Fortune Insurance and Surety Co Inc vs CA1995 || Davide Jr, JFactsProducers Bank of the Phil was insured by Fortune Insurance against robbery (Money, Security, and Payroll Robbery policy). The loss took place along Taft Ave in Pasay City as Producers armored car was robbed. The armored car was transferring P725k cash from the Pasay City branch to the head office in Makati. The cash was under the custody of teller Maribeth Alampay while the car was driven by Benjamin Magalong and escorted by Security Guard Saturnino Atiga. Driver Magalong was assigned by PRC Management Systems while the guard was assigned by Unicorn Security Services Inc (both contractors). Atiga and Magalong were both charged with several others in violating PD 532 or the Anti-Highway Robbery Law.

Producers filed an action to recover P725k under the policy. Fortune claims that, under the policy, the General Exceptions preclude recovery when the loss is caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction with others. Fortune claims that Atiga and Magalong are either employees or authorized representatives of Producers.

RTC: Not employees, Fortune must pay Driver and security guard were merely offered by the contractors and assigned to Producers Bank Producers did NOT have the power to (1) select and engage (2) pay wages (3) dismiss or (4) control. It was the respective contractors.CA affirmed. Labor Code is a special law designed to protect labor. Its definition of employee-employer relationships is inapplicable to an insurance contract, which is to be constructed liberally in favor of the insured. Had Fortune intended to apply the Labor Code in defining employee it should have stated such expressly

Fortunes contentions: When Producers commissioned a guard and a driver to transfer its funds, they effectively and necessarily became its authorized representatives in the care and custody of the money. Employees of Producers. Existence of an employer-employee relationship is determined by law and being such, it cannot be the subject of agreement. 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, would not obliterate the relationship. Power of selection and engagement, payment of wages, dismissal and control over Magalong and Atiga was vested in and exercised by Producers PRC and Unicorn merely labor-only contractors, thus the principal (Producers) is the direct employer.

Producers arguments (reiterate basis of RTC and CA decisions)

Issue: WoN Magalong and Atiga were employees of Producers YES. Fortune is NOT liable.

Ratio: In burglary, robbery, and theft insurance, 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, many designed to reduce this hazard. Persons frequently excluded under such provisions are those in the insured's service and employment. The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property. The terms specifying the excluded classes are to be given their meaning as understood in common speech. "Service" and "employment" are generally associated with the idea of selection, control, and compensation. As far as Fortune is concerned, it was its intention to exclude and exempt from protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted access to Producers' money or payroll. When it used then the term "employee," it must have had in mind any person who qualifies as such as generally and universally understood, or jurisprudentially established in the light of the 4 standards in the determination of the employer-employee relationship. Labor-only contracts is a question of fact. In the case, the stipulation of facts is limited to the insurance policy, the contracts with PRC Management Systems and Unicorn Security Services, the complaint for violation of PD 532, and the information filed by the City Fiscal, there is a paucity of evidence. They were authorized representatives. Producers entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the needed security for the money, the vehicle, and his two other companions. The three acted as agents

REPUBLIC GLASS CORP V QUA (2004)Republic and Gervel seeks to recover from Qua his share in the payment they made as sureties of Ladtek.

Ladtek obtained a loan from Metrobank. Republic Glass (RGC), Gervel, and Qua were Ladtek's sureties. Agreement: RGC, Gervel and Qua would reimburse each other the proportionate share on any sum that any of them might pay to the creditor (Metrobank).

Ladtek defaulted. RGC and Gervel paid a sum of money thereby partially paying Ladtek's obligation to Metrobank. They then wrote to Qua demanding that he pay them. Qua refused. As a result, RGC and Gervel foreclosed several stocks Qua owned and sold them.

Qua is not happy.

TC & CA: Qua is not liable to reimburse RGC and Gervel. RGC and Gervel only made partial payments and did not pay the entire obligation. Hence, Qua remains to be solely liable for the remaining debt. The foreclosure and sale of Qua's stocks was unjustified because the obligation secured by the underlying pledgee had been extinguised by novation.

RGC and Gervel contention in this appeal: Payment of the entire obligation is not a condition sine qua non for them to claim reimbursement from Qua.

WON Payment of the entire obligation is not a condition sine qua non for them to claim reimbursement from Qua. NOWON they are entitled to reimbursement. NO

Payment of entire obligation is not a requisite for liability to arise in a contract of indemnity against liablity. The contract becomes operative as soon as the liability of the person indemnified arises (because of default) whether or not he has suffered actual loss.

