Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-9374 February 16, 1915

FRANCISCO DEL VAL, ET AL., plaintiffs-appellants, vs. ANDRES DEL VAL, defendant-appellee. Ledesma, Lim and Irureta Goyena for appellants. O'Brien and DeWitt for appellee. MORELAND, J.: This is an appeal from a judgment of the Court of First Instance of the city of Manila dismissing the complaint with costs. The pleadings set forth that the plaintiffs and defendant are brother and sisters; that they are the only heirs at law and next of kin of Gregorio Nacianceno del Val, who died in Manila on August 4, 1910, intestate; that an administrator was appointed for the estate of the deceased, and, after a partial administration, it was closed and the administrator discharged by order of the Court of First Instance dated December 9, 1911; that during the lifetime of the deceased he took out insurance on his life for the sum of P40,000 and made it payable to the defendant as sole beneficiary; that after his death the defendant collected the face of the policy; that of said policy he paid the sum of P18,365.20 to redeem certain real estate which the decedent had sold to third persons with a right to repurchase; that the redemption of said premises was made by the attorney of the defendant in the name of the plaintiff and the defendant as heirs of the deceased vendor; that the redemption of said premises they have had the use and benefit thereof; that during that time the plaintiffs paid no taxes and made no repairs. It further appears from the pleadings that the defendant, on the death of the deceased, took possession of most of his personal property, which he still has in his possession, and that he has also the balance on said insurance policy amounting to P21,634.80. Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and not to the defendant personally; that, therefore, they are entitled to a partition not only of the real and personal property, but also of the P40,000 life insurance. The complaint prays a partition of all the property, both real and personal, left by the deceased; that the defendant account for P21,634.80, and that that sum be divided equally among the plaintiffs and defendant along with the other property of deceased. The defendant denies the material allegations of the complaint and sets up as special defense and counterclaim that the redemption of the real estate sold by his father was made in the name of the plaintiffs and himself instead of in his name alone without his knowledge or consent; and that it was not his intention to use the proceeds of the insurance policy for the benefit of any person but himself, he alleging that he was and is the sole owner thereof and that it is his individual property. He, therefore, asks that he be declared the owner of the real estate redeemed by the payment of the P18,365.20, the owner of the remaining P21,634.80, the balance of the insurance policy, and that the plaintiff's account for the use and occupation of the premises so redeemed since the date of the redemption. The learned trial court refused to give relief to either party and dismissed the action.

