1. KEPPEL CEBU SHIPYARD, INC. vs.

PIONEER INSURANCE AND SURETY CORPORATION,

PIONEER INSURANCE AND SURETY CORPORATION vs. KEPPEL CEBU SHIPYARD, INC.

G.R. Nos. 180880-81 G.R. Nos. 180896-97 September 25, 2009 Article 2180 of the Civil Code, Marine
Insurance, Negligence, Damages

OCTOBER 23, 2017

FACTS:

WG & A JEBSENS SHIPMGMT. Owner/Operator of M/V “SUPERFERRY 3” and KEPPEL CEBU

SHIPYARD, INC. (KCSI) enter into an agreement that the Drydocking and Repair of the above-named
vessel ordered by the Owner’s Authorized Representative shall be carried out under the Keppel Cebu
Shipyard Standard Conditions of Contract for Ship repair, guidelines and regulations on safety and security
issued by Keppel Cebu Shipyard.

In the course of its repair, M/V “Superferry 3” was gutted by fire. Claiming that the extent of the damage
was pervasive, WG&A declared the vessel’s damage as a “total constructive loss” and, hence, filed an
insurance claim with Pioneer.

Pioneer paid the insurance claim of WG&A, which in turn, executed a Loss and Subrogation Receipt in
favor of Pioneer.

Pioneer tried to collect from KCSI, but the latter denied any responsibility for the loss of the subject vessel.
As KCSI continuously refused to pay despite repeated demands, Pioneer, filed a Request for Arbitration
before the Construction Industry Arbitration Commission CIAC seeking for payment of U.S.$8,472,581.78
plus interest, among others.

The CIAC rendered its Decision declaring both WG&A and KCSI guilty of negligence, the CIAC ordered
KCSI to pay Pioneer the amount of P25,000,000.00, with interest at 6% per annum. Both Keppel and
Pioneer appealed to the CA.

The cases were consolidated in the CA. the CA rendered a decision dismissing petitioner’s claims in its
entirety. Keppel was declared as equally negligent.

ISSUE:

To whom may negligence over the fire that broke out on board M/V “Superferry 3” be imputed? What is the
extent of the damage, if any?

RULING:

1. The issue of negligence

Undeniably, the immediate cause of the fire was the hot work done by Angelino Sevillejo (Sevillejo) on the
accommodation area of the vessel, specifically on Deck A. As established before the CIAC –
Pioneer contends that KCSI should be held liable because Sevillejo was its employee who, at the time the
fire broke out, was doing his assigned task, and that KCSI was solely responsible for all the hot works done
on board the vessel. We rule in favor of Pioneer.

At the time of the fire, Sevillejo was an employee of KCSI and was subject to the latter’s direct control and
supervision.There was a lapse in KCSI’s supervision of Sevillejo’s work at the time the fire broke out.

KCSI failed to exercise the necessary degree of caution and foresight called for by the circumstances.

The circumstances, taken collectively, yield the inevitable conclusion that Sevillejo was negligent in the
performance of his assigned task. His negligence was the proximate cause of the fire on board M/V
“Superferry 3.” As he was then definitely engaged in the performance of his assigned tasks as an employee
of KCSI, his negligence gave rise to the vicarious liability of his employer43 under Article 2180 of the Civil
Code.

KCSI failed to prove that it exercised the necessary diligence incumbent upon it to rebut the legal
presumption of its negligence in supervising Sevillejo.44 Consequently, it is responsible for the damages
caused by the negligent act of its employee, and its liability is primary and solidary.

2. Damages

In marine insurance, a constructive total loss occurs under any of the conditions set forth in Section 139 of
the Insurance Code, which provides—

Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any
particular portion hereof separately valued by the policy, or otherwise separately insured, and recover for a
total loss thereof, when the cause of the loss is a peril insured against:

(a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it
from the peril;

(b) If it is injured to such an extent as to reduce its value more than three-fourths; x x x.

It cannot be denied that M/V “Superferry 3” suffered widespread damage from the fire that occurred on
February 8, 2000, a covered peril under the marine insurance policies obtained by WG&A from Pioneer.
The estimates given by the three disinterested and qualified shipyards show that the damage to the ship
would exceed P270,000,000.00, or ¾ of the total value of the policies – P360,000,000.00. These estimates
constituted credible and acceptable proof of the extent of the damage sustained by the vessel.

Considering the extent of the damage, WG&A opted to abandon the ship and claimed the value of its
policies. Pioneer, finding the claim compensable, paid the claim, with WG&A issuing a Loss and
Subrogation Receipt evidencing receipt of the payment of the insurance proceeds from Pioneer.

The Loss and Subrogation Receipt issued by WG&A to Pioneer is the best evidence of payment of the
insurance proceeds to the former, and no controverting evidence was presented by KCSI to rebut the
presumed authority of the signatory to receive such payment.
2. ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY

G.R. No. 166245 09 April 2008

Facts:

Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with
petitioner. Under the policy, the clients of Eternal who purchased burial lots from it on installment basis
would be insured by Philamlife. Among those insured was John Chuang who died with a balance of
payments pf PhP100,000.00. More than a year after complying with the required documents, Philamlife had
not furnished Eternal with any reply to the latter’s insurance claim. This prompted Eternal to demand from
Philamlife the payment of the claim for PhP 100,000 on April 25, 1986. Only then did Philamlife respond
that the deceased was not covered by the Policy.

The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment
must follow. The CA ruled that the non-accomplishment of the submitted application form violated Section
26 of the Insurance Code. Thus, the CA concluded, there being no application form, Chuang was not
covered by Philamlifes insurance.

Issue: May the inaction of the insurer on the insurance application be considered approval of the
application?

Ruling:

Yes. As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group
Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the
Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by
the Company.

An examination of the above provision would show ambiguity between its two sentences. A contract of
insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against
the insurer. Moreover, the mere inaction of the insurer on the insurance application must not work to
prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination
of the insurance contract by the insurer must be explicit and unambiguous.

3. Philippine Health Care Providers v CIR

G.R. No. 167330 June 12, 2008
J. Corona

Facts:

The petitioner, a prepaid health-care organization offering benefits to its members. The CIR found that the
organization had a deficiency in the payment of the DST under Section 185 of the 1997 Tax Code which
stipulated its implementation:
“On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability
made or renewed by any person, association or company or corporation transacting the business of
accident, fidelity, employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or
other branch of insurance (except life, marine, inland, and fire insurance)”

The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest, for 1996-
1997 in the total amount of P224,702,641.18.

The petitioner protested to the CIR, but it didn’t act on the appeal. Hence, the company had to go to the
CTA. The latter declared judgment against them and reduced the taxes. It ordered them to pay 22 million
pesos for deficiency VAT for 1997 and 31 million deficiency VAT for 1996.

CA denied the company’s appeal an d increased taxes to 55 and 68 million for 1996 to 1997.

Issues: WON a health care agreement in the nature of an insurance contract and therefore subject to the
documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)

Held: Yes. Petition dismissed.

Ratio:

The DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision,
or termination of specific legal relationships through the execution of specific instruments.

The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the transaction of
the business. In particular, the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of
making or renewing any policy of insurance (except life, marine, inland and fire insurance), bond or
obligation in the nature of indemnity for loss, damage, or liability.

Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross
Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a non-life
insurance policy.

