CHERIE PALILEO VS.

BEATRIZ COSIO
Gr no. L-7667, November 28, 1955
FACTS:
Cherie Palileo, who is a debtor-mortgagor, filed a complaint against Beatriz
Cosio, the
creditor-mortgagee, praying that their transaction be one of a loan with an
equitable
mortgage to secure the payment of the loan. Said complaint against Cosio in
the CFI of
Manila was raised on the ground that the transaction entered by them be
declared as one of
loan and that the said transaction be one of equitable mortgage to secure the
payment of
the loan.
Cosio filed her answer setting up a defense that the transaction between them
is one of sale
with option to repurchase. However, the period for repurchase had expired
which resulted
to the ownership of Cosio. The latter set up counterclaims but failed to appear
in court in
which judgment was granted in favor of the evidence presented by Palileo.
On February 2, 1954, the original counsel of Cosio was substituted and the
new counsel
immediately moved that the judgment be set aside. The motion has been
denied making
Cosio to take an appeal.
The loan of P12,000 was secured by a "Conditional Sale of Residential
Building" with a right
to repurchase. After the execution of the contract, Cosio insured in her name
the building
with Associated Insurance & Surety Co. against fire. The building was partly
destroyed by
fire so she claimed an indemnity of P13,107.00. Palileo then demanded that the
amount of
insurance proceeds be credited to her loan. The RTC: declared that the
transaction was a
loan with equitable mortgage so the insurance proceeds should be credited to
the loan and
be refunded to the overpayment.
ISSUE:
Whether or not Cosio as mortgagee is entitled to the insurance proceeds for her
own
benefit
HELD:
YES. The collection of insurance proceeds shall not be deemed to have
compensated the
obligation of the Palileo to Cosio, but bars Cosio from claiming its payment
from Palileo.
Cosio shall pay to Palileo P810.00 representing the overpayment made by
Palileo by way of
interest on the loan.
When the the mortgagee may insure his interest in the property independently
of the
mortgagor , upon the destruction of the property the insurance money paid to
the
mortgagee, the same will not inure to the benefit of the mortgagor and the
amount due
under the mortgage debt remains unchanged. The mortgagee, however, is not
allowed to
retain his claim against the mortgagor, but it passes by subrogation to the
insurer, to the
extent of the insurance money paid.
It is true that there are authorities which hold that "If a mortgagee procures
insurance on
his separate interest at his own expense and for his own benefit, without any
agreement
with the mortgagor with respect thereto, the mortgagor has no interest in the
policy, and is
not entitled to have the insurance proceeds applied in reduction of the
mortgage debt".
However, these authorities merely represent the minority view.

JAIME T. GAISANO VS. DEVELOPMENT INSURANCE AND SURETY

CORPORATION
G.R. No. 190702, February 27, 2017
FACTS:
Petitioner was the registered owner of a 1992 Mitsubishi Montero. Respondent
is a
domestic corporation engaged in the insurance business. On September 27,
1996,
respondent issued a comprehensive commercial vehicle policy to petitioner in
the amount
of P1,500,000.00 over the vehicle for a period of one year commencing on
September 27,
1996 up to September 27, 1997. Respondent also issued two other commercial
vehicle
policies to petitioner covering two other motor vehicles for the same period.
Petitioner’s
company, Noah's Ark Merchandising immediately processed the payments and
issued a Far
East Bank check dated September 27, 1996 payable to respondent's agent,
Trans-Pacific
Underwriters Agency on the same day. However, nobody from Trans-Pacific
picked up the
check that day. In the evening of September 27, 1996, while under the official
custody of
Noah's Ark marketing manager Achilles Pacquing as a service company vehicle,
the vehicle
was stolen in the vicinity of SM Megamall at Ortigas. Despite search and
retrieval efforts,
the vehicle was not recovered. Oblivious of the incident, Trans-Pacific picked
up the check
the next day, September 28. It issued an official receipt acknowledging the
receipt of
premium and other charges over the vehicle. The check issued to Trans-Pacific
was
deposited for encashment on October 1, 1996. On October 1, 1996, Pacquing
informed
petitioner of the vehicle's loss. Thereafter, petitioner reported the loss and filed
a claim
with respondent for the insurance proceeds of P1,500,000.00. After
investigation,
respondent denied petitioner's claim on the ground that there was no
insurance
contract. Respondent refused to pay the insurance proceeds or return the
premium paid on
the vehicle. Respondent asserted that the non-payment of the premium
rendered the policy
ineffective. The premium was received by the respondent only on October 2,
1996, and
there was no known loss covered by the policy to which the payment could be
applied.
ISSUE:
Whether or not there was a binding insurance contract between petitioner and
respondent
HELD:
Insurance is a contract whereby one undertakes for a consideration to
indemnify another
against loss, damage or liability arising from an unknown or contingent event.
Just like any
other contract, it requires a cause or consideration. The consideration is the
premium,
which must be paid at the time and in the way and manner specified in the
policy. If not so
paid, the policy will lapse and be forfeited by its own terms. The law, however,
limits the
parties' autonomy as to when payment of premium may be made for the
contract to take
effect. The general rule in insurance laws is that unless the premium is paid,
the insurance
policy is not valid and binding. In an insurance contract, both the insured and
insurer
undertake risks. On one hand, there is the insured, a member of a group
exposed to a
particular peril, who contributes premiums under the risk of receiving nothing
in return in
case the contingency does not happen; on the other, there is the insurer, who
undertakes to
pay the entire sum agreed upon in case the contingency happens. This risk-
distributing
mechanism operates under a system where, by prompt payment of the
premiums, the
insurer is able to meet its legal obligation to maintain a legal reserve fund
needed to meet
its contingent obligations to the public. The premium, therefore, is the elixir
vitae or source
of life of the insurance business.
Here, there is no dispute that the check was delivered to and was accepted by
respondent's
agent, Trans-Pacific, only on September 28, 1996. No payment of premium had
thus been
made at the time of the loss of the vehicle on September 27, 1996. While
petitioner claims
that Trans-Pacific was informed that the check was ready for pick-up on
September 27,
1996, the notice of the availability of the check, by itself, does not produce the
effect of
payment of the premium. Trans-Pacific could not be considered in delay in
accepting the
check because when it informed petitioner that it will only be able to pick-up
the check the
next day, petitioner did not protest to this, but instead allowed Trans-Pacific to
do so. Thus,
at the time of loss, there was no payment of premium yet to make the
insurance policy
effective.