HOWEVER, if we allow RGC and Gervel to collect from Qua, then Qua would pay much more than his stipulated liability. They can recover reimbursement from the co-debtor Qua only in so far as their payment exceed their share in the obligation. This is not the case here. The two paid less than their share in the obligation, therefore they cannot demand reimbursement since their payment is actually less than their actual debt.

In addition to theP3,860,646 claimed by RGC and Gervel, Qua would have to pay his liability ofP6.2 million to Metrobank and more thanP1 million to PDCP. Since Qua would surely exceed his proportionate share, he would then recover from RGC and Gervel the excess payment. This situation is absurd and circuitous.

Guingon v Del Monte (1967)Plaintiffs: Guingon FamilyDefendants: Iluminado Del Monte (jeepney driver), Julio Aguilar, Capital Insurance & Surety CoPonente: Bengzon, JP

Julio Aguilar was a jeepney operator. He insured his jeepneys with Capital Insurance against third-party liability. A provision of the insurance policy called Liability to the Public states that Capital Insurance will indemnify the INSURED in the event of accident arising out of the use of the motor vehicle or in connection with loading/unloading of passengers, against all sums including the claimants costs and expenses which the INSURED shall be liable to pay in respect of:1. Death of or bodily injury to any person1. Damage to property One of Aguilars jeepney drivers, driving one of the jeepneys insured, bumped Gervasio Guingon who had just alighted from another jeep. Guingon died some days later. The driver was charged and found guilty of homicide thru reckless imprudence. The heirs of Guingon filed an action for damages they prayed that P80k be paid to them jointly and severally by the driver, Julio Aguilar, and Capital Insurance In the policy is a no action clause that says: ...nothing contained in this policy shall give any person the right to join the Company as co-defendant in any action against the Insured to determine the Insureds liability

Capital Insurance says: The Guingons have no cause of action against it because of the no action clause in the policy.

Issues:1. W/N Capital Insurance may be sued by the Guingons1. W/N Capital Insurance may be sued jointly with the Insured

Held:Yes to both

Ratio:

Re: Capital Insurance may be sued The policy involves insurance for third-party liability. Since the insured is liable to the third person, such third person can sue the insurer. The right of the person injured to sue the insurer of depends on whether the contract of insurance is intended to benefit third persons also or only the insured. If the contract provides for indemnity againstliabilityto third persons , third persons can sue the insurer. If the contract is for indemnity against actual loss or payment third persons cannot sue the insurer (the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third persons)

Re: May be sued jointly with Aguilar Rules of Court Sec 5 Rule 2 (Joinder of causes of action) and Sec 6 Rule 3 (Permissive joinder of parties) are aimed at avoiding multiplicity of suits. The no action clause cannot override procedural rules

EASTERN ASSURANCE & SURETY v. IAC

Cebu Office of Dept. of Agrarian Reform put up a public bidding job or project consisting of repair of 7 units of Willys Mitsubishi Jeeps. Motor City won the bid, its bid was accompanied by the required Proposal Bond[footnoteRef:1] of 33,275 pesos issued by Eastern Assurance as surety on behalf of Motor City. [1: Proposal bond: If Motor City shall become a successful bidder and 1) fails to guarantee performance of the contract 2) refuse to accept it 3) shall not answer for any delay or default of the EXECUTION of the contact, DAR shall be indemnified for loss or damage not to exceed 33k]

DAR entered into a Contract for Repair of Jeeps with Motor City on January 31, 1976. Motor City will repair the 7 jeeps within 90 days failure to do so will obligate him to indemnify DAR the amount equivalent to 1% of the quoted price for each day of late delivery Motor City will put up 10k pesos as Performance bond upon award of bid

Motor City fully repaired and returned on time 6 of the jeeps (minus 1). DAR several letters/granted extensions but Motor City failed to comply.

DAR filed a suit for specific performance and damages v. Motor city and co-defendant Eastern City. Eastern argument: denied liability, the Proposal Bond was a mere offer and not binding and pleaded by way of cross claim that Motor City indemnify Easter whatever amount court would order it to pay. Proposal bond to assure owner of project of the good faith of bidder and that bidder will enter into the contract v. performance bond which is to assure project owner that the contractor will perform the contract and make good on damages.

TC: Motor City to deliver last unit and pay indemnity for later delivery. In case of default, payment will be assumed by Eastern.

CA: re-affirmed but change on the date of computation for interest to March 3, 1978.

ISSUE: WON Eastern liable for the contractual breach by Motor City? YES

HELD: Easterns liability under the Proposal Bond accured the moment Motor failed to post the 10k performance bond, and incurred in delay and defaulted in the repair/delivery of the 7th jeep. Delay and % of indemnity counted from the date of last demand. Easterns liability shall NOT exceed the amt in the Proposal Bond of 33k.

