Facts: Pickup Truck hit Insured Mitsubishi Colt Lancer;

Insurer pays insured then claims against pickup owner

Mistaken Arguments (No Cause of Action):
Insurance Case Digests | Atty. Norianne Tan | 2015 0. Own damage clause - assumption that no third party
1. “Own Damage” Clause of Contract - does not referred to third party damage
2. Ejusdem Generis - does not cover collission/overturning due to third party

PAN MALAYAN INSURANCE CORP. v. CA

INSURANCE CASE DIGEST SET 1 Sec.
Correct 1
argument
SECTIONS 1-2 1. 2207: Subrogation arises by operation of law upon payment by insurer to the insured
CASE: 2. Not based on privy of contract
SEC 1 PANMALAY paid for the cost of repair of the Mitsubishi Colt
Lancer owned by CANLUBANG after it was hit by a pick-up owned
1. Pen Malayan Insurance Corp vs. CA-- BAGUYOT by respondent Fabie, driven by her unknown driver. PANMALAY
2. Federa Express Corp. vs. American Home Ass. Co.— subrogated the rights of CANLUBANG and filed a complaint against
CALANGI respondents. The RTC and CA dismissed the complaint for there is
3. Fireman’s Fund Insurance Co & Firestone Tire vs. Jamila, no cause of action. The Supreme Court ruled in favor of petitioner
Inc—ESTIPONA stating that if the insured property is destroyed or damaged through
4. FF Cruz & Co., Inc. vs. CA— LEDESMA the fault or negligence of a party other than the assured, then the
5. Rizal Surety & Ins. Co vs. Manila Railroad Co.-- LIM, insurer, upon payment to the assured, will be subrogated to the
AUBBREY rights of the assured to recover from the wrongdoer to the extent that
6. Pioneer Insurance & Surety Corp. vs CA— LIM, YVETTE the insurer has been obligated to pay.
7. Compañia Martima vs. Ins. Co. of North America – MIRANDA

SEC 2 FACTS:
 On December 10, 1985, PANMALAY filed a complaint for
1. CCC Ins. Corp vs. CA – PACAMARRA damages with the RTC of Makati against respondents
2. Assoc. of Baptists vs. Fieldmen’s Ins – RIVERA Erlinda Fabie and her driver. PANMALAY averred that it
3. Landicho vs. GSIS – SANTOS insured a Mitsubishi Colt Lancer car registered in the name
4. Mayer Steel Pipe Corp vs. CA – SORONGON of Canlubang Automotive Resources Corporation
5. Great Pacific Life vs. CA – TAMONDONG [CANLUBANG]; the insured car was hit by a pick-up owned
6. American Home Ass. vs. Tantuco Ent. – TORCUATOR by respondent and suffered damages in the amount of
7. Rizal Surety vs. CA – VELENA P42,052.00; that PANMALAY defrayed the cost of repair of
8. Perla Compania de Seguros Inc vs. CA – YOGUE the insured car and, therefore, was subrogated to the rights
9. Zenith Ins. Corp vs. CA—BAGUYOT of CANLUBANG against respondents and that, despite
10. Vector Shipping Corp vs. AHAC – CALANGI repeated demands, the latter failed and refused to pay the
claim of PANMALAY.
 PANMALAY clarified, among others, that the damage
caused to the insured car was settled under the "own
damage", coverage of the insurance policy.
 Respondents filed a Motion to Dismiss alleging that
PANMALAY had no cause of action against them. They
argued that payment 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.

Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
Insurance Case Digests | Atty. Norianne Tan | 2015
 RTC issued an order dismissing PANMALAY's complaint for
no cause of action. These orders were upheld by the Court
of Appeals.
 Consequently, PANMALAY filed the present petition for
review.
 PANMALAY contended, therefore, that its cause of action
against private respondents was anchored upon Article 2207
of the Civil Code, which reads:
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 violated the contract
ISSUES:
1. Whether or not the insurer PANMALAY may institute an
action to recover the amount it had paid to its assured in
settlement of an insurance claim against private respondents
as the parties responsible for the damage caused to the
insured vehicle?
HELD & RATIO:
1. YES, PANLAMAY can institute an action to recover the
amount it had paid to the insured car.
 Article 2207 of the Civil Code is founded on the well-
settled 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.
 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.
 The trial court held that payment by PANMALAY of
CANLUBANG's claim under the "own damage" clause of
the insurance policy was an admission by the insurer
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
that the damage was caused by the assured and/or its
representatives. On the other hand, the Court of Appeals
in applying the ejusdem generis rule held that Section III-
1 of the policy, which was the basis for settlement of
CANLUBANG's claim, did not cover damage arising from
collision or overturning due to the negligence of third
parties as one of the insurable risks. Both tribunals
concluded that PANMALAY could not now invoke Article
2207 and claim reimbursement from private respondents
as alleged wrongdoers or parties responsible for the
damage.
 When PANMALAY utilized the phrase "own damage" —
a phrase which, incidentally, is not found in the
insurance policy — to define the basis for its settlement
of CANLUBANG's claim under the policy, it simply meant
that it had assumed to reimburse the costs for repairing
the damage to the insured vehicle.
 Neither is there merit in the Court of Appeals' ruling that
the coverage of insured risks under Section III-1 of the
policy does not include to the insured vehicle arising
from collision or overturning due to the negligent acts of
the third party. This is an erroneous interpretation of the
provisions of the section, and also violates a
fundamental rule on the interpretation of property
insurance contracts.
 It is a basic rule in the interpretation of contracts that the
terms of a contract are to be construed according to the
sense and meaning of the terms which the parties
thereto have used. In the case of property insurance
policies, the evident intention of the contracting parties.
 PANMALAY contends that the coverage of insured risks
under Section III-1 of the policy is comprehensive
enough to include damage to the insured vehicle arising
from collision or overturning due to the fault or
negligence of a third party. CANLUBANG is apparently
of the same understanding. Based on a police report
wherein the driver of the insured car reported that after
the vehicle was sideswiped by a pick-up, the driver
thereof fled the scene, CANLUBANG filed its claim with
PANMALAY for indemnification of the damage caused to
Insurance Case Digests | Atty. Norianne Tan | 2015
its car. It then accepted payment from PANMALAY, and
executed a Release of Claim and Subrogation Receipt in
favor of latter.
 Considering that the very parties to the policy were not
shown to be in disagreement regarding the meaning and
coverage of Section III-1, it was improper for the
appellate court to indulge in contract construction, to
apply the ejusdem generis rule, and to ascribe meaning
contrary to the clear intention and understanding of
these parties.
 The Court, furthermore, finds it noteworthy that the
meaning advanced by PANMALAY regarding the
coverage of Section III-1(a) of the policy is undeniably
more beneficial to CANLUBANG than that insisted upon
by respondents herein. By arguing that this section
covers losses or damages due not only to malicious, but
also to negligent acts of third parties, PANMALAY in
effect advocates for a more comprehensive coverage of
insured risks. And this, in the final analysis, is more in
keeping with the rationale behind the various rules on
the interpretation of insurance contracts favoring the
assured or beneficiary so as to effect the dominant
purpose of indemnity or payment.
FINAL VERDICT: The petition is granted. Petitioner's complaint for
damages against private respondents is hereby reinstated and the
case was remanded to the lower court for trial on the merits.
Additional information:
 General Rule: The insurer will be subrogated to the rights of
the assured to recover from the wrongdoer.
 Exception to the rule:
1. If the assured by his own act releases the wrongdoer for
the loss or damage
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, the settlement is
binding on both the assured and the insurer, and the
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
latter cannot bring an action against the carrier on his
right of subrogation.
3. Where the insurer pays the assured for a loss, which is
not a risk, covered by the policy, thereby effecting
"voluntary payment".
FEDERAL EXPRESS CORP. v. AMERICAN HOME ASS. CO.
G.R. No. 150094
(Sec. 1; Subrogation; Notice is a Condition Precedent)
CASE:
Upon payment of insurance proceeds to Smithkline (the
consignee), respondents AHAC and Philam (the insurers) exercised
their subrogation rights and filed an action for damages against
FedEx and Cargohaus (the carriers), imputing negligence on either
or both of them for the loss or damage of 109 cartons of veterinary
biologicals. The vaccines were stored in a ‘cool room’ with two (2)
air-conditioners instead of a refrigerator, despite the instructions and
warning that the goods were ‘perishable’ and must be ‘refrigerated.’
The trial court held both carriers to be solidarily liable for the
loss. FedEx appealed to CA alleging respondents have no
personality to sue since the insured under the policy is Burlington.
The case was dimissed for lack of merit; hence, this petition for
review on certiorari.
SC upheld that there was a cause of action. Smithkline is the
proper payee for being the holder of the Certificate of Insurance (i.e.,
bearer instrument based on evidence). Thus, there was a valid right
of the consignee to be subrogated. Nonetheless, SC granted the
petition and ruled that the respondents’ claim and right of action are
already barred by prescription for failure to file any written notice or
complaint regarding its claim for damage/loss to the subject cargo
within the period prescribed in the Warsaw Convention and/or the
airway bill. In this jurisdiction, the filing of a claim with the carrier
within the time limitation therefor actually constitutes a condition
precedent to the accrual of a right of action against a carrier for loss
of or damage to the goods. Failure to comply with such stipulation
bars recovery for the loss or damage suffered. Subrogation Receipt = Sufficient
Insurance Policy = Not Necessary!!
SmithKline - insured
AHAX and Philam - insurers
FedEx - wrongdoers
 Insurance Case Digests | Atty. Norianne Tan | 2015
FACTS:
 26 January 1994: SMITHKLINE Beecham of Nebraska, USA
delivered to BURLINGTON Air Express (agent of Petitioner
FEDERAL EXPRESS Corporation) a shipment of 109
cartons of veterinary biologicals for delivery to consignee
SMITHKLINE and French Overseas Company in Makati
City.
o It was covered by Burlington Airway Bill No.
11263825 with the words, ‘REFRIGERATE WHEN
FedEx - carrier/wrongdoer NOT IN TRANSIT’ and ‘PERISHABLE’ stamped on
AHAC - insurer its face.
Burlington - insured o Burlington insured the cargoes for $39,339.00 with
Smithkline - shipper
American Home Assurance Company (AHAC).
 On the following day, Burlington turned over the custody of
said cargoes to FedEx which transported the same to
Manila.
Delivery
Smithkline -> Burlington
o 29 January 1994: The first shipment of 92 cartons
arrived in Manila and was immediately stored at
CARGOHAUS Inc.’s warehouse.
o 31 January 1994: Two days later, the second
shipment of 17 cartons arrived and was immediately
stored at the warehouse as well.
 10 February 1994: While he was about to cause the release
of the subject cargoes, Dario C. Dioneda, a non-licensed
custom’s broker assigned by GETC Cargo Int’l Corp. (i.e.,
the company hired by the consignee to facilitate the release
of its cargoes from the Bureau of Customs), found out that
the cartons were stored only in a ‘cool room’ with two (2)
air-conditioners running, instead of placing it in a
refrigerator.
o Reason: The cartons where the vaccines were
contained specifically indicated that it should not be
subjected to hot or cold temperature. (as explained
by an employee of Cargohaus)
o Result: Upon examination of the samples taken and
brought by Smithkline to the Bureau of Animal
Industry of the Department of Agriculture in the
Philippines, it was discovered that the ‘ELISA
reading of vaccinates sera are below the positive
reference serum.’