NEW LIFE ENTERPRISES AND JULIAN SY VS. HON. COURT OF APPEALS,

EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND
INSURANCE
CO., INC. AND WESTERN GUARANTY CORPORATION
G.R. No. 94071, March 31, 1992
FACTS:
Julian Sy and Jose Sy Bang have formed a business partnership. Under the
business name of
New Life Enterprises, the partnership engaged in the sale of construction
materials at its
place of business, a two storey building situated at Lucena City. Julian Sy
insured the stocks
in trade of New Life Enterprises with Western Guaranty Corporation, Reliance
Surety and
Insurance. Co., Inc., and Equitable Insurance Corporation. Western Guaranty
Corporation
issued Fire Insurance Policy No. 37201 in the amount of P350,000.00; Reliance
Surety and
Insurance Co., Inc. issued Fire Insurance Policy No. 69135 in the amount of
P300,000.00
and an additional insurance in the amount of P700,000.00; and Equitable
Insurance
Corporation issued Fire Insurance Policy No. 39328 in the amount of
P200,000.00.
Thus when the building occupied by the New Life Enterprises was gutted by
fire, the stocks
in the trade inside said building were insured against fire in the total amount
of
P1,550,000.00. The cause of fire was electrical in nature. The petitioners went
to the three
companies to enforce the fire insurance policy but all of them desisted.
Allegedly, the
petitioner violated the policy thereby negating his claim.
The respondents aver that petitioner violated Condition no. 3 and 27 regarding
the “Other
Insurance Clause”, this provides that the insured must give notice to the
company
regarding all insurances already effected.
ISSUE:
Whether or not the petitioner has violated the pertinent clauses thereby
making the denial
of his claim justifiable.
HELD:
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The Court ruled in favor of the respondents.
While petitioner Julian Sy claimed that he had informed insurance agent
Alvarez regarding
the co-insurance on the property, he contradicted himself by inexplicably
claiming that he
had not read the terms of the policies. Petitioners should be aware of the fact
that a party is
not relieved of the duty to exercise the ordinary care and prudence that would
be exacted
in relation to other contracts. The conformity of the insured to the terms of the
policy is
implied from his failure to express any disagreement with what is provided for.
It may be
true that the majority rule, as cited by petitioners, is that injured persons may
accept
policies without reading them, and that this is not negligence per se. But, this
is not without
any exception. It is and was incumbent upon petitioner Sy to read the
insurance contracts,
and this can be reasonably expected of him considering that he has been a
businessman
since 1965 and the contract concerns indemnity in case of loss in his money-
making trade
of which important consideration he could not have been unaware as it was
pre-in case of
loss in his money-making trade of which important consideration he could not
have been
unaware as it was precisely the reason for his procuring the same.
Furthermore, when the words and language of documents are clear and plain
or readily
understandable by an ordinary reader thereof, there is absolutely no room for
interpretation or construction anymore. Courts are not allowed to make
contracts for the
parties; rather, they will intervene only when the terms of the policy are
ambiguous,
equivocal, or uncertain. The parties must abide by the terms of the contract
because such
terms 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.
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to
be construed liberally in favor of the insured and strictly against the insurer
company, yet
contracts of insurance, like other contracts, are to be construed according to
the sense and
meaning of the terms which the parties themselves have used. If such terms
are clear and
unambiguous, they must be taken and understood in their plain, ordinary and
popular
sense. Moreover, obligations arising from contracts have the force of law
between the
contracting parties and should be complied with in good faith.
Indeed, the claims of Sy under the fire insurance policies must be denied.

DOMINGO GARCIA AND THE PHILIPPINE NATIONAL BANK VS. THE

HONGKONG FIRE & MARINE INSURANCE CO., LTD
G.R. No. 20341, September 1, 1923
FACTS:
Domingo Garcia entered into a contract with the defendant to insure his
merchandise. The
defendant issue a fire insurance policy, not on the merchandise in the building,
but on the
building itself. The plaintiff was not the owner of, and did not have any interest
in, the
building; and that the policy was so issued through error, carelessness and
negligence of
the defendant. Garcia executed a mortgage to the plaintiff Bank on the
merchandise insured
by the defendant, and that with the consent of the defendant, the plaintiff
endorsed the
policy to the Bank. While the policy was in force and effect, a fire took place
which
destroyed the merchandise in the building of the value of P20,000, together
with the
building itself.
ISSUE:
Whether or not the plaintiffs may collect on the policy
HELD:
The mistake was obviously on the part of the insurer when it issued a wrong
policy. It
cannot deny such allegation due to the fact that it even confirmed with PNB the
nature of
said policy when it was endorsed. Garcia could not have noticed the mistake
due to his
ignorance of the English language.
MALAYAN INSURANCE CO., INC. VS. THE HON. COURT OF APPEALS
(THIRD DIVISION) MARTIN C. VALLEJOS, SIO CHOY, SAN LEON RICE
MILL, INC. AND PANGASINAN TRANSPORTATION CO., INC.
G.R. No. L-36413 September 26, 1988