Its health care agreement is not a contract for the provision of medical services. Petitioner does not actually
provide medical or hospital services but merely arranges for the same

It is also incorrect to say that the health care agreement is not based on loss or damage because, under
the said agreement, petitioner assumes the liability and indemnifies its member for hospital, medical and
related expenses (such as professional fees of physicians). The term "loss or damage" is broad enough to
cover the monetary expense or liability a member will incur in case of illness or injury.

Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life insurance,
which is primarily a contract of indemnity.

Similarly, the insurable interest of every member of petitioner's health care program in obtaining the health
care agreement is his own health. Under the agreement, petitioner is bound to indemnify any member who
incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingency
to the extent agreed upon under the contract.
4. Insular v Ebrado

G.R. No. L-44059 October 28, 1977

Facts:

J. Martin:

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 admited 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 courtdeclared Carponia as disqualified.

Issue: WON 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: No. Petition

Ratio:

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
fife 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.
There is every reason to hold that the bar in donations between legitimate spouses and those between
illegitimate ones should be enforced in life insurance policies since the same are based on similar
consideration. So long as marriage remains the threshold of family laws, reason and morality dictate that
the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship.

A conviction for adultery or concubinage isn’t required exacted before the disabilities mentioned in Article
739 may effectuate. The article says that in the case referred to in No. 1, the action for declaration of nullity
may be brought by the spouse of the donor or donee; and the guilty of the donee may be proved by
preponderance of evidence in the same action.

The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent.
The law plainly states that the guilt of the party may be proved “in the same acting for declaration of nullity
of donation.” And, it would be sufficient if evidence preponderates.

The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also living
in with his common-law wife with whom he has two children.

5. HEIRS OF LORETO C. MARAMAG, represented by surviving spouse VICENTA PANGILINAN

MARAMAG,

Petitioners,

- versus -

EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN MARAMAG, KARL BRIAN DE GUZMAN
MARAMAG, TRISHA ANGELIE MARAMAG, THE INSULAR LIFE ASSURANCE COMPANY, LTD., and
GREAT PACIFIC LIFE ASSURANCE CORPORATION,

Respondents.

G.R. No. 181132, June 5, 2009

FACTS:

The case stems from a petition filed against respondents with the RTC for revocation and/or reduction of
insurance proceeds for being void and/or inofficious. The petition alleged that: (1) petitioners were the
legitimate wife and children of Loreto Maramag (Loreto), while respondents were Loreto’s illegitimate
family; (2) Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect in the killing of
the latter, thus, she is disqualified to receive any proceeds from his insurance policies from Insular
Life Assurance Company, Ltd. (Insular) and Great Pacific Life Assurance Corporation (Grepalife) (3) the
illegitimate children of Loreto—Odessa, Karl Brian, and Trisha Angelie—were entitled only to one-half of
the legitime of the legitimate children, thus, the proceeds released to Odessa and those to be released to
Karl Brian and Trisha Angelie were inofficious and should be reduced; and (4) petitioners could not
be deprived of their legitimes, which should be satisfied first.

Insular admitted that Loreto misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and Trisha
Angelie as his legitimate children, and that they filed their claims for the insurance proceeds of the
insurance policies; that when it ascertained that Eva was not the legal wife of Loreto, it disqualified her as
a beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha Angelie, as the remaining
designated beneficiaries; and that it released Odessa’s share as she was of age, but withheld the release
of the shares of minors Karl Brian and Trisha Angelie pending submission of letters of
guardianship. Insular alleged that the complaint or petition failed to state a cause of action insofar as
it sought to declare as void the designation of Eva as beneficiary, because Loreto revoked her designation
as such in Policy No. A001544070 and it disqualified her in Policy No. A001693029; and insofar as it sought
to declare as inofficious the shares of Odessa, Karl Brian, and Trisha Angelie, considering that no
settlement of Loreto’s estate had been filed nor had the respective shares of the heirs been
determined. Insular further claimed that it was bound to honor the insurance policies designating
the children of Loreto with Eva as beneficiaries pursuant to Section 53 of the Insurance Code.
Grepalife alleged that Eva was not designated as an insurance policy beneficiary; that the claims filed by
Odessa, Karl Brian, and Trisha Angelie were denied because Loreto was ineligible for insurance due to a
misrepresentation in his application form that he was born on December 10, 1936 and, thus, not more than
65 years old when he signed it in September 2001; that the case was premature, there being no claim filed
by the legitimate family of Loreto; and that the law on succession does not apply where the designation of
insurance beneficiaries is clear.

ISSUE:

Whether or not illegitimate children can be beneficiaries in an insurance contract.

RULING:

Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be applied exclusively to
the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified
in the policy. Pursuant thereto, it is obvious that the only persons entitled to claim the insurance proceeds
are either the insured, if still alive; or the beneficiary, if the insured is already deceased, upon the maturation
of the policy.The exception to this rule is a situation where the insurance contract was intended to benefit
third persons who are not parties to the same in the form of favorable stipulations or indemnity. In such a
case, third parties may directly sue and claim from the insurer.

Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are not entitled
to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no legal obligation to turn
over the insurance proceeds to petitioners. The revocation of Eva as a beneficiary in one policy and her
disqualification as such in another are of no moment considering that the designation of the
illegitimate children as beneficiaries in Loreto’s insurance policies remains valid. Because no legal
proscription exists in naming as beneficiaries the children of illicit relationships by the insured, the shares
of Eva in the insurance proceeds, whether forfeited by the court in view of the prohibition on donations
under Article 739 of the Civil Code or by the insurers themselves for reasons based on the insurance
contracts, must be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion
of petitioners. It is only in cases where the insured has not designated any beneficiary, or when
the designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds
shall redound to the benefit of the estate of the insured

6. Insurance Case Digest: Gaisano Cagayan, Inc. V. Insurance Company Of North America (2006)

G.R. No. 147839 June 8, 2006

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of Insurance Code

FACTS:
 Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi Strauss
(Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co

IMC and LSPI separately obtained from Insurance Company of North America fire insurance
policies for their book debt endorsements related to their ready-made clothing materials which have been
sold or delivered to various customers and dealers of the Insured anywhere in the Philippines which are
unpaid 45 days after the time of the loss

February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano
Cagayan, Inc., containing the ready-made clothing materials sold and delivered by IMC and LSPI was
consumed by fire.

February 4, 1992: Insurance Company of North America filed a complaint for damages against
Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims under their respective fire insurance
policies which it paid thus it was subrogated to their rights

Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities event or force
majeure

RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss
(res perit domino)

CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res perit
domino

ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the debt that
was isnured

HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold
and delivered to the customers and dealers of the insured

ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are
at the buyer's risk whether actual delivery has been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of
the contract and the ownership in the goods has been retained by the seller merely to secure performance
by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such
delivery;

IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until
full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest
is not determined by concept of title, but whether insured has substantial economic interest in the property

Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether
real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated
peril might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.

Anyone has an insurable interest in property who derives a benefit from its existence or would
suffer loss from its destruction.
 it is sufficient that the insured is so situated with reference to the property that he would be liable
to loss should it be injured or destroyed by the peril against which it is insured

an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
possession of, the subject

matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of
such an interest

insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI
that remained unpaid 45 days after the fire - obligation is pecuniary in nature

obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds
true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding
him liable even in case of fortuitous event

Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of
anything of the same kind does not extinguish the obligation (Genus nunquan perit)

The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent
as insurer and IMC as the insured, but also the amount paid to settle the insurance claim

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 wrongdoer or the person
who has violated the contract.

