digest insurance case (1)

7/27/2019 Digest Insurance Case (1)

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Republic vs. Sunlife Assurance Company of Canada [GR No.

15805; October 14, 2005]

Facts: On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its decision in Insular Life

Assurance Co. Ltd. v. [CIR], which held that mutual life insurance companies are purely cooperative

companies and are exempt from the payment of premium tax and DST. This pronouncement was later

affirmed by this court in [CIR] v. Insular Life Assurance Company, Ltd. Sun Life surmised that[,] being amutual life insurance company, it was likewise exempt from the payment of premium tax and DST.

Hence, on August 20, 1999, Sun Life filed with the CIR an administrative claim for tax credit of itsalleged erroneously paid premium tax and DST for the aforestated tax periods.

For failure of the CIR to act upon the administrative claim for tax credit and with the 2-year period to filea claim for tax credit or refund dwindling away and about to expire, Sun Life filed with the CTA a

petition for review. The CTA found in favor of Sun Life.

Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life ought to haveregistered, foremost, with the Cooperative Development Authority before it could enjoy the exemptions

from premium tax and DST extended to purely cooperative companies or associations under [S]ections121 and 199 of the Tax Code. For its failure to register, it could not avail of the exemptions prayed for.The CTA denied the CIRs motion for reconsideration.

Issue: Whether or not respondent is exempted from payment of tax on life insurance premiums anddocumentary stamp tax

Held: YES. The Tax Code defines a cooperative as an association conducted by the members thereof

with the money collected from among themselves and solely for their own protection and not for profit.Without a doubt, respondent is a cooperative engaged in a mutual life insurance business.

First, it is managed by its members. Both the CA and the CTA found that the management and affairs ofrespondent were conducted by its member-policyholders. SUNLIFE has been mutualized or converted

from a stock life insurance company to a nonstock mutual life insurance corporation pursuant to Section

266 of the Insurance Code of 1978. On the basis of its bylaws, its ownership has been vested in itsmember-policyholders who are each entitled to one vote; and who, in turn, elect from among themselves

the members of its board of trustees.

Second, it is operated with money collected from its members. Since respondent is composed entirely of

members who are also its policyholders, all premiums collected obviously come only from them. The

member-policyholders constitute both insurer and insured who contribute, by a system of premiums or

assessments, to the creation of a fund from which all losses and liabilities are paid.

Third, it is licensed for the mutual protection of its members, not for the profit of anyone. A mutual life

insurance company is conducted for the benefit of its member-policyholders, who pay into its capital byway of premiums.

Under the Tax Code although respondent is a cooperative, registration with the Cooperative DevelopmentAuthority (CDA) is not necessary in order for it to be exempt from the payment of both percentage taxes

on insurance premiums, under Section 121; and documentary stamp taxes on policies of insurance or

annuities it grants, under Section 199.
http://coffeeafficionado.blogspot.com/2012/02/republic-vs-sunlife-assurance-company.htmlhttp://coffeeafficionado.blogspot.com/2012/02/republic-vs-sunlife-assurance-company.htmlhttp://coffeeafficionado.blogspot.com/2012/02/republic-vs-sunlife-assurance-company.htmlhttp://coffeeafficionado.blogspot.com/2012/02/republic-vs-sunlife-assurance-company.html


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PEZA v. ALIKPALA

160 SCRA 31

NARVASA; April 15, 1988

NATUREMotion praying that Judge Alikpala be declared guilty of contempt of court for having decided the case on the merits despitethe pendency in this Court of the certiorari action instituted by the plaintiffs

FACTS- vehicular accident with 2 children running across the path of a Chevrolet "Carry-All", belonging to a partnership known as

Diman & Company driven by its driver, Perfecto Amar, as it was passing a national highway at barrio Makiling Calamba,Laguna. They were killed. It was insured with the Empire Insurance Co., Inc. under a so-called 'comprehensive coverage"policy, loss by theft excluded. The policy was in force at the time of the accident.- Placida Peza, the managing partner of Diman & Co. filed a claim with Empire, for payment of compensation to the family ofthe 2 children who died as a result of the accident. Empire refused to pay on the ground that the driver had no authority tooperate the vehicle, a fact which it expressly excepted from liability under the policy. What Peza did was to negotiate directly

with the deceased children father for an out-of-court settlement. The father agreed to accept P6,200.00 in fun settlement ofthe liability of the vehicles owner and driver, and Peza paid him this sum.- Peza thereafter sued Empire to recover this sum of P6,200.00 as actual damages, as well as P20,000.00 as moral damages,P10,000.00 as exemplary damages, and P10,000.00 as attorney's fees. She amended her complaint shortly thereafter toinclude Diman & Co. as alternative party plaintiff.- Empire's basic defense to the suit was anchored on the explicit requirement in the policy limiting the operation of theinsured vehicle to the "authorized driver" therein defined, namely, (a) the insured, or (b) any person driving on the insured

order or with his permission, provided that-... that the person driving is permited in accordance with the licensing or other laws or regulations to drive the Motorvehicle or has been so permitted and is not disqualified by order of the Court of Law of by reason of any enactment orregulation in that behalf from driving such Motor Vehicle.-

- driver Perfecto Amar, only having a temporary operator's permit (TVR) [already expired] his drivers license having earlierbeen confiscated by an agent of the Land Transportation Commission for an alleged violation of Land Transportation andTraffic Rules, was not permitted by law and was in truth disqualified to operate any motor vehicle; Peza attempted to

neutralize that fact by(1) the issuance of the TVR by the LTC officer to Amar; in proof of the proposition that there was noreason for confiscation of Amar's license (2) Amar's license had not expired, but had been renewed.- Judge Alikpala did not admit such evidence

ISSUES1. WON Judge Alikapala committed grave abuse of discretion in not admitting evidence

2. WON confiscation of license and expiration of TVR of the driver would serve as bar for Peza in recovering from Empire

HELD1. NO- Even positing error in the Judge's analysis of the evidence attempted to be introduced and his rejection thereof, it is clearthat it was at most an error of judgment, not such an error as may be branded a grave abuse of discretion, i.e., suchcapricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, against which the writ of certiorari willlie. In any event, the established principle is "that ruling of the trial court on procedural questions and on admissibility ofevidence during the course of the trial are interlocutory in nature and may not be the subject of separate appeal or review oncertiorari, but are to be assigned as errors and reviewed in the appeal properly taken from the decision rendered by the trialcourt on the merits of the case.- In the meantime, Judge Alikpala rendered judgment on the merits, since the case was then already ripe for adjudication.The judgment ordered dismissal of the case for failure on the part of the plaintiff to prove their cause of action againstEmpire. Notice of the judgment was served on the parties in due course.

2. YES- It would seem fairly obvious that whether the LTC agent was correct or not in his opinion that driver Amar had violatedsome traffic regulation warranting confiscation of his license and issuance of a TVR in lieu thereof, this would not alter theundisputed fact that Amar's licence had indeed been confiscated and a TVR issued to him, and the TVR had already expired at

the time that the vehicle being operated by him killed two children by accident. Neither would proof of the renewal of Amar'slicense change the fact that it had really been earlier confiscated by the LTC agent.