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
 Consequently, Smithkline abandoned the shipment; declared
‘total loss’ for the unusable shipment; and filed a claim with
AHAC through its representative in the Philippines, the
PHILAM Insurance Co., Inc.
o Philam recompensed Smithkline for the whole
insured amount of $39,339.00
 Subsequently, respondents (AHAC & Philam) filed an action
for damages against FedEx and Cargohaus, imputing
negligence on either or both of them in the handling of the
cargo.
o Trial Court held herein petitioner, FedEx, solidarily
liable for the loss.
o CA dismissed the appeal and found petitioner’s
claim that respondents had no personality to sue to
be devoid of merit.
o Hence, this petition for review on certiorari.
ISSUES:
1. Whether or not there is personality to sue when the payment
was made by respondents to Smithkline, albeit the insured
under the policy is Burlington.
2. Whether or not FedEx is liable for damage to or loss of the
insured goods.
HELD & RATIO:
1. YES, the insurer’s subrogatory right to sue for recovery
under the bill of lading in case of loss or damage to the
cargo is jurisprudentially upheld.
 Smithkline, being the holder of the Certificate of
Insurance and having an insurable interest in the
goods, is the proper payee.
o The wording of the Certificate (i.e., “payable
to order x x x upon surrender of this
Certificate”) conveys the right of collecting or
of being indemnified for loss or damage to
the insured shipment, as fully as if the
property were covered by a special policy
in the name of the holder itself.
o At the back of the Certificate appears the
signature of the representative of Burlington,
Insurance Case Digests | Atty. Norianne Tan | 2015
signifying that the document has been duly
indorsed in blank and is deemed a bearer
instrument.
 Upon payment to Smithkline (the consignee) of an
indemnity for the loss/damage, the insurer’s
(respondents’) entitlement to subrogation pro tanto
– being of the highest equity – equips it with a cause
of action in case of a contractual breach or
negligence.
o When Smithkline received the insurance
proceeds, it executed a subrogation receipt
in favor of respondents, authorizing them “to
file claims and begin suit against any such
carrier, vessel, person, corporation or
government.”
2. NO, FedEx is not liable since the respondents’ claim and
right of action are already barred by prescription.
 The respondents, and even the consignee, never
filed with the carrier any written notice or complaint
regarding its claim for damage of or loss to the
subject cargo within the period required by the
Warsaw Convention and/or in the airway bill.
o In this jurisdiction, the filing of a claim with
the carrier within the time limitation therefor
actually constitutes a condition precedent
to the accrual of a right of action against a
carrier for loss of or damage to the goods.
FINAL VERDICT: Petition GRANTED; assailed decision
REVERSED insofar as it pertains to Petitioner FedEx.
Additional information:
 The requirement of giving notice of loss or of injury to the
goods is a reasonable condition precedent; it does not
constitute a limitation of action.
 The fundamental reasons for such a stipulation are (1) to
inform the carrier that the cargo has been damaged, and that
it is being charged with liability therefor; and (2) to give it an
opportunity to examine the nature and extent of the injury
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
while the matter is fresh and easily investigated. This equips
the carrier to safeguard itself from false and fraudulent
claims.
FIREMAN’S FUND INSURANCE CO. & FIRESTONE TIRE v.
JAMILA, INC.
Sec. 1
CASE:
An incident occurred when Fireman properties of Firestone
were lost due to acts of its employees who connived with Jamila’s
security guard. Prior to this, Firestone and Jamila entered into a
contract where the latter supplies security guards to the former with a
provision that the latter assumes responsibility for the acts of its
guards. A bond was secured by Jamila and executed by First QC
Insurance (surety) to guarantee Jamila’s obligations under the said
contract. Later on, Fireman’s Fund (insurer) was subrogated to
Firestone’s right to get reimbursement from Jamila for Jamila and
First QC Insurance’s failure to pay the amount of the loss despite
repeated demands. A complaint was then filed by Firestone and
Fireman’s Fund against Jamila for the recovery of the sum of money.
The court resolved this by determining if there was a cause of action
against Jamila. The court then found that Firestone had no cause of
action as it was only a nominal party and had already been
indemnified. However, it found that Fireman’s Fund had cause of
action as sanctioned by Article 2207. Fireman’s Fund, as insurer, is
entitled to go after Jamila as it was the one who violated its
contractual commitment to answer for the loss insured against. Upon
payment of the loss, Fireman’s Fund as the insurer, is entitled to
subrogation “pro tanto” to any right of action which Firestone, as the
insured, may have against Jamila whose negligence or wrongful act
caused the loss. Cause of Action
= insurer YES
= insured NO
FACTS: - bayad na eh subrogated na!
 Jamila & Co., Inc. or the Veterans Philippine Scouts Securty
Agency contracted to supply security guards to Firestone Tire
and Rubber Company of the Philippines.
Jamila - wrongdoer
QC Insurance - guarantor
Firestone - insured
Fireman’s Fund - insurer
Insurance Case Digests | Atty. Norianne Tan | 2015
o Jamila assumed responsibility for acts of its security
guards.
o First Quezon City Insurance Co. executed a bond
(P20,000.00) to guarantee Jamila’s obligations under said
contract.
 18 May 1963: Properties of Firestone worth P11,925.00 were
lost due to acts of its employes who connived with Jamila’s
security guard.
 Fireman’s Fund & Insurance Co. (insurer) paid Firestone said
amount lost.
 Fireman’s Fund was subrogated to Firestone’s right to get
reimbursement from Jamila.
o Jamila and First QC Insurance (surety) failed to pay
amount of the loss in spite of repeated demands.
 Fireman’s Fund and Firestone filed a complaint against Jamila
for the recovery of the sum of P11,925.00 plus interest,
damages, and attorney’s fees.
o Firestone and Fireman’s Fund’s Argument/s:
 Cited Article 2207 (“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 violated the contract.”).
 1 June 1965: Firestone and Jamila entered into
“contract of guard services”.
[No copy of this contract was ever
found annexed to the complaint]
o Jamila’s argument:
 Legal subrogation under Article 2207 requires
debtor’s consent and that it takes place in the cases
mentioned in Article 1302, Civil Code.
 No subrogation since according to plaintiffs the
contract between Jamila and Firestone was entered
into on 1 June 1965 but the loss complained of
occurred on 18 May 1963.
ISSUES:
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
3. Whether or not the complaint of Firestone and Fireman’s
Fund states a cause of action against Jamila? YES and NO.
HELD & RATIO:
3. NO, Firestone has no cause of action.
 Firestone is only really a nominal party and had
already been indemnified the loss which it sustained.
 It only joined as a party-plaintiff in order to help
Fireman’s Fund recover the amount of the loss from
Jamila and First QC Insurance.
 Tacit assignment by Firestone of its cause of action
against Jamila for breach of contract.
4. TYES, Fireman’s Fund has cause of action.
 This is squarely sanctioned by Article 2207 (refer to
Facts).
o As insurer, Fireman’s Fund is entitled to go
after the person/entity that violated its
contractual commitment to answer for the
loss insured against.
o Subrogation has been referred to as the
doctrine of substitution. (“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”). It is a normal incident of indemnity
insurance. Upon payment of the loss, the
insurer (in this case, Fireman’s Fund) 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.
o The right of subrogation is of the highest
st
equity. The loss in the 1 instance is that of
the insured but after
reimbursement/compensation, it becomes
the loss of the insurer.
FINAL VERDICT: Lower court’s dismissal set aside with costs
against Jamila & Co., Inc.
 Cruz - Wrongdoer (furniture manufacturer)
Mable - Insured (request to put up firewall)
Insurance Case Digests | Atty. Norianne Tan | 2015 Insurer - partial payment (35k)
Damages awarded - 120k
Appeal Assignment of Error - reduce 35k
SC: Tama. REduce 35k
FF Cruz & Co., Inc vs. CA. ground. The cause of the conflagration was never
Sec 1. discovered. The National Bureau of Investigation found
specimens from the burned structures negative for the
CASE: presence of inflammable substances.
Petitioner owns a furniture manufacturing shop adjacent to  Subsequently, private respondents collected P35,000.00
Respondent’s residential building. Respondent has constantly telling on the insurance on their house and the contents thereof.
Petitioner of his desire to have a firewall built between their property
 Respondents filed an action for damages against
and each time he has been ignored. A fire broke out and
petitioners and won the case and were awarded
Respondent’s property was burned down. Respondent sued
Petitioner for damages and won since Petitioner failed to construct a P120,000 in damages.
firewall in violation of an ordinance requiring him to do so.  Petitioner’s appealed and in their MR in the CA one of their
Respondent seeks to collect the amount from Petitioner but the contentions was that the CA erred in not deducting the
Court of Appeals reduced it by P35,000 because he was indemnified P35,000 that Respondent’s collected from the Insurance.
this amount by his insurer.
The Court cited Art 2207 of the Civil Code, which states that
if a property is insured and indemnified by the insurance company ISSUES:
then the insurer is subrogated to the rights of the insured. If 4. Whether or not the P35,000 should be deducted from the
indemnity is not enough to cover the damage or injury then the damage award?
Insured can only collect the deficiency from the person who caused
the injury. Thus the real party in interest in this case is the Insurer but HELD & RATIO:
it is his discretion whether he wants to collect from Petitioner.
Respondent can only collect the deficiency. 5. While this Court finds that petitioner is liable for damages
to private respondents as found by the Court of Appeals,
the fact that private respondents have been indemnified
by their insurer in the amount of P35,000.00 for the
FACTS: damage caused to their house and its contents has not
 The furniture manufacturing shop of petitioner in escaped the attention of the Court. Hence, the Court
Caloocan City was situated adjacent to the residence of holds that in accordance with Article 2207 of the Civil
private respondents. Sometime in August 1971, private Code the amount of P35,000.00 should be deducted from
respondent Gregorio Mable first approached Eric Cruz, the amount awarded as damages. Said article provides:
petitioner's plant manager, to request that a firewall be  Art. 2207. If the plaintiffs property has been
constructed between the shop and private respondents' insured, and he has received indemnity from the
residence. The request was repeated several times but insurance company for the injury or loss arising
they fell on deaf ears. out of the wrong or breach of contract complained
 In the early morning of September 6, 1974, fire broke out of, the insurance company is subrogated to the
in petitioner's shop. Petitioner's employees, who slept in rights of the insured against the wrongdoer or the
the shop premises, tried to put out the fire, but their efforts person who violated the contract. If the amount
proved futile. The fire spread to private respondents' paid by the insurance company does not fully
house. Both the shop and the house were razed to the cover the injury or loss, the aggrieved party shall

Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
Insurance Case Digests | Atty. Norianne Tan | 2015
be entitled to recover the deficiency from the
person causing the loss or injury.
6. Under Article 2207, the real party in interest with regard to
the indemnity received by the insured is the insurer [Phil.
Air Lines, Inc. v. Heald Lumber Co., 101 Phil. 1031,
(1957).] Whether or not the insurer should exercise the
rights of the insured to which it had been subrogated lies
solely within the former's sound discretion. Since the
insurer is not a party to the case, its identity is not of
record and no claim is made on its behalf, the private
respondent's insurer has to claim his right to
reimbursement of the P35,000.00 paid to the insured.
FINAL VERDICT: WHEREFORE, in view of the foregoing, the
decision of the Court of Appeals is hereby AFFIRMED with the
following modifications as to the damages awarded for the loss of
private respondents' house, considering their receipt of
P35,000.00 from their insurer: (1) the damages awarded for the
loss of the house is reduced to P35,000.00; and (2) the right of
the insurer to subrogation and thus seek reimbursement from
petitioner for the P35,000.00 it had paid private respondents is
recognized.
Additional Info:
There was also a discussion of res ipsa loquitur, regarding the acts
of petitioner. Res Ipsa Loquitur is a principle that states that the
occurrence of an accident implies negligence however the Court
decided not to pursue the issue since Petitioner violated an
Ordinance requiring a firewall to be constructed.