As to LSPI, no subrogation receipt was offered in evidence.

Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the
amount of P535,613.

7. Rizal Commercial Banking Corporation (RCBC) vs. Court of Appeals [GR 128833, 20 April 1998];

also RCBC vs. Court of Appeals [GR 128834]

Facts:

Goyu & Sons, Inc. (Goyu) applied for credit facilities and accommodations with Rizal Commercial

Banking Corporation (RCBC) at its Binondo Branch. After due evaluation, RCBC Binondo Branch, through
its key officers, petitioners Uy Chun Bing and Eli D. Lao, recommended Goyu's application for approval by
RCBC's executive committee. A credit facility in the amount of P30 million was initially granted. Upon Goyu's
application and Uy's and Lao's recommendation, RCBC's executive committee increased Goyu's credit
facility to P50 million, then to P90 million, and finally to P117 million. As security for its credit facilities with
RCBC, Goyu executed two real estate mortgages and two chattel mortgages in favor of RCBC, which were
registered with the Registry of Deeds at Valenzuela, Metro Manila. Under each of these four mortgage
contracts, Goyu committed itself to insure the mortgaged property with an insurance company approved by
RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC. Goyu obtained in its
name a total of 10 insurance policies from MICO. In February 1992, Alchester Insurance Agency, Inc., the
insurance agent where Goyu obtained the Malayan insurance policies, issued 9 endorsements in favor of
RCBC seemingly upon instructions of Goyu. On 27 April 1992, one of Goyu's factory buildings in Valenzuela
was gutted by fire. Consequently, Goyu submitted its claim for indemnity on account of the loss insured
against.

MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of

attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by
other creditors of Goyu alleging better rights to the proceeds than the insured. Goyu filed a complaint for
specific performance and damages which was docketed at the Regional Trial Court of the National Capital
Judicial Region (Manila, Branch 3) as Civil Case 93-65442. RCBC, one of Goyu's creditors, also filed with
MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the
same reasons that AGCO denied Goyu's claims. In an interlocutory order dated 12 October 1993, the
Regional Trial Court of Manila (Branch 3), confirmed that Goyu's other creditors, namely, Urban Bank,
Alfredo Sebastian, and Philippine Trust Company obtained their respective writs of attachments from
various courts, covering an aggregate amount of P14,938,080.23, and ordered that the proceeds of the 10
insurance policies be deposited with the said court minus the aforementioned P14,938,080.23. Accordingly,
on 7 January 1994, MICO deposited the amount of P50,505,594.60 with Branch 3 of the Manila RTC. In
the meantime, another notice of garnishment was handed down by another Manila RTC sala (Branch 28)
for the amount of P8,696,838.75.

After trial, Branch 3 of the Manila RTC rendered judgment in a favor of Goyu, ordering Malayan to pay Goyu
its fire loss claims in the total amount of P74,040,518.58 less the amount of P50,000,000.00 which is
deposited with the Court; damages by way of interest for the duration of the delay since 27 July 1992 (90
days after Malayan's receipt of the required proof of loss and notice of loss) at the rate of twice the ceiling
prescribed by the Monetary Board, on the amounts of (1) P50,000,000.00 from 27 July 1992 up to the time
said amount was deposited with the Court on 7 January 1994; and (2) P24,040,518.58 — from 17 July
1992 up to the time when the writs of attachments were received by Malayan. The court also ordered RCBC
to pay Goyu actual and compensatory damages in the amount of P2,000,000.00, and both Malayan and
RCBC to solidarily pay Goyu (1) P1,000,000.00 as exemplary damages; (2) P1,000,000.00 as, and for,
attorneys fees; and (3) Costs of suit. The Court, on the Counterclaim of RCBC, ordered Goyu to pay its
loan obligations with RCBC in the amount of P68,785,069.04, as of 27 April 1992, with interest thereon at
the rate stipulated in the respective promissory notes (without surcharges and penalties). From this
judgment, all parties interposed their respective appeals. Goyu was unsatisfied with the amounts awarded
in its favor. MICO and RCBC disputed the trial court's findings of liability on their part. The Court of Appeals
partly granted Goyu's appeal, but sustained the findings of the trial court with respect to MICO and RCBC's
liabilities. The appellate court modified the decision by ordering Malayan to pay Goyu its fire loss claim in
the total amount of P74,040,518.58 less than the amount of P50,505,549.60 (per O.R. No. 3649285) plus
deposited in court and damages by way of interest commencing 27 July 1992 until the time Goyu receives
the said amount at the rate of 37% per annum which is twice the ceiling prescribed by the Monetary Board;
ordering RCBC to pay Goyu actual and compensatory damages in the amount of P5,000,000.00; and
Malayan and RCBC, Uy Chun Bing and Eli Lao to pay Goyu solidarily in the amounts of (1) P1,500,000.00
as exemplary damages; and (2) P1,500,000.00 as and for attorney's fees. The Court, on RCBC's
Counterclaim, ordered Goyuto pay its loan obligation with RCBC in the amount of P68,785.069.04 as of 27
April 1992 without any interest, surcharges and penalties. RCBC and Malayan appealed separately but, in
view of the common facts and issues involved, their individual petitions were consolidated.

Issue [1]: Whether RCBC, as mortgagee, has any right over the insurance policies taken by Goyu, the

mortgagor, in case of the occurrence of loss.

Held [1]: YES. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests
in the same mortgaged property, such that each one of them may insure the same property for his own sole
benefit. There is no question that Goyu could insure the mortgaged property for its own exclusive benefit.

Herein, although it appears that Goyu obtained the subject insurance policies naming itself as the sole
payee, the intentions of the parties as shown by their contemporaneous acts, must be given due
consideration in order to better serve the interest of justice and equity. It is to be noted that nine
endorsement documents were prepared by Alchester in favor of RCBC. The Court is in a quandary how
Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular
beneficiary or payee other than the insured had not such named payee or beneficiary been specifically
disclosed by the insured itself. It is also significant that Goyu voluntarily and purposely took the insurance
policies from MICO, a sister company of RCBC, and not just from any other insurance company. Alchester
would not have found out that the subject pieces of property were mortgaged to RCBC had not such
information been voluntarily disclosed by Goyu itself. Had it not been for Goyu, Alchester would not have
known of Goyu's intention of obtaining insurance coverage in compliance with its undertaking in the
mortgage contracts with RCBC, and verify, Alchester would not have endorsed the policies to RCBC had it
not been so directed by Goyu. On equitable principles, particularly on the ground of estoppel, the Court is
constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement
documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. Such reliance
is justified under the circumstances of the case. Goyu failed to seasonably repudiate the authority of the
person or persons who prepared such endorsements. Over and above this, Goyu continued, in the
meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of the
loss insured against, it was too late for Goyu to disown the endorsements for any imagined or contrived
lack of authority of Alchester to prepare and issue said endorsements. If there had not been actually an
implied ratification of said endorsements by virtue of Goyu's inaction in this case, Goyu is at the very least
estopped from assailing their operative effects. To permit Goyu to capitalize on its nonconfirmation of these
endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good
faith that there was due endorsement pursuant to their mortgage contracts, is to countenance grave
contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot
sanction. Under the peculiar circumstances, the Court is bound to recognize RCBC's right to the proceeds
of the insurance policies if not for the actual endorsement of the policies, at least on the basis of the
equitable principle of estoppel.