Disposition petition is DISMISSED for lack of merit

SUN INSURANCE OFFICE, LTD. V CA (LIM)

211 SCRA 554

CRUZ; July 17, 1992

NATURE


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Petition for review from the decision of the Court of Appeals

FACTS

- Felix Lim was issued a Personal Accident Policy insurance with petitioner company with a face value of P200,000. His

beneficiary was his wife Nerissa.

- October 6, 1982 Felix accidentally shot himself in the head with his own gun.

- He was playing with the handgun after he had removed the guns magazine ( kasi naman).

- He pointed the gun at his secretary and only witness Pilar Nalagon as a joke and assured her that the gun was not loaded

(are you sure).

- He then put the gun to his temple and fired it (haaay, sabi ko na nga ba).

- Both parties are in agreement that there was no suicide.

- Nerissa claimed as Felixs beneficiary but Sun Insurance would not grant her claim, saying that her husbands death was not

an accident.

- Nerissa sued Sun Insurance and won the case. Sun Insurance was ordered to pay her P200,000 representing the face value

of the claim along with moral, exemplary and compensatory damages and attorneys fees. The decision was affirmed by the

CA.

Petitioners Claim

- Sun Insurance cites one of the four exceptions in the contract of insurance which includes bodily injury consequent upon the

insured person attempting to commit suicide or willfully exposing himself to needless peril in an attempt to save a human life.

- There mere act of pointing the gun to his temple showed that Felix willfully exposed himself to danger because a gun should

always be handled with caution.

Respondents Comments

- Felix believed the gun to be safe because he had removed the magazine.

- He repeatedly assured his secretary that the gun was not loaded.

ISSUES

1. WON Felix Lims death was an accident, thus making his widow Nerissa liable to claim the accident insurance

2. WON the award of damages to Nerissa Lim was justified

HELD

1. YES, Felix Lims death was an accident.

Ratio There is no accident when a deliberate act is performed unless some additional, unexpected, independent and

unforeseen happening occurs which produces or brings bout their injury or death.

Reasoning

- An accident has been defined to be that which happens by chance or fortuitously without intention or design and which is

unexpected, unusual and unforeseen. It an event that takes pace without ones foresight or expectastion an event that

proceeds from an unknown cause or is an unusual effect of a known case and therefore not expected. It happens without any

human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens.

- The firing of the gun was deemed to be the unexpected and independent and unforeseen occurrence that led to the insured

persons death.

- There was no willful exposure to needless peril for the part of Felix. Suicide and exposure to needless peril are similar in the

sense that both signify disregard for ones life. Suicide imparts a positive act of ending ones life whereas the latter indicates

recklessness that is almost suicidal in intent.


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- Accident insurance policies were never meant to reward the insured for his tendency to show off or for his miscalculations.

They were intended to provide for contingencies.

- Lim was unquestionably negligent but it should not prevent his widow from recovering from the insurance policy he obtained

precisely against accident.

- Insurance contracts are, as a rule, supposed to be interpreted liberally in favor of the assured.

2. NO, the claim for damages should not be granted for being unjust.

Ratio A person may be made liable to the payment of moral damages if his act is wrongful. The adverse result of an actiondoes not per se make the act wrongful and subject the act or to the payment of moral damages.

Reasoning

- Petitioner was acting in good faith when it resisted the private respondents claim on the ground that the death of the

insured was covered by the exception.

- The issue was debatable and was clearly not raised only for the purpose of evading a legitimate obligation.

DE LA CRUZ v. CAPITAL INSURANCE

17 SCRA 554

BARRERA; June 30, 1966

NATURE

Appeal from the decision of the CFI of Pangasinan

FACTS

-Eduardo de la Cruz, employed in the Itogon-Suyoc Mines, Inc., was the holder of an accident insurance policy underwritten

by the Capital Insurance & Surety Co., Inc., for the period beginning November 13, 1956 to November 12, 1957.

- On January 1, 1957, the Itogon-Suyoc Mines, Inc. sponsored a boxing contest wherein the insured Eduardo de la Cruz

participated.

- In the course of his bout, Eduardo slipped and was hit by his opponent on the left part of the back of the head, causingEduardo to fall, with his head hitting the rope of the ring.

- He was brought to the Baguio General Hospital, but he died as a result of hemorrhage, intracranial, left.

- Simon de la Cruz, the father and named beneficiary of the insured, filed a claim with the insurance company for payment of

the indemnity, but it was denied.

- He instituted the action in the CFI of Pangasinan for specific performance.

- Defendant insurer set up the defense that the death of the insured, caused by his participation in a boxing contest, was not

accidental and, therefore, not covered by insurance

- The court rendered the decision in favor of the plaintiff, hence, the present appeal.

ISSUE

WON the death of the insured was not accidental and, therefore, not covered by insurance

HELD

NO

- The terms "accident" and "accidental", as used in insurance contracts, have not acquired any technical meaning, and are

construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which

happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An


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accident is an event that takes place without one's foresight or expectation, an event that proceeds from an unknown cause,

or is an unusual effect of a known cause and, therefore, not expected.

- The generally accepted rule is that, death or injury does not result from accident or accidental means within the terms of an

accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the

death or injury. There is no accident when a deliberate act is performed unless some additional, unexpected, independent,

and unforeseen happening occurs which produces or brings about the result of injury or death. In other words, where the

death or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the

doing of the act which produces the injury, the resulting death is within the protection of policies insuring against death or

injury from accident.

- In the present case, while the participation of the insured in the boxing contest is voluntary, the injury was sustained when

he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring.

- The fact that boxing is attended with some risks of external injuries does not make any injuries received in the course of the

game not accidental. In boxing as in other equally physically rigorous sports, such as basketball or baseball, death is not

ordinarily anticipated to result. If, therefore, it ever does, the injury or death can only be accidental or produced by some

unforeseen happening or event as what occurred in this case.

- Furthermore, the policy involved herein specifically excluded from its coverage:

(e) Death or disablement consequent upon the Insured engaging in football, hunting, pigsticking, steeplechasing, polo-

playing, racing of any kind, mountaineering, or motorcycling.

- Death or disablement resulting from engagement in boxing contests was not declared outside of the protection of theinsurance contract. Failure of the defendant insurance company to include death resulting from a boxing match or other

sports among the prohibitive risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability

for such death.

