resistance or might obstruct them from pursuing their
main objective which was robbery. 5
It is respectfully submitted that the lower court committed no error in law in
holding defendant insurance company liable to plaintiffs-beneficiaries under

26

its accidental death benefit clause, by virtue of the following

considerations:
1. The case of Calanoc cited by the lower court is indeed controlling
here. 6 This Court, there construing a similar clause, squarely ruled that fatal injuries
inflicted upon an insured by a malefactor(s) during the latter's commission of a crime
are deemed accidental and within the coverage of such accidental death benefit
clauses and the burden of proving that the killing was intentional so as to have it fall
within the stipulated exception of having resulted from injuries "intentionally inflicted
by a third party" must be discharged by the insurance company. This Court there
clearly held that in such cases where the killing does not amount to murder, it must be
held to be a "pure accident" on the part of the victim, compensable with doubleindemnity, even though the malefactor is criminally liable for his act. This Court
rejected the insurance-company's contrary claim, thus:

Much less can it be pretended that Basilio died in the

course of an assault or murder considering the very
nature of these crimes. In the first place, there is no proof
that the death of Basilio is the result of either crime
for the record is barren of any circumstance showing how
the fatal shot was fired. Perhaps this may be clarified in
the criminal case now pending in court a regards the
incident but before that is done anything that might be
said on the point would be a mere conjecture. Nor can it
be said that the killing was intentional for there is the
possibility that the malefactor had fired the shot merely
to scare away the people around for his own protection
and not necessarily to kill or hit the victim. In any
event,while the act may not exempt the triggerman from
liability for the damage done, the fact remains thatthe
happening was a pure accident on the part of the victim.
The victim could have been either the policeman or Atty.
Ojeda for it cannot be pretended that the malefactor
aimed at the deceased precisely because he wanted to
take his life. 7
2. Defendant company patently failed to discharge its burden of proving
that the fatal injuries were inflicted upon the deceased intentionally,
i.e. deliberately. The lower court correctly held that since the case was
submitted upon the parties' stipulation of facts which did not cover the
malefactors' intent at all, there was an "utter absence of evidence in this
case as to the real intention of the malefactors in making a thrust with their
sharp-pointed instrument(s) on any person, the victim in particular." From
the undisputed facts, supra, 8 the robbers had "rushed towards the doors of the
second floor room, where they suddenly met a person ... who turned out to be the
insured Juan S. Biagtan who received thrusts from their pointed instruments." The

thrusts were indeed properly termed "purely accidental" since they seemed to be a
reflex action on the robbers' part upon their being surprised by the deceased. To
argue, as defendant does, that the robbers' intent to kill must necessarily be deduced
from the four mortal wounds inflicted upon the deceased is to beg the question.
Defendant must suffer the consequences of its failure to discharge its burden of
proving by competent evidence, e.g. the robbers' or eyewitnesses' testimony, that the
fatal injuries were intentionally inflicted upon the insured so as to exempt itself from
liability.

3. Furthermore, plaintiffs-appellees properly assert in their brief that the

sole error assigned by defendant company, to wit, that the fatal injuries
were not accidental as held by the lower court but should be held to have
beenintentionally inflicted, raises a question of fact which defendant is
now barred from raising, since it expressly limited its appeal to this Court
purely "on questions of law", per its noitice of appeal, 9 Defendant is therefore
confined to "raising only questions of law" and "no other questions" under Rule 42,
section 2 of the Rules of Court 10 and is deemed to have conceded the findings of fact
of the trial court, since he thereby waived all questions of facts. 11

4. It has long been an established rule of construction of so-called contracts

of adhesion such as insurance contracts, where the insured is handed a
printed insurance policy whose fine-print language has long been selected
with great care and deliberation by specialists and legal advisers employed
by and acting exclusively in the interest of the insurance company, that the
terms and phraseology of the policy, particularly of any exception clauses,
must be clearly expressed so as to be easily understood by the insured and
any "ambiguous, equivocal or uncertain terms" are to be "construed strictly
and most strongly against the insurer and liberally in favor of the insured so
as to effect the dominant purpose of indemnity or payment to the insured,
especially where a forfeiture is involved.
The Court so expressly held in Calanoc that:
... While as a general rule "the parties may limit the
coverage of the policy to certain particular accidents and
risks or causes of loss, and may expressly except other
risks or causes of loss therefrom" (45 C.J.S. 781-782),
however, it is to be desired that the terms and
phraseology of the exception clause be clearly expressed
so as to be within the easy grasp and understanding of
the insured, for if the terms are doubtful or obscure the
same must of necessity be interpreted or resolved
against the one who has caused the obscurity. (Article
1377, new Civil Code) And so it has been generally held
that the "terms in an insurance policy, which are