Issue [2]: Whether Goyu can insist that the proceeds of insurance shall exclusively apply to the interest of
the person in whose name or for whose benefit it is made.

Held [2]: NO. Goyu cannot seek relief under Section 53 of the Insurance Code which provides that the

proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose
benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification
to take exception to the strict application of said provision, it having been sufficiently established that it was
the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were
taken out. Consider thus the following: (1) It is undisputed that the insured pieces of property were the
subject of mortgage contracts entered into between RCBC and Goyu in consideration of and for securing
Goyu's credit facilities from RCBC. The mortgage contracts contained common provisions whereby Goyu,
as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance
company acceptable to RCBC. (2) Goyu voluntarily procured insurance policies to cover the mortgaged
property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance
company to RCBC. (3) Endorsement documents were prepared by MICO's underwriter, Alchester
Insurance Agency, Inc., and copies thereof were sent to Goyu, MICO and RCBC. Goyu did not assail, until
of late, the validity of said endorsements. (4) Goyu continued until the occurrence of the fire, to enjoy the
benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the
insurance policies to be taken by Goyu to cover the mortgaged properties. The fact that upon receiving its
copies of the endorsement documents prepared by Alchester, Goyu, despite the absence written conformity
thereto, obviously considered said endorsement to be sufficient compliance with its obligation under the
mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and Goyu
continued to benefit therefrom.

Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance
policies obtained by Goyu. The intention of the parties will have to be given full force and effect in this
particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC, which under the
factual circumstances of the case, is truly the person or entity for whose benefit the policies were clearly
intended. Moreover, the law's evident intention to protect the interests of the mortgagee upon the mortgaged
property is expressed in Article 2127 of the Civil Code. The proceeds of the 8 insurance policies endorsed
to RCBC aggregate to P89,974,488.36. Being exclusively payable to RCBC by reason of the endorsement
by Alchester to RCBC, which we already ruled to have the force and effect of an endorsement by Goyu
itself, these 8 policies can not be attached by Goyu's other creditors up to the extent of the Goyu's
outstanding obligation in RCBC's favor. Section 53 of the Insurance Code ordains that the insurance
proceeds of the endorsed policies shall be applied exclusively to the proper interest of the person for whose
benefit it was made. In this case, to the extent of Goyu's obligation with RCBC, the interest of Goyu in the
subject policies had been transferred to RCBC effective as of the time of the endorsement. These policies
may no longer be attached by the other creditors of Goyu, like Alfredo Sebastian in GR 128834, which may
nonetheless forthwith be dismissed for being moot and academic in view of the results reached herein.
Only the two other policies amounting to P19,646,224.92 may be validly attached, garnished, and levied
upon by Goyu's other creditors. To the extent of Goyu's outstanding obligation with RCBC, all the rest of
the other insurance policies which were endorsed to RCBC, are, therefore, to be released from attachment,
garnishment, and levy by the other creditors of Goyu.

8. Geagonia v CA
G.R. No. 114427 February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1
year policy and covered thestock trading of dry goods.

The policy noted the requirement that

"3. The insured shall give notice to the Company of any insurance or insurances already effected, or which
may subsequently be effected, covering any of the property or properties consisting of stocks in trade,
goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of
such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits
under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the
total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00."

The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied
because the petitioner’s stocks were covered by two other fire insurance policies for Php 200,000 issued
by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3
of the policy.

Geagonia then filed a complaint against the private respondent in the Insurance Commission for the
recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence
of the other two policies. But, he said that he had no knowledge of the provision in the private respondent's
policy requiring him to inform it of the prior policies and this requirement was not mentioned to him by the
private respondent's agent.

The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of
the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles
w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as
his creditor, had insurable interest on the stocks.

The Insurance Commission then ordered the respondent company to pay complainant the sum of
P100,000.00 with interest and attorney’s fees.
CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC.

Issues:

1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and
thereby violated Condition 3 of the policy.

2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:

1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter
of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the
contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written
admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies
since these policies were not new or original.

2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are inserted, and
most favorably toward those against whom they are intended to operate.

With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must
be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double
insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total
policies obtained.

Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in
force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a
co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-
insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to
prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance
policies from two or more insurers in a total amount that exceeds the property's value, the insured may
have an inducement to destroy the property for the purpose of collecting the insurance. The public as well
as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

9. South Sea Surety And Insurance Co., Inc. V. CA (1995)

G.R. No. 102253 June 2, 1995

Lessons Applicable:
 Authority to Receive Payment/Effect of Payment (Insurance)

Binding Effect of Payment (Insurance)

Laws Applicable: Section 77,Section 301, Section 306 of the Insurance Code

FACTS:

Valenzuela Hardwood and Industrial Supply, Inc. shipped with Seven Brothers' vessel M/V Seven
Ambassador lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila

Valenzuela insured the logs against loss and/or, damage with South Sea Surety and Insurance
Co., Inc. for P2,000,000 issuing a Marine Cargo Insurance Policy

January 24 1984: Valenzuela gave the check in payment of the premium on the insurance policy
to Mr. Victorio Chua

January 25 1984: M/V Seven Ambassador sank

January 30 1984: The check was tendered to South Sea but it refused. Instead it cancelled the
insurance policy for non-payment of the premium

RTC: favored Valenzuela against South Sea and Seven Brothers

CA: Absolved Seven Brothers stipulation in the charter party that the ship owner would be
exempted from liability in case of loss

South Sea contends that it is cancelled and that Mr. Chua is not authorized

ISSUE: W/N Mr. Chua is an authorized representative to receive the payment

HELD: YES. petition is DENIED

payment of the premium is a condition precedent to, and essential for, the efficaciousness of the
contract.

The only two statutorily provided exceptions are

(a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace
period applies and

(b) when the insurer makes a written acknowledgment of the receipt of premium, this
acknowledgment being declared by law to be then conclusive evidence of the premium payment

South Sea Surety and Insurance Co., Inc. delivered to him the policy on 21 January 1984 at his
office to be delivered to the Valenzuela - deemed to have been authorized by the South Sea Surety and
Insurance Co., Inc. to receive the premium

10. Makati Tuscany Condominium Corporation v CA (Insurance)

G.R. No. 95546 November 6, 1992

MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS,
AMERICAN HOME ASSURANCE CO., represented by American International Underwriters (Phils.),
Inc., respondent.
FACTS:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by
American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany
Condominium Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452 on the latter's building and
premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of
P466,103.05. The premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982 and
16 November 1982, all of which were accepted by private respondent.
Successive renewals of the policies were made in the same manner. On 1984, the policy was again
renewed and petitioner made two installment payments, both accepted by private respondent, the first on
6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, petitioner
refused to pay the balance of the premium.

Private respondent filed an action to recover the unpaid balance of P314,103.05 for Insurance Policy.
Petitioner explained that it discontinued the payment of premiums because the policy did not contain a
credit clause in its favor. Petitioner further claimed that the policy was never binding and valid, and no risk
attached to the policy. It then pleaded a counterclaim for P152,000.00 for the premiums already paid for
1984-85, and in its answer with amended counterclaim, sought the refund of P924,206.10 representing the
premium payments for 1982-85.

DECISION OF LOWER COURTS:

(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due

ISSUE:
Whether payment by installment of the premiums due on an insurance policy invalidates the contract of
insurance, in view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended, which
provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril
insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued
by an insurance company is valid and binding unless and until the premium thereof has been paid, except
in the case of a life or an industrial life policy whenever the grace period provision applies.

