Insurance 2nd Cases

THIRD DIVISION[G.R. No. 112360. July 18, 2000] RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS and TRANSWORLD KNITTING MILLS, INC., respondents. DECISION PURISIMA, J.: At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the July 15, 1993 Decision [1] and October 22, 1993 Resolution[2] of the Court of Appeals[3] in CA-G.R. CV NO. 28779, which modified the Ruling [4] of the Regional Trial Court of Pasig, Branch 161, in Civil Case No. 46106. The antecedent facts that matter are as follows: On March 13, 1980, Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy No. 45727 in favor of Transworld Knitting Mills, Inc. (Transworld), initially for One Million (P1,000,000.00) Pesos and eventually increased to One Million Five Hundred Thousand (P1,500,000.00) Pesos, covering the period from August 14, 1980 to March 13, 1981. Pertinent portions of subject policy on the buildings insured, and location thereof, read: "On stocks of finished and/or unfinished products, raw materials and supplies of every kind and description, the properties of the Insureds and/or held by them in trust, on commission or on joint account with others and/or for which they (sic) responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound at MAGDALO STREET, BARRIO UGONG, PASIG, METRO MANILA, PHILIPPINES, BLOCK NO. 601. xxx...............xxx...............xxx Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills, garment and lingerie factory, transistor-stereo assembly plant, offices, warehouse and caretaker's quarters. 'Bounds in front partly by one-storey concrete building under galvanized iron roof occupied as canteen and guardhouse, partly by building of two and partly one storey constructed of concrete below, timber above undergalvanized iron roof occupied as garage and quarters and partly by open space and/or tracking/ packing, beyond which is the aforementioned Magdalo Street; on its right and left by driveway, thence open spaces, and at the rear by open spaces.'" [5] The same pieces of property insured with the petitioner were also insured with New India Assurance Company, Ltd., (New India). On January 12, 1981, fire broke out in the compound of Transworld, razing the middle portion of its four-span building and partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) where fun and amusement machines and spare parts were stored, was also destroyed by the fire. Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India Assurance Company but to no avail. On May 26, 1982, private respondent brought against the said insurance companies an action for collection of sum of money and damages, docketed as Civil Case No. 46106 before Branch 161 of the then Court of First Instance of Rizal; praying for judgment ordering Rizal Insurance and New India to pay the amount of P2,747, 867.00 plus legal interest, P400,000.00 as attorney's fees, exemplary damages, expenses of litigation of P50,000.00 and costs of suit.[6] Petitioner Rizal Insurance countered that its fire insurance policy sued upon covered only the contents of the four-span building, which was partly burned, and not the damage caused by the fire on the two-storey annex building. [7] On January 4, 1990, the trial court rendered its decision; disposing as follows: "ACCORDINGLY, judgment is hereby rendered as follows: (1)Dismissing the case as against The New India Assurance Co., Ltd.; (2) Ordering defendant Rizal Surety And Insurance Company to pay Transwrold (sic) Knitting Mills, Inc. the amount of P826, 500.00 representing the actual value of the losses suffered by it; and (3) Cost against defendant Rizal Surety and Insurance Company. SO ORDERED."[8] Both the petitioner, Rizal Insurance Company, and private respondent, Transworld Knitting Mills, Inc., went to the Court of Appeals, which came out with its decision of July 15, 1993 under attack, the decretal portion of which reads: "WHEREFORE, and upon all the foregoing, the decision of the court below is MODIFIED in that defendant New India Assurance Company has and is hereby required to pay plaintiff-appellant the amount of P1,818,604.19 while the other Rizal Surety has to pay the plaintiff-appellant P470,328.67, based on the actual losses sustained by plaintiff Transworld in the fire, totalling P2,790,376.00 as against the amounts of fire insurance coverages respectively extended by New India in the amount of P5,800,000.00 and Rizal Surety and Insurance Company in the amount of P1,500,000.00. No costs. SO ORDERED."[9] On August 20, 1993, from the aforesaid judgment of the Court of Appeals New India appealed to this Court theorizing inter alia that the private respondent could not be compensated for the loss of the fun and amusement machines and spare parts stored at the two-storey building because it (Transworld) had no insurable interest in said goods or items. On February 2, 1994, the Court denied the appeal with finality in G.R. No. L-111118 (New India Assurance Company Ltd. vs. Court of Appeals). Petitioner Rizal Insurance and private respondent Transworld, interposed a Motion for Reconsideration before the Court of Appeals, and on October 22, 1993, the Court of Appeals reconsidered its decision of July 15, 1993, as regards the imposition of interest, ruling thus: "WHEREFORE, the Decision of July 15, 1993 is amended but only insofar as the imposition of legal interest is concerned, that, on the assessment against New India Assurance Company on the amount of P1,818,604.19 and that against Rizal Surety & Insurance Company on the amount of P470,328.67, from May 26, 1982 when the complaint was filed until payment is made. The rest of the said decision is retained in all other respects. SO ORDERED."[10] Undaunted, petitioner Rizal Surety & Insurance Company found its way to this Court via the present Petition, contending that: I.....SAID DECISION (ANNEX A) ERRED IN ASSUMING THAT THE ANNEX BUILDING WHERE THE BULK OF THE BURNED PROPERTIES WERE STORED, WAS INCLUDED IN THE COVERAGE OF THE INSURANCE POLICY ISSUED BY RIZAL SURETY TO TRANSWORLD. II.....SAID DECISION AND RESOLUTION (ANNEXES A AND B) ERRED IN NOT CONSIDERING THE PICTURES (EXHS. 3 TO 7-C-RIZAL SURETY), TAKEN IMMEDIATELY AFTER THE FIRE, WHICH CLEARLY SHOW THAT THE PREMISES OCCUPIED BY TRANSWORLD, WHERE THE INSURED PROPERTIES WERE LOCATED, SUSTAINED PARTIAL DAMAGE ONLY. III. SAID DECISION (ANNEX A) ERRED IN NOT HOLDING THAT TRANSWORLD HAD ACTED IN PALPABLE BAD FAITH AND WITH MALICE IN FILING ITS CLEARLY UNFOUNDED CIVIL ACTION, AND IN NOT ORDERING TRANSWORLD TO PAY TO RIZAL SURETY MORAL AND PUNITIVE DAMAGES (ART. 2205, CIVIL CODE), PLUS ATTORNEY'S FEES AND which petitioner itself cited and invoked. ware house and caretaker's quarter. to wit: "First. 4 and 11. both the trial court and the Court of Appeals found that the so called "annex " was not an annex building but an integral and inseparable part of the fourspan building described in the policy and consequently. garment and lingerie factory.[15] In the case under consideration. On the other hand. It is petitioner's submission that the fire insurance policy litigated upon protected only the contents of the main building (four-span).EXPENSES OF LITIGATION (ART. it can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what were stored in the four-span building. the goods and items stored therein were covered by the same fire insurance policy. offices. 2208 PARS. said properties must be contained and/or stored in the areas occupied by Transworld and second. the machines and spare parts stored therein were covered by the fire insurance in dispute. two requirements must concur in order that the said fun and amusement machines and spare parts would be deemed protected by the fire insurance policy under scrutiny. The letter-report of the Manila Adjusters and Surveyor's Company. which reads: "xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound xxx" Therefrom. the private respondent theorized that the so called "annex" was not an annex but was actually an integral part of the four-span building [13] and therefore. describes the "annex" building as follows: "Two-storey building constructed of partly timber and partly concrete hollow . said areas must form part of the building described in the policy xxx"[14] 'Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills. and the same carry even more weight when the Court of Appeals has affirmed the findings of fact arrived at by the lower court.[12] and did not include those stored in the two-storey annex building. As opined by the trial court of origin. CIVIL CODE). [11] The Petition is not impressed with merit.' The Court is mindful of the well-entrenched doctrine that factual findings by the Court of Appeals are conclusive on the parties and not reviewable by this Court. Resolution of the issues posited here hinges on the proper interpretation of the stipulation in subject fire insurance policy regarding its coverage. transistorstereo assembly plant. [17] formed part thereof. equivocal. or uncertain x x x are to be construed strictly and most strongly against the insurer. and the reason for this is that the 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by. the Court in Landicho vs. and instead.i. a permanent structure which adjoins and intercommunicates with the "first right span of the lofty storey building". especially where forfeiture is involved' (29 Am."[16] Verily. whose lawyer or managers drafted the fire insurance policy contract under scrutiny. Rizal Surety Insurance Company. . Government Service Insurance System. went on to provide that such fire insurance policy covers the products.[18] petitioner should have specifically excluded the said twostorey building from the coverage of the fire insurance if minded to exclude the same but if did not. the stipulation as to the coverage of the fire insurance policy under controversy has created a doubt regarding the portions of the building insured thereby.[19] ruled: "This is particularly true as regards insurance policies. 181). the two-storey building involved.J. having been constructed sometime in 1978. Citing the aforecited provision of law in point.' (44 C. 1174). The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity" Conformably. 1981. and acting exclusively in the interest of. and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured. roof which is adjoining and intercommunicating with the repair of the first right span of the lofty storey building and thence by property fence wall. it stands to reason that the doubt should be resolved against the petitioner. the insurance company. raw materials and supplies stored within the premises of respondent Transworld which was an integral part of the four-span building occupied by Transworld. which are ambiguous. knowing fully well the existence of such building adjoining and intercommunicating with the right section of the four-span building. After a careful study."" [20] Equally relevant is the following disquisition of the Court in Fieldmen's Insurance Company.blocks under g. Article 1377 of the New Civil Code provides: "Art. p.S.1377. in respect of which it is settled that the 'terms in an insurance policy. considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on January 12. and meets the requisites for compensability under the fire insurance policy sued upon. Jur... the Court does not find any basis for disturbing what the lower courts found and arrived at. Indeed. So also. De Songco. vs. the previous judgment is conclusive in the second case.. entitled New India Assurance Company. which entitles it to be indemnified for the loss thereof. cartels and concentration of capital. Court of Appeals. J.R. only as those matters actually and directly controverted and determined and not as to matters merely involved therein."[23] Applying the abovecited pronouncement. endowed with overwhelming economic power. The . Inc. "xxx the judgment in the prior action operates as estoppel only as to those matters in issue or points controverted. in Smith Bell and Company (Phils.). his participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats [sic] d'adhesion). 27 February 1942. Reyes.[24] held that the issue of negligence of the shipping line.)'"[22] The issue of whether or not Transworld has an insurable interest in the fun and amusement machines and spare parts. as already noted. 1934. such contracts (of which policies of insurance and international bills of lading are prime example) obviously call for greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from abuses and imposition. which issue had already been passed upon in a case filed by one of the insurers. Ratiocinating further. or so negligent as to have proximately caused the collision between them.[21] to wit: "'This rigid application of the rule on ambiguities has become necessary in view of current business practices.A. Ltd.. L-111118. L. vs.-G. 61320-R.Inc. where the appeal of New India from the decision of the Court of Appeals under review.B. vs. had been settled in G. the Court opined: "In the case at bar. that Decision was affirmed by this Court in G. was denied with finality by this Court on February 2. No. was an issue that was actually. Vda. directly and expressly raised. Article 24. Court of Appeals. The courts cannot ignore that nowadays monopolies.R. 1994. of Supreme Court of Spain. precludes the relitigation of a particular fact or issue in another action between the same parties based on a different claim or cause of action. controverted and litigated in C.R. No. 13 Dec. The rule on conclusiveness of judgment.. is conclusive and can no longer be relitigated in a similar case filed by another insurer against the same shipping line on the basis of the same factual circumstances. which obtains under the premises. L-48839 in a Resolution dated 6 December 1987. and prevent their becoming traps for the unwary (New Civil Code. In fine. resolved that issue in his Decision and held the 'Don Carlos' to have been negligent rather than the 'Yotai Maru' and. No. upon the determination of which the finding or judgment was rendered. the issue of which vessel ('Don Carlos' or 'Yotai Maru') had been negligent. Sent. the Court. manage to impose upon parties dealing with them cunningly prepared 'agreements' that the weaker party may not change one whit. in contrast to these entered into by parties bargaining on an equal footing. L-111118.R. 51. and that of this Court. Rizal Surety Insurance Company.. Paras (Chairman). which is assailed in the case at bar. No pronouncement as to costs. is bound by the ruling of the Court of Appeals and of this Court that the private respondent has an insurable interest in the aforesaid fun and amusement machines and spare parts. and by this Court in G. in a Resolution. had long been settled by this Court and could no longer be relitigated in C. Ineluctably. 1993. pp. L. Francisco (Ponente). Special Tenth Division.A. WHEREFORE.[26] All things studiedly considered and viewed in proper perspective. settled and sustained by the Court of Appeals in CA-G. and compensability for the loss of subject fun and amusement machines and spare parts. No. 28779. liable for the destruction and loss of the insured buildings and articles of the private respondent. was promulgated. it being the total loss and damage suffered by Transworld for which petitioner Rizal Insurance is liable. 28779 are AFFIRMED in toto. Galvez (Member) [3] .328. Gloria C. that the Court of Appeals erred not in holding the petitioner. of the Court of Appeals in CA-G. composed of Associate Justices: Cezar D.Reyes Decision thus became final and executory approximately two (2) years before the Sison Decision.B. No. 27-49. 61206-R.52. So also. Vitug. the question of which vessel had been negligent in the collision between the two (2) vessels. the same can no longer be relitigated and passed upon in the present case. pp. dated October 22. Considering that private respondent's insurable interest in. the petitioner. dated July 15. 1994. and Ricardo P. 1993. (Chairman). CV NO.R. JJ. Applying the rule of conclusiveness of judgment.G. [1] Annex "A". [2] Annex "B". J. Rizal Surety Insurance Company.67. CV NO. and Gonzaga-Reyes.. Rollo. Rollo."[25] The controversy at bar is on all fours with the aforecited case. the Court of Appeals correctly adjudged petitioner liable for the amount of P470. and so finds. and should be indemnified for the loss of the same. the Court is of the irresistible conclusion. Panganiban. Private respondent Go Thong was certainly bound by the ruling or judgment of Reyes. had been adjudicated. the Decision. and the Resolution.R. dated February 2. SO ORDERED.R. Melo. concur. The Court of Appeals fell into clear and reversible error when it disregarded the Decision of this Court affirming the Reyes Decision. . Ibid. 79. Rollo.E. 75908. [23] [24] Smith Bell and Company (Phils. vs. 197 SCRA 201. pp. citing: Meneses vs.R. pp. Court of Appeals. [13] Rollo. Coca Cola Bottlers Phil. Villanueva. 246 SCRA 162. 42. [5] Decision. 12-13. also. [7] Rollo. G. p. 519. [17] Rollo. 620 O. Rollo. vs. Annex "A". p.. [14] Rollo. 17. [20] [21] 25 SCRA 70. Macondray. p. Inc. 210-211. Court of Appeals. The Equitable Insurance. 49. p. 209.). 78-79. p. 205. 52. October 22.. Rivero vs. 62. Rollo. Manalo. H. citing: Tingson vs. p. 165. Court of Appeals. citing: Calanoc vs. 62. Rollo. Heacock Co. 77. p. [25] Ibid. 84. 12-13.. Smith Bell and Company (Phils. [18] Decision. Del Rosario vs. Rollo. 54 Phil. pp. [15] [16] Petitioner. p. [12] Answer. 229 SCRA 533. Court of Appeals. 75. and Binalay vs. Gonzales vs. 69.171. 49 SCRA 429. [11] Petition. [10] Resolution.. p. p. pp. 195 SCRA 374. La Previsora Filipina. Phil. supra. . 74 Phil. 5403-04.[4] Penned by Judge Efren D. 28-29. Court of Appeals. 76. [22] Ibid. See. 982. Asturias Sugar Central vs. pp. Borromeo vs. 43. p. 59. p. The Pure Cane Molasses Co. Robe. Rollo. Court of Appeals. Inc. Rollo. p. Inc vs.).G. Court of Appeals. vs. 17. [9] Decision. [19] 44 SCRA 7. No. 1999. [8] Decision. 98 Phil. Rollo. 5400. p. 57 Phil. [26] Rollo. [6] Rollo. C....v e r s u s ....... in CA-G. 2004 in Civil Case No.... 2008 x. 03-1153. For the same period. AZCUNA and LEONARDO-DE CASTRO.. SP No... 2003 in Civil Case No. G.[4] which in turn reversed the decision of the Metropolitan Trial Court (MeTC). 169737 INC... respectively. Inc.CORONA. Promulgated: February 12. Respondents.. Present: PUNO.. JJ.FIRST DIVISION BLUE CROSS HEALTH CARE...... No. Petitioner..: This is a petition for review on certiorari[1] of a decision[2] and resolution[3] of the Court of Appeals (CA) dated July 29.R. Chairperson.. Branch 61 dated February 2.. Olivares applied for a health care program with petitioner Blue Cross Health Care.[6] she paid the amount of P11... 80867. Branch 66 dated August 5. Makati City.J...x DECISION CORONA. 2005. NEOMI* and DANILO OLIVARES. SANDOVAL-GUTIERREZ. she also . 2003..[5] Respondent Neomi T... ..... Makati City....... 84163 which affirmed the decision of the Regional Trial Court (RTC). a health maintenance firm... J.117..R.... 2002 to October 15. For the period October 16. 2005 and September 21.... Dr.217. were constrained to settle the bill. she demanded that petitioner pay her medical bill. Edmundo Saniel. petitioner maintained that it had not yet denied respondents' claim as it was still awaiting Dr. her attending physician.000. 2002. When petitioner still refused.20. But petitioner refused to issue the letter and suspended payment pending the submission of a certification from her attending physician that the stroke she suffered was not caused by a pre-existing condition. 2003.[10] They thereafter filed a complaint for collection of sum of money against petitioner in the MeTC on January 8.[9] She was discharged from the hospital on December 3. She incurred hospital expenses amounting to P34. she requested from the representative of petitioner at Medical City a letter of authorization in order to settle her medical bills.availed of the additional service of limitless consultations for an additional amount of P1. 2002. On December 2. 2003. She paid these amounts in full on October 17. ailments due to preexisting conditions were excluded from the coverage. During her confinement. On December 5. Consequently.[7] On November 30. respondent Danilo Olivares. 2002.[11] In its answer dated January 24. she underwent several laboratory tests. 2002. respondent Neomi suffered a stroke and was admitted at the Medical City which was one of the hospitals accredited by petitioner. In the health care agreement. . 2002. 2002. The application was approved on October 22. or barely 38 days from the effectivity of her health insurance. Saniel's report. she and her husband.[8] informed her that she could be discharged from the hospital. 000 as moral damages. Saniel stated that: This is in response to your letter dated February 13.20 representing the medical bill in Medical City and P1. 2004. It was not able to discharge that burden. petitioner cannot be faulted from suspending payment of her claim. (2) P20. with legal interest from the filing of the complaint until fully paid.000 as reimbursement for consultation fees. 2003. (3) P20. xxx But since the evidence on record reveals that it was no less than [respondent Neomi] herself who prevented her attending physician from issuing the required certification.In a letter to petitioner dated February 14. reversed the ruling of the MeTC and ordered petitioner to pay respondents the following amounts: (1) P34. 2003. That she no longer has any relationship with [petitioner]. [Respondent] Neomi T.[15] Aggrieved. the same day I instructed my secretary to inform your office thru Ms. It held: xxx the best person to determine whether or not the stroke she suffered was not caused by preexisting conditions is her attending physician Dr. for until and unless it can be shown from the findings made by her attending physician that the stroke she suffered was not due to pre-existing conditions could she demand entitlement to the benefits of her policy. She stated that she is invoking patient-physician confidentiality. Saniel who treated her and conducted the test during her confinement. Dr. the RTC. 2003. petitioner filed a petition for review under Rule 42 of the Rules of Court in . Hence.217. (4) P20. the MeTC dismissed the complaint for lack of cause of action.[14] The RTC held that it was the burden of petitioner to prove that the stroke of respondent Neomi was excluded from the coverage of the health care program for being caused by a pre-existing condition. Bernie regarding [respondent's] wishes.[13] On appeal. in a decision dated February 2. And that I should not release any medical information concerning her neurologic status to anyone without her approval. xxx xxx xxx[12] In a decision dated August 5. Olivares called by phone on January 29.000 as exemplary damages.000 as attorney's fees and (5) costs of suit. 2003. The health care agreement defined a pre-existing condition as: x x x a disability which existed before the commencement date of membership whose natural history can be clinically determined. Epilepsy XI. Cataract/Glaucoma V. Hallux valgus XVI. Hypertension and other Cardiovascular diseases XVII. Calculi XVIII. Hernia/Benign prostatic hypertrophy VIII. whether or not the Member was aware of such illness or condition. It denied reconsideration in a resolution promulgated on September 21. Tumor of Internal Organs II. Cholecysitis XIV. Tuberculosis XIII. Hemorrhoids/Anal Fistula III. Scholiosis/Herniated disc and other Spinal column abnormalities XII. bone or any form of blood dyscracias . the following disabilities but not to the exclusion of others are considered pre-existing conditions including their complications when occurring during the first year of a Members coverage: I. Endometriosis IX. 2005. Goiter and other thyroid disorders VII. the CA affirmed the decision of the RTC. Gastric or Duodenal ulcer XV. muscular tissue. Tumors of skin. Hence this petition which raises the following issues: (1) whether petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing condition and therefore was excluded from the coverage of the health care agreement and (2) whether it was liable for moral and exemplary damages and attorney's fees. In a decision promulgated on July 29. Such conditions also include disabilities existing prior to reinstatement date in the case of lapse of an Agreement. Diseased tonsils and sinus conditions requiring surgery IV.the CA. Pathological Abnormalities of nasal septum or turbinates VI. 2005. Notwithstanding. Asthma/Chronic Obstructive Lung disease X. CA. [17] Respondents counter that the burden was on petitioner to prove that Neomi's stroke was excluded from the coverage of their agreement because it was due to a pre-existing condition. Petitioner argues that respondents prevented Dr.[21] Petitioner never presented any evidence to prove that respondent Neomi's stroke was . This doctrine is equally applicable to health care agreements. These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. In Philamcare Health Systems. they should be construed strictly against the insurer. Stated otherwise.Diabetes Mellitus XX. this pre-existing provision shall no longer be applicable except for illnesses specifically excluded by an endorsement and made part of this Agreement. Saniel from submitting his report regarding the medical condition of Neomi.[20] It is an established rule in insurance contracts that when their terms contain limitations on liability.[18] We agree with respondents. petitioner is not liable for pre-existing conditions if they occur within one year from the time the agreement takes effect.[19] we ruled that a health care agreement is in the nature of a non-life insurance. Collagen/Auto-Immune disease After the Member has been continuously covered for 12 months. It failed to prove this. disabilities which existed before the commencement of the agreement are excluded from its coverage if they become manifest within one year from its effectivity.[16] XIX. v. it contends that the presumption that evidence willfully suppressed would be adverse if produced should apply in its favor. Hence. Under this provision. Inc. limitations of liability on the part of the insurer or health care provider must be construed in such a way as to preclude it from evading its obligations. (c) it is merely corroborative or cumulative and (d) the suppression is an exercise of a privilege.[24] Since petitioner had the burden of proving exception to liability. Next. ― The following presumptions are satisfactory if uncontradicted. Saniel's report would be adverse to Neomi. they should be scrutinized by the courts with extreme jealousy[23] and care and with a jaundiced eye. It could not just passively wait for Dr. This was a disputable presumption at best.due to a pre-existing condition. Saniel's report was justified. Suffice it to say that this presumption does not apply if (a) the evidence is at the disposal of both parties.[22] Here. Disputable presumptions. It was privileged communication between physician and patient. (b) the suppression was not willful. The mere reliance on a disputable presumption does not meet the strict standard required under our jurisprudence. but may be contradicted and overcome by other evidence: xxx xxx xxx (e) That evidence willfully suppressed would be adverse if produced. as already stated. it should have made its own assessment of whether respondent Neomi had a pre-existing condition when it failed to obtain the attending physician's report. Accordingly. based on her invocation of the doctor-patient privilege. 3. Section 3 (e). It merely speculated that Dr. respondents' refusal to present or allow the presentation of Dr. Rule 131 of the Rules of Court states: Sec. Saniel's report to bail it out. petitioner argues that it should not be held liable for moral and exemplary . Furthermore. based on general medical findings. It insists that it waited in good faith for Dr. The RTC and CA found that there was a factual basis for the damages adjudged against petitioner. shock. and attorney's fees since it did not act in bad faith in denying respondent Neomi's claim.[25] We disagree. They found that it was guilty of bad faith in denying a claim based merely on its own perception that there was a pre-existing condition: [Respondents] have sufficiently shown that [they] were forced to engage in a dispute with [petitioner] over a legitimate claim while [respondent Neomi was] still experiencing the effects of a stroke and forced to pay for her medical bills during and after her hospitalization despite being covered by [petitioners] health care program. .00. 2005 resolution of the Court of Appeals in CA-G. [they had] to engage the services of counsel for a fee of P20. SP No. (emphasis supplied) This is a factual matter binding and conclusive on this Court. [They] have shown that because of the refusal of [petitioner] to issue a letter of authorization and to pay [respondent Neomi's] hospital bills. 2005 decision and September 21. the refusal of petitioner to pay respondent Neomi's bills smacks of bad faith. 84163 are AFFIRMED. thereby suffering in the process extreme mental anguish.R. SO ORDERED. Finally. Saniel's report and that.damages. the petition is hereby DENIED. The July 29. as its refusal [was] merely based on its own perception that a stroke is a pre-existing condition. WHEREFORE. considering it occurred only 38 days after the coverage took effect. Treble costs against petitioner. serious anxiety and great stress.000.[26] We see no reason to disturb these findings. it had reasonable ground to believe that her stroke was due to a pre-existing condition. REYNATO S. Sundiam of the Former Fifteenth Division of the Court of Appeals. PUNO Chief Justice * The petition spelled the name of respondent as Noemi Olivares but in the decision of the Court of Appeals. Dimaampao and concurred in by Associate Justices Martin S. Barza. pp. 178. Penned by Associate Justice Japar B. p. [1] Under Rule 45 of the Rules of Court. pp. [5] Penned by Judge Perpetua Atal-Pao. AZCUNA Associate Justice Associate Justice TERESITA J. [4] Penned by Judge Romeo F. pp.RENATO C. [2] [3] Id. rollo. and Edgardo F.. p. I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. Jr... [6] Id. 39. . Article VIII of the Constitution. 18.. LEONARDO-DE CASTRO Associate Justice C E R T I FI C AT I O N Pursuant to Section 13. 27-28. 17-25. p. CORONA Associate Justice WE CONCUR: REYNATO S. [8] Id. p. id. [7] Id. 44-47. Villarama. Neomi was used since she signed as such in the verification and certificate of non-forum shopping attached to her complaint. 39. 38-43.. [9] Id. id. pp. PUNO Chief Justice Chairperson ANGELINA SANDOVAL-GUTIERREZ ADOLFO S... [17] Id. citations omitted. Chia Yu.. [24] [25] Rollo.. 24 SCRA 454 and Eagle Star Insurance.R. INC. [16] Id.. No. 43. Navaja. p. 835 (1996). No. v.. 90. [14] Id. CA. 27 January 2006. 20 July 1990. 659-660. v.R. [23] Western Guaranty Corporation v. Inc. 42. p. 977. Inc. p. & Surety Co. [21] Id. petitioner. 96 Phil.. [13] Id. The Capital Ins. 824.[10] Id. [18] Id. [12] Id. 47. 326 Phil. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. G. p. 86939. 220 SCRA 624. v. G. 889. 225 SCRA 1 and People v.. p. citations omitted. 633.R. 696 (1955)... 115278 May 23. 344 Phil.. pp. pp. [22] DBP Pool of Accredited Insurance Companies v. vs. G. 91666. p. Radio Mindanao Network. p. 214. No. 38. p. 114. 336 Phil. [20] Id.. 30 March 1993. Ltd. Court of Appeals. [26] PAL. citing Taurus Taxi Co. . Andal. 912 (1997). p. 480 SCRA 314. 322. [11] Id. 989 (1997). Inc.. citing Malayan Insurance Corporation v. [19] 429 Phil. 1995 FORTUNE INSURANCE AND SURETY CO. 187 SCRA 652. People v.... Court of Appeals. 2 August 1993. 147039..R. No. [15] Id. No. citing People v. 104044. G. Ducay. L-23491. No.. p. 29.R. G. 196-198. 195. Inc.R.. 31 July 1968. 82 (2002). 109. 93-94. . J. Makati. 2. 5. Driver Magalong was assigned by PRC Management Systems with the plaintiff by virtue of an Agreement executed on August 7. by private respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner Fortune Insurance and Surety Co.. Maribeth Alampay. Metro Manila on June 29. 1982. was robbed of the said cash. the duplicate original of which is hereto attached as Exhibit "A". Both the trial court and the Court of Appeals held that there should be recovery. The robbery took place while the armored car was traveling along Taft Avenue in Pasay City.: The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is liable under the Money. This case began with the filing with the Regional Trial Court (RTC) of Makati.000. The said armored car was driven by Benjamin Magalong Y de Vera. 1987. 3. The petitioner contends otherwise. Metro Manila. from its Pasay Branch to its Head Office at 8737 Paseo de Roxas. with the plaintiff by virtue of a contract of Security Service executed on October 25. 1983.000. The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its head office in Makati. Inc. (hereinafter Fortune) of a complaint for recovery of the sum of P725. respondents. The Security Guard Atiga was assigned by Unicorn Security Services.00 under the custody of its teller. while in the process of transferring cash in the sum of P725. Inc. After joinder of issues. a duplicate original copy of which is hereto attached as Exhibit "C". The plaintiff was insured by the defendants and an insurance policy was issued. The case was docketed as Civil Case No. 1817 and assigned to Branch 146 thereof. the parties asked the trial court to render judgment based on the following stipulation of facts: 1. together with Edelmer . 4. JR.COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES. escorted by Security Guard Saturnino Atiga Y Rosete. the driver Magalong and guard Atiga were charged.00 under the policy issued by Fortune. and Payroll Robbery policy it issued to the private respondent or whether recovery thereunder is precluded under the general exceptions clause thereof. a duplicate original copy of which is hereto attached as Exhibit "B". DAVIDE. Security. An armored car of the plaintiff. After an investigation conducted by the Pasay police authorities. trustee or authorized representative of the Insured whether acting alone or in conjunction with others. "General Exceptions" Section (b). employee. the Court finds for plaintiff and against defendant. Reynaldo Aquino and John Doe. until fully paid. A copy of the said information is hereto attached as Exhibit "E. with interest thereon at the legal rate. director.00 as liability under Policy No. . .00. partner. employee. 0207 (as mitigated by the P40. . Demands were made by the plaintiff upon the defendant to pay the amount of the loss of P725." and which reads as follows: GENERAL EXCEPTIONS The company shall not be liable under this policy in report of xxx xxx xxx (b) any loss caused by any dishonest. The Fiscal of Pasay City then filed an information charging the aforesaid persons with the said crime before Branch 112 of the Regional Trial Court of Pasay City. and ..000.Bantigue Y Eulalio. 8." specifically under page 1 thereof. premises considered.000. A copy of the complaint is hereto attached as Exhibit "D". at the time of the robbery. but the latter refused to pay as the loss is excluded from the coverage of the insurance policy. .000. The plaintiff opposes the contention of the defendant and contends that Atiga and Magalong are not its "officer. and (a) orders defendant to pay plaintiff the net amount of P540. 7. . (b) orders defendant to pay plaintiff the sum of P30. which is marked as Exhibit "A-1. . The dispositive portion thereof reads as follows: WHEREFORE. 1 On 26 April 1990. trustee or authorized representative . 6. fraudulent or criminal act of the insured or any officer.D.00). 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City.000.00 special clause deduction and by the recovered sum of P145. the trial court rendered its decision in favor of Producers.00 as and for attorney's fees.." The case is still being tried as of this date. attached hereto as Exhibit "A.000. with violation of P. 2 The trial court ruled that Magalong and Atiga were not employees or representatives of Producers. The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were neither employees nor authorized representatives of Producers and ratiocinated as follows: A policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurance company (New Life Enterprises vs. They were merely an assigned armored car driver and security guard. All other claims and counterclaims are accordingly dismissed forthwith. 1987 money transfer from plaintiff's Pasay Branch to its Makati Head Office.00 cash being transferred along a specified money route. 3 Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G. they must be taken and understood in their plain. are to be construed according to the sense and meaning of the terms which the parties themselves have used. which alone wields the power to dismiss them. vs. their services as armored car driver and as security guard having been merely offered by PRC Management and by Unicorn Security and which latter firms assigned them to plaintiff. ordinary and popular . In its decision 4 promulgated on 3 May 1994. 32946. The wages and salaries of both Magalong and Atiga are presumably paid by their respective firms. it affirmed in toto the appealed decision. The finding is accordingly compelled that neither Magalong nor Atiga were plaintiff's "employees" in avoidance of defendant's liability under the policy. Neither is the Court prepared to accept the proposition that driver Magalong and guard Atiga were the "authorized representatives" of plaintiff. Court of Appeals. respectively. Ltd. 207 SCRA 669. SO ORDERED. beyond perhaps entitling plaintiff to request are replacement for such driver guard. If such terms are clear and unambiguous. Magalong and Atiga are assigned to plaintiff in fulfillment of agreements to provide driving services and property protection as such — in a context which does not impress the Court as translating into plaintiff's power to control the conduct of any assigned driver or security guard. It Said: The Court is satisfied that plaintiff may not be said to have selected and engaged Magalong and Atiga. Quite plainly — it was teller Maribeth Alampay who had "custody" of the P725. Court of Appeals. 211 SCRA 554).000. and hence plaintiff's then designated "messenger" adverted to in the policy.(c) orders defendant to pay costs of suit. CV No. for the June 29. like other contracts. particularly the general exceptions therein embodied.R. Contracts of insurance. Sun Insurance Office. they were. Ltd. Sun Insurance Office. Fortune points out that an employer-employee relationship depends upon four standards: (1) the manner of selection and engagement of the putative employee. Fortune filed this petition for review on certiorari. on the one hand. — There is "labor-only" contracting where the . (3) the presence or absence of a power to dismiss. 