Disposition The decision appealed from is affirmed

FINMAN GENERAL ASSURANCE CORPORATION v. CA (SURPOSA)213 SCRA 493NOCON; September 2, 1992

NATURECertiorari

FACTS- Oct. 22, 1986: Carlie Surposa was insured with Finman General Assurance Corporation under Finman General TeachersProtection Plan Master Policy No. 2005 and Individual Policy No. 08924 with his parents, spouses Julia and Carlos Surposa,and brothers Christopher, Charles, Chester and Clifton, all surnamed, Surposa, as beneficiaries.- While said insurance policy was in full force and effect, the insured, Carlie Surposa, died on October 18, 1988 as a result ofa stab wound inflicted by one of the 3 unidentified men without provocation and warning on the part of the former as he andhis cousin, Winston Surposa, were waiting for a ride on their way home after attending the celebration of the "MaskarraAnnual Festival."- Thereafter, Julia Surposa and the other beneficiaries of said insurance policy filed a written notice of claim with the FINMANCorp which denied said claim contending that murder and assault are not within the scope of the coverage of the insurancepolicy.- Feb. 24, 1989: Surposa filed a complaint with the Insurance Commission which subsequently ordered FINMAN to paySurposa the proceeds of the policy with interest.- CA affirmed said decision.

ISSUE

WON CA committed GAD in applying the principle of "expresso unius exclusio alterius" in a personal accident insurance policy(since death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the causeof death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the former asindicated by the location of the lone stab wound on the insured) [TF they cannot be made to indemnify the Surposa heirs]

HELDNO- The record is barren of any circumstance showing how the stab wound was inflicted. While the act may not exempt theunknown perpetrator from criminal liability, the fact remains that the happening was a pure accident on the part of the victim.The insured died from an event that took place without his foresight or expectation, an event that proceeded from an unusualeffect of a known cause and, therefore, not expected.Reasoning- De la Cruz vs. Capital Insurance & Surety Co., Inc (1966)~ The terms "accident" and "accidental" as used in insurancecontracts have not acquired any technical meaning, and are construed by the courts in their ordinary and common


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acceptation. Thus, the terms have been taken to mean that which happen by chance or fortuitously, without intention anddesign, and which is unexpected, unusual, and unforeseen. An accident is an event that takes place without one's foresight orexpectation an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, notexpected.RatioThe generally accepted rule is that, death or injury does not result from accident or accidental means within the termsof an accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except

the death or injury. There is no accident when a deliberate act is performed unless some additional, unexpected, independent,and unforeseen happening occurs which produces or brings about the result of injury or death. In other words, where thedeath or injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in thedoing of the act which produces the injury, the resulting death is within the protection of the policies insuring against death orinjury from accident.

- The personal accident insurance policy involved herein specifically enumerated only 10 circumstances wherein no liabilityattaches to FINMAN for any injury, disability or loss suffered by the insured as a result of any of the stimulated causes.-The principle of " expresso unius exclusio alterius" the mention of one thing implies the exclusion of another thing istherefore applicable in the instant case since murder and assault, not having been expressly included in the enumeration ofthe circumstances that would negate liability in said insurance policy: the failure of the FINMAN to include death resultingfrom murder or assault among the prohibited risks leads inevitably to the conclusion that it did not intend to limit or exemptitself from liability for such death.

- A1377 NCC: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused theobscurity.- NPC vs. CA [1986]~ It is well settled that contracts of insurance are to be construed liberally in favor of the insured andstrictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of itsbeneficiary.

DispositionDENIED for lack of merit.

UCPB GENERAL INSURANCE CO., INC. v. MASAGANA TELAMART,

INC. (EN BANC)

356 SCRA 307DAVIDE; April 4, 2001

NATURE

Motion for reconsideration of the decision of the Supreme Court.

FACTS

- In its decision of 15 June 1999, the SC defined the main issue to be whether the fire insurance policies issued by petitioner

to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an impliedcredit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the (fire) risk

insured against. The Court resolved this issue in the negative in view of Section 77 of the Insurance Code and its decisions

in Valenzuela v. Court of Appeals; South Sea Surety and Insurance Co., Inc. v. Court of Appeals ; and Tibay v. Court of

Appeals. Accordingly, it reversed and set aside the decision of the Court of Appeals.

- Respondent seasonably filed a motion for the reconsideration of the adverse verdict. It alleges in the motion that the SC

had made in the decision its own findings of facts, which are not in accord with those of the trial court and the Court of

Appeals. The courts below correctly found that no notice of non-renewal was made within 45 days before 22 May 1992, or

before the expiration date of the fire insurance policies. Thus, the policies in question were renewed by operation of law and

were effective and valid on 30 June 1992 when the fire occurred, since the premiums were paid within the 60- to 90-day

credit term.

- Respondent likewise disagrees with its ruling that parties may neither agree expressly or impliedly on the extension of credit

or time to pay the premium nor consider a policy binding before actual payment. It urges the Court to take judicial notice ofthe fact that despite the express provision of Section 77 of the Insurance Code, extension of credit terms in premium

payment has been the prevalent practice in the insurance industry. Most insurance companies, including Petitioner, extend

credit terms because Section 77 of the Insurance Code is not a prohibitive injunction but is merely designed for the protection

of the parties to an insurance contract. The Code itself, in Section 78, authorizes the validity of a policy notwithstanding non-

payment of premiums.

- Respondent also asserts that the principle of estoppel applies to Petitioner. Despite its awareness of Section 77 Petitioner

persuaded and induced Respondent to believe that payment of premium on the 60- to 90-day credit term was perfectly

alright; in fact it accepted payments within 60 to 90 days after the due dates. By extending credit and habitually accepting

payments 60 to 90 days from the effective dates of the policies, it has implicitly agreed to modify the tenor of the insurance

policy and in effect waived the provision therein that it would pay only for the loss or damage in case the same occurred after


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payment of the premium.

- Petitioner filed an opposition to the Respondents motion for reconsideration. It argues that both the trial court and the

Court of Appeals overlooked the fact that on 6 April 1992 Petitioner sent by ordinary mail to Respondent a notice of non-

renewal and sent by personal delivery a copy thereof to Respondents broker, Zuellig. Both courts likewise ignored the fact

that Respondent was fully aware of the notice of non-renewal. A reading of Section 66 of the Insurance Code readily shows

that in order for an insured to be entitled to a renewal of a non-life policy, payment of the premium due on the effective date

of renewal should first be made. Respondents argument that Section 77 is not a prohibitive provision finds no authoritative

support.

- The following facts, as found by the trial court and the Court of Appeals, are indeed duly established:

1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies were annually renewed.

2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to pay the premiums on the

renewed policies.

3. There was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by

ordinary mail was received by Respondent, and the copy thereof allegedly sent to Zuellig was ever transmitted to

Respondent.

4. The premiums for the policies in question in the aggregate amount of P225,753.95 were paid by Respondent within

the 60- to 90-day credit term and were duly accepted and received by Petitioners cashier.

ISSUE

WON Sec. 77 of the Insurance Code of 1978 must be strictly applied to Petitioners advantage despite its practice of granting

a 60- to 90-day credit term for the payment of premiums

HELDNO- Section 77 of the Insurance Code of 1978 provides:

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured

against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance

company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an

industrial life policy whenever the grace period provision applies.

- This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code) promulgated on 18 December 1974. In

turn, this Section has its source in Section 72 of Act No. 2427 otherwise known as the Insurance Act as amended by R.A. No.

3540, approved on 21 June 1963, which read:

SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against,

unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance

company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied)

- It can be seen at once that Section 77 does not restate the portion of Section 72 expressly permitting an agreement to

extend the period to pay the premium. But there are exceptions to Section 77.