RIZAL SURETY & INSURANCE COMPANY v. MANILA
RAILROAD COMPANY and MANILA PORT SERVICE
Sec. 1
Suter - insured (press machines)
CASE:
Rizal surety - insurer
Manila Port - wrongdoer
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
Shipment for consignee, Suter Inc. was loaded to the vessel
SS Flying trader. The cargo contained 6 cases of an offset press
machine. It was insured by petitioner Rizal Surety. The goods arrived
in Manila in good condition and put under the custody of respondent
Manila Port Service. However, when the goods were about to be
transferred to the consignee’s truck, one of the 6 cases was dropped
by respondent’s crane. As a result, Rizal Surety was required to pay
the consignee the amount of P16,500.00 for the goods damaged.
Rizal Surety wants to recover from respondent the full amount it paid
to consignee under the insurance contract. However, the lower court
held that Rizal Surety is entitled only to P500 due to the limitation
annotated in the delivery receipt for the goods. Clause 15 of the
management contract which appeared at the dorsal part of the
Delivery Permit contained an important notice to the effect that the
Company liability is limited only to P500.00 per package, unless the
value of the goods is otherwise, specified, declared or manifested
and the corresponding arrastre charges have been paid.
Under Art. 2207 of the Civil Code, 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." As such, Plaintiff-appellant Insurance
Company, having been subrogated merely to the rights of the
consignee, 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 toP500.00.
FACTS:
 The vessel, SS Flying Trader, loaded on board at Italy, a
shipment for consignee Suter Inc., bound for Manila
Philippines.
 The cargo contained 6 cases of OMH, Special Single Colour
Offset Press Machine. The shipment was insured by
petitioner Rizal surety.
 The vessel arrived at the Port of Manila in good condition. It
was placed in the custody of defendant Manila Port Service
as arrastre operator.
 However, in the course of the handling, one of the 6 cases
was dropped by the crane of the Manila Port Service while
Insurance Case Digests | Atty. Norianne Tan | 2015
the same was being lifted and loaded by the crane into the
consignee's truck and as a consequence, the machine was
heavily damaged.
 As a result, plaintiff Rizal Surety was required to pay the
consignee, Suter Inc. the amount of P16,500.00,
representing damages by way of costs of replacement parts
and repairs to put the machine in working condition.
 Incidentally, clause 15 of the management contract which
appeared at the dorsal part of the Delivery Permit contained
an important notice to the effect that the Company liability is
limited only to P500.00 per package, unless the value of the
goods is otherwise, specified, declared or manifested and
the corresponding arrastre charges have been paid.
 This delivery permit is presented to claim the delivery from
Manila Port Service.
 Plaintiff Rizal Surety is now claiming from defendant Manila
Port Service the reimbursement of the total amount it paid in
full to the consignee under the insurance contract in view of
the Art. 2207 of the Civil Code which provides that the
insurance company shall be subrogated to the rights of the
insured.
 The lower court held that Rizal Surety’s entitlement is limited
only up to P500 as stated in the delivery permit.
ISSUES:
Whether or not Rizal Surety is entitled to the amount paid by it in full,
by virtue of the insurance contract.
HELD & RATIO:
NO, it can recover P500 only. Art. 2207 provides the following:
"Art. 2207. If the plaintiff's 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 wrong-doer or the person who has violated the contract.
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."
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
Under the provision, Plaintiff-appellant Insurance Company, 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).
Having taken delivery of the shipment aforementioned by virtue of a
delivery permit, incorporating thereto, paragraph 15 of the
management contract, the consignee became bound by said
provisions, and because it could have avoided the application of said
maximum limit of P500.00 per package by stating the true value
thereof in its claim for delivery of the goods in question, which,
admittedly, the consignee failed to do.
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.
FINAL VERDICT: Defendants were jointly and severally to pay
plaintiff-appellants to P500.00 with legal interest thereon from
January 31, 1962, the date of the filing of the complaint.
Pioneer Insurance & Surety Corporation vs. Court of Appeals
GR No. 841997; 84157; July 28, 1989
Section 1
CASE:
Jacob S. Lim owner of Southern Air Lines bought 2 aircrafts
plus spare parts from Japan Domestic Airlines. Pioneer Insurance
became surety to the agreement. Unfortunately, Lim defaulted in
payment which prompted Pioneer to pay JDA. The amount paid by
Pioneer was reimbursed by their reinsurer Malayan Insurance.
Pioneer filed a case against Lim holding him liable with the
amount paid to JDA. The SC ruled that since the indemnity was paid
by the reinsurer, the case should be filed by the same, being the real
party in interest having subrogated in the rights of Pioneer.
Lim - wrongdoer
Pioneer Insurance - surety/insurer
Japan Domesticc Airlines - insured
Malayan Insurance - reinsurer
Malayan paid Pioneer already
Insurance Case Digests | Atty. Norianne Tan | 2015
FACTS:
 Jacob S. Lim was engaged in the airline business as owner-
operation of Southern Air Lines (SAL) a single
proprietorship.
 On May 17, 1965, Japan Domestic Airlines (JDA) and Lim
entered into and executed a sales contract for the sale and
purchase of two (2) DC-3A Type Aircrafts and one (1) set of
necessary spare parts for total agreed price of US
$109,000.00 to be paid in installments. Pioneer Insurance
and Surety Corporation acted as surety in the said
transaction.
 It was also evident in the facts that Border Machinery and
Heavy Equipment Company, Inc., Francisco and Modesto
Cervantes and Constancio Maglana contributed some funds
used in the purchase of the above aircrafts and spare parts
which represents their contribution in forming a new
corporation with Lim. These same people also executed 2
indemnity agreements in favor of Pioneer which stipulates
that the indemnitors principally agree and bind themselves to
jointly and severally indemnify Pioneer for any loss it may
suffer. While Lim executed a deed of chattel mortgage using
the two aircrafts as security in favor of Pioneer.
 Lim defaulted on his subsequent installments payments
prompting JDA to request payments from the surety. Pioneer
paid a total sum of P298,626.12.
 Pioneer then filed a petition for the extrajudicial foreclosure
of the said chattel mortgage. The Cervanteses and Maglana
however, filed a third party claim alleging that they are co-
owners of the aircrafts. They also filed cross-claims against
Lim alleging that they are not privy with the chattel mortgage
and hence they are seeking for damages for being exposed
to litigation and for recovery of sum of money they gave Lim
in purchasing the aircrafts.
 During the pendency of the case Pioneer collected the
amount of P295,000 from a reinsurer (Malaya Insurance) of
the Bond executed in favor of the JDA.
 The Lower Court ruled holding Lim liable to pay Pioneer but
dismissed its complaint with the other defendants. On
Appeal the CA dismissed the complaint against all
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
defendants on the ground that Pioneer had already collected
the proceeds of the reinsurance on its bond and that it
cannot represent a reinsurer to recover the amount in
question.
ISSUES:
1. W/N PIONEER CAN REPRESENT THE REINSURER IN
THE CASE AT BAR EVEN AFTER RECEIVING THE
PROCEEDS OF THE SAME?
HELD AND RATIO:
 The applicable law in this case is Art. 2207 of the new Civil
Code which states that: If the plaintiff’s property has been
insured, and he has received 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 violated the contract. 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.
 Hence in the case of Phil Air Lines vs Herald Lumber the
Court explained that under this legal provision, the real party
in interest of the indemnity paid is the insurer and not the
insured.
 In this case Pioneer is suing in its own name and not as an
attorney-in-fact of the reinsurer. Based on the provision
above, Pioneer is not the real party in interest since it has
received the proceeds from the reinsurer, hence it was
correct for the CA to dismiss the case against respondents
2. W/N PIONEER CAN CLAIM FROM THE COUNTER
INDEMNITORS?
 No the trial court was correct in ruling that the indemnitors
(Cervantes, et al) are not liable to Pioneer.
 Pioneer having foreclosed the chattel mortgage on the
planes and spare parts no longer has further action against
Insurance Case Digests | Atty. Norianne Tan | 2015
the defendants as indemnitors to recover any unpaid
balance of the price. The indemnity agreement was ipso jure
extinguished upon the foreclosure of the chattel mortgage. -
This is in accordance with Recto Law.
3. W/N THERE IS A DE FACTO PARTNERSHIP CREATED
AMONG LIM, BORDER MACHINERY, CERVANTES AND
MAGLANA? W/N THEY SHOULD BE PAID WITH THE
COUNTER CLAIMS ASKED
 As a general rule, a de facto partnership was created when a
corporation fails to incorporate itself. The effect of this is that
all supposed to be incorporators will share on the profits and
losses of the de facto partnership.
 Although in this case there was no de facto partnership since
it was evident that Lim had no intention to form a
corporation. After receiving the aggregate amount of
P178,997.14 from Cervantes et al. Lim refused comply and
ignored to set up the corporation. That Lim acted on his own
in the transaction involving the airplane and spareparts.
Hence it is only right in this instance to require Lim to pay
cross party plaintiffs P184,878.74 plus moral/exemplary
damages and attorney’s fees.
COMPAÑIA MARITIMA vs. INSURANCE COMPANY OF NORTH
AMERICA
Effect of Assignment by insured of its rights against third party to
insurer
CASE:
Macleod and Company of the Philippines (Macleod)
contracted the services of Compañia Maritima for the shipment of
2,645 bales of hemp to Manila and subsequently to Boston,
Massachusetts. Two barges loaded said bales of hemp and
proceeded to a wharf where they would await SS Bowline Knot on
which the hemp was to be loaded. Unfortunately, however, one of
the two barges sank resulting in the damage or loss of the hemp
loaded therein. The damaged hemp was brought to a plantation for
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
cleaning, washing, redrying and reconditioning. A total loss
amounted to P60,421.02. Since the hemp was insured with the
Insurance Company of North America (Insurance Company),
Macleod filed a claim against it for the total value of the loss incurred
and the insurance company in turn, paid such amount. The
document of such transaction not only served as the receipt but also
a subrogation agreement, wherein Macleod assigned to the
insurance company its rights over the insured and damaged cargo.
The Insurance company failed to recover the same amount from
Compañia Maritima, hence this present action. The issue is whether
or not Insurance Company of North America can sue Compañia
Maritima under its insurance contract as assignee of Macleod. Yes,
the insurance company can recover from the carrier as assignee of
the owner of the cargo. Where the insured (shipper) has assigned its
rights against the carrier to the insurance company, which paid the
amount represented by the loss, the case is not between the insured
and the insurance company but one between the shipper and the
carrier because the insurance company merely stepped into the
shoes of the shipper. And if the shipper has a direct cause of action
against the carrier on account of the damage to cargo, such action
can be asserted or availed of by the insurer as a subrogee of the
insured and the carrier cannot set up as a defense any defect in the
insurance policy because it is not a privy to it.
FACTS:
 Macleod and Company of the Philippines contracted by
telephone the services of the Compañia Maritima, a shipping
corporation, for the shipment of 2,645 bales of hemp from
the former's Sasa private pier at Davao City to Manila and
for their subsequent transhipment to Boston, Massachusetts,
U.S.A. on board the S.S. Steel Navigator.
 Oral contract was later on confirmed by a formal and written
booking.
 Two barges loaded the bales of hemp, left Macleod's wharf
and proceeded to and moored at the government's marginal
wharf in the same place to await the arrival of the S.S.
Bowline Knot belonging to Compañia Maritima on which the
hemp was to be loaded.
Insurance Case Digests | Atty. Norianne Tan | 2015
 At the early hours of October 30, LCT No. 1025 (one of the
two loaded barges) sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein.