6 It asserts that the power of control over Magalong and Atiga was vested in and exercised by Producers. vs. Of the four. 195 SCRA 193). it must/should have so stated expressly in the insurance policy. would not obliterate the relationship. Said driver and security guard cannot be considered as employees of plaintiff-appellee bank because it has no power to hire or to dismiss said driver and security guard under the contracts (Exhs. the provisions in the contracts of Producers with PRC Management System for Magalong and with Unicorn Security Services for Atiga which state that Producers is not their employer and that it is absolved from any liability as an employer. p. nevertheless.sense (New Life Enterprises Case. ordinary and simple. Fortune further insists that PRC Management System and Unicorn Security Services are but "labor-only" contractors under Article 106 of the Labor Code which provides: Art. the right-of-control test has been held to be the decisive factor. it cannot be the subject of agreement. The Labor Code is a special law specifically dealing with/and specifically designed to protect labor and therefore its definition as to employer-employee relationships insofar as the application/enforcement of said Code is concerned must necessarily be inapplicable to an insurance contract which defendant-appellant itself had formulated. No other interpretation is necessary. It alleges that the trial court and the Court of Appeals erred in holding it liable under the insurance policy because the loss falls within the general exceptions clause considering that driver Magalong and security guard Atiga were Producers' authorized representatives or employees in the transfer of the money and payroll from its branch office in Pasay City to its head office in Makati. when Producers commissioned a guard and a driver to transfer its funds from one branch to another. and Magalong and Atiga. Contractor or subcontractor. 8 and C) except only to ask for their replacements from the contractors. The language used by defendant-appellant in the above quoted stipulation is plain. 676. (2) the mode of payment of wages. It asserts that the existence of an employer-employee relationship "is determined by law and being such. Court of Appeals. The word "employee" must be taken to mean in the ordinary sense. Assuming that they could not be considered authorized representatives. According to Fortune. and (4) the presence and absence of a power to control the putative employee's conduct. if there was in reality an employer-employee relationship between Producers. 106. 5 On 20 June 1994. on the other. employees of Producers. supra. they effectively and necessarily became its authorized representatives in the care and custody of the money. Had it intended to apply the Labor Code in defining what the word "employee" refers to." Thus. person supplying workers to an employer does not have substantial capital or investment in the form of tools. Since under Producers' contract with PRC Management Systems it is the latter which assigned Magalong as the driver of Producers' armored car and was responsible for his faithful discharge of his duties and responsibilities. vs. On the other hand. It includes. work premises. burglary and theft insurance. and the control of their conduct. It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is a form of casualty insurance. public liability insurance. a social legislation whose provisions may set aside contracts entered into by parties in order to give protection to the working man. equipment.400. plate glass insurance. among others. the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. and since Producers paid the monthly compensation of P1. but is not limited to. namely: (1) the selection and engagement of the employee. employer's liability insurance. Section 174 of the Insurance Code provides: Sec. Producers contends that Magalong and Atiga were not its employees since it had nothing to do with their selection and engagement. 8 to wit: In determining the existence of employer-employee relationship.00 per driver to PRC Management Systems and not to Magalong. and (4) the power to control the employee's conduct. As to Atiga. the payment of their wages. 174. their dismissal. Casualty insurance is insurance covering loss or liability arising from accident or mishap. personal accident . the following elements are generally considered." There is merit in this petition. Producers argued that the rule in International Timber Corp. In such cases. and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. (2) the payment of wages. Clave. Producers relies on the provision of its contract with Unicorn Security Services which provides that the guards of the latter "are in no sense employees of the CLIENT. motor vehicle liability insurance. NLRC 7 that a finding that a contractor is a "labor-only" contractor is equivalent to a finding that there is an employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor. it is clear that Magalong was not Producers' employee. machineries. Producers further asseverates that what should be applied is the rule in American President Lines vs. excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of insurance such as fire or marine. following the ruling in International Timber Corp. Fortune thus contends that Magalong and Atiga were employees of Producers. (3) the power of dismissal. is not applicable to all cases but only when it becomes necessary to prevent any violation or circumvention of the Labor Code. partner. employee. many designed to reduce this hazard. robbery. 13 The terms "service" and "employment" are generally associated with the idea of selection. director. there is no room for construction and such terms cannot be enlarged or diminished by judicial construction. Seldom does the insurer assume the risk of all losses due to the hazards insured against. insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. These contracts are. thus any ambiguity therein should be resolved against the insurer. "the opportunity to defraud the insurer — the moral hazard — is so great that insurers have found it necessary to fill up their policies with countless restrictions. the rights and obligations of the parties must be determined by the terms of their contract. Outside of these. 17 It goes without saying then that if the terms of the contract are clear and unambiguous. 15 or it should be construed liberally in favor of the insured and strictly against the insurer. trustee or authorized . and other substantially similar kinds of insurance. (emphases supplied) Except with respect to compulsory motor vehicle liability insurance. control." 10 Persons frequently excluded under such provisions are those in the insured's service and employment. therefore. for easy reference. 19 It is settled that the terms of the policy constitute the measure of the insurer's liability. 12 In such cases.and health insurance as written by non-life insurance companies. is again quoted: GENERAL EXCEPTIONS The company shall not be liable under this policy in respect of xxx xxx xxx (b) any loss caused by any dishonest. 20 In the absence of statutory prohibition to the contrary. 14 A contract of insurance is a contract of adhesion. the Insurance Code contains no other provisions applicable to casualty insurance or to robbery insurance in particular. 11 The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. and compensation. With the foregoing principles in mind. it may now be asked whether Magalong and Atiga qualify as employees or authorized representatives of Producers under paragraph (b) of the general exceptions clause of the policy which. taking into consideration its purpose and always in accordance with the general principles of insurance law. fraudulent or criminal act of the insured or any officer. the terms specifying the excluded classes are to be given their meaning as understood in common speech. as to preclude the insurer from non-compliance with its obligation. 9 It has been aptly observed that in burglary. governed by the general provisions applicable to all types of insurance. 16 Limitations of liability should be regarded with extreme jealousy and must be construed in such a way. 18 An insurance contract is a contract of indemnity upon the terms and conditions specified therein. and theft insurance. But even granting for the sake of argument that these contracts were not "labor-only" contracts. for these particular tasks. in the light of the criteria provided for in Article 106 of the Labor Code. in respect of the transfer of Producer's money from its Pasay City branch to its head office in Makati. and his two other companions. however. (emphases supplied) There is marked disagreement between the parties on the correct meaning of the terms "employee" and "authorized representatives. or jurisprudentially established in the light of the four standards in the determination of the employeremployee relationship. the complaint for violation of P. the contracts with PRC Management Systems and Unicorn Security Services. 21 or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as employees of the party employing them and not of the party who supplied them to the employer. we are satisfied that Magalong and Atiga were. with Alampay to be responsible for its custody in transit. No. . and PRC Management Systems and Unicorn Security Services were truly independent contractors. there is a paucity of evidence as to whether the contracts between Producers and PRC Management Systems and Unicorn Security Services are "labor-only" contracts. the vehicle. 22 Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security Services are "labor-only" contracts. Howsoever viewed. Producers. and Atiga to provide the needed security for the money. or criminal acts of persons granted or having unrestricted access to Producers' money or payroll. .D. . Whether they are is. its "authorized representatives" who served as such with its teller Maribeth Alampay. When it used then the term "employee. it is not the employer of Magalong. in fact. 532. Since the parties opted to submit the case for judgment on the basis of their stipulation of facts which are strictly limited to the insurance policy. Magalong to drive the armored vehicle which would carry the money. fraudulent. . indeed. and the information therefor filed by the City Fiscal of Pasay City. insists that by the express terms thereof. be that it is because the contracts are.representative of the Insured whether acting alone or in conjunction with others. Producers entrusted the three with the specific duty to safely transfer the money to its head office. "labor-only" contracts. it may. a question of fact. Notwithstanding such express assumption of PRC Management Systems and Unicorn Security Services that the drivers and the security guards each shall supply to Producers are not the latter's employees." It is clear to us that insofar as Fortune is concerned." it must have had in mind any person who qualifies as such as generally and universally understood. In short. it was its intention to exclude and exempt from protection and coverage losses arising from dishonest. W.. 156 SCRA 522 [1987].. Andersen [1951]. Footnotes 1 Rollo. 2d 229. Civ. App... 145 S. WHEREFORE . Co.. concur. took no part. Per Austria-Martinez.. CV No. Bellosillo and Kapunan. J. 52.W. 2d 315. 1983 ed. 2 Id. 8 114 SCRA 832 [1982]. SO ORDERED. 3 Rollo. as an agent. 3rd ed.R. A. and in the Memorandum. Insurance. 10 WILLIAM B. 10-11. 5 Rollo.. is on leave. 11 Bowling vs. . 6 Citing in the Petition. 8. NLRC." 23 In view of the foregoing. The decision of the Court of Appeals in CAG. one who represents others or another in a special capacity.. A. 9 MARIA CLARA M.. NLRC. 4 Annex "A" of Petition. Padilla. Inc. J. No pronouncement as to costs.. The complaint in Civil Case No. J. JJ. Handbook on the Law of Insurance. 51-52. A "representative" is defined as one who represents or stands in the place of another. concurring. 1817 is DISMISSED. Quiason. R.the three acted as agents of Producers. 7 169 SCRA 341 [1989]. and Reyes.. 16 Tenn. 46-47 (emphases supplied). App. the instant petition is hereby GRANTED. Hamblen County Motor Co.. CAMPOS. Broadway Motors. vs. Vallum Security Services vs.. with Marigomen. Commercial Standard Ins. and is interchangeable with "agent. JJ. 1014. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court of Makati in Civil Case No. 224 SCRA 781 [1993]. 66 S. 1817 are REVERSED and SET ASIDE. 199. 45-53. Id. Tex. VANCE. 12 Barret vs. by Buist M. Fortune is exempt from liability under the general exceptions clause of the insurance policy. cit. petitioner. of New York. 225 SCRA 537 [1993]. NLRC. 596. vs.R. vs. NLRC. 167. DECISION PUNO. SECOND DIVISION [G. Petitioner avers that. Gulf Finance & Securities Co. Respondent contends that the rider limits its liability for loss to the two swimming pools of petitioner. 1170. 15 CAMPOS. May 16. vs. App. Insurance Policy No. NLRC. Home Ins. supra note 6. 17 CAMPOS. National Fire Ins. Canlubang Security Agency Corp.... 7 La. 217 SCRA 417 [1993]. 16 Verendia vs. supra note 7. vs.. op. For review are the warring interpretations of petitioner and respondent on the scope of the insurance companys liability for earthquake damage to petitioners properties. 20 Paramount Insurance Corp. Co. J. No. 8. La Union and had its properties in said . 18 43 Am Jur 2d Insurance § 271 [1982]. Vallum Security Services vs. 434. Fifth ed. 202 SCRA 465 [1965]. 22. NLRC. 211 SCRA 879 [1992]. Petitioner assails the appellate court decision[1] which dismissed its two appeals and affirmed the judgment of the trial court.R. 216 SCRA 280 [1992]. supra note 6. 14 Id. Baguio vs. vs. and affirmed by the appellate court are as follows: [P]laintiff is the owner of the Plaza Resort situated at Agoo. 2005] GULF RESORTS. 22 See International Timber Corp.L. 115 A. Court of Appeals. Co. 13. Malayan Insurance. pursuant to its earthquake shock endorsement rider.. 19 Stokes vs. and Villuga vs. Inc. NLRC. Japzon. NLRC. 156167. PHILIPPINE CHARTER INSURANCE CORPORATION. respondent.: Before the Court is the petition for certiorari under Rule 45 of the Revised Rules of Court by petitioner GULF RESORTS. 139 Md. The facts as established by the court a quo.13 Ledvinka vs. vs. INC. 31944 covers all damages to the properties within its resort caused by earthquake. 21 See Broadway Motors. op. against respondent PHILIPPINE CHARTER INSURANCE CORPORATION. 127 SCRA 766 [1984]. 23 Black's Law Dictionary. cit. 19 A.. INC.. 700.P41.on the furniture.600.800. 393.14 (Exhs.551% b) Power House. 1989 to March 14. 1. 1. only (against the peril of earthquake shock only) @ 0.00 for a total premium of P45. 1985-86. G also G-1) and in said policy the earthquake endorsement clause as indicated in Exhibits C-1.on the Clubhouse only @ .540% P100. D-1. thus. also Exhs.658. D-1. 1988 to March 14. 6-A and 6-B) as premium thereof.700. 1990 under Policy No.00.000.0.000.00 for furniture. H) which carried the entry under Endorsement/Warranties at Time of Issue.00. (Item 5 only) (Exhs.92 (Exh. D-1. C-1. the risk of loss from earthquake shock was extended only to plaintiffs two swimming pools.00 .P55. 3-B and F-2). 31944 to plaintiff covering the period of March 14. which read Endorsement to Include Earthquake Shock (Exh.other buildings include as follows: a) Tilter House. earthquake shock endt. 1990 to March 14. 2-B.resort insured originally with the American Home Assurance Company (AHAC-AIU).00 .392%.500. and 1987-88 (Exhs.00. that defendant issued Policy No. 1-B. I).600. E and F-1).00 -0.551% c) House Shed. etc.00. 3 and 4 respectively).000.100% 116.on the two swimming pools. C-1. 2064568061-9 (Exh. C.490%. In the first four insurance policies issued by AHAC-AIU from 1984-85.691.0. and E and two (2) swimming pools only (Exhs.000. H) provided that the policy wording and rates in said policy be copied in the policy to be issued by defendant. 206-4182383-0 covering the period March 14. Item 5 in those policies referred to the two (2) swimming pools only (Exhs. D.000. 206-4568061-9 (Exh. that subsequently AHAC(AIU) issued in plaintiffs favor Policy No.P19.000. contained in the building above-mentioned@ . computed as follows: Item -P7.159. 6-B-1) in the amount of P10.00 and paid P42. that . Exhibits E and F-1 was deleted and the entry under Endorsements/Warranties at the time of issue read that plaintiff renewed its policy with AHAC (AIU) for the period of March 14. 1989 (Exhs. E and F. 1991 for P10. fixtures. lines air-con and operating equipment that plaintiff agreed to insure with defendant the properties covered by AHAC (AIU) Policy No. 2. 1986-1987. G and H).030. contained on the right-hand upper portion of page 7 thereof.S. Bayne Adjusters and Surveyors.420. notwithstanding what is stated in the printed conditions of this policy due to the contrary. 5-A. I).00 (Exhs. D. 6-C-1. including the two swimming pools in its Agoo Playa Resort were damaged. then assigned the investigation of the claim to an independent claims adjuster. 1990. through its Vice-President A. On August 23. F-02 and 4-A-1.52 Typhoon 1. 6-D and 7-C).P37. Inc.[4] rendered a preliminary report[5] finding extensive damage caused by the earthquake to the clubhouse and to the two swimming pools. the premium against the peril of earthquake shock is the same. Tax 409.[2] After the earthquake.in the computation of the premium. the shock endorsement provide(sic): In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees.00 ES Doc.T. that in Exhibit 7-C the word included above the underlined portion was deleted.89 Prem. 1990. 31944 (Exh. Bayne Adjusters and Surveyors.[6] On August 11.068. F. that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake (Exhs.061. 31944 issued by defendant.[3] On July 30. petitioner filed its formal demand[7] for settlement of the damage to all its properties in the Agoo Playa Resort. that the above break-down of premiums shows that plaintiff paid only P393.159.. that on July 16. 1990. C. that in all the six insurance policies (Exhs. G-2 and 5-C-1. C. which is the policy in question.76 EC 393. the following: Rate-Various Premium . 776. 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy No.10 F. Inc. de Leon stated that except for the swimming pools. respondent denied petitioners claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort.92. 1990. Mr. G and H) and in Policy No. petitioner advised respondent that it would be making a claim under its Insurance Policy No. through its adjuster. Respondent instructed petitioner to file a formal claim. 4-B. all affected items have no coverage for earthquake shocks. E. D. E. Stamps 3. 31944 issued by defendant. 3-A. respondent. 1-D. F. issued by AHAC (Exhs.00 as premium against earthquake shock (ES). 31944 for damages on its properties. requested petitioner to submit various documents in support of its claim. .05 TOTAL 45. C and 1-B. defendants Policy No. 2-B and 3-B-1 and 3-B-2.R. de Leon. 2-D. that is P393.60 F/L 2. On August 7. the language used in the policy in litigation is clear and unambiguous hence there is no need for interpretation or construction but only application of the provisions therein.[11] Respondent filed its Answer with Special and Affirmative Defenses with Compulsory Counterclaims. From the above observations the Court finds that only the two (2) swimming pools had earthquake shock coverage and were heavily damaged by the earthquake which struck on July 16. E. the same premium it paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC(AIU) (Exhibits C. Plaintiff correctly points out that a policy of insurance is a contract of adhesion hence. representing losses sustained by the insured properties. 1991. 1994. Because it is the finding of the Court as stated in the immediately preceding paragraph that defendant is liable only for the damage caused to the two (2) swimming pools and that defendant has made known to plaintiff its willingness and readiness to settle said liability. by virtue of the contract of insurance.) Costs.00.. i.00 against the peril of earthquake shock. the insurance company which prepared the contract.) The sum of P500. viz: The above schedule clearly shows that plaintiff paid only a premium of P393. representing continuing losses sustained by plaintiff on account of defendants refusal to pay the claims.) The sum of P500. by way of exemplary damages. where the language used in an insurance contract or application is such as to create ambiguity the same should be resolved against the party responsible therefor.00 per month. petitioner filed a complaint[10] with the regional trial court of Pasig praying for the payment of the following: [8] 1. the Court does not agree that the action filed by plaintiff is baseless and highly speculative since such action is a lawful exercise of the plaintiffs right to come to Court in the honest belief that their Complaint is meritorious.00) representing damage to the two (2) swimming pools. Defendant having admitted that the damage to the swimming pools was appraised by defendants adjuster at P386. 3.000. pay plaintiff said amount. premises considered. as computed under par. To the mind of [the] Court. F and G). the lower court after trial ruled in favor of the respondent.427. From this fact the Court must consequently agree with the position of defendant that the endorsement rider (Exhibit 7-C) means that only the two swimming pools were insured against earthquake shock.000. 1990.00. WHEREFORE. therefore.779.Petitioner and respondent failed to arrive at a settlement. with interest thereon. The prayer. there is no basis for the grant of the other damages prayed for by plaintiff. D.000. of defendant for damages is likewise denied. [12] On February 21. on January 24.e.842. defendant is ordered to pay plaintiffs the sum of THREE HUNDRED EIGHTY SIX THOUSAND PESOS (P386.) The sum of P428.00 by way of attorneys fees and expenses of litigation.[9] Thus. 29 of the policy (Annex B) until fully paid.00. 2.) The sum of P5. As to the counterclaims of defendant. 4. defendant must. with interest at 6% per annum from the date of the filing of the Complaint until .000. 5. July 18. Thus. which the plaintiff-appellant had with AHAC (AIU) and upon which the subject insurance contract with Philippine Charter Insurance Corporation is said to have been based and copied (Exh. CONSIDERING ITS PROVISIONS. EXH I) BY LIMITING ITSELF TO A CONSIDERATION OF THE SAID POLICY ISOLATED FROM THE CIRCUMSTANCES SURROUNDING ITS ISSUANCE AND THE ACTUATIONS OF THE PARTIES AFTER THE EARTHQUAKE OF JULY 16. G and H). long-standing is the rule that the award thereof is subject to the sound discretion of the court. G.280. CA. No. Moreover. THE CIRCUMSTANCES SURROUNDING THE ISSUANCE OF SAID POLICY AND THE ACTUATIONS OF THE PARTIES SUBSEQUENT TO THE EARTHQUAKE OF JULY 16. After review. THE TRIAL COURT ERRED IN DETERMINING PLAINTIFF-APPELLANTS RIGHT TO RECOVER UNDER DEFENDANT-APPELLEES POLICY (NO.000. it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such .defendants obligation to plaintiff is fully paid. No pronouncement as to costs. Coming to the defendant-appellants prayer for an attorneys fees. covered an extended earthquake shock insurance on all the insured properties. the appellate court affirmed the decision of the trial court and ruled. 1990. et al. thus: However. it then cannot be said that it was in default and therefore liable for interest. 31944. B. THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT CAN ONLY RECOVER FOR THE DAMAGE TO ITS TWO SWIMMING POOLS UNDER ITS FIRE POLICY NO. petitioner filed an appeal with the Court of Appeals based on the following assigned errors:[14] A. as the Court a quo and this Court correctly found it to be liable only. after carefully perusing the documentary evidence of both parties. assailing the lower courts failure to award it attorneys fees and damages on its compulsory counterclaim. xxx We also find that the Court a quo was correct in not granting the plaintiff-appellants prayer for the imposition of interest 24% on the insurance claim and 6% on loss of income allegedly amounting to P4. 31944.R.00. if such discretion is well-exercised.[13] Petitioners Motion for Reconsideration was denied. it will not be disturbed on appeal (Castro et al.. THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF-APPELLANT IS ENTITLED TO THE DAMAGES CLAIMED. Since the defendant-appellant has expressed its willingness to pay the damage caused on the two (2) swimming pools. WITH INTEREST COMPUTED AT 24% PER ANNUM ON CLAIMS ON PROCEEDS OF POLICY. We are not convinced that the last two (2) insurance contracts (Exhs. 1990. v. 115838. Thus. On the other hand. C. 2002). respondent filed a partial appeal. being the award thereof an exception rather than a rule. I). both appeals are hereby DISMISSED and judgment of the Trial Court hereby AFFIRMED in toto. that the policys earthquake shock endorsement clearly covers all of the properties insured and not only the swimming pools. such as to remove the two swimming pools from the coverage for the risk of fire. 136914. Fourth. WHETHER THE COURT OF APPEALS CORRECTLY DENIED PETITIONERS PRAYER FOR DAMAGES WITH INTEREST THEREON AT THE RATE CLAIMED.award (Country Bankers Insurance Corp. January 25. It should not be used to limit the respondents liability for . 31944.[17] Third. because the rider is the more deliberate expression of the agreement of the contracting parties. ATTORNEYS FEES AND EXPENSES OF LITIGATION.. Earthquake Shock Endt. We find that the Court a quo did not err in granting the same. in view of all the foregoing. that the qualification referring to the two swimming pools had already been deleted in the earthquake shock endorsement. FEA Warranty & Annual Payment Agreement On Long Term Policies. and it should be interpreted as all inclusive. the unqualified and unrestricted nature of the earthquake shock endorsement is confirmed in the body of the insurance policy itself.. Extended Coverage Endt. B. ONLY THE TWO (2) SWIMMING POOLS. Lianga Bay and Community Multi-Purpose Coop. Eighth. that the earthquake shock endorsement rider should be given precedence over the wording of the insurance policy. Fifth.. G. v. Seventh.. the qualification of the endorsement limiting the earthquake shock endorsement should be interpreted as a caveat on the standard fire insurance policy. WHEREFORE. any ambiguity in the earthquake shock endorsement should be resolved in favor of petitioner and against respondent. It was respondent which caused the ambiguity when it made the policy in issue. holding that the plaintiff-appellants action is not baseless and highly speculative. Inc. WHETHER THE COURT OF APPEALS CORRECTLY HELD THAT UNDER RESPONDENTS INSURANCE POLICY NO. 2002). It used the words any property insured by this policy.R. No costs. which states that it is [s]ubject to: Other Insurance Clause. limits were placed on the endorsements/warranties enumerated at the time of issue. Typhoon Endorsement. it is unbelievable for respondent to claim that it only made an inadvertent omission when it deleted the said qualification.[15] Petitioner filed the present petition raising the following issues:[16] A. ARE INSURED AGAINST THE RISK OF EARTHQUAKE SHOCK. No. Therefore. Second. that in their previous insurance policies. Petitioner contends: First. Sixth. RATHER THAN ALL THE PROPERTIES COVERED THEREUNDER. Second. where only the two swimming pools were noted as covered for earthquake shock damage. From 1988 until 1990. . No additional premium was paid to warrant coverage of the other properties in the resort. it cannot deny that the insurance policy it issued to petitioner covered all of the properties within the resort. Ninth. respondent made the following counter arguments:[18] First. none of the previous policies issued by AHAC-AIU from 1983 to 1990 explicitly extended coverage against earthquake shock to petitioners insured properties other than on the two swimming pools. This inadvertence did not make the policy incomplete. AHAC-AIU. AHAC-AIU. Bayne Adjusters and Surveyors. in the last two policies. and there is no need for calibration of the evidence in order to establish the facts upon which this petition is based. that it is proper for it to avail of a petition for review by certiorari under Rule 45 of the Revised Rules of Court as its remedy. The premium for the earthquake shock coverage was already included in the premium paid for the policy. this qualification in the title was deleted. respondent copied its policy from the AHAC-AIU policy provided by petitioner. the provisions in its policy were practically identical to its earlier policies. J. specially the enumeration of the items insured. Tenth. in a letter[19] by its representative Manuel C. As per its agreement with petitioner. from which respondents policy was copied.earthquake shock to the two swimming pools only. through Mr. which covered all the resorts properties for earthquake shock damage and respondent agreed. under the doctrine of equitable estoppel. 1990 earthquake. Third. and there was no increase in the premium paid. Inc. stated that such deletion was a mere inadvertence. petitioners payment of additional premium in the amount of P393. After the July 16.. Thus. On the other hand. respondent assured petitioner that it was covered for earthquake shock. covered only earthquake shock for the two swimming pools. petitioner told respondent that it wanted an exact replica of its latest insurance policy from American Home Assurance Company (AHAC-AIU). likewise requested petitioner to submit the necessary documents for its building claims and other repair costs. categorically stated that its previous policy. there is no basis for the appellate court to hold that the additional premium was not paid under the extended coverage. Any ambiguity in the policy can be easily resolved by looking at the other provisions. Baranda III. the deletion of the phrase pertaining to the limitation of the earthquake shock endorsement to the two swimming pools in the policy schedule did not expand the earthquake shock coverage to all of petitioners properties.00 shows that the policy only covered earthquake shock damage on the two swimming pools. Quijano. The amount was the same amount paid by petitioner for earthquake shock coverage on the two swimming pools from 1990-1991. Although the first five policies contained the said qualification in their riders title. Eleventh. Respondents insurance adjuster. nor did it broaden the scope of the endorsement whose descriptive title was merely enumerated. Petitioner admitted that from 1984 to 1988. the parties contemporaneous and subsequent acts show that they intended to extend earthquake shock coverage to all insured properties. only the two swimming pools were insured against earthquake shock. When it secured an insurance policy from respondent. petitioner alleged that in its policies from 1984 through 1988. 31944. In Insurance Policy No. Seventh.[21] it was stated that: .000. The policy binds the petitioner. only the two swimming pools were specified as included. petitioner only paid P393. The adjusters letter notifying petitioner to present certain documents for its building claims and repair costs was given to petitioner before the adjuster knew the full coverage of its policy. in order for the earthquake shock endorsement to be effective. Eighth. In all of its seven insurance policies. the riders of the old policy and the policy in issue are identical.00 as premium for coverage of the swimming pools against earthquake shock. We hold that the petition is devoid of merit. under the breakdown for premium payments. in the designation of location of risk. the only difference being the designation of the two swimming pools as Item 3. First. it had the opportunity to read its conditions. petitioner did not inform respondent of its requirement that all of its properties must be included in the earthquake shock coverage. In addition. Fifth. Before petitioner accepted the policy. it cannot be considered to be in default.Fourth. there is no basis for petitioner to claim damages. Since respondent was willing and able to pay for the damage caused on the two swimming pools. the use of the qualifier ANY instead of ALL to describe the property covered was done deliberately to enable the parties to specify the properties included for earthquake coverage. in its Complaint. However.00 On the two (2) swimming pools only (against the peril of earthquake shock only) [20] Second. Petitioner anchors its claims on AHAC-AIUs inadvertent deletion of the phrase Item 5 Only after the descriptive name or title of the Earthquake Shock Endorsement. attorneys fees and litigation expenses. premiums must be paid for all the properties covered.00 on the two swimming pools only (against the peril of earthquake shock only) meant that only the swimming pools were insured for earthquake damage. With regard to the issue under litigation. four key items are important in the resolution of the case at bar. Respondents only deviation from the agreement was when it modified the provisions regarding the replacement cost endorsement. the phrase Item 5 P393. and therefore. the words of the policy reflect the parties clear intention to limit earthquake shock coverage to the two swimming pools. Petitioners own evidence shows that it only required respondent to follow the exact provisions of its previous policy from AHAC-AIU. Sixth. it is not liable for interest.000. respondent did not do any act or give any assurance to petitioner as would estop it from maintaining that only the two swimming pools were covered for earthquake shock. No other premium was paid for earthquake shock coverage on the other properties. It did not object to any deficiency nor did it institute any action to reform the policy. Respondent complied with this requirement. viz: ITEM 3 393. The same phrase is used in toto in the policies from 1989 to 1990. . . Provided always that all the conditions of this Policy shall apply (except in so far as they may be hereby expressly varied) and that any reference therein to loss or damage by fire should be deemed to apply also to loss or damage occasioned by or through or in consequence of Earthquake.100%-E/S 393. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other provisions. The policy cannot be construed piecemeal. that this insurance covers loss or damage (including loss or damage by fire) to any of the property insured by this Policy occasioned by or through or in consequence of Earthquake. Certain stipulations cannot be segregated and then made to control. additional premium the Company agrees. notwithstanding what is stated in the printed conditions of this Policy to the contrary. . . viz: ANNUAL PAYMENT AGREEMENT ON LONG TERM POLICIES THE INSURED UNDER THIS POLICY HAVING ESTABLISHED AGGREGATE SUMS INSURED IN EXCESS OF FIVE MILLION PESOS. Thus.00 0. It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other. . [23] Fourth. namely:-(a) Earthquake. the policy extended earthquake shock coverage to all of the insured properties. . . All the provisions and riders. Policy Condition No. . the rider attached to the policy. IN CONSIDERATION OF A DISCOUNT OF 5% OR 7 % OF THE NET PREMIUM x x x POLICY HEREBY UNDERTAKES TO CONTINUE THE INSURANCE UNDER THE ABOVE NAMED x x x AND TO PAY THE PREMIUM. volcanic eruption or other convulsion of nature. neither do particular words or phrases necessarily determine its character. AMOUNT RATES PREMIUM xxx 3 393. . This insurance does not cover any loss or damage occasioned by or through or in consequence. . . . Vehicle and Smoke). . . . stated. directly or indirectly of any of the following occurrences. indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only.PREMIUM RECAPITULATION ITEM NOS. . titled Extended Coverage Endorsement (To Include the Perils of Explosion. . no qualifications were placed on the scope of the earthquake shock coverage. Earthquake Endorsement In consideration of the payment by the Insured to the Company of the sum of P. Aircraft.[24] Petitioner contends that pursuant to this rider.[25] All its parts are reflective of the true intent of the parties. taken and interpreted together.000.00[22] Third. 6 stated: 6. 1985 the coverage on earthquake shock was limited to the two swimming pools only? A.[27] In fire. the insured pays a premium. Yes. Now Mr. except on the two swimming pools. specifically shown in the warranty. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk. 1984 to March 4. no premium payments were made with regard to earthquake shock coverage. 1991 pp. will it be correct to state also that insofar as your insurance policy during the period from March 4.[26] (Emphasis ours) An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. and marine insurance. and 5. The insured has an insurable interest. As borne out by petitioners witnesses: CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. there is a provision here that it was only for item 5. sir. For the period from March 14. This is consistent with the history of petitioners previous insurance policies from AHAC-AIU. an insurance contract exists where the following elements concur: 1. . 23-26 Q. The insurer assumes the risk. It is limited to the two swimming pools. In consideration of the insurer's promise.[28] In the subject policy. 1989. did you personally arrange for the procurement of this policy? A. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. Yes. 12-13 Q. Yes. More specifically Item 5 states the amount of P393. Q. Section 2(1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss.000. 1991 pp. sir. damage or liability arising from an unknown or contingent event. 2. the premium payable becomes a debt as soon as the risk attaches. 3. 1988 up to March 14.A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend earthquake shock coverage only to the two swimming pools. 