The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace

period provision applies.

The second is that covered by Section 78 of the Insurance Code, which provides:

SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its

payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until

premium is actually paid.

- A third exception was laid down in Makati Tuscany CondominiumCorporation vs. Court of Appeals,wherein we ruled that

Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has

been made at the time of loss. Tuscanyhas provided a fourth exception to Section 77, namely, that the insurer may grant

credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term

for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed

even though the premium is paid after the loss but within the credit term.


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Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within

which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The

agreement binds the parties. Article 1306 of the Civil Code provides:

ART. 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem

convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

- Finally, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had

consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section 77.

Estoppel bars it from taking refuge under said Section since Respondent relied in good faith on such practice. Estoppel then

is the fifth exception to Section 77.

Disposition Judgment reconsidered and set aside, that of the Court of Appeals affirmed in toto.

NEW LIFE ENTERPRISES V CA

207 SCRA 669

REGALADO; March 31, 1992

NATURE

Appeal by certiorari

FACTS

- The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business partnership in the City of

Lucena. Under the business name of New Life Enterprises, the partnership engaged in the sale of construction materials at its

place of business, a two storey building situated at Iyam, Lucena City. The facts show that Julian Sy insured the stocks in

trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance Co. Inc., and Equitable

Insurance Corporation.

- On May 15, 1981, Western Guaranty Corporation issued Fire Insurance Policy No. 37201 in the amount of P350,000.00. This

policy was renewed on May 13, 1982.

- On July 30, 1981, Reliance Surety and Insurance Co., Inc. issued Fire Insurance Policy No. 69135 in the amount of

P300,000.00 (Renewed under Renewal Certificate No. 41997). An additional insurance was issued by the same company on

November 12, 1981 under Fire Insurance Policy No. 71547 in the amount of P700,000.00.

- On February 8, 1982, Equitable Insurance Corporation issued Fire Insurance Policy No. 39328 in the amount of

P200,000.00.

- Thus when the building occupied by the New Life Enterprises was gutted by fire at about 2:00 o'clock in the morning of

October 19, 1982, the stocks in trade inside said building were insured against fire in the total amount of P1,550,000.00.

According to the certification issued by the Headquarters, Philippine Constabulary/Integrated National Police, Camp Crame,

the cause of fire was electrical in nature. According to the plaintiffs, the building and the stocks inside were burned. After the

fire, Julian Sy went to the agent of Reliance Insurance whom he asked to accompany him to the office of the company so that

he can file his claim. He averred that in support of his claim, he submitted the fire clearance, the insurance policies and

inventory of stocks.

He further testified that the three insurance companies are sister companies, and as a matter of fact when he was following-

up his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance Insurance and if said company

agrees to pay, they would also pay. The same treatment was given him by the other insurance companies. Ultimately, the

three insurance companies denied plaintiffs' claim for payment.

Respondents comments

> Western Guaranty Corporation through Claims Manager Bernard S. Razon told the plaintiff that his claim 'is denied for

breach of policy conditions.' Reliance Insurance purveyed the same message as well as Equitable Insurance Corporation.


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A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual practice. Themortgagee may be made the beneficial payee in several ways. He may become the assignee of the policy with theconsent of the insurer; or the mere pledgee without such consent; or the original policy may contain a mortgageclause; or a rider making the policy payable to the mortgagee "as his interest may appear" may be attached; or a"standard mortgage clause," containing a collateral independent contract between the mortgagee and insurer, maybe attached; or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by amortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee acquires anequitable lien upon the proceeds. 21

In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his interest mayappear, the mortgagee is only a beneficiary under the contract, and recognized as such by the insurer but not madea party to the contract himself. Hence, any act of the mortgagor which defeats his right will also defeat the right ofthe mortgagee. 22 This kind of policy covers only such interest as the mortgagee has at the issuing of the policy. 23

On the other hand, a mortgagee may also procure a policy as a contracting party in accordance with the terms ofan agreement by which the mortgagor is to pay the premiums upon such insurance. 24 It has been noted, however,that although the mortgagee is himself the insured, as where he applies for a policy, fully informs the authorizedagent of his interest, pays the premiums, and obtains on the assurance that it insures him, the policy is in fact in theform used to insure a mortgagor with loss payable clause. 25

XXX With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally free fromambiguity and must, perforce, be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition

applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00of the total policies obtained.

The first conclusion is supported by the portion of the condition referring to other insurance "covering any of theproperty or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured," andthe portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is MercantileInsurance Co., Inc. in the sum of P50,000.00. A double insurance exists where the same person is insured byseveral insurers separately in respect of the same subject and interest. As earlier stated, the insurableinterests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since thetwo policies of the PFIC do not cover the same interest as that covered by the policy of the privaterespondent, no double insurance exists. The non-disclosure then of the former policies was not fatal to thepetitioner's right to recover on the private respondent's policy.

PHIL. AMERICAN LIFE INSURANCE v. PINEDA

175 SCRA 416

PARAS; July 19, 1989

NATURE

Petition for review on certiorari the orders of CFI Judge Pineda

FACTS

- In 1968, Private Respondent Rodolfo Dimayuga procured an ordinary life insurance policy from the petitioner company anddesignated his wife and children as irrevocable beneficiaries. On Feb. 22, 1980, Dimayuga filed with the CFI a petition to

amend the designation of the beneficiaries in his life policy from irrevocable to revocable. Petitioner filed an Urgent Motion to

reset hearing as well as its comment and/or Opposition to the respondents petition.

- Respondent Judge denied petitioners Urgent Motion, thus allowing private respondent to adduce evidence, the consequence

of which was the issuance of the questioned Order granting the petition. Petitioner then filed a MFR which was also denied

hence this petition.

ISSUE


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1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the

irrevocable beneficiaries

2. WON the irrevocable beneficiaries herein, one of whom is already deceased while the others are all minors could validly

give consent to the change or amendment in the designation of the irrevocable beneficiaries

HELD

1. NO

- Based on the provision of their contract and the law applicable, it is only with the consent of all the beneficiaries that any

change or amendment in the policy concerning the irrevocable beneficiaries may be legally and validly effected. Both the law

and the Policy do not provide for any other exception.

Reasoning

- Since the policy was procured in 1968, the applicable law in this case is the Insurance Act and under that law, the

beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he has a

vested interest in the policy.

- The Beneficiary Designation Indorsement in the policy in the name of Dimayuga states that the designation of the

beneficiaries is irrevocable: no right or privilege under the Policy may be exercised, or agreement made with the Company to

any change in or amendment to the Policy, without the consent of the said beneficiary/beneficiaries.

- Contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their

stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts

are obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present.

- Finally, the fact that the contract of insurance does not contain a contingency when the change in the designation of

beneficiaries could be validly effected means that it was never within the contemplation of the parties.

2. NO

- The parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract, for otherwise, the vested

rights of the irrevocable beneficiaries would be rendered inconsequential. The alleged acquiescence of the 6 children

beneficiaries cannot be considered an effective ratification to the change of the beneficiaries from irrevocable to revocable.