 The damaged hemp was brought to Odell Plantation in
Madaum, Davao, for cleaning, washing, reconditioning, and
redrying. A total of 2,197.75 piculs of the reconditioned hemp
out of the original 2,324 piculs. The value of the
reconditioned hemp was reduced to P84,887.28, or a loss in
value of P31,947.72.
 Adding to this last amount the sum of P8,863.30
representing Macleod's expenses in checking, grading,
rebating, and other fees for washing, cleaning and redrying
in the amount of P19.610.00, the total loss adds up to
P60,421.02.
 All abaca shipments of Macleod, including the 1,162 bales
loaded on the sunken carrier, were insured with the
Insurance Company of North America against all losses and
damages.
 Macleod filed a claim for the loss it suffered as above stated
with said insurance company, and after the same had been
processed, the sum of P64,018.55 was paid, which was
noted down in a document which aside from being a receipt
of the amount paid, was a subrogation agreement between
Macleod and the insurance company wherein the former
assigned to the latter its rights over the insured and
damaged cargo.
 The insurance company tried to recover the amount it paid to
Macleod (P60,421.02 the amount supported by receipts) but
all efforts were futile. Hence, this present action.
ISSUES:
5. Whether or not Insurance Company of North America can
sue Compañia Maritima under its insurance contract as
assignee of Macleod.
HELD & RATIO:
7. YES, the insurance company can recover from the carrier as
assignee of the owner of the cargo.
 Since the cargo that was damaged was insured with
respondent company and the latter paid the amount
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
represented by the loss, it is but fair that it be given
the right to recover from the party responsible for the
loss.
 The instant case, therefore, is not one between the
insured and the insurer, but one between the
shipper and the carrier, because the insurance
company merely stepped into the shoes of the
shipper. And since the shipper has a direct cause of
action against the carrier on account of the damage
of the cargo, no valid reason is seen why such
action cannot be asserted or availed of by the
insurance company as a subrogee of the shipper.
 Furthermore, the carrier cannot set up as a defense
any defect in the insurance policy not only because
it is not a privy to it but also because it cannot avoid
its liability to the shipper under the contract of
carriage which binds it to pay any loss that may be
caused to the cargo involved therein.
FINAL VERDICT: Petitioner is denied.
SECTION 2
CCC INSURANCE CORPORATION v. COURT OF APPEALS
Sec. 2: liberal interpretation of the insurance policy for the
benefit of the party insured, and strictly against the insurer
CASE:
Private respondent availed of a car insurance policy over his Dodge
Kingsway from CCC Insurance Corporation. The insured car, while
being driven by his driver, met a vehicular accident. The insurance
claim was denied by the insurance company on the ground that the
one driving the car during the accident was not an “authorized driver”
as provided in the insurance contract, The Supreme Court ruled in
favor the insured. The driver’s license was genuine and was
regularly issued by the government regulatory agency. The insured
Insurance Case Digests | Atty. Norianne Tan | 2015
was entitled to rely on the license. In construing an insurance
contract, there is liberal interpretation of the insurance policy for
the benefit of the party insured, and strictly against the insurer
FACTS:
 Private respondent Carlos F. Robes took an insurance, with
the CCC Insurance Corporation, on his Dodge Kingsway car
against loss or damage through accident for an amount not
exceeding P8,000.00.
 During the effectivity of the policy, the insured vehicle, while
being driven by the owner's driver (Domingo Reyes),
became involved in a vehicular collision along Rizal Avenue
Extension, Potrero, Malabon, Rizal.
 The car was damaged, and the repair was estimated to cost
P5,300.00.
 As the insurance company refused either to pay for the
repair or to cause the restoration of the car to its original
condition, Robes instituted a civil case in the CFI Rizal for
recovery not only of the amount necessary for the repair of
the insured car but also of actual and moral damages,
attorneys' fees and costs.
 Resisting plaintiff's claim, the insurance company disclaimed
liability for payment, alleging that there had been violation of
the insurance contract because the one driving the car at the
time of the incident was not an "authorized driver."
 The insurer argued that the one driving the insured vehicle at
the time of the accident was not an authorized driver thereof
within the purview of the following provision of the insurance
policy:
“AUTHORIZED DRIVER:
Any of the following:
(a) The insured;
(b) Any person driving on the Insured's order or with his
permission, provided that the person driving is permitted in
accordance with licensing laws or regulations to drive the
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
motor vehicle covered by this Policy, or has been so
permitted and is not disqualified by order of a court of law or
by reason of any enactment or regulation from driving such
Motor Vehicle. (Emphasis ours)”
ISSUES:
1. Whether or not the insurance company is liable to pay the
insurance claim?
HELD & RATIO:
1. YES, as correctly found by the CA, the driver’s license was
genuine and this finding of fact is now conclusive and may
not be questioned in this appeal.
 Nevertheless, the appellant insurer insists that,
under the established facts of this case, Reyes,
being admittedly one who cannot read and write,
who has never passed any examination for drivers,
and has not applied for a license from the duly
constituted government agency entrusted with the
duty of licensing drivers, cannot be considered an
authorized driver.
 As the law stood in 1961, when the claim arose, the
examinations could be dispensed with in the
discretion of the Motor Vehicles Office officials.
 There is no proof that the owner of the automobile
knew that the circumstance surrounding such
issuance showed that it was irregular.
 The issuance of the license is proof that the Motor
Vehicles Office official considered Reyes, the driver
of the insured- appellee, qualified to operate motor
vehicles, and the insured was entitled to rely upon
such license.
 The weight of authority is in favor of a liberal
interpretation of the insurance policy for the
benefit of the party insured, and strictly against
the insurer.
Insurance Case Digests | Atty. Norianne Tan | 2015
FINAL VERDICT: WHEREFORE, the decision of the Court of
Appeals is affirmed, with costs against appellant CCC Insurance
Corporation.
ASSOCIATION OF BAPTISTS FOR WORLD EVANGELISM, INC.,
v. FIELDMEN’S INSURANCE CO., INC.,
Sec. 2
CASE:
Association of Baptists has an insurable interest in a vehicle
insured with Fieldmen’s Insurance. Said vehicle was placed at a
service station to be displayed for sale. Thereafter, one of the station
boys, together with his companion, took the said vehicle for a joy ride
without permission, authority or consent of either the plaintiff or its
representative, and while the same was in his possession he
bumped it against an electric post resulting in damages.
W/N there must be prior criminal conviction for theft for the
damage to the vehicle to be compensable under Fieldmen’s Private
Car Comprehensive Policy
NO. Prior conviction for theft is not necessary to make an
insurer liable under the theft clause of the policy. The
Comprehensive Policy issued by the insurance company includes
loss of or damage to the motor vehicle by "burglary . . . or theft." It is
settled that the act of taking the vehicle for a joy ride constitutes
theft within the meaning of the insurance policy and that recovery for
damage to the car is not barred by the illegal use of the car by one of
the station boys. In a civil action for recovery on an automobile
insurance, the question whether a person using a certain automobile
at the time of the accident stole it or not is to be determined by a
fair preponderance of evidence and not by the rule of criminal
law requiring proof of guilt beyond reasonable doubt. Besides,
there is no provision in the policy requiring prior criminal conviction
for theft.
FACTS:
 Association of Baptists (plaintiff) has an insurable interest in
a Chevrolet Carry-all 1955 Model owned by Reverend
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
Clinton Bonnel. Such vehicle is insured with Fieldmen’s
Insurance Co., Inc. under its Private Car Comprehensive
Policy against loss or damage up to the amount of
P5,000.00.
 In 1961 the vehicle was placed at the Jones Monument
Mobilgas Service Station at Davao City, under the care of
said station’s operator so that it could be displayed as for
sale.
 In January 1962, Romeo Catiben one of the boys at the
Service Station and a nephew of the wife of the station
operator, took the said vehicle for a joy ride without the prior
permission, authority or consent of either the plaintiff or its
representative, and on its way back to Davao City, said
vehicle, due to some mechanical defect accidentally bumped
an electric post causing actual damages valued at
P5,518.61.
ISSUES:
1. W/N there must be prior criminal conviction for theft for the
damage to the vehicle to be compensable under Fieldmen’s
Private Car Comprehensive Policy
HELD & RATIO:
2. NO, There is no need for prior conviction for theft to make an
insurer liable under the theft clause of the policy.
 The Comprehensive Policy issued by the insurance
company includes loss of or damage to the motor
vehicle by "burglary . . . or theft."
 Upon the facts stipulated by the parties it is admitted
that Catiben had taken the vehicle for a joy ride and
while the same was in his possession he bumped it
against an electric post resulting in damages. That act is
theft within a policy of insurance.
 In a civil action for recovery on an automobile insurance,
the question whether a person using a certain
automobile at the time of the accident stole it or not is to
be determined by a fair preponderance of evidence
and not by the rule of criminal law requiring proof of guilt
Insurance Case Digests | Atty. Norianne Tan | 2015
beyond reasonable doubt. Besides, there is no provision
in the policy requiring prior criminal conviction for theft.
FINAL VERDICT: Judgment appealed from is AFFIRMED.
LANDICHO v. GSIS
Sec. 2
CASE:
Petitioners are the family left by Flaviano Landicho, a civil
engineer of the Bureau of Public Works. During his lifetime, he was
given an optional additional life insurance policy by the GSIS. The
basis of the policy is the application prepared by GSIS, which was
answered and signed by Landicho. The application states that it
would only take effect “on the first day of the month following the
month the first premium is paid.” The application also said that the
premiums were to come from the deduction made from Landicho’s
salary. Landicho died, so his family filed a claim before the GSIS.
The claim was denied on the ground that Landicho failed to pay his
premiums, and pursuant to the application he signed, the policy
never took effect.
The issue is whether or not the insurance policy has ever
been in force, notwithstanding the non-payment of the premiums.
The Court said the policy is deemed effective. The Civil
Code and jurisprudence state that, in case of any ambiguity or
obscurity in stipulations of a contract, especially insurance contracts
or insurance applications, the same must be construed strictly
against the insurer who personally prepared the contract, and
liberally in favor of the insured who, generally, had no say in the
drawing up of the contract.
Furthermore, the non-payment was due to the fact that no
deduction was made from Landicho’s salary because GSIS did not
inform the Bureau of Public Works of its obligation to do so. Surely,
the negligence of GSIS cannot benefit it.
FACTS:
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
 In 1964, GSIS issued to Flaviano Landicho, a civil engineer
of the Bureau of the Public Works optional additional life
insurance policy no. OG-136107 in the sum of P7,900.
 Before the issuance of said policy, Landicho filed an
application form prepared by GSIS. The application contains
the following provisions:
o (a) xxx (b) xxx
o (c) “That this application serves as a letter of
authority to the Collective Officer of our Office thru
the GSIS to deduct from my salary the monthly
premium of P33.36 xxx”
o (d) “That the failure to deduct from my salary the
monthly premiums shall not make the policy lapse,
however, the premium account shall be considered
as indebtedness which I bind myself to the pay the
System;”
o (e) “That my policy shall be made effective on the
first day of the month next following the month the
first premium is paid; xxx”
 Landicho died in 1966 in an airplane crash.
 His wife, Fe Landicho, and their children filed with the GSIS
a claim of P15,800 as the double indemnity due under the
policy.
 GSIS denied the claim. Because no premiums had ever
been paid on the policy, and pursuant to provision (e) of the
application, the policy had never taken effect.
 Landicho’s family posits that provisions (c) and (d) should be
taken into consideration.
ISSUE:
2. Whether or not the insurance policy in question has ever
been in force, notwithstanding the non-payment of premium
HELD & RATIO:
3. YES, the policy should be deemed in force.
 Art. 1377 of the Civil Code provides that
“interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity.”