4.00 corresponding to the two swimming pools only? A. The insured is subject to a risk of loss by the happening of the designated peril. Mantohac. November 25. sir. casualty. Thus. November 25. In the procurement of the insurance police (sic) from March 14. is that not correct? A. I examined the policy and seeing that the warranty on the earthquake shock endorsement has no more limitation referring to the two swimming pools only. Petitioner also cited and relies on the attachment of the phrase Subject to: Other Insurance Clause. Q. yes. Typhoon Endorsement. I was contented already that the previous limitation pertaining to the two swimming pools was already removed. If you are referring to Forte Insurance Agency. although we made an oral instruction to that effect of extending the coverage on (sic) the other properties of the company. No. 1989. Is Forte Insurance Agency a department or division of your company? A. sir. Yes. And that instruction. sir. Earthquake Shock Endorsement. clauses. sir. Witness: A. Extended Coverage Endorsement. But insofar as the procurement of the insurance policy is concerned they are of course subject to your instruction. Q. 1988 to March 14. And you wanted to protect all your properties against similar tremors in the [future]. Yes. sir. Now. We did not make any written instruction. However. warranties or endorsements to which the . was very important because in April 1987 there was an earthquake tremor in La Union? A. The final action is still with us although they can recommend what insurance to take. Are you referring to the insurance policy issued by American Home Assurance Company marked Exhibit G? Atty. FEA Warranty & Annual Payment Agreement on Long Term Policies[29] to the insurance policy as proof of the intent of the parties to extend the coverage for earthquake shock. No. sir. Q. Q. Did you also do this through your insurance agency? A.Q. after this policy was delivered to you did you bother to check the provisions with respect to your instructions that all properties must be covered again by earthquake shock endorsement? A. is that correct? A. Q. And they are independent of your company insofar as operations are concerned? A. Q. Q. according to you. sir. Yes. this phrase is merely an enumeration of the descriptive titles of the riders. Yes. They are our insurance agency. Mejia: Yes. did you give written instruction to Forte Insurance Agency advising it that the earthquake shock coverage must extend to all properties of Agoo Playa Resort in La Union? A. they are separate entity. your Honor. wach (sic) of these six (6) policies marked in evidence as Exhibits C to H respectively carries an earthquake shock endorsement[?] My question to you is. paragraph 2 of the Insurance Code. Did you have occasion to review of (sic) these six (6) policies issued by your company [in favor] of Agoo Playa Resort? WITNESS: Yes[. 1992 pp. underwriter for AHAC-AIU: DIRECT EXAMINATION OF JUAN BARANDA III[30] TSN. D. Now. ATTY. sir. sir. Yes. in the Clauses and Warranties: Item 5 only (Earthquake Shock Endorsement). MEJIA: What is your basis for stating that the coverage against earthquake shock as provided for in each of the six (6) policies extend to the two (2) swimming pools only? WITNESS: Because it says here in the policies. The earthquake shock endorsement cannot stand alone. F. As explained by the testimony of Juan Baranda III. MEJIA: Witness referring to Exhibit C-1. in the enumeration Earthquake Shock Endorsement. E. sir. August 11. sir. Q. Q.policy is subject. For swimming pools we . We also hold that no significance can be placed on the deletion of the qualification limiting the coverage to the two swimming pools. as required under Section 50. WITNESS: We do not normally cover earthquake shock endorsement on stand alone basis. Is that for each of the six (6) policies namely: Exhibits C. ATTY. G and H? A. Mejia: We respectfully manifest that the same exhibits C to H inclusive have been previously marked by counsel for defendant as Exhibit[s] 1-6 inclusive.] I remember having gone over these policies at one point of time. on the basis on (sic) the wordings indicated in Exhibits C to H respectively what was the extent of the coverage [against] the peril of earthquake shock as provided for in each of the six (6) policies? xxx WITNESS: The extent of the coverage is only up to the two (2) swimming pools. 9-12 Atty. there is no increase in the amount of the premium. foundations. For building we covered it for full earthquake coverage which includes earthquake shock COURT: As far as earthquake shock endorsement you do not have a specific coverage for other things other than swimming pool? You are covering building? They are covered by a general insurance? WITNESS: Earthquake shock coverage could not stand alone. I think there is a substantial increase in the premium. the thing that comes to my mind is either insuring a swimming pool. Plaintiffs witness. if we are going to look at the premium there has been no change with respect to the rates. We are not only going to consider the two (2) swimming pools of the other as stated in the policy. what can you say about that testimony of plaintiffs witness? WITNESS: As I have mentioned earlier. DIRECT EXAMINATION OF JUAN BARANDA III TSN. As I see. D. I assure you that this one covers the two swimming pools with respect to earthquake shock endorsement. September 7. COURT: They are the same. earthquake shock cannot stand alone without the other half of it. 1992 pp. they are normally affected by earthquake but not by fire.do cover earthquake shock. August 11. the premium rates? WITNESS: They are the same in the sence (sic). sir. 1992 pp. CROSS-EXAMINATION OF JUAN BARANDA III TSN. E and F inclusive [remained] its coverage against earthquake shock to two (2) swimming pools only but that Exhibits G and H respectively entend the coverage against earthquake shock to all the properties indicated in the respective schedules attached to said policies. 23-25 Q. Everytime (sic) there is a renewal if the intention of the insurer was to include the earthquake shock. in the amount of the coverage. your Honor. If you are going to do some computation based on the rates you will arrive at the same premiums. If we are covering building or another we can issue earthquake shock solely but that the moment I see this. Based on it. Mantohac testified and he alleged that only Exhibits C. 4-6 . I must say that the coverage was not broaden (sic) to include the other items. Mr. we do not cover. Yes. It was inadvertent. sir. January 14. ATTY. Q. 206-4568061-9. Just to be clear about this particular answer of yours Mr. . we dont. Being a company underwriter. Yes. 1992 pp.ATTY. ANDRES: As an insurance executive will you not attach any significance to the deletion of the qualifying phrase for the policies? WITNESS: My answer to that would be. it was inadvertent because of the previous policies that we have issued with no specific attachments. That is why the phrase earthquake shock to the two (2) swimming pools only was placed. sir. . Witness. 5 only meaning to (sic) the two (2) swimming pools was deleted from the policies issued by AIU. to Exhibit H. is it not? A. 4-5 Q. premium rates and so on. I told him that the insurance that they will have to get will have the same provisions as this American Home Insurance Policy No. the phrase Item no. sir. what exactly did you tell Atty. Respondent only insured the properties as intended by the petitioner. viz: CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. is it not? xxx ATTY. Omlas (sic) to copy from Exhibit H for purposes of procuring the policy from Philippine Charter Insurance Corporation? A. Q. The Court also rejects petitioners contention that respondents contemporaneous and subsequent acts to the issuance of the insurance policy falsely gave the petitioner assurance that the coverage of the earthquake shock endorsement included all its properties in the resort. Exhibits G and H which you have pointed to during your direct-examination. the deletion of that particular phrase is inadvertent. You are referring to Exhibit H of course? A. sir. ANDRES: Would you as a matter of practice [insure] swimming pools for fire insurance? WITNESS: No. ANDRES: Will you not also agree with me that these exhibits. Petitioners own witness testified to this agreement. Bayne Adjusters and Surveyors. sir. Will it be correct to state[.Q.. Umlas categorically denied having given such assurances. Yes. about that time. No. January 26. 1992 pp. Inc. petitioner puts much stress on the letter of respondents independent claims adjuster. Inc. that you made a comparison of the provisions and scope of coverage of Exhibits I and H sometime in the third week of March. respondent never meant to lead petitioner to believe that the endorsement for earthquake shock covered properties other than the two swimming pools. Umlas were not proved. sir. CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. viz: DIRECT EXAMINATION OF ALBERTO DE LEON (Bayne Adjusters and Surveyors. The verbal assurances allegedly given by respondents representative Atty. 1990 or thereabout? A. He assured me that with regards to the insurance premium rates that they will be charging will be limited to this one. Witness.000. Finally.] Mr.) TSN. Mejia: Q. I (sic) can even be lesser. Q. Q. all the provisions here will be the same except that of the premium rates? A. With regard to the wordings I did not notice any difference because it was exactly the same P393. Do you recall the circumstances that led to your discussion regarding the extent of coverage of the policy issued by Philippine Charter Insurance Corporation? . 12-14 Atty. Yes. Inc. So. But as testified to by the representative of Bayne Adjusters and Surveyors. sir. January 14. 22-26 Q. I did not discover any difference inasmuch (sic) as I was assured already that the policy wordings and rates were copied from the insurance policy I sent them but it was only when this case erupted that we discovered some discrepancies.00 on the two (2) swimming pools only against the peril of earthquake shock which I understood before that this provision will have to be placed here because this particular provision under the peril of earthquake shock only is requested because this is an insurance policy and therefore cannot be insured against fire. so this has to be placed. Atty. With respect to the items declared for insurance coverage did you notice any discrepancy at any time between those indicated in Exhibit I and those indicated in Exhibit H respectively? A. 1993 pp. And at that time did you notice any discrepancy or difference between the policy wordings as well as scope of coverage of Exhibits I and H respectively? A. is reflective of petitioners knowledge. there is no ambiguity in the terms of the contract and its riders. September 23. 1991 . I based my statement on my findings. I got a photocopy of the insurance coverage policy and it was indicated under Item 3 specifically that the coverage is only for earthquake shock. Now. because upon my examination of the policy I found out that under Item 3 it was specific on the wordings that on the two swimming pools only. when I examined the summary of premium payment only Item 3 which refers to the swimming pools have a computation for premium payment for earthquake shock and all the other items have no computation for payment of premiums. et al. any ambiguity therein is resolved against the insurer. the parties do not bargain on equal footing. I remember I had a talk with Atty. usually a corporation. may we know from you Engr. In Development Bank of the Philippines v. the weaker party's participation being reduced to the alternative to take it or leave it. The testimony of Mr.[34] Thus.[33] The case law will show that this Court will only rule out blind adherence to terms where facts and circumstances will show that they are basically one-sided. petitioner had required the respondent to copy verbatim the provisions and terms of its latest insurance policy from AHAC-AIU. Umlas (sic). while the other party merely affixes his signature or his "adhesion" thereto. we have called on lower courts to remain careful in scrutinizing the factual circumstances behind each case to determine the efficacy of the claims of contending parties. Through the years. I remember that when I returned to the office after the inspection. Petitioner cannot rely on the general rule that insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it. prepares the stipulations in the contract. were presumed to have assented to the assailed documents with full knowledge. xxx Q. de Leon your basis. or construed liberally in favor of the insured.A. viz: DIRECT EXAMINATION OF LEOPOLDO MANTOHAC[36] TSN. if any. who were acute businessmen of experience.[35] the parties.[31] A contract of adhesion is one wherein a party.[32] Consequently. We cannot apply the general rule on contracts of adhesion to the case at bar. a direct participant in securing the insurance policy of petitioner. National Merchandising Corporation. and secondly. In sum. for stating that except for the swimming pools all affected items have no coverage for earthquake shock? xxx A. Petitioner cannot claim it did not know the provisions of the policy. Then. Leopoldo Mantohac. From the inception of the policy. Thus. the courts have held that in these type of contracts. and I relayed to him what I had found out in the policy and he confirmed to me indeed only Item 3 which were the two swimming pools have coverage for earthquake shock. then enclosed in parenthesis (against the peril[s] of earthquake shock only). these contracts are viewed as traps for the weaker party whom the courts of justice must protect.. 47. 206-4568061-9. p.[37] IN VIEW WHEREOF. . 20-21 Q. I told him that I will agree to that renewal of this policy under Philippine Charter Insurance Corporation as long as it will follow the same or exact provisions of the previous insurance policy we had with American Home Assurance Corporation. [7] Id. we cannot apply the "fine print" or "contract of adhesion" rule in this case as the parties intent to limit the coverage of the policy to the two swimming pools only is not ambiguous. Sr. It is true that there was variance in some terms.. Tinga. but the principal provisions of the policy remained essentially similar to AHAC-AIUs policy. Callejo. p. copied AIU Policy No. What steps did you take? A. JJ. [8] Id... SO ORDERED. 44-48. pp. Consequently. p.pp. 50. Engineering and Allied Claims Division. pp. Respondent. 31944. sir. Witness to ensure that the provisions which you wanted in the American Home Insurance policy are to be incorporated in the PCIC policy? A. 50. Jr. 2064568061-9 in drafting its Insurance Policy No. Q. Did you take any step Mr. [3] Original Records. and Chico-Nazario. When I examined the policy of the Philippine Charter Insurance Corporation I specifically told him that the policy and wordings shall be copied from the AIU Policy No. Did you indicate to Atty. [1] The decision was penned by Justice Jose L. of the 10th Division of the Court of Appeals. Austria-Martinez. [5] Original Records. Yes. in compliance with the condition set by the petitioner. [2] Rollo. sir. 10-12.. p. the judgment of the Court of Appeals is affirmed. No costs. Sabio. specifically in the replacement cost endorsement. concur. The petition for certiorari is dismissed. Q. 49. Omlas (sic) what kind of policy you would want for those facilities in Agoo Playa? A.. [6] Original Records. [4] Vice-President for the Fire. Yes. Court of Appeals. 17. [14] CA Rollo. [28] De Leon. 28-42. 184-186. [26] [27] 43 Am. 6-7. 71. p. Philamcare Health Systems. Court of Appeals. pp. 196 SCRA 536 (1991). [17] Rollo. Sun Insurance Office. [15] CA Rollo. 1-7. The underwriter for Phil-American Insurance Corporation (formerly AIU) who reviewed the Agoo Playa Resort insurance policies. Ltd. Court of Appeals. (1986). Ruiz v. [31] [32] Philippine National Bank v. vol. Inc. Court of Appeals. Hector S. pp. p.[9] Id. p.. Sheriff of Manila. cited in Agbayani. [29] Exhibits I and I-2. Verendia v. [18] Rollo. 1-2. 400-401. [33] . p. 42. [23] Rollo. New Life Enterprises v. p. 50-54. 402.. p. 217 SCRA 417 (1993). pp. 68. Verendia v. 211 SCRA 554 (1992). Stolt-Nielsen Philippines. Inc. pp.. 194. 207 SCRA 669 (1992). The Insurance Code of the Philippines (1992). Jur. Commercial Laws of the Philippines. v. 187 SCRA 652 (1990).. [10] Id. Court of Appeals. 6. 2. [13] Original Records. [11] Id. 217 SCRA 417 (1993). 379 SCRA 356 (2002). p. v. 348-395. [30] Western Guaranty Corporation v. 2d 878. 34 SCRA 83 (1970). 184 SCRA 682 (1990). [12] Original Records. pp. pp. [22] Original Records. Court of Appeals. p. [21] Original Records. p. Court of Appeals. pp. 17. [16] Rollo. 408-409.. pp. [25] See Vance. 70. [19] Exhibit 9. [24] Original Records. [20] Original Records. National Union Fire Insurance Company of Pittsburg v. pp. No.: The Case Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26. v. 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. J. [34] [35] 40 SCRA 624 (1971). Under the policy. 209 SCRA 67 (1992).R. BPI Credit Corporation v. Testimony of the vice president for corporate affairs and corporate secretary of petitioner. CV No. P-19202 with petitioner Eternal Gardens Memorial Park Corporation (Eternal). The amount of insurance coverage depended upon the existing balance of the purchased burial lots. renewable on a yearly basis. Court of Appeals. September 23. 83 SCRA 361 (1978).Pan American World Airways. 204 SCRA 601 (1991). Tan v. the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. Inc. 2008 ETERNAL GARDENS MEMORIAL PARK CORPORATION. [36] [37] Sweet Lines. 229 SCRA 60 (1994). 57810 is the query: May the inaction of the insurer on the insurance application be considered as approval of the application? The Facts On December 10. Rapadas. TSN. petitioner. Court of Appeals. is . vs. respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. The policy was to be effective for a period of one year. Teves. JR. Inc. 1991. The relevant provisions of the policy are: ELIGIBILITY. 166245 April 9. Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age. DECISION VELASCO. Serra v. Republic of the Philippines SUPREME COURT Baguio City SECOND DIVISION G. v. 174 SCRA 403 (1989). 1980.. Court of Appeals. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY. respondent. Any lot purchaser who is more than 55 years of age. One of those included in the list as "new business" was a certain John Chuang. The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100. 2. However. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy.000. However. His balance of payments was PhP 100. 19845 to Philamlife. LIFE INSURANCE BENEFIT. Attached to the claim were the following documents: (1) Chuang’s Certificate of Death. 1984. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following: 1.4 containing a list of insurable balances of its lot buyers for October 1982. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. Chuang. Philamlife wrote Eternal a letter on November 12. Chuang died.indebted to the Assured for the unpaid balance of his loan with the Assured. Eternal complied by submitting a letter dated December 29. and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy.00.00.3 Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers. In relation to the instant petition. there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. and the amounts of the respective unpaid balances of all insured lot purchasers. whichever is smaller. (3) Certificate of Claimant. (2) Assured’s Certificate (with form attached). EFFECTIVE DATE OF BENEFIT. In reply. together with a copy of the application of each purchaser. (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen. which served as an insurance claim for Chuang’s death. .000. 6 requiring Eternal to submit the following documents relative to its insurance claim for Chuang’s death: (1) Certificate of Claimant (with form attached). and (4) Statement of Account showing the unpaid balance of Chuang before his death. a declaration of good health shall be required for all Lot Purchasers as part of the application. EVIDENCE OF INSURABILITY.000. Eternal sent a letter dated August 20. Any amount of insurance in excess of P50.000. and (5) Assured’s Certificate. while still living. No medical examination shall be required for amounts of insurance up to P50. (3) Application for Insurance accomplished and signed by the insured. (4) Certificate of Attending Physician. On August 2. 1982. 1984.00. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100. prior to his death." We cite further the provision on Effective Date of Coverage under the policy which states that "there shall be no insurance if the application is not approved by the Company. 1984. John Uy Chuang was not covered under the Policy. The trial court decided in favor of Eternal. 1984.00. representing the proceeds of the Policy of John Uy Chuang.000 on April 25. after his death.00 each. We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was therefore aware of these pertinent provisions. ordering the Defendant PHILAMLIFE. return all the premiums which have been paid in behalf of John Uy Chuang. to pay the sum of P10.00 as attorney’s fees. No application for Group Insurance was submitted in our office prior to his death on August 2. Philamlife had not furnished Eternal with any reply to the latter’s insurance claim. In accordance with our Creditor’s Group Life Policy No. for our approval but was submitted instead on November 15. judgment is hereby rendered in favor of Plaintiff ETERNAL." 10 It further ruled that due to Philamlife’s inaction from the submission of the requirements of the group insurance . After more than a year. Mr. under Evidence of Insurability provision. 1986. stating.Eternal transmitted the required documents through a letter dated November 14. "a declaration of good health shall be required for all Lot Purchasers as party of the application. to pay the sum of P100. We will however. among others: "Encl: Phil-Am Life Insurance Application Forms & Cert. until fully paid." Since no application had been submitted by the Insured/Assured. The RTC found that Eternal submitted Chuang’s application for insurance which he accomplished before his death.000.9 a portion of which reads: The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100. the dispositive portion of which reads: WHEREFORE. against Defendant PHILAMLIFE. Consequently. Philamlife denied Eternal’s insurance claim in a letter dated May 20. premises considered. plus legal rate of interest. 1984.000. as testified to by Eternal’s witness and evidenced by the letter dated December 29. 1984. 14736. 7 which was received by Philamlife on November 15.8 In response to Eternal’s demand. these do not connote our approval per se of the insurance coverage but are held by us in trust for the payor until the prerequisites for insurance coverage shall have been met. With regard to our acceptance of premiums. P-1920. docketed as Civil Case No. and. SO ORDERED.000. 1986. 1982. Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife. No costs. 57810 is REVERSED and SET ASIDE. (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent. this Court is not a trier of facts and will not re-examine factual issues raised before the CA and first level courts. as enunciated in Sampayan v. (8) when the findings are conclusions without citation of specific evidence on which they are based. once proof of death is submitted. Reversing and setting aside the Decision of the Regional Trial Court dated May 29. (2) when the inference made is manifestly mistaken. The application for insurance was not duly submitted to respondent PhilamLife before the death of John Chuang. Court of Appeals: (1) when the findings are grounded entirely on speculation. absurd or impossible.on December 29. 1982. (4) when the judgment is based on a misapprehension of facts. SO ORDERED. Chuang was not covered by Philamlife’s insurance. (3) when there is grave abuse of discretion. in holding that: I. (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record. 1982 to Chuang’s death on August 2. such rule is subject to exceptions. and the complaint is DISMISSED. we have this petition with the following grounds: The Honorable Court of Appeals has decided a question of substance. which ruled. The Court’s Ruling As a general rule. surmises or conjectures. or has decided it in a way not in accord with law or with the applicable jurisprudence. (5) when the findings of facts are conflicting. and (11) when the Court of . (7) when the findings [of the CA] are contrary to the trial court. as well as Philamlife’s acceptance of the premiums during the same period.11 The CA based its Decision on the factual finding that Chuang’s application was not enclosed in Eternal’s letter dated December 29. 1996. not therefore determined by this Honorable Court. Thus. However. It further ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance Code. payment must follow. The RTC said that since the contract is a group life insurance. and III. (6) when in making its findings the [CA] went beyond the issues of the case. Philamlife was deemed to have approved Chuang’s application. II. there being no application form. the CA concluded. or its findings are contrary to the admissions of both the appellant and the appellee. considering their findings of facts are conclusive and binding on this Court. 1984. the decision of the Regional Trial Court of Makati in Civil Case No. thus: WHEREFORE. Philamlife appealed to the CA. Hence. There was no valid insurance coverage. Such receipt is an admission by Philamlife against its own interest." were enclosed in the letter that was apparently received by Philamlife on January 15. Philamlife’s allegation that Eternal’s witnesses ran out of credibility and reliability due to inconsistencies is groundless. On the other hand. Eternal alleged that it provided a copy of the insurance application which was signed by Chuang himself and executed before his death. Eternal added it was noted at the bottom of said letter that the corresponding "Phil-Am Life Insurance Application Forms & Cert. Philamlife failed to do so. would justify a different conclusion. misapprehended. Findings of the trial court on such matters are binding and conclusive on the appellate court. if considered. 1982. if properly considered. In Eternal’s letter dated December 29. it was Philamlife’s bounden duty to make sure that before a transmittal letter is stamped as received. thus. including Chuang in the list of new businesses. The fact of the matter is. states that the insurance forms for the attached list of burial lot buyers were attached to the letter. Philamlife is deemed to have received Chuang’s insurance application.Appeals manifestly overlooked certain relevant facts not disputed by the parties. Eternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance application of Chuang before his death.14 that. and attitude. the contents of the letter are correct and accounted for. 1983. Finally. the factual findings of the RTC were reversed by the CA. thus. Philamlife claims that the evidence presented by Eternal is insufficient. this Court may review them. The evidence on record supports Eternal’s position. which must prove that the letter did not contain Chuang’s insurance application. arguing that Eternal must present evidence showing that Philamlife received a copy of Chuang’s insurance application.) In the instant case. the letter dated December 29. To reiterate. because it has the opportunity to observe firsthand the witnesses’ demeanor. which Philamlife stamped as received. might affect the result of the case. 13 The burden of evidence has shifted to Philamlife.15 An examination of the testimonies of the witnesses mentioned by Philamlife. which.12 (Emphasis supplied. However. or misinterpreted. 1982. The trial court is in the best position to determine the reliability and credibility of the witnesses. conduct. reveals no overlooked facts of substance and value. Philamlife primarily claims that Eternal did not even know where the original insurance application of . unless some facts or circumstances of weight and substance have been overlooked. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. however. a list of insurable interests of buyers for October 1982 was attached. Arevalo: Q Where is the original of the application form which is required in case of new coverage? [Mendoza:] A It is [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the marketing department of Eternal Gardens. but believed that the application was transmitted to Philamlife as an attachment to a transmittal letter. Miranda: We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not [ask] for the number of copy.17 We reiterated the above ruling in Merencillo v. the witness admitted not knowing where the original insurance application was. these are minor inconsistencies that do not affect the credibility of the witnesses. People: Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecution’s evidence as a whole or reflect on the witnesses’ honesty. Atty.Chuang was.16 In other words. we ruled in People v. and these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed. Atty. Thus. As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form. Paredes that minor inconsistencies are too trivial to affect the credibility of witnesses.18 . The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and substantially coincide with each other so as to make a consistent and coherent whole. Arevalo: Q Where is the original? [Mendoza:] A As far as I remember I do not know where the original but when I submitted with that payment together with the new clients all the originals I see to it before I sign the transmittal letter the originals are attached therein. as shown by the testimony of Edilberto Mendoza: Atty. the question arises as to whether Philamlife assumed the risk of loss without approving the application. the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternal’s witnesses. Inc.In the present case. This question must be answered in the affirmative. we reiterated the above ruling. An examination of the above provision would show ambiguity between its two sentences. Thus. P-1920 dated December 10. However. neither is whether the insurance application presented by Eternal has been falsified. it should be construed liberally in favor of the insured and strictly against the insurer. stating that: When the terms of insurance contract contain limitations on liability. in Malayan Insurance Corporation v. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. 1980. v. Court of Appeals. As earlier stated. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective.19 (Emphasis supplied. courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. Being a contract of adhesion. In the policy. However.) In the more recent case of Philamcare Health Systems. where the contract or policy is prepared by the insurer. the number of copies of the insurance application that Chuang executed is not at issue. this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured. being a contract of adhesion. there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. the insurer. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest. A contract of insurance. any ambiguity therein should be resolved against the insurer. Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. par excellence. the terms of an insurance contract are to be construed strictly against the party which prepared the contract. in other words. it is provided that: EFFECTIVE DATE OF BENEFIT. ambiguity must be . Thus. Court of Appeals. 1996 Decision of the Makati City RTC. The May 29. and binding until terminated by Philamlife by disapproving the insurance application. The termination of the insurance contract by the insurer must be explicit and unambiguous.000 representing the proceeds of the Life Insurance Policy of Chuang. in order to protect the interest of insurance applicants.R. or otherwise be bound to honor the application as a valid. confusing if at all understandable to laypersons. CV No. insurance companies must be obligated to act with haste upon insurance applications. Moreover. and . More often than not. the vague contractual provision. As such. we GRANT the petition. 1996. insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Philamlife is hereby ORDERED: (1) To pay Eternal the amount of PhP 100. that are imposed on those who wish to avail of insurance. an insurance contract covering the lot purchaser is created and the same is effective. 1996 RTC Decision on June 17. 2004 CA Decision in CA-G. especially to avoid forfeiture. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. (3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100. it cannot be interpreted as a termination of the insurance contract. P-1920 dated December 10.000 from June 17. As a final note. and effective insurance contract.20 Clearly. Branch 138 is MODIFIED. Hence. binding. (2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100. insurance contracts are contracts of adhesion containing technical terms and conditions of the industry. On the other hand.21 WHEREFORE. valid. the mere inaction of the insurer on the insurance application must not work to prejudice the insured. to characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best.000 from the time of extra-judicial demand by Eternal until Philamlife’s receipt of the May 29. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage.strictly interpreted against the insurer and liberally in favor of the insured. 57810 is REVERSED and SET ASIDE. 1980. The November 26. in Creditor Group Life Policy No. the seemingly conflicting provisions must be harmonized to mean that upon a party’s purchase of a memorial lot on installment from Eternal. to either deny or approve the same. 1996 until full payment of this award. must be construed in favor of the insured and in favor of the effectivity of the insurance contract. The second sentence of Creditor Group Life Policy No. (4) To pay Eternal attorney’s fees in the amount of PhP 10. at 58. at 164. 5 Id. 8. SO ORDERED. 228-229. 43. 7 Id. Carpio-Morales. 517 SCRA 579. Footnotes * Additional member as per February 6. at 139. 142369-70. 368 SCRA 102. April 13. 18 G. 156360. 307 SCRA 93. pp. 254. p. 26. No. at 165. 119599. 2007. G. March 6. 588. Brion. Chico-Nazario*. 102.R. Sec. 1997. 1990. October 23. pp. 17 G. Tinga. 12 G.R. Oliquino. 6 Id. 108. 10 Rollo. 2008 raffle. Buzon (Chairperson) and Mario L. 15 People v. January 14. . September 13. No. Acting Chairperson. 521 SCRA 31. at 162. 2 Records. at 160. 45-54. 9 Id. No costs. 136105. 2005. Nos.R. May 12. No.000. 2001. Penned by Associate Justice Santiago Javier Ranada and concurred in by Associate Justices Marina L.R. 1 Rollo. at 54. 14 People v.. 16 TSN. No. 19 G. Rule 130. 13 Rules of Court. 44. G. Guariña III. 4 Id. p. 57-62. 11 Id. 128147. Jaberto. 448 SCRA 220. 1999. 8 Id. 270 SCRA 242. at 163. concur. 171314. 3 Id. JJ. 2007.R.R. No. March 20. DECISION DEL CASTILLO. CV No. 5 as her beneficiary. indiscriminately soliciting and accepting insurance business from any Tom. Insurance Law – A Guide to Fundamental Principles. CRESENCIA P.7 when the insurance policy had been in force for more than two years and seven . they will be obligated to honor claims on the policies they issue. I. 62286 and its November 9. 175666 July 29. 2013 MANILA BANKERS LIFE INSURANCE CORPORATION. If they do not. Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance Corporation (Bankers Life).6 On April 10. Petitioner issued Insurance Policy No. 125678. after the requisite medical examination and payment of the insurance premium.20 G. 2006 Resolution 3 denying the petitioner’s Motion for Reconsideration.4 Factual Antecedents On July 3. 747411 (the policy). designating respondent Cresencia P. 1993. 366. J.00. 1993. No. Keeton & A. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 2002. No. concealment or misrepresentation. 379 SCRA 356. with a face value of P100.: The ultimate aim of Section 48 of the Insurance Code is to compel insurers to solicit business from or provide insurance coverage only to legitimate and bona fide clients. her niece. Dick and Harry. Petitioner. Respondent. The law assumes that they will do just that and not sit on their laurels. Legal Doctrines and Commercial Practices 77-78. 2005 Decision2 of the Court of Appeals' (CA) in CA-G. by requiring them to thoroughly investigate those they insure within two years from effectivity of the policy and while the insured is still alive. 21 R. vs. Assailed in this Petition for Review on Certiorari 1 are the September 28. E. Widiss.R. ABAN. in Sotero’s favor on August 30.000.R. 1996.R. regardless of fraud. Aban (Aban). March 18. the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy No. ABAN’s Motion to Dismiss is hereby granted. defendant CRESENCIA P. Respondent filed a claim for the insurance proceeds on July 9. the trial court issued an Order17 granting respondent’s Motion to Dismiss. Sotero did not personally apply for insurance coverage. 747411. concealment and/or misrepresentation under the Insurance Code. petitioner filed a civil case for rescission and/or annulment of the policy. 1997. and x x x designated herself as the beneficiary. The main thesis of the Complaint was that the policy was obtained by fraud.months. 2. Dindo Aban.12 which thus renders it voidable under Article 139013 of the Civil Code. During the proceedings on the Motion to Dismiss. thus: WHEREFORE. 1993 application for insurance. petitioner denied respondent’s claim on April 16. 97-867 is hereby dismissed. Petitioner conducted an investigation into the claim.11 On April 24. 3. Sotero died.10 For the above reasons. as she was illiterate.8 and came out with the following findings: 1. 1996. . 4. 1997 and refunded the premiums paid on the policy. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement.9 and 5. petitioner’s investigator testified in court. stating among others that the insurance underwriter who solicited the insurance is a cousin of respondent’s husband. 97-867 and assigned to Branch 134 of the Makati Regional Trial Court.16 Ruling of the Regional Trial Court On December 9. which provides as follows: Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter. Sotero was sickly since 1990. Respondent filed a Motion to Dismiss14 claiming that petitioner’s cause of action was barred by prescription pursuant to Section 48 of the Insurance Code. Sotero did not sign the July 3. such right must be exercised previous to the commencement of an action on the contract. 1997.15 and that it was the respondent who paid the annual premiums on the policy. Civil Case No. Respondent was the one who filed the insurance application. which was docketed as Civil Case No. 2006 Resolution.21 but the CA denied the same in its November 9. It ratiocinated that petitioner was equipped with ample means to determine. Petitioner questioned the dismissal of Civil Case No. Applying Section 48 to petitioner’s case. It contended that since it was respondent – and not Sotero – who obtained the insurance. Issues Petitioner raises the following issues for resolution: I WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE ORDER OF THE TRIAL COURT DISMISSING THE COMPLAINT ON THE GROUND OF PRESCRIPTION IN CONTRAVENTION (OF) PERTINENT LAWS AND APPLICABLE . 