INSURANCE || Batch 1 (Cases 9-17)

CASE 09: FIREMANS FUND INSURANCE COMPANY AND THE

FIRESTONE TIRE AND RUBBER COMPANY OF THE
PHILIPPINES v JAMILA & COMPANY - Rebecca Flores
Topic: Subrogation
DOCTRINE: When the insurance company pays for the loss, such
payment operates as an equitable assignment to the insurer of the
property and all remedies which the insured may have for the
recovery thereof. That right is not dependent upon, nor does it grow
out of, any privity of contract, or upon written assignment of claim,
and payment to the insured makes the insurer an assignee in equity.
FACTS
1. Jamila/Veterans PH Scouts Security Agency contracted to supply
security guards to Firestone. Jamila assumed responsibility for
the acts of its security guards.
2. First Quezon City Insurance executed a bond for P20K to
guarantee Jamilas obligation under that contract.
3. Later on Firestones properties valued at P11,925 were allegedly
lost due to the acts of its employees who connived with Jamilas
security guard
4. Firemans Fund, as insurer paid to Firestone the amount of the
loss and Firemans Fund was subrogated to Firestones right to
get reimbursement from Jamila. Jamila and its surety (First
Quezon Insurance) failed to pay the amount of the loss.
5. Fireman invoked Article 2207, as the insurer Firemans Fund is
entitled to go after the person or entity that violated its
contractual commitment to answer for the loss insured against.
6. Jamila contends that it did not consent to the subrogation of
Firemans Fund to Firestones right to get reimbursement from
Jamila and its surety. Further arguing that legal subrogation
under Art 2207 of the Civil Code requires the debtors consent
and that according to Art 1302, the instant case is not among the
cases mentioned when legal subrogation can take place.
ISSUE: WON Firemans Fund can subrogate to the rights of Jamilia?
RULING: YES! Article 2207 is a restatement of a settled principle of
American jurisprudence. Subrogation has been referred to as the
doctrine of substitution. It is an arm of equity that may guide or even
force one to pay a debt for which an obligation was incurred but
which was in whole or in part paid by another.

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Subrogation is founded on principles of justice and equity, and its

operation is governed by principles of equity. It rests on the principle
that substantial justice should be attained regardless of form, that is,
its basis is the doing of complete, essential, and perfect justice
between all the parties without regard to form.
Subrogation is a normal incident of indemnity insurance. Upon
payment of the loss, the insurer is entitled to be subrogated pro tanto
to any right of action which the insured may have against the third
person whose negligence or wrongful act caused the loss
When the insurance company pays for the loss, such payment
operates as an equitable assignment to the insurer of the property
and all remedies which the insured may have for the recovery
thereof. That right is not dependent upon, nor does it grow out of,
any privity of contract, or upon written assignment of claim, and
payment to the insured makes the insurer an assignee in equity
DIPOSITIVE: Costs against Jamila. Fireman Fund won!
CASE 10: PAN MALAYAN INSURANCE V. CA CHARLENE
DACARA
Topic: Subrogation
DOCTRINE: Article 2207 of the Civil Code is founded on the wellsettled principle of subrogation. If the insured property is destroyed
or damaged through the fault or negligence of a party other than the
assured, then the insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the
loss. The right of subrogation is not dependent upon, nor does it
grow out of, any privity of contract or upon written assignment of
claim. It accrues simply upon payment of the insurance claim by the
insurer.
FACTS: Petitioner PanMalay was an insurer of the car of Canlubang
Automotive Resources Corp. While the policy was still in effect, the
insured car was allegedly hit by a pick-up owned by Erlinda Fabie but
driven by another person. The car suffered damages in the
amount of P42,052.00. PanMalay defrayed the cost of repair of the
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INSURANCE || Batch 1 (Cases 9-17)