FACTS:
On 29 March 1967, herein petitioner, Malayan Insurance Co., Inc., issued in
favor of private
respondent Sio Choy Private Car Comprehensive Policy No. MRO/PV-15753,
effective from
18 April 1967 to 18 April 1968, covering a Willys jeep with Motor No. ET-03023
Serial No.
351672, and Plate No. J-21536, Quezon City, 1967. The insurance coverage
was for "own
damage" not to exceed P600.00 and "third-party liability" in the amount of
P20,000.00.
During the effectivity of said insurance policy, and more particularly on 19
December 1967,
at about 3:30 o'clock in the afternoon, the insured jeep, while being driven by
one Juan P.
Campollo an employee of the respondent San Leon Rice Mill, Inc., collided with
a passenger
bus belonging to the respondent Pangasinan Transportation Co., Inc.
(PANTRANCO, for
short) at the national highway in Barrio San Pedro, Rosales, Pangasinan,
causing damage to
the insured vehicle and injuries to the driver, Juan P. Campollo, and the
respondent Martin
C. Vallejos, who was riding in the ill-fated jeep.
Martin C. Vallejos filed an action for damages against Sio Choy, Malayan
Insurance Co., Inc.
and the PANTRANCO before the Court of First Instance of Pangasinan. The trial
court
rendered judgment holding Sio Choy, SAN LEON, and MALAYAN jointly and
severally liable.
However, MALAYAN’s liability will only be up to P20,000.
On appeal, CA affirmed the decision of the trial court. However, it ruled that
SAN LEON has
no obligation to indemnify or reimburse the petitioner insurance company for
whatever
amount it has been ordered to pay on its policy, since the San Leon Rice Mill,
Inc. is not a
privy to the contract of insurance between Sio Choy and the insurance
company.
MALAYAN appealed to the SC by way of review on certiorari.
ISSUES:
(1) Whether or not MALAYAN is solidarily liable to Vallejos, along with Sio Choy
and SAN
LEON
(2) Whether or not MALAYAN is entitled to be reimbursed by SAN LEON for
whatever
amount petitioner has been adjudged to pay respondent Vallejos on its
insurance policy.
HELD:
(1) Only Sio Choy and SAN LEON are solidarily liable to Martin Vallejos for
the award of damages. Sio Choy is liable as owner of the jeep pursuant to
Article 2184,
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while SAN LEON is liable as the employer of the driver of the jeep at the time of
the
accident pursuant to Art 2180.
MALAYAN’s liability, however, arose only out of the insurance policy with Sio
Choy.
Petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot,
as
incorrectly held by the trial court, be made "solidarily" liable with the two
principal
tortfeasors namely respondents Sio Choy and SAN LEON.
(2) MALAYAN is entitled to be reimbursed. Upon payment of the loss, the
insurer is entitled
to be subrogated pro tanto to any right of action which the insured may have
against the
third person whose negligence or wrongful act caused the loss. When the
insurance
company pays for the loss, such payment operates as an equitable assignment
to the
insurer of the property and all remedies which the insured may have for the
recovery
thereof. That right is not dependent upon, nor does it grow out of any privity of
contract or
upon written assignment of claim, and payment to the insured makes the
insurer assignee
in equity.
CAPITAL INSURANCE & SURETY CO. INC. V. PLASTIC ERA CO. IN
G.R. No. L-22375 July 18, 1975
FACTS:
December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to the
respondent Plastic Era
Manufacturing Co., Inc. its open Fire Policy insuring its building, equipments,
raw materials,
products and accessories located at Sheridan Street, Mandaluyong, Rizal
between December 15,
1960 1 pm - December 15, 1961 1 pm up to P100,000 but Plastic Era did not
pay the premium
January 8, 1961: Plastic Era delivered to Capital Insurance its partial payment
through check
P1,000 postdated January 16, 1961
February 20, 1961: Capital Insurance tried to deposit the check but it was
dishonored due to lack
of funds. According to the records, on January 19, 1961 Plastic Era has had a
bank balance of
P1,193.41
January 18, 1961: Plastic Era's properties were destroyed by fire amounting to
a loss of
P283,875. The property was also insured to Philamgen Insurance Company for
P200K.
Capital Insurance refused Plastic Era's claim for failing to pay the insurance
premium
CFI: favored Capital Insurance
CA: affirmed
ISSUE:
Whether or not there was a valid insurance contract because there was an
extention of credit
despite failing to encash the check payment
HELD:
YES. Affirmed
Article 1249 of the New Civil Code
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile
documents shall produce the effect of payment only when they have been
cashed, or when
through the fault of the creditor they have been impaired Capital Insurance
accepted the promise of Plastic Era to pay the insurance premium within 30
days from the effective date of policy. Considering that the insurance policy is
silent as to the
mode of payment, Capital Insurance is deemed to have accepted the
promissory note in payment
of the premium. This rendered the policy immediately operative on the date it
was delivered.
By accepting its promise to pay the insurance premium within thirty (30) days
from the
effectivity date of the policy — December 17, 1960 Capital Insurance had in
effect extended
credit to Plastic Era.
Where credit is given by an insurance company for the payment of the
premium it has no right to
cancel the policy for nonpayment except by putting the insured in default and
giving him
personal notice
Having held the check for such an unreasonable period of time, Capital
Insurance was estopped
from claiming a forfeiture of its policy for non-payment even if the check had
been dishonored
later.