Insurance Case Digests | Atty. Norianne Tan | 2015
 It is also settled in jurisprudence that “terms in an
insurance policy, which are ambiguous, equivocal or
uncertain xxx are to be constructed 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.”
o The language of the provisions (c), (d) and
(e) created an ambiguity that should be
resolved against the party responsible for its
preparation. In this case, GSIS.
 The above arguments find support in the following
considerations:
o The insured usually has no voice in the
preparation or selection of words to be used
in insurance contracts. Such is what
happened to Landicho.
o Going back to provisions (c) and (d) of the
application, the Court notes that no
deduction was made because the collecting
officer of the Bureau of Public Works was
not advised by the GSIS to make it. Clearly,
this negligence should not benefit GSIS.
o Finally, GSIS induced, although not
deliberately, Landicho to believe that the
policy was in force by paying him the
dividends corresponding to said policy. If
Landicho had been informed that the policy
is not yet in effect due to his non-payment,
in all probability, he would have addressed
this immediately by paying the premiums.
FINAL VERDICT: Petition is granted.
MAYER STEEL PIPE CORPORATION vs. CA
Sec. 2
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
CASE:
Hongkong Government Supplies Department (Hongkong)
contracted with Mayer Steel Pipe Corporation (Mayer) to
manufacture and supply various steel pipes and fittings. The insurers
are South Sea Surety and Insurance Co., Inc. (South Sea) and
Charter Insurance Corp. (Charter). When the goods reached
Hongkong, a substantial portion was damaged. So, Hongkong and
Mayer filed an indemnity case against South Sea and Charter under
the insurance contract. Said insurers did not pay the balance
because they claimed that the damage was due to factory defect
which is not covered by the insurance policy. RTC ruled that it is not
a factory defect and that indemnity is proper because an “all risks”
policy was entered into which insure against all causes of
conceivable loss or damage. While CA agreed with the RTC
decision, it dismissed the complaint because the action had
prescribed because it was filed only 2 years after the date the goods
have been delivered or should have been delivered. It should have
been filed within one year only from said date as based on the
Carriage of Goods by Sea Act.
Issues:
(1) Is the damage, which is claimed as a factory defect,
covered by the insurance policy?
(2) Is the action prescribed?
Held:
(1) Yes. An “all risks” policy was entered into which insure
against all causes of conceivable loss or damage. No
factory defect in this case also.
(2) No. The Carriage of Goods by Sea Act defines the
obligations of the carrier under the contract of carriage
and not of the insurer. The liability of the insurer is the
one involved in this case which is governed by the
contract of insurance.
FACTS:
 Hongkong Government Supplies Department (Hongkong)
contracted with Mayer Steel Pipe Corporation (Mayer) to
manufacture and supply various steel pipes and fittings.
 Mayer shipped the pipes and fittings to Hongkong.
Insurance Case Digests | Atty. Norianne Tan | 2015
 Mayer insured the pipes and fittings against all risks with
South Sea Surety and Insurance Co., Inc. (South Sea) and
Charter Insurance Corp. (Charter). The pipes and fittings
with a total amount of US$212,772.09 were insured with
South Sea. On the other hand, those with a total amount of
US$149,470 were insured with Charter.
 When the goods reached Hongkong, a substantial portion
thereof was damaged.
 So, Hongkong and Mayer filed a claim against South Sea
and Charter for indemnity under the insurance contract.
Charter only paid HK$64,904.75. South Sea and Charter
refused to pay the balance because insurance surveyor’s
report allegedly showed that the damage is a factory defect,
hence, not covered by the insurance policies.
 The trial court ruled in favor of Hongkong and Mayer. It
found that the damage was not due to factory defect. It also
noted that the insurance contracts in this case are “all risks”
policies which insure against all causes of conceivable loss
or damage.
 The CA affirmed the finding of the trial court that there was
no factory defect and on the matter of the “all risks” policy.
However, the CA set aside and dismissed the complaint on
the ground of prescription. It held that the action is barred
under the Carriage of Goods by Sea Act since it was filed
two years from the time the goods were unloaded from the
vessel. Said Act provides that “the carrier and the ship shall
be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the
goods or the date when the goods should have been
delivered.” According to CA, this also applies to the insurer.
ISSUES:
3. Whether or not the damage, which is claimed by the insurers
as a factory defect, is covered by the insurance policy.
4. Whether or not the action had already prescribed based on
the Carriage of Goods by Sea Act.
HELD & RATIO:
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
4. YES. An “all risks” insurance policy covers all kinds of loss
other than those due to willful and fraudulent act of the
insured.
Thus, when South Sea and Charter issued the “all risks”
policies to Mayer, they bound themselves to indemnify the
latter in case of loss or damage to the goods insured.
Such obligation prescribes in 10 years, in accordance with
Art. 144 of the Civil Code.
There was no factory defect in this case also.
5. NO. Under the said provision of the Carriage of Goods by
Sea Act, only the carrier’s liability is extinguished if no suit is
brought within one year.
The liability of the insurer is not extinguished because
the insurer’s liability is based not on the contract of
carriage but on the contract of insurance.
The Carriage of Goods by Sea Act defines the obligations of
the carrier under the contract of carriage. It does not,
however, affect the relationship between the shipper and the
insurer. It is rather governed by the Insurance Code.
FINAL VERDICT: Petition is GRANTED. CA Decision is SET ASIDE.
RTC Decision is REINSTATED.
GREAT PACIFIC LIFE ASSURANCE CORP. v. COURT OF
APPEALS and MEDARDA V. LEUTERIO
Sec. 2
CASE:
Petitioner and DBP had a contract of group life insurance as
petitioner agreed to the life insurance of DBP’s eligible housing loan
mortgagors. Dr. Leuterio applied for membership. In the course of his
application, he said he is in good health. However, around a year
after, he died. Consequently, DBP submitted a death claim to
Insurance Case Digests | Atty. Norianne Tan | 2015
Grepalife, which the latter denied alleging that the doctor concealed
his sickness that led to his death and such concealment is allegedly
a ground for denial of the claim.
The Court said that Grepalife is liable to private respondent
because DBP already foreclosed on the mortgage contracted by her
late husband. The private respondent can sue Grepalife even if DBP
is the one in contract with it because Sec. 8 of the Insurance Code
tells us that unless otherwise provided in the insurance policy, the
mortgagee can perform acts with the same effect as if the mortgagor
performed it. The Court also said that this is so especially where the
mortgagee’s interest is less than the full amount recoverable under
the policy. Since a policy of insurance upon life or health may be
transferred, the widow of the decedent Dr. Leuterio may file the suit
against Grepalife. DBP also foreclosed in 1995 their residential lot,
so equity dictates that the insurance proceeds shall inure to the
benefit of the heirs or beneficiaries of the deceased. In addition,
there was no concealment proven so Grepalife cannot refuse
payment of the claim. Therefore, Grepalife is liable to pay
P86,200.00 even if without proof of the actual outstanding mortgage
payable by the mortgagor Leuterio to DBP because unless the
interest of a person insured is susceptible of exact pecuniary
measurement, the measure of indemnity is the sum fixed in the
policy. That is the amount stated in the policy.
FACTS:
 A contract of group life insurance was executed between
petitioner Grepalife and Development Bank of the
Philippines (DBP). Grepalife agreed to insure the lives of
eligible housing loan mortgagors of DBP.
 November 11, 1983: Dr. Wilfredo Leuterio, a physician and a
housing debtor of DBP applied for membership in the group
insurance plan. In an application form, he answered
questions concerning his health condition, basically saying to
the best of his knowledge, he is in good health.
 November 15, 1983: Grepalife issued Certificate No. B-
18558, as insurance coverage of Dr. Leuterio, to the extent
of his DBP mortgage indebtedness amounting to
P86,200.00.
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
 August 6, 1984: Dr. Leuterio died due to massive cerebral
hemorrhage.
o DBP submitted a death claim to Grepalife.
o Grepalife denied the claim alleging that Dr. Leuterio
was not physically healthy when he applied for an
insurance coverage, insisting that he did not
disclose that he was suffering from hypertension
which caused his death. Allegedly, the non-
disclosure constituted concealment that justified the
denial of the claim.
 October 20, 1986: The widow of Dr. Leuterio, respondent
Medarda Leuterio, filed a complaint with the RTC of Misamis
Oriental against Grepalife for Specific Performance with
Damages.
ISSUES:
5. Whether or not petitioner is liable to DBP as beneficiary in a
group life insurance contract from a complaint filed by the
widow of the decedent/mortgagor.
6. Whether or not Dr. Leuterio concealed that he had
hypertension, which would vitiate the insurance contract.
7. Whether or not Grepalife is liable for P86,200.00 without
proof of the actual outstanding mortgage payable by the
mortgagor to DBP.
HELD & RATIO:
6. Initially yes, but Grepalife is liable to respondent Leuterio
because DBP already foreclosed on the mortgage
contracted by her late husband.
 We consider the insurable interest in mortgaged
properties and the parties to this type of contract.
o The rationale of a group insurance policy of
mortgagors, otherwise known as the
mortgage redemption insurance, is a device
for the protection of both the mortgagee and
the mortgagor.
o For the mortgagee, it has to enter into such
form of contract so that in the event of the
unexpected demise of the mortgagor during
the subsistence of the mortgage contract,
Insurance Case Digests | Atty. Norianne Tan | 2015
the proceeds from such insurance will be
applied to the payment of the mortgage
debt, thereby relieving the heirs of the
mortgagor from paying the obligation.
o For the mortgagor, ample protection is given
to him/her under such a concept so that in
the event of death; the mortgage obligation
will be extinguished by the application of the
insurance proceeds to the mortgage
indebtedness.
o In this type of policy insurance, the
mortgagee is simply an appointee of the
insurance fund, such loss-payable clause
does not make the mortgagee a party to the
contract.
o Sec. 8, Insurance Code: Unless the policy
provides, where a mortgagor of property
effects insurance in his own name providing
that the loss shall be payable to the
mortgagee, or assigns a policy of insurance
to a mortgagee, the insurance is deemed to
be upon the interest of the mortgagor, who
does not cease to be a party to the original
contract, and any act of his, prior to the loss,
which would otherwise avoid the insurance,
will have the same effect, although the
property is in the hands of the mortgagee,
but any act which, under the contract of
insurance, is to be performed by the
mortgagor, may be performed by the
mortgagee therein named, with the same
effect as if it had been performed by the
mortgagor.
o Insurance Policy: In the event of the debtors
death before his indebtedness with the
Creditor [DBP] shall have been fully paid, an
amount to pay the outstanding indebtedness
shall first be paid to the creditor and the
balance of sum assured, if there is any, shall
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
then be paid to the beneficiary/ies
designated by the debtor.
1. When DBP submitted the insurance
claim against petitioner, the latter
denied payment thereof, interposing
the defense of concealment
committed by the insured.
Thereafter, DBP collected the debt
from the mortgagor and took the
necessary action of foreclosure on
the residential lot of private
respondent.
2. Although a policy issued to a
mortgagor is taken out for the
benefit of the mortgagee and is
made payable to him, yet the
mortgagor may sue thereon in his
own name, especially where the
mortgagees interest is less than the
full amount recoverable under the
policy.
o Since a policy of insurance upon life or
health may pass by transfer, will or
succession to any person, whether he has
an insurable interest or not, and such person
may recover it whatever the insured might
have recovered, the widow of the decedent
Dr. Leuterio may file the suit against the
insurer, Grepalife.
o DBP also foreclosed in 1995 their residential
lot, so equity dictates that the insurance
proceeds shall inure to the benefit of the
heirs or beneficiaries of the deceased.