AS SURETY, EASTERN LIABLE upon happening of ANY of the events:1. refusal of Motor City to guarantee performance of contract. -There was a breach of this, no performance bond of 10k was ever posted. DAR did not waive this condition.1. refusal of Motor City to enter into the contract-NO, was entered into1. to answer for any delay or default in the execution of the contract as stated in the proposal-Eastern argument: this pertains to the SIGNING or the conclusion of the contract not the performanceThe Proposal Bond was drafted by Eastern-contract of adhesion and any ambiguity must be construed against Eastern.

ANTONIO ZARAGOZA v. MA. ANGELA FIDELINO and MABINI INSURANCE & FIDELITY1988 / NarvasaSuretyship > Nature and extent of liability of surety > Proceeding against a surety bond

Antonio Zaragoza sold a car to Angela Fidelino, but she failed to pay the price in the manner stipulated in their agreement, so Zaragoza filed a replevin suit. The car was taken from Fidelino's possession on the strength of a writ of delivery. However, the car was returned to her when a surety bond for the car's release was posted by Mabini Insurance.The court ruled in favor of Zaragoza, ordering Fidelino to pay the balance of the purchase price. Zaragoza moved for the amendment of the decision to include Mabini Insurance as a party solidarily liable with Fidelino, and the court granted his motion.

ISSUE & HOLDINGWON MABINI should be held liable. YES

Applicable provisions are RoC Rule 60, Section 10[footnoteRef:2], and Rule 57, Section 20[footnoteRef:3] [2: SEC. 10. Judgment to include recovery against sureties. The amount, if any, to be awarded to either party upon any bond filed by the other in accordance with the provisions of this rule, shag be claimed, ascertained, and granted under the same procedure as prescribed in section 20 of Rule 57.] [3: SEC. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof]

SC notes that it would seem that Rule 57, Section 20 is not relevant.What the law saysIn this case

Title and first sentence speak of an illegal attachmentThe writ of delivery was not illegal

and of a judgment "in favor of the party against whom (said illegal) attachment was issuedThe judgment was against, NOT in favor of Fidelino

Although a party be adjudged liable to another, if it be established that the attachment issued at the latter's instance was wrongful and the former had suffered injury thereby, recovery for damages may be had by the party thus prejudiced by the wrongful attachment, even if the judgment be adverse to him.

To hold a surety on a counter-bond liable, what is entailed is:1. Filing of an application with the Court having jurisdiction of the action1. Presentation before the judgment becomes executory1. Statement in the application of the facts showing applicant's right to damages and the amount thereof1. Giving of due notice of the application to the attaching creditor and his surety or sureties1. Holding of a proper hearing at which the attaching creditor and the sureties may be heard on the application

Enforcement of a surety's liability on a counter-bond given for the release of property seized under a writ of preliminary attachment is governed by Section 17 of Rule 57.

SEC. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counter-bond given pursuant to the provisions of this rule to secure the payment of the judgment shall become charged on such counter-bond, and bound to pay to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action."

MABINI bound itself "jointly and severally" with Fidelino in the sum of P48k which is double the value of the property stated in the affidavit of Zaragoza, for the delivery thereof if such delivery is adjudged, or for the payment of such sum to him as may be recovered against the defendant and the costs of the action. MABINIs liability attached upon the promulgation of the verdict against Fidelino. All that was necessary to enforce the judgment against it was an application therefor with the Court, with due notice to the surety, and a proper hearing.The filing of the bond was an act of voluntary submission to the Court's authority, which is one of the modes for the acquisition of jurisdiction over a party.

STRONGHOLD INSURANCE CO. VS. COURT OF APPEALSJustice Paras, 5 May 1992

Northern Motors Inc., (Northern) and Macronics Marketing entered into a leased agreement wherein the Marcronics leased certain premises from the Northern. Macronics failed to pay its bills so Northern was forced to terminate the lease. Because of Macronics' unpaid liabilities, Northern was forced to sell off the Marcronics properties in an auction sale wherein Northern was the buyer. Macronics was duly notified of the sale. These properties sold were the sole means available by which Northern Motors Inc. could enforce its claim against Macronics.On March 1985, Leisure Club, Inc. filed a civil case against Northern Motors Inc. for replevin and damages. It sought the recovery of certain office furniture and equipments. The lower court ordered the delivery of subject properties to Leisure Club Inc. subject to the posting of the requisite bond. Accordingly, Leisure Club Inc. posted a replevin bond in the amount of P42,000.00 issued by Stronghold Insurance Co., Inc. In due course, the lower court issued the writ of replevin, thereby enabling Leisure Club Inc. to take possession of the disputed properties.Northern Motors filed a counterbond for the release of the disputed properties. However, efforts to recover these properties proved futile as Leisure Club Inc. was never heard of again. The lower court eventually rendered its decision in favor of Northern Motors Inc.Northern Motors then filed a "Motion for Issuance of Writ of Execution Against Bond of Plaintiff's Surety", which was treated by the lower court as an application for damages against the replevin bond. The lower court issued then issued the disputed Order finding Stronghold liable under its surety bond for the damages awarded to Northern Motors Inc.