They were minors at the time, and could not validly give consent. Neither could they act through their father-insured since

their interests are quite divergent from one another.

Disposition questioned Orders of respondent judge are nullified and set aside.

GERCIO v. SUN LIFE ASSURANCE OF CANADA

48 PHIL 53

MALCOLM; September 28, 1925

NATURE

Mandamus to compel Sun Life Assurance Co. of Canada to change the beneficiary in the policy issued by the defendant

company on the life of the plaintiff Hilario Gercio

FACTS

- On January 29, 1910, the Sun Life Assurance Co. of Canada issued an insurance policy on the life of Hilario Gercio. The

policy was what is known as a 20-year endowment policy. By its terms, the insurance company agreed to insure the life of

Hilario Gercio for the sum of P2,000, to be paid him on February 1, 1930, or if the insured should die before said date, then to

his wife, Mrs. Andrea Zialcita, should she survive him; otherwise to the executors, administrators, or assigns of the insured.

The policy did not include any provision reserving to the insured the right to change the beneficiary.


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- On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio. Towards the end of the year 1919,

she was convicted of the crime of adultery. On September 4, 1920, a decree of divorce was issued in civil case no. 17955,

which had the effect of completely dissolving their bonds of matrimony

- On March 4, 1922, Hilario Gercio formally notified the Sun Life that he had revoked his donation in favor of Andrea Zialcita,

and that he had designated in her stead his present wife, Adela Garcia de Gercio, as the beneficiary of the policy. Gercio

requested the insurance company to eliminate Andrea Zialcita as beneficiary. This, the insurance company has refused and

still refuses to do.

ISSUES

1. (Preliminary) WON the provisions of the Code of Commerce and the Civil Code shall be in force in 1910, or the provisions

of the Insurance Act now in force, or the general principles of law, guide the court in its decision

2. WON the insured, the husband, has the power to change the beneficiary, the former wife, and to name instead his actual

wife, where the insured and the beneficiary have been divorced and where the policy of insurance does not expressly reserve

to the insured the right to change the beneficiary

HELD

1. Whether the case be considered in the light of the Code of Commerce, the Civil Code, or the Insurance Act, the deficiencies

in the law will have to be supplemented by the general principles prevailing on the subject. To that end, we have gathered the

rules which follow from the best considered American authorities. In adopting these rules, we do so with the purpose of

having the Philippine Law of Insurance conform as nearly as possible to the modern Law of Insurance as found in the United

States proper.

- Courts first duty is to determine what law should be applied to the facts. The insurance policy was taken out in 1910, that

the Insurance Act. No. 2427, became effective in 1914, and that the effort to change the beneficiary was made in 1922.

- Code of Commerce- there can be found in it no provision either permitting or prohibiting the insured to change the

beneficiary.

- Civil Code- it would be most difficult, if indeed it is practicable, to test a life insurance policy by its provisions. In the case

of Del Val vs. Del Val, it declined to consider the proceeds of the insurance policy as a donation or gift, saying "the contract of

life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal

exclusively with that subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contracts

or to the destination of life-insurance proceeds. . . ."

- Insurance Act- there is likewise no provision either permitting or prohibiting the insured to change the beneficiary.

2. NO

Ratio The wife has an insurable interest in the life of her husband. The beneficiary has an absolute vested interest in the

policy from the date of its issuance and delivery. So when a policy of life insurance is taken out by the husband in which the

wife is named as beneficiary, she has a subsisting interest in the policy. And this applies to a policy to which there are

attached the incidents of a loan value, cash surrender value, an automatic extension by premiums paid, and to an endowment

policy, as well as to an ordinary life insurance policy. If the husband wishes to retain to himself the control and ownership of

the policy he may so provide in the policy. But if the policy contains no provision authorizing a change of beneficiary without

the beneficiary's consent, the insured cannot make such change. Accordingly, it is held that a life insurance policy of a

husband made payable to the wife as beneficiary, is the separate property of the beneficiary and beyond the control of the

husband.

- Unlike the statutes of a few jurisdictions, there is no provision in the Philippine Law permitting the beneficiary in a policy for

the benefit of the wife of the husband to be changed after a divorce. It must follow, therefore, in the absence of a statute to

the contrary, that if a policy is taken out upon a husband's life the wife is named as beneficiary therein, a subsequent divorce

does not destroy her rights under the policy.

Reasoning


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- Yore vs. Booth

. . . It seems to be the settled doctrine, with but slight dissent in the courts of this country, that a person who procures a

policy upon his own life, payable to a designated beneficiary, although he pays the premiums himself, and keeps the policy

in his exclusive possession, has no power to change the beneficiary, unless the policy itself, or the charter of the insurance

company, so provides. In policy, although he has parted with nothing, and is simply the object of another's bounty, has

acquired a vested and irrevocable interest in the policy, which he may keep alive for his own benefit by paying the

premiums or assessments if the person who effected the insurance fails or refuses to do so.

- Connecticut Mutual Life Insurance Company vs Schaefer

We do not hesitate to say, however, that a policy taken out in good faith and valid at its inception, is not avoided by the

cessation of the insurable interest, unless such be the necessary effect of the provisions of the policy itself.. . . .In our

judgment of life policy, originally valid, does not cease to be so by the cessation of the assured party's interest in the life

insured.

- Central National Bank of Washington City vs. Hume

It is indeed the general rule that a policy, and the money to become due under it, belong, the moment it is issued, to the

person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the

insurance, by any act of his, by deed or by will, to transfer to any other person the interest of the person named.

- In re Dreuil & Co.

In so far as the law of Louisiana is concerned, it may also be considered settled that where a policy is of the semitontinevariety, as in this case, the beneficiary has a vested right in the policy, of which she cannot be deprived without her

consent

- Wallace vs Mutual Benefit Life Insurance Co.

As soon as the policy was issued Mrs. Wallace acquired a vested interest therein, of which she could not be deprived

without her consent, except under the terms of the contract with the insurance company. No right to change the

beneficiary was reserved. Her interest in the policy was her individual property, subject to be divested only by her death,

the lapse of time, or by the failure of the insured to pay the premiums. She could keep the policy alive by paying the

premiums, if the insured did not do so. It was contingent upon these events, but it was free from the control of her

husband. He had no interest in her property in this policy, contingent or otherwise. Her interest was free from any claim on

the part of the insured or his creditors. He could deprive her of her interest absolutely in but one way, by living more than

twenty years.

- Filley vs. Illinois Life Insurance Company

The benefit accruing from a policy of life insurance upon the life of a married man, payable upon his death to his wife,

naming her, is payable to the surviving beneficiary named, although she may have years thereafter secured a divorce from

her husband, and he was thereafter again married to one who sustained the relation of wife to him at the time of his death.

The rights of a beneficiary in an ordinary life insurance policy become vested upon the issuance of the policy, and can

thereafter, during the life of the beneficiary, be defeated only as provided by the terms of the policy.