JOSE MARQUES AND MAXILITE TECHNOLOGIES, INC. VS. FAR EAST

BANK
AND TRUST COMPANY, FAR EAST BANK INSURANCE BROKERS, INC.,
AND
MAKATI INSURANCE COMPANY
G.R. No. 171419 January 10, 2011
FACTS:
Jose Marques and Maxilite technologies entered into a Trust Receipt
transaction
with Far East Bank and Trust Company (FEBTC). FEBTC also referred the
incoming goods
to Far East Bank Insurance Company (FEBIC) to insure said goods from fire.
Marques et al.
were unable to comply with the trust agreement, and restructured the debt
with FEBTC by
availing of a straight loan to pay for the initial obligation. At the same time,
Marques et al.
were unable to pay the premium for the fire insurance. FEBIC notified FEBTC
of the unpaid
premium, and asked that Marquesaccount be debited the amount. FEBTC was
unable to do
so. Subsequently, the warehouse where the goods in question were stored
burned down.
Marques et al. sought to collect the insurance proceeds from Makati Insurance
and FEBIC.
Both refused compliance as the insurance premium was unpaid. Marques et al.
sued FEBTC,
FEBIC, and Makati Insurance companyfor actual, moral, and exemplary
damages. The RTC
found for Marques, and ruled that all respondents were solidarilyliable to
Marques for
actual damages, with 12% interest per annum, as well as moral and exemplary
damages.
On appeal, the CA affirmed the finding of the RTC but modified the interest to
6% per
annum. Both parties appealed. Marques contends that since the obligation is
to render a
sum of money, the proper interest is 12%. FEBTC, and Makati Insurance
Company raised
the non-payment of premiums, as well as its separate juridical entity as
defense.
ISSUE:
Whether or not the premium for the subject insurance policy has in fact been
paid;
and whether or not FEBTC, FEBIBI and Makati Insurance Company are jointly
and severally
liable to pay respondents the full coverage of the subject insurance policy
HELD:
Both trial and appellate courts basically agree that FEBTC is estopped from
claiming
that the insurance premium has been unpaid. That FEBTC induced Maxilite
and Marques to
believe that the insurance premium has in fact been debited from Maxilite’s
account is
grounded on the the following facts: (1) FEBTC represented and committed to
handle
Maxilite’s financing and capital requirements, including the related
transactions such as the
insurance of the trust receipted merchandise; (2) prior to the subject Insurance
Policy No.
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1024439, the premiums for the three separate fire insurance policies had been
paid
through automatic debit arrangement; (3) FEBIBI sent FEBTC, not Maxilite nor
Marques,
written reminders dated 19 October 1994, 24 January 1995, and 6 March
1995 to debit
Maxilite’s account, establishing FEBTC’s obligation to automatically debit
Maxilite’s account
for the premium amount; (4) there was no written demand from FEBTC or
Makati
Insurance Company for Maxilite or Marques to pay the insurance premium; (5)
the subject
insurance policy was released to Maxilite on 19 August 1994; and (6) the
subject insurance
policy remained uncancelled despite the alleged non-payment of the premium,
making it
appear that the insurance policy remained in force and binding.
As a consequence of its negligence, FEBTC must be held liable for damages
pursuant
to Article 2176 of the Civil Code which states “whoever by act or omission
causes damage
to another, there being fault or negligence, is obliged to pay for the damage
done.”
Indisputably, had the insurance premium been paid, through the automatic
debit
arrangement with FEBTC, Maxilite’s fire loss claim would have been approved.
Hence,
Maxilite suffered damage to the extent of the face value of the insurance policy
or the sum
of P2.1 million. FEBTC is solely liable for the payment of the face value of the
insurance
policy. Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company
are
independent and separate juridical entities, even if FEBIBI and Makati
Insurance Company
are subsidiaries of FEBTC. Absent any showing of its illegitimate or illegal
functions, a
subsidiary’s separate existence shall be respected, and the liability of the
parent
corporation as well as the subsidiary shall be confined to those arising in their
respective
business.
FINMAN GENERAL ASSURANCE CORP V. INOCENCIO
G.R. No. 90273-75, November 15, 1989
FACTS:
Private respondents William Inocencio, Perfecto Palero, Jr., Edwin Cardones
and one Edwin
Hernandez filed with the POEA separate complaints against Pan Pacific for
violation of Articles
32 and 34 (a) of the Labor Code, as amended and for refund of placement fees
paid to Pan
Pacific. The complainants alleged that Pan Pacific charged and collected such
fees from them but
did not secure employment for them.
For its part, petitioner Finman filed an answer denying liability and pleading,
by way of special
and affirmative defenses, that: (1) the POEA had no "jurisdiction over surety
bonds," that
jurisdiction being vested in the Insurance Commission or the regular courts;
(2) it (Finman) had
not violated Articles 32 and 34 (a) of the Labor Code and complainants' claims
had accrued
during the suspension of the principal obligor, Pan Pacific; (3) complainants
had no cause of
action against Finman, since it was not privy to the transactions between them
and Pan Pacific
and had not received any moneys from them; and (4) the amounts claimed by
complainants had
been paid by them as deposits and not as placement fees.
ISSUE:
Whether or not POEA was authorized to require, in those same proceedings,
petitioner to pay
private respondents' claims for refund against Pan Pacific on the basis of the
surety bond issued
by petitioner.
HELD:
Petitioner cannot seriously dispute the direct and solidary nature of its
obligations under its own
surety bond. Under Section 176 of the Insurance Code, as amended, the
liability of a surety in a
surety bond is joint and several with the principal obligor. Petitioner's bond
was posted by Pan
Pacific in compliance with the requirements of Article 31 of the Labor Code,
which states that —
Art. 31. Bonds. — All applicants for license or authority shall post such cash
and
surety bonds as determined by the Secretary of Labor to guarantee compliance
with prescribed recruitment procedures, rules and regulations, and terms and,
conditions of employment as appropriate.
The Secretary of Labor shall have the exclusive power to determine, decide,
order
or direct payment from, or application of, the cash and surety bond for any
claim
or injury covered and guaranteed by the bonds.
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The tenor and scope of petitioner Finman's obligations under the bond it issued
are set out in
broad ranging terms by Section 4, Rule II, Book I of the POEA Rules and
Regulations.
In the case at bar, the POEA held, and the Secretary of Labor affirmed, that
Pan Pacific had
violated Article 32 of the Labor Code, as amended
Article 32. Fees to be paid by workers. — Any person applying with a private