Petitioners Arguments It is not a party to the case and that the decision clearly became final and executory and, therefore, is no longer liable on the bond. Northern Motors failed to prove any damage by reason of the insurance of replevin bond.Trial Court Being the prevailing party, it is undeniable that the defendant is entitled to recover against the bond. The application for that propose was made before the decision became final and before the appeal was perfected. Both the prevailing and losing parties may appeal the decision. with respect to the defendant the motion against the bond was filed before any appeal was instituted and definitely on or before the judgment became final. Although the claim against the bond was denominated as a motion for issuance of a writ of execution, the allegations are to the effect that the defendant is applying for damages against the bond. defendant suffered damages by reason of the wrongful replevin, in that it has been deprived of the properties upon which it was entitled to enforce its claim

CA: Affirmed

Issue and Holding: Whether or not the Stronghold is liable under its surety bond for the damages awarded to Northern Motors. YES

The Court found that Stronghold Insurance never denied that it issued a replevin bond. Under the terms of the said bond, Stronghold Insurance together with Leisure Club solidarily bound themselves for P42,000 (a) for the prosecution of the action,(b) for the return of the property to the defendant if the return thereof be adjudged, and(c) for the payment of such sum as may in the cause be recovered against the plaintiff and the costs of the action.

In the case at bar, all the necessary conditions for proceeding against the bond are present, to wit:(i) the plaintiffa quo, in bad faith, failed to prosecute the action, and after relieving the property, it promptly disappeared;(ii) the subject property disappeared with the plaintiff, despite a court order for their return; and(iii) a reasonable sum was adjudged to be due to respondent, by way of actual and exemplary damages, attorney's fees and costs of suit.Northern Motors proved the damages it suffered thru evidence presented in the hearing of the case itself and in the hearing of its motion for execution against the replevin bond. No evidence to the contrary was presented by Stronghold Insurance Co., Inc. in its behalf.The obligation of Stronghold Insurance Co., Inc., under the bond is specific. It assures "the payment of such sum as may in the cause be recovered against the plaintiff, and the costs of the action.

PETITION DENIED.

Phil Pryce Assurance Corp vs CA1994 || Nocon, J

FactsPhil Pryce Assurance Corp (formerly known as Interworld Assurance Corp) issued 2 surety bonds in behalf of its principal, Sagum General Merchandise for P500k and P1M. The complaint for recovery of P1.5M was filed by Gegroco Inc. Phil Pryce admitted to issuing the 2 surety bonds but denied liability

Defense of Phil Pryce:1. The checks which were to pay for the premiums bounced and were dishonored hence there is no contract to speak of between petitioner and its supposed principal; 1. The bonds were merely to guarantee payment of its principal's obligation, thus, excussion[footnoteRef:4] is necessary. [4: process or proceedings whereby a creditor must proceed against a principal debtor before proceeding against a surety or subsidiary debtor]

RTC ordered Phil Pryce to pay. CA affirmed.

Issue: WoN Phil Pryce is liable for the P1.5M in the surety bonds YES

Ratio:

Defense #1 lacks merit Art 177. The surety is entitled to payment of the premium as soon as the contract of surety ship or bond is perfected and delivered to the obligor. No contract of surety ship or bonding shall be valid and binding unless and until the premium therefore has been paid, except where the obligee has accepted the bond in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety.

Phil Pryce: Art 177 is inapplicable because Gegroco (obligee) allegedly did NOT accept the surety bond and could not delivery goods to Sagum no merit But facts show that Phil Pryce admitted to have issued the bonds. Leonardo Guzman, witness for Gegroco, testified that (1) Sagum was required to submit a surety bond to guaranty payment of spare parts it purchased from Gegroco. (2) Sagum submitted the surety bonds which Gegroco accepted Evidence of delivery invoices addressed to Sagum proving that the parts were purchased, delivered and received.

Phil Pryce: no authority to issue a Surety Bond no merit Admission of fraud committed against Gegroco. No person can benefit from a wrong he himself committed.

ARRANZ V MANILA FIDELITY AND SURETY CO.