7. NO, there was no concealment proven so Grepalife cannot
refuse payment of the claim.
 Concealment exists where the assured had
knowledge of a fact material to the risk, and honesty,
good faith, and fair dealing requires that he should
communicate it to the assured, but he designedly
and intentionally withholds the same.
Insurance Case Digests | Atty. Norianne Tan | 2015
 Petitioner merely relied on the testimony of the
attending physician, Dr. Hernando Mejia, as
supported by the information given by the widow of
the decedent.
 As the attending physician, Dr. Mejia stated that he
had no knowledge of Dr. Leuterio’s any previous
hospital confinement. Dr. Leuterio’s death certificate
stated that hypertension was only the possible
cause of death. The private respondent’s statement,
as to the medical history of her husband, was due to
her unreliable recollection of events. Hence, this was
just hearsay.
 There was no sufficient proof that the insured had
suffered from hypertension. Aside from the
statement of the insureds widow who was not even
sure if the medicines taken by Dr. Leuterio were for
hypertension, the appellant had not proven nor
produced any witness who could attest to Dr.
Leuterio’s medical history.
8. YES, because a life insurance policy is a valued policy.
Unless the interest of a person insured is susceptible of
exact pecuniary measurement, the measure of indemnity is
the sum fixed in the policy.
 The mortgagor paid the premium according to the
coverage of his insurance, which states that a death
benefit is in the amount of P86,200.00.
 The policy also states that in the event of the
debtors death before his indebtedness with the
creditor shall have been fully paid, an amount to pay
the outstanding indebtedness shall first be paid to
the creditor and the balance of the sum assured, if
there is any shall then be paid to the beneficiary/ies
designated by the debtor.
FINAL VERDICT: Petitioner is ordered to pay the insurance
proceeds to the heirs of Dr. Leuterio, upon presentation of proof of
prior settlement of mortgagor’s indebtedness to DBP.
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
AMERICAN HOME ASSURANCE COMPANY vs. TANTUCO
ENTERPRISES, INC.
G.R. No. 138941
(Sec. 1; Contract of Insurance)
CASE:
Respondent owns two oil mills for its coconut oil milling and
refining business. It appears that respondent commenced its
business operations with only one oil mill. In 1988, it started
operating its second oil mill so the latter came to be commonly
referred to as the new oil mill. Both mills were separately covered by
fire insurance policies issued by petitioner. Later on, a fire broke out
which consumed the new oil mill so respondent immediately notified
petitioner of it. However, petitioner rejected respondent’s claim for
the insurance proceeds alleging that no policy covered the new oil
mill. Petitioner argues that this specific boundary description clearly
pertains, not to the burned oil mill, but to the other mill. In other
words, the oil mill gutted by fire was not the one described by the
specific boundaries in the contested policy.
However, the Court said in construing the words used
descriptive of a building insured, the greatest liberality is shown by
the courts in giving effect to the insurance. It would be absurd to
assume that respondent would protect its first oil mill for different
amounts and leave uncovered its second one. Notwithstanding the
misdescription in the policy, it is beyond dispute, that what the
parties manifestly intended to insure was the new oil mill, based on
the evidence on record.
Neither did respondent violate the express terms of the Fire
Extinguishing Appliances Warranty as what petitioner alleged. What
the warranty mandates is that respondent should maintain in efficient
working condition within the premises of the insured property, fire
fighting equipments such as, but not limited to, those identified in the
list, which will serve as the oil mill's first line of defense in case any
part of it bursts into flame. Respondent was able to comply with this.
FACTS:
 Respondent Tantuco Enterprises, Inc. is engaged in the
coconut oil milling and refining industry. It owns two oil mills
which are located at factory compound at Iyam, Lucena City.
Insurance Case Digests | Atty. Norianne Tan | 2015
 It appears that respondent commenced its business
operations with only one oil mill. In 1988, it started operating
its second oil mill. The latter came to be commonly referred
to as the new oil mill.
 The two oil mills were separately covered by fire insurance
policies issued by petitioner American Home Assurance Co.,
Philippine Branch.
o The first oil mill was insured for three million pesos
(P3,000,000.00) under Policy No. 306-7432324-3 for
the period March 1, 1991 to 1992.
o The new oil mill was insured for six million pesos
(P6,000,000.00) under Policy No. 306-7432321-9 for
the same term
 A fire that broke out in the early morning of September
30,1991 gutted and consumed the new oil mill.
 Respondent immediately notified the petitioner of the
incident.
o The latter then sent its appraisers who inspected the
burned premises and the properties destroyed.
o Thereafter, in a letter dated October 15, 1991,
petitioner rejected respondent's claim for the
insurance proceeds on the ground that no policy
was issued by it covering the burned oil mill.
o It stated that the description of the insured
establishment referred to another building thus: "Our
policy nos. 306-7432321-9 (Ps 6M) and 306-
7432324-4 (Ps 3M) extend insurance coverage to
your oil mill under Building No. 5, whilst the
affected oil mill was under Building No. 14.”
Complaint by Respondent:
 A complaint for specific performance and damages was
consequently instituted by the respondent with the RTC,
Branch 53 of Lucena City.
 On October 16, 1995, after trial, the lower court rendered a
Decision finding the petitioner liable on the insurance policy,
ordering petitioner to pay respondent:
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
(a) P4,406,536.40 representing damages for loss
by fire of its insured property with interest at the
legal rate;
(b) P80,000.00 for litigation expenses;
(c) P300,000.00 for and as attorney's fees; and
(d) Pay the costs.
 The appellate court affirmed the decision of the RTC in toto.
Petitioner’s assertion:
 Petitioner argues that this specific boundary description
clearly pertains, not to the burned oil mill, but to the other
mill. In other words, the oil mill gutted by fire was not the one
described by the specific boundaries in the contested policy.
 According to it, the oil mill insured is specifically described in
the policy by its boundaries in the following manner:
"Front: by a driveway thence at 18 meters distance by Bldg.
No. 2.
Right: by an open space thence by Bldg. No. 4.
Left: Adjoining thence an imperfect wall by Bldg. No. 4.
Rear: by an open space thence at 8 meters distance."
 However, it argues that this specific boundary description
clearly pertains, not to the burned oil mill, but to the other
mill. In other words, the oil mill gutted by fire was not the one
described by the specific boundaries in the contested policy.
 What exacerbates respondent's predicament, petitioner
posits, is that it did not have the supposed wrong description
or mistake corrected.
o Despite the fact that the policy in question was
issued way back in 1988, or about three years
before the fire, and despite the "Important Notice" in
the policy that "Please read and examine the policy
and if incorrect, return it immediately for alteration,"
respondent apparently did not call petitioner's
attention with respect to the misdescription.
Insurance Case Digests | Atty. Norianne Tan | 2015
ISSUE:
1. Whether or not the court of appeals erred in finding that the
insurance policy covered the new mill, thus making the
petitioner liable for the insurance policy?
2. Whether or not respondent violated the express terms of the
Fire Extinguishing Appliances Warranty?
HELD:
1. No, it did not err.
2. No, respondent did not violate such warranty.
RATIO:
ISSUE 1.
Construction Of Insurance Contract
 In construing the words used descriptive of a building
insured, the greatest liberality is shown by the courts in
giving effect to the insurance.
 In view of the custom of insurance agents to examine
buildings before writing policies upon them, and since a
mistake as to the identity and character of the building is
extremely unlikely, the courts are inclined to consider that
the policy of insurance covers any building which the parties
manifestly intended to insure, however inaccurate the
description may be.
The first oil mill was already covered by an existing insurance
 It would be absurd to assume that respondent would protect
its first oil mill for different amounts and leave uncovered its
second one.
 As mentioned earlier, the first oil mill is already covered
under Policy No. 306-7432324-4 issued by the petitioner. It
is unthinkable for respondent to obtain the other policy from
the very same company. The latter ought to know that a
second agreement over that same realty results in its over
insurance.
Records show that the parties indeed agreed and intended that the
new mill was to be covered by the insurance policy
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
 Notwithstanding, therefore, the misdescription in the policy, it
is beyond dispute, that what the parties manifestly intended
to insure was the new oil mill. This is obvious from the
categorical statement embodied in the policy, extending its
protection:
"On machineries and equipment with complete accessories
usual to a coconut oil mill including stocks of copra, copra
cake and copra mills whilst contained in the new oil mill
building, situate (sic) at UNNO. ALONG NATIONAL HIGH
WAY, BO. IYAM, LUCENA CITY UNBLOCKED.''
 If the parties really intended to protect the first oil mill, then
there is no need to specify it as new.
 The imperfection in the description of the insured oil mill's
boundaries can be attributed to a misunderstanding between
the petitioner's general agent, Mr. Alfredo Borja, and its
policy issuing clerk, who made the error of copying the
boundaries of the first oil mill when typing the policy to
be issued for the new one. As testified to by Mr. Borja.
 Further, Evidence on record reveals that respondent's
operating manager, Mr. Edison Tantuco, notified Mr. Borja
(the petitioner's agent with whom respondent negotiated for
the contract) about the inaccurate description in the policy.
However, Mr. Borja assured Mr. Tantuco that the use of
the adjective new will distinguish the insured property.
The assurance convinced respondent, despite the
impreciseness in the specification of the boundaries, the
insurance will cover the new oil mill.
 The Supreme Court reiterated that:
o “We again stress that the object of the court in
construing a contract is to ascertain the intent of the
parties to the contract and to enforce the agreement
which the parties have entered into. In determining
what the parties intended, the courts will read and
construe the policy as a whole and if possible, give
effect to all the parts of the contract, keeping in mind
always, however, the prime rule that in the event of
Insurance Case Digests | Atty. Norianne Tan | 2015
doubt, this doubt is to be resolved against the
insurer. In determining the intent of the parties to the
contract, the courts will consider the purpose and
object of the contract.”
ISSUE 2.
 Petitioner contends that respondent violated the express
terms of the Fire Extinguishing Appliances Warranty. The
said warranty provides:
"WARRANTED that during the currency of this Policy,
Fire Extinguishing Appliances as mentioned below shall
be maintained in efficient working order on the premises
to which insurance applies:
- PORTABLE EXTINGUISHERS
- INTERNAL HYDRANTS
- EXTERNAL HYDRANTS
- FIRE PUMP
- 24-HOUR SECURITY SERVICES
BREACH of this warranty shall render this policy null and
void and the Company shall no longer be liable for any
loss which may occur."
 The SC agreed with the appellate court's conclusion that
the aforementioned warranty did not require respondent
to provide for all the fire extinguishing appliances
enumerated therein.
 Additionally, it found that neither did it require that the
appliances are restricted to those mentioned in the
warranty.
 In other words, what the warranty mandates is that
respondent should maintain in efficient working condition
within the premises of the insured property, fire fighting
equipments such as, but not limited to, those identified in
the list, which will serve as the oil mill's first line of
defense in case any part of it bursts into flame.
 To be sure, respondent was able to comply with the
warranty. Within the vicinity of the new oil mill can be
found the following devices: numerous portable fire
extinguishers, two fire hoses, fire hydrant, and an
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
emergency fire engine. All of these equipments were in
efficient working order when the fire occurred.
FINAL VERDICT:
Finding no reversible error in the impugned Decision, the instant
petition is hereby DISMISSED.
RIZAL SURETY & INSURANCE COMPANY vs. COURT OF
APPEALS and TRANSWORLD KNITTING MILLS, INC.
Sec. 2, Contracts of Adhesion
CASE:
Rizal Surety and New India issued Fire Insurance Policy in favor of
Transworld Knitting Mills for P 1 Million initially and increased to P
1.5 Million. The fire insurance included the building itself as well as
raw materials contained/stored in the buildings. The four storey main
building as well as a 2 storey building where fun and amusement
machines and spare parts were stored were caught in a fire.