fee
charging employment agency for employment assistance shall not be charged
any
fee until he has obtained employment through its efforts or has actually
commenced employment. Such fee shall be always covered with the approved
receipt clearly showing the amount paid. The Secretary of Labor shall
promulgate
a schedule of allowable fees.
There is, hence, no question that, both under the Labor Codeand the POEA
Rules and
Regulations, Pan Pacific had violated at least one of the conditions for the grant
and continued
use of the recruitment license granted to it. There can, similarly, be no
question that the POEA
Administrator and the Secretary of Labor are authorized to require Pan Pacific
to refund the
placement fees it had charged private respondents without securing
employment for them and to
impose the fine of P60,000.00 upon Pan Pacific. Article 36 of the Labor Code
authorizes the
Secretary of Labor "to restrict and regulate" the recruitment and placement
activities of agencies
like Pan Pacific and "to issue orders and promulgate rules and regulations to
carry out the
objectives and implement the provisions of [Title I on "Recruitment and
Placement of
Workers]," including of course, Article 32 on "Fees to be paid by workers,"
quoted earlier. Upon
the other hand, Section 13 of Rule VI, Book I of the POEA Rules and
Regulations expressly
authorize the POEA Administrator or the Secretary of Labor to impose fines "in
addition to or in
lieu of the penalties of suspension or cancellation" of the violator recruitment
agency's license.
Clearly, petitioner Finman is a party-in-interest in, certainly a proper party to,
the proceedings
private respondents had initiated against Pan Pacific the principal obligor.
Since Pan Pacific had
thoughtfully refrained from notifying the POEA of its new address and from
responding to the
complaints, petitioner Finman may well I be regarded as an indispensable
party to the
proceedings before the POEA. Whether Finman was an indepensable or merely
a proper party to
the proceedings, we believe and so hold that the POEA could properly implead
it as party
respondent either upon the request of the private respondents or, as it
happened, motu propio.
Such is the situation under the Revised Rules of Court 5 and the application
thereof, directly or
by analogy, by the POEA can certainly not be regarded as arbitrary, oppressive
or capricious.
GREAT PACIFIC LIFE ASSURANCE CORP. VS. COURT OF APPEALS AND
MEDARDA V. LEUTERIO
G.R. No. 113899, October 13, 1999
FACTS:
A contract of group life insurance was executed between petitioner Great
Pacific Life Assurance
Corporation (hereinafter Grepalife) and Development Bank of the Philippines
(hereinafter
DBP).Grepalife agreed to insure the lives of eligible housing loan mortgagors of
DBP.
On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied
for membership in the group life insurance plan. In an application form, Dr.
Leuterio answered
questions concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high
blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other physical
impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.
On 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.
On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage.
Consequently, DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging that
Dr. Leuterio was
not physically healthy when he applied for an insurance coverage on November
15,
1983. Grepalife insisted that Dr. Leuterio did not disclose he had been
suffering from
hypertension, which caused his death.Allegedly, such non-disclosure
constituted concealment
that justified the denial of the claim.
The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a
complaint with the
Regional Trial Court against Grepalife for Specific Performance with Damages.
The RTC ruled
in favor of respondent. The CA affirmed.
ISSUE:
Whether Grepalife is liable.
HELD: Yes. The fraudulent intent on the part of the insured must be
established to entitle the insurer to
rescind the contract. In the case at bar, the petitioner failed to clearly and
satisfactorily establish
its defense, and is therefore liable to pay the proceeds of the insurance.
The policy states that upon receipt of due proof of the debtors death during the
terms of this
insurance, a death benefit in the amount of P86,200.00 shall be paid.
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.
DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagors
outstanding
loan. Considering this supervening event, the insurance proceeds shall inure to
the benefit of the
heirs of the deceased person or his beneficiaries. Equity dictates that DBP
should not unjustly
enrich itself at the expense of another (Nemo cum alterius detrimenio protest).
Hence, it cannot
collect the insurance proceeds, after it already foreclosed on the mortgage. The
proceeds now
rightly belong to Dr. Leuterios heirs represented by his widow, herein private
respondent
Medarda Leuterio.
The Supreme Court affirmed CA’s decision.
MALAYAN INSURANCE CO. INC. VS. PAP LTD. CO. (PHIL. BR.)
G.R. No. 200784, 7 August 2013
FACTS:
On May 13, 1996, Malayan Insurance Company (Malayan) issued Fire
Insurance Policy No. F-
00227-000073 to PAP Co., Ltd. (PAP Co.) for the latter’s machineries and
equipment located at
Sanyo Precision Phils. Bldg., Phase III, Lot 4, Block 15, PEZA, Rosario, Cavite
(Sanyo
Building). After the passage of almost a year but prior to the expiration of the
insurance
coverage, PAP Co. renewed the policy on an "as is" basis. Pursuant thereto, a
renewal policy,
Fire Insurance Policy No. F-00227-000079, was issued by Malayan to PAP Co.
for the period
May 13, 1997 to May 13, 1998.On October 12, 1997 and during the
subsistence of the renewal
policy, the insured machineries and equipment were totally lost by fire. Hence,
PAP Co. filed a
fire insurance claim with Malayan in the amount insured.Malayan denied the
claim upon the
ground that, at the time of the loss, the insured machineries and equipment
were transferred by
PAP Co. to a location different from that indicated in the policy. PAP Co. filed
the complaint
below against Malayan. The RTC handed down its decision, ordering Malayan
to pay PAP Co.
The Court of Appeals rendered the assailed decision which affirmed the RTC
decision. Hence,
this petition.
ISSUE:
Whether or not Malayan Insurance is liable under the insurance contract.
HELD:
Malayan Insurance is not liable under the insurance contract. Under the policy
and when it was
renewed, it forbade the removal of the insured properties unless sanctioned or
consented by
Malayan. PAP failed to notify and to obtain consent of Malayan regarding the
removal. The
transfer also increased the risk. With the transfer of location of the subject
properties, without
notice to and consent of Malayan, PAP committed concealment,
misrepresentation and breach of
a material warranty. Under the Insurance Code, Malayan can rescind the
insurance contract.
Thus, the decision of Court of Appeals is reversed and set aside.