It says in its opinion: "This purports to be an action for partition, brought against an heir by his coheirs. The complaint, however, fails to comply with Code Civ., Pro. sec. 183, in that it does not 'contain an adequate description of the real property of which partition is demanded.' Because of this defect (which has not been called to our attention and was discovered only after the cause was submitted) it is more than doubtful whether any relief can be awarded under the complaint, except by agreement of all the parties." This alleged defect of the complaint was made one of the two bases for the dismissal of the action. We do not regard this as sufficient reason for dismissing the action. It is the doctrine of this court, set down in several decisions, Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504, that, even though the complaint is defective to the extent of failing in allegations necessary to constitute a cause of action, if, on the trial of the cause, evidence is offered which establishes the cause of action which the complaint intended to allege, and such evidence is received without objection, the defect is thereby cured and cannot be made the ground of a subsequent objection. If, therefore, evidence was introduced on the trial in this case definitely and clearly describing the real estate sought to be partitioned, the defect in the complaint was cured in that regard and should not have been used to dismiss the action. We do not stop to inquire whether such evidence was or was not introduced on the trial, inasmuch as this case must be turned for a new trial with opportunity to both parties to present such evidence as is necessary to establish their respective claims. The court in its decision further says: "It will be noticed that the provision above quoted refers exclusively to real estate. . . . It is, in other words, an exclusive real property action, and the institution thereof gives the court no jurisdiction over chattels. . . . But no relief could possibly be granted in this action as to any property except the last (real estate), for the law contemplated that all the personal property of an estate be distributed before the administration is closed. Indeed, it is only in exceptional cases that the partition of the real estate is provided for, and this too is evidently intended to be effected as a part of the administration, but here the complaint alleges that the estate was finally closed on December 9, 1911, and we find upon referring to the record in that case that subsequent motion to reopen the same were denied; so that the matter of the personal property at least must be considered res judicata (for the final judgment in the administration proceedings must be treated as concluding not merely what was adjudicated, but what might have been). So far, therefore, as the personal property at least is concerned, plaintiffs' only remedy was an appeal from said order." We do not believe that the law is correctly laid down in this quotation. The courts of the Islands have jurisdiction to divide personal property between the common owners thereof and that power is as full and complete as is the power to partition real property. If an actual partition of personal property cannot be made it will be sold under the direction of the court and the proceeds divided among the owners after the necessary expenses have been deducted. The administration of the estate of the decedent consisted simply, so far as the record shows, in the payment of the debts. No division of the property, either real or personal, seems to have been made. On the contrary, the property appears, from the record, to have been turned over to the heirs in bulk. The failure to partition the real property may have been due either to the lack of request to the court by one or more of the heirs to do so, as the court has no authority to make a partition of the real estate without such request; or it may have been due to the fact that all the real property of decedent had been sold under pacto de retro and that, therefore, he was not the owner of any real estate at the time of his death. As to the personal property, it does not appear that it was disposed of in the manner provided by law. (Sec. 753, Code of Civil Procedure.) So far as this action is concerned, however, it is sufficient for us to know that none of the property was actually divided among the heirs in the administration proceeding and that they remain coowners and tenants-in- common thereof at the present time. To maintain an action to partition real or personal property it is necessary to show only that it is owned in common.

The order finally closing the administration and discharging the administrator, referred to in the opinion of the trial court, has nothing to do with the division of either the real or the personal property. The heirs have the right to ask the probate court to turn over to them both the real and personal property without division; and where that request is unanimous it is the duty of the court to comply with it, and there is nothing in section 753 of the Code of Civil Procedure which prohibits it. In such case an order finally settling the estate and discharging the administrator would not bar a subsequent action to require a division of either the real or personal property. If, on the other hand, an order had been made in the administration proceedings dividing the personal or the real property, or both, among the heirs, then it is quite possible that, to a subsequent action brought by one of the heirs for a partition of the real or personal property, or both, there could have been interposed a plea of res judicata based on such order. As the matter now stands, however, there is no ground on which to base such a plea. Moreover, no such plea has been made and no evidence offered to support it. With the finding of the trial court that the proceeds of the life-insurance policy belong exclusively to the defendant as his individual and separate property, we agree. That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured, and that such proceeds are the separate and individual property of the beneficiary, and not of the heirs of the person whose life was insured, is the doctrine in America. We believe that the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce, which reads: The amount which the underwriter must deliver to the person insured, in fulfillment of the contract, shall be the property of the latter, even against the claims of the legitimate heirs or creditors of any kind whatsoever of the person who effected the insurance in favor of the former. It is claimed by the attorney for the plaintiffs that the section just quoted is subordinate to the provisions of the Civil Code as found in article 1035. This article reads: An heir by force of law surviving with others of the same character to a succession must bring into the hereditary estate the property or securities he may have received from the deceased during the life of the same, by way of dowry, gift, or for any good consideration, in order to compute it in fixing the legal portions and in the account of the division. Counsel also claim that the proceeds of the insurance policy were a donation or gift made by the father during his lifetime to the defendant and that, as such, its ultimate destination is determined by those provisions of the Civil Code which relate to donations, especially article 819. This article provides that "gifts made to children which are not betterments shall be considered as part of their legal portion." We cannot agree with these contentions. 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 lifeinsurance contracts or to the destination of life insurance proceeds. That subject is regulated exclusively by the Code of Commerce which provides for the terms of the contract, the relations of the parties and the destination of the proceeds of the policy. The proceeds of the life-insurance policy being the exclusive property of the defendant and he having used a portion thereof in the repurchase of the real estate sold by the decedent prior to his death with right to repurchase, and such repurchase having been made and the conveyance taken in the names of all of the heirs instead of the defendant alone, plaintiffs claim that the property belongs to the heirs in common and not to the defendant alone. We are not inclined to agree with this contention unless the fact appear or be shown that the defendant acted as he did with the intention that the other heirs should enjoy with him the