Transworld issued a claim on the insurance. Rizal Surety contends
that the 2-storey building was not included in the insurance policy.
The issue is whether or not the 2 storey house is part of the
insurance policy. The court held that it is covered by the insurance
policy (meaning Rizal Surety would have more to pay). Insurance
contracts that are in the nature of contracts of adhesion are
construed strictly against the person who prepared the insurance
policy. The insurance policy states "xxx contained and/or stored
during the currency of this Policy in the premises occupied by them
forming part of the buildings situate (sic) within own Compound
xxx", which means that 2 storey building (behind the 4 storey building
and part of the compound) is covered by the insurance policy.
FACTS:
 On March 13, 1980, Rizal Surety & Insurance Company
(Rizal Insurance) issued Fire Insurance Policy No. 45727 in
favor of Transworld Knitting Mills, Inc. (Transworld), initially
for One Million (P1,000,000.00) Pesos and eventually
increased to One Million Five Hundred Thousand
Insurance Case Digests | Atty. Norianne Tan | 2015
(P1,500,000.00) Pesos, covering the period from August 14,
1980 to March 13, 1981.
 Pertinent portions of subject policy on the buildings insured,
and location thereof, read:
"On stocks of finished and/or unfinished products, raw
materials and supplies of every kind and description, the
properties of the Insureds and/or held by them in trust, on
commission or on joint account with others and/or for which
they (sic) responsible in case of loss whilst contained
and/or stored during the currency of this Policy in the
premises occupied by them forming part of the
buildings situate (sic) within own Compound at
MAGDALO STREET, BARRIO UGONG, PASIG, METRO
MANILA, PHILIPPINES, BLOCK NO. 601.
 Said building of four-span lofty one storey in height with
mezzanine portions is constructed of reinforced concrete
and hollow blocks and/or concrete under galvanized iron roof
and occupied as hosiery mills, garment and lingerie factory,
transistor-stereo assembly plant, offices, warehouse and
caretaker's quarters.
 The same pieces of property insured with the petitioner were
also insured with New India Assurance Company, Ltd., (New
India).
 On January 12, 1981, fire broke out in the compound of
Transworld, razing the middle portion of its four-span
building and partly gutting the left and right sections thereof.
A two-storey building (behind said four-span building)
where fun and amusement machines and spare parts
were stored, was also destroyed by the fire. Transworld
filed its insurance claims with Rizal Surety & Insurance
Company and New India Assurance Company but to no
avail.
 On May 26, 1982, private respondent brought against the
said insurance companies an action for collection of sum of
money and damages.
 Petitioner Rizal Insurance countered that its fire insurance
policy sued upon covered only the contents of the four-span
building, which was partly burned, and not the damage
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
caused by the fire on the two-storey annex building.
 On January 4, 1990, the trial court rendered its decision,
ordering defendant Rizal Surety And Insurance Company to
pay Transworld Knitting Mills, Inc. the amount of P826,
500.00 representing the actual value of the losses suffered
by it. The case was dismissed against New India
 In Court of Appeals, a decision was rendered wherein New
India is required to pay P1,818,604.19 while the other Rizal
Surety has to pay the plaintiff-appellant P470,328.67, based
on the actual losses sustained by plaintiff Transworld in the
fire
 On August 20, 1993, from the aforesaid judgment of the
Court of Appeals New India appealed to this Court theorizing
that the private respondent (Transworld) could not be
compensated for the loss of the fun and amusement
machines and spare parts stored at the two-storey building
because it (Transworld) had no insurable interest in said
goods or items. The Court denied such appeal with finality
 Petitioner Rizal Insurance and private respondent
Transworld, interposed a Motion for Reconsideration before
the Court of Appeals, and on October 22, 1993, the Court of
Appeals reconsidered its decision, but insofar as legal
interest is concerned (all else is retained)
ISSUES:
Whether or not the fire insurance policy litigated upon protected only
the contents of the main building (four-span), and did not include
those stored in the two-storey annex building.
HELD & RATIO:
NO, fire insurance policy protected not only the main building but the
two-storey annex building. Petition is not impressed with merit
 Stipulation in subject fire insurance policy regarding its
coverage, which reads: "xxx contained and/or stored during
the currency of this Policy in the premises occupied by them
forming part of the buildings situate (sic) within own
Compound xxx". Since the 2 storey building was behind the
4 storey building and part of the compound, therefrom, it can
be gleaned unerringly that the fire insurance policy in
Insurance Case Digests | Atty. Norianne Tan | 2015
question did not limit its coverage to what were stored in the
four-span building.
 In the case under consideration, both the trial court and the
Court of Appeals found that the so called "annex " was not
an annex building but an integral and inseparable part of the
four-span building described in the policy and consequently,
the machines and spare parts stored therein were covered
by the fire insurance in dispute. (as they are contained/
stored in the Building)
 Indeed, the stipulation as to the coverage of the fire
insurance policy under controversy has created a doubt
regarding the portions of the building insured thereby. Article
1377 of the New Civil Code provides:
"Art.1377. The interpretation of obscure words or stipulations
in a contract shall not favor the party who caused the
obscurity"
 Conformably, it stands to reason that the doubt should be
resolved against the petitioner, Rizal Surety Insurance
Company, whose lawyer or managers drafted the fire
insurance policy contract under scrutiny. (Contract of
adhesion)
 Court in Landicho vs. Government Service Insurance
System, ruled: (IMPORTANT DOCTRINE)
"This is particularly true as regards insurance policies, in
respect of which it is settled that the 'terms in an insurance
policy, which are ambiguous, equivocal, or uncertain x x x
are to be construed strictly and most strongly against
the insurer, and liberally in favor of the insured xxx and
the reason for this 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
 The issue of whether or not Transworld has an insurable
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
interest in the fun and amusement machines and spare
parts, which entitles it to be indemnified for the loss thereof,
had already been settled in G.R. No. L-111118, entitled
New India Assurance Company, Ltd., vs. Court of Appeals,
where the appeal of New India from the decision of the Court
of Appeals under review, was denied with finality by this
Court on February 2, 1994.
Perla Compania de Seguros, Inc vs. CA
G.R. No. 78860; May 28, 1990
Sec. 1
CASE:
Milagros Cayas (Cayas) was the registered owner of
a Mazda bus which was insured with Perla Compania de Seguros,
Inc. (PCSI). In the insurance policy agreed upon by Cayas and PCSI,
there is a provision stating, “no admission, offer, promise or payment
shall be made by or on behalf of the Insured without the written
consent of the Company xxx”. In addition, the insurance policy
also expressly provided that the liability of PCSI is only up to
P12,000 per person and to P50,000 per accident.
The Mazda bus figured in an accident in Cavite wherein
several of its passengers were injured. One of the passenger,
Edmund Perea, filed a case for damages against Cayas. The other 3
passengers namely: Rosario del Carmen, Ricardo Magsarili and
Charlie Antolin, agreed to a settlement of P4000 each with Cayas
without the latter securing a written consent from PCSI. CFI-
Cavite ruled in favor of Perea ordering Cayas to pay damages.
Thereafter, Cayas filed a case against PCSI for the reimbursement
of the amount she paid to Perea, del Carmen, Magsarili and Antolin.
The lower court ruled that PCSI should pay the amount of P50,000 to
Cayas as compensation for the injured passengers.
The issue in this case is the extent of the liability of PCSI.
PCSI contends that its liability is only up to P12,000 in
accordance with their insurance policy. It stated that its liability is
limited to the reimbursement of the payments made by Cayas to
Perea. PCSI contends that due to failure of Cayas to secure a written
consent from the company before she entered into a settlement with
Insurance Case Digests | Atty. Norianne Tan | 2015
del Carmen, Magsarili and Antolin hence, PCSI cannot be liable for
the reimbursement of such.
Acccording to SC, contracts are respected as the law
between the contracting parties and the terms of the contract
constitute the measure of the insurer’s liability and compliance
therewith is a condition precedent to the insured’s right of recovery
from the insurer. SC ruled that it being specifically required that
PCSI’s written consent be first secured before any payment in
settlement of any claim could be made, Cayas is precluded from
seeking reimbursement of the payments made to del Carmen,
Magsarili and Antolin in view of her failure to comply with the
condition contained in the insurance policy. Hence, PCSI is only
liable for the reimbursement of the amount paid to Perea and the
extent of liability of PCSI should be only up to P12,000.
FACTS:
 Milagros Cayas was the registered owner of a Mazda Bus.
o Said passenger vehicle was insured with Perla Compania
de Seguros, Inc. (PCSI)
 The Mazda bus figured in an accident in Naic, Cavite injuring
several of its passengers.
o Edmund Perea (passenger of said bus) sued Milagros
Cayas for damages in CFI-Cavite.
o Rosario del Carmen, Ricardo Magsarili and Charlie Antolin
(3 other passengers) agreed to a settlement of P4,000.00
each with Milagros Cayas without the latter securing a
written consent from PCSI.
 At the pre-trial of the case of Perea against Cayas, Cayas
failed to appear and hence, she was declared as in default.
After trial, CFI-Cavite rendered a decision in favor of Perea
ordering Cayas to compensate Perea with damages in the sum
of:
o P10,000 for the medical predicament he found himself as
damaging consequences of Milagros Cayas’ complete lack
of diligence of a good father of a family when she secured
the driving services of Oscar Figueroa (driver of the bus);
o P10,000 for exemplary damages;
o P5,000 for moral damages; and
o P7,000 for attorney’s fees.
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
 Thereafter, on November 11, 1981, Milagros Cayas filed a
complaint for a sum of money and damages against PCSI
in CFI-Cavite.
o She contended that she sought reimbursement of said
amounts (amount paid to Perea and to the three other
injured passengers) from PCSI, which, notwithstanding the
fact that her claim was within its contractual liability under
the insurance policy, refused to make such reimbursement.
o The court rendered judgment by default ordering PCSI to
pay Milagros Cayas P50,000 as compensation for the
injured passengers and P5,000 as moral damages and
P5,000 as attorney’s fees.
 PCSI appealed to the CA, which affirmed in toto the decision of
the lower court.
ISSUES:
1. WON Milagros Cayas can claim reimbursement from PCSI of the
payments she made to the 3 other victims (Del Carmen,
Magsarili and Antolin) NO!
2. WON the liability of PCSI under the insurance policy is only up to
P12,000 instead of the P50,000 as determined by the lower court
 YES!
RATIO:
1. Cayas cannot claim reimbursement for the amount of
payment she made to the 3 other victims because she failed
to obtain a written consent from PCSI before she paid the
said victims.
 PCSI’s Contention: It seeks to limit their liability only to the
payment made by Cayas to Perea and only up to the
amount of P12,000. PCSI denies liability for the payments
made by Cayas to the 3 other injured passengers del
Carmen, Magsarili and Antolin in the amount of P4,000
each or a total of P12,000. PCSI contends that in
accordance with their insurance policy, Cayas should have
first obtained the written consent of the company before
she paid the said 3 injured passengers. Having failed to
obtain the required written permission, Cayas cannot claim
reimbursement for the payment she made to the three
injured passengers.
Insurance Case Digests | Atty. Norianne Tan | 2015
 SC’s RULING:
o The insurance policy signed by the parties include
a provision which states that, “No admission, offer,
promise or payment shall be made by or on behalf
of the Insured without the written consent of the
Company xxx”
o The terms of the contract constitute the measure
of the insurer’s liability and compliance therewith
is a condition precedent to the insured’s right of
recovery from the insurer.
o The condition abovementioned, i.e. securing a
written consent from the company before effecting
any payment in settlement of any claim against
her, is valid and binding upon Milagros Cayas.