27

ambiguous, equivocal, or uncertain ...are to be construed

strictly and most strongly against the insurer, and
liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the
insured, especially where a forfeiture is involved" (29 AM.
Jur., 181), and the reason for this rule is that the "insured
usually has no voice in the selection or arrangement of
the words employed and that the language of the
contract is selected with great care and deliberation by
experts and legal advisers employed by, and acting
exclusively in the interest of, the insurance company." (44
C.J.S., p. 1174)
Insurance is, in its nature, complex and difficult for the
layman to understand. Policies are prepared by
experts who know and can anticipate the bearing and
possible complications of every contingency. So long as
insurance companies insist upon the use of ambiguous,
intricate and technical provisions, which conceal rather
than frankly disclose, their own intentions, the courts
must, in fairness to those who purchase insurance
construe every ambiguity in favor of the insured." (Algoe
vs. Pacific Mut. L. Ins. Co., 91 Wash. 324 LRA 1917A,
1237.)
"An insurer should not be allowed, by the use of obscure
phrases and exceptions, to defeat the very purpose for
which the policy was procured." (Moore vs. Aetna Life
Insurance Co., LRA 1915D, 164). 12
The Court has but recently reiterated this doctrine in Landicho vs.
GSIS 13 and again applied the provisions of Article 1377 of our Civil Code that "The
interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity."

5. The accidental death benefit clause assuring the insured's beneficiaries

of double indemnity, upon payment of an extra premium, in the event that
the insured meets violent accidental death is contractually stipulated as
follows in the policy: "that the death of the insured resulted directly from
bodily injury effected solely through external and violent means sustained
in an accident," supra. The policy then lists numerous exceptions, which
may be classified as follows:

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

28

Finally, the untenability of herein defendant insurer's claim that the

insured's death fell within the exception is further heightened by the
stipulated fact that two other insurance companies which likewise covered
the insured for which larger sums under similar accidental death benefit
clauses promptly paid the benefits thereof to plaintiffs-beneficiaries.
I vote accordingly for the affirmance in toto of the appealed decision, with
costs against defendant-appellant.
Concepcion, C.J. and Reyes, J.B.L., J., concur.
G.R. No. 92383 July 17, 1992
SUN INSURANCE OFFICE, LTD., petitioner,
vs.
THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

CRUZ, J.:
The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr.
with a face value of P200,000.00. Two months later, he was dead with a
bullet wound in his head. As beneficiary, his wife Nerissa Lim sought
payment on the policy but her claim was rejected. The petitioner agreed
that there was no suicide. It argued, however that there was no accident
either.
Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It
happened on October 6, 1982, at about 10 o'clock in the evening, after his
mother's birthday party. According to Nalagon, Lim was in a happy mood
(but not drunk) and was playing with his handgun, from which he had
previously removed the magazine. As she watched television, he stood in
front of her and pointed the gun at her. She pushed it aside and said it
might he loaded. He assured her it was not and then pointed it to his
temple. The next moment there was an explosion and Lim slumped to the
floor. He was dead before he fell. 1
The widow sued the petitioner in the Regional Trial Court of Zamboanga
City and was sustained. 2 The petitioner was sentenced to pay her P200,000.00,
representing the face value of the policy, with interest at the legal rate; P10,000.00 as

moral damages; P5,000.00 as exemplary damages; P5,000.00 as actual and

compensatory damages; and P5,000.00 as attorney's fees, plus the costs of the suit.
This decision was affirmed on appeal, and the motion for reconsideration was
denied. 3 The petitioner then came to this Court to fault the Court of Appeals for
approving the payment of the claim and the award of damages.

The term "accident" has been defined as follows:

The words "accident" and "accidental" have never acquired any technical
signification in law, and when used in an insurance contract are to be
construed and considered according to the ordinary understanding and
common usage and speech of people generally. In-substance, the courts
are practically agreed that the words "accident" and "accidental" mean that
which happens by chance or fortuitously, without intention or design, and
which is unexpected, unusual, and unforeseen. The definition that has
usually been adopted by the courts is that an accident is an event that
takes place without one's foresight or expectation an event that
proceeds from an unknown cause, or is an unusual effect of a known case,
and therefore not expected. 4
An accident is an event which happens without any human agency or, if
happening through human agency, an event which, under the
circumstances, is unusual to and not expected by the person to whom it
happens. It has also been defined as an injury which happens by reason of
some violence or casualty to the injured without his design, consent, or
voluntary co-operation. 5
In light of these definitions, the Court is convinced that the incident that
resulted in Lim's death was indeed an accident. The petitioner, invoking the
case of De la Cruz v. Capital Insurance, 6 says that "there is no accident when a
deliberate act is performed unless some additional, unexpected, independent and
unforeseen happening occurs which produces or brings about their injury or death."
There was such a happening. This was the firing of the gun, which was the additional
unexpected and independent and unforeseen occurrence that led to the insured
person's death.