CAPITAL INSURANCE & SURETY CO., INC., HEREIN REPRESENTED BY

ITS GENERAL AGENT, THE PAN AMERICAN INSURANCE AGENCIES, INC.
VS.
RONQUILLO TRADING AND JOSE L. BAUTISTA
G.R. No. L-36488, July 25, 1983
FACTS:
Capital Surety and Insurance Co., Inc., thru its general agent, executed and
issued a surety
bond in the amount of $14,800.00 in behalf of Ronquillo Trading and in favor
of S.S.
Eurygenes, its master, and/or its agents, Delgado Shipping Agencies. The bond
was a
guarantee for any additional freight which may be determined to be due on a
cargo of 258
surplus army vehicles consigned from Pusan, Korea to the Ronquillo Trading
on board the
S.S. Eurygenes and booked on said vessel by the Philippine Merchants
Steamship Company,
Inc. In consideration for the issuance by the appellant of the aforesaid surety
bond the
appellees executed an indemnity agreement whereby among other things, they
jointly and
severally promised to pay the appellant the sum of P1,827.00 in advance as
premium and
documentary stamps for each period of twelve months while the surety bond
was in effect.
On April 30, 1963 or about five (5) days before the expiration of the liability on
the bond,
P.D. Marchessini and Co., Ltd. and Delgado Shipping Agencies, Inc., filed a
case against the
Philippine Merchants Steamship Co., Inc., Jose L. Bautista, doing business
under the name
and style of "Ronquillo Trading", and the herein appellant Capital Insurance &
Surety Co.,
Inc. for the sum of $14,800.00 or its equivalent in Philippine currency, the loss
they
allegedly suffered as a direct consequence of the failure of the defendants to
load the
stipulated quantity of 406 U.S. surplus army vehicles. The appellant was made
party
defendant because of the bond it posted in behalf of the appellees.
Upon the expiration of the 12 months life of the bond, the appellant made a
formal demand
for the payment of the renewal premiums and cost of documentary stamps for
another
year in the amount of P1,827.00. The appellees refused to pay, contending that
the liability
of the appellant under the surety bond accrued during the period of twelve
months the said
bond was originally in force and before its expiration and that the defendants-
appellees
were under no obligation to renew the surety bond. The appellant, therefore,
filed a
complaint to recover the sum of P l,827.00 against the appellees in the City
Court of Manila.
ISSUE:
Whether or not the appellees are obliged to pay the premiums
HELD:
No. While it is true that the lower court held that the bond was still in effect
after its expiry
date, the effectivity was not due to a renewal made by the appellees but
because the surety
bond provided that "the liability of the surety will not expire if, as in this case,
it is notified
of an existing obligation thereunder". The meaning of the bond's still being in
effect is that,
the suit on the bond instituted by the obligees prior to the expiration of the
"liability"
thereunder was only for the purpose of enforcing that liability and amounted to
notice to
appellant of an already existing or accrued liability so as not to let that liability
lapse or
expire and thereby bar enforcement. It must be noted that in the surety bond it
is
stipulated that the "liability of surety on this bond will expire on May 5, 1963
and said bond
will be cancelled 15 days after its expiration, unless surety is notified of any
existing
obligations thereunder." Under this stipulation the bond expired on the stated
date and the
phrase "unless surety is notified of any existing obligations thereunder" refers
to
obligations incurred during the term of the bond.
Furthermore, under the Indemnity Agreement, the appellees "agree to pay the
company the
sum of one thousand eight hundred only (P1,800.00) Pesos, Philippine
Currency, in
advance as premium thereof for every twelve (12) months or fraction thereof,
while this
bond or any renewal or substitution thereof is in effect." Obviously, the
duration of the
bond is for "every twelve (12) months or fraction thereof, while this bond or any
renewal
or substitution is in effect." Since the appellees opted not to renew the contract
they cannot
be obliged to pay the premiums. More specifically, where a contract of surety is
terminated
under its terms, the liability of the principal for premiums after such
termination ceases
notwithstanding the pendency of a lawsuit to enforce a liability that accrued
during its
stipulated lifetime.
FIRST LEPANTO-TAISHO INSURANCE CORPORATION (NOW
KNOWN AS FLT PRIME INSURANCE CORPORATION), VS. CHEVRON
PHILIPPINES, INC.(FORMERLY KNOWN AS CALTEX [PHILIPPINES], INC.),
January 18, 2012, G.R. No. 177839
FACTS:
Respondent Chevron Philippines, Inc., formerly Caltex Philippines, Inc., sued
petitioner
First Lepanto-Taisho Insurance Corporation (now known as FLT Prime
Insurance
Corporation) for the payment of unpaid oil and petroleum purchases made by
its
distributor Fumitechniks Corporation (Fumitechniks).
Fumitechniks, represented by Ma. Lourdes Apostol, had applied for and was
issued Surety
Bond FLTICG (16) No. 01012 by petitioner for the amount of P15, 700,000.00.
Fumitechniks defaulted on its obligation.
On April 9, 2002, respondent formally demanded from petitioner the payment
of its claim
under the surety bond. However, petitioner reiterated its position that without
the basic
contract subject of the bond, it cannot act on respondents claim; petitioner
also contested
the amount of Fumitechniks supposed obligation.
After trial, the RTC rendered judgment dismissing the complaint as well as
petitioners
counterclaim. The CA ruled in favor of respondent.
ISSUE:
Whether a surety is liable to the creditor in the absence of a written contract
with the
principal.
HELD:
Section 175 of the Insurance Code defines a suretyship as a contract or
agreement whereby
a party, called the surety, guarantees the performance by another party, called
the principal
or obligor, of an obligation or undertaking in favor of a third party, called the
obligee. It
includes official recognizances, stipulations, bonds or undertakings issued
under Act
536, as amended. Suretyship arises upon the solidary binding of a person
deemed the
surety with the principal debtor, for the purpose of fulfilling an
obligation. Such undertaking makes a surety agreement an ancillary contract
as it
presupposes the existence of a principal contract. Although the contract of a
surety is in
essence secondary only to a valid principal obligation, the surety becomes
liable for the
debt or duty of another although it possesses no direct or personal interest
over the
obligations nor does it receive any benefit therefrom. And notwithstanding the
fact that the
surety contract is secondary to the principal obligation, the surety assumes
liability as a
regular party to the undertaking.
The extent of a suretys liability is determined by the language of the suretyship
contract or
bond itself. It cannot be extended by implication, beyond the terms of the
contract. Thus, to
determine whether petitioner is liable to respondent under the surety bond, it
becomes
necessary to examine the terms of the contract itself.
The law is clear that a surety contract should be read and interpreted together
with the
contract entered into between the creditor and the principal. Section 176 of the
Insurance
Code states:
Sec. 176. The liability of the surety or sureties shall be joint and several with
the obligor
and shall be limited to the amount of the bond. It is determined strictly by the
terms of the
contract of suretyship in relation to the principal contract between the obligor
and the
obligee.
A surety contract is merely a collateral one, its basis is the principal contract or
undertaking which it secures. Necessarily, the stipulations in such principal
agreement
must at least be communicated or made known to the surety particularly in
this case where
the bond expressly guarantees the payment of respondents fuel products
withdrawn by
Fumitechniks in accordance with the terms and conditions of their agreement.
The bond
specifically makes reference to a written agreement. It is basic that if the terms
of a
contract are clear and leave no doubt upon the intention of the contracting
parties, the
literal meaning of its stipulations shall control. Moreover, being an onerous
undertaking, a
surety agreement is strictly construed against the creditor, and every doubt is
resolved in
favor of the solidary debtor. Having accepted the bond, respondent as creditor
must be
held bound by the recital in the surety bond that the terms and conditions of
its
distributorship contract be reduced in writing or at the very least
communicated in writing
to the surety. Such non-compliance by the creditor (respondent) impacts not
on the validity
or legality of the surety contract but on the creditor’s right to demand
performance. The
creditor is generally held bound to a faithful observance of the rights of the
surety and to
the performance of every duty necessary for the protection of those rights.
Moreover, in
this jurisdiction, obligations arising from contracts have the force of law
between the
parties and should be complied with in good faith. Respondent is charged with
notice of the
specified form of the agreement or at least the disclosure of basic terms and
conditions of
its distributorship and credit agreements with its client Fumitechniks after its
acceptance
of the bond delivered by the latter. However, it never made any effort to relay
those terms
and conditions of its contract with Fumitechniks upon the commencement of
its
transactions with said client, which obligations are covered by the surety bond
issued by
petitioner. Contrary to respondent’s assertion, there is no indication in the
records that
petitioner had actual knowledge of its alleged business practice of not having
written
contracts with distributors; and even assuming petitioner was aware of such
practice, the
bond issued to Fumitechniks and accepted by respondent specifically referred
to a written agreement.

FIRST INTEGRATED BONDING &INSURANCE COMPANY, INC. V. HON.