There is nothing unreasonable, arbitrary or
objectionable in this stipulation as would warrant
its nullification. The said stipulation was obviously
designed to safeguard the insurer’s (PCSI)
interest against collusion between the insured and
the claimants.
o Contracts are respected as the law between the
contracting parties finds application in the case at
bar.
o It being specifically required that PCSI’s
written consent be first secured before any
payment in settlement of any claim could be
made, Cayas is precluded from seeking
reimbursement of the payments made to del
Carmen, Magsarili and Antolin in view of her
failure to comply with the condition contained
in the insurance policy. Hence, PCSI is only
liable for the reimbursement of the amount
paid to Perea.
2. The Liability of PCSI is only up to P12,000 because the
insurance policy involved explicitly limits the PCSI’s liability
to P12,000 per person and to P50,000 per accident.
 In the case at bar, the insurance clearly and categorically
placed PCSI’s liability for all damages arising out of death
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
or bodily injury sustained by one person as a result of any
one accident at P12,000.
o The said amount complied with the minimum fixed
by the law prevailing at the time (PD 612) which is
P12,000 per passenger. PCSI’s liability under the
insurance contract not being less than P12,000
and therefor not contrary to law, morals, good
customs, public order or public policy, said
stipulation must be upheld as effective, valid and
binding as between the parties.
o It is important to note that since only the payments
made to Perea (only one passenger) should be
reimbursed to Milagros Cayas, the extent of
liability of PCSI should be only up to P12,000.
o The SC also observed that although Cayas was
able to prove a total loss of only P44,000, PCSI
was made liable for the amount of P50,000, the
maximum liability per accident stipulated in the
policy. This, according to the SC, is a patent error.
An insurance indemnity being merely an
assistance or restitution in so far as can be
fairly ascertained, it cannot be availed of by
any accident victim or claimant as an
instrument of enrichment by reason of an
accident.
FINAL VERDICT: PETITION GRANTED
ZENITH INSURANCE CORP. v. CA
Sec. 2
CASE:
Fernandez insured his car with petitioner. The car figured in
an accident and suffered damages worth P3460. Fernandez filed
complaint against petitioner for refusing to pay the amount claimed
(damages). The lower court ruled in favor of Fernandez and ordered
petitioner to pay moral and exemplary damages, and attorney’s fee
in an amount more than that prayed for by Fernandez.
The issue is whether or not the amount awarded is proper.
Insurance Case Digests | Atty. Norianne Tan | 2015
The Supreme Court ruled that the act of petitioner in
delaying payment was not so wanton and malevolent that would
justify in the increase of moral damages since the reason for the
delay is that the parties could not agree as to the amount of actual
damages. The exemplary damages could not also be awarded
because petitioner had not acted in wanton, oppressive or
malevolent manner.
FACTS:
 On January 25, 1983, respondent Lawrence Fernandez
insured his car for "own damage" under private car Policy
No. 50459 with petitioner Zenith Insurance Corporation.
 On July 6, 1983, the car figured in an accident and suffered
actual damages in the amount of P3,640.00. After allegedly
being given a run around by Zenith for two (2) months,
Fernandez filed a complaint with the RTC-Cebu for sum of
money and damages resulting from the refusal of Zenith to
pay the amount claimed.
 Aside from actual damages and interests, Fernandez also
prayed for moral damages in the amount of P10,000.00,
exemplary damages of P5,000.00, attorney's fees of
P3,000.00 and litigation expenses of P3,000.00.
 Zenith alleged that it offered to pay the claim of Fernandez
pursuant to the terms and conditions of the contract, which
the private respondent rejected.
 A decision was rendered by the trial court in favor of
respondent Fernandez.
 Zenith was ordered to pay Fernandez P3640 for actual
damages, P20,000 for moral damages, P20,000 for
exemplary damages, P5000 attorney’s fees, and P3000 for
litigation expenses.
 Petitioner contends that while the complaint of private
respondent prayed for P10,000.00 moral damages, the lower
court awarded twice the amount, or P20,000.00 without
factual or legal basis; while private respondent prayed for
P5,000.00 exemplary damages, the trial court awarded
P20,000.00; and while private respondent prayed for
P3,000.00 attorney's fees, the trial court awarded P5,000.00.
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
ISSUE:
1. Whether or not the lower court erred in awarding moral
damages, exemplary damages, and attorney’s fees for
more than what is prayed for in the complaint.
HELD & RATIO:
2. YES
 Under the Insurance Code, in case of unreasonable delay in
the payment of the proceeds of an insurance policy, the
damages that may be awarded are:
1. attorney's fees;
2. other expenses incurred by the insured person by
reason of such unreasonable denial or withholding of
payment;
3. interest at twice the ceiling prescribed by the Monetary
Board of the amount of the claim due the injured; and
4. the amount of the claim.
 In the instant case, there was a finding that private
respondent was given a "run-around" for two months, which
is the basis for the award of the damages granted under the
Insurance Code for unreasonable delay in the payment of
the claim. However, the act of petitioner of delaying payment
for two months cannot be considered as so wanton or
malevolent to justify an award of P20,000.00 as moral
damages, taking into consideration that the actual damage
on the car was only P3,460.
 The reason for petitioner's failure to indemnify private
respondent within the two-month period was that the parties
could not come to an agreement as regards the amount of
the actual damage on the car. The amount of P10,000.00
prayed for by private respondent as moral damages is
equitable.
 On the other hand, exemplary or corrective damages are
imposed by way of example or correction for the public good.
Exemplary damages will not awarded, as the insurance
company had not acted in wanton, oppressive or malevolent
manner.
Insurance Case Digests | Atty. Norianne Tan | 2015
 The amount of P5,000.00 awarded as attomey's fees is
justified under the circumstances of this case considering
that there were other petitions filed and defended by private
respondent in connection with this case.
 When contract is silent with respect to a particular matter –
Any doubt that may arise for failure of the contract to provide
with respect to a particular matter should be resolved against
the insurer. In a case, the insurer contended that the amount
recoverable on a car insurance policy is subject to a
deductible franchise. It was ruled that the deductions of
P250.00 and P274.00 as deductible franchise and 20%
depreciation on parts, respectively, claimed by the insurer as
agreed upon in the contract has no basis, because “the
policy does not mention any deductible franchise.”
FINAL VERDICT: The appealed decision is MODIFIED.
VECTOR SHIPPING CORP. v. AHAC
(Sec. 2; Right of Subrogation)
CASE:
Caltex entered into a contract of affreightment with Vector
Shipping for the transport of thousands of barrels of different
petroleum products through M/T Vector owned by Soriano. The
cargo was insured with AHAC for Php7,455,421.08. Unfortunately,
the vessel collided with M/T Doña Paz owned by Sulpicio, causing
both vessels to sink. The entire petroleum cargo on board perished.
Caltex received from AHAC the whole amount of insurance
proceeds. Thereafter, AHAC filed a complaint against Vector,
Soriano, and Sulpicio.
The lower court held that the action is upon a quasi-delict,
thus, barred by prescription for having filed beyond four (4) years as
required by Art. 1146(2) of NCC. When it was appealed to CA, it
reversed the decision and ruled that it is culpa contractual based on
the Contract of Affreightment. Hence, action can be filed within ten
(10) years pursuant to Art. 1144(1) of NCC.
Upon appeal, the SC sided with CA that it is not a quasi-
delict, but clarified that the applicable provision is Art. 1144(2). It is
not upon a written contract, but upon an obligation created by law,
particularly Art. 2207 of the Civil Code.
Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue
AHAC’s right of subrogation pursuant to Art. 2207 was “not
dependent upon, nor did it grow out of, any privity of contract or upon
written assignment of claim but accrued simply upon payment of the
insurance claim by the insurer. Hence, petition is denied.
FACTS:
 30 September 1987: Caltex entered into a contract of
affreightment with VECTOR Shipping Corp. (the operator)
for the transport of Caltex’s petroleum cargo through the M/T
Vector (owned by Petitioner Francisco Soriano).
o Caltex insured the cargo with American Home
Assurance Corporation (Respondent AHAC) for
Php7,455,421.08 under Marine Open Policy No. 34-
5093-6.
 20 December 1987 (evening): M/T Vector collided with M/T
Doña Paz (owned and operated by SULPICIO Lines Inc.) in
the open sea near Dumali Point in Tablas Strait, which
resulted to the sinking of both vessels.
o The entire petroleum cargo of Caltex on board
perished.
o 12 July 1988: AHAC paid to Caltex the full amount of
the insurance.
 05 March 1992: AHAC filed a complaint against Vector,
Soriano, and Suplicio to recover the full amount it paid to
Caltex.
 RTC-Makati dismissed the case for having prescribed. It
ruled that the action is upon a quasi-delict and as such
must be commenced within four (4) years from the day the
quasi-delict occurred as stipulated in Art. 1146(2) of the New
Civil Code.
 AHAC appealed to the CA, which reversed the decision of
the lower court. It held that the relationship between Caltex
and M/V Doña Paz is that of a quasi-delict, while that of
Caltex and M/V Vector is culpa contractual based on a
Contract of Affreightment or a charter party.
o There is breach of contract of affreightment for
having misrepresented that the vessel is seaworthy
when in fact it is not.
Insurance Case Digests | Atty. Norianne Tan | 2015

o Thus, the prescriptive period is ten (10) years from
the time the right of action accrued as provided for in
Art. 1144(1) of the New Civil Code. The ticket issued
for the transportation is by itself a complete written
contract.
 The petitioners immediately appealed for the petition for
review on certiorari of CA’s decision.
ISSUES:
6. Whether or not the action was already barred by prescription
7. Whether or not the contract of affreightment gave rise to the
legal obligation of petitioners to pay the demand for
reimbursement
9. NO, the contract of affreightment that Caltex and Vector
entered into did not give rise to the legal obligation of Vector
and Soriano to pay the demand for reimbursement by AHAC
because it concerned only the agreement for the
transport of Caltex’s petroleum cargo.
 AHAC’s right of subrogation pursuant to Art. 2207
was “not dependent upon, nor did it grow out of, any
privity of contract or upon written assignment of
claim but accrued simply upon payment of the
insurance claim by the insurer.” (Pan Malayan
Insurance Corp. v. CA)
FINAL VERDICT: Petition DENIED; judgment AFFIRMED.

HELD & RATIO:

8. NO, the legal provision governing this case was not Art. Additional information:
1146, but Art. 1144(2) which provides for a prescriptive  Subrogation is the “substitution of another person in the
period of ten (10) years. place of the creditor, to whose rights he succeeds in relation
 SC clarified that the present action was not upon a to the debt”; and is “independent of any mere contractual
written contract, but upon an obligation created by relations between the parties to be affected by it, and is
law, as opposed to the ratio of the CA. broad enough to cover every instance in which one
o The subrogation of respondent to the rights party is required to pay a debt for which another is
of Caltex as the insured was by virtue of primarily answerable, and which in equity and conscience
express provision of law embodied in Art. ought to be discharged by the latter.”
2207 of the Civil Code (i.e., “x x x the
insurance company shall be subrogated to
the rights of the insured against the
wrongdoer or the person who has violated
the contract. x x x.”).
 The subrogation receipt was enough by itself to
prove the payment to Caltex of the full settlement of
its claim. Due to the duly documented payment
made to the insured, respondent became
subrogated as a matter of course pursuant to Art.
2207.
 “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.” (Pan Malayan Insurance Corp. v. CA)

Baguyot Calangi Estipona Ledesma Lim, A. Lim, Y. Miranda Pacamarra Rivera Santos, R. Sorongon Tamondong Torcuator Velena Yogue