62286. the policy issued was rendered void ab initio for want of insurable interest. since the policy had been in force for more than two years. petitioner is now barred from contesting the same or seeking a rescission or annulment thereof. Petitioner moved for reconsideration. the trial court found that Sotero. docketed as CA-G. arguing that the trial court erred in applying Section 48 and declaring that prescription has set in. the trial court stood its ground.22 Hence. CV No. thus. If it failed to do so within the statutory two-year period. 2005. within the first two years of the policy. but in another Order 19 dated October 20.R. Ruling of the Court of Appeals On September 28. Petitioner interposed an appeal with the CA. 1998. the instant appeal is DISMISSED for lack of merit. and not respondent. whether fraud.20 The CA thus sustained the trial court. SO ORDERED. It held further that under Section 48.SO ORDERED. the CA issued the assailed Decision. petitioner had only two years from the effectivity of the policy to question the same.18 In dismissing the case. the present Petition. Petitioner moved for reconsideration. 97-867. concealment or misrepresentation was present when the insurance coverage was obtained. was the one who procured the insurance. in the light of all the foregoing. then the insured must be protected and allowed to claim upon the policy. the CA held that petitioner may no longer prove that the subject policy was void ab initio or rescindible by reason of fraudulent concealment or misrepresentation after the lapse of more than two years from its issuance. which contained the following decretal portion: WHEREFORE. Sotero could legally take out insurance on her own life and validly designate – as she did – respondent as the beneficiary. II WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING THE APPLICATION OF THE INCONTESTABILITY PROVISION IN THE INSURANCE CODE BY THE TRIAL COURT. She adds that petitioner’s new allegation in its Petition that the policy is void ab initio merits no attention. as it appeared that Sotero did not actually apply for insurance coverage. posing as Sotero and fraudulently obtaining insurance in the latter’s name without her knowledge and consent.JURISPRUDENCE. and could validly designate anyone as her beneficiary. Petitioner adds that Insurance Policy No. On the issue of insurable interest. insurable interest was present. having failed to raise the same below. 747411 was void ab initio and could not have given rise to rights and obligations. petitioner argues in its Petition and Reply 24 that Section 48 cannot apply to a case where the beneficiary under the insurance contract posed as the insured and obtained the policy under fraudulent circumstances. essentially argues in her Comment26 that the CA is correct in applying Section 48. It adds that respondent. who was merely Sotero’s niece.25 Respondent’s Arguments Respondent. as it had claimed originally that the policy was merely voidable. Our Ruling .23 Petitioner’s Arguments In praying that the CA Decision be reversed and that the case be remanded to the trial court for the conduct of further proceedings. respondent echoes the CA’s pronouncement that since it was Sotero who obtained the insurance. sickly. III WHETHER THE COURT OF APPEALS ERRED IN DENYING PETITIONER’S MOTION FOR RECONSIDERATION. Relying on the results of the investigation that it conducted after the claim for the insurance proceeds was filed. Sotero had insurable interest in her own life. petitioner insists that respondent’s claim was spurious. Respondent submits that the CA’s findings of fact leading to such conclusion should be respected. as such. was unlettered. had no insurable interest in the life of her aunt. on the other hand. Under Section 10 of the Insurance Code. and had no visible source of income to pay for the insurance premiums. and that respondent was an impostor. the action for the declaration of its nullity or inexistence does not prescribe. Section 48 regulates both the actions of the insurers and prospective takers of life insurance. the insurer must make good on the policy. are at once belied by the trial and appellate courts’ finding that Sotero herself took out the insurance for herself. Both courts are in accord in this respect. Under the provision. concealment. as it regulates the actions of both the insurer and the insured. This finding of fact binds the Court. The Court will not depart from the trial and appellate courts’ finding that it was Sotero who obtained the insurance for herself. Moreover. as will be discussed at length below. but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized. on the other hand. After the two-year period lapses. this claim is no longer feasible in the wake of the courts’ finding that it was Sotero who obtained the insurance for herself. which are predicated on respondent’s alleged posing as Sotero and forgery of her signature in the insurance application. and attempts at unduly denying a claim would be struck down. or misrepresentation. who obtained the insurance. or misrepresentation by insurers. or when the insured dies within the period. for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general. Section 48 serves a noble purpose. concealment. legitimate policy holders are absolutely protected from unwarranted denial of their claims or delay in the collection of insurance proceeds occasioned by allegations of fraud. and the Court is loath to disturb this. With the above crucial finding of fact – that it was Sotero who obtained the insurance for herself – petitioner’s case is severely weakened. This is not to say that insurance fraud must be rewarded. While petitioner insists that its independent investigation on the claim reveals that it was respondent. At the same time. Life insurance policies that pass the statutory two- . it forewarns scheming individuals that their attempts at insurance fraud would be timely uncovered – thus deterring them from venturing into such nefarious enterprise. posing as Sotero. claims which may no longer be set up after the two-year period expires as ordained under the law. designating respondent as her beneficiary. or misrepresentation. if not totally disproved. Allegations of fraud. the results and conclusions arrived at during the investigation conducted unilaterally by petitioner after the claim was filed may simply be dismissed as self-serving and may not form the basis of a cause of action given the existence and application of Section 48. the self-regulating feature of Section 48 lies in the fact that both the insurer and the insured are given the assurance that any dishonest scheme to obtain life insurance would be exposed."27 In the absence of proof of such fraudulent intent. even though the policy was obtained by fraud. Thus. an insurer is given two years – from the effectivity of a life insurance contract and while the insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. It gives insurers enough time to inquire whether the policy was obtained by fraud. "Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. no right to rescind arises. concealment.The Court denies the Petition. petitioner collected the premiums and devoted the same to its own profit. no matter how patent or wellfounded. instead of conducting at the first instance an investigation into the circumstances surrounding the issuance of Insurance Policy No. and the individuals who wield them are made secure by the thought that they will be paid promptly upon claim. the insurer cannot prove that the policy is void ab initio or is rescindible by reason of fraudulent concealment or misrepresentation of the insured or his agent. At least two (2) years from the issuance of the policy or its last reinstatement. such as what obtains in the instant case. will no longer lie. In this manner. Section 48 prevents a situation where the insurer knowingly continues to accept annual premium payments on life insurance. 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. Section 48 must be applied to it with full force and effect. petitioner appears to have turned a blind eye and opted instead to continue collecting the premiums on the policy. Section 48 contributes to the stability of the insurance industry. only to raise the issue of fraudulent concealment or misrepresentation when the insured dies in order to defeat the right of the beneficiary to recover under the policy. the defenses of concealment or misrepresentation. The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period of only two (2) years from the issuance of the policy or its last reinstatement. from the date of the last reinstatement. Thus. The Court therefore agrees fully with the appellate court’s pronouncement that – the "incontestability clause" is a provision in law that after a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from the date of its issue or of its last reinstatement. The provision also makes clear when the two-year period should commence in case the policy should lapse and is reinstated. It is not fair for the insurer to collect the premiums as long as the insured is still alive. The phrase "during . For nearly three years. only to later on deny a claim on the policy on specious claims of fraudulent concealment and misrepresentation.year period are essentially treated as legitimate and beyond question. It cannot now deny the claim when it is called to account. The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation within a period of two (2) years. After two years. 747411 which would have timely exposed the supposed flaws and irregularities attending it as it now professes. that is. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. the beneficiary is given the stability to recover under the policy when the insured dies. generating profits and returns therefrom for their own benefit. If they could not properly screen their agents or salesmen before taking them in to market their products. and not after claims for insurance proceeds are filed with them. therefore. herein defendant-appellee. The business of insurance is a highly regulated commercial activity in the country. barred from proving that the policy is void ab initio by reason of the insured’s fraudulent concealment or misrepresentation or want of insurable interest on the part of the beneficiary. they benefit from collecting the interest and/or returns on both the premiums previously paid by the insured and the insurance proceeds which should otherwise go to their beneficiaries. then petitioner would have discovered the scheme earlier if it had in earnest conducted an investigation into the circumstances surrounding the Sotero policy. 29 and is imbued with public interest. and thus insinuates that both connived to commit insurance fraud. happens to be the cousin of respondent’s husband. the insured died on April 10. 1997. then they should cease doing business. The plaintiff-appellant failed to discharge that burden.28 Petitioner claims that its insurance agent. its case precisely provides the strong argument for requiring insurers to diligently conduct investigations on each policy they issue within the two-year period mandated under Section 48.30 "An insurance contract is a contract of adhesion which must be . the Court cannot sympathize with its plight. naturally it was unable to detect the scheme. For its negligence and inaction. insurers cannot be allowed to collect premiums on insurance policies. who solicited the Sotero account. The insurance policy was thus in force for a period of 3 years. use these amounts collected and invest the same through the years. If this were truly the case. Considering that the insured died after the two-year period. In the meantime. Otherwise said. 1996. This is exactly one of the schemes which Section 48 aims to prevent." As borne by the records. if insurers cannot vouch for the integrity and honesty of their insurance agents/salesmen and the insurance policies they issue. hoping that the inevitable may be put off for years – or even decades – by the pendency of these unnecessary court cases. Besides. Insurers may not be allowed to delay the payment of claims by filing frivolous cases in court. Well-settled is the rule that it is the plaintiff-appellant’s burden to show that the factual findings of the trial court are not based on substantial evidence or that its conclusions are contrary to applicable law and jurisprudence. then they have only themselves to blame. and 24 days. and thereafter conveniently deny insurance claims by questioning the authority or integrity of their own agents or the insurance policies they issued to their premium-paying clients. and the claim was denied on April 16.the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. But because it did not and it investigated the Sotero account only after a claim was filed thereon more than two years later. or if they do not thoroughly investigate the insurance contracts they enter into with their clients. 7 months. Instead. the plaintiffappellant is. the policy was issued on August 30. 1993. The key phrase in the second paragraph of Section 48 is "for a period of two years. penned by Associate Justice Amelita G. 38-47. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. 2005 Decision and the November 9.E. ANTONIO T. A. DEL CASTILLO Associate Justice WE CONCUR: ANTONIO T. MARIANO C. Article VIII of the Constitution and the Division Chairperson's Attestation. Veloso. CV No. the Petition is DENIED. 62286 are AFFIRMED.R. 3-14. pp. SO ORDERED. penned by Associate Justice Amelita G. Pine and Vicente S. MARIA LOURDES P. CARPIO Associate Justice Chairperson ARTURO D. CARPIO Associate Justice Chairperson C E R T I F I CAT I O N Pursuant to Section 13.construed liberally in favor of the insured and strictly against the insurer in order to safeguard the former’s interest. BRION JOSE PORTUGAL PEREZ Associate Justice Associate Justice ESTELA M. 3 Id. at 59-60. 2 CA rollo. SERENO Chief Justice Footnotes 1 Rollo. Tolentino and concurred in by Associate Justices Danilo B. Tolentino and concurred in by Associate . 2006 Resolution of the Court of Appeals in CA-G. pp."31 WHEREFORE. PERLAS-BERNABE Associate Justice ATT E S TAT I O N I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. The assailed September 28. records. 46.E. 5 Rollo. Maambong and Vicente S. at 59-60. even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract. 7. The following contracts are voidable or annullable. 19-22. 18 Id. unless they are annulled by a proper action in court. 16 Id. at 48-56. Veloso. 23 Rollo. at 15. undue influence or fraud. 95-96. 1998. 1390. 9. id. 6. Capulong. at 116-119. 16. 6 Id. These contracts are binding. (2) Those where the consent is vitiated by mistake. penned by Judge Ignacio M. at 48-56. p. 19 Id. p.Justices Regalado E. p. p. intimidation. 15 TSN. 12-13. 20 CA rollo. 2. 23. 11 Id. at 98. at 7. 22 Id. They are susceptible of ratification. . 14 Records. pp. 8 Rollo. May 5. 13 Art. 9 Id. at 56. 71. violence. p. at 6-7. 21 Id. 7 Records. pp. 4 Id. 10 Records. 12 Presidential Decree No. pp. 612. p. pp. 55-56. 17 Records. 76399 January 22. No. April 9. v. 502 Phil. INC. Court of Appeals. White Gold Marine Services.). 13. 26 Rollo. No. 142. 2010.R. 30 Republic v. pp. 75. vs. 25 Citing Article 1410 of the Civil Code: Art. Co. Inc. G. 27 Great Pacific Life Assurance Corporation v. Inc. 60 (2006). for Fidelity & Surety. June 29. vs. at 69-75. 692. RAFAEL VERENDIA and THE COURT OF APPEALS. Sabino Padilla. 551 SCRA 1. Pioneer Insurance & Surety Corporation. G. 167622. respondents. The action or defense for the declaration of the inexistence of a contract does not prescribe. 152 (1999). Jr.. pp. Philippine American Life Insurance Company. 31 Eternal Gardens Memorial Park Corporation v. 166245. COURT OF APPEALS and FIDELITY & SURETY CO. 1993 RAFAEL (REX) VERENDIA. 535 Phil. G. Inc. 622 SCRA 58. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. 700 (2005).24 Id. 1410. OF THE PHILIPPINES.L. respondents. B. No.. The Manufacturers Life Insurance Company (Phils. Padilla for petitioner.R. 28 CA rollo. Del Monte Motors. 29 Tongko v..R. 375 Phil. . petitioner. 53. 44-46. No. 75605 January 22. 2008. 1993 FIDELITY & SURETY CO. 57-67. petitioner. OF THE PHILIPPINES.R. ). In sustaining the defenses set up by Fidelity. 14. Rizal in the amount of P385. Fidelity was accordingly informed of the loss and despite demands. and The Development Insurance for P400. .000. (CA-G. the trial court rendered a decision. among other things.R. refused payment under its policy.: The two consolidated cases involved herein stemmed from the issuance by Fidelity and Surety Insurance Company of the Philippines (Fidelity for short) of its Fire Insurance Policy No. PDB-80-1913 expiring on May 12. Designated as beneficiary was the Monte de Piedad & Savings Bank. F-48867 expiring on June 30. a motion for extension of 3 days within which to file a motion for reconsideration. 1986. 1983. the trial court ruled that Paragraph 3 of the policy was also violated by Verendia in that the insured failed to inform Fidelity of his other insurance coverages with Country Bankers Insurance and Development Insurance. averred that the policy was avoided by reason of over-insurance. Bartolome. Fidelity filed on April 21. and Ejercito (P). Record). the appellate court reversed for the following reasons: (a) there was no misrepresentation concerning the lease for the contract was signed by Marcelo Garcia in the name of Roberto Garcia. F18876 effective between June 23. 32-33. but Fidelity had in the meantime filed its motion for reconsideration on April 24. The complaint was later amended to include Monte de Piedad as an "unwilling defendant" (P. 1980 and June 23.).00 under Policy No. Ortiz. 16. when actually it was a Marcelo Garcia who was the lessee. Antipolo. 1986.MELO. Coquia. The motion for extension was granted by the appellate court on April 30. 1980. 75605). the insured property was completely destroyed by fire on the early morning of December 28. CV No. Rollo of G. plus attorney's fees and litigation expenses. Rollo of G.R.). Answering the complaint. The motion for extension was not filed on April 19. Verendia also insured the same building with two other companies. legal interest thereon. ruling in favor of Fidelity.000. No. 1980 to a certain Roberto Garcia. Fidelity received a copy of the appellate court's decision on April 4. 15. 1981 covering Rafael (Rex) Verendia's residential building located at Tulip Drive.. praying for payment of P385. J.00 under Policy No. Verendia appealed to the then Intermediate Appellate Court and in a decision promulgated on March 31. namely.00.000.R. ibid. 1986 (p. per Judge Rodolfo A. 1981. 1986 (p.000. Zosa. JJ. No. Fidelity. 02895. 16. 198l. 1986 which was the 15th day after receipt of the decision because said 15th day was a Saturday and of course. The Country Bankers Insurance for P56. 1986. No. 76399). thus prompting Verendia to file a complaint with the then Court of First Instance of Quezon City.00. While the three fire insurance policies were in force. Beverly Hills. and (b) Paragraph 3 of the policy contract requiring Verendia to give notice to Fidelity of other contracts of insurance was waived by Fidelity as shown by its conduct in attempting to settle the claim of Verendia (pp. ibid. the following day was a Sunday (p. but instead of directly filing a motion for reconsideration within 15 days therefrom. that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25. On May 24. R. magistrates. the petition herein docketed as G. the appellate court denied Fidelity's motion for reconsideration and account thereof. or more specifically on October 21. Before we can even begin to look into the merits of the main case which is the petition for review on certiorari. 76399. although. this Court through Justice Ozaeta already pronounced the doctrine that the pendency of a motion for extension of time to perfect an appeal does not suspend the running of the period sought to be extended (Garcia vs. 1986. To the same effect were the rulings in Gibbs vs. Fernando (4 SCRA 138 [1962]). (at p. As early as 1944. therefore. before anything else. 54. 1986 (p. 1986. of course.R. 1986. and Joe vs. for indeed. ibid. 1986 (p. . inquiry must be made into the issue of whether Fidelity could have legally asked for an extension of the 15-day reglementary period for appealing or for moving for reconsideration.). or after the dictum in Habaluyas had taken effect. 76399) and thereafter given due course. Japson (142 SCRA [1986]). Inc. the filing of the motion for extension came before its formal proscription under Habaluyas. declaring that beginning one month from the promulgation of the resolution on May 30. 30. No. Fidelity filed on March 31. Verendia's motion to expunge the motion for reconsideration was not finally disposed until July 22. inter-related as they are.) and after a motion for reconsideration was similarly brushed aside on July 22. No. The two petitions. 1986. vs. CFI of Manila (80 Phil. Seemingly.Verendia filed a motion to expunge from the record Fidelity's motion for reconsideration on the ground that the motion for extension was filed out of time because the 15th day from receipt of the decision which fell on a Saturday was ignored by Fidelity. the Intermediate Appellate Court has personnel receiving pleadings even on Saturdays. for which reason we now turn our attention to G. 212. 27. 160 [1948]) Bello vs.R. . 76399. ibid . Buenaventura 74 Phil. Reduced to bare essentials. 75605 was initiated. 611 [1944]). so Verendia contended. the motion for extension was filed and granted before June 30. No. we must first determine whether the decision of the appellate court may still be reviewed. held sharply divided opinions on whether the period for appealing which also includes the period for moving to reconsider may be extended.R. the petition for review on certiorari now docketed as G. Stated otherwise. The above cases notwithstanding and because the Rules of Court do not expressly prohibit the filing of a motion for extension of time to file a motion for reconsideration in regard to a final order or judgment.) In the instant case. The motion to expunge was denied on June 17. Subsequently. 1986 — . the rule shall be strictly enforced that no motion for extension of time to file a motion for new trial or reconsideration shall be filed . The matter was not definitely settled until this Court issued its Resolution in Habaluyas Enterprises. or whether the same is beyond further judicial scrutiny. King (20 SCRA 1120 [1967]). Rollo of G. . . including those in the Court of Appeals. were consolidated (p. No. the issues Fidelity raises therein are: (a) whether or not the contract . whom he considered as the real lessee. it was signed by Marcelo Garcia. July 27. and (6) when the Court of Appeals in making its findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee (Ronquillo v. married to Helen Cawinian. it appears that Robert Garcia (or Roberto Garcia) was still within the premises. in submitting the subrogation receipt in evidence. or conjectures. Fidelity had in effect agreed to settle Verendia's claim in the amount stated in said receipt.10). 1981 recommending the denial of Verendia's claim (Exh. the issue of the veracity or falsity of the lease contract could have been better resolved by the appellate court for. Eleuterio M. cousin of Robert. Thus. the building appeared to have "no occupant" and that Mr. (4) when the judgment is premised on a misapprehension of facts. on the strength of these facts. on June 25. The appellate court's findings of fact are. was occupying the building when it was burned (TSN. p. failed to explain why Marcelo had to sign his cousin's name when he in fact was paying for the rent and why he (Verendia) himself. 1 Verging on the factual. According to Verendia. The contract of lease upon which Verendia relies to support his claim for insurance benefits. however. the jurisdiction of this Court is limited to the review of errors of law. Verendia admitted that it was not Robert Garcia who signed the lease contract. Buenviaje of the Antipolo police. In view of the conflicting findings of the trial court and the appellate court on important issues in these consolidated cases and it appearing that the appellate court judgment is based on a misapprehension of facts. surmises. according to the investigation report prepared by Pat. this Court shall review the evidence on record. a couple of days after the effectivity of the insurance policy. mistaken. the adjuster submitted a report dated December 4. "E"). Robert Garcia disappeared after the fire. Robert Garcia then executed an affidavit before the National Intelligence and Security Authority (NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the contract of lease was a complete forgery. or impossible. was entered into between him and one Robert Garcia. therefore. (3) when there is grave abuse of discretion in the appreciation of facts. Roberto Garcia was "renting on the otherside (sic) portion of said compound" (Exh. Verendia. These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia. (5) when the findings of fact are conflicting. in a petition for review on certiorari under Rule 45. the . during the trial. When the rented residential building was razed to the ground on December 28. 1982. who had been paying the rentals all the while. Court of Appeals. It was only on October 9.of lease submitted by Verendia to support his claim on the fire insurance policy constitutes a false declaration which would forfeit his benefits under Section 13 of the policy and (b) whether or not. 1980 (Exh. conclusive upon this Court except in the following cases: (1) when the conclusion is a finding grounded entirely on speculation. "2"). 1980. (2) when the inference made is manifestly absurd. 1981 that an adjuster was able to locate him. "1"). However. Ironically. 195 SCRA 433 [1991]). or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy". citing Perla Compania de Seguros.685. however. 173 SCRA 228 [1989]). Verendia failed to live by the terms of the policy.500 when in fact. an insurance contract is the law between the parties (Pacific Banking Corporation vs. but surely. allowed such a ruse. is proven by the fact that Verendia himself filed the complaint for the full amount of P385. Inc. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract. and created a dead-end for the adjuster by the disappearance of Robert Garcia. Verendia. no representative of Fidelity had signed it. Court of Appeals. by presenting a false lease contract. Its terms and conditions constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery from the insurer (Oriental Assurance Corporation vs. the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy No. Basically a contract of indemnity. supra). the terms of the policy should be strictly construed against the insured. It is even incomplete as the blank spaces for a witness and his address are not filled up. Apostol.00 stated in the policy. Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee".000. Court of Appeals. inflated the value of the property by the alleged monthly rental of P6. to have sufficient bases. Fidelity's conclusions on these proven facts appear. insured the same property with two other insurance companies for a total coverage of around P900. There is also no reason to conclude that by submitting the subrogation receipt as evidence in court. 185 SCRA 741 [1991]). Court of Appeals. Considering.lessor. Court of Appeals 168 SCRA 1 [1988]). vs. he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking Corporation vs. the same receipt states that Verendia had received the aforesaid amount. that all benefits under the policy shall be forfeited "If the claim be in any respect fraudulent. the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40.000. Worse yet. reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith (Velasco vs. the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. More significantly. F-18876.300. or if any false declaration be made or used in support thereof. therefore. Verendia. to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but . However.00. While the said receipt appears to have been a filled-up form of Fidelity. It might be that there had been efforts to settle Verendia's claims. that Verendia had not received the amount stated therein. 187 SCRA 652 [1980]).77. As it is also a contract of adhesion. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it (Western Guaranty Corporation vs. Thus. 200 SCRA 459 [1991]. Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142. Court of Appeals. specifically Section 13 thereof which is expressed in terms that are clear and unambiguous. " FIRST DIVISION [G. give details).R. 1989 to . liver disease.: Ernani Trinos. P010194. 125678. 76399. respondents husband was entitled to avail of hospitalization benefits. he answered no to the following question: Have you or any of your family members ever consulted or been treated for high blood pressure. INC. the amounts to be declared in the event of loss or when required. applied for a health care coverage with petitioner Philamcare Health Systems. preventive health care and other out-patient services. He was also entitled to avail of out-patient benefits such as annual physical examinations. he was issued Health Care Agreement No. No. respondents. It must have likewise realized the futility of assigning it as an error because on the first page of the policy the following is typewritten: "Other insurances allowed. Accordingly. Upon the termination of the agreement. concur. Inc. # Footnotes 1 Fidelity appears to have agreed with the appellate court that it had waived Verendia's failure to abide by policy condition No. Bidin. 1989.. COURT OF APPEALS and JULITA TRINOS. Under the agreement.would be substituting the will of the Court for that of the parties.. JJ.R. heart trouble. the same was extended for another year from March 1. cancer. petitioner. whether ordinary or emergency. DECISION YNARES-SANTIAGO. deceased husband of respondent Julita Trinos.. Gutierrez. WHEREFORE.R. No. No. March 18. Jr. Davide. asthma or peptic ulcer? (If Yes. 75605 is DISMISSED. Jr. listed therein. In the standard application form. 3 on disclosure of other insurance policies by its failure to assign it as an error in the petition in G. diabetes. No. J. vs. 1988 to March 1. 76399 is GRANTED and the decision of the then Intermediate Appellate Court under review is REVERSED and SET ASIDE and that of the trial court is hereby REINSTATED and UPHELD. The petition in G.R. the petition in G.[1] The application was approved for a period of one year from March 1. and Romero. 2002] PHILAMCARE HEALTH SYSTEMS. SO ORDERED. Ernani had fever and was feeling very weak. he was admitted at the Chinese General Hospital.000. Benito Reverente. 90-53795. respondent tried to claim the benefits under the health care agreement. respondent brought her husband home again.00 to plaintiff.000. Respondent was constrained to bring him back to the Chinese General Hospital where he died on the same day. which was docketed as Civil Case No. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. After trial.000. Branch 44.00. 1990. SO ORDERED. 4. ordering: 1. Defendants to pay the reduced amount of moral damages of P10. After her husband was discharged from the MMC. Defendants to pay the reduced amount of P10. Due to financial difficulties.000. According to petitioner. viz: WHEREFORE. unlike in an .00 plus interest. 1990. respondent instituted with the Regional Trial Court of Manila. Later. Petitioner also points out that only medical and hospitalization benefits are given under the agreement without any indemnification.00. the lower court ruled against petitioners. in view of the forgoing.[5] Hence. plus costs of suit. 1990 to June 1. petitioner denied her claim saying that the Health Care Agreement was void. then from March 1. petitioner brought the instant petition for review.March 1. raising the primary argument that a health care agreement is not an insurance contract. However. While her husband was in the hospital. 2. 1990. Petitioner argues that the agreement grants living benefits.000. he was attended by a physical therapist at home. contrary to his answer in the application form. Dr.[3] On appeal. Defendants to pay and reimburse the medical and hospital coverage of the late Ernani Trinos in the amount of P76. She asked for reimbursement of her expenses plus moral damages and attorneys fees. 3.00 per disability. Doctors at the MMC allegedly discovered at the time of Ernanis confinement that he was hypertensive. The amount of coverage was increased to a maximum sum of P75. such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year thereafter.00 as exemplary damages to plaintiff. Thus. the Court of Appeals affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner Reverente. 1990. there was a concealment regarding Ernanis medical history. diabetic and asthmatic.[2] During the period of his coverage. however. On July 24. hence the incontestability clause under the Insurance Code[6] does not apply.000. In the morning of April 13. an action for damages against petitioner and its president. amounting to about P76. Defendants to pay attorneys fees of P20. respondent paid the hospitalization expenses herself.[4] Petitioners motion for reconsideration was denied. the Court renders judgment in favor of the plaintiff Julita Trinos. until the amount is fully paid to plaintiff who paid the same. 1990. and 5. treatment or any other . Moreover. Every person has an insurable interest in the life and health of himself. 3. In the case at bar. whether past or future. 2. which may damnify a person having an insurable interest against him. consultation. injury or other stipulated contingent. of his spouse and of his children. Section 10 provides: Every person has an insurable interest in the life and health: (1) of himself. which is primarily a contract of indemnity. respecting property or service. Petitioner further argues that it is not an insurance company. as the same requires an effectivity period of at least two years. An insurance contract exists where the following elements concur: 1. It appears that in the application for health coverage. petitioners required respondents husband to sign an express authorization for any person. The insured has an insurable interest. (3) of any person under a legal obligation to him for the payment of money. and (4) of any person upon whose life any estate or interest vested in him depends. the health care provider must pay for the same to the extent agreed upon under the contract.insurance contract where the insured is indemnified for his loss. medical or any other expense arising from sickness. which is governed by the Insurance Commission. Petitioner argues that respondents husband concealed a material fact in his application. the insurable interest of respondents husband in obtaining the health care agreement was his own health. since Health Care Agreements are only for a period of one year. as compared to insurance contracts which last longer. The insurer assumes the risk. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk. the insured pays a premium. damage or liability arising from an unknown or contingent event. (2) of any person on whom he depends wholly or in part for education or support. The health care agreement was in the nature of non-life insurance. or in whom he has a pecuniary interest. In consideration of the insurers promise.[9] Once the member incurs hospital. but a Health Maintenance Organization under the authority of the Department of Health. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. 4. Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss. The insured is subject to a risk of loss by the happening of the designated peril.[8] Section 3 of the Insurance Code states that any contingent or unknown event.[7] petitioner argues that the incontestability clause does not apply. may be insured against. of which death or illness might delay or prevent the performance. or entity that has any record or knowledge of my health and/or that of __________ to give to the PhilamCare Health Systems. petitioner additionally required the applicant for authorization to inquire about the applicants medical history. A photographic copy of this authorization shall be as valid as the original. This largely depends on opinion rather than fact. and this is likewise the rule although the statement is material to the risk. since in such case the insurer is not justified in relying upon such statement. if the statement is obviously of the foregoing character.[11] (Underscoring ours) In addition to the above condition. consultation. any and all information relative to any hospitalization. especially coming from respondents husband who was not a medical doctor. belief. opinion. intention. [14] Thus.[10] Specifically. expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members and that the acceptance of any Agreement issued on this application shall be a ratification of any correction in or addition to this application as stated in the space for Home Office Endorsement. or its acceptance at a lower rate of premium. This authorization is in connection with the application for health care coverage only. whether intentional or unintentional. that there shall be no contract of health care coverage unless and until an Agreement is issued on this application and the full Membership Fee according to the mode of payment applied for is actually paid during the lifetime and good health of proposed Members. thus: I hereby authorize any person. Where matters of opinion or judgment are called for. by these presents.[12] (Underscoring ours) Petitioner cannot rely on the stipulation regarding Invalidation of agreement which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination.medical advice or examination. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. treatment or any other medical advice or examination. complete and true and bind all parties in interest under the Agreement herein applied for.[13] The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. the Health Care Agreement signed by respondents husband states: We hereby declare and agree that all statement and answers contained herein and in any addendum annexed to this application are full. that no information acquired by any Representative of PhilamCare shall be binding upon PhilamCare unless set out in writing in the application. a representation of the expectation. (A)lthough false. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. but is obligated to make further inquiry. There is a clear . An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. Inc. that any physician is. organization. In the end. or the impossibility of which is shown by the facts within his knowledge. