PAN MALAYAN INSURANCE v.
CA rights of the assured to recover from the wrongdoer to the extent that the insurer has been
DOCTRINE:
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. Payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the insurance claim by the
insurer.
FACTS:
Petitioner PanMalay was an insurer of the car of Canlubang Automotive Resources Corp.
While the policy was still in effect, the insured car was allegedly hit by a pick-up
owned by Erlinda Fabie but driven by another person. The car suffered damages in the
amount of P42,052.00. PanMalay defrayed the cost of repair of the insured car. It then
demanded reimbursement from Fabie and her driver of said amount, but to no avail.
Petitioner filed a complaint against private respondent before the RTC. It averred that the
damages caused to the insured car were settled under the “own damage” coverage of the
insurance policy. Private respondent filed a motion to dismiss arguing that under the
"own damage" clause of the insurance policy precluded subrogation under Article 2207
of the Civil Code, since indemnification thereunder was made on the assumption that
there was no wrongdoer or no third party at fault.
RTC: The complaint was dismissed and ruled that payment under the “own damage”
clause was an admission by the insurer that the damage was caused by the assured and/or
its representatives.
CA: Affirmed the trial court’s ruling but on different ground. Applying the ejusdem
generis rule, CA held that Section III-I of the policy, which was the basis for
the settlement of the claim against insurance, did not cover damage arising from collision
or overturning due to the negligence of 3rd parties as one of the insurable risks.
ISSUE:
WON PanMalay subrogated to the rights of Canlubang against the driver and his
employer?
RULING:
YES. Art. 2207 of the civil code states that “If the plaintiffs property has been insured,
and he has received indemnity from the insurance company for the injury or loss arising
out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has
violated
the contract.” This was 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, the insurer, upon payment to the assured, will be subrogated to the
obligated to pay. Payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies, which the latter may have against the third party
whose negligence or wrongful act caused the loss.
There are a few recognized exceptions to this rule:
1. where the assured by his own act releases the wrongdoer or third party liable for
the loss or damage
2. where the insurer pays the assured the value of the lost goods without notifying
the carrier who has in good faith settled the assured's claim for loss
3. where the insurer pays the assured for a loss which is not a risk covered by the
policy, thereby effecting "voluntary payment"
None of these exceptions are present in this case.
AS to the Trial Court’s ruling: 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, it simply meant that it had assumed to reimburse the costs for repairing the
damage to the insured vehicle.
It is in this sense that the so-called “own damage” coverage of policy is different from the
“3rd party liability” coverage and from the “property damage” coverage.
As to the Court of Appeals’ ruling: CA’s ruling that the coverage of the insured risks
under Section III-I of the policy does not include damage to the insured vehicle arising
from collision or overturning due to negligent acts of a 3rd party, has no merit.
Not only is it an erroneous interpretation of the provisions of the section, but it also
violates a fundamental rule on the interpretation of property insurance contracts where
interpretation should be liberally in favor of the assured and strictly against the insurer in
cases of disagreement between the parties.
The meaning advanced by Panmalay regarding the coverage of Section III-I of the policy
is undeniable more beneficial to Canlubang than that insisted upon by the CA.
In any case, the very parties to the policy, Canlubang and Panmalay, were not shown to
be in disagreement regarding the meaning and coverage of Section III-I. Hence, it was
improper for CA to assert its own interpretation of the contract that is contrary to the
clear understanding and intention of the parties to it.
Thus, SC held that Panmalay, as subrogee, has no legal obstacle from filing the complaint
for damages against the 3rd parties responsible for the damage to the car.
DISPOSITIVE: Petitioner won.
FEDERAL EXPRESS CORPORATION v. AMERICAN HOME ASSURANCE Second Issue: Under the Warsaw Convention, Notice of Claim is a condition precedent to
COMPANY AND PHILAM INSURANCE COMPANY the accrual of a Right of Action against a carrier for loss or damage to the goods. Being a
condition precedent, it must precede a suit for enforcement. In the instant case, AHAC
FACTS: never complied such requirement. Thus, it cannot file claims against Federal Express.
On January 26, 1994, SMITHKLINE Beecham of Nebraska, USA delivered to
Burlington Air Express (AGENT OF FEDREAL EXPRESS) a shipment of 109 cartons
of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas
Company in Makati City, Metro Manila. The shipment was covered by Burlington
Airway Bill No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN
TRANSIT’ and ‘PERISHABLE’ stamp marked on its face. That same day, Burlington
insured the cargoes in the amount of $39,339.00 with AHAC. The following day,
Burlington turned over the custody of said cargoes to Federal Express which transported
the same to Manila. The first shipment, consisting of 92 cartons arrived in Manila on
January 29, 1994 and was immediately stored at Cargohaus Inc.’s warehouse. While the
second, consisting of 17 cartons, came in two (2) days later, or on January 31,
1994,which was likewise immediately stored at Cargohaus’ warehouse. 12 days later, the
Customs Broker who was assigned by Smithkline of Makati to facilitate the withdrawal
of the Cargoes, did not proceed with such withdrawal for he found out that the Cartons
containing the vaccines were not properly stored as ordered. For this reason, the vaccines
were examined, only to find out that they were damaged and unusable. Consequently
Smithkline of Makati abandoned the shipment.