insured car. It then demanded reimbursement from Fabie and her

driver of said amount, but to no avail.
Petitioner filed a complaint against private respondent before the
RTC. It averred that the damages caused to the insured car were
settled under the own damage coverage of the insurance policy.
Private respondent filed a motion to dismiss arguing that under the
"own damage" clause of the insurance policy precluded subrogation
under Article 2207 of the Civil Code, since indemnification thereunder
was made on the assumption that there was no wrongdoer or no
third party at fault.
RTC: The complaint was dismissed and ruled that payment under
the own damage clause was an admission by the insurer that the
damage was caused by the assured and/or its representatives.
CA: Affirmed the trial courts ruling but on different ground. Applying
the ejusdem generis rule, CA held that Section III-I of the policy,
which was the basis for the settlement of the claim against
insurance, did not cover damage arising from collision or overturning
due to the negligence of 3rd parties as one of the insurable risks.
ISSUE: WON PanMalay subrogated to the rights of Canlubang
against the driver and his employer?
RULING: YES. Art. 2207 of the civil code states that If the plaintiffs
property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the
person who has violatedthe contract. This was founded on the wellsettled principle of subrogation. If the insured property is destroyed
or damaged through the fault or negligence of a party other than the
assured, the insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable
assignmentto the former of all remedies, which the latter may have
against the third party whose negligence or wrongful act caused the
loss.
There are a few recognized exceptions to this rule:
1. where the assured by his own act releases the wrongdoer or
third party liable for the loss or damage

Batch 4 GO4 (2015)Z

2. where the insurer pays the assured the value of the lost
goods without notifying the carrier who has in good faith
settled the assured's claim for loss
3. where the insurer pays the assured for a loss which is not a
risk covered by the policy, thereby effecting "voluntary
payment"
None of these exceptions are present in this case.
AS to the Trial Courts ruling: When Panmalay utilized the phrase
own damage-- a pharase which, incidentally, is not found in the
insurance policyto define the basis for its settlement, it simply
meant that it had assumed to reimburse the costs for repairing the
damage to the insured vehicle.
It is in this sense that the so-called own damage coverage of policy
is different from the 3rd party liability coverage and from the
property damae coverage.
As to the Court of Appeals ruling: CAs ruling that the coverage of the
insured risks under Section III-I of the policy does not include
damage to the insured vehicle arising from collision or overturning
due to negligent acts of a 3rd party, has no merit.
Not only is it an erroneous interpretation of the provisions of the
section, but it also violates a fundamental rule on the interpretation of
property insurance contracts where interpretation should be liberally
in favor of the assured and strictly against the insurer in cases of
disagreement between the parties.
The meaning advanced by Panmalay regarding the coverage of
Section III-I of the policy is undeniable more beneficial to Canlubang
than that insisted upon by the CA.
In any case, the very parties to the policy, Canlubang and Panmalay,
were not shown to be in disagreement regarding the meaning and
coverage of Section III-I. Hence, it was improper for CA to assert its
own interpretation of the contract that is contrary to the clear
understanding and intention of the parties to it.
Thus, SC held that Panmalay, as subrogee, has no legal obstacle
from filing the complaint for damages against the 3 rd parties
responsible for the damage to the car.
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INSURANCE || Batch 1 (Cases 9-17)

DISPOSITIVE: Petitioner won.