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. Under Section 27 of the Insurance Code. we quote with approval the following findings of the trial court: (U)nder the title Claim procedures of expenses. 3. must be liberally construed in favor of the subscriber. Must be in writing. as a matter of expectation or belief. In any case. the terms of an insurance contract are to be construed strictly against the party which prepared the contract the insurer.[21] This is equally applicable to Health Care Agreements. had twelve months from the date of issuance of the Agreement within which to contest the membership of . ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. Having assumed a responsibility under the agreement.[17] In this case. When the terms of insurance contract contain limitations on liability.[20] By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. and exclusionary clauses of doubtful import should be strictly construed against the provider. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. to be actually untrue. the defendant Philamcare Health Systems Inc. 4. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted.[18] None of the above pre-conditions was fulfilled in this case.[22] Anent the incontestability of the membership of respondents husband. Besides. such as the one at bar. a concealment entitles the injured party to rescind a contract of insurance. with or without the authority to investigate. that which he then knows. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. 2. no rescission was made.[15] (Underscoring ours) The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. The phraseology used in medical or hospital service contracts. to furnish facts on which cancellation is based. mailed or delivered to the insured at the address shown in the policy. The right to rescind should be exercised previous to the commencement of an action on the contract. petitioner is bound to answer the same to the extent agreed upon. courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Prior notice of cancellation to insured.[16] Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. petitioner is liable for claims made under the contract.[19] Being a contract of adhesion.distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. especially to avoid forfeiture. Bryant v. 2. The periods having expired.J. Commercial Laws of the Philippines. (Chairman). 22-23. 6. Rollo. Modern Woodmen of America.. Davide. [7] Petition. 125 NW 621. Modern Woodmen of America. [8] See Vance pp. Fire Ins. The health care agreement is in the nature of a contract of indemnity. 1996. No. p. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. [14] Bryant v. 694 (1997). [3] Dated November 16.. 28. p. Jr.the patient if he had previous ailment of asthma. Rollo. 1460 otherwise known as the Insurance Code.[24] WHEREFORE.[23] Finally. and Conchita Carpio Morales. Purisima. and Kapunan. [9] Cha v. pp. [6] Section 48 of P. vol. The records adequately prove the expenses incurred by respondent for the deceaseds hospitalization.D. penned by Judge Lolita Gal-lang. [2] Exhibit 4. p. Union Mut. Co. [1] Record. 1995 is AFFIRMED. [10] Record. Rollo. p. 1995. [13] Ibid. SO ORDERED. 48. 45. 1993. C. the deceased was previously married to another woman who was still alive. p. p. Rollo. pp. pp. Puno. It is not controverted that respondent paid all the hospital and medical expenses. Record. 156. JJ. concurred in by Associate Justices Fermin A. She is therefore entitled to reimbursement. [4] Dated December 14. 48 Me 558.. [15] Herrick v. 270 SCRA 690. . the defense of concealment or misrepresentation no longer lie. The assailed decision of the Court of Appeals dated December 14. Hence. 28. p. 1-2 cited in Agbayani. [5] Resolution dated July 23. concur.. the petition is DENIED. Martin. [12] Ibid. payment should be made to the party who incurred the expenses. Jr.. 86 Neb 372. Court of Appeals. [11] Ibid. penned by Associate Justice Fidel P. petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time of their marriage. 13. 13-14. 134-135. medication and the professional fees of the attending physicians. in view of the foregoing. 1986 ed. supra. COURT OF APPEALS AND ZENITH INSURANCE CORPORATION. L-52756 October 12. 29 Am. petitioner insured its Mercedes Benz 4-door sedan with respondent insurance company. ordering petitioner Manila Mahogany Manufacturing Corporation to pay private respondent Zenith Insurance Corporation the sum of Five Thousand Pesos (P5. petitioner. 24 L ed 689.. respondents. p. Court of Appeals. 474 P2d 109. SP-08642. vs. Co. PADILLA. 316 SCRA 677 [1999]. From 6 March 1970 to 6 March 1971. [24] Exhibit B. [17] Section 48. v. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 96 U. 187 SCRA 652 [1990].. Cruz Arnaldo.Boutelle v. 66 ALR3d 1196. 122 SCRA 461 [1983]. [16] Great Pacific Life v. Jur. Hospital Service Plan. pp. 170 F2d 111. [20] Landicho v. 297 SW 847.000. Co. 81 ALR 2d 919 cited in 43 Am Jur 2d 289. and the resolution of the same Court. 174 Ark 783. 78 Wash 2d 286. 154 SCRA 672 [1987]. 180. v. For the damage caused. Court of Appeals. Westchester Fire Ins. GSIS. Rhodes. Pfeiffer v. Sr. dated 21 March 1979. [19] Heirs of Ildefonso Cosculluela. Petitioner's general manager executed a . Exhibits D to D-7. [21] 44 C. v. 179 SCRA 511 [1989]. No. Insurance Code. No.R. Insurance Co. Hunt v. in CA-G. pp. Missouri State Life Ins. Western Guaranty Company v.J.00). On 4 May 1970 the insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. Norton. [22] See Myers v. respondent company paid petitioner five thousand pesos (P5. 88-97. See also Aetna Insurance Co. attorney's fees in the sum of five hundred pesos (P500. citing Ng Gan Zee v. dated 8 February 1980.00) with 6% annual interest from 18 January 1973. 51 Vt 4 cited in 43 Am Jur 2d 1016. denying petitioner's motion for reconsideration of it's decision. 1166-1175. 257.S..000.00) in amicable settlement. Rico General Insurance Corporation. 234. Kitsap Physicians Service. 1987 MANILA MAHOGANY MANUFACTURING CORPORATION.S. Asian Crusader Life Assurance Corp. 44 SCRA 7 [1972].R. [23] Record. J: Petition to review the decision * of the Court of Appeals. [18] Malayan Insurance v. and costs of suit. Record. which CFI decision was affirmed by the Court of Appeals. alleging that San Miguel Corporation had already paid petitioner P4. stating. Petitioner also invokes Art. claims. To support its alleged right not to return the P4.00 paid by San Miguel Corporation. The City Court ordered petitioner to pay respondent P4." Respondent insurance company thus demanded from petitioner reimbursement of the sum of P4. On 11 December 1972.000. petitioner cites Art. hence. which states: If the plaintiff's property has been insured. the contents of said deed having expressed all the intents and purposes of the parties. as evidenced by a cash voucher and a Release of Claim executed by the General Manager of petitioner discharging San Miguel Corporation from "all actions.500.43 and only P5.00.00 for the damages to petitioner's motor vehicle.00.00 that it had earlier received from the respondent insurance company.00 eventually paid to it by the latter. and much more.500.486. with the modification that petitioner was to pay respondent the total amount of P5.00 was received by petitioner from respondent. 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. Inc. to demand reimbursement from San Miguel Corporation of the amount it had paid petitioner. 1304 of the Civil Code. P5. demands the rights of action that now exist or hereafter [sic] develop arising out of or as a consequence of the accident. subrogating respondent company to all its right to action against San Miguel Corporation. Petitioner refused.00 paid by San Miguel Corporation. A creditor. Respondent of course disputes this allegation and states that there was no qualification to its right of subrogation under the Release of Claim executed by petitioner. Since total damages were valued by petitioner at P9. and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. Insurance Adjusters. respondent company filed suit in the City Court of Manila for the recovery of P4.00.000. without having to turn over said amount to respondent.00 to respondent company as the subrogation in the Release of Claim it executed in favor of respondent was conditioned on recovery of the total amount of damages petitioner had sustained. respondent company wrote Insurance Adjusters.500. 2207 of the Civil Code. 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. refused reimbursement.500. Inc.500. . Petitioner now contends it is not bound to pay P4.500.500.Release of Claim. On appeal the Court of First Instance of Manila affirmed the City Court's decision in toto. to whom partial payment has been made. petitioner argues that it was entitled to go after San Miguel Corporation to claim the additional P4. may exercise his right for the remainder.000. petitioner claims a preferred right to retain the amount coming from San Miguel Corporation.S.Y.500. 1 As held in Phil. 132 Misc. it is provided in [Article 2207 of the New Civil Code] that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss. Ltd.We find petitioners arguments to be untenable and without merit.G. then the aggrieved party is the one entitled to recover the deficiency.000. without prejudice to the insurer's right of subrogation.. demands and rights of action that now exist or hereafter arising out of or as a consequence of the accident" after the insurer had paid the proceeds of the policy. against the wrongdoer. . to the effect that if the amount paid by an insurance company does not fully cover the loss. should the insurance company not fully pay for the injury caused (Article . the Court of Appeals held: . thereby defeating private respondents. 61.000. 391) Otherwise stated: private respondent may recover the sum of P5. 229 N.. 151). claims.. vs. Although petitioners right to file a deficiency claim against San Miguel Corporation is with legal basis. not the P4.. the right of subrogation. Under this legal provision. Heald Lumber Co. the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured 3 (Emphasis supplied) The decision of the respondent court ordering petitioner to pay respondent company. Citing Article 2207.the compromise agreement of P5.. despite the subrogation in favor of Private respondent..00 as originally asked for. 132 cited in Insurance Code and Insolvency Law with comments and annotations. Queensland Insurance Co. Since petitioner by its own acts released San Miguel Corporation. New Civil Code. Badler. Perez 1976. Air Lines v. (Sy Keng & Co.00 being based on the insurance policy-the insurer is entitled to recover from the insured the amount of insurance money paid (Metropolitan Casualty Insurance Company of New York vs. is also in accord with law and jurisprudence.B. In disposing of this issue.000. p.. 2 If a property is insured and the owner receives the indemnity from the insurer. such ease of Claim must be taken as the best evidence of the intent and purpose of the parties. but P5.00. not embodied in the Release of Claim.00 it had earlier paid to petitioner. In the absence of any other evidence to support its allegation that a gentlemen's agreement existed between it and respondent. the amount respondent company paid petitioner as insurance. the Court of Appeals rightly stated: Petitioner argues that the release claim it executed subrogating Private respondent to any right of action it had against San Miguel Corporation did not preclude Manila Mahogany from filing a deficiency claim against the wrongdoer. Thus. H. 54 O.500. nevertheless when Manila Mahogany executed another release claim (Exhibit K) discharging San Miguel Corporation from "all actions. the right of action of petitioner against the insurer was also nullified. petitioner is entitled to keep the sum of P4.00 paid by San Miguel Corporation under its clear right to file a deficiency claim for damages incurred. the aggrieved party shall be entitled to recover the deficiency from the person causing the loss. But in such a case. after receiving payment from the insurer. Rosales vs. Since the insurer can be subrogated to only such rights as the insured may have.000.00 San Miguel Corporation had paid to petitioner. still. 1 Rollo at 45-46. when petitioner released San Miguel Corporation from any liability. Gopengco. Sec. concur. the insurer will be entitled to recover from the insured whatever it has paid to the latter. then he may sue the party responsible for the damage for the the [sic] remainder. (Rule 6. To the extent of the amount he has already received from the insurer enjoy's [sic] the right of subrogation. 4 (Emphasis supplied. JJ. 25 Phil. the insurer loses his rights against the latter.00 paid by San Miguel Corporation. The judgment appealed from is hereby AFFIRMED with costs against petitioner. Reyes Ordoveza.500. New Civil Code).2207. thereby entitling private respondent to recover the same.000.) And even if the specific amount asked for in the complaint is P4. Busran and Isidro C. If the insurance proceeds are not sufficient to cover the damages suffered by the insured. the total amount paid by the insurer.000. However.00 only and not P5. (Emphasis supplied) As has been observed: .00 paid under the insurance policy.500. Revised Rules of Court. unless the release was made with the consent of the insurer. in its companies.00 it had paid under the insurance policy but P4. The right of subrogation can only exist after the insurer has paid the otherwise the insured will be deprived of his right to full indemnity. 3. instead of P5.00. 844..00. not of P5. 77 Phil 120).500. the petition is DENIED. SO ORDERED. Melencio-Herrera.000. should the insured. Lim. Although private respondent prays for the reimbursement of P4. . the respondent Court acted well within its discretion in awarding P5. prays for the recovery. Baguiro vs. under the general prayer in the complaint "for such further or other relief as may be deemed just or equitable. the trial court should have awarded the latter. Cabigao vs. release the wrongdoer who caused the loss.. with the concurrence of Justices Mama D. 50 Phil.00 no longer existed. Paras and Sarmiento. 495 . petitioner's right to retain the sum of P5..000. On this score. although not prayed for. We believe the City Court and Court of First Instance erred in not awarding the proper relief. Yap (Chairman). Barrios Tupas. Footnotes * Penned by Justice Simeon M. premises considered. The Court of Appeals rightly reasoned as follows: It is to be noted that private respondent. WHEREFORE. Borromeo. R. Costs against the [petitioner and Cargohaus. within the period prescribed by the Warsaw Convention and/or the airway bill. NOTES AND SELECTED CASES ON INSURANCE LAW 492 (1960) THIRD DIVISION [G. The Facts The antecedent facts are summarized by the appellate court as follows: On January 26. 58208.: Basic is the requirement that before suing to recover loss of or damage to transported goods. a shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City. 3 Id. 2001 Decision[2] and the September 21. No.2 101 Phil. 150094. FEDERAL EXPRESS CORPORATION and/or CARGOHAUS. INC.[4] The assailed Resolution denied petitioners Motion for Reconsideration. 11263825 with the words. The shipment was covered by Burlington Airway Bill No. entitled American Home Assurance Co. the plaintiff must give the carrier notice of the loss or damage. 2001 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 1031 (1957). 1994. premises considered. Inc. INC. respondents. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court.. petitioner. 951219. The assailed Decision disposed as follows: WHEREFORE. at 1035..). an agent of [Petitioner] Federal Express Corporation. INC. (formerly U-WAREHOUSE. and PHILAM Insurance Co. v. REFRIGERATE WHEN NOT IN . DECISION PANGANIBAN. vs. Metro Manila. AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY. J. 4 Campos and Campos. 2004] FEDERAL EXPRESS CORPORATION. USA delivered to Burlington Air Express (BURLINGTON). The appealed Decision of Branch 149 of the Regional Trial Court of Makati City in Civil Case No. Inc.]. the present appeal is hereby DISMISSED for lack of merit. August 18. challenging the June 4. SMITHKLINE Beecham (SMITHKLINE for brevity) of Nebraska. is hereby AFFIRMED and REITERATED. Actual damages in the amount of the peso equivalent of US$39. twelve (12) days after the cargoes arrived in Manila. declaring total loss for the unusable shipment. to cool the place instead of a refrigerator. 1994 in Flight No. that the same [were] stored only in a room with two (2) air conditioners running. of the impending arrival of its clients cargoes. a non-licensed customs broker who was assigned by GETC to facilitate the release of the subject cargoes.339.s] warehouse.339.[5] . Burlington insured the cargoes in the amount of $39. in Flight No. [respondents] filed an action for damages against the [petitioner] imputing negligence on either or both of them in the handling of the cargo. 1994. 0071-28NRT and was immediately stored at [Cargohaus Inc.000.00 with interest from the time of the filing of the complaint to the time the same is fully paid. 1997 with the [petitioner] being held solidarily liable for the loss as follows: WHEREFORE. [petitioner] appealed to [the CA]. SMITHKLINE abandoned the shipment and. did not proceed with the withdrawal of the vaccines and instead.00 with American Home Assurance Company (AHAC).339. jointly and severally. 0071-30NRT which was likewise immediately stored at Cargohaus warehouse. the following: 1. When he asked an employee of Cargohaus why the cargoes were stored in the cool room only. While the second. 2. Burlington turned over the custody of said cargoes to Federal Express which transported the same to Manila. DIONEDA. while he was about to cause the release of the said cargoes. Thereafter. As a consequence of the foregoing result of the veterinary biologics test. Federal Express informed GETC Cargo International Corporation. judgment is hereby rendered in favor of [respondents] and [petitioner and its CoDefendant Cargohaus] are directed to pay [respondents]. Aggrieved. came in two (2) days later. or on January 31.00 and 3. Costs of suit. (PHILAM) which recompensed SMITHKLINE for the whole insured amount of THIRTY NINE THOUSAND THREE HUNDRED THIRTY NINE DOLLARS ($39. DARIO C. The first shipment. the Philam Insurance Co. DIONEDA (DIONEDA). Inc. consisting of 92 cartons arrived in Manila on January 29. Thereafter. Attorneys fees in the amount of P50. samples of the same were taken and brought to the Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was discovered that the ELISA reading of vaccinates sera are below the positive reference serum. filed a claim with AHAC through its representative in the Philippines.00). Trial ensued and ultimately concluded on March 18. upon instructions from GETC. Prior to the arrival of the cargoes. SO ORDERED.. 1994. the latter told him that the cartons where the vaccines were contained specifically indicated therein that it should not be subjected to hot or cold temperature. That same day.TRANSIT and PERISHABLE stamp marked on its face. found out. the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of Customs. On February 10. The following day. consisting of 17 cartons. This argument was supposedly not raised in the Answer or during trial. Is the Honorable Court of Appeals correct in ignoring the Warsaw Convention?[8] .[7] The Issues In its Memorandum.Ruling of the Court of Appeals The Test Report issued by the United States Department of Agriculture (Animal and Plant Health Inspection Service) was found by the CA to be inadmissible in evidence. Despite this ruling. not admissible? V. the appellate court held that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to the carrier in good condition. Is the conclusion of the Honorable Court of Appeals that the goods were received in good condition. Is the Honorable Court of Appeals correct in ignoring and disregarding respondents own admission that petitioner is not liable? and VI.e. a presumption is raised that the damage occurred through the fault or negligence of the carrier. Hence. correct or not? IV. this Petition. Is the conclusion of the Honorable Court of Appeals petitioners claim that respondents have no personality to sue because the payment was made by the respondents to Smithkline when the insured under the policy is Burlington Air Express is devoid of merit correct or not? III. the shipping receipts]. or that the damage was occasioned by some cause excepting the carrier from absolute liability. Are the decision and resolution of the Honorable Court of Appeals proper subject for review by the Honorable Court under Rule 45 of the 1997 Rules of Civil Procedure? II. We quote from the ruling as follows: Where the plaintiff introduces evidence which shows prima facie that the goods were delivered to the carrier in good condition [i. petitioner raises the following issues for our consideration: I.[6] Found devoid of merit was petitioners claim that respondents had no personality to sue. x x x. Are Exhibits F and G hearsay evidence.. This the [petitioner] failed to discharge. and that the carrier delivered the goods in a damaged condition. and therefore. and this casts upon the carrier the burden of showing that the goods were not in good condition when delivered to the carrier. Subrogation Upon receipt of the insurance proceeds. Such wording conveys the right of collecting on any such damage or loss. the facts are undisputed. As distinguished from a question of law which exists when the doubt or difference arises as to what the law is on a certain state of facts -.[9] In the present case. At the back of the Certificate appears the signature of the representative of Burlington. or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses. this case is a proper subject for review by this Court. Hence. not a question of fact. Smithkline was the proper payee of the insurance proceeds. the latter had the right of collecting or of being indemnified for loss of or damage to the insured shipment. as fully as if the property were covered by a special policy in the name of the holder.[11] Proper Payee The Certificate specifies that loss of or damage to the insured cargo is payable to order x x x upon surrender of this Certificate. They differ only in their interpretation of what their rights are under its terms. the issues are as follows: (1) Is the Petition proper for review by the Supreme Court? (2) Is Federal Express liable for damage to or loss of the insured goods? This Courts Ruling The Petition has merit. Pertinent to this issue is the Certificate of Insurance[10] (Certificate) that both opposing parties cite in support of their respective positions. Since the Certificate was in the possession of Smithkline. their relation to each other and to the whole and the probabilities of the situation. as fully as if the property were covered by a special policy in the name of the holder itself. no cause of action against it -because the payment made to Smithkline was erroneous. Hence.thus. the consignee (Smithkline) executed a subrogation Receipt[12] . Preliminary Issue: Propriety of Review The correctness of legal conclusions drawn by the Court of Appeals from undisputed facts is a question of law cognizable by the Supreme Court. The determination of those rights involves a question of law.Simply stated. existence and relevancy of specific surrounding circumstance. Main Issue: Liability for Damages Petitioner contends that respondents have no personality to sue -.there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts. petitioner is questioning the conclusions drawn from such facts. As will be shown shortly. being the holder of the Certificate and having an insurable interest in the goods. This document has thus been duly indorsed in blank and is deemed a bearer instrument. within fourteen (14) days from the date of receipt of the goods. the insurers entitlement to subrogation pro tanto -. 11263825. The latter were thus authorized to file claims and begin suit against any such carrier. the consignee would have a cause of action against the person responsible therefor. vessel. is presented by shipper or consignee to an office of Burlington within (14) days from the date the goods are placed at the disposal of the person entitled to delivery. immediately after discovery of the damage and at the latest within fourteen (14) days from receipt of the goods.2 of other damage to the goods.[17] . corporation or government. both the insurer and the consignee are bound by the contractual stipulations under the bill of lading. person. never filed with the carrier any written notice or complaint regarding its claim for damage of or loss to the subject cargo within the period required by the Warsaw Convention and/or in the airway bill. If that right was violated.1 of visible damage to the goods. Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods. or to the first carrier or to the last carrier or to the carrier who performed the transportation during which the loss. To all intents and purposes.[13] Further.[16] Relevantly. Indeed. the consignee had a legal right to receive the goods in the same condition it was delivered for transport to petitioner.4 of non-delivery of the goods. states: 6. it stands in the place and in substitution of the consignee. and 12. 12.1.1. 12. and the details of the claim. the insurers subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld. within one hundred and twenty (120) days from the date of the issue of the air waybill. issued by Burlington as agent of petitioner. or in the case of total loss (including non-delivery) unless presented within (120) days from the date of issue of the [Airway Bill].3 delay.equips it with a cause of action in case of a contractual breach or negligence. the approximate date of the damage or loss.1.1 complaint in writing may be made to the carrier whose air waybill was used.[14] In the exercise of its subrogatory right. damage or delay took place. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice. Airway Bill No.[15] Prescription of Claim From the initial proceedings in the trial court up to the present. A fortiori. petitioner has tirelessly pointed out that respondents claim and right of action are already barred./12.2 For the purpose of 12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case: 12. Undeniably.in favor of respondents. within twenty-one (21) days of the date the goods are placed at his disposal.being of the highest equity -. an insurer may proceed against an erring carrier.1. 12. and even the consignee. The latter. sufficiently describing the goods concerned. this fact has never been denied by respondents and is plainly evident from the records. petitioners airway bill states: 12. and the carrier is not liable if notice is not given in accordance with the stipulation.[18] Condition Precedent In this jurisdiction. To stress.[21] When an airway bill -. (4) Failing complaint within the times aforesaid.or any contract of carriage for that matter -. If it fails to do so. (3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid. no action shall lie against the carrier. within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. we find no more necessity to pass upon the other issues raised by petitioner. it does not constitute a limitation of action. . In view of the foregoing. and. [23] Being a condition precedent.[20] The requirement of giving notice of loss of or injury to the goods is not an empty formalism. 26. on the other hand. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.[19] The shipper or consignee must allege and prove the fulfillment of the condition.Article 26 of the Warsaw Convention. While respondents may have had a cause of action then. and that it is being charged with liability therefor. notice is a condition precedent. no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent.has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with. at the latest. provides: ART. The fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged. the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. its enforcement can be prevented and the liability cannot be imposed on the carrier. (1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same have been delivered in good condition and in accordance with the document of transportation.[24] In the present case. the notice must precede a suit for enforcement. (2) In case of damage. the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage. there is neither an allegation nor a showing of respondents compliance with this requirement within the prescribed period. In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or goods have been placed at his disposal. they cannot now enforce it for their failure to comply with the aforesaid condition precedent. save in the case of fraud on his part.[22] Failure to comply with such a stipulation bars recovery for the loss or damage suffered. and (2) to give it an opportunity to examine the nature and extent of the injury. rollo. 142. 10. 1976). [12] Exhibit N. Emiliano S. 2002. 43. Inc. supra. Inc. inter alia. Inc. pp. .... pp. December 7.. Petitioners Memorandum. upon this Courts receipt of respondents Memorandum. v. 70 SCRA 323. Villarama Jr. [10] Exhibit D. August 19. actual damages in the amount of the peso equivalent of US $39. pp. IAC. April 7. [1] Rollo. concur.. 8 & 42.. Sweet Lines..petitioners co-defendant in respondents Complaint below -. CA. 1992 (citing Firemans Fund Insurance Company. (Division chair) and Alicia L. Citations omitted. Twelfth Division. and Carpio-Morales. signed by Atty. Inc. [4] Assailed CA Decision.. [6] Id. per Regalado. Court of Appeals.. records. [5] Id. 216 SCRA 224. 1988). p. Corona. p. December 12. 9. p. 116. Jamila & Company. Cargohaus. (citing National Development Company v. 1986. Mary Joyce M. Sweet Lines.. Sandoval-Gutierrez. JJ. with the concurrence of Justices Conrado M. 14-33. [2] [3] Id. 164 SCRA 593. 35-43. p 159. No pronouncement as to costs. v. [13] Philippine American General Insurance Co. on leave. v.[25] This judgment was affirmed by the Court of Appeals and is already final and executory. was received by this Court on August 28. Inc.. pp. [7] [8] Petitioners Memorandum. the Petition is GRANTED.has been adjudged by the trial court as liable for. 212 SCRA 194. pp. Samson. -. [14] [15] Philippine American General Insurance Co. [11] Bernardo v. Inc.. Inc. v. J. per Campos Jr. Santos (member). 146 SCRA 215. [9] Pilar Development Corp. Sweet Lines. 1992. p. supra.339.[26] WHEREFORE.. signed by Atty. 45-47. Inc. August 5. 201. 1-3 & 35-37. Philippine American General Insurance Co. SO ORDERED. Penned by Justice Martin S. p. Inc. Id. rollo.We note that respondents are not without recourse. J. v. Sasan.. records. and the assailed Decision REVERSED insofar as it pertains to Petitioner Federal Express Corporation. J.. Vasquez Jr. The case was deemed submitted for decision on September 20. p. 2002. Jur. Inc. v.. per Regalado. Triton Insurance Co. October 1955. supra. 1960). 208. Inc. [22] [23] Philippine American General Insurance Co. Sweet Lines. Carriers 97. p. Inc. [19] Philippine American General Insurance Co. J. records. [20] [21] Philippine American General Insurance Co. Inc. 1917... 194..R. pp. Sweet Lines. Respondent. Id. [25] The insured value of the goods lost.[16] Exhibit B of respondent.. 208-209. CHICO-NAZARIO. v. supra. 180896-97 Present: X----------------------------X YNARES-SANTIAGO. 285. Inc. [17] Exhibit 5-a of Federal Express. Inc.. 231. p. Jose.. Inc. 33 Phil. THIRD DIVISION KEPPEL CEBU SHIPYARD. 139-A. p. supra.R.. 24 Phil. 2003.. Petitioner. v. records. 1916. February 14. Consunji v. December 7. Manila Port Service. Lim Ponzo & Co. Chairperson. [26] Entry of judgment in the Supreme Court was made on March 11. This airway bill was issued on January 26. 1913. 2d. Nos. Nos. Inchausti & Co. 1994. . G. November 29. [18] 51 OG 5091-5092. J. 110 Phil. supra. (citing 14 Am. January 14.* PIONEER INSURANCE AND SURETY CORPORATION.. Petitioner. INC. 189-A. [24] Philippine American General Insurance Co. JR.. v.. 180880-81 G. .versus PIONEER INSURANCE AND SURETY CORPORATION. Sweet Lines. VELASCO. 315. Government of the Philippine Islands v. Inc v. 37 Phil. Sweet Lines. Roldan v. INC. Superferry 3 was already insured by WG&A with Pioneer for US$8. JJ. (KCSI) enter into an agreement that the Drydocking and Repair of the above-named vessel ordered by the Owners Authorized Representative shall be carried out under the Keppel Cebu Shipyard Standard Conditions of Contract for Shiprepair. J. SP Nos.581. 2009 x------------------------------------------------------------------------------------x DECISION NACHURA. WG & A JEBSENS SHIPMGMT. In addition. Port Area. On January 26. (WG&A) executed a Shiprepair Agreement[5] wherein KCSI would renovate and reconstruct WG&As M/V Superferry 3 using its dry docking facilities pursuant to its restrictive safety and security rules and regulations.[2] (KCSI)to review on certiorari the Decision[3] dated December 17. INC. Address: Harbour Center II. Prior to the execution of the Shiprepair Agreement. guidelines and regulations on safety and security issued by Keppel Cebu Shipyard.versus - NACHURA. and KEPPEL CEBU SHIPYARD.R.. 2007 of the Court of Appeals (CA) in CA-G.472. City of We. 2000. KCSI and WG&A Jebsens Shipmanagement. Railroad & Chicago Sts. the following are mutually agreed upon by the parties: .78. Respondent.. The Shiprepair Agreement reads SHIPREPAIR AGREEMENT[6] Company: WG & A JEBSENS SHIPMANAGEMENT INC.: Before us are the consolidated petitions filed by the partiesPioneer Insurance and Surety Corporation[1] (Pioneer) and Keppel Cebu Shipyard. Inc. Promulgated: September 25. 74018 and 73934. PERALTA. Inc. 2004 and the Amended Decision[4] dated December 20. Owner/Operator of M/V SUPERFERRY 3 and KEPPEL CEBU SHIPYARD. 1998. 1008 under the auspices of the Philippine . or damages to the vessel or other property however caused. and given copies of Shipyard safety regulations. Safety and Security personnel whereby they will be briefed on. The Owner shall inform its insurer of Clause 20[7] and 22 (a) [8] (refer at the back hereof) and shall include Keppel Cebu Shipyard as a co-assured in its insurance policy. Owners sub-contractors or workers are not permitted to work in the yard without the written approval of the Vice President Operations. 5. the Owner shall indemnify and hold Keppel Cebu Shipyard harmless from any or all claims. 10. 8. The Owner shall waive its right to claim for any loss of profit or loss of use or damages consequential on such loss of use resulting from the delay in the redelivery of the above vessel. 7. the Owner Representative. 6. The Owner and Keppel Cebu Shipyard shall endeavor to settle amicably any dispute that may arise under this Agreement. 11. 2. On arrival. An adequate number of officers and crew must remain on board at all times to ensure the safety of the vessel and compliance of safety regulations by crew and owner employed workmen. The yard must be informed and instructed to provide the necessary security arrangement coverage should there be inadequate or no crew on board to provide the expressed safety and security enforcement. Payment term shall be as follows: 12. The ships officers/crew or owner appointed security personnel shall maintain watch against pilferage and acts of sabotage. 9. theft and/or damages to Keppel Cebu Shipyards properties and other liabilities which are caused by the workers of the Owner. Chief Officer and Chief Engineer will be invited to attend a conference with our Production. In consideration of Keppel Cebu Shipyard allowing Owner to carry out own repairs onboard the vessel. damages.1. Captain. The Owner shall be liable to Keppel Cebu Shipyard for any death and/or bodily injuries for the [K]eppel Cebu Shipyards employees and/or contract workers. The invoice shall be based on quotation reference 99-KCSI-211 dated December 20. or liabilities arising from death or bodily injuries to Owners workers. Should all efforts for an amicable settlement fail. 3. 1999 tariff dated March 15. the disputes shall be submitted for arbitration in Metro Manila in accordance with provisions of Executive Order No. 4. 00).000.581. in the course of its repair.472. MH-H0-99-0000168-00-D (H&M) and MH-H0-99-0000169 (I. compromise and discharge of all claims for loss and expenses sustained to the vessel SUPERFERRY 3 insured under Policy Nos. to wit: LOSS AND SUBROGATION RECEIPT 16 June 2000 Our Claim Ref: MH-NIL-H0-99-00018 US$8. executed a Loss and Subrogation Receipt[9] in favor of Pioneer.Arbitration Commission.581.472. filed an insurance claim with Pioneer. WG&A. DOLLARS EIGHT MILLION FOUR HUNDRED SEVENTY-TWO THOUSAND FIVE HUNDRED EIGHTY-ONE & 78/100 (US$ 8. M/V Superferry 3 was gutted by fire.78) equivalent to PESOS THREE HUNDRED SIXTY MILLION & 00/100 (Php 360.581. for and in behalf of: WG & A Jebsens Shipmgmt.78 -----------------------------------------------RECEIVED from PIONEER INSURANCE & SURETY CORPORATION the sum of U. 2000. hence. Claiming that the extent of the damage was pervasive. in turn. JAN.V. On June 16. ________________________ Date Date On February 8.000.) by reason as follows: Fire on board at Keppel Cebu Shipyard on 08 February 2000 . 26.S. Pioneer paid the insurance claim of WG&A in the amount of US$8. (Signed) BARRY CHIA SOO HOCK _________(Signed)__________ (Printed Name/Signature Above Name) (Printed Name/Signature Above Name) Vice President Operations Authorized Representative Keppel Cebu Shipyard. 2000 .78. Inc.472. in full satisfaction. WG&A declared the vessels damage as a total constructive loss and. 2000. persons. WILLIAM. filed a Request for Arbitration before the Construction Industry Arbitration Commission (CIAC) docketed as CIAC Case No. but the latter denied any responsibility for the loss of the subject vessel. 3.000. Pioneer. By: (Signed) ______________________________________ Witnesses: (Signed) ______________________________________ (Signed) ______________________________________ Armed with the subrogation receipt. the sum of P500.000.[10] . and the costs of suit. Pioneer tried to collect from KCSI.000.and in consideration of which the undersigned hereby assigns and transfers to the said company each and all claims and demands against any person.S. corporation or property in the premises to the extent of the amount above-mentioned. including arbitration fees and other litigation expenses.78 or its equivalent amount in Philippine Currency. 21-2000. 