RULING:
No, the contract remains valid even if the premiums were paid on installments. Certainly, basic principles
of equity and fairness would not allow the insurer to continue collecting and accepting the premiums,
although paid on installments, and later deny liability on the lame excuse that the premiums were not
prepared in full.
At the very least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.
Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is
indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk
insured for any period, however brief or momentary. The obligation to pay premiums when due is ordinarily
as indivisible obligation to pay the entire premium.

11. AMERICAN HOME ASSURANCE, COMPANY, Petitioner, v. THE COURT OF APPEALS and
NATIONAL MARINE CORPORATION and/or NATIONAL MARINE CORPORATION
(Manila),Respondents.

FACTS:

Both petitioner American Home Assurance Co. and the respondent National Marine Corporation are foreign
corporations licensed to do business in the Philippines, the former through its branch, The American Home
Assurance Company (Philippines), Inc. and the latter through its branch, The National Marine Corporation
(Manila) .That on or about June 19, 1988, Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT)
of bleached kraft pulp from Haulien, Taiwan on board "SS Kaunlaran", which is owned and operated by
herein respondent National Marine Corporation. The said shipment was consigned to Mayleen Paper, Inc.
of Manila, which insured the shipment with herein petitioner American Home Assurance Co. as evidenced
by Bill of Lading.

On June 22, 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port
Services, Inc., for eventual delivery to the consignee-assured. However, upon delivery of the shipment to
Mayleen Paper, Inc., it was found that 122 bales had either been damaged or lost. The loss was calculated
to be 4,360 kilograms with an estimated value of P61,263.41.

Mayleen Paper, Inc. then duly demanded indemnification from respondent National Marine Corporation for
the aforesaid damages/losses in the shipment but, for apparently no justifiable reason, said demand was
not heeded.

Mayleen Paper, Inc. sought recovery from the former. Upon demand and submission of proper
documentation, American Home Assurance paid Mayleen Paper, Inc. the adjusted amount of P31.506.75
for the damages/losses suffered by the shipment, hence, the former was subrogated to the rights and
interests of Mayleen Paper, Inc.

Petitioner, as subrogee, then brought suit against respondent for the recovery of the amount of P31.506.75
and 25% of the total amount due as attorney’s fees, by filing a complaint for recovery of sum of money.

Respondent, National Marine Corporation, filed a motion to dismiss stating that American Home Assurance
Company had no cause of action. Hence, defendant claims that plaintiff is barred from suing for recovery.

Instead of filing an appeal from the order of the court a quo dismissing the complaint for recovery of a sum
of money, American Home Assurance Company filed a petition for certiorari with the Court of Appeals to
set aside the two orders of respondent judge in said court. But the Court of Appeals dismissed the petition
as constituting plain errors of law and not grave abuse of discretion correctible by certiorari (a Special Civil
Action). If at all, respondent court ruled that there are errors of judgment subject to correction by certiorarias
a mode of appeal but the appeal is to the Supreme Court under Section 17 of the Judiciary Act of 1948 as
amended by Republic Act No. 5440. Otherwise stated, respondent Court opined that the proper remedy is
a petition for review on certiorari with the Supreme Court on pure questions of law
Hence, this petition.

ISSUE:

whether the loss suffered by the cargo in question is a ‘particular average’.

whether or not certiorari was the proper remedy in the case before the Court of Appeals.

On the main controversy, the pivotal issue to be resolved is the application of the law on averages

RULING:

)‘Particular average is a loss happening to the ship, freight, or cargo which is not be (sic) shared by
contributing among all those interested, but must be borne by the owner of the subject to which it occurs.
(Black’s Law Dictionary, Revised Fourth Edition, p. 172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395).’

as distinguished from general average which.

‘is a contribution by the several interests engaged in the maritime venture to make good the loss of one of
them for the voluntary sacrifice of a part of the ship or cargo to save the residue of the property and the
lives of those on board, or for extraordinary expenses necessarily incurred for the common benefit and
safety of all (Ibid., citing California Canneries Co. v. Canton Ins. Office 25 Cal. App. 303, 143 p. 549-553).

"From the foregoing definition, it is clear that the damage on the cargo in question, is in the nature of the
‘particular average.’ Since the loss is less than 1% to the value of the cargo and there appears to be no
allegations as to any agreement defendants and the consignee of the goods to the contrary, by express
provision of the law, plaintiff is barred from suing for recovery.

2.)The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two orders
dismissing the complaint for lack of cause of action are final orders within the meaning of Rule 41, Section
2 of the Rules of Court, subject petition raised questions which if at all, constitute plain errors of law or of
judgment not constituting grave abuse of discretion correctible by certiorari.

3.)Petitioner avers that respondent court failed to consider that respondent National Marine Corporation
being a common carrier, in conducting its business is regulated by the Civil Code primarily and suppletorily
by the Code of Commerce; and that respondent court refused to consider the Bill of Lading as the law
governing the parties.

Private respondent countered that in all matters not covered by the Civil Code, the rights and obligations of
the parties shall be governed by the Code of Commerce and by special laws as provided for in Article 1766
of the Civil Code; that Articles 806, 809 and 848 of the Code of Commerce should be applied suppletorily
as they provide for the extent of the common carriers’ liability.

This issue has been resolved by this Court in National Development Co. v. C.A. (164 SCRA 593 [1988];
citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the law of
the country to which the goods are to be transported governs the liability of the common carrier in case of
their loss, destruction or deterioration." (Article 1753, Civil Code). Thus, for cargoes transported to the
Philippines as in the case at bar, the liability of the carrier is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the
Code of Commerce and by special laws (Article 1766, Civil Code).

Corollary thereto, the Court held further that under Article 1733 of the Civil Code, common carriers from the
nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of passengers transported by them according to all
circumstances of each case. Thus, under Article 1735 of the same Code, in all cases other than those
mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary diligence required by law (Ibid., p.
595).

But more importantly, the Court ruled that common carriers cannot limit their liability for injury or loss of
goods where such injury or loss was caused by its own negligence. Otherwise stated, the law on averages
under the Code of Commerce cannot be applied in determining liability where there is negligence (Ibid., p.
606).

Under the foregoing principle and in line with the Civil Code’s mandatory requirement of extraordinary
diligence on common carriers in the care of goods placed in their stead, it is but reasonable to conclude
that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce
on the extent of liability may be applied.