Smithkline of Makati filed a claim with PHILAM, the representative of AHAC in the
Philippines. By virtue of its right of subrogation, AHAC proceeded against FEDERAL
EXPRESS. Federal Express declined the claim of AHAC contending that the latter had
no cause of action against the former. Moreover, Federal Express contended that no
notice of claim was filed, hence, not complying with the condition precedent, AHAC was
precluded from asserting its claim against it.

ISSUES:
1.Whether or not AHAC has legal personality to sue, thus, no cause of action against
Federal Express?
2.Whether or not AHAC complied with the necessary condition precedent in order to file
claims against Federal Express?

RULING:
First Issue: Federal Express argued that payment was erroneous for the proper payment
should have been made to Burlington as agent of Federal Express, and as payee of the
bill. Held, Smithkline of Makatin has the personality to claim for the damages because
the Certificate of Insurance is payable to the bearer thereof. Upon payment by AHAC to
Smithkline, the latter executed a subrogation receipt. Hence, AHAC and PHILAM have
personality to file claims.

Upon payment to the consignee of an indemnity for the loss of or damage to the insured
goods, the insurer’s 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. Further, the
insurer’s subrogatory right to sue for recovery under the bill of lading in case of loss of or
damage to the cargo is jurisprudentially upheld.”
FIREMAN’S FUND INSURANCE COMPANY AND THE FIRESTONE TIRE the recovery thereof. That right is not dependent upon, nor does it grow out of, any
AND RUBBER COMPANY OF THE PHILIPPINES v. JAMILA & COMPANY privity of contract, or upon written assignment of claim, and payment to the insured
makes the insurer an assignee in equity
DOCTRINE:
When the insurance company pays for the loss, such payment operates as an equitable DIPOSITIVE: Costs against Jamila. Fireman Fund won!
assignment to the insurer of the property and all remedies which the insured may have for
the recovery thereof. That right is not dependent upon, nor does it grow out of, any
privity of contract, or upon written assignment of claim, and payment to the insured
makes the insurer an assignee in equity.

FACTS:
1. Jamila/Veterans PH Scouts Security Agency contracted to supply security guards to
Firestone. Jamila assumed responsibility for the acts of its security guards.
2. First Quezon City Insurance executed a bond for P20K to guarantee Jamila’s
obligation under that contract.
3. Later on Firestone’s properties valued at P11,925 were allegedly lost due to the acts
of its employees who connived with Jamila’s security guard
4. Fireman’s Fund, as insurer paid to Firestone the amount of the loss and Fireman’s
Fund was subrogated to Firestone’s right to get reimbursement from Jamila. Jamila
and its surety (First Quezon Insurance) failed to pay the amount of the loss.
5. Fireman invoked Article 2207, as the insurer Fireman’s Fund is entitled to go after
the person or entity that violated its contractual commitment to answer for the loss
insured against.
6. Jamila contends that it did not consent to the subrogation of Fireman’s Fund to
Firestone’s right to get reimbursement from Jamila and its surety. Further arguing
that legal subrogation under Art 2207 of the Civil Code requires the debtor’s consent
and that according to Art 1302, the instant case is not among the cases mentioned
when legal subrogation can take place.

ISSUE:
WON Fireman’s Fund can subrogate to the rights of Jamilia?

RULING:
YES! Article 2207 is a restatement of a settled principle of American jurisprudence.
Subrogation has been referred to as the doctrine of substitution. It „is an arm of equity
that may guide or even force one to pay a debt for which an obligation was incurred but
which was in whole or in part paid by another.

Subrogation is founded on principles of justice and equity, and its operation is governed
by principles of equity. It rests on the principle that substantial justice should be attained
regardless of form, that is, its basis is the doing of complete, essential, and perfect justice
between all the parties without regard to form.

Subrogation is a normal incident of indemnity insurance. Upon payment of the loss, the
insurer is entitled to be subrogated pro tanto to any right of action which the insured may
have against the third person whose negligence or wrongful act caused the loss.