Ylang ylang distillery: creditor/obligeeArranz: principalManila fidelity: surety

Arranz brought a property from Ylang Ylang (did not say what property). Manila fidelity undertook to be Arranz' surety in his obligation to Ylang ylang distillery.

Surety stipulation: Distillery can proceed against Manila Fidelity without proceeding against the Principal (Arranz) for the latters' obligation.

As added security in favor this time of Manila fidelity, Arranz also executed a mortgage of his property for any loss that will be suffered by Manila Fidelity (by virtue of Manila answering Arranz' obligations to Distillery.)

1950-19511st installment (50K) on the property became due and Manila Fidelity was unable to pay Ylang-ylang.2nd installment (40K) became due, and Manila fidelity still was unable to pay.

Arranz, in order to be able to pay his obligations, wanted to mortgage the same properties to PNB in order to secure a loan. But PNB will only agree if Arranz were to cancel the initial mortgage he executed on the property in favor of Manila Distillery. In response, Manila Distillery will only accede to this cancellation of the mortgage originally established in its favor if Arranz pays the premiums he owes for the years 1950-1945 amounting to Php7,200.

Arranz was constrained to pay the premiums because he needed the loan from PNB in order to be able to pay Ylang-ylang distillery.

Present case: Arranz wants to recover the amount he paid Manila Fidelity as premium. He asserts that the premiums were not due and he is not obliged to pay them since Manila fidelity failed to pay Ylang-ylang.

Is Arranz under obligation to pay the premiums because of his surety (manila fidelity)'s failure to pay the indebtedness he secured from Ylang-ylang? YES.

Manila Fidelity, as Arranz' surety, committed no breach. Their agreement only allowed the creditor (Ylang-ylang) to proceed against the surety without the need of proceeding against Arranz. The failure or refusal of the surety to pay the debt for the principal's account did not have the effect of relieving the principal of his obligation to pay the premium on the bond furnished.

As long as the liability of the surety to creditor exists, the premium remains to be collectible from Arranz. As the loan and interest to Ylang-ylang remains unpaid, the surety continued to be bound to the creditor & as a corrolary its right to premiums.

PETITION DENIED

Reparations Commission v. Universal Deep Sea FishingJune 27, 1978 || Concepcion, J.

Universal Deep Sea-Fishing Corporation (UNIVERSAL) was awarded 6 trawl boats by the Reparations Commission as end-user of reparations goods. BoatsDelivered onContract (executed on)First installment representing 10% cost due dateInstallment #1 date due

M/S UNIFISH 1 & 2November 20, 1958K of Conditional Purchase and Sale of Reparations of Goods (Feb 12, 1960) May 8, 1961May 8, 1982

M/S UNIFISH 3 & 4April 20, 1959K of Conditional Purchase and Sale of Reparations of Goods (Nov 25, 1959) July 1961July 1962

M/S UNIFISH 5 & 6not statedcovered by Contract for the Utilization of Reparations Goods (Feb 12, 1960)Oct 17, 1961Oct 17, 1962

*In all of the contracts, Manila Surety & Fidelity Co. Inc acted as surety. There was also a corresponding indemnity agreement to indemnify the surety company for any damage/loss which it may incur as a consequence of having become a surety. One of the indemnitors was Pablo Sarmiento (acting general manager of UNIVERSAL).*In the first 2 contracts, it provided that the first installment representing 10% of the amount shall be paid within 24 months from the date of complete delivery thereof

On August 10, 1962, Reparations Commission instituted present action against UNIVERSAL and surety company to recover money due under these contracts. UNIVERSAL claims the amounts are not yet due and demandable. Surety company also said the action was premature but set up a cross-claim against UNIVERSAL for reimbursement of whatever money it may have to pay. It also filed a complaint against Pablo Sarmiento. Pablo Sarmiento denied liability saying he signed it in his capacity as acting general manager of UNIVERSAL.

Trial court ruled in favor of Reparations Commission.1. UNIVERSAL must pay P100k in first cause of action, P141k in second cause of action and P54k in third cause of action, with interest starting from August 10, 19622. Surety company, jointly and severally with UNIVERSAL, pays P53k in first cause, P68k in second cause and P54k in third cause of action3. UNIVERSAL and Pablo Sarmiento jointly and severally pays Manila Surety P53k and P68k with interest starting from August 10, 1962 plus attorneys fees4. UNIVERSAL pays Manila Surety P54k with interest starting from August 10, 19625. UNIVERSAL shall pay costs

UNIVERSALs argument: there is obscurity in terms of the contracts and they should first be fixed before a creditor can demand its payment from the debtor. Schedule of payment in the contract says first installment is due on May 8, 1961. However, amount of the first of the succeeding itemized installments is due on May 8, 1962.