The petitioner also cites one of the four exceptions provided for in the
insurance contract and contends that the private petitioner's claim is
barred by such provision. It is there stated:
Exceptions
The company shall not be liable in respect of

29

1. Bodily injury
xxx xxx xxx
b. consequent upon
i) The insured person attempting to commit suicide or
willfully exposing himself to needless peril except in an
attempt to save human life.
To repeat, the parties agree that Lim did not commit suicide. Nevertheless,
the petitioner contends that the insured willfully exposed himself to
needless peril and thus removed himself from the coverage of the
insurance policy.
It should be noted at the outset that suicide and willful exposure to
needless peril are in pari materia because they both signify a disregard for
one's life. The only difference is in degree, as suicide imports a positive act
of ending such life whereas the second act indicates a reckless risking of it
that is almost suicidal in intent. To illustrate, a person who walks a tightrope
one thousand meters above the ground and without any safety device may
not actually be intending to commit suicide, but his act is nonetheless
suicidal. He would thus be considered as "willfully exposing himself to
needless peril" within the meaning of the exception in question.
The petitioner maintains that by the mere act of pointing the gun to hip
temple, Lim had willfully exposed himself to needless peril and so came
under the exception. The theory is that a gun is per se dangerous and
should therefore be handled cautiously in every case.
That posture is arguable. But what is not is that, as the secretary testified,
Lim had removed the magazine from the gun and believed it was no longer
dangerous. He expressly assured her that the gun was not loaded. It is
submitted that Lim did not willfully expose himself to needless peril when
he pointed the gun to his temple because the fact is that he thought it was
not unsafe to do so. The act was precisely intended to assure Nalagon that
the gun was indeed harmless.
The contrary view is expressed by the petitioner thus:

Accident insurance policies were never intended to

reward the insured for his tendency to show off or for his
miscalculations. They were intended to provide for
contingencies. Hence, when I miscalculate and jump from
the Quezon Bridge into the Pasig River in the belief that I
can overcome the current, I have wilfully exposed myself
to peril and must accept the consequences of my act. If I
drown I cannot go to the insurance company to ask them
to compensate me for my failure to swim as well as I
thought I could. The insured in the case at bar
deliberately put the gun to his head and pulled the
trigger. He wilfully exposed himself to peril.
The Court certainly agrees that a drowned man cannot go to the insurance
company to ask for compensation. That might frighten the insurance people
to death. We also agree that under the circumstances narrated, his
beneficiary would not be able to collect on the insurance policy for it is
clear that when he braved the currents below, hedeliberately exposed
himself to a known peril.
The private respondent maintains that Lim did not. That is where she says
the analogy fails. The petitioner's hypothetical swimmer knew when he
dived off the Quezon Bridge that the currents below were dangerous. By
contrast, Lim did not know that the gun he put to his head was loaded.
Lim was unquestionably negligent and that negligence cost him his own
life. But it should not prevent his widow from recovering from the insurance
policy he obtained precisely against accident. There is nothing in the policy
that relieves the insurer of the responsibility to pay the indemnity agreed
upon if the insured is shown to have contributed to his own accident.
Indeed, most accidents are caused by negligence. There are only four
exceptions expressly made in the contract to relieve the insurer from
liability, and none of these exceptions is applicable in the case at bar. **
It bears noting that insurance contracts are as a rule supposed to be
interpreted liberally in favor of the assured. There is no reason to deviate
from this rule, especially in view of the circumstances of this case as above
analyzed.
On the second assigned error, however, the Court must rule in favor of the
petitioner. The basic issue raised in this case is, as the petitioner correctly
observed, one of first impression. It is evident that the petitioner was acting
in good faith then it resisted the private respondent's claim on the ground

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that the death of the insured was covered by the exception. The issue was
indeed debatable and was clearly not raised only for the purpose of evading
a legitimate obligation. We hold therefore that the award of moral and
exemplary damages and of attorney's fees is unjust and so must be
disapproved.
In order that a person may be made liable to the payment
of moral damages, the law requires that his act be
wrongful. The adverse result of an action does not per
se make the act wrongful and subject the act or to the
payment of moral damages. The law could not have
meant to impose a penalty on the right to litigate; such
right is so precious that moral damages may not be
charged on those who may exercise it erroneously. For
these the law taxes costs. 7
The fact that the results of the trial were adverse to Barreto did
not alone make his act in bringing the action wrongful because in
most cases one party will lose; we would be imposing an unjust
condition or limitation on the right to litigate. We hold that the
award of moral damages in the case at bar is not justified by the
facts had circumstances as well as the law.

If a party wins, he cannot, as a rule, recover attorney's

fees and litigation expenses, since it is not the fact of
winning alone that entitles him to recover such damages
of the exceptional circumstances enumerated in Art.
2208. Otherwise, every time a defendant wins,
automatically the plaintiff must pay attorney's fees
thereby putting a premium on the right to litigate which
should not be so. For those expenses, the law deems the
award of costs as sufficient. 8
WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED
in so far as it holds the petitioner liable to the private respondent in the
sum of P200,000.00 representing the face value of the insurance contract,
with interest at the legal rate from the date of the filing of the complaint
until the full amount is paid, but MODIFIED with the deletion of all awards
for damages, including attorney's fees, except the costs of the suit.
SO ORDERED.
Grio-Aquino, Medialdea and Bellosillo, JJ., concur.

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