When the insurance company pays for the loss, such payment operates as an equitable
assignment to the insurer of the property and all remedies which the insured may have for
F.F. CRUZ v. CA

DOCTRINE:
In Article 2207. Upon payment of the loss incurred by the insured, the insurer is entitled
to be subrogated pro tanto to any right of action which the insured may have against the
third person whose negligence or wrongful act caused the loss.

FACTS:
The furniture manufacturing shop of petitioner was situated adjacent to the residence of
private respondents. Private respondent, Gregorio Mable, first approached the petitioner's
plant manager to request that a firewall be constructed between the shop and private
respondents' residence. The request was repeated several times but they fell on deaf ears.

A fire broke out in petitioner's shop. Petitioner's employees tried to put out the fire, but
their efforts proved futile. The fire spread to private respondents' house. Both the shop
and the house were razed to the ground. The cause of the conflagration was never
discovered.
Private respondents collected P35,000.00 on the insurance on their house and the contents
thereof.

Private respondents filed an action for damages against petitioner. Trial Court awarded
damages in favor of the private respondent; Court of Appeals: affirmed the decision of
the trial court

ISSUE:
Even though the Respondent received a sum of money (P35,000) from the insurer, can
the latter collect from the petitioner

RULING:
The Court finds that petitioner is liable for damages to private respondents, the fact that
private respondents have been indemnified by their insurer in the amount of P35,000.00
for the damage caused to their house and its contents has not escaped the attention of the
Court. Hence, the Court holds that in accordance with Article 2207 of the Civil Code the
amount of P35,000.00 should be deducted from the amount awarded as damages. Said
article provides:
Art. 2207. Xxx If the amount paid by the insurance company does not fully cover
the injury or loss, the aggrieved party shall be entitled to recover the deficiency
from the person causing the loss or injury.

DISPOSITIVE: WHEREFORE, the decision of the Court of Appeals is affirmed and

modified and deducted the award since the insurer had already paid the a portion of the
amount claimed
RIZAL SURETY v. MANILA RAILROAD COMPANY (1968) 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
DOCTRINE: recoverable by the insured. The lower court therefore did not err when in the decision
Insurer after paying the claim of the insured for damages under the insurance is appealed from, it limited the amount which defendants were jointly and severally to pay
subrogated merely to the rights of the insured and therefore can necessarily recover only plaintiff-appellants to "Five Hundred Pesos (P500.00) with legal interest thereon from
that to what was recoverable by the insured. January 31, 1962, the date of the filing of the complaint, . . . ."

FACTS: DISPOSITIVE: The Decision appealed from is affirmed.

On or about November 29, 1960, the vessel, SS Flying trader, loaded on board at Genoa,
Italy for shipment to Manila, among other cargoes, 6 cases OMH Special Single Colour
Offset Press machine, for which Bill of Lading No. 1 was issued, consigned to Suter, Inc.

On or about January 16, 1961, the vessel arrived in Manila and subsequently discharged
complete and in good order the aforementioned shipment into the custody of defendant
Manila Port Service as arrastre operator.

While one of the six cases was being lifted and loaded by the crane of Manila Port
Service into the consignee’s truck, it was dropped by the crane and as a consequence the
machine was heavily damaged.

The plaintiff, as the insurer, paid the consignee the amount of P16,500 representing
damages by way of costs of replacement parts and repairs to put the machine on a
working condition. The plaintiff also paid P16,680.70 to the International Adjustment
Bureau as adjuster’s fee.

The paragraph 15 of the management contract between the Bureau of Customs and
Manila Port Service states that the Company’s liability is limited to P500.00 per package
unless the value of the goods is otherwise, specified, declared or manifested and the
corresponding arrastre has been paid.

The lower court ordered the defendants, jointly and severally to pay the plaintiff the
amount of P500.00. on appeal, it was stated that the plaintiff could recover in full based
on Article 2207 of the Civil Code.

ISSUE:
Whether or not the insurance company can collect more than what was stipulated in the
Management Contract?

RULING:
No.The literal language of Article 2207, however, does not warrant such an
interpretation. It is there made clear that in the event that the property has been insured
and the Insurance Company has paid the indemnity for the injury or loss sustained, it
"shall be subrogated to the rights of the insured against the wrong-doer or the person who
has violated the contract."