Thus, American Home Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper,
Inc. as insurer.
12. Malayan Insurance v Phil First Insurance

G.R. No. L-59919 November 26, 1986

Lessons Applicable: Motor Vehicle Liability Insurance - Authorized Driver Cause (Insurance)
Laws Applicable:
FACTS:
Aurelio Lacson ,owner of a Toyota NP Land Cruiser, Model 1972, bearing Plate No. NY-362 and with engine
Number F-374325 insured with Malayan Insurance Co
Dec. 1, 1975: Aurelio brought it to the shop of Carlos Jamelo for repair
Dec. 2, 1975: Rogelio Mahinay, together with Johnny Mahinay, Rogelio Macapagong and Rogelio
Francisco took and drove the Toyota Land Cruiser and it met an accident with Bo
Carlos reported the incident to the police and instituted a criminal case for Qualified Theft against his
employees
Rogelio Mahinay pleaded guilty and was convicted of theft
Aurelio was not allowed to claim on the ground that the claim is not covered by the policy inasmuch as the
driver of the insured vehicle at the time of the accident was not a duly licensed driver
Trial Court: favored Aurelio
CA: Affirmed
ISSUE: W/N the taking of the vehicle by another person without permission or authority from the owner or
person-in-charge thereof is sufficient to place it within the ambit of the word theft in the policy
HELD: YES.
The damages therefore were sustained in the course of the unlawful taking
Bacolod IFCs interest in the insured vehicle was in the amount of P2,000.00 only compared to plaintiff's
P26,000.00 it is well to presume that Bacolod IFC did not deem it wise to be impleaded as party-plaintiff in
this case. This inaction on the part of BIFC will only show that it was not really interested to intervene.
13. Pacific Timber Export Corp. v. CA

G.R. No. L-38613 February 25, 1982

Facts:

On March 13, 1963, Pacific Timber secured temporary insurance from the Workmen’s Insurance Co. for its
exportation of logs to Japan. Workmen Insurance issued on said date Cover Note 1010 insuring said cargo.
The regular marine policies were issued by the company in favor of Pacific Timber on April 2, 1963. The
two marine policies bore the number 53H01032 and 53H01033. After the issuance of the cover note but
before the issuance of the two policies, some of the logs intended to be exported were lost due to a typhoon.
Pacific Timber filed its claim with the company, but the latter refused, contending that the cover note insuring
the cargo is null and void for lack of valuable consideration.

Issue:

WON the cover note was without consideration, thus null and void.

Held:

It was with consideration

We uphold petitioner's submission that the Cover Note was not without consideration. The fact that no
separate premium was paid on the Cover Note before the loss insured against occurred, does not militate
against the validity of petitioner's contention, for no such premium could have been paid, since by the nature
of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that
would serve as basis for the computation of the premiums. As a logical consequence, no separate
premiums are intended or required to be paid on a Cover Note.

At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the statement issued
by private respondent after the issuance of the two regular marine insurance policies, thereby leaving no
account unpaid by petitioner due on the insurance coverage, which must be deemed to include the Cover
Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies
subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered
meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer.

14. CIR v Lincoln Philippine Life Insurance

G.R. No. 119176. March 19, 2002. 379 SCRA 423.

FACTS:

Respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.)
is a domestic corporation engaged in life insurance business. Respondents issued a special kind of life
insurance policy known as the Junior Estate Builder Policy, in which there is a clause providing for an
automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured
without the need of issuing a new policy.

CIR then issued deficiency documentary stamps tax assessment corresponding to the amount of automatic
increase of the sum assured on the policy issued by respondent.

Respondent filed a petition with the CTA which was held in their favor. The CIR appealed with the CA
affirming the decision of the CTA.

ISSUE: Whether a new insurance policy is distinct from the main policy making it liable for additional taxes.

RULING:

YES.

The subject insurance policy at the time it was issued contained an automatic increase clause. Although
the clause was to take effect on a later date, it was written into the policy at the time of its issuance.

Section 173 of the NIRC provides that the payment of documentary stamp taxes is done at the time the act
is done. Section 183 of the NIRC provides that the tax base for the computation of documentary stamp
taxes on life insurance policies is the amount fixed in policy.

Here, although the automatic increase in the amount of life insurance coverage was to take effect later on,
the amount of the increase was already definite at the time of the issuance of the policy. Thus, the amount
insured by the policy at the time of its issuance necessarily included the additional sum covered by the
automatic increase clause because it was already determinable at the time the transaction was entered
into and formed part of the policy.

The additional insurance was an obligation subject to a suspensive obligation, but still a part of the
insurance sold to which respondent was liable for the payment of the documentary stamp tax. The
deficiency of documentary stamp tax imposed on respondent is not on the amount of the original insurance
coverage, but on the increase of the amount insured upon the effectivity of the Junior Estate Builder Policy.

15. Ng Gan Zee v Asian Crusader Insurance

G.R. No. L-30685 May 30, 1983
J. Escolin:

Facts:

Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000.00, with his wife,
appellee Ng Gan Zee as beneficiary. On the same date, Asian Crusader, upon receipt of the required
premium from the insured, approved the application and issued the corresponding policy. Kwong Nam died
of cancer of the liver with metastasis. All premiums had been paid at the time of his death.

Ng Gan Zee presented a claim for payment of the face value of the policy. On the same date, she submitted
the required proof of death of the insured. Appellant denied the claim on the ground that the answers given
by the insured to the questions in his application for life insurance were untrue.

Appellee brought the matter to the attention of the Insurance Commissioner. The latter, after conducting an
investigation, wrote the appellant that he had found no material concealment on the part of the insured and
that, therefore, appellee should be paid the full face value of the policy. The company refused to settle its
obligation.

Appellant alleged that the insured was guilty of misrepresentation when he answered "No" to the following
question appearing in the application for life insurance-

Has any life insurance company ever refused your application for insurance or for reinstatement of a lapsed
policy or offered you a policy different from that applied for? If, so, name company and date.

The lower court ruled against the company on lack of evidence.

Appellant further maintains that when the insured was examined in connection with his application for life
insurance, he gave the appellant's medical examiner false and misleading information as to his ailment and
previous operation. The company contended that he was operated on for peptic ulcer 2 years before the
policy was applied for and that he never disclosed such an operation.
Issue: WON Asian Crusader was deceived into entering the contract or in accepting the risk at the rate of
premium agreed upon because of insured's representation?

Held: No. Petition dismissed.

Ratio:

Section 27 of the Insurance Law:

Sec. 27. Such party a contract of insurance must communicate to the other, in good faith, all facts within
his knowledge which are material to the contract, and which the other has not the means of ascertaining,
and as to which he makes no warranty.

"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 assurer, but he designedly and
intentionally withholds the same."

It has also been held "that the concealment must, in the absence of inquiries, be not only material, but
fraudulent, or the fact must have been intentionally withheld."

Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract.
And as correctly observed by the lower court, "misrepresentation as a defense of the insurer to avoid liability
is an 'affirmative' defense. The duty to establish such a defense by satisfactory and convincing evidence
rests upon the defendant. The evidence before the Court does not clearly and satisfactorily establish that
defense."

It bears emphasis that Kwong Nam had informed the appellant's medical examiner of the tumor. His
statement that said tumor was "associated with ulcer of the stomach" should be construed as an expression
made in good faith of his belief as to the nature of his ailment and operation.

While the information communicated was imperfect, the same was sufficient to have induced appellant to
make further inquiries about the ailment and operation of the insured.

Section 32 of Insurance Law:

Section 32. The right to information of material facts maybe waived either by the terms of insurance or by
neglect to make inquiries as to such facts where they are distinctly implied in other facts of which information
is communicated.

Where a question appears to be not answered at all or to be imperfectly answered, and the insurers issue
a policy without any further inquiry, they waive the imperfection of the answer and render the omission to
answer more fully immaterial.

The company or its medical examiner did not make any further inquiries on such matters from the hospital
before acting on the application for insurance. The fact of the matter is that the defendant was too eager to
accept the application and receive the insured's premium. It would be inequitable now to allow the defendant
to avoid liability under the circumstances."
16. Vda. DE CANILANG v. COURT OF

Facts:

On 18 June 1982, Jaime Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus
tachycardia” And was latter found to have "acute bronchitis." On next day, Jaime applied for a "non-medical"
insurance policy with respondent Great Pacific Life Assurance naming his wife, Thelma Canilang, as his
beneficiary. Jaime was issued ordinary life insurance Policy effective as of 9 August 1982. On 5 August
1983, Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia." Petitioner, widow
and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied upon the ground
that the insured had concealed material information from it. Petitioner filed a complaint against Great Pacific
with the Insurance Commission for recovery of the insurance proceeds. During the hearing called by the
Insurance Commissioner, petitioner testified that she was not aware of any serious illness suffered by her
late husband.