2. be all declared illegal and void ab initio and without any legal effect whatsoever. &/OR ABOITIZ SHIPPING CORP. INC. as may be found proper. Inc. persons. 2000. It is likewise further prayed that Clauses 1 and 2 on the unsigned page 1 of the Shiprepair Agreement (Annex A) as well as the hardly legible Clauses 20 and 22 (a) and other similar clauses printed in very fine print on the unsigned dorsal page thereof.00 plus interest thereon from the date of filing [of the] Request for Arbitration or date of the arbitral award. plus other damages as may be established during the proceedings. as may be found proper. corporation or property arising from or connected with such loss or damage and the said company is subrogated in the place of and to the claims and demands of the undersigned against said person. seeking the following reliefs: 1.00 for and as attorneys fees. To pay to claimant WG&A. To pay to the claimants herein the sum of P3.581. on August 7. To pay to the claimant Pioneer Insurance and Surety Corporation the sum of U. and/or Aboitiz Shipping Corporation and WG&A Jebsens Shipmanagement.000. plus interest thereon computed from the date of the Loss and Subrogation Receipt on 16 June 2000 or from the date of filing of [the] Request for Arbitration. $8. As KCSI continuously refused to pay despite repeated demands. INC.472. GOTHONG & ABOITIZ. Respondent Keppel assumed responsibility over M/V Superferry 3 when it brought the vessel inside its graving dock and applied its own safety rules to the dry-docking and repairs of the vessel. The Claimant claims that it has the preponderance of evidence over that of the Respondent. while still dry docked in KCSIs shipyard. Respondent Keppel had custody of and control over the M/V Superferry 3 while said vessel was in Respondent Keppels premises. Second. thereby dismissing the claim of WG&A against KCSI. In its Draft Decision. In the course of the proceedings.KCSI and WG&A reached an amicable settlement. . 2001. Claimant then proceeded to explain that the Right of Subrogation: Is by Operation of Law exists in Property Insurance is not Dependent Upon Privity of Contract.: Pioneers Theory of the Case: First. 2000. Claimant stated: A. among others. 2001 with the CIAC. Cebu. Pioneer and KCSI stipulated. M/V Superferry 3 arrived at KCSI in Lapu-Lapu City. 2000. B.[11] As regards the disputed facts. Pioneer (as Claimant) is the real party in interest in this case and that Pioneer has been subrogated to the claim of its assured. below are the respective positions of the parties. (2) on the same date. Claimant then argued that Payment Operates as Equitable Assignment of Rights to Insurer and that the Right of Subrogation Entitles Insurer to Recover from the Liable Party. that: (1) on January 26. for dry docking and repairs. The CIAC granted the withdrawal on October 22. the arbitration proceeded with Pioneer as the remaining claimant. leading the latter to file a Notice of Withdrawal of Claim on April 17. viz. Hence. Claimant cited documentary references on the Statutory Source of the Principle of Subrogation. C. The evidence presented during the hearings indubitably proves that respondent not only took custody but assumed responsibility and control over M/V Superferry 3 in carrying out the drydocking and repair of the vessel. WG&A signed a ship repair agreement with KCSI. and (3) a fire broke out on board M/V Superferry 3 on February 8. The presence on board the M/V Superferry 3 of its officers and crew does not relieve the respondent of its responsibility for said vessel. The mere fact that Dr. Claimant proffers that Dr.D. The practice of allowing a shipowner and its sub-contractors to perform maintenance works while the vessel was within respondents premises does not detract from the fact that control and custody over M/V Superferry 3 was transferred to the yard. B. C. In contemplation of law. being his employer. . There was no independent work contract between Joniga and Sevillejo Joniga was not the employer of Sevillejo. Dr. The yard. for an owners application for a hot work permit was canceled out by the yards actual knowledge of Sevillejos whereabouts and the fact that he was in deck A doing owners hotworks. not Dr. Sixth. and the owners hotworks were conducted by welders who remained employees of the yard. Joniga requested Sevillejo to perform some of the Owners hot works under the 26 January 2000 work order did not make Dr. Joniga. the Respondent Yard is liable under the Doctrine of Res Ipsa Loquitur. Eight[h]. the Yard is liable under the ruling laid down by the Supreme Court in the case. but from its negligence in this case. Claimant asserts that said ruling is applicable hereto as The Law of the Case. Fifth. The power of control is not diminished by the failure to exercise control. the shipowner had no legal duty to apply for a hotworks permit since it was not required by the yard. and B. From the preceding statements. the Respondent Yard was the employer responsible for the negligent acts of the welder. the Vessels Safety Manual cannot be relied upon as proof of the Masters continuing control over the vessel. gave the welders their marching orders. The yard. Joniga was not a Contractor of the Hot Work Done on Deck A. Fourth. in supplying welders and equipment as per The Work Order Dated 26 January 2000. Sevillejo was not a loaned servant/employee. the liability of Respondent does not arise merely from the application of the Doctrine of Res Ipsa Loquitur. the Yard did so at its own risk. Claimant argued that: A. Seventh. According to Claimant. is solely and exclusively liable for his negligent acts. The Control Test The yard exercised control over Sevillejo. Claimant proceeded to enumerate its reasons: A. According to Claimant. and acted as a Less Than Prudent Ship Repairer. Jonigas authority to request the execution of owners hot works in the passenger areas was expressly recognized by the Yard Project Superintendent Orcullo. as Sevillejo remained an employee of the yard at the time the loss occurred. Joniga the employer of Sevillejo. Claimant claims that Keppel is clearly liable for the loss of M/V Superferry 3. if any. Claimant contends that the need. Third. Claimant presented its case against: (i) Non-removal of the life jackets theory. Yard Fire Fighting Efforts and Equipment Were Inadequate. Consequently. D. no binding arbitration agreement between the Vessel Owner and the Yard to which the Claimant can claim to be subrogated and which can support CIAC jurisdiction. Severino Sevillejo. Claimant disputed the theories propounded by the Respondent (The Yard).The Claimant then disputed the statements of Manuel Amagsila by claiming that Amagsila was a disgruntled employee. as a result. Yards water supply was inadequate. B. (iv) The unauthorized hot works theory. when another firm. Mr. Yard Safety Practices and Procedures Were Unsafe or Inadequate. In any event. the same was still owned by Aboitiz Shipping. On January 26. (v) The report theory. Claimant enumerated further badges of yard negligence. (ii) Hole-in-the[-]floor theory. Nevertheless. There is. C. Yard Safety Assistants and Firewatch-Men were Overworked. Claimant claims that Amagsila affirmed that the five yard welders never became employees of the owner so as to obligate the latter to be responsible for their conduct and performance. Claimant claims that this is suppression of evidence by Respondent. (b) The Claimant is not a real party in interest and has no standing because it has not been subrogated to the Vessel Owner. authorized WG&A Jebsens to manage the MV Superferry 3. it had no authority to do so. 2000. For the reason stated above. The Claimant called the attention of the Tribunal (CIAC) on the non-appearance of the welder involved in the cause of the fire. The Claimant has no standing to file the Request for Arbitration and the Tribunal has no jurisdiction over the case: (a) There is no valid arbitration agreement between the Yard and the Vessel Owner. (iii) Need for a plan theory. the insurance policies on which the Claimant bases its right of subrogation were not validly obtained. Finally. when the ship repair agreement (which includes the arbitration agreement) was signed by WG&A Jebsens on behalf of the Vessel. WG&A. According to Claimant: A. the Claimant has not . KCSIs Theory of the Case 1. a threshold which the actual repair cost for the Vessel did not reach. because the sparks and slag could . and there was no resulting subrogation to the Vessel. These decisions or oversights guaranteed that the cutting would be done in extremely hazardous conditions and were the proximate cause of the fire and the resulting damage to the Vessel. As a consequence. Third. (c) The Yards expert witness. The proximate cause of the fire and damage to the Vessel was not any negligence committed by Angelino Sevillejo in cutting the bulkhead door or any other shortcoming by the Yard. The Ship [R]epair Agreement was not imposed upon the Vessel. (b) Uncontroverted evidence proved that Dr. there are no signing or other formal defects that can invalidate the agreement.been subrogated to any rights which the Vessel may have against the Yard because: i. its payment was voluntary. The Vessel knowingly and voluntarily accepted that agreement. then there is no legal subrogation under Article 2207 and it does not succeed to the Vessels rights under the Ship [R]epair Agreement and the arbitration agreement. Moreover. He established that: i) the fire started when the cutting of the bulkhead door resulted in sparks or hot molten slag which fell through pre-existing holes on the deck floor and came into contact with and ignited the flammable lifejackets stored in the ceiling void directly below. the proximate cause of the fire was Dr. 2. if the Claimant asserts a right of payment only by virtue of Article 1236. There was also no subrogation under Article 1236 of the Civil Code. ii. and ii) the bottom level of the bulkhead door was immaterial. First. 3. Joniga neglected or decided not to obtain a hot work permit for the bulkhead cutting and also neglected or refused to have the ceiling and the flammable lifejackets removed from underneath the area where he instructed Angelino Sevillejo to cut the bulkhead door. Eric Mullen gave the only credible account of the cause and the mechanics of ignition of the fire. Jonigas and the Vessels deliberate decision to have Angelino Sevillejo undertake cutting work in inherently dangerous conditions created by them. (a) The Claimants material witnesses lied on the record and the Claimant presented no credible proof of any negligence by Angelino Sevillejo. the Claimant has not proved payment of the proceeds to the Vessel Owner. Since the Claimant opted to pay contrary to the provisions of the policies. Dr. The Claimant had no legally demandable obligation to pay under the policies and did so only voluntarily. iii. It does not have a right to demand arbitration and will have only a purely civil law claim for reimbursement to the extent that its payment benefited the Yard which should be filed in court. the Claimant and the Vessel agreed that there is no Constructive Total Loss unless the expense of recovering and repairing the vessel would exceed the Agreed Value of P360 million assigned by the parties to the Vessel. The Claimant has not proved payment of the proceeds of the policies to any specific party. On the contrary. it has also not proved payment to the Vessel Owner. Second. in any event. then it derived no benefit from the Claimants payment to the Vessel Owner. since the Yard is not liable for the fire and the resulting damage to the Vessel. Under the policies. 4. even if the principle were applied to create a presumption of negligence by the Yard. was the proximate cause of the fire. The fire was a direct and logical consequence of the Vessels decisions to: (1) take Angelino Sevillejo away from his welding work at the Promenade Deck restaurant and instead to require him to do unauthorized cutting work in Deck A. may be raised against the Yard. Consequently. that presumption is conclusively rebutted by the evidence on record. Even assuming that the Yard was Angelino . the Manila City pronouncements regarding the res ipsa loquitur doctrine are obiter dicta without value as binding precedent. contrary to the requirements not only of the Yards Safety Rules but also of the demands of standard safe practice and the Vessels own explicit safety and hot work policies. (d) The Manila case is irrelevant to this dispute and in any case. the Yard may still not be held liable for the resulting damage. Joniga. (e) The Vessels deliberate acts and its negligence created the inherently hazardous conditions in which the cutting work that could otherwise be done safely ended up causing a fire and the damage to the Vessel. Joniga and the Vessel for that activity caused the fire. the Vessel was the party with actual control over his tasks and is deemed his true and effective employer for purposes of establishing Article 2180 employer liability. Consequently. does not establish governing precedent to the effect that when a ship is damaged in dry dock. rather than the positioning of the doors bottom edge. (a) The Yards only contractual obligation to the Vessel in respect of the 26 January 2000 Work Order was to supply welders for the Promenade Deck restaurant who would then perform welding work per owner[s] instruction. Furthermore. (f) The vessel has not presented any proof to show that the Yard was remiss in its fire fighting preparations or in the actual conduct of fighting the 8 February 2000 fire. Joniga to cut the bulkhead door. the cutting itself of the bulkhead door under the hazardous conditions created by Dr.have come from the cutting of any of the sides of the door. once it had provided those welders. The Yard had the necessary equipment and trained personnel and employed all those resources immediately and fully to putting out the 8 February 2000 fire. its obligation to the Vessel was fully discharged and no claim for contractual breach. however. the shipyard is presumed at fault. The Vessel exercised supervision and control over Angelino Sevillejo when he was doing work at the Promenade Deck restaurant and especially when he was instructed by Dr. ii. and that this circumstance rather than the extremely hazardous conditions created by Dr. including Angelino Sevillejo. Even assuming that Angelino Sevillejo cut the bulkhead door close to the deck floor. i. Consequently. or for damages on account thereof. Apart from the differences in the factual setting of the two cases. (b) The Yard is also not liable to the Vessel/Claimant on the basis of quasi-delict. and (2) to have him do that without satisfying the requirements for and obtaining a hot work permit in violation of the Yards Safety Rules and without removing the flammable ceiling and life jackets below. The contractor is responsible for the work done by persons employed by him. The Respondent listed what it believes the Claimant wanted to impress upon the Tribunal. at the time of the fire.Sevillejos employer. it cannot be compelled to pay the full amount of P360 million paid by the Claimant. the Yard Safety Superintendent. the right of the Vessel to recover is limited to actual damage to the MV Superferry 3. admitted that No hot works could really be hidden from the Yard. [is] the cutting work was known to the yard and coordinated with Mr. the Yard may not be held liable to the Claimant. that they could easily be detected because Mr. Joniga told Gerry Orcullo about his intention to have Angelino Sevillejo do cutting work at the Deck A bulkhead on the morning of 8 February 2000. your Honors. Claimants counsel contends that the cutting of the bulkhead door was covered by the 26 January 2000 Work Order. This liability should in turn be set-off against the Claimants claim for damages. Assuming that the Yard is liable. because the welding cables and the gas hoses emanating from the dock will give these hotworks away apart from the assertion and the fact that there were also safety assistants supposedly going around the vessel. iii. (c) The Vessel breached its obligation under Clause 22 (a) of the Yards Standard Terms to name the Yard as co-assured under the policies a breach which makes the Vessel liable for damages. to make the Vessels unauthorized hot works activities seem less likely. is valid. (b) Under the Ship [R]epair Agreement. Respondent enumerated and disputed these as follows: 1. 3. the Yard may nevertheless not be held liable under Article 2180 because Angelino Sevillejo was acting beyond the scope of his tasks assigned by the Yard (which was only to do welding for the Promenade Deck restaurant) when he cut the bulkhead door pursuant to instructions given by the Vessel. 4.[12] . Gerry Orcullo. 5. The Yard is nonetheless not liable under Article 2180 because it exercised due diligence in the selection and supervision of Angelino Sevillejo. binding and enforceable. the liability of the Yard is limited to P50 million a stipulation which. under the law and decisions of the Supreme Court. Claimants counsel contends that [t]he second reason why there was no job spec or job order for this cutting work. for an amount greater than that which the Vessel could have recovered. Respondent disputed the above by presenting its own argument in its Final Memorandum. 5. as subrogee. Avelino Aves. the yard project superintendent. even if the Claimant may have paid a higher amount under its policies. Claimants counsel also contends. Claimants counsel contends that Dr. (a) Under the law. Claimants counsel contends that under Article 1727 of the Civil Code. In turn. 2. the Vessel is considered equally negligent.R. that only Yard welders are to undertake hotworks. by requiring. .00.000. However. No costs.[14] Holding that the liability for damages was limited to P50. after it becomes final and executory.On October 28. 73934) is GRANTED. To the Tribunal. the Petition of Pioneer (CA-G. dismissing petitioners claims in its entirety. As discussed earlier by the Tribunal. with interest at 6% per annum from the time of the filing of the case up to the time the decision is promulgated. The Tribunal notes that the hotworks permit require[s] a request by at least a foreman. 2002. with the fact that what was ask (sic) of Sevillejo was outside the work order.R.[15] Pioneer appealed to the CA and its petition was docketed as CA-G. SP No. and complying with the conditions of the hotwork permit prior to implementation. The fact that no foreman was included in the five welders issued to the Vessel was never raised in this dispute. Joniga as both contributory to the cause of the fire that damaged the vessel.000.00.000. the Tribunal finds that Sevillejo remains a yard employee. it follows that there are certain qualifications of Yard welders that would be requisite of yard welders against those of the vessel welders. premises considered. SP No. 2004. SP No. disposing as follows: WHEREFORE. On December 17. the Former Fifteenth Division of the CA rendered its Decision. and 12% interest per annum added to the award. The act of Sevillejo is however mitigated in that he was not even a foreman.R. By the requirement that all hotworks are to be done by the Yard. this means that yard welders are aware of the Yard safety rules and regulations on hotworks such as applying for a hotwork permit. the CIAC ordered KCSI to pay Pioneer the amount of P25. according to its own regulations. KCSI likewise filed its own appeal and the same was docketed as CA-G.000. The CIAC further ordered that the arbitration costs be imposed on both parties on a pro rata basis. or any balance thereof. with the following findings and conclusions The Tribunal agrees that the contractual obligation of the Yard is to provide the welders and equipment to the promenade deck. 74018. 74018) is DISMISSED while the Petition of the Yard (CA-G. This Tribunal finds the concurrent negligence of the Yard through Sevillejo and the Vessel through Dr. the CIAC rendered its Decision[13] declaring both WG&A and KCSI guilty of negligence. 73934. The cases were consolidated. SP No. discussing the work in a production meeting. [The] Tribunal agrees that the cutting of the bulkhead door was not a contractual obligation of the Yard.R. and that the instructions to him was (sic) by an authorized person. and 3. The Yard is hereby declared as equally negligent.R. subject to the following modifications: 1.The Yard and The WG&A are hereby ordered to pay the arbitration costs pro-rata. SO ORDERED.00. without legal interest. KCSI.[18] Hence. filed a motion for partial reconsideration of the same Decision. 73934) is now reduced to PARTIALLY GRANTED.000. within 15 days from the finality of this Amended Decision.[17] joined by Associate Justice Japar B. thus. an Amended Decision was promulgated by the Special Division of Five Former Fifteenth Division of the CA in light of the dissent of Associate Justice Lucas P. insisting that it suffered from serious errors in the appreciation of the evidence and from gross misapplication of the law and jurisprudence on negligence. 74018) is PARTIALLY GRANTED as the Yard is hereby ordered to pay Pioneer P25 Million without legal interest.000.[16] Aggrieved.1 Pioneers Petition (CA-G. ARTICLE VIII OF THE CONSTITUTION. 2007. 2.R. SP No. in so far as it is ordered to pay Pioneer P25 Million. Dimaampao. these petitions. Pioneer bases its petition on the following grounds: I THE COURT OF APPEALS ERRED IN BASING ITS ORIGINAL DECISION ON NON-FACTS LEADING IT TO MAKE FALSE LEGAL CONCLUSIONS. II THE COURT OF APPEALS ERRED IN LIMITING THE LEGAL LIABILITY OF THE YARD TO THE SUM OF P50. within 15 days from the finality of this Amended Decision. Pioneer sought reconsideration of the December 17. without legal interest. Pioneers Motion for Reconsideration is PARTIALLY GRANTED. the Court hereby decrees that: 1. IN THAT: . The fallo of the Amended Decision reads WHEREFORE. 2004 Decision. ordering The Yard to pay Pioneer P25 Million. the total GRANTING of its Petition (CAG. On December 20. premises considered. Bersamin. SP No. SO ORDERED. for its part. NON-FACTS REMAIN TO INVALIDATE THE AMENDED DECISION. THIS ALSO VIOLATES SECTION 14. The rest of the disposition in the original Decision remains the same. IV THE COURT OF APPEALS CORRECTLY RULED THAT WG&A SUFFERED A CONSTRUCTIVE TOTAL LOSS OF ITS VESSEL BUT ERRED BY NOT HOLDING THAT THE YARD WAS LIABLE FOR THE VALUE OF THE FULL CONSTRUCTIVE TOTAL LOSS. BE IT DIRECT OR CONTRIBUTORY TO THE LOSS. THE YARD AUTHORIZED THE HOT WORK OF YARD WELDER ANGELINO SEVILLEJO. STARE DECISIS RENDERS INAPPLICABLE ANY INVOCATION OF LIMITED LIABILITY BY THE YARD.A. THE VESSEL OWNER DID NOT AGREE THAT THE YARDS LIABILITY FOR LOSS OR DAMAGE TO THE VESSEL ARISING FROM YARDS NEGLIGENCE IS LIMITED TO THE SUM OF P50. B. THE VESSELS PASSAGE TEAM LEADER. IN THAT: (i) THE YARD HAD CUSTODY AND CONTROL OVER THE VESSEL (M/V SUPERFERRY 3) ON 08 FEBRUARY 2000 WHEN IT WAS GUTTED BY FIRE. D. DID NOT SUPERVISE OR CONTROL THE REPAIRS. C. SINCE ONLY YARD WELDERS COULD PERFORM HOT WORKS IT FOLLOWS THAT THEY ALONE COULD BE GUILTY OF NEGLIGENCE IN DOING THE SAME. CONSIDERING THAT: A. C. E. III THE COURT OF APPEALS ERRED IN ITS RULING THAT WG&A WAS CONCURRENTLY NEGLIGENT. B. THE LIMITATION CLAUSE IS CONTRARY TO PUBLIC POLICY. DR. . WG&A WAS NOT GUILTY OF NEGLIGENCE. JONIGA.000. IT WAS THE YARD THROUGH ITS PROJECT SUPERINTENDENT GERMINIANO ORCULLO THAT SUPERVISED AND CONTROLLED THE REPAIR WORKS. D. (ii) THE DAMAGING FIRE INCIDENT HAPPENED IN THE COURSE OF THE REPAIRS EXCLUSIVELY PERFORMED BY YARD WORKERS.00 ONLY. THE NEGLIGENCE OF ANGELINO SEVILLEJO WAS THE PROXIMATE CAUSE OF THE LOSS. F.000. V THE COURT OF APPEALS ERRED IN NOT HOLDING THE YARD LIABLE FOR INTEREST. IT IS INIQUITOUS TO ALLOW THE YARD TO LIMIT LIABILITY. 2. THE CIACS RULING THAT THE YARD WAS EQUALLY NEGLIGENT BECAUSE OF ITS FAILURE TO REQUIRE A HOT WORKS PERMIT FOR THE CUTTING WORK DONE BY ANGELINO SEVILLEJO. FAILURE TO CREDIT FOR SALVAGE RECOVERY EVEN IF THE COURT OF APPEALS RULINGS ON ALL OF THE FOREGOING ISSUES WERE CORRECT AND THE YARD MAY PROPERLY BE HELD EQUALLY LIABLE FOR THE DAMAGE TO THE VESSEL AND REQUIRED TO PAY HALF OF THE DAMAGES AWARDED . ABSENCE OF YARD RESPONSIBILITY IT WAS GRIEVOUS ERROR FOR THE COURT OF APPEALS TO ADOPT. FAILURE OR REFUSAL TO ADDRESS KEPPELS MOTION FOR RECONSIDERATION FINALLY. KCSI cites the following grounds for the allowance of its petition.[19] On the other hand. IT WAS ALSO GRIEVOUS ERROR FOR THE COURT OF APPEALS TO HAVE EFFECTIVELY DENIED. NO CONSTRUCTIVE TOTAL LOSS IT WAS EQUALLY GRIEVOUS ERROR FOR THE COURT OF APPEALS TO RULE. 4. KEPPELS PARTIAL MOTION FOR RECONSIDERATION OF THE ORIGINAL DECISION WHICH SHOWED: 1) WHY PIONEER WAS NOT SUBROGATED TO THE RIGHTS OF THE VESSEL OWNER AND SO HAD NO STANDING TO SUE THE YARD. AFTER THE COURT OF APPEALS ITSELF HAD SHOWN THAT RULING TO BE COMPLETELY WRONG AND BASELESS. to wit: 1. WITHOUT ADDRESSING IT AND ALSO WITHOUT EXPLANATION. WITHOUT EXPLANATION.VI THE COURT OF APPEALS ERRED IN NOT HOLDING THE YARD SOLELY LIABLE FOR ARBITRATION COSTS. THAT THE VESSEL WAS A CONSTRUCTIVE TOTAL LOSS AFTER HAVING ITSELF EXPLAINED WHY THE VESSEL COULD NOT BE A CONSTRUCTIVE TOTAL LOSS. 3. 2) WHY KEPPEL MAY NOT BE REQUIRED TO REIMBURSE PIONEERS PAYMENTS TO THE VESSEL OWNER IN VIEW OF THE CO-INSURANCE CLAUSE IN THE SHIPREPAIR AGREEMENT. AND 3) WHY PIONEER ALONE SHOULD BEAR THE COSTS OF ARBITRATION. WITHOUT EXPLANATION. these errors assigned by both Pioneer and KCSI may be summed up in the following core issues: A. Considering the disparate findings of fact of the CIAC and the CA which led them to different conclusions.874 MILLION. Should interest be imposed on the award of damages? If so. TO REDUCE ANY LIABILITY ON THE PART OF THE YARD TO P9. To whom may negligence over the fire that broke out on board M/V Superferry 3 be imputed? B. PIONEER. only questions of law shall be entertained. how much? D. Is subrogation proper? If proper. Who should bear the cost of the arbitration? To resolve these issues. it is imperative that we digress from the general rule that in petitions for review under Rule 45 of the Rules of Court.(P25 MILLION). [20] To our minds. we are constrained to revisit the factual circumstances surrounding this controversy. THE COURT OF APPEALS STILL ERRED IN NOT DEDUCTING THE SALVAGE VALUE OF THE VESSEL RECOVERED AND RECEIVED BY THE INSURER.[21] . to what extent can subrogation be made? C. From there. and its guidelines and regulations on . stating that the hot work done was beyond the scope of Sevillejos assigned tasks. other workers in the immediate vicinity tried to fight the fire by using fire extinguishers and buckets of water. entered into a contract for the dry docking and repair of the vessel under KCSIs Standard Conditions of Contract for Shiprepair. as owner of M/V Superferry 3.[23] pp. Fighting the fire was extremely difficult because the life jackets and the construction materials of the Deck B ceiling were combustible and permitted the fire to spread within the ceiling void. Exh. 1-Ms. for failing to remove the life jackets from the ceiling void. 2-Mullen. In the meantime. was doing his assigned task. As established before the CIAC The fire broke out shortly after 10:25 and an alarm was raised (Exh. causing the immediate spread of the fire to the other areas of the ship. 18. 1-Mullen. Raymundo Joniga (Dr. smoke came up from under Deck A. where there were combustible materials. 7-8. specifically on Deck A. the fire dropped into the Deck B accommodation areas at various locations. The Shiprepair Agreement is clear that WG&A. The issue of negligence Undeniably. First. particularly Dr. through its crew. Respondent points to cans of paint and thinner. KCSI further posits that WG&A was itself negligent. pp.[24] Pioneer contends that KCSI should be held liable because Sevillejo was its employee who. Angelino Sevillejo tried to put out the fire by pouring the contents of a five-liter drinking water container on it and as he did so. the immediate cause of the fire was the hot work done by Angelino Sevillejo (Sevillejo) on the accommodation area of the vessel.[22] p. it was extremely difficult to contain or extinguish. 2000 or under the Shiprepair Agreement. at the time the fire broke out. KCSI claims otherwise. and it spread rapidly because it was not possible to direct water jets or the fire extinguishers into the space at the source. We rule in favor of Pioneer.The Courts Ruling A. the same not having been authorized under the Work Order[25] dated January 26. 20). 11-12). Joniga). He got another container of water which he also poured whence the smoke was coming. Aini Ling. in addition to the plywood partitions and foam mattresses on deck B (Exh. But because the fire was inside the ceiling void. and that KCSI was solely responsible for all the hot works done on board the vessel. and fuel oil tanks to be carried out only by shipyard workers x x x. Thus. KCSI welders covered by the Work Order performed hot works on various areas of the M/V Superferry 3. Jonigas authority to request the conduct of hot works even on the passenger . aside from its promenade deck. Dr. the vessels passage team leader in charge of its hotel department. Joniga. 2000.[27] This was corroborated by the statements of the vessels hotel manager Marcelo Rabe[28] and the vessels quality control officer Joselito Esteban. Third.[26] WG&A recognized and complied with this restrictive directive such that. 1997. This is supported by Clause 3 of the Shiprepair Agreement requiring the prior written approval of KCSIs Vice President for Operations before WG&A could effect any work performed by its own workers or sub-contractors. viz. KCSIs Vice-President for Operations. accommodation cabin.safety and security.[30] This shows that Dr.[29] KCSI knew of the unfinished hot works in the passenger accommodation areas. Its safety supervisor Esteban Cabalhug confirmed that KCSI was aware that the owners of this vessel (M/V Superferry 3) had undertaken their own (hot) works prior to arrival alongside (sic) on 26 th January. only employees of KCSI may undertake hot works on the vessel while it was in the graving dock in . in the letter dated January 2. . This was a recognition of Dr. the CA erred when it said that WG&A would renovate and reconstruct its own vessel merely using the dry docking facilities of KCSI.: The Yard will restrict all hot works in the engine room. Second. and that no hot work permits could thereafter be issued to WG&As own workers because this was not allowed for the Superferry 3. during the arrival conference on January 26. In the exercise of this authority. banned any hot works from being done except by KCSIs workers. Joniga had authority only to request the performance of hot works by KCSIs welders as needed in the repair of the vessel while on dry dock. specifically requested KCSI to finish the hot works started by the vessels contractors on the passenger accommodation decks. Pursuant to KCSIs rules and regulations on safety and security. providing him and the other welders with its equipment. The Work Order was only a special arrangement between KCSI and WG&A that meant additional cost to the latter. 2000 (five days before the fire) [the Yard] had acknowledged Dr. and (c) did the cutting and welding works on the protection bars at the tourist dining salon of Deck B. giving him and the other welders marching orders to work on the vessel. it was not restricted to the promenade deck only.[35] it was incumbent upon Sevillejo to obtain the required hot work safety permit before starting the work he did. which specifically provides that (n)o hotwork (welding/cutting works) shall be done on board [the] vessel without [a] Safety Permit from KCSI Safety Section. aware of KCSIs Safety Regulations on Vessels Afloat/Dry.[34] Thus. Sevillejo was an employee of KCSI and was subject to the latters direct control and supervision. At the time of the fire. Fourth. and monitoring and keeping track of his and the other welders activities on board. subject to the provision of the January 26. Indeed. in view of the delicate nature of their work. Jonigas authority to order such works or additional jobs. Project Superintendent of KCSI. admitted that as early as February 3. Orcullo. the welders of KCSI: (a) did the welding works on the ceiling hangers in the lobby of Deck A. .accommodation decks. 2000 Work Order that KCSI would supply welders for the promenade deck of the ship. including that done on Deck A where the fire started. At the CIAC proceedings. 2000 Work Order was a special order for the supply of KCSI welders to the promenade deck. that although the January 26.[32] In fact.00/welder/hour.[33] It is evident.[31] at a rate of P150. KCSI was the employer of Sevillejopaying his salaries. (b) did the welding and cutting works on the deck beam to access aircon ducts. as such employee. retaining the power and the right to discharge or substitute him with another welder. 2000. therefore. it was adequately shown that between February 4 and 6. not a cutter. Unfortunately for KCSI. and it may well be that Angelino Sevillejo would not have a full appreciation of the dangers involved.. two hours before the fire. It was established that no hot works could be hidden from or remain undetected by KCSI because the welding cables and the gas hoses emanating from the dock would give the hot works away. However. Hence. who should have had such an appreciation. Sevillejo reluctantly proceeded with his cutting of the bulkhead door at Deck A after Rebaca left. who observed that 4. The foregoing would be compounded by Angelino Sevillejo being an electric arc welder. it is noteworthy that. KCSIs own fire expert. Eric Mullen of the Dr. KCSIs Safety Supervisor. the safety precautions that are expected to be applied by the supervisor are the same for both types of work. KCSI contends that it did its duty when it prohibited Sevillejo from continuing the hot work.H. This conclusion on the failure of supervision by KCSI was absolutely supported by Dr. There was a lapse in KCSIs supervision of Sevillejos work at the time the fire broke out. KCSI had roving fire watchmen and safety assistants who were moving around the vessel. Moreover. However. ensured that the appropriate safety precautions were carried out. a fire watchman.[37] . Rebaca left without pulling Sevillejo out of the work area or making sure that the latter did as he was told.Fifth. the quantity and incendivity of the spray from the hot cutting are much greater than those of sparks from electric arc welding. The dangers of ignition occurring as a result of the two processes are similar in that both electric arc welding and hot cutting produce heat at the work area and sparks and incendive material that can travel some distance from the work area. Burgoyne & Partners (International) Ltd. This made it all the more important that the supervisor. J. thus cutting the door level with the deck.3. until the fire broke out. after purportedly scolding Sevillejo for working without a permit and telling him to stop until the permit was acquired and the other safety measures were observed.[36] This was confirmed by Restituto Rebaca (Rebaca). even disregarding the 4-inch marking set. Singapore. or a fire extinguisher. doing his cutting work without a hot work permit. who actually spotted Sevillejo on Deck A. The omission of that care constitutes negligence. he should have taken all possible precautionary measures. a reasonable and prudent man would take. not only because he worked without the required permit. Rebaca should have replaced him. Generally. For instance. the more imminent the danger. fire buckets. ensured that whatever combustible material may have been in the vicinity would be protected from the sparks caused by the welding torch. including those above mentioned. and covered any holes where the sparks may enter.workers. . under ordinary circumstances of the case.[38] Verily. as well as the foam mattresses. Conjunctively. The greater the danger. inasmuch as KCSI had the power to substitute Sevillejo with another electric arc welder. Similarly. the higher degree of care warranted.[39] In this aspect. since Rebaca was already aware of the hazard. There is negligence when an act is done without exercising the competence that a reasonable person in the position of the actor would recognize as necessary to prevent an unreasonable risk of harm to another. In addition to scolding Sevillejo. fire watch. and extinguishers. He could have easily removed the life jackets from the ceiling void. Those who undertake any work calling for special skills are required to exercise reasonable care in what they do. Rebaca merely checked that no fire had started yet. the greater the degree of care required. failed to comply with the strict safety standards of KCSI. Extraordinary risk demands extraordinary care. arising from the activity that the actor pursues or the instrumentality that he uses. Also. there is an obligation all persons have to take due care which. but also because he failed to undertake other precautionary measures for preventing the fire. Nothing more. at the very least. the degree of care required is graduated according to the danger a person or property may be subjected to. he could have. before allowing Sevillejo to continue with his hot work on Deck A. as discussed above. his negligence gave rise to the vicarious liability of his employer[43] under Article 2180 of the Civil Code. The obligation imposed by article 2176 is demandable not only for ones own act or omission. It was shown during the hearings before the CIAC that the removal of the life jackets would not have made much of a difference.KCSI failed to exercise the necessary degree of caution and foresight called for by the circumstances. was negligent. yield the inevitable conclusion that Sevillejo was negligent in the performance of his assigned task. Dr. but failed to supervise him with the degree of care warranted by the attendant circumstances. This was the uniform conclusion of both WG&As[40] and KCSIs[41] fire experts. 2000 Work Order and the Shiprepair Agreement. 2180. It was also proven during the CIAC proceedings that KCSI did not see the life jackets as being in the way of the hot works. taken collectively. Dr. The fire would still have occurred due to the presence of other combustible materials in the area. These hot works were deemed included in the January 26. xxxx . Neither can Dr. On the one hand. KCSI was aware of what Sevillejo was doing. In the exercise of this authority. making their removal from storage unnecessary. thus. but also for those of persons for whom one is responsible. Joniga be faulted for not removing the life jackets from the ceiling void for two reasons (1) the life jackets were not even contributory to the occurrence of the fire.