CASE 11: SVERIGES ANGFARTYGS ASSURANS FORENIN vs.
GAN (1967). Olive Cachapero
Topic: Subrogation Article 2027, Civil Code
DOCTRINE: [A]n insurer who pays the insured for loss or liability not
covered by the policy is not subrogated to the latter. However, even
assuming that there was unwarranted or "volunteer" payment,
plaintiff could still recover what it paid in effect to the carrier
from defendant shipper under Art. 1236 of the Civil Code which
allows a third person who pays on behalf of another to recover from
the latter, although there is no subrogation.
FACTS: Defendant Qua Chee Gan shipped on board the S.S.
NAGARA, as per bills of lading Exhs. A and B, 2,032,000 kilos of bulk
copra at Siain, Quezon, consigned to DAL International Trading Co.,
in Gdynia, Poland. The vessel first called at the port of Karlshamn,
Sweden, where it unloaded 969,419 kilos of bulk copra. Then, it
proceeded to Gdynia where it unloaded the remaining copra
shipment. The actual outturn weights in the latter port showed that
only 1,569,429 kilos were discharged. Because of the alleged
confirmed cargo shortage, the Polish cargo insurers had to indemnify
the consignee for the value thereof. Thereafter, the former sued the
shipowner, the Swedish East Asia Company, in Gothenburg,
Sweden. The latter, in turn sued, defendant and had it summoned to
Gothenburg. A settlement was effected between the Polish cargo
insurers and the shipowner. Plaintiff, as the indemnity insurer for the
latter, paid approximately $60,733.53 to the Polish insurers. Claiming
to have been subrogated to the rights of the carrier, plaintiff sued
defendant before the CFI of Manila to recover U.S. $60,733.53 plus
17% exchange tax, with legal interest, as the value of the alleged
cargo short shipment.
Defendant filed a motion to dismiss on the ground of prescription
under the Carriage of Goods by Sea Act. The lower court ruled that
plaintiff's insurance policy did not cover the short shipment,
reasoning that unless the same as the best evidence were
presented, it could not be conclusively determined if "liability for short
shipment" was a covered risk.

Batch 4 GO4 (2015)Z

RULING: NO. [T]he rule is that an insurer who pays the insured for
loss or liability not covered by the policy is not subrogated to the
latter. However, even assuming that there was unwarranted or
"volunteer" payment, plaintiff could still recover what it paid in
effect to the carrier from defendant shipper under Art. 1236 of the
Civil Code which allows a third person who pays on behalf of another
to recover from the latter, although there is no subrogation. But since
the payment here was without the knowledge and consent of
defendant, plaintiff's right of recovery is defeasible by the former's
defenses since the Code is clear that the recovery is only up to the
amount by which the defendant was benefited.
CASE 12: RIZAL SURETY v. MANILA RAILROAD COMPANY
(1968) Michelle Sy
Topic: Subrogation (Art. 2027 NCC)
DOCTRINE: Insurer after paying the claim of the insured for
damages under the insurance is subrogated merely to the rights of
the insured and therefore can necessarily recover only that to what
was recoverable by the insured.
FACTS: On or about November 29, 1960, the vessel, SS Flying
trader, loaded on board at Genoa, Italy for shipment to Manila,
among other cargoes, 6 cases OMH Special Single Colour Offset
Press machine, for which Bill of Lading No. 1 was issued, consigned
to Suter, Inc.
On or about January 16, 1961, the vessel arrived in Manila and
subsequently discharged complete and in good order the
aforementioned shipment into the custody of defendant Manila Port
Service as arrastre operator.
While one of the six cases was being lifted and loaded by the crane
of Manila Port Service into the consignees truck, it was dropped by
the crane and as a consequence the machine was heavily damaged.
The plaintiff, as the insurer, paid the consignee the amount of
P16,500 representing damages by way of costs of replacement parts
and repairs to put the machine on a working condition. The plaintiff
also paid P16,680.70 to the International Adjustment Bureau as
adjusters fee.

ISSUE: WON plaintiff is subrogated to the rights of the carrier.