Issue: WON the first installments under the 3 contracts were already due and demandable when the complaint was filed (August 10, 1962) YES

On first installments and due datesTerms of the contracts are very clear and leave no doubt as to intent of both parties first installment shall be paid within 24 months from the date of complete delivery or on May 8, 1961, and the balance paid in 10 equal yearly installments.What UNIVERSAL claims is obscure, the other first installment is but the first of the 10 equal yearly installments of the balance of the purchase price. (aka DIFFERENT from the real first installment stated in contract)

In Reparations Commission vs Northern Lines Inc, the court faced a similar situation. It held that the schedule of payments for the 10 equal yearly installments DO NOT INCLUDE the one designated as first installment. The 10 equal yearly installments refer to the balance of the price to be paid by the buyer after deducting the first installment, so that altogether there would be 11 installments.

Thus, the obligation was already due and demandable for the first installments as well as the first of the 10 equal yearly installments on the 2 contracts.

On premiums on the performance bondsSurety company claims that RTC erred in not awarding it the amount of P7k as premiums on performance bonds.

The premium is consideration for furnishing the bonds and the obligation to pay subsists for as long as the liability of the surety exists.

SC agrees with Surety that UNIVERSAL should pay the P7k to Manila Surety as it was expressly undertaken by UNIVERSAL.

Down payment of P10k by UNIVERSALSurety company claims RTC erred in not applying the down payment of UNIVERSAL of P10,000 to the guaranteed indebtedness. NCC 1254 where there is no imputation of payment made by either debtor or creditor, debt which is most onerous to the debtor shall be deemed to have been satisfied. P10k should be applied to the guaranteed portion of the debt, thus releasing part of the liability (P53k P43k).

SC: Rules in NCC 1252-1254 applies to a person owing several debts of the same kind to a single creditor. Cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular. Obligation included the payment of not only the first installment but also of the 10 equal yearly installments. No error was made in holding the surety company to the full extent of its undertaking.

Pablo Sarmientos liabilityHe executed the indemnity agreements in both (1) capacity as acting general manager of UNIVERSAL (2) individual capacity. He is liable.

WHEREFORE judgment affirmed with modification that UNIVERSAL should pay Manila Surety P7k for premiums.

SHAFER v JUDGE , RTC

Sherman Shafer obtained a private car policy over his Ford Laser car from Makati Insurance Company for third party liability (TPL). During the effectivity of the policy, Shafer got into an accident while driving the vehicle. He hit and bump and Volkswagen driven by Felipo Legaspi causing damage amounting to 12,345 pesos and a passenger on the vehicle, Jovencio Poblete, sustained physical injuries.

CASES: Owner of the Volkswagen car filed a separate civil action v. Shafer for damages Criminal case-Poblete testified on claim to serious physical injuries sustained from the accident.

Shafer was granted leave by the judge to file a 3rd party complaint v. Makati insurance Co. Court dismissed this claiming it was premature- Shafer would have to be convicted and sentenced to pay the offended party first. Court suggested to wait for outcome of case to determine WON Shafer has a cause of action v. insurer for 3rd party liability (TPL). Shafer: dismissal of the 3rd party complaint would amount to denial of this rights, must be allowed to legally implead the insurance company in a criminal action for reckless imprudence with a civil action jointly prosecuted. Makati Insurance: TPL available only if defendant has a right ot demand contribution/indemnity/or other relief. The contract of motor vehicle insurance is DISTINCT from the criminal liability of Shafer.

HELD: Petition granted, Shafers 3rd party complaint against Makati Insurance Company is entered. The physical injuries of Poblete was impliedly instituted with the criminal case.

ISSUES:

1. When does liability of the insurance company arise?Compulsory Motor Vehicle Liability Insurance in this case was for loss or damage, where the insurance policy insures directly against liability, the insurers liability ACCURES IMMEDIATELY UPON THE OCCURRENCE OF THE INJURY OR EVENT. No need for the insured to wait for the court decision. Third party complaint is allowed by the rules of procedure to avoid unnecessary lawsuits, predicated on the need for expediency and avoidance of unnecessary lawsuits. Intent of the Insurance contract: to provide compensation for death or bodily injuries suffered by innocent 3rd parties or passengers as a result of the negligent operation and use of vehicles

1. Can the injured sue the insurer directly? The injured for whom the contract of insurance is intended can directly sue the insurer. Intent was to protect the injured persons against insolvency of the insured who causes such injury

PERLA COMPANIA DE SEGUROS, INC VS. COURT OF APPEALS (1992)Justice Nocon, 7 May 1992