HERNANDO
G.R. No. L-51221, July 31, 1991
FACTS:
Blanco was the owner of a passenger jeep that was insured against liabilities
for death and
injuries to third persons with First Insurance. On November 25, 1976, the said
jeepney
driven by Blanco bumped a 5 year old child, causing the latter’s death. A
complaint was
filed against Blanco and First Insurance by the parent of the child, the latter
being declared
in default for not filing an action. When a decision was rendered against the
petitioners,
First Insurance filed for a motion for relief from judgment.The same was
denied.
ISSUE:
Whether or not the parents of the victim can directly sue the insurer?
HELD:
It is settled that where the insurance contract provides for indemnity against
liability to a
third party, such third party can directly sue the insurer (Caguia v. Fieldman's
Insurance
Co., Inc., G. R. No. 23276, November 29, 1968, 26 SCRA 178). The liability of
the insurer to
such third person is based on contract while the liability of the insured to the
third party is
based on tort.
The injured for whom the contract of insurance is intended can sue directly the
insurer.
The general purpose of statutes enabling an injured person to proceed directly
against the
insurer is to protect injured persons against the insolvency of the insured who
causes such
injury, and to give such injured person a certain beneficial interest in the
proceeds of the
policy, and statutes are to be liberally construed so that their intended purpose
may be
accomplished. It has even been held that such a provision creates a
contractual relation
which inures to the benefit of any and every person who may be negligently
injured by the
named insured as if such injured person were specifically named in the policy.
In the event that the injured fails or refuses to include the insurer as party
defendant in his
claim for indemnity against the insured, the latter is not prevented by law to
avail of the
procedural rules intended to avoid multiplicity of suits. Not even a "no action"
clause under
the policy which requires that a final judgment be first obtained against the
insured and
that only thereafter can the person insured recover on the policy can prevail
over the Rules
of Court provisions aimed at avoiding multiplicity of suits. (p. 391, 167 SCRA)
First Insurance cannot evade its liability as insurer by hiding under the cloak
of the insured.
Its liability is primary and not dependent on the recovery of judgment from the
insured.
LOADSTAR SHIPPING INC. V. PIONEER SHIPPING CO.
Gr. No. 157481 January 24, 2006
FACTS:
Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered
owner and
operator of the vessel M/V Weasel. On June 6, 1984, Loadstar entered into a
voyage-charter
with Northern Mindanao Transport Company, Inc. for the carriage of 65,000
bags of
cement from Iligan City to Manila. The shipper was Iligan Cement Corporation,
while the
consignee in Manila was Market Developers, Inc. On June 24, 1984, 67,500
bags of cement
were loaded on board M/V Weasel and stowed in the cargo holds for delivery to
the
consignee. The shipment was covered by petitioners Bill of Lading. Prior to the
voyage, the
consignee insured the shipment of cement with respondent Pioneer Asia
Insurance
Corporation for P1,400,000, for which respondent issued Marine Open Policy
No. MOP-006
dated September 17, 1980, covering all shipments made on or after September
30,
1980.M/V Weasel left Iligan City for Manila in good weather. However, at 4:31
in the
morning of June 25, 1984, Captain Vicente C. Montera, master of M/V Weasel,
ordered the
vessel to be forced aground. Consequently, the entire shipment of cement was
good as gone
due to exposure to sea water. Petitioner thus failed to deliver the goods to the
consignee in
Manila.
The consignee demanded from petitioner full reimbursement of the cost of the
lost
shipment. Petitioner, however, refused to reimburse the consignee despite
repeated
demands.
Nonetheless, on March 11, 1985, respondent insurance company paid the
consignee
P1,400,000 plus an additional amount of P500,000, the value of the lost
shipment of
cement. In return, the consignee executed a Loss and Subrogation Receipt in
favor of
respondent concerning the latters subrogation rights against petitioner.
ISSUE:
Did petitioner exercise the required diligence i.e., the extraordinary diligence of
a common
carrier or the ordinary diligence of a private carrier?
HELD:
No. Article 1732. Common carriers are persons, corporations, firms or
associations
engaged in the business of carrying or transporting passengers or goods or
both, by land,
water, or air, for compensation, offering their services to the public.
As a common carrier, petitioner is required to observe extraordinary diligence
in the
vigilance over the goods it transports. When the goods placed in its care are
lost, petitioner
is presumed to have been at fault or to have acted negligently. Petitioner
therefore has the
burden of proving that it observed extraordinary diligence in order to avoid
responsibility
for the lost cargo.

CEBU SALVAGE CORPORATION V. PHILIPPINE HOME ASSURANCE

CORPORATION
Gr. No. 150403 January 25, 2007
FACTS:
On November 12, 1984, Cebu Salvage Corporation, as carrier, and Maria
Cristina Chemicals
Industries, Inc. (MCCII), as charterer, entered into a voyage charter wherein
CSC was to
load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo
at Ayungon,
Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental
to
consignee Ferrochrome Phils., Inc. On December 23, 1984, CSC received and
loaded 1,100
metric tons of silica quartz on board the M/T Espiritu Santo which left for
Misamis. M/T
Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the
total loss of the
cargo. MCCII filed a claim for the loss of the shipment with its insurer
Philippine Home
Assurance Corporation à paid the claim of P211,500.00 and was subrogated to
the rights of
MCCII.
ISSUE:
May CSC be held liable for the loss of cargo resulting from the sinking of the
ship?
HELD:
Yes. Based on the agreement signed by the parties and the testimony of CSC’s
operations
manager, it is clear that it was a contract of carriage. There is no dispute that
CSC was a
common carrier. At the time of the loss of the cargo, it was engaged in the
business of
carrying and transporting goods by water, for compensation, and offered its
services to the
public. From the nature of their business and for reasons of public policy,
common carriers
are bound to observe extraordinary diligence over the goods they transport
according to
the circumstances of each case. In the event of loss of the goods, common
carriers are
responsible, unless they can prove that this was brought about by the causes
specified in
Article 1734. In all other cases, common carriers are presumed to be at fault or
to have
acted negligently, unless they prove that they observed extraordinary diligence.
A bill of lading may serve as the contract of carriage between the parties but it
cannot
prevail over the express provision of the voyage charter in cases where a Bill of
Lading has
been issued by a carrier covering goods shipped aboard a vessel under a
charter party, and
the charterer is also the holder of the bill of lading, "the bill of lading operates
as the receipt
for the goods, and as document of title passing the property of the goods, but
not as varying
the contract between the charterer and the shipowner."