ownership of the estate in other words, that he proposed, in effect, to make a gift of the real estate to the other heirs. If it is established by the evidence that that was his intention and that the real estate was delivered to the plaintiffs with that understanding, then it is probable that their contention is correct and that they are entitled to share equally with the defendant therein. If, however, it appears from the evidence in the case that the conveyances were taken in the name of the plaintiffs without his knowledge or consent, or that it was not his intention to make a gift to them of the real estate, then it belongs to him. If that facts are as stated, he has two remedies. The one is to compel the plaintiffs to reconvey to him and the other is to let the title stand with them and to recover from them the sum he paid on their behalf. For the complete and proper determination of the questions at issue in this case, we are of the opinion that the cause should be returned to the trial court with instructions to permit the parties to frame such issues as will permit the settlement of all the questions involved and to introduce such evidence as may be necessary for the full determination of the issues framed. Upon such issues and evidence taken thereunder the court will decide the questions involved according to the evidence, subordinating his conclusions of law to the rules laid down in this opinion. We do not wish to be understood as having decided in this opinion any question of fact which will arise on the trial and be there in controversy. The trial court is left free to find the facts as the evidence requires. To the facts as so found he will apply the law as herein laid down. The judgment appealed from is set aside and the cause returned to the Court of First Instance whence it came for the purpose hereinabove stated. So ordered. Arellano, C.J., and Carson, J., concur. Torres, J., concurs in the result.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-44059 October 28, 1977 THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs. CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants.

MARTIN, J.: This is a novel question in insurance law: Can a common-law wife named as beneficiary in the life insurance policy of a legally married man claim the proceeds thereof in case of death of the latter? On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado designated T. Ebrado as the revocable beneficiary in his policy. He to her as his wife.

On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by a failing branch of a tree. As the policy was in force, The Insular Life Assurance Co., Ltd. liable to pay the coverage in the total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid premiums and interest thereon due for January and February, 1969, in the sum of P36.27. Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado. In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd. commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970. After the issues have been joined, a pre-trial conference was held on July 8, 1972, after which, a pre-trial order was entered reading as follows: +.wph!1 During the pre-trial conference, the parties manifested to the court. that there is no possibility of amicable settlement. Hence, the Court proceeded to have the parties submit their evidence for the purpose of the pre-trial and make admissions for the purpose of pretrial. During this conference, parties Carponia T. Ebrado and Pascuala Ebrado agreed and stipulated: 1) that the deceased Buenaventura Ebrado was married to Pascuala Ebrado with whom she has six (legitimate) namely; Hernando, Cresencio, Elsa, Erlinda, Felizardo and Helen, all surnamed Ebrado; 2) that during the lifetime of the deceased, he was insured with Insular Life Assurance Co. Under Policy No. 009929 whole life plan, dated September 1, 1968 for the sum of P5,882.00 with the rider for accidental death benefit as evidenced by Exhibits A for plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit 7 for Carponia Ebrado; 3) that during the lifetime of Buenaventura Ebrado, he was living with his common-wife, Carponia Ebrado, with whom she had 2 children although he was not legally separated from his legal wife; 4) that Buenaventura in accident on October 21, 1969 as evidenced by the death Exhibit 3 and affidavit of the police report of his death Exhibit 5; 5) that complainant Carponia Ebrado filed claim with the Insular Life Assurance Co. which was contested by Pascuala Ebrado who also filed claim for the proceeds of said policy 6) that in view ofthe adverse claims the insurance company filed this action against the two herein claimants Carponia and Pascuala Ebrado; 7) that there is now due from the Insular Life Assurance Co. as proceeds of the policy P11,745.73; 8) that the beneficiary designated by the insured in the policy is Carponia Ebrado and the insured made reservation to change the beneficiary but although the insured made the option to change the beneficiary, same was never changed up to the time of his death and the wife did not have any opportunity to write the company that there was reservation to change the designation of the parties agreed that a decision be rendered based on and stipulation of facts as to who among the two claimants is entitled to the policy. Upon motion of the parties, they are given ten (10) days to file their simultaneous memoranda from the receipt of this order. SO ORDERED.