On December 1981, Sps. Herminio and Evelyn Lim executed a promissory note in favor Supercars, Inc. in the sum of P77,940.00, payable in monthly installments and secured by a chattel mortgage over a brand new red Ford Laser, which is registered under the name of Herminio Lim and insured with Perla Compania de Seguros, Inc. (Perla) for comprehensive coverage. On the same date, Supercars, Inc., with notice to the Sps. Lim, assigned to FCP Credit Corporation (FCP) its rights, title and interest on said promissory note and chattel mortgage as shown by the Deed of Assignment.On November 1982, said vehicle was carnapped. Evelyn Lim, who was driving said car before it was carnapped, immediately called up the Anti-Carnapping Unit of the Philippine Constabulary to report said incident and thereafter, went to the nearest police substation to make a police report regarding said incident.Sps. Lim filed a claim for loss with Perla but said claim was denied on the ground that Evelyn Lim, who was using the vehicle before it was carnapped, was in possession of an expired driver's license at the time of the loss of said vehicle which is in violation of the authorized driver clause of the insurance policy. Sps. Lim requests from FCP for a suspension of payment on the monthly amortization agreed upon due to the loss of the vehicle and, since the carnapped vehicle insured with Perla, said insurance company should be made to pay the remaining balance of the promissory note and the chattel mortgage contract. Perla denied Sps. Lims claim. Consequently, FCP demanded that Sps. Lim pay the whole balance of the promissory note or to return the vehicle but the latter refused. FCP filed a complaint against Sps. Lim, who in turn filed an amended third party complaint against Perla.

TC: Dismissed the Third-Party Complaint filed against PerlaCA: Reversed

Issue and Holding: Whether or not the Perla, the insurable company, is liable for the payment of the outstanding balance of the mortgage at the time of the loss. YES

The comprehensive motor car insurance policy issued by Perla undertook to indemnify the Sps. Lim against loss or damage to the car:1. by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear; 1. (by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft; and 1. by malicious actWhere a car is admittedly, as in this case, unlawfully and wrongfully taken without the owner's consent or knowledge, such taking constitutes theft, and, therefore, it is the "THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should apply.Theft is an entirely different legal concept from that of accident. Theft is committed by a person with the intent to gain or, to put it in another way, with the concurrence of the doer's will. On the other hand, accident, although it may proceed or result from negligence, is the happening of an event without the concurrence of the will of the person by whose agency it was caused.The risk against accident is distinct from the risk against theft. The "authorized driver clause" in a typical insurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction often seized upon by insurance companies in resisting claims from their assureds between death occurring as a result of accident and death occurring as a result of intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had figured in an accident at the time she drove it with an expired license, then, appellee Perla Compania could properly resist appellants' claim for indemnification for the loss or destruction of the vehicle resulting from the accident. But in the present case. The loss of the insured vehicle did not result from an accident where intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intentIn addition, the Court finds that there is no causal connection between the possession of a valid driver's license and the loss of a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadowSps. Lim were able to secure an insurance policy from petitioner Perla, and the same was made specifically payable to FCP. The insurance policy was therefore meant to be an additional security to the principal contract, that is, to insure that the promissory note will still be paid in case the automobile is lost through accident or theft.It is clear from then that upon the loss of the insured vehicle, the insurance company Perla undertakes to pay directly to the mortgagor or to their assignee, FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage contract. If the claim on the insurance policy had been approved by Perla, it would have paid the proceeds thereof directly to FCP, and this would have had the effect of extinguishing Sps. Lims obligation to FCP. Therefore, Sps. Lim were justified in asking petitioner FCP to demand the unpaid installments from Perla.

THE MAGLANAs v. JUDGE FRANCISCO CONSOLACION and AFISCO INSURANCE1992 / RomeroMotor vehicle insurance > Comprehensive motor vehicle liability insurance

FACTSBureau of Customs [BoC] employee Lope Maglana was on his way to work, driving a BoC-owned motorcycle, when a PUJ jeep bumped him. He was thrown from the road, and he died on the spot. Maglanas heirs filed an action for damages against the jeepney operator and Afisco Insurance [AFISCO]. An information for homicide thru reckless imprudence was filed against the driver. The lower court found that the jeepney operator did not exercised sufficient diligence. AFISCO was ordered to reimburse whatever amounts the jeepney operator shall have paid only up to the extent of its insurance coverage.

ARGUMENTS MAGLANAs AFISCO should not merely be held secondarily liable. The 20k coverage of the insurance policy issued by AFISCO should have been awarded in their favor. IC: The insurer's liability is direct and primary and/or jointly and severally with the operator of the vehicle, although only up to the extent of the insurance coverage. Insurance policy provides: In the event of the death of any person entitled to indemnity under this Policy, the Company will, in respect of the liability incurred to such person indemnify his personal representatives in terms of, and subject to the terms and conditions hereof. AFISCO Presumption: JOINT obligation, since IC does not expressly provide for a solidary obligation

The lower court denied the Maglanas MfR. Since the insurance contract is in the nature of suretyship, then AFISCOs liability is secondary only up to the extent of the coverage.