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INSURANCE || Batch 1 (Cases 9-17)

The paragraph 15 of the management contract between the Bureau

of Customs and Manila Port Service states that the Companys
liability is limited to P500.00 per package unless the value of the
goods is otherwise, specified, declared or manifested and the
corresponding arrastre has been paid.
The lower court ordered the defendants, jointly and severally to pay
the plaintiff the amount of P500.00. on appeal, it was stated that the
plaintiff could recover in full based on Article 2207 of the Civil Code.
ISSUE: Whether or not the insurance company can collect more than
what was stipulated in the Management Contract?
RULING: No. The literal language of Article 2207, however, does not
warrant such an interpretation. It is there made clear that in the event
that the property has been insured and the Insurance Company has
paid the indemnity for the injury or loss sustained, it "shall be
subrogated to the rights of the insured against the wrong-doer or the
person who has violated the contract."
Plaintiff-appellant Insurance Company, therefore, cannot recover
from defendants an amount greater than that to which the consignee
could lawfully lay claim. The management contract is clear. The
amount is limited to Five Hundred Pesos (P500.00).
Plaintiff-appellant Rizal Surety and Insurance Company, having been
subrogated merely to the rights of the consignee, its recovery
necessarily should be limited to what was recoverable by the
insured. The lower court therefore did not err when in the decision
appealed from, it limited the amount which defendants were jointly
and severally to pay plaintiff-appellants to "Five Hundred Pesos
(P500.00) with legal interest thereon from January 31, 1962, the date
of the filing of the complaint, . . . ."
DISPOSITIVE: The Decision appealed from is affirmed.
CASE 13: ST. PAUL FIRE & MARINE INSURANCE CO. VS.
MACONDRAY & CO., INC. (1976)
Author: Carlo Guevara
Topic: Subrogation, Article 2027 Civil Code.

Batch 4 GO4 (2015)Z

DOCTRINE: Insurance carrier is subrogated merely to rights of the

assured and can recover from common carrier only the amount
recoverable by the latter.
FACTS: Winthrop Products, Inc., of U.S.A., shipped aboard the SS
"Tai Ping", owned and operated by Wilhelm Wilhelmsen, 218 cartons
and drums of drugs and medicine, with the freight prepaid, which
were consigned to Winthrop-Stearns Inc., Manila, Philippines. The
shipment was insured by the shipper against loss and/or damage
with the St. Paul Fire & Marine Insurance Company.
The SS "Tai Ping" arrived at the Port of Manila and discharged its
shipment into the custody of Manila Port Service, the arrastre
contractor for the Port of Manila. The said shipment was discharged
complete and in good order with the exception of one (1) drum and
several cartons which were in bad order condition. Hence, the
consignee filed a claim in the amount of P1,109.67 representing the
C.I.F. value of the damaged drum and cartons of medicine with the
carrier, herein defendants-appellees and the Manila Port Service.
Both refused to pay the claim. Consequently, the consignee filed its
claim with the insurer, St. Paul Fire & Marine Insurance Co., and the
insurance company, on the basis of such claim, paid to the
consignee the insured value of the lost and damaged goods,
including other expenses in connection therewith, in the total amount
of $1,134.46
As subrogee of the rights of the shipper and/or consignee, the
insurer, St. Paul Fire & Marine Insurance Co., instituted with the CFI
the present action against the defendants for the recovery of said
amount plus costs. Defendants resisted the action, contending that
the whole cargo was delivered to the consignee in the same
condition in which it was received from the carrying vessel; that their
rights, duties and obligations as arrastre contractor at the Port of
Manila are governed by and subject to the terms, conditions and
limitations contained in the Management Contract between the
Bureau of Customs and Manila Port Service, and their liability is
limited to the invoice value of the goods, but in no case more than
P500.00 per package, pursuant to the said Management Contract;
and that they are not the agents of the carrying vessel in the receipt
and delivery of cargoes in the Port of Manila.