Plaintiff-appellant Insurance Company, therefore, cannot recover from defendants an

amount greater than that to which the consignee could lawfully lay claim. The
management contract is clear. The amount is limited to Five Hundred Pesos (P500.00).
PIONEER INSURANCE v. CA
G.R. No. 84197; July 28, 1989

FACTS:
Lim is an owner-operator of Southern Airlines (SAL). Japan Domestic Airlines (JDA)
and Lim enteredinto a sales contract. Pioneer Insurance and Surety Corp. as surety
executed its surety bond in favor of JDA onbehalf of its principal Lim. Border Machinery
and Heacy Equipment Co, Inc., Francisco and ModestoCervantes, and Constancio
Maglana contributed funds based on the misrepresentation of Lim that they willform a
new corporation to expand his business. They executed two separate indemnity
agreements in favorof Pioneer, one signed by Maglana and the other jointly signed by
Lim for SAL, Bormaheco and theCervanteses. The indemnity agreements stipulated that
the indemnitors principally agree and bindthemselves jointly and severally to indemnify
and hold and save Pioneer from and against any/all damages,losses, etc. of whatever kind
and nature may incur in consequence of having become surety.Lim executed in favor of
Pioneer a deed of chattel mortgage as security. Upon default on thepayments, Pioneer
paid for him and filed a petition for the foreclosure of chattel mortgage as security.
Maglana, Bormaheco and the Cervantes’s filed cross -claims against Lim alleging that
they were not privies tothe contracts signed by Lim and for recovery of the sum of money
they advanced to Lim for the purchase of the aircrafts. The decision was rendered holding
Lim liable to pay.

ISSUES:
1. Whether Pioneer has a cause of action against respondents.
2. Whether failure to incorporate automatically resulted to de facto partnership.

HELD:
1. Pioneer has no right to institute and maintain in its own name an action for the benefit
of thereinsurers. It is well-settled that an action brought by an attorney-in-fact in his own
name instead of that of the principal will not prosper, and this is so even where the name
of the principal is disclosed in thecomplaint. An attorney-in-fact is not a real party in
interest, that there is no law permitting an action to bebrought by an attorney-in-fact.