The medical declaration which was set out in the application for insurance executed by Jaime Canilang
read as follows: xxxx
(1) I have not been confined in any hospital, sanitarium or infirmary, nor receive any medical or surgical
advice/attention within the last five (5) years.
(2) I have never been treated nor consulted a physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney, stomach disorder, or any other physical impairment.
(3) I am, to the best of my knowledge, in good health.
EXCEPTIONS:
Issue:

Whether or not there is a material concealment

Held:

There is a material concealment.

On appeal by Great Pacific, the Court of Appeals reversed and set aside the decision of the Insurance
Commissioner and dismissed Thelma Canilang's complaint and Great Pacific's counterclaim. The Court of
Appeals found that the failure of Jaime Canilang to disclose previous medical consultation and treatment
constituted material information which should have been communicated to Great Pacific to enable the latter
to make proper inquiries.

Canilang failed to disclose, under the caption "Exceptions," that he had twice consulted Dr. Claudio who
had found him to be suffering from "sinus tachycardia" and "acute bronchitis."

The provisions of P.D. No. 1460, also known as the Insurance Code of 1978 read as follows:
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a
concealment. xxx xxx xxx
Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors
within his knowledge which are material to the contract and as to which he makes no warranty, and
which the other has not the means of ascertaining.

The information concealed must be information which the concealing party knew and "ought to [have]
communicate[d]," that is to say, information which was "material to the contract." The test of materiality is
contained in Section 31 of the Insurance Code of 1978 which reads:
 Sec. 31. Materially is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in forming his estimate of the
disadvantages of the proposed contract, or in making his inquiries.

The information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to
estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to
his doctor in the insurance application, it may be reasonably assumed that Great Pacific would have made
further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very
least, required a higher premium for the same coverage. The materiality of the information withheld by
Great Pacific did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective
belief is not capable of proof in our judicial process, except through proof of external acts or failure to act
from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend
upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable
influence of the facts" upon the party to whom the communication should have been made, in assessing
the risk involved in making or omitting to make further inquiries and in accepting the application for
insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined
objectively, by the judge ultimately.
The insurance Great Pacific applied for was a "non-medical" insurance policy. In Saturnino v. Philippine-
American Life Insurance Company, this Court held that:
.. . if anything, the waiver of medical examination [in a non-medical insurance contract] renders even
more material the information required of the applicant concerning previous condition of health and
diseases suffered, for such information necessarily constitutes an important factor which the insurer
takes into consideration in deciding whether to issue the policy or not . . .

The Insurance Code of 1978 was amended by

B.P. Blg. 874. This subsequent statute modified Section 27 of the Insurance Code of 1978 so as to read as
follows:
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a
contract of insurance.

The Commissioner is wrong when it said that by deleting the phrase "intentional or unintentional," the
Insurance Code of 1978 (prior to its amendment by B.P. Blg. 874) intended to limit the kinds of concealment
which generate a right to rescind on the part of the injured party to "intentional concealments." "Intentional"
and "unintentional" cancel each other out. The deletion of the phrase "whether intentional or unintentional"
could not have had the effect of imposing an affirmative requirement that a concealment must be intentional
if it is to entitle the injured party to rescind a contract of insurance. The restoration in 1985 by B.P. Blg. 874
of the phrase "whether intentional or unintentional" merely underscored the fact that all throughout (from
1914 to 1985), the statute did not require proof that concealment must be "intentional" in order to authorize
rescission by the injured party.

The nature of the facts not conveyed to the insurer was such that the failure to communicate must have
been intentional rather than merely inadvertent. For Jaime Canilang could not have been unaware that his
heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the 2
months before applying for non-medical insurance. The last medical consultation took place just the day
before the insurance application was filed. Jaime Canilang went to visit his doctor precisely because of the
discomfort and concern brought about by his experiencing "sinus tachycardia."

We find it difficult to take seriously the argument that Great Pacific had waived inquiry into the concealment
by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the
questions in the insurance application. Such failure precisely constituted concealment on the part of
Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from the Insurance Code of
1978.

It remains only to note that the Court of Appeals finding that the parties had not agreed in the pretrial before
the Insurance Commission that the relevant issue was whether or not Jaime Canilang had intentionally
concealed material information from the insurer, was supported by the evidence of record, i.e., the Pre-trial
Order itself dated 17 October 1984 and the Minutes of the Pre-trial Conference dated 15 October 1984,
which "readily shows that the word "intentional" does not appear in the statement or definition of the issue
in the said Order and Minutes."

WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of is
AFFIRMED.

17. TAN VS. CA

G.R. No. 48049 June 29, 1989

EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners,
vs.
THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY, respondents.

FACTS:

Businessman Tan Lee Siong applied for life insurance policy with American Life Insurance Company in the
amount of P80,000.00 by virtue of which he was issued Policy No. 1082467 effective November 6,1973,
with his sons as designated beneficiaries thereof. On April 1975, Tan Lee Siong died and the sons
subsequently filed their claim for the insurance proceeds. But in September of the same year, the company
sent a letter denying petitioners' claim and rescinded the policy by reason of the alleged misrepresentation
and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance.
The premiums paid on the policy, however, were thereupon refunded.

ISSUES:

Whether or not the insurance company no longer had the right to rescind the contract of insurance as
rescission must allegedly be done during the lifetime of the insured within two years and prior to the
commencement of the action.

RULING:
The so-called "incontestability clause" precludes the insurer from raising the defenses of false
representations or concealment of material facts insofar as health and previous diseases are concerned if
the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the
lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured
has died. The key phrase in the second paragraph of Section 48 is "for a period of two years."

As noted by the Court of Appeals, to wit:

The policy was issued on November 6, 1973 and the insured died on April 26,1975. The policy was thus in
force for a period of only one year and five months. Considering that the insured died before the two-year
period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab
initio by reason of the insured's fraudulent concealment or misrepresentation. Moreover, respondent
company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975,
previous to the commencement of this action on November 27,1975.

The deceased, by affixing his signature on the application form, affirmed the correctness of all the entries
and answers appearing therein. It is but to be expected that he, a businessman, would not have affixed his
signature on the application form unless he clearly understood its significance. For, the presumption is that
a person intends the ordinary consequence of his voluntary act and takes ordinary care of his concerns.
[Sec. 5(c) and (d), Rule 131, Rules of Court].

The evidence for respondent company shows that on September 19,1972, the deceased was examined by
Dr. Victoriano Lim and was found to be diabetic and hypertensive; that by January, 1973, the deceased
was complaining of progressive weight loss and abdominal pain and was diagnosed to be suffering from
hepatoma, (t.s.n. August 23, 1976, pp. 8-10; Exhibit 2). Another physician, Dr. Wenceslao Vitug, testified
that the deceased came to see him on December 14, 1973 for consolation and claimed to have been
diabetic for five years. (t.s.n., Aug. 23,1976, p. 5; Exhibit 6) Because of the concealment made by the
deceased of his consultations and treatments for hypertension, diabetes and liver disorders, respondent
company was thus misled into accepting the risk and approving his application as medically standard
(Exhibit 5- C) and dispensing with further medical investigation and examination (Exhibit 5-A). For as long
as no adverse medical history is revealed in the application form, an applicant for insurance is presumed
to be healthy and physically fit and no further medical investigation or examination is conducted by
respondent company

18. Florendo v Philam Plans

MA. LOURDES S. FLORENDO, Petitioner,
vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE, Respondents.