- On the admitted facts and the authorities supporting the nearly universally accepted principles of insurance, we are

irresistibly led to the conclusion that the question at issue must be answered in the negative

Disposition The judgment appealed from will be reversed and the complaint ordered dismissed as to the appellant.

Go vs. Redfern [GR 47705, 25 April 1941]Second Division, Horrilleno (J): 4 concur

Decision in Spanish [Rough translation, accuracy unverified]Facts: In October 1937, Edward K. Redfern obtained an insurance policy against accidents from theInternational Assurance Co, Ltd. On 31 August 1938, Redfern died from an accident. The mother of thedeceased, presenting the necessary evidence of the death of Redfern, sought to claim the proceeds of theinsurance policy from the assurance company. The company, however, denied such claim, on the ground that

the insurance policy was amended on 22 November 1937 to include another beneficiary, Concordia Go.


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Hence, an action was filed to determine who has the right to collect the insurance proceeds of the deceasedRedfern. The mother claimed that the addition of the co-beneficiary is illegal. Go, on her part, alleged the

contrary. The trial court ruled in favor of Angela Redfern, the mother. Go appealed.

Issue: Whether the addition of Gos name as co-beneficiary can be allowed for her share in the insuranceproceeds.

Held: When designated in a policy, the beneficiary acquires a right of which he cannot be deprived of without hisconsent, unless the right has been reserved specifically to the insured to modify the policy.

The same doctrine was enunciated by the Court in the cases of Gercio vs. Sun Life Assurance Co. of Canada (48Phil.55) and Insular Life vs. Suva (34 Off. Gaz. 861). Thus, unless the insured has reserved specifically the right tochange or to modify the policy, with respect to the beneficiary, said policy constitutes an acquired right of thebeneficiary, which cannot be modified except with the consent of the latter. Herein, it is admitted that Redfern did

not reserve expressly his right to change or modify the policy. Change implies the idea of an alteration. Theaddition of Go's name as one of the beneficiaries of the policy constitutes change as all addition is an alteration.The addition of Go's name changed the policy inasmuch as there are two beneficiaries instead of one, and thus ineffect the original beneficiary cannot recieve the full amount of the policy. The Supreme Court affirmed the

appealed judgment in all of its parts, with costs against Go.

DELFIN NARIO and ALEJANDRA SANTOS-NARIO

vs.

THE PHILIPPINE AMERICAN LIFEINSURANCE COMPANY (G.R. No. L-22796,

June 26, 1967)

FACTS: Mrs. Nario was issued by respondent Philamlife a life insurance policy. She designated her husband,

Delfin and their unemancipated minor son, Ernesto, as her irrevocable beneficiaries. She a ppl ie d fo r

a loan on the pol icy for the school expenses of her son. The loan appl icat ion bore the

signature of Delfin as the father-gua rdian of minor son and as the legal administrator of the minor's

properties. Philamlife denied the application because the written consent for the minor son must not only be given

by his father as legal guardian but it must also be author ized by the court in a competent guardianshipproceeding. After the denial, Mrs. Nario decided to surrender her policy to Philamlife and demanded its cash value

of then amounting to P520. Philamlife also denied the surrender of the policy, on the same ground, hence, Nario

brought suit. Philamlife claims that under Articles 320 and 326 of the Civil Code, mere written consent given by the

father-guardian, for and in behalf of the minor son, without any cour t authority, was insuff ici ent , inasmuch

as the pol icy loan appli cat ion and the sur render of the policy involved acts of disposition and alienation of

the property rights of the minor, and said acts are notwithin the powers of the legal adminis tra tor . The lower

court agreed with Philamlife and dismissed petitioner s claim. It held that under the policy, the minor

son, as one of the designated irrevocable beneficiaries, "acquired a vested right to all benefits accruing to the

policy, including that of obtaining a policy loan to the extent stat ed in the schedule of values at tached to

the policy. On appeal to the SC, petitioner averred that the minor's interest amounted to only one-half of the

policy's cash surrender value of P520; that payment of the ward's debts is within the powers of the guardian, where

no realty is involved(Rule 96, Sec. 2 of the Revised Rules of Court); hence, father may validlyagr ee to the propos ed transaction on behalf of the minor without need of court authority.

ISSUE: Can an insurer refuse to grant the loan application (on a cash surrender value and not full face value) and the

surrender of the policy claimed by a father-guardian in behalf of his minor son when it is without court authority?

HELD: Yes, the insurer can validly refuse. The vested interest or right of the beneficiaries in the policy should be

measured on its full face value and not on its cash surrender value, for in case of death of the insured, said


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beneficiaries are paid o n the basis of i t s face va lue and in case the insured should discont inue

paying premiums, the beneficiar ies may continue paying it and are enti tled to au tomatic extended

term or paid-up insurance options, etc. and that said vested right under the policy cannot be divisible at any

given time. As above noted, the full face value of the policy is P5,000 and the minor's vested interest therein, as one

of the two irrevocable beneficiaries, consists of one-half () of said amount or P2,500.The transactions in question

(policy loan and surrender of policy) constitute acts of disposition or alienation of property rights and not merely of

management or administration because they involve the incurring or termination of contractual obligations. Under

Articles 320 and 326 of the Civil Code provide that the father, or in his absence the mother, is the legal

administrator of their childs property and when it is worth more than two thousand pesos, as in this case,

he should have filed a formal application or petition for guardianship and bond. As there was no such petitionfor guardianship and bond, the consent given by the father-guardian , was insufficient and ineffective, anddefendant-appellee was justified in disapproving the proposed transactions in question. The result

would be the same even if interest is worth less than P2,000. The parent's authority over the estate of the

ward as a legal-guardian would not extend to acts of encumbrance or disposition, as distinguished from acts of

management or administration. Since the law merely constitutes the parent as legal administrator of the child's

property (which is a general power), the parent requires special authority for the acts above specified, and this

authority can be given only by a court.

SUNLIFE ASSURANCE COMPANY v. CA (SPS. BACANI)

245 SCRA 268

QUIASON; June 22, 1995

NATURE

A petition for review on certiorari.

FACTS

- April 15, 1986: Robert John B. Bacani procured a life insurance contract for himself from SUNLIFE (petitioner) valued at

P100K. The designated beneficiary was his mother, Bernarda Bacani (respondent).

- June 26, 1987: the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the

insurance policy taken by her son. Petitioner conducted an investigation and its findings prompted it to reject the claim on the

ground that the insured did not disclose facts material to the issuance of the policy. The insured gave false statements in theapplication when he answered in the negative to the question have you ever had or sought advice for urine, kidney,

bladder disorder?

- Sunlife discovered that two weeks prior to the issuance, insured was diagnosed with renal failure, was confined, and

underwent tests.

- November 17, 1988: Bacani and her husband filed for specific performance against Sunlife. RTC granted the plea on the

ground that that the facts concealed by the insured were made in good faith and under the belief that they need not be

disclosed, and that the disclosure was not material since the policy was non-medical.

- Sunlife appealed to the CA, but the latter denied the appeal on the ground that the cause of death was unrelated to the

facts concealed by the insured.