ISSUE & HOLDINGWON AFISCO is directly liable with the jeepney operator up to the extent of its insurance coverage. YES

AFISCOs liability based on the insurance contract is direct [but NOT solidary with jeepney operators liability under NCC 2180]. Since the Maglanas received 5k from AFISCO under the no-fault clause, AFISCO's liability is now limited to 15k. The Maglanas can choose from either of the following: Claim P15,000 from AFISCO and the balance from the jeepney operator Enforce the entire judgment from the jeepney operator subject to reimbursement from AFISCO to the extent of the insurance coverage

RATIOThe UNDERLYING REASON behind the third party liability of the Compulsory Motor Vehicle Liability Insurance is to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy. Where an insurance policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or event upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured. [Shafer v. RTC Judge]

AFISCO is directly liable, but NOT solidarily liable with jeepney operatorWhere the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer. However, the insurers direct liability under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. Insurers liability is based on contract; insureds liability based on tort.While in solidary obligations, the creditor may enforce the entire obligation against one of the solidary debtors, in an insurance contract, the insurer undertakes for a consideration to indemnify the insured against loss, damage or liability arising from an unknown or contingent event. [Malayan Insurance v. CA]

PERLA COMPANIA de SEGUROS, INC. vs. ANCHETAJustice Cortes, 8 August 1988

Facts:On December 1977, private respondents vehicle collided with a Superlines bus along a national highway. Because of the collision, private respondents sustained physics injuries in varying degrees of gravity. As such, they filed with a complaint for damages against Superlines, the bus driver and Perla Compania de Seguros (Perla, the insurer of the bus. The bus was insured with Perla for the amount of P50,000.00 as and for passenger liability and P50,000.00 as and for third party liability. On the other hand, the vehicle in which private respondents were riding was insured with Malayan Insurance Co.On March 1978, the CFI judge issued an order requiring Perla to pay immediately the P5,000.00 under the "no fault clause" as provided for under Section 378 of the Insurance Code.

Petitioners Argument: Under Sec. 378 of the Insurance Code, the insurer liable to pay the P5,000.00 is the insurer of the vehicle in which private respondents were riding, not petitioner, as the provision states that "[i]n the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from."

Issue and Holding:Whether or not petitioner is the insurer liable to indemnify private respondents under Sec. 378 of the Insurance Code. NO

Ratio:The Court finds that the key to the resolution of the issue is of courts e Sec. 378, which provides:Sec. 378. Any claim for death or injury to any passenger or third party pursuant to the provision of this chapter shall be paid without the necessity of proving fault or negligence of any kind. Provided, That for purposes of this section xxx(iii) Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained.From a reading of the provision, the following rules on claims under the "no fault indemnity" provision, where proof of fault or negligence is not necessary for payment of any claim for death or injury to a passenger or a third party, are established:1. A claim may be made against one motor vehicle only.2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle. in which he is riding, mounting or dismounting from.3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie against the insurer of the directly offending vehicle.4. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained.

The Court finds that the law is very clear the claim shall lie against the insurer of the vehicle in which the "occupant" ** is riding, and no other. The claimant is not free to choose from which insurer he will claim the "no fault indemnity," as the law, by using the word "shall, makes it mandatory that the claim be made against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from.That said vehicle might not be the one that caused the accident is of no moment since the law itself provides that the party paying the claim under Sec. 378 may recover against the owner of the vehicle responsible for the accident. This is precisely the essence of "no fault indemnity" insurance which was introduced to and made part of our laws in order to provide victims of vehicular accidents or their heirs immediate compensation, although in a limited amount, pending final determination of who is responsible for the accident and liable for the victims 'injuries or death. In turn, the "no fault indemnity" provision is part and parcel of the Insurance Code provisions on compulsory motor vehicle ability insurance [Sec. 373-389] and should be read together with the requirement for compulsory passenger and/or third party liability insurance [Sec. 377] which was mandated in order to ensure ready compensation for victims of vehicular accidents.Irrespective of whether or not fault or negligence lies with the driver of the Superlines bus, as private respondents were not occupants of the bus, they cannot claim the "no fault indemnity" provided in Sec. 378 from petitioner. The claim should be made against the insurer of the vehicle they were riding.

PETITION GRANTED. ORDER ANNULED AND SET ASIDE.

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