INSURANCE || Batch 1 (Cases 9-17)

The defendants Macondray & Co., Inc., Barber Steamship Lines, Inc.
and Wilhelm Wilhelmsen also contested the claim alleging that if any
damage was sustained by the shipment while it was under the
control of the vessel, such damage was caused by insufficiency of
packing, force majeure and/or perils of the sea, and that they, in
good faith and for the purpose only of avoiding litigation without
admitting liability to the consignee, offered to settle the latter's claim
in full by paying the corresponding C.I.F. value, but their offer was
declined by the consignee and/or the plaintiff.
The lower court rendered judgment ordering the defendants to pay to
the plaintiff, jointly and severally. Plaintiff-appellant argues that, as
subrogee of the consignee, it should be entitled to recover from the
defendants appellees the amount of $1,134.46 which it actually paid
to the consignee and which represents the value of the lost and
damaged shipment as well as other legitimate expenses. Defendants
appellees are not insurers of the goods, and as such they should not
be made to pay the insured value.
ISSUE: WON the insurance carrier can recover the said amount
claimed.
RULING: YES, the plaintiff-appellant, as insurer, after paying the
claim of the insured for damages under the insurance, is subrogated
merely to the rights of the assured. As subrogee, it can recover only
the amount that is recoverable by the latter. Since the right of the
assured, in case of loss or damage to the goods, is limited or
restricted by the provisions in the bill of lading, a suit by the insurer
as subrogee necessarily is subject to like limitations and restrictions.
DISPOSITIVE: Respondent Won. Decision is affirmed.
CASE 14: NATIONAL UNION FIRE LNSURANCE V. STOLT
NIELSEN Patrick Mendoza
Topic: Subrogation
DOCTRINE:: By subrogation, it became privy to the Charter Party as
fully as the SHIPPER before the latter was indemnified, because as
subrogee it stepped into the shoes of the SHIPPER-ASSURED and
is subrogated merely to the latter's rights. It can recover only the
amount that is recoverable by the assured.

Batch 4 GO4 (2015)Z

FACTS: United Coconut Chemicals, Inc. shipped 404.774 metric

tons of distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a
tanker owned by Stolt-Nielsen Philippines Inc. , from Bauan,
Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam,
Netherlands, covered by Tanker Bill of Lading BL No. BAT-1. The
shipment was insured under a marine cargo policy with Petitioner
National Union Fire Insurance Company of Pittsburg, a non-life
American insurance corporation, through its settling agent in the
Philippines, the American International Underwriters (Philippines),
Inc. A Bill of Lading was present , containing a general statement of
incorporation of the terms of a Charter Party between the Shipper,
namely, United Coconut Chemicals Inc., and Parcel Tankers, Inc.,
entered into in Greenwich, Connecticut, U.S.A. Upon receipt of the
goods in Netherlands, they were found to be discolored. The insurer
indemnified the shipper because of this.
As a subrogee of the shipper, the insurer filed suit against the carrier,
Stolt-Nielsen. The latter moved to dismiss the case, as they claim it
is an arbitrable one, the Bill of Lading being its basis which contained
provisions relating to a Charter Party. The RTC deferred the motion,
and the appellate court reversed the RTC, and ordered the case for
arbitration.
ISSUE: WON the claim of the insurer against the carrier is an
arbitrable one.
RULING: We hold, therefore, that the INSURER cannot avoid the
binding effect of the arbitration clause. By subrogation, it became
privy to the Charter Party as fully as the SHIPPER before the latter
was indemnified, because as subrogee it stepped into the shoes of
the SHIPPER-ASSURED and is subrogated merely to the latter's
rights. It can recover only the amount that is recoverable by the
assured. And since the right of action of the SHIPPER-ASSURED is
governed by the provisions of the Bill of Lading, which includes by
reference the terms of the Charter Party, necessarily, a suit by the
INSURER is subject to the same agreements
DISPOSITIVE: Yes, the case is an arbitrable one, Stolt-Nielsen wins
the case, as it cannot escape liability arising from the Charter Party
Provisions included in the Bill of Lading as it is a subrogee of the
rights of the shipper.

INSURANCE || Batch 1 (Cases 9-17)

CASE 15: CEBU SHIPYARD V. WILLIAM LINES, INC.