[42] These circumstances. As he was then definitely engaged in the performance of his assigned tasks as an employee of KCSI. Joniga had authority to request the performance of hot works in the other areas of the vessel. We cannot subscribe to KCSIs position that WG&A. through Dr. which provides Art. Joniga. Joniga asked Sevillejo to do the cutting of the bulkhead door near the staircase of Deck A. His negligence was the proximate cause of the fire on board M/V Superferry 3. and (2) it was not incumbent upon him to remove the same. a constructive total loss occurs under any of the conditions set forth . and its liability is primary and solidary. subject to the claim of KCSI as to the salvage value of M/V Superferry 3. KCSI insists on the validity of the limited-liability clause up to P50. It further argues that the limitation of liability clause found in the Shiprepair Agreement is null and void for being iniquitous and against public policy. even though the former are not engaged in any business or industry. and that there is no proof of payment of the insurance proceeds.000. there is ample proof of the employees negligence. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. The right of subrogation Pioneer asseverates that there existed a total constructive loss so that it had to pay WG&A the full amount of the insurance coverage and. by operation of law. it is responsible for the damages caused by the negligent act of its employee.Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks.[45] From the foregoing disquisition. it was entitled to be subrogated to the rights of WG&A to claim the amount of the loss. KCSI also claims that the salvage value of the vessel should be deducted from whatever amount it will be made to pay to Pioneer. because WG&A acceded to the provision when it executed the Shiprepair Agreement. KCSI counters that a total constructive loss was not adequately proven by Pioneer.00. by his negligence. In marine insurance. We find in favor of Pioneer. caused damage to another in order to make the employer responsible for the tortuous act of the former.[44] Consequently.000. B. KCSI failed to prove that it exercised the necessary diligence incumbent upon it to rebut the legal presumption of its negligence in supervising Sevillejo. All that is needed is proof that the employee has. 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 appears, however, that in the execution of the insurance policies over M/V Superferry 3, WG&A and Pioneer incorporated by reference the American Institute Hull Clauses 2/6/77, the Total Loss Provision of which reads Total Loss In ascertaining whether the Vessel is a constructive Total Loss the Agreed Value shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck shall be taken into account. There shall be no recovery for a constructive Total Loss hereunder unless the expense of recovering and repairing the Vessel would exceed the Agreed Value in policies on and Machinery. In making this determination, only expenses incurred or to be incurred by reason of a single accident or a sequence of damages arising from the same accident shall be taken into account, but expenses incurred prior to tender of abandonment shall not be considered if such are to be claimed separately under the Sue and Labor clause. x x x. In the course of the arbitration proceedings, Pioneer adduced in evidence the estimates made by three (3) disinterested and qualified shipyards for the cost of the repair of the vessel, specifically: (a) P296,256,717.00, based on the Philippine currency equivalent of the quotation dated April 17, 2000 turned in by Tsuneishi Heavy Industries (Cebu) Inc.; (b) P309,780,384.15, based on the Philippine currency equivalent of the quotation of Sembawang Shipyard Pte. Ltd., ; and (c) P301,839,974.00, based on the Philippine currency equivalent of the quotation of Singapore Technologies Marine Ltd. All the estimates showed that the repair expense would exceed P270,000,000.00, the amount equivalent to of the vessels insured value of P360,000,000.00. Thus, WG&A opted to abandon M/V Superferry 3 and claimed from Pioneer the full amount of the policies. Pioneer paid WG&As claim, and now demands from KCSI the full amount of P360,000,000.00, by virtue of subrogation. KCSI denies the liability because, aside from its claim that it cannot be held culpable for negligence resulting in the destructive fire, there was no constructive total loss, as the amount of damage was only US$3,800,000.00 or P170,611,260.00, the amount of repair expense quoted by Simpson, Spence & Young. In the face of this apparent conflict, we hold that Section 139 of the Insurance Code should govern, because (1) Philippine law is deemed incorporated in every locally executed contract; and (2) the marine insurance policies in question expressly provided the following: IMPORTANT This insurance is subject to English jurisdiction, except in the event that loss or losses are payable in the Philippines, in which case if the said laws and customs of England shall be in conflict with the laws of the Republic of the Philippines, then the laws of the Republic of the Philippines shall govern. (Underscoring supplied.) The CA held that Section 139 of the Insurance Code is merely permissive on account of the word may in the provision. This is incorrect. Properly considered, the word may in the provision is intended to grant the insured (WG&A) the option or discretion to choose the abandonment of the thing insured (M/V Superferry 3), or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss when the cause of the loss is a peril insured against. This option or discretion is expressed as a right in Section 131 of the same Code, to wit: Sec. 131. A constructive total loss is one which gives to a person insured a right to abandon under Section one hundred thirty-nine. and acceptable proof of the extent of the damage sustained by the vessel. It is significant that these estimates were confirmed by the Adjustment Report dated June 5, 2000 submitted by Richards Hogg Lindley (Phils.), Inc., the average adjuster that Pioneer had enlisted to verify and confirm the extent of the damage. The Adjustment Report verified and confirmed that the damage to the vessel amounted to a constructive total loss and that the claim for P360,000,000.00 under the policies was compensable.[46] It is also noteworthy that KCSI did not cross-examine Henson Lim, Director of Richards Hogg, whose affidavit-direct testimony submitted to the CIAC confirmed that the vessel was a constructive total loss. 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. On this note, we find as unacceptable the claim of KCSI that there was no ample proof of payment simply because the person who signed the Receipt appeared to be an employee of Aboitiz Shipping Corporation.[47] 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. On the matter of subrogation, Article 2207 of the Civil Code provides Art. 2207. If the plaintiffs property has been insured and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. 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. Subrogation is the substitution of one person by another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under an insurance policy is entitled to all the rights in .[50] . and good conscience. as found in the Shiprepair Agreement. However. otherwise. that KCSI stands as a co-assured in the insurance policies.and remedies belonging to the insured against a third party with respect to any loss covered by the policy. It is designed to promote and to accomplish justice. because he did not want WG&A to be bound by them. and is the mode that equity adopts to compel the ultimate payment of a debt by one who.[49] We cannot accept KCSIs insistence on upholding the validity Clause 20. such as M/V Superferry 3. nor of Clause 22(a). nor does it grow out of. They are unfair and inequitable under the premises. in justice. It contemplates full substitution such that it places the party subrogated in the shoes of the creditor. and he may use all means that the creditor could employ to enforce payment. testified that he did not sign the fine-print portion of the Shiprepair Agreement where Clauses 20 and 22(a) were found. The doctrine of subrogation has its roots in equity. any privity of contract. It accrues simply upon payment by the insurance company of the insurance claim. equity. Clauses 20 and 22(a) of the Shiprepair Agreement are without factual and legal foundation. Engr.[48] We have held that payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the insured may have against the third party whose negligence or wrongful act caused the loss. Bello. The right of subrogation is not dependent upon.000.00. considering that it was only KCSI that had shipyard facilities large enough to accommodate the dry docking and repair of big vessels owned by WG&A.000. ought to pay. WG&As fleet manager. Elvin F. which provides that the limit of its liability is only up to P50. he had to sign the front portion of the Shiprepair Agreement. the vessel would not be accepted for dry docking. It was established during arbitration that WG&A did not voluntarily and expressly agree to these provisions. It is an elementary rule that a waiver must be positively proved. To have . The intention of the parties to make each other a co-assured under an insurance policy is to be gleaned principally from the insurance contract or policy itself and not from any other contract or agreement. but must have been made knowingly. To allow KCSI to limit its liability to only P50.[53] Along the same vein. and with sufficient awareness of the relevant circumstances and likely consequences. because the insurance policy denominates the assured and the beneficiaries of the insurance contract. notwithstanding the fact that there was a constructive total loss in the amount of P360.000. at the very least. while the other party merely affixes his signature signifying his adhesion thereto.00. completely depriving such party of the opportunity to bargain on equal footing. There was clearly no intention on the part of WG&A to relinquish such right. Although not invalid. a contract of adhesion is void when the weaker party is imposed upon in dealing with the dominant bargaining party. Clause 22(a) cannot be upheld. There was no manifest intention on the part of WG&A to constitute KCSI as a co-assured under the policies. since a waiver by implication is not normally countenanced.000.000. would sanction the exercise of a degree of diligence short of what is ordinarily required.00. and its option is reduced to the alternative of taking it or leaving it. for its actual market value.[52] This has not been demonstrated in this case.000. The norm is that a waiver must not only be voluntary. Clause 20 is a stipulation that may be considered contrary to public policy.prepared by only one party. It would not be difficult for a negligent party to escape liability by the simple expedient of paying an amount very much lower than the actual damage or loss sustained by the other. Likewise. the hull and machinery insurance procured by WG&A from Pioneer named only the former as the assured.[51] Clause 20 is also a void and ineffectual waiver of the right of WG&A to be compensated for the full insured value of the vessel or. Undeniably. per se. intelligently. There must be persuasive evidence to show an actual intention to relinquish the right. It was proven before the CIAC that the machinery and the hull of the vessel were separately sold for P25.809.[54] Nevertheless.00 (or US$468.333.648.89 should earn interest at 6% per annum from the filing of the case until the award becomes final and executory. Not considering this salvage value in the award would amount to unjust enrichment on the part of Pioneer. v. C.812. Thereafter. Inc.50. On the imposition of interest Pursuant to our ruling in Eastern Shipping Lines. or equivalent to P30.[55] the award in favor of Pioneer in the amount of P350. However. the rate of interest shall be 12% per annum from the date the award becomes final and executory until its full satisfaction.252.deemed KCSI as a co-assured under the policies would have had the effect of nullifying any claim of WG&A from Pioneer for any loss or damage caused by the negligence of KCSI.96).75 (or US$157.33) and US$363. on a pro rata basis. WG&As claim for the upkeep of the wreck until the same were sold amounts to P8. for a net recovery of US$673. as it believed that it was entitled to claim reimbursement of the amount it paid to WG&A.000. Otherwise.737. WG&A could not have intended such a result.289.290.786. we disagree with Pioneer that only KCSI should shoulder the .09. Court of Appeals. respectively. D.146.87. the prevailing exchange rate when the Request for Arbitration was filed.8977/$1. at P44. any claim for loss or damage under the policy would be rendered nugatory. No ship owner would agree to make a ship repairer a co-assured under such insurance policy. to be deducted from the proceeds of the sale of the machinery and the hull. we concur with the position of KCSI that the salvage value of the damaged M/V Superferry 3 should be taken into account in the grant of any award. We find that Pioneer had a valid reason to institute a suit against KCSI. On the payment for the cost of arbitration It is only fitting that both parties should share in the burden of the cost of arbitration.521. 91.R.252. with six percent (6%) interest per annum reckoned from the time the Request for Arbitration was filed until this Decision becomes final and executory.000.351. VELASCO. The arbitration costs shall be borne by both parties on a pro rata basis. the Petition of Pioneer Insurance and Surety Corporation in G. or the net total amount of P329. Otherwise. Inc. in G. we would be putting a price on the right to litigate on the part of Pioneer.747. plus twelve percent (12%) interest per annum on the said amount or any balance thereof from the finality of the Decision until the same will have been fully paid. KCSI is ordered to pay Pioneer the amount of P360.arbitration costs. Accordingly.09. 2007 of the Court of Appeals is MODIFIED. 180896-97 and the Petition of Keppel Cebu Shipyard. Associate Justice Associate Justice . equivalent to the salvage value recovered by Pioneer from M/V Superferry 3. SO ORDERED. WHEREFORE.648. No.R. CHICO-NAZARIO PRESBITERO J. KCSI cannot be faulted for defending itself for perceived wrongful acts and conditions. No. JR. ANTONIO EDUARDO B. 180880-81 are PARTIALLY GRANTED and the Amended Decision dated December 20. Costs against KCSI.00 less P30.000. NACHURA Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Acting Chief Justice Chairperson MINITA V. Nos. Article VIII of the Constitution. [5] at 483-484. namely [7] (a) The total liability of the Contractor to the Customer (including the liability to replace under Clause 17) or of any Sub-contractor shall be limited in respect of any and/or defect(s) or event(s) to the sum of Pesos Philippine Currency Fifty Million only x x x. pp. Nos.R. [12] at 236-242. 180896-97). [4] at 146-165. p. [8] [9] Rollo (G. 180880-81).R. 526. [13] at 229-320. Nos. [2] Rollo (G. [6] The Shiprepair Agreement was duly acknowledged by the parties before a notary public. [11] at 236. Nos. 180896-97). 338-378. 116-144. her crew and the equipment on board and on other goods owned or held by the Customer against any and all risks and liabilities and ensure that such insurance policies shall include the Contractor as a coassured.R. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. [10] at 167. PERALTA Associate Justice C E RT I FI CAT I O N Pursuant to Section 13.R. CONSUELO YNARES-SANTIAGO Acting Chief Justice * Acting Chief Justice. pp.DIOSDADO M. 22(a) The Customer shall keep the vessel adequately insured for the vessels hull and machinery. pp. [3] Rollo (G. 33-109. The Contractor shall not be under any liability to the Customer either in contract or otherwise except for negligence and such liability shall itself be subject to the following overriding limitations and exceptions. [1] Rollo (G. . 180896-97). 20. No. x x x we discussed the projected dry docking works and the shipyard safety regulations particularly the restriction that only shipyard workers and welders can perform hot works on board the vessel. a Work Order dated January 26. meaning. [25] The Work 1. 3. February 8. pp. [15] at 319. the ship owner through me as the one in charge of the hotel department could request maintenance works in the passenger decks which may be determined and the need for which may arise only in the course of the dry docking and which will require hot works by the yards welders subject to shipyard safety and billing regulations. p. engine blower & change both ball bearing 15 kw. Joniga gave this narration under oath: 5. 2007. [27] Dr. Rita. Renew deteriorated air vent and sides pls as required. 440 Wtts as required. 262.R. Order dated January 26. That at the arrival conference on January 26. JO# 89/99 Pull-out & clean w/ chemical of Aux. Renew sleeve on endcover of motor as required. 2. pp.R. [23] Dr. Renew deteriorated side frames & fwd pls as required. [17] Now a member of this Court. and on that same date. 515 SCRA 157. 180880-81). Sta. My aforementioned input was duly taken note of. 2000 provided to Supply of 5 welders & equipment as per Owners instructions to promenade deck. G. 2000. [18] at 163-164. Nos. 180896-97). [24] Rollo (G. [20] Rollo (G. the fire expert presented by KCSI. 2000 signed by the Ship Superintendent Manuel Amagsila and KCSI Project Superintendent Gerry .[14] at 286. Prudential Shipping and Management Corporation v. 180896-97). Nos. 5. During the said conference. [21] [22] The fire expert presented by Pioneer. Eric Mullen. [19] Rollo (G. 46-48.R. No. 28. [16] at 143-144. 356-357. p. Deck B and Deck C. according to owners instructions. 27 amp. 166580. I brought up the need of the hotel department specifically for the yard to provide welders to the passenger accommodations on Deck A. [26] CIAC Decision.R. 4. par. Gerry Orcullo. p. p. (Exhibit A-Esteban. 357 Phil. (TSN. 319-320. which the Yard knew because they inspected and went around the vessel when we arrived on January 26. par. (Exhibit CRabe. p. Aini Ling. your Honor. 58. [35] at 52. but included the unfinished hot works in the tourist and other passenger areas. x x x That doesnt mean that they (sic) might not be a fire. pp. a Work Order dated January 26. to supply 5 welders and equipment as per owners instructions to promenade deck. Per the affidavit of The Yards Commercial Manager Khew Kah Khin who said. p. [40] Ms. This was an unusual arrangement and I cannot recall any other occasion on which the Yard welders were supplied in similar circumstances. 2.) [30] Cabalhugs affidavit-direct testimony dated May 24.) [28] 4. Exhibit A-Esteban. par. Without the Yards express knowledge or permission. because Dr. 2000 was signed whereby the ship owner could request for some hot work in the passenger decks as per Owners instructions with the ships hotel department indicating certain maintenance or renovation in the course of the dry docking but it will be the yard which will execute the hot works needed. 2002. there is no ignition of life jackets. x x x I confirm that said Work Order [of 26 January 2000] required the Yard.Orcullo x x x. WG&As fire expert. [34] CIAC Decision. 4. pp. Exhibit C-Rabe. because there are other combustible materials in the ceiling void. and the Yard agreed. 2002. 2. (Exhibit C-Joniga. 6. 2) 4. 167-170. CA. otherwise the dry docking would be useless. Joniga wanted that the unfinished hot works in the promenade deck and passenger areas that were started in Manila should be finished. specifically testified: Sir. May 22. I quoted verbally PhP150 per man per hour. Exhibit 2-Mullen (Supplementary Report on the fire on board Superferry 3). p. no yard welder will just go to some part of the vessel and do some kind of hot work. if there is no life jacket. [36] TSN. May 21. Joniga during said arrival conference. 7. Avelino Aves [37] (on cross-examination). 2001. of course. as quoted in the CIAC Decision. As I said only Yard workers performed hot works on board the vessel. [31] Exhibit C-Joniga. 2000. Later I saw a copy of the work order for the supply of welders to the owners to carry out the same work and was asked for a quotation for this. [38] Far Eastern Shipping Company v. 703 (1998). [29] The place mentioned was to promenade deck because the bulk of the work was in the promenade deck. That upon request of Dr. The unfinished hot works in the passenger areas were also known to shipyard project superintendent Gerry Orcullo. [32] [33] TSN. . Huang. which I firmly believe to be the case that the material fell through the holes. No. 525 SCRA 427. as quoted in the CIAC Decision. you also heard Ms. G. [43] Garcia. the ceiling itself would ignite easily because the material that is falling down is very incendive (sic) and in some cases has flames on them. 525 SCRA 229. 168512. it wouldnt have made that much difference had the life jackets been removed. 132-133. 518 SCRA 568. Q Up to now you do not require despite A We dont touch any item unless it is in the way of the work. 2007. 2002. Lapanday Agricultural and Development Corporation (LADECO) v. 54-55). I said it belongs to the ship. would have eliminated the most likely source of the fire. The Yards fire expert. . 2007. 153076. pp. [44] [45] Mercury Drug Corporation v. p. her opinion was still that there was a possibility of fire from say. G. pp. Angala. Ling say that even if she concedes that the removal of the life jackets from under the ceiling void would have made the most likely source of the fire.38). LIM: Q Did you require the vessel to take out the life jackets and put them somewhere else or some place else on board or on shore? MR.R. who testified in this wise: [42] ATTY. 172122. Rollo (G. MULLEN: In so far as my mechanism.R. June 21. v. wires or the ceiling material which was plywood she says on top of the Formica. March 20. p. Q You. This fact was admitted during cross-examination by Geoff Phoon. Do you have any views regarding that? DR. Because you have the life jackets would ignite easily. there was still possibility for fire. (TSN.R.R. in fact. 368-369. Eric Mullen. May 22. No. . May 23. it would have made that much difference. June 22. 180880-81). 38-39). is as follows: ATTY. You asked me do I require. No. LOMBOS: Now. Jr. [46] CIAC Decision. ah. 2007. So. [41] The pertinent testimony of Dr. Nos. 31-32. 2002. G. pp. 80. pp. The Yards president. PHOON: A We dont touch the ship property. did not require that? A It belongs to the ship. (TSN. [47] KCSIs Petition. Inc.* and PERLAS-BERNABE. ENRICO ALBERTO REYES..[48] Lorenzo Shipping Corp. 431 SCRA 266. [52] Cebu Shipyard and Engineering Works. RODELIO ALBERTO and PERALTA. 558 SCRA 300. 234 SCRA 78. JR. Inc. Promulgated: February 1. 174466. G.R.. 1994. Perez. JJ. No. 147724. 2004. Present: .R.. 2004. 339 Phil..R.R. v.versus - VELASCO. Respondents. July 12. July 14. [55] G. 148541. 2009. 176246. Court of Appeals. November 11. Inc. 455 (1997). Inc. [51] Premiere Development Bank v. No. Chairperson. 3-4. No. [53] [54] at 780. 194320 Petitioner.. Development Bank of the v. No. 442 SCRA 238. G. INC. pp.R. J. February 13. Inc. MENDOZA. May 5. G. No. G. v. Chubb and Sons. 306 SCRA 762. G.. 781.. 2008. v. [49] PHILAMGEN v. No.R. No. 1999. 2012 x-----------------------------------------------------------------------------------------x . [50] Exhibit E-Bello. June 8. 132607.R. William Lines. Central Surety & Insurance Company. G. REYES. Republic of the SUPREME COURT Manila THIRD DIVISION MALAYAN INSURANCE CO. ACI Philippines. Coquia. 97412. (2) an Isuzu Tanker with plate number PLR 684. seeking to reverse and set aside the July 28. own damage and theft. Having insured the vehicle against such risks.[5] Previously. Branch 51 in .. Senior Police Officer 1 Alfredo M. 2010 Resolution[2] denying the motion for reconsideration filed by petitioner Malayan Insurance Co. J. (3) a Fuzo Cargo Truck with plate number PDL 297. The Facts At around 5 oclock in the morning of December 17. to wit: (1) a Nissan Bus operated by Aladdin Transit with plate number NYS 381. Malayan Insurance claimed in its Complaint dated October 18. 2009 of the Regional Trial Court. PV-025-00220 in favor of First Malayan Leasing and Finance Corporation (the assured). Inc. these two vehicles were shoved forward and the front left portion of the Mitsubishi Galant rammed into the rear right portion of the Isuzu Tanker. Malayan Insurance issued Car Insurance Policy No.[4] Based on the Police Report issued by the on-the-spot investigator.. City.DECISION VELASCO. (Malayan Insurance). All three (3) vehicles were at a halt along EDSA facing the south direction when the Fuzo Cargo Truck simultaneously bumped the rear portion of the Mitsubishi Galant and the rear left portion of the Nissan Bus. involving four (4) vehicles. Dungga (SPO1 Dungga). an accident occurred at the corner of EDSA and . JR. insuring the aforementioned Mitsubishi Galant against third party liability.: The Case Before Us is a Petition for Review on Certiorari under Rule 45. 2010 CA Decision reversed and set aside the Decision[3] dated February 2. among others. Due to the strong impact. the Isuzu Tanker was in front of the Mitsubishi Galant with the Nissan Bus on their right side shortly before the vehicular incident. 1994. and (4) a Mitsubishi Galant with plate number TLM 732. 2010 Decision[1] of the Court of Appeals (CA) and its October 29. 1999 that it paid the . particularly on December 15. 1995. The July 28. who attested that he processed the insurance claim of the assured and verified the documents submitted to him. coming from the service road of EDSA. the registered owner and the driver. trial ensued.[7] In their Answer. ruled in favor of Malayan Insurance and declared respondents liable for damages. The dispositive portion reads: WHEREFORE. a motor car claim adjuster. The Nissan Bus. causing damage to the latter in the amount of PhP 20. in Civil Case No. Malayan Insurance was constrained to file a complaint for damages for gross negligence against respondents. the trial court. on the other hand.[6] Maintaining that it has been subrogated to the rights and interests of the assured by operation of law upon its payment to the latter. the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant.damages sustained by the assured amounting to PhP 700. As a consequence. They alleged that the speeding bus. respondents asserted that they cannot be held liable for the vehicular accident.000. hit the rear end of the vehicle in front of it. Reyes stepped hard on the brakes but the braking action could not cope with the inertia and failed to gain sufficient traction. respectively. When the Nissan Bus abruptly stopped. 2009. 99-95885.000. of the Fuzo Cargo Truck. Respondents also controverted the results of the Police Report. asserting that it was based solely on the biased narration of the Nissan Bus driver. Malayan Insurance presented the testimony of its lone witness. maneuvered its way towards the middle lane without due regard to Reyes right of way. When respondents refused to settle their liability. Malayan Insurance sent several demand letters to respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes). judgment is hereby rendered in favor of the plaintiff against defendants jointly and . requiring them to pay the amount it had paid to the assured. which. In its Decision dated February 2. in turn. Respondents.[8] After the termination of the pre-trial proceedings. sideswiped the Fuzo Cargo Truck. on the other hand. since its proximate cause was the reckless driving of the Nissan Bus driver. failed to present any evidence. [10] The CA held that the evidence on record has failed to establish not only negligence on the part of respondents. The Complaint dated 18 October 1999 is hereby DISMISSED for lack of merit. 3. respondents are deemed to have waived their right to question its authenticity and due execution. was not properly identified by the police officer who conducted the on-the-spot investigation of the subject collision. Malayan Insurance raises the following . The amount of P700. as a reviewing body. No costs. the CA reversed and set aside the Decision of the trial court and ruled in favor of respondents. Cost of suit. which has been made part of the records of the trial court. much less accord it evidentiary value. In its Decision dated July 28. held that an appellate court. Attorneys fees of P10. arguing that a police report is a prima facie evidence of the facts stated in it.[13] In its Resolution dated October 29. the CA denied the motion for reconsideration. SO ORDERED. 2. disposing: WHEREFORE. thus. And inasmuch as they never questioned the presentation of the report in evidence.000. the instant appeal is hereby GRANTED and the assailed Decision dated 2 February 2009 REVERSED and SET ASIDE. but also compliance with the other requisites and the consequent right of Malayan Insurance to subrogation.00 with legal interest from the time of the filing of the complaint. The Issues In its Memorandum[14] dated June 27. CV No. 2010. Hence.R. SO ORDERED.000. 2011.severally to pay plaintiff the following: 1. docketed as CA-G.00 and.[12] Subsequently. It. 2010. the foregoing considered. 93112.[9] Dissatisfied. respondents filed an appeal with the CA. cannot rightly appreciate firsthand the genuineness of an unverified and unidentified document. Malayan Insurance filed its Motion for Reconsideration. Malayan Insurance filed the instant petition.[11] It noted that the police report. On the other hand. II WHETHER THE SUBROGATION OF MALAYAN INSURANCE IS IMPAIRED AND/OR DEFICIENT. even without the presentation of the police investigator who prepared the police report. respondents submit the following issues in its Memorandum[15] dated July 7. the issues boil down to the following: (1) the admissibility of the police report. II WHETHER THE PIECES OF EVIDENCE PRESENTED BY MALAYAN INSURANCE ARE SUFFICIENT TO CLAIM FOR THE AMOUNT OF DAMAGES. Essentially. said report is still admissible in evidence. III WHETHER THE SUBROGATION OF MALAYAN INSURANCE HAS PASSED COMPLIANCE AND REQUISITES AS PROVIDED UNDER PERTINENT LAWS. 2011: I WHETHER THE CA IS CORRECT IN DISMISSING THE COMPLAINT FOR FAILURE OF MALAYAN INSURANCE TO OVERCOME THE BURDEN OF PROOF REQUIRED TO ESTABLISH THE NEGLIGENCE OF RESPONDENTS. (2) the sufficiency of the evidence to support a claim for gross negligence.issues for Our consideration: I WHETHER THE CA ERRED IN REFUSING ADMISSIBILITY OF THE POLICE REPORT SINCE THE POLICE INVESTIGATOR WHO PREPARED THE SAME DID NOT ACTUALLY TESTIFY IN COURT THEREON. Our Ruling The petition has merit. and (3) the validity of subrogation in the instant case. Admissibility of the Police Report Malayan Insurance contends that. especially since respondents failed to make a timely objection to its presentation in . which must have been acquired by the public officer or other person personally or through official information. CA. the presentation of the police report itself is admissible as an exception to the . PICOP Resources. (b) that it was made by the public officer in the performance of his or her duties. [17] Indeed. Consunji.[19] Such testimony is considered hearsay and may not be received as proof of the truth of what the witness has learned. a witness can testify only to those facts which the witness knows of his or her personal knowledge. and (c) that the public officer or other person had sufficient knowledge of the facts by him or her stated.[16] Respondents counter that since the police report was never confirmed by the investigating police officer. Rule 130 provides: Entries in official records made in the performance of his duty by a public officer of the .[18] Concomitantly. as an exception to the hearsay rule of entries in official records. or by a person in the performance of a duty specially enjoined by law are prima facie evidence of the facts therein stated. thus: (a) that the entry was made by a public officer or by another person specially enjoined by law to do so. that is. This is known as the hearsay rule. In Alvarez v. which are derived from the witness own perception. Notably. among which are entries in official records.evidence. [20] As discussed in D. it cannot be considered as part of the evidence on record. There are several exceptions to the hearsay rule under the Rules of Court. v. under the rules of evidence. a witness may not testify on matters which he or she merely learned from others either because said witness was told or read or heard those matters. Inc. the general rule that excludes hearsay as evidence applies to written.[21] Hearsay is not limited to oral testimony or statements.[22] Section 44.M. or by such other person in the performance of a duty specially enjoined by law. as well as oral statements.[23] this Court reiterated the requisites for the admissibility in evidence. [27] We agree with Malayan Insurance. It further contends that respondents failed to present any evidence to overturn the presumption of negligence. bumped the rear of the Mitsubishi Galant. the police report is still admissible in evidence. respondents claim that since Malayan Insurance did not present any witness who shall affirm any negligent act of Reyes in driving the Fuzo Cargo truck before and after the incident.hearsay rule even if the police investigator who prepared it was not presented in court. the on-the-spot investigator. The D. loses relevance in the face of the application of res ipsa loquitur by the CA. and while the . there is no evidence which would show negligence on the part of respondents. still. the doctrine of res ipsa loquitur is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence. Respondents failed to make a timely objection to the police reports presentation in evidence. the third requisite is lacking. prepared the report. thus. Even if We consider the inadmissibility of the police report in evidence. As a rule of evidence. what is not clear is whether SPO1 Dungga had sufficient personal knowledge of the facts contained in his report. the driver of the Fuzo Cargo truck.[26] Contrarily. and he did so in the performance of his duty. case is quite elucidating: Petitioners contention. however. they are deemed to have waived their right to do so. The effect of the doctrine is to warrant a presumption or inference that the mere fall of the elevator was a result of the person having charge of the instrumentality was negligent. he is presumed to be negligent unless proved otherwise. as long as the above requisites could be adequately proved. The concept of res ipsa loquitur has been explained in this wise: While negligence is not ordinarily inferred or presumed. there is no dispute that SPO1 Dungga.[24] Here. However. respondents cannot evade liability by virtue of the res ipsa loquitur doctrine. Sufficiency of Evidence Malayan Insurance contends that since Reyes. Consunji. Inc. Thus.[25] As a result.M. and therefore is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence. It has been said that the doctrine of res ipsa loquitur furnishes a bridge by which a plaintiff. as sometimes stated. that the thing or instrumentality speaks for itself. is a rule of necessity. The inference which the doctrine permits is grounded upon the fact that the chief evidence of the true cause. reasonable evidence. in the absence of explanation by the defendant.mere happening of an accident or injury will not generally give rise to an inference or presumption that it was due to negligence on defendants part. The construction site is within the exclusive control and management of appellant. it is within the power of the defendant to show that there was no negligence on his part. some courts add to the three prerequisites for the application of the res ipsa loquitur doctrine the further requirement that for the res ipsa loquitur doctrine to apply. that necessary evidence is absent or not available.. Accordingly. One of the theoretical bases for the doctrine is its necessity. It has a safety engineer. or at least permit an inference of negligence on the part of the defendant. and direct proof of defendants negligence is beyond plaintiffs power.e. and that the occurrence resulting in the injury was such as in the ordinary course of things would not happen if those who had its control or management used proper care. or in one jurisdiction. x x x where it is shown that the thing or instrumentality which caused the injury complained of was under the control or management of the defendant. or that the party to be charged with negligence has superior knowledge or opportunity for explanation of the accident. whether culpable or innocent. The CA held that all the requisites of res ipsa loquitur are present in the case at bar: There is no dispute that appellees husband fell down from the 14th floor of a building to the basement while he was working with appellants construction project. that the injury arose from or was caused by the defendants want of care. which means. reaches over to defendant who knows or should know the cause. is practically accessible to the defendant but inaccessible to the injured person. under the doctrine of res ipsa loquitur. the facts or circumstances accompanying an injury may be such as to raise a presumption. for any explanation of care exercised by the defendant in respect of the matter of which the plaintiff complains. without knowledge of the cause. there is sufficient evidence. or. a project . it must appear that the injured party had no knowledge or means of knowledge as to the cause of the accident. in that it proceeds on the theory that under the peculiar circumstances in which the doctrine is applicable. another court has said. literally. The res ipsa loquitur doctrine. or some other person who is charged with negligence. resulting to his death. the thing or transaction speaks for itself. The res ipsa loquitur doctrine is based in part upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge. i. superintendent, a carpenter leadman and others who are in complete control of the situation therein. The circumstances of any accident that would occur therein are peculiarly within the knowledge of the appellant or its employees. On the other hand, the appellee is not in a position to know what caused the accident. Res ipsa loquitur is a rule of necessity and it applies where evidence is absent or not readily available, provided the following requisites are present: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence; and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured. x x x. No worker is going to fall from the 14th floor of a building to the basement while performing work in a construction site unless someone is negligent[;] thus, the first requisite for the application of the rule of res ipsa loquitur is present. As explained earlier, the construction site with all its paraphernalia and human resources that likely caused the injury is under the exclusive control and management of appellant[;] thus[,] the second requisite is also present. No contributory negligence was attributed to the appellees deceased husband[;] thus[,] the last requisite is also present. All the requisites for the application of the rule of res ipsa loquitur are present, thus a reasonable presumption or inference of appellants negligence arises. x x x. Petitioner does not dispute the existence of the requisites for the application of res ipsa loquitur, but argues that the presumption or inference that it was negligent did not arise since it proved that it exercised due care to avoid the accident which befell respondents husband. Petitioner apparently misapprehends the procedural effect of the doctrine. As stated earlier, the defendants negligence is presumed or inferred when the plaintiff establishes the requisites for the application of res ipsa loquitur. Once the plaintiff makes out a prima facie case of all the elements, the burden then shifts to defendant to explain. The presumption or inference may be rebutted or overcome by other evidence and, under appropriate circumstances a disputable presumption, such as that of due care or innocence, may outweigh the inference. It is not for the defendant to explain or prove its defense to prevent the presumption or inference from arising. Evidence by the defendant of say, due care, comes into play only after the circumstances for the application of the doctrine has been established.