2. NO. Partnership inter se does not necessarily exist, for ordinarily persons cannot be
made toassume the relation of partners as between themselves, when their purpose is that
no partnership shall existand it should be implied only when necessary to do justice
between the parties; thus, one who takes no partexcept to subscribe for stock in a
proposed corporation which is never legally formed does not become apartner with other
subscribers who engage in business under the name of the pretended corporation, so asto
be liable as such in an action for settlement of the alleged partnership and contribution
ORIENTAL ASSURANCE CORPORATION v. MANUEL ONG, DOING
BUSINESS UNDER THE BUSINESS NAME OF WESTERN PACIFIC
TRANSPORT SERVICES AND/OR ASIAN TERMINALS, INC.
G.R. No. 189524 - October 11, 2017
FACTS:
JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-zinc-
alloy-coated steel sheets in coils. These steel sheets were transported to Manila on board
the vessel M/V Dooyang Glory as evidenced by Bill of Lading No. HDMUBSOML-
214s011. Upon arrival of the shipment in Manila, these coils were stored under the
custody of Asian Terminals, Inc. and were thereafter loaded on the trucks of Manuel
Ong. The coils were delivered to JEA Steel’s plant in Cavite where it was found that
eleven of the 72 coils were in damaged condition, dented and deformed.
JEA Steel filed a claim with Oriental for the value of the 11 damaged coils pursuant to
Marine Insurance Policy No. OAC/M-12292. Oriental paid JEA Steel the sum of PHP
521,530.16 and subsequently demanded indemnity from Ong and Asian Terminals, but
the latter refused to pay.
Oriental filed a complaint for sum of money against the respondents.
Ong countered that the 11 coils were already damages when they were loaded on board
his trucks and transported to the consignee. Meanwhile, Asian Terminals claimed that it
exercised due diligence in handling the cargo. It further alleged that Oriental’s claim was
barred for the latter’s failure to file a notice of claim within the 15-day period provided in
the Gate Pass and in Article VII, Section 7.01 of the Contact for Cargo Handling Services
(Management Contract) between the Philippine Ports Authority and Asian Terminals.
Such Gate Pass was signed by the consignee’s representative to acknowledge the delivery
and receipt of the shipment. In addition, Asian Terminals contended that its liability, if
any, should not exceed PHP 5,000.00, pursuant to Section 7.01.
The trial court dismissed the complaint. The Court of Appeals dismissed Oriental’s
appeal on the ground that it had already prescribed. The appellate court held that Asian
Terminals was bound to observe the same degree of care required of common carriers.
ISSUES:
1. Whether or not the Court of Appeals gravely erred in passing upon the issue of
prescription even though it was not an assigned error in the appeal;
2. Whether or not the claim against Asian Terminals, Inc. is barred by prescription; and
3. Whether or not the Court of Appeals gravely erred in ruling that Manuel Ong is not
liable for the damage of the cargo
RULING:
The petition was granted. The consignee’s claim latter that was received by the arrastre
operator two (2) days after complete delivery of the cargo constitutes substantial
compliance with the time limitation for filing claims under the Gate Pass and the
Management Contract. However, the arrastre operator’s liability for damage to the cargo
is limited to PHP 5,000.00 per package in accordance with the Management Contract.
The Court of Appeals properly passed upon the issue of prescription. An assignment of
error is generally required for appellate review. Rule 51, Section 8 of the Rules of Court
provides that only errors which have been stated in the assignment of errors and properly
argued in the brief will be considered by the appellate court. The exceptions to this rule
are errors affecting jurisdiction over the subject matter as well as plain and clerical errors.
However, as ruled in Mendoza v. Bautista, an appellate court is clothed with ample
authority to review rulings even if they are not assigned as errors in the appeal in the
following instances: (a) grounds not assigned as errors but affecting jurisdiction over the
subject matter; (b) matters not assigned as errors on appeal but are evidently plain or
clerical errors within contemplation of law; (c) matters not assigned as errors on appeal
but consideration of which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal
justice; (d) matters not specifically assigned as errors on appeal but raised in the trial
court and are matters of record having some bearing on the issue submitted which the
parties failed to raise or which the lower court ignored; (e) matters not assigned as errors
on appeal but closely related to an error assigned; and (f) matters not assigned as errors
on appeal but upon which the determination of a question property assigned, is
dependent. Exceptions (d) and (e) apply in this case.
The provisions of the Management Contract and the Gate Pass are binding on Oriental as
insurersubrogee and successor-in-interest of the consignee. In Government Service
Insurance System v. Manila Railroad Company, it was held that the provisions of a gate
pass or of an arrastre management contract are binding on an insurer-subrogee even if the
latter is not a party to it. Accordingly, by availing the services of an arrastre operator and
taking delivery in pursuance of a permit and a pass issued by the latter, which were
“subject to all the terms and conditions” of said management contract, including the
requirement thereof that “a c alim is filed with the Company within 15 days from the date
of arrival of the goods”, the consignee - together with the insurer or plaintiff herein, as
successor to the rights of the consignee – became bound by the provisions of said
contract.
This doctrine was also reiterated in the case of Summa Insurance Corporation v. Court of
Appeals which stated that a management contract, which is a sort of a stipulation pour
autrui within the meaning of Article 1311 of the Civil Code, is also binding on a
consignee because it is incorporated in the gate pass and delivery receipt which must be
presented by the consignee before delivery can be effected to it.
The fact that Oriental is not a party to the Gate Pass and the Management Contract does
not mean that it cannot be bound by their provisions. Oriental is subrogated to the rights
of the consignee upon its payment of the insurance claim.
According to Article 2207 of the Civil Code, 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 wrongdoer or the person who has
violated the contract. This article is founded on the well-settled principle of subrogation.
The Court held that payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the insurance claim by the
insurer.

The issuance of a certificate of loss is not an indispensable condition for the 15-day limit
to run. The Court has ruled that the purpose of the time limitation for filing claims is “to
apprise the arrastre operator of the existence of a claim and enable it to check on the
validity of the claimant’s demand while the facts are still fresh for recollection of the
persons who took part in the undertaking and the pertinent papers are still available.” In
addition, the Court has liberally construed the requirement for filing a formal claim and
allowed claims filed even beyond the 15-day prescriptive period after finding that the
request for bad order survey o the provisional claim filed by the consignee had
sufficiently served the purpose of a formal claim (New Zealand Insurance Co., Ltd. v.
Navarro).

It is well-settled in jurisprudence that substantial compliance with the 15-day time

limitation is allowed provided that the consignee has made a provisional claim thru a
request for bad order survey or examination report.

However, the facts of this case do not show that a provisional claim or a request for bad
order survey was made by the consignee. Even so, the Court adopts a reasonable
interpretation of the stipulations in the Management Contract and hold that petitioner’s
complaint is not time-barred. The consignee’s claim letter is regarded as substantial
compliance with the condition precedent set forth in the Management Contract to hold
the arrastre operator liable.

Since the Cargo Gate Passes issued by Asian Terminals do not indicate the value of the
cargo, the liability of the latter should be limited to the maximum recoverable value of
PHP 5,000.00 per package or coil, totalling PHP 55,000.00 for the 11 damaged coils.
This amount shall earn a legal interest rate of 6% per annum from the date of finality of
this judgment until its full satisfaction as per Nacar v. Gallery Frames.