Author: Geloace
Topic: Subrogation
DOCTRINE:
When the insurer, after due verification of the merit and validity of the
insurance claim of the assured, pays the latter the total amount
covered by its insurance policy, it becomes subrogated to the right of
the latter to recover the insured loss from the liable party.
FACTS:
1. Cebu Shipyard is a domestic corporation engaged in the
business of dry-docking and repairing of marine vessels while
the private respondent Prudential, a domestic corporation, is in
the business of non-life insurance.
2. William Lines, Inc. is in the shipping business. It was the owner
of M/V Manila City, a luxury passenger-cargo vessel, which
caught fire and sank. At the time of the accident, the vessel as
insured with Prudential for P45M.
3. Petitioner was also insured by Prudential for 3rd party liability
under a Ship repairers Legal Liability for Insurance Policy, such
was for P10M. William Lines, Inc. brought its vessel to the Cebu
Shipyard for annual dry-docking and repair. After the subject
vessel was transferred to the docking quay, it caught fire and
sank resulting to its loss.
4. William Lines, Inc. filed a complaint for damages against
petitioner alleging that the fire which broke out was the result of
CSEWs negligence and lack of care. An amended complaint
was filed impleading Prudential as co-plaintiff after the latter had
paid William Lines, Inc. the value of the hull and machinery
insurance on the M/V Manila City. As a result of the payment,
Prudential was subrogated to the claim of P45 million,
representing the value of the insurance it paid.
5. The trial court issued a decision against petitioner Cebu
Shipyards. The Court of Appeals affirmed the said decision.
6. Petitioner claims that Prudential is not entitled to be subrogated
to the rights of William Lines, Inc. theorizing that (1) the fire
which gutted M/V Manila City was an excluded risk (2) it is a coassured under the Marine Hull Insurance Policy.
ISSUE: WON Prudential was subrogated to the rights of William
Lines, Inc. upon its payment of the total amount covered in the
insurance policy.

Batch 4 GO4 (2015)Z

RULING: YES. Clause 20 of the Work Order in question is clear in

the sense that it requires William Lines to maintain insurance on the
vessel during the period of dry-docking or repair. Concededly, such a
stipulation works to the benefit of CSEW as the ship repairer.
However, the fact that CSEW benefits from the said stipulation does
not automatically make it as a co-assured of William Lines. The
intention of the parties to make each other a co-assured under an
insurance policy is to be gleaned principally from the insurance
contract or policy itself and not from any other contract or agreement
because the insurance policy denominates the assured and the
beneficiaries of the insurance. The hull and machinery insurance
procured by William Lines, Inc. from Prudential named only "William
Lines, Inc." as the assured. There was no manifestation of any
intention of William Lines, Inc. to constitute CSEW as a co-assured
under subject policy. It is axiomatic that when the terms of a contract
are clear its stipulations control. Thus, when the insurance policy
involved named only William Lines, Inc. as the assured thereunder,
the claim of CSEW that it is a co-assured is unfounded.
DISPOSITIVE: Petition was denied and petitioner was not allowed to
limit its liability based on the contract.
CASE 16: MANILA MAHOGANY MANUFACTURING CORP. v. CA
(1967)
Author: Ralph Agbisit
Topic: Subrogation
DOCTRINE: The right of subrogation can only exist after the insurer
has paid the insured, otherwise the insured will be deprived of his
right to full indemnity. If the insurance proceeds are not sufficient to
cover the damages suffered by the insured, then he may sue the
party responsible for the damage for the remainder. To the extent of
the amount he has already received from the insurer, the insurer
enjoys the right of subrogation. Since the insurer can be subrogated
to only such rights as the insured may have, should the insured, after
receiving payment from the insurer, release the wrongdoer who
caused the loss, the insurer loses his rights against the latter. But in
such a case, the insurer will be entitled to recover from the insured,
whatever it has paid to the latter, unless the release was made with
the consent of the insurer.