[28] In the case at bar, aside from the statement in the police report, none of the parties disputes the fact that the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which, in turn, hit the rear end of the vehicle in front of it. Respondents, however, point to the reckless driving of the Nissan Bus driver as the proximate cause of the collision, which allegation is totally unsupported by any evidence on record. And assuming that this allegation is, indeed, true, it is astonishing that respondents never even bothered to file a cross-claim against the owner or driver of the Nissan Bus. What is at once evident from the instant case, however, is the presence of all the requisites for the application of the rule of res ipsa loquitur. To reiterate, res ipsa loquitur is a rule of necessity which applies where evidence is absent or not readily available. As explained in D.M. Consunji, Inc., it is partly based upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge, and, therefore, is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence. As mentioned above, the requisites for the application of the res ipsa loquitur rule are the following: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence; and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.[29] In the instant case, the Fuzo Cargo Truck would not have had hit the rear end of the Mitsubishi Galant unless someone is negligent. Also, the Fuzo Cargo Truck was under the exclusive control of its driver, Reyes. Even if respondents avert liability by putting the blame on the Nissan Bus driver, still, this allegation was self-serving and totally unfounded. Finally, no contributory negligence was attributed to the driver of the Mitsubishi Galant. Consequently, all the requisites for the application of the doctrine of res ipsa loquitur are present, thereby creating a reasonable presumption of negligence on the part of respondents. It is worth mentioning that just like any other disputable presumptions or inferences, the presumption of negligence may be rebutted or overcome by other evidence to the contrary. It is unfortunate, however, that respondents failed to present any evidence before the trial court. Thus, the presumption of negligence remains. Consequently, the CA erred in dismissing the complaint for Malayan Insurances adverted failure to prove negligence on the part of respondents. Validity of Subrogation Malayan Insurance contends that there was a valid subrogation in the instant case, as evidenced by the claim check voucher[30] and the Release of Claim and Subrogation Receipt[31] presented by it before the trial court. Respondents, however, claim that the documents presented by Malayan Insurance do not indicate certain important details that would show proper subrogation. As noted by Malayan Insurance, respondents had all the opportunity, but failed to object to the presentation of its evidence. Thus, and as We have mentioned earlier, respondents are deemed to have waived their right to make an objection. As this Court held in Asian Construction and Development Corporation v. COMFAC Corporation: The rule is that failure to object to the offered evidence renders it admissible, and the court cannot, on its own, disregard such evidence. We note that ASIAKONSTRUCTs counsel of record before the trial court, Atty. Bernard Dy, who actively participated in the initial stages of the case stopped attending the hearings when COMFAC was about to end its presentation. Thus, ASIAKONSTRUCT could not object to COMFACs offer of evidence nor present evidence in its defense; ASIAKONSTRUCT was deemed by the trial court to have waived its chance to do so. Note also that when a party desires the court to reject the evidence offered, it must so state in the form of a timely objection and it cannot raise the objection to the evidence for the first time on appeal. Because of a partys failure to timely object, the evidence becomes part of the evidence in the case. Thereafter, all the parties are considered bound by any outcome arising from the offer of evidence properly presented.[32] (Emphasis supplied.) Bearing in mind that the claim check voucher and the Release of Claim and Subrogation Receipt presented by Malayan Insurance are already part of the evidence on record, and since it is not disputed that the insurance company, indeed, paid PhP 700,000 to the The CAs July 28.[33] Considering the above ruling. SO ORDERED. 2010 Resolution in CA-G. No pronouncement as to cost. 99-95885 is hereby REINSTATED. 2009 issued by the trial court in Civil Case No. It is designed to promote and to accomplish justice.assured. It accrues simply upon payment by the insurance company of the insurance claim. equity. The principle covers a situation wherein an insurer has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. VELASCO. PERALTA Associate Justice . in justice. The doctrine of subrogation has its roots in equity. then there is a valid subrogation in the case at bar. PRESBITERO J. and is the mode that equity adopts to compel the ultimate payment of a debt by one who. it is only but proper that Malayan Insurance be subrogated to the rights of the assured. The Decision dated February 2.R. JR. ought to pay. CV No. 93112 are hereby REVERSED and SET ASIDE. so that he who is substituted succeeds to the rights of the other in relation to a debt or claim. It contemplates full substitution such that it places the party subrogated in the shoes of the creditor. As explained in Keppel Cebu Shipyard. WHEREFORE. v. We have held that payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the insured may have against the third party whose negligence or wrongful act caused the loss. Inc. and good conscience. the petition is hereby GRANTED. including its remedies or securities. Pioneer Insurance and Surety Corporation: Subrogation is the substitution of one person by another with reference to a lawful claim or right. 2010 Decision and October 29. nor does it grow out of. and he may use all means that the creditor could employ to enforce payment. Associate Justice WE CONCUR: DIOSDADO M. The right of subrogation is not dependent upon. any privity of contract. Penned by Associate Justice Josefina Guevara-Salonga and concurred in by Associate Justices Mariflor P. . Associate Justice Chairperson C E R T I FI CAT I O N Pursuant to Section 13. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. JR. and the Division Chairpersons Attestation. RENATO C. Diamante. Punzalan Castillo and Franchito N. PERLAS-BERNABE Associate Justice ATT E S TAT I O N I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CORONA Chief Justice * Additional member per Special Order No. Rollo. pp.JOSE CATRAL BIENVENIDO L. [1] [2] at 29-30. 1178 dated January 26. 16-26. VELASCO. REYES Associate Justice Associate Justice ESTELA M. PRESBITERO J. Article VIII of the Constitution. 2012. [12] at 24.R. Exhibit D. No. 106. [18] RULES OF COURT. citing Africa v. April 20. G.R. 36. Penned by Presiding Judge Gregorio B. 105. COMFAC Corporation. . 2009. 525. [4] at 17. 164516 & 171875. [14] at 99-107. 272. Rule 130. Sec. [5] at 17-18 [6] [7] at 18. at 257-260. [9] at 69-70. 504 SCRA 519. [13] at 88. [8] at 18-19.R.[3] at 64-70. [11] at 22. [15] at 110-115. citations omitted. 2001. 137873. [10] at 25. p. v. 123 Phil. 163915. 2006. [23] [24] at 525-526. [19] D. [27] at 113. G. [17] at 113. [30] Rollo. 606 SCRA 444. Asian Construction and Development Corporation v. Consunji. [29] at 259. Jr. Inc. [21] [22] G. 524. No. December 3. 357 SCRA 249. Clemea. [20] at 254. [28] Supra note 19. [16] at 101. Nos. [25] [26] Rollo. CA. 162243. Caltex. October 16. 253-254. 277 (1966).M. p. R. 141-142. Nos. September 25. . [33] G. 2009. Exhibit E.[31] . 180880-81 & 180896-97. 601 SCRA 96. [32] Supra note 25. 0123. No. 185964 June 16.9 After the requisite investigation and adjustment. 2014 ASIAN TERMINALS.959. (SMITH BELL).40 as insurance indemnity. 1996 and was discharged into the possession and custody of ATI. Respondent. GASI executed a Release of Claim11 discharging FIRST LEPANTO from any and all liabilities pertaining to the lost/damaged shipment and subrogating it to all the rights of recovery and claims the former may have against any person or corporation in relation to the lost/damaged shipment.10 Thereafter. (COSCO) in favor of consignee. GASI sought recompense from COSCO. FIRST LEPANTO-TAISHO INSURANCE CORPORATION. thru its Philippine agent Smith Bell Shipping Lines.550. vs.5 GASI subjected the same to inspection and found that the delivered goods incurred shortages of 8. INC.41. Inc. Petitioner. it appears that the shipment was insured against all risks by GASI with FIRST LEPANTO for P7. Inc. (ATI) liable to pay the money claims of respondent First Lepanto-Taisho Insurance Corporation (FIRST LEPANTO). The shipment arrived in Manila on July 18.000 bags of sodium tripolyphosphate contained in 100 plain jumbo bags complete and in good condition were loaded and received on board M/V "Da Feng" owned by China Ocean Shipping Co..3 3. 1995. The Undisputed Facts On July 6. The shipment remained for quite some time at ATI’s storage area until it was withdrawn by broker. . on August 8 and 9.915 kg of loss/damage valued at P166.50 under Marine Open Policy No. (GASI). SP No.600 kilograms and spillage of 3.: This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeking to annul and set aside the Decision2 dated October 10.772. J. 2008 of the Court of Appeals (CA) in CA-G. Inc. Grand Asian Sales. it pursued indemnification from the shipment’s insurer. DECISION REYES.6 ATI7 and PROVEN8 but was denied.772.R. Proven Customs Brokerage Corporation (PROVEN). 1996 for delivery to the consignee. Based on a Certificate of Insurance4 dated August 24. Hence.R.315 kg for a total of11. 99021 which adjudged petitioner Asian Terminals. FIRST LEPANTO paid GASI the amount of P165. Upon receipt of the shipment. 1996.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. a domestic corporation engaged in arrastre business. 13 ATI averred that upon arrival of the shipment. 199616 jointly executed by the respective representatives of ATI and PROVEN. thieves and vandals. FIRST LEPANTO sought that it be reimbursed the amount of 166. ATI denied liability for the lost/damaged shipment and claimed that it exercised due diligence and care in handling the same.00 against FIRST LEPANTO as and for attorney’s fees. However. the MeTC ruled it has no jurisdiction over COSCO because it is a foreign . ATI also submitted various Cargo Gate Passes17 showing that PROVEN was able to completely withdraw all the shipment from ATI’s warehouse in good order condition except for that one damaged jumbo bag.00 per package. its shipping agency in the Philippines.000. reimbursement of the amount it paid to GASI.As such subrogee. 2006. To bolster this claim. 40622 dated August 9."22 Ruling of the MeTC In a Judgment23 dated May 30. its contract for cargo handling services limits its liability to not more than P5. Branch 3. SMITH BELL requested for its inspection14 and it was discovered that one jumbo bag thereof sustained loss/damage while in the custody of COSCO as evidenced by Turn Over Survey of Bad Order Cargo No. It also filed a cross-claim against its co-defendants COSCO and SMITH BELL in the event that it is made liable to FIRST LEPANTO. SMITH BELL. PROVEN and ATI. and render judgment upon the evidence presented. 1996. Section 3 of the Rules of Civil Procedure. it filed on May 29. ATI interposed a counterclaim of P20. 1997 a Complaint12 for sum of money before the Metropolitan Trial Court (MeTC) of Manila.20 COSCO and SMITH BELL failed to file an answer to the complaint. the Court shall try the case against all upon the answers thus filed.18 PROVEN denied any liability for the lost/damaged shipment and averred that the complaint alleged no specific acts or omissions that makes it liable for damages. FIRST LEPANTO thus moved that they be declared in default21 but the motion was denied by the MeTC on the ground that under Rule 9.772. FIRST LEPANTO demanded from COSCO. When FIRST LEPANTO’s demands were not heeded.000. ATI asserted that even if it is found liable for the lost/damaged portion of the shipment. some of whom answer and the other fail to do so.41. PROVEN also filed a counterclaim for attorney’s fees and damages. "when a pleading asserting a claim states a common cause of action against several defending parties. 199615 jointly executed by the respective representatives of ATI and COSCO. the entire shipment was re-examined and it was found to be exactly in the same condition as when it was turned over to ATI such that one jumbo bag was damaged. and costs of suit. PROVEN contended that it exercised due diligence and prudence in handling the shipment. ATI submitted Request for Bad Order Survey No. twenty-five percent (25%) thereof as attorney’s fees. the MeTC absolved ATI and PROVEN from any liability and instead found COSCO to be the party at fault and hence liable for the loss/damage sustained by the subject shipment. 47890 dated August 6. PROVEN claimed that the damages in the shipment were sustained before they were withdrawn from ATI’s custody under which the shipment was left in an open area exposed to the elements.19 Despite receipt of summons on December 4. During the withdrawal of the shipment by PROVEN from ATI’s warehouse. In the alternative. corporation. Also, it cannot enforce judgment upon SMITH BELL because no evidence was presented establishing that it is indeed the Philippine agent of COSCO. There is also no evidence attributing any fault to SMITH BELL. Consequently, the complaint was dismissed in this wise: WHEREFORE, in light of the foregoing, judgment is hereby rendered DISMISSING the instant case for failure of [FIRST LEPANTO] to sufficiently establish its cause o faction against [ATI, COSCO, SMITH BELL, and PROVEN]. The counterclaims of [ATI and PROVEN] are likewise dismissed for lack of legal basis. No pronouncement as to cost. SO ORDERED.24 Ruling of the Regional Trial Court On appeal, the Regional Trial Court (RTC) reversed the MeTC’s findings. In its Decision25 dated January 26, 2007, the RTC of Manila, Branch 21, in Civil Case No. 06-116237, rejected the contentions of ATI upon its observation that the same is belied by its very own documentary evidence. The RTC remarked that, if, as alleged by ATI, one jumbo bag was already in bad order condition upon its receipt of the shipment from COSCO on July 18, 1996, then how come that the Request for Bad Order Survey and the Turn Over Survey of Bad Order Cargo were prepared only weeks thereafter or on August 9, 1996 and August 6, 1996, respectively. ATI was adjudged unable to prove that it exercised due diligence while in custody of the shipment and hence, negligent and should be held liable for the damages caused to GASI which, in turn, is subrogated by FIRST LEPANTO. The RTC rejected ATI’s contention that its liability is limited only to P5,000.00 per package because its Management Contract with the Philippine Ports Authority (PPA) purportedly containing the same was not presented as evidence. More importantly, FIRST LEPANTO or GASI cannot be deemed bound thereby because they were not parties thereto. Lastly, the RTC did not give merit to ATI’s defense that any claim against it has already prescribed because GASI failed to file any claim within the 15-day period stated in the gate pass issued by ATI to GASI’s broker, PROVEN. Accordingly, the RTC disposed thus: WHEREFORE, in light of the foregoing, the judgment on appeal is hereby REVERSED. [ATI] is hereby ordered to reimburse [FIRST LEPANTO] the amount of [P]165,772.40 with legal interest until fully paid, to pay [FIRST LEPANTO] 10% of the amount due the latter as and for attorney’s fees plus the costs of suit. The complaint against [COSCO/SMITH BELL and PROVEN] are DISMISSED for lack of evidence against them. The counterclaim and cross[-]claim of [ATI] are likewise DISMISSED for lack of merit. SO ORDERED.26 Ruling of the CA ATI sought recourse with the CA challenging the RTC’s finding that FIRST LEPANTO was validly subrogated to the rights of GASI with respect to the lost/damaged shipment. ATI argued that there was no valid subrogation because FIRSTLEPANTO failed to present a valid, existing and enforceable Marine Open Policy or insurance contract. ATI reasoned that the Certificate of Insurance or Marine Cover Note submitted by FIRST LEPANTO as evidence is not the same as an actual insurance contract. In its Decision27 dated October 10, 2008, the CA dismissed the appeal and held that the Release of Claim and the Certificate of Insurance presented by FIRST LEPANTO sufficiently established its relationship with the consignee and that upon proof of payment of the latter’s claim for damages, FIRST LEPANTO was subrogated to its rights against those liable for the lost/damaged shipment. The CA also affirmed the ruling of the RTC that the subject shipment was damaged while in the custody of ATI. Thus, the CA disposed as follows: WHEREFORE, premises considered, the assailed Decision is hereby AFFIRMED and the instant petition is DENIED for lack of merit. SO ORDERED.28 ATI moved for reconsideration but the motion was denied in the CA Resolution29 dated January 12, 2009. Hence, this petition arguing that: (a) The presentation of the insurance policy is indispensable in proving the right of FIRST LEPANTO to be subrogated to the right of the consignee pursuant to the ruling in Wallem Philippines Shipping, Inc. v. Prudential Guarantee and Assurance Inc.;30 (b) ATI cannot be barred from invoking the defense of prescription as provided for in the gate passes in consonance with the ruling in International Container Terminal Services, Inc. v. Prudential Guarantee and Assurance Co, Inc.31 Ruling of the Court The Court denies the petition. ATI due shipment control operator. failed care to prove and was and that diligence under possession it while its as exercised the custody, arrastre It must be emphasized that factual questions pertaining to ATI’s liability for the loss/damage sustained by GASI has already been settled in the uniform factual findings of the RTC and the CA that: ATI failed to prove by preponderance of evidence that it exercised due diligence in handling the shipment. Such findings are binding and conclusive upon this Court since a review thereof is proscribed by the nature of the present petition. Only questions of law are allowed in petitions for review on certiorari under Rule 45 of the Rules of Court. It is not the Court’s duty to review, examine, and evaluate or weigh all over again the probative value of the evidence presented, especially where the findings of the RTC are affirmed by the CA, as in this case.32 There are only specific instances when the Court deviates from the rule and conducts a review of the courts a quo’s factual findings, such as when: (1) the inference made is manifestly mistaken, absurd or impossible; (2) there is grave abuse of discretion;(3) the findings are grounded entirely on speculations, surmises or conjectures; (4) the judgment of the CA is based on misapprehension of facts; (5) the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (6) the findings of fact are conclusions without citation of specific evidence on which they are based; (7) the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (8) the findings of fact of the CA are premised on the absence of evidence and are contradicted by the evidence on record.33 None of these instances, however, are present in this case. Moreover, it is unmistakable that ATI has already conceded to the factual findings of RTC and CA adjudging it liable for the shipment’s loss/damage considering the absence of arguments pertaining to such issue in the petition at bar. These notwithstanding, the Court scrutinized the records of the case and found that indeed, ATI is liable as the arrastre operator for the lost/damaged portion of the shipment. The relationship between the consignee and the arrastre operator is akin to that existing between the consignee and/or the owner of the shipped goods and the common carrier, or that between a depositor and a warehouseman. Hence, in the performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman. Being the custodian of the goods discharged from a vessel, an arrastre operator’s duty is to take good care of the goods and to turn them over to the party entitled to their possession.34 In a claim for loss filed by the consignee (or the insurer), the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. Since the safekeeping of the goods is its responsibility, it must prove that the losses were not due to its negligence or to that of its employees. To avoid liability, the arrastre operator must prove that it exercised diligence and due care in handling the shipment.35 ATI failed to discharge its burden of proof. Instead, it insisted on shifting the blame to COSCO on the basis of the Request for Bad Order Survey dated August 9, 1996 purportedly showing that when ATI received the shipment, one jumbo bag thereof was already in damaged condition. The RTC and CA were both correct in concluding that ATI’s contention was improbable and illogical. As judiciously discerned by the courts a quo, the date of the document was too distant from the date when the shipment was actually received by ATI from COSCO on July 18, 1996. In fact, what the document established is that when the loss/damage was discovered, the shipment has been in ATI’s custody for at least two weeks. This circumstance, coupled with the undisputed declaration of PROVEN’s witnesses that while the shipment was in ATI’s custody, it was left in an open area exposed to the elements, thieves and vandals,36 all generate the conclusion that ATI failed to exercise due care and diligence while the subject shipment was under its custody, control and possession as arrastre To do so would be unfair to the adverse party. Non-presentation of the insurance contract is not fatal to FIRST LEPANTO’s cause of action for reimbursement as subrogee. thieves or vandals. Further. Since it was not agreed during the pre-trial proceedings that FIRST LEPANTO will have to prove its subrogation rights by presenting a copy of the insurance contract. is not only irregular but also extrajudicial and invalid. no reasonable explanation. It is conspicuous from the records that ATI put in issue the submission of the insurance contract for the first time before the CA. who had no opportunity to present evidence in connection with the new theory. To prove the exercise of diligence in handling the subject cargoes.40 (Citation omitted) While the Court may adopt a liberal stance and relax the rule. whether during trial or on appeal. on appeal. for resolving an issue not framed during the pre-trial and on which the parties were not heard during the trial. Points of law. however. Neither was the same considered during pre-trial as one of the decisive matters in the case. an arrastre operator must do more than merely show the possibility that some other party could be responsible for the loss or the damage. issues and arguments not brought to the attention of the lower court will not be considered by the reviewing court. theories. ATI is barred from pleading the absence of such contract in its appeal. ATI failed to allege in its answer the necessity of the insurance contract. As stressed in Jose v.37 It must prove that it used all reasonable means to handle and store the shipment with due care and diligence including safeguarding it from weather elements. they are bound by the delimitation of such issues. It is imperative for the parties to disclose during pre-trial all issues they intend to raise during the trial because. change fundamentally the nature of the issue in the case. The defenses not pleaded in the answer cannot. The fact that the CA took cognizance of and resolved the said issue did not cure or ratify ATI’s faux pas. "[A] judgment that goes beyond the issues and purports to adjudicate something on which the court did not hear the parties. Despite opportunity to study FIRST LEPANTO’s complaint before the MeTC. ATI never challenged the relevancy or materiality of the Certificate of Insurance presented by FIRST LEPANTO as evidence during trial as proof of its right to be subrogated in the consignee’s stead. Alfuerto:39 [A] party cannot change his theory ofthe case or his cause of action on appeal. was introduced to justify ATI’s failure to timely question the basis of FIRST LEPANTO’s rights as a subrogee.38 A faithful adherence to the rule by litigants is ensured by the equally settled principle that a party cannot change his theory on appeal as such act violates the basic rudiments of fair play and due process. The determination of issues during the pre-trial conference bars the consideration of other questions. this would offend the basic rules of due process and fair play."41 Thus.operator. that portion of the CA’s judgment discussing the necessity of presenting an insurance contract was . . the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. if any. CA. the non-presentation of the insurance contract is not fatal to FIRST LEPANTO’s right to collect reimbursement as the subrogee of GASI. the Court has admitted exceptions by declaring that a marine insurance policy is dispensable evidence in reimbursement claims instituted by the insurer. "Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right.erroneous. The insurance contract.46 An analogous disposition was arrived at in the Wallem47 case cited by ATI wherein the Court held that the insurance contract must be presented in evidence in order to determine the extent of its coverage. In Delsan Transport Lines..44 In Home Insurance Corporation v. 2207. 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."42 The right of subrogation springs from Article 2207 of the Civil Code which states: Art.45 the Court also held that the insurance contract was necessary to prove that it covered the hauling portion of the shipment and was not limited to the transport of the cargo while at sea.43 the Court stated that the presentation of the contract constitutive of the insurance relationship between the consignee and insurer is critical because it is the legal basis of the latter’s right to subrogation. Hence. Inc. If the amount paid by the insurance company does not fully cover the injury or loss. was necessary to determine the scope of the insurer’s liability. which was not presented in evidence. including its remedies or securities. the rule is not inflexible. by itself. It was further ruled therein that the liability of the carrier from whom reimbursement was demanded was not established with certainty because the alleged shortage incurred by the cargoes was not definitively determined. so that he who is substituted succeeds to the rights of the other in relation to a debt or claim. was held sufficient to establish not only the relationship between the insurer and consignee.48 Nevertheless.Regis Brokerage Corp. As a general rule. v. The shipment in that case passed through six stages with different parties involved in each stage until it reached the consignee. CA.49 the Court ruled that the right of subrogation accrues simply upon payment by the insurance company of the insurance claim. In certain instances. At any rate. the insurance company shall be subrogated to the rights of the insured against the wrong-doer or the person who has violated the contract. the marine insurance policy needs to be presented in evidence before the insurer may recover the insured value of the lost/damaged cargo in the exercise of its subrogatory right. Inc. but . v. In Malayan Insurance Co. since no evidence was adduced indicating at what stage in the handling process the damage to the cargo was sustained. presentation in evidence of the marine insurance policy is not indispensable before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. If the plaintiff’s property has been insured. The subrogation receipt. v.52 Based on the attendant facts of the instant case. as follows: Issuance of this Gate Pass Constitutes delivery to and receipt by consignee of the goods as described above in good order and condition unless an accompanying x x x certificates duly issued and noted on the face of this Gate Pass appeals. Verily. Subrogation is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice.56 ATI cannot invoke prescription ATI argued that the consignee.1âwphi1 As discussed above. it is already settled that the loss/damage to the GASI’s shipment occurred while they were in ATI’s custody.000. With ATI’s liability having been positively established. The presentation of the insurance contract was deemed not fatal to the insurer’s cause of action because the loss of the cargo undoubtedly occurred while on board the petitioner’s vessel. and amendment thereto and alterations thereof particularly but not limited to the [A]rticle VI thereof. 1996 or more than one month from the date the shipment was delivered to the consignee’s warehouse on August 9. As in Delsan. thru its insurer. FIRST LEPANTO is barred from seeking payment for the lost/damaged shipment because the claim letter of GASI to ATI was served only on September 27.also the amount paid to settle the insurance claim.00 per package unless the importation is otherwise specified or manifested or communicated in writing together with the invoice value and supported by a certified packing list to the contractor by the . PROVEN. to strictly require the presentation of the insurance contract will run counter to the principle of equity upon which the doctrine of subrogation is premised. the application of the exception is warranted. FGU Insurance Corporation. Inc. GASI.51 wherein the arrastre operator was found liable for the lost shipment despite the failure of the insurance company to offer in evidence the insurance contract or policy. possession and control as arrastre operator.55 The payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies which the insured may have against the third party whose negligence or wrongful act caused the loss. the Certificate of Insurance53 and the Release of Claim54 presented as evidence sufficiently established FIRST LEPANTO’s right to collect reimbursement as the subrogee of the consignee.50 The same rationale was the basis of the judgment in International Container Terminal Services. It accrues simply upon payment by the insurance company of the insurance claim. The right of subrogation is not dependent upon. equity and good conscience ought to pay. 1996. Inc. limiting the contractor’s liability to [P]5. nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. The claim of GASI was thus filed beyond the 15-day period stated in ATI’s Management Contract with PPA which in turn was reproduced in the gate passes issued to the consignee’s broker. it was certain that the loss of the cargo occurred while in the petitioner’s custody. [sic] This Gate pass is subject to all terms and conditions defined in the Management Contract between the Philippine Port[s] Authority and Asian Terminals. ATI was notified of the loss/damage to the subject shipment as early as August 9. Pursuant to Nacar v. PROVEN. As correctly imposed by the RTC and the CA. Inc. The said amount shall earn legal interest at the rate of six percent ( 6%) per annum from the date of finality of this . the arrastre operator suffered no prejudice by the lack of strict compliance with the 15-day limitation to file the formal complaint. plus costs of suit. ATI was not deprived the best opportunity to probe immediately the veracity of such claims. the amount of P165. Asian Terminals.40 representing the insurance indemnity paid by the latter to GASI. ATI is liable to pay FIRST LEPANTO the amount of the Pl 65.62 the said amount shall earn a legal interest at the rate of six percent (6%) per annum from the date of finality of this judgment until its full satisfaction. GASI is thus deemed to have substantially complied with the notice requirement to the arrastre operator notwithstanding that a formal claim was sent to the latter only on September 27..59 (Citations omitted) In the present case.. Hence. 2008 of the Court of Appeals in CA-G. or Certificate of non-delivery. to pay First Lepanto-Taisho Insurance Corp.63 WHEREFORE. Inc.interested party or parties before the discharge of the goods and corresponding arrastre charges have been paid providing exception or restrictions from liability releasing the contractor from liability among others unless a formal claim with the required annexes shall have been filed with the contractor within fifteen (15) days from date of issuance by the contractors or certificate of loss.772.. injury. is not barred by filing the herein action in court. the purpose of the time limitations for the filing of claims had already been fully satisfied by the request of the consignee’s broker for a bad order survey and by the examination report of the arrastre operator on the result thereof.58 substantial compliance with the 15-day time limitation is allowed provided that the consignee has made a provisional claim thru a request for bad order survey or examination report. The Decision dated October 10.R. damages. For having submitted a provisional claim. and the representatives of ATI. ten percent (10%) thereof as and for attorney's fees. thru its subrogee FIRST LEPANTO. as the arrastre operator had become aware of and had verified the facts giving rise to its liability. 772. viz: Although the formal claim was filed beyond the 15-day period from the issuance of the examination report on the request for bad order survey. 1996. Verily then. Gallery Frames. 1996 thru a Request for Bad Order Survey60 jointly prepared by the consignee’s broker. ten percent (10%) of the judgment award is reasonable as and for attorney's fees considering the length of time that has passed in prosecuting the claim. 99021 is hereby AFFIRMED insofar as it adjudged liable and ordered Asian Terminals. the petition is hereby DENIED. SP No.40. As clarified in Insurance Company of North America v.57 The contention is bereft of merit. Attorney's fees and interests All told. ATI cannot rely on the ruling in Prudentiat61 because the consignee therein made no provisional claim thru request for bad order survey and instead filed a claim for the first time after four months from receipt of the shipment. premises considered. GASI. SERENO Chief Justice Footnotes 1 Rollo. 8 Id. at 114. at 103. at 102. with Associate Justices Juan Q. 6 Id. at 115. Enriquez. 3 Id. SO ORDERED. at 317. 4 Id. MARIA LOURDES P. at 92-101. Associate Justice C E R T I F I CAT I O N Pursuant to Section 13. VILLARAMA. SERENO Chief Justice Chairperson TERESITA J.judgment until its full satisfaction. at 116. BERSAMIN Associate Justice Associate Justice MARTIN S. 13-37. at 88. JR. Dicdican. 9 Id. pp. Article VIII of the Constitution. 11 Id. Jr. REYES Associate Justice WE CONCUR: MARIA LOURDES P. concurring. id. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. at 41-51. 10 Id. 2 Penned by Associate Justice Marlene Gonzales-Sison. A. and Isaias P. . 7 Id. LEONARDO-DE CASTRO LUCAS P. BIENVENIDO L. at 104. A. 5 Id. at 162. v. 75-76. Inc. at 72-74. 562-563. 18 Id. at 53-54. 31 377 Phil. Inc. at 563-564. 26 Id. at 41-51. at 91. at 67-70. . 35 Id. 16 Id.. id. 13 Id. at 119-128. 2001. 2011. 171194. at 217. 2010. 15 Id. Malayan Insurance Co. p. 14 Id. 38 Supra note 32. at 126-127. April 4. Jr. rollo. 152. G. 647 SCRA 111. 136 (2003). 32 Asian Terminals. Daehan Fire and Marine Insurance Co. 36 Paragraph 12 of PROVEN’s Memorandum before the MeTC. 25 Issued by Judge Amor A.. 29 Id. No. 37 Supra note 34. 28 Id. id. at 90. 33 Id. at 67-70. 30 445 Phil. id. 24 Id. at 122. Reyes. 2001. 171406. at 215. at 61-65. 611 SCRA 555. v.R. 126. 20 Per the findings of the Regional Trial Court. Inc. 22 MeTC Order dated July 23.. id. at 155-162. at 151-154. 23 Issued by Presiding Judge Juan O. id. Ltd. February 4. 27 Id.R. at 563-564.. 1082 (1999). Bermejo.. No.12 Id. at 218. at 213-218. 21 FIRST LEPANTO’s Omnibus Motion dated January 16. G. 34 Asian Terminals. 17 Id. 19 Id. at 50. at 415-416. 639 SCRA 69. 180784. NYK-Fi/Japan Shipping Corp. 2012. CA. August 13. 686 SCRA 323. 179446. 824 (2001). 119-128. G. 78-79. at 760.171468.R. 2012. 61 Supra note 31. 52 Id. 44 Id. 169380. Mirant Pagbilao Corporation. p. Inc. at 151-153. January 10. 189871. 47 Supra note 30. No. Inc. 339 Phil. 245. at 340-341. February 15. 45 G. 62 G. v. 1003 (2007).August24. 703 SCRA 439. 751 (2008). No. Glodel Brokerage Corporation.2011. No. 1993.39 G.R. No. 57 Rollo. 51 578 Phil. 91. 40 Id. August 18. at 114.R. 138-139.R. 109293. 53 Rollo. 490 (2006). 666 SCRA 226. 50 Id. November 26. 535 Phil. p. 2011. 58 G. at 835. 56 Id.). 43 563 Phil. 466 (1997). 46 Id. pp. 225 SCRA 411. 55 PHILAMGEN v. 42 Loadmasters Customs Services. at 1016. 48 Id.R. 105. G. No. 63 See New World International Development (Phils. .656SCRA 129. 481.R. 54 Id. v. 59 Id. 2013. 41Commission on Internal Revenue v. 60 Rollo. 455. No.. 49 420 Phil.