Petitioners Claim

> The insured did not disclose facts relevant to the issuance of the policy, thus rescission of the contract may be invoked by

the insurance company.

Respondents Comments

> The actual cause of death was not relevant to the concealed information, and the policy was entered into by the insured in

good faith.


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ISSUE

WON the concealment renders the insurance policy rescissible

HELD

YES

Ratio The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his

health.

Reasoning

SEC. 26 (IC)

A neglect to communicate that which a party knows and ought to communicate, is called a concealment.

SEC. 31 (IC)

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon

the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in

making his inquiries

- The information which the insured failed to disclose was material and relevant to the approval and the issuance of the

insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by

approving it with the corresponding adjustment for a higher premium or rejecting the same.

- Good faith is no defense in concealment. It appears that such concealment was deliberate on the part of the insured.

- The waiver of a medical examination [in a non-medical insurance contract] renders even more material the information

required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily

constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.

- Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the

insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the

insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries

Disposition Petition is granted and the decision of CA is reversed and set aside.

FILIPINO MERCHANTS INS. v. CA (CHOA TIEK SENG)

179 SCRA 638

REGALADO; November 28, 1989

NATURE

Review of the decision of the CA

FACTS

- Plaintiff insured said shipment with defendant insurance company under said cargo for the goods described as 600 metric

tons of fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to

warehouse terms.

- Some of the goods arrived in bad condition. Plaintiff made a claim against Filipino Merchants Insurance Company. The latter

refused to pay. Plaintiff brought an action against them. The defendant insurance company presented a third party complaint

against the vessel and the arrastre contractor.


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- Judgment was rendered against the insurance company. On the third party complaint, the third party defendants were

ordered to pay the third party plaintiffs. The CA affirmed, but modified the same with regard to the adjudication of the third-

party complaint

ISSUES

1. WON some fortuity, casualty or accidental cause is needed to be proved despite the all risks policy (as asserted by the

insurance company)

2. WON the respondent has an insurable interest

HELD

1. NO

- The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a

willful and fraudulent act of the insured. 7 This is pursuant to the very purpose of an "all risks" insurance to give protection to

the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property.

- Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks"

policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The

insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the

policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the

insurer to show the exception to the coverage. As we held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the

basic rule is that the insurance company has the burden of proving that the loss is caused by the risk excepted and for want

of such proof, the company is liable. In the present case, there being no showing that the loss was caused by any of the

excepted perils, the insurer is liable under the policy.

2. YES

- Section 13 of the Insurance Code defines insurable interest in property as every interest in property, whether real or

personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly

damnify the insured. In principle, anyone has an insurable interest in property who derives a benefit from its existence or

would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property y. 16

Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest;

or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.

- Respondents interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him

and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the

conditions of the sale.

- Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized or

required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the

purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not

obtaining in the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels

partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and

paid the insurance premium covering them

- Moreover, the issue of lack of insurable interest was not raised in petitioners answer.

DispositionPetition denied

[G.R. No. 137775. March 31, 2005]

FGU INSURANCE CORPORATION,petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL

CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all

surnamed ANG, and CO TO, respondents.

[G.R. No. 140704. March 31, 2005]


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The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The

vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30 September 1979. Thetugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.

When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the

clouds over the area were dark and the waves were already big. The arrastre workers unloading the

cargoes of SMC on board the D/B Lucio began to complain about their difficulty in unloading thecargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to

transfer the barge to a safer place because the vessel might not be able to withstand the big waves.

ANCOs representative did not heed the request because he was confident that the barge could withstandthe waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of

San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the waves growing

bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into

the custody of the arrastre operator.

At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the

vessel because the barges rope attached to the wharf was cut off by the big waves. At around midnight,

the barge run aground and was broken and the cargoes of beer in the barge were swept away.

As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten(29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of

Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza Negra

was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim against ANCO amounted to OneMillion Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).

As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages

against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-

Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the totalclaim as attorneys fees.

Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a

second amended complaint which was admitted by the Court impleading the surviving partner, Co To and

the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang. The substituteddefendants adopted the original answer with counterclaim of ANCO since the substantial allegations of

the original complaint and the amended complaint are practically the same.

ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were

indeed loaded on the vessel belonging to ANCO. It claimed however that it had an agreement with SMCthat ANCO would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous

event. Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous

event which battered and sunk the vessel in which they were loaded, they should not be held liable.ANCO further asserted that there was an agreement between them and SMC to insure the cargoes in order

to recover indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of Twenty

Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the total amount of

Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No.29591.

Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that

before the vessel of ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to theextent of Twenty Thousand (20,000) cases, were insured with FGU for a total amount of Eight Hundred


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Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance Policy No. 29591.

ANCO further alleged that on or about 02 October 1979, by reason of very strong winds and heavy wavesbrought about by a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a

result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or

destroyed. According to ANCO, the loss of said cargoes occurred as a result of risks insured against inthe insurance policy and during the existence and lifetime of said insurance policy. ANCO went on to

assert that in the remote possibility that the court will order ANCO to pay SMCs claim, the third-party

defendant corporation should be held liable to indemnify or reimburse ANCO whatever amounts, or

damages, it may be required to pay to SMC.

In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the

Insurance Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes

covered by the said insurance policy cannot be attributed directly or indirectly to any of the risks insuredagainst in the said insurance policy. According to FGU, it is only liable under the policy to Third-party

Plaintiff ANCO and/or Plaintiff SMC in case of any of the following:

a) total loss of the entire shipment;

b) loss of any case as a result of the sinking of the vessel; or

c) loss as a result of the vessel being on fire.

Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exerciseordinary diligence or the diligence of a good father of the family in the care and supervision of the

cargoes insured to prevent its loss and/or destruction.

Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual,

moral, and exemplary damages and attorneys fees.[1]

The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on

ANCOs part, through their representatives, to observe the degree of diligence required that wouldexonerate them from liability. The trial court thus held the Estate of Ang Gui and Co To liable to SMCfor the amount of the lost shipment. With respect to the Third-Party complaint, the court a quo found

FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes. According to the trial

court:

. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken

and the beer cargoes on the said barge were swept away. It is the sense of this Court that the risk insured

against was the cause of the loss.

. . .

Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of thepolicy was only for P858,500.00, defendants as assured, therefore, were considered co-insurers of third-

party defendant FGU Insurance Corporation to the extent of 975,405.00 value of the cargo.

Consequently, inasmuch as there was partial loss of only P1,346,197.00, the assured shall bear 53% of theloss[4][Emphasis ours]

The appellate court affirmed in toto the decision of the lower court and denied the motion for

reconsideration and the supplemental motion for reconsideration.
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Hence, the petitions.

The Issues

In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1)

Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable

under the insurance contract considering the circumstances surrounding the loss of the cargoes; and 2)Whether or not the Court of Appeals committed an error of law in holding that the doctrine ofres

judicata applies in the instant case.