FACTS:

Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans, Inc.
(Philam Plans) Manuel signed the application and left to Perla the task of supplying the information needed
in the application. Respondent Ma. Celeste Abcede, Perla’s daughter, signed the application as sales
counselor. Philam Plans issued Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S.
Florendo, his wife, as beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later, Manuel
died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans for the payment of the
benefits under her husband’s plan but Philam Plans declined her claim prompting her to file the present
action against the pension plan company before the Regional Trial Court (RTC) of Quezon City and ruled
in favor of Ma. Lourdes. However, the Court of Appeals then reversed the RTC decision. Hence this appeal.

ISSUE:

Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under the insurance
plan despite consideration that her husband Manuel concealed the true condition of his health.

RULING:

The Supreme Court answers this to the negative and the AFFIRMED in its entirety the decision of the Court
of Appeals.

The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It
states:

VIII. INCONTESTABILITY

After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons
any claim for insurance under this Agreement, except for the reason that installment has not been paid
(lapsed), or that you are not insurable at the time you bought this pension program by reason of age. If this
Agreement lapses but is reinstated afterwards, the one (1) year contestability period shall start again on
the date of approval of your request for reinstatement.

The above incontestability clause precludes the insurer from disowning liability under the policy it issued
on the ground of concealment or misrepresentation regarding the health of the insured after a year of its
issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability
period has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement
to the benefits of her husband’s pension plan.

19. Loadmasters Customs Services v Glodel Brokerage

FACTS:

The case is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing
the August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 82822.
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks. On August
28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the
pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia’s warehouses/plants in
Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed
drivers and accompanied by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan,
only five (5) reached the destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper
cathodes, failed to deliver its cargo.
 Later on, the said truck, was recovered but without the copper cathodes. Because of this
incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount ofP1,903,335.39.
After the investigation, R&B Insurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel
before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of the amount it had
paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the
consignee to recover from the party/parties who may be held legally liable for the loss."
On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages for the loss
of the subject cargo and dismissing Loadmasters’ counterclaim for damages and attorney’s fees against
R&B Insurance.
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel, whatever
liability the latter owes to appellant R&B Insurance Corporation as insurance indemnity must likewise be
the amount it shall be paid by appellee Loadmasters. Hence, Loadmasters filed the present petition for
review on certiorari.

ISSUE:
Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the
subject cargo.
RULING:

The petition is PARTIALLY GRANTED. Judgment is rendered declaring petitioner Loadmasters Customs
Services, Inc. and respondent Glodel Brokerage Corporation jointly and severally liable to respondent
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations
engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for
compensation, offering their services to the public. Loadmasters is a common carrier because it is engaged
in the business of transporting goods by land, through its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and
it does not hold itself out to carry goods for the general public. Glodel is also considered a common carrier
within the context of Article 1732. For as stated and well provided in the case of Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc., a customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and
for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods
transported by them according to all the circumstances of such case, as required by Article 1733 of the Civil
Code. When the Court speaks of extraordinary diligence, it is that extreme measure of care and caution
which persons of unusual prudence and circumspection observe for securing and preserving their own
property or rights. With respect to the time frame of this extraordinary responsibility, the Civil Code provides
that the exercise of extraordinary diligence lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them.

The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance
for the loss of the subject cargo. Loadmasters’ claim that it was never privy to the contract entered into by
Glodel with the consignee Columbia or R&B Insurance as subrogee, is not a valid defense.

For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts
or omissions, but also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers acting within
the scope of their assigned tasks, even though the former are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees
(truck driver and helper) were instrumental in the hijacking or robbery of the shipment. As employer,
Loadmasters should be made answerable for the damages caused by its employees who acted within the
scope of their assigned task of delivering the goods safely to the warehouse.

Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated
destination. Glodel should, therefore, be held liable with Loadmasters. Its defense of force majeure is
unavailing.

For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable
grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is applied only in the
absence of, and never against, statutory law or judicial rules of procedure." The Court cannot be a lawyer
and take the cudgels for a party who has been at fault or negligent.

20. Aboitiz Shipping v Insurance Company of North America

FACTS:
On June 20, 1993 MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies
(MSAS) procured an "all-risk" marine insurance policy from ICNA UK Limited of London for wooden work
tools and workbenches purchased by consignee Science Teaching Improvement Project (STIP), Ecotech
Center, Sudlon Lahug, Cebu City. On July 26, 1993, the cargo was received by Aboitiz Shipping
Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System. August
1, 1993 the container van was loaded on board MV Super Concarrier I. August 3, 1993 the shipment arrived
in Cebu City, as per Stripping Report, the checker noted that the crates were slightly broken or cracked at
the bottom. On August 11, 1993 the cargo was withdrawn by the representative of the consignee, Science
Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High School, Punta Princesa,
Cebu City. August 13, 199, Mayo B. Perez, Head of Aboiti received a call from the receiver Mr. Bernhard
Willig that the cargo sustained water damage so he checked the other cargo but they were dry. In a letter
dated August 15, 1993, Willig informed Aboitiz that the damage was caused by water entering through the
broken bottom parts of the crate. Consignee filed a claim against ICNA. CAC reported to ICNA that
the shipment was placed outside the warehouse when it was delivered on July 26, 1993 and it was only on
July 31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu. Weather
report shows that the heavy rains on July 28 and 29, 1993 caused the damages. Aboitiz refused to settle
the claim. ICNA paid the amount of P280,176.92 to consignee and a subrogation receipt was duly signed
by Willig. ICNA then advised Aboitiz of the receipt signed in its favor but received no reply so it filed for
collection at the RTC.
RTC ruled against ICNA on the ground that the subrogation Form is self-serving and has no probative value
since Wellig was not presented to the witness stand. CA reversed the RTC ruling on the ground that the
right of subrogation accrues simply upon payment by the insurance company of the insurance claim even
assuming that it is an unlicensed foreign corporation

ISSUE: WON ICNA can claim under the right of subrogation

HELD: YES.
Only when that foreign corporation is "transacting" or "doing business" in the country will a license be
necessary before it can institute suits. It may, however, bring suits on isolated business transactions, which
is not prohibited under Philippine law
The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on
behalf of the assured.
Insurance Code. Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever, during
the continuance of the risk, may become the owner of the interest insured.
Civil Code. 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 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.

This right of subrogation, however, has its limitations.

First, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading.
Second, the insurer can be subrogated only to the rights as the insured may have against the wrongdoer.
If by its own acts after receiving payment from the insurer, the insured releases the wrongdoer who caused
the loss from liability, the insurer loses its claim against the latter.

Article 366. Within twenty-four hours following the receipt of the merchandise, the claim against the carrier
for damages or average which may be found therein upon opening the packages, may be made, provided
that the indications of the damage or average which give rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in which the goods transported were delivered.
The call was made 2 days from delivery, a reasonable period considering that the goods could not have
corroded instantly overnight such that it could only have sustained the damage during transit.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.
The shipment delivered to the consignee sustained water damage. SC agree with the findings of the CA
that petitioner failed to overturn this presumption