INSURANCE || Batch 1 (Cases 9-17)

Batch 4 GO4 (2015)Z

FACTS: Manila Mahogany Manufacturing Corp. (petitioner) insured

its Mercedes Benz 4-door sedan with Zenith Insurance Corp.
(respondent). The insured vehicle was bumped and damaged by a
truck owned by San Miguel Corp. For the damage cause, respondent
paid petitioner P5,000 in an amicable settlement. Petitioners general
manager executed a Release of Claim, subrogating respondent to all
its right to action against San Miguel. Thereafter, respondent wrote
Insurance Adjusters Inc. to demand reimbursement, alleging that San
Miguel has already paid petitioner P4,500 for the damagers to
petitioners motor vehicle, as evidenced by a cash voucher and a
Release of Claim executed by the General Manager of petitioner,
discharging San Miguel from all actions, claims, demands the rights
of action that now exist or hereafter develop arising out of or as a
consequence of the accident. Respondent thus demanded from
petitioner, reimbursement of the sum of P4,500 paid by San Miguel
Corp. Petitioner refused.

right of action which the insured may have against the third person
whose negligence or wrongful act caused the loss.

ISSUE: Whether or not Zenith Insurance Corp. is subrogated in the

rights of Manila Mahogany Manufacturing Corp. against San Miguel
Corp?

Private respondents filed an action for damages against petitioner.

Trial Court awarded damages in favor of the private respondent;
Court of Appeals: affirmed the decision of the trial court

HELD: YES. If a property is insured and the owner receives the

indemnity from the insurer, it is provided in Art. 2207 of the New Civil
Code that the insurer is deemed subrogated to the rights of the
insured against the wrongdoer and if the amount paid by the insurer
does not fully cover the loss, then the aggrieved party is the one
entitled to recover the deficiency. Under this legal provision, the real
party in interest with regard to the portion of the indemnity paid is the
insurer and not the insured.

ISSUE: Even though the Respondent received a sum of money

(P35,000) from the insurer, can the latter collect from the petitioner

In this case, petitioner is entitled to keep the sum of P4,500 paid by

San Miguel under its clear right to file a deficiency claim for damages
incurred, against the wrongdoer, should the insurance company not
fully pay for the injury caused. However, when petitioner released
San Miguel from any liability, petitioners right to retain the sum of
P5,000 no longer existed, thereby entitling private respondents to
recover the same.
CASE 17: F.F. Cruz v CA Dennis Reyes
Topic: Subrogation

FACTS: The furniture manufacturing shop of petitioner was situated

adjacent to the residence of private respondents. Private respondent,
Gregorio Mable, first approached the petitioner's plant manager to
request that a firewall be constructed between the shop and private
respondents' residence. The request was repeated several times but
they fell on deaf ears.
A fire broke out in petitioner's shop. Petitioner's employees tried to
put out the fire, but their efforts proved futile. The fire spread to
private respondents' house. Both the shop and the house were razed
to the ground. The cause of the conflagration was never discovered.
Private respondents collected P35,000.00 on the insurance on their
house and the contents thereof.

RULING: The Court finds that petitioner is liable for damages to

private respondents, the fact that private respondents have been
indemnified by their insurer in the amount of P35,000.00 for the
damage caused to their house and its contents has not escaped the
attention of the Court. Hence, the Court holds that in accordance with
Article 2207 of the Civil Code the amount of P35,000.00 should be
deducted from the amount awarded as damages. Said article
provides:
Art. 2207. Xxx If the amount paid by the insurance company
does not fully cover the injury or loss, the aggrieved party shall
be entitled to recover the deficiency from the person causing
the loss or injury.
DISPOSITIVE: WHEREFORE, the decision of the Court of Appeals
is affirmed and modified and deducted the award since the insurer
had already paid the a portion of the amount claimed

DOCTRINE: in Article 2207. Upon payment of the loss incurred by

the insured, the insurer is entitled to be subrogated pro tanto to any
7