In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court

based on the following assignments of error: 1) The Court of Appeals committed grave abuse ofdiscretion in affirming the findings of the lower court that the negligence of the crewmembers of the D/B

Lucio was the proximate cause of the loss of the cargoes; and 2) The respondent court acted with grave

abuse of discretion when it ruled that the appeal was without merit despite the fact that said court hadaccepted the decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme

Court, as res judicata.

Ruling of the Court

First, we shall endeavor to dispose of the common issue raised by both petitioners in their respectivepetitions for review, that is, whether or not the doctrine ofres judicata applies in the instant case.

It is ANCOs contention that the decision in Civil Case No. R-19341,[5] which was decided in its favor,constitutes res judicata with respect to the issues raised in the case at bar.

The contention is without merit. There can be no res judicata as between Civil Case No. R-19341 and thecase at bar. In order forres judicata to be made applicable in a case, the following essential requisites

must be present: 1) the former judgment must be final; 2) the former judgment must have been rendered

by a court having jurisdiction over the subject matter and the parties; 3) the former judgment must be a

judgment or order on the merits; and 4) there must be between the first and second action identity ofparties, identity of subject matter, and identity of causes of action.[6]

There is no question that the first three elements of res judicata as enumerated above are indeed satisfied

by the decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due to the absenceof the last essential requisite of identity of parties, subject matter and causes of action.

The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant

case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed

Ang and Co To as defendants, with the latter merely impleading FGU as third-party defendant.

The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, theowner of the vessel, with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter

of litigation is the loss of the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resultingfailure of ANCO to deliver to SMCs consignees the lost cargo. Otherwise stated, the controversy in the

first case involved the rights and liabilities of the shipownervis--vis that of the insurer, while the present

case involves the rights and liabilities of the shippervis--vis that of the shipowner. Specifically, Civil

Case No. R-19341 was an action for Specific Performance and Damages based on FGU Marine HullInsurance Policy No. VMF-MH-13519 covering the vessel D/B Lucio, while the instant case is an action

for Breach of Contract of Carriage and Damages filed by SMC against ANCO based on Bill of Lading
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No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU under Insurance Policy No.

MA-58486, should the former be held liable to pay SMC.

Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in

Civil Case No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel

while in the former, the third-party complaint arose from the insurance contract covering the cargoes on

board the D/B Lucio.

The doctrine ofres judicata precludes the re-litigation of a particular fact or issue already passed upon bya court of competent jurisdiction in a former judgment, in another action between the same parties based

on a different claim or cause of action. The judgment in the prior action operates as estoppel only as tothose matters in issue or points controverted, upon the determination of which the finding or judgment

was rendered.[7] If a particular point or question is in issue in the second action, and the judgment willdepend on the determination of that particular point or question, a former judgment between the sameparties or their privies will be final and conclusive in the second if that same point or question was in

issue and adjudicated in the first suit.[8]

Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only

findings with respect to matters passed upon by the court in the former judgment are conclusive in the

disposition of the instant case. A careful perusal of the decision in Civil Case No. R-19341 will revealthat the pivotal issues resolved by the lower court, as affirmed by both the Court of Appeals and the

Supreme Court, can be summarized into three legal conclusions: 1) that the D/B Lucio before and duringthe voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the

reglementary period; and 3) that the vessel D/B Lucio was a constructive total loss.

Said decision, however, did not pass upon the issues raised in the instant case. Absent therein was any

discussion regarding the liability of ANCO for the loss of the cargoes. Neither did the lower court passupon the issue of the alleged negligence of the crewmembers of the D/B Lucio being the cause of the loss

of the cargoes owned by SMC.

Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals thatthere is res judicata.

Anent ANCOs first assignment of error, i.e., the appellate court committed error in concluding that the

negligence of ANCOs representatives was the proximate cause of the loss, said issue is a question of fact

assailing the lower courts appreciation of evidence on the negligence or lack thereof of the crewmembers

of the D/B Lucio. As a rule, findings of fact of lower courts, particularly when affirmed by the appellatecourt, are deemed final and conclusive. The Supreme Court cannot review such findings on appeal,

especially when they are borne out by the records or are based on substantial evidence.[9] As held in thecase ofDonato v. Court of Appeals,[10] in this jurisdiction, it is a fundamental and settled rule thatfindings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless

for strong and cogent reasons because the trial court is in a better position to examine real evidence, aswell as to observe the demeanor of the witnesses while testifying in the case.[11]

It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing

that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitutepalpable error or grave abuse of discretion.[12]
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A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained

by the appellate court, that ANCOs representatives failed to exercise the extraordinary degree ofdiligence required by the law to exculpate them from liability for the loss of the cargoes.

First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand

Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.

Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine

of its own and could not maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO left it tofend for itself notwithstanding the fact that as the two vessels arrived at the port of San Jose, Antique,

signs of the impending storm were already manifest. As stated by the lower court, witness Mr. AnastacioManilag testified that the captain or patron of the tugboat M/T ANCO left the barge D/B Lucio

immediately after it reached San Jose, Antique, despite the fact that there were already big waves and the

area was already dark. This is corroborated by defendants own witness, Mr. Fernando Macabueg.[13]

The trial court continued:

At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary

diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing

the defendant could have placed D/B Lucio in a very safe location before they left knowing or sensing atthat time the coming of a typhoon. The presence of big waves and dark clouds could have warned the

patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a

barge, without its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by

itself. Had the patron or captain of M/T ANCO, the representative of the defendants observedextraordinary diligence in placing the D/B Lucio in a safe place, the loss to the cargo of the plaintiff could

not have occurred. In short, therefore, defendants through their representatives, failed to observe the

degree of diligence required of them under the provision of Art. 1733 of the Civil Code of the Philippines.[14]

Petitioners Estate of Ang Gui and Co To, in theirMemorandum, asserted that the contention of

respondents SMC and FGU that the crewmembers of D/B Lucio should have left port at the onset of thetyphoon is like advising the fish to jump from the frying pan into the fire and an advice that borders on

madness.[15]

The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San

Jose, Antique, during the time in question. The other vessels were transferred and temporarily moved toMalandong, 5 kilometers from wharf where the barge remained.[16]Clearly, the transferred vessels weredefinitely safer in Malandong than at the port of San Jose, Antique, at that particular time, a fact which

petitioners failed to dispute

ANCOs arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang,

a fortuitous event (caso fortuito), and there was no fault or negligence on their part. In fact, ANCOclaims that their crewmembers exercised due diligence to prevent or minimize the loss of the cargoes but

their efforts proved no match to the forces unleashed by the typhoon which, in petitioners own wordswas, by any yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of which

petitioners could not be held liable for.[17]

The Civil Code provides:
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Art. 1733. Common carriers, from the nature of their business and for reasons of public policy are bound

to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengerstransported by them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and

1745 Nos. 5, 6, and 7 . . .

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless

the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

. . .

Art. 1739.In order that the common carrier may be exempted from responsibility, the natural disastermust have been the proximate and only cause of the loss. However, the common carrier must exercisedue diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other

natural disaster in order that the common carrier may be exempted from liability for the loss, destruction,

or deterioration of the goods . . . (Emphasis suppl

digest insurance case (1)

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