ZENITH INSURANCE CORP. V CA

G.r. No. 85296 May 14, 1990
FACTS:
Private respondent Lawrence Fernandez insured his car for "own damage"
under private
car Policy with petitioner Zenith Insurance Corporation. Later, 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
Regional Trial Court of Cebu for sum of money and damages resulting from the
refusal of
Zenith to pay the amount claimed. 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 filed an answer alleging that it offered to pay the claim of Fernandez
pursuant to the
terms and conditions of the contract which, the private respondent rejected.
The trial court
terminated the pre-trial. Subsequently, Fernandez presented his evidence.
Petitioner
Zenith, however, failed to present its evidence in view of its failure to appear in
court,
without justifiable reason, on the day scheduled for the purpose. The trial
court issued an
order submitting the case for decision without Zenith's evidence. Petitioner
filed a petition
for certiorari with the Court of Appeals assailing the order of the trial court
submitting the
case for decision without petitioner's evidence. CA rendered its decision
affirming in
toto the decision of the trial court.
ISSUE:
Whether or not the award of damages is proper in case of reasonable delays in
the payment
of insurance claims
HELD:
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The award of damages in case of unreasonable delay in the payment of
insurance claims is
governed by the Philippine Insurance Code. It is clear that 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.
As regards the award of moral and exemplary damages, the rules under the
Civil Code of
the Philippines shall govern.
The purpose of moral damages is essentially indemnity or reparation, not
punishment or
correction. While it is true that no proof of pecuniary loss is necessary in order
that moral
damages may be adjudicated, the assessment of which is left to the discretion
of the court
according to the circumstances of each case (Art. 2216, New Civil Code), it is
equally true
that in awarding moral damages in case of breach of contract, there must be a
showing that
the breach was wanton and deliberately injurious or the one responsible acted
fraudently
or in bad faith.
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
also the fact 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 (Art. 2229, New Civil Code of the Philippines). In
the case
of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227,
exemplary damages
were not awarded as the insurance company had not acted in wanton,
oppressive or
malevolent manner. The same is true in the case at bar.
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.
As regards the actual damages incurred by private respondent, the amount of
P3,640.00
had been established before the trial court and affirmed by the appellate court.
Respondent
appellate court correctly ruled that the deductions of P250.00 and P274.00 as
deductible
franchise and 20% depreciation on parts, respectively claimed by petitioners as
agreed
upon in the contract, had no basis.
PHILIPPINE HOME ASSURANCE VS. COURT OF APPEALS
(257 SCRA 468)
G.R. No. 106999. June 20, 1996
FACTS:
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in
Kobe, Japan,
Shipment for carriage to Manila and Cebu freight prepaid and in good order
and condition.
While the vessel is off Okinawa, Japan, a small flame was detected on the
acetylene cylinder
located in the main deck level. As the crew was trying to extinguish the fire, the
acetylene
cylinder suddenly exploded sending a flash of flame throughout the
accommodation area,
thus causing death and severe injuries to the crew and instantly setting fire to
the whole
superstructure of the vessel. The incident forces the master and the crew to
abandon the
ship. Thereafter, SS Eastern Explorer was found to be constructive total loss
and its voyage
was declared abandoned. Several hours later, a tugboat under the control of
Fukuda
Salvage Co. arrived near the vessel and commenced to tow the vessel for the
port of Naha,
Japan. After the fire was extinguished, the cargoes which were saved were
loaded to
another vessel for delivery for their original of port of destination. ESLI charged
the
consignees several amounts corresponding to additional freight and salvage
charges. The
charges were all paid by Philippine some Assurance Corporation (PHAC) under
protest for
and in behalf of the consignees. PHAC, as subrogee of the consignees,
thereafter filed a
complaint before the Regional Trial Court of Manila, Branch 39, against ESLI to
recover the
sum paid under protest on the ground that the same were actually damages
directly
brought about by the fault, negligence, illegal act and/or breach of contract of
ESLI. In its
answer, ESLI contended that it exercised the diligence required by law in the
handling,
custody and carriage of the shipment; that the fire was caused by unforeseen
event; that
the additional freight charges are due and demandable pursuant to the Bill of
Lading, and
that salvage charges are properly collectible under Act. No. 2616, known as the
Salvage
Law. The trial court dismissed the PHAC’s complaint and ruled in favor of
ESLI. The court
said that the Supreme Court has ruled in Erlanger and Galinger vs. Swedish
East Asiatic Co.,
Ltd., 34 Phil. 178, that three elements are (1) a marine peril (2) service
voluntary rendered
when not required as an existing duty or from a special contract and (3)
success in whole
or in part, or that the service rendered contributed to such success. The court
said that the
above elements are all present in the instant case. Salvage charges may thus
be assessed on
the cargoes saved from the vessel. As provided for in Section 13 of the Salvage
Law, “The
expenses of salvage, as well as the reward forsalvage or assistance shall be a
charge on the
things salvaged or their value.” In Manila RailroadCo. vs. Macondray Co., 37
Phil. 583. It
was also held that “When a ship and its cargo are savedtogether, the salvage
allowance
should be charged against the ship and the cargo in the proportionof their
respective
values, the same as in the case of general average…” Thus, the “compensation
tobe paid by
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We are what we repeatedly do. Excellence, then, is not an act, but a
habit--- Aristotle
the owner of the cargo is in proportion to the value of the vessel and the value
of thecargo
saved.”
On appeal to the Court of Appeals, respondent court affirmed the trial court’s
findings
andconclusion; hence, the present petition for review before this Court on the
following
error, amongothers:
ISSUE:
Whether or not the respondent Court erroneously adopted with approval the
Trial Court’s
conclusion that the expenses or averages incurred in saving the cargo
constitute general
average?
HELD:
On the issue whether or not respondent court committed an error in
concluding that the
expenses incurred in saving the cargo are considered general average, we rule
in the
affirmative. As a rule, general or gross averages include all damages and
expenses which
are deliberately causedin order to save vessels, its cargo or both at the same
time, from a
real and known risk. While theinstant case may technically fall within the
purview of the
said provision, the formalities prescribedunder Article 813 and 814 of the Code
of
Commerce in order to incur the expenses and cause thedamage corresponding
to gross
average were not complied with. Consequently, respondent ESLI’sclaim for
contribution
from the consignees of the cargo at the time of the occurrence of the
averageturns to
naught.The Court reversed and set aside the judgment of the respondent court
and ordered
respondentEastern Shipping Lines. Inc. to return to petitioner Philippine Home
Assurance
Corporation theamount it paid under protest in behalf of the consignees.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. , VS. CARPONIA T.
EBRADO
AND PASCUALA VDA. DE EBRADO
G.R. No. L-44059, October 28, 1977
FACTS:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for
P5,882.00 with a
rider for Accidental Death. He designated Carponia T. Ebrado as the revocable
beneficiary
in his policy. He referred to her as his wife. Cristor was killed when he was hit
by a
failing branch of a tree. Insular Life was made liable to pay the coverage in the
total amount
of P11,745.73, representing the face value of the policy in the amount of
P5,882.00 plus the
additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as
the designated beneficiary therein, although she admitted that she and the
insured were
merely living as husband and wife without the benefit of marriage. Pascuala
Vda. de Ebrado
also filed her claim as the widow of the deceased insured. She asserts that she
is the one
entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who
should be
given the proceeds. The trial court declared Carponia as disqualified.
ISSUE:
Whether or not a common-law wife named as beneficiary in the life insurance
policy of a
legally married man can claim the proceeds in case of death of the latter
HELD:
Section 50 of the Insurance Act which provides that "the insurance shall be
applied
exclusively to the proper interest of the person in whose name it is made" The
word
"interest" highly suggests that the provision refers only to the "insured" and not
to the
beneficiary, since a contract of insurance is personal in character. Otherwise,
the
prohibitory laws against illicit relationships especially on property and descent
will be
rendered nugatory, as the same could easily be circumvented by modes of
insurance.
When not otherwise specifically provided for by the Insurance Law, the contract
of life
insurance is governed by the general rules of the civil law regulating contracts.
And under
Article 2012 of the same Code, any person who is forbidden from receiving any
donation under Article 739 cannot be named beneficiary of a life insurance
policy by
the person who cannot make a donation to him. Common-law spouses are
barred from
receiving donations from each other.
Article 739 provides that void donations are those made between persons who
were guilty
of adultery or concubinage at the time of donation.