On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T. Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the deceased insured. The trial court held: +.wph!1 It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or concubinage is not essential in order to establish the disqualification mentioned therein. Neither is it also necessary that a finding of such guilt or commission of those acts be made in a separate independent action brought for the purpose. The guilt of the donee (beneficiary) may be proved by preponderance of evidence in the same proceeding (the action brought to declare the nullity of the donation). It is, however, essential that such adultery or concubinage exists at the time defendant Carponia T. Ebrado was made beneficiary in the policy in question for the disqualification and incapacity to exist and that it is only necessary that such fact be established by preponderance of evidence in the trial. Since it is agreed in their stipulation above-quoted that the deceased insured and defendant Carponia T. Ebrado were living together as husband and wife without being legally married and that the marriage of the insured with the other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the insurance in question was purchased there is no question that defendant Carponia T. Ebrado is disqualified from becoming the beneficiary of the policy in question and as such she is not entitled to the proceeds of the insurance upon the death of the insured. From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11, 1976, the Appellate Court certified the case to Us as involving only questions of law. We affirm the judgment of the lower court. 1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shag be applied exclusively to the proper interest of the person in whose name it is made" 1 cannot be validly seized upon to hold that the mm includes the beneficiary. The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract of insurance is personal in character. 2 Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance. Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. 3 And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides: +.wph!1 The following donations shall be void: 1. Those made between persons who were guilty of adultery or concubinage at the time of donation; Those made between persons found guilty of the same criminal offense, in consideration thereof;

3. Those made to a public officer or his wife, descendants or ascendants by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the same action. 2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation.5 Under American law, a policy of life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it as a will and determine the effect of a clause designating the beneficiary by rules under which wins are interpreted. 6 3. Policy considerations and dictates of morality rightly justify the institution of a barrier between common law spouses in record to Property relations since such hip ultimately encroaches upon the nuptial and filial rights of the legitimate family There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration As above pointed out, a beneficiary in a fife insurance policy is no different from a donee. Both are recipients of pure beneficence. So long as manage remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities. Thus, in Matabuena v. Cervantes, 7 this Court, through Justice Fernando, said: +.wph!1 If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that court (Court of Appeals), 'to prohibit donations in favor of the other consort and his descendants because of and undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law;" por-que no se enganen desponjandose el uno al otro por amor que han de consuno' (According to) the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale 'No Mutuato amore invicem spoliarentur' the Pandects (Bk, 24, Titl. 1, De donat, inter virum et uxorem); then there is very reason to apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such donations should subsist, lest the condition 6f those who incurred guilt should turn out to be better.' So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage. It is hardly necessary to add that even in the absence of the above pronouncement, any other conclusion cannot stand the test of scrutiny. It would be to indict the frame of the Civil Code for a failure to apply a laudable rule to a situation which in its essentials cannot be distinguished. Moreover, if it is at all to be differentiated the policy of the law which embodies a deeply rooted notion of what is just and what is right would be nullified if such irregular relationship instead of being visited with disabilities would be attended with benefits. Certainly a legal norm should not be susceptible to such a reproach. If there is every any

occasion where the principle of statutory construction that what is within the spirit of the law is as much a part of it as what is written, this is it. Otherwise the basic purpose discernible in such codal provision would not be attained. Whatever omission may be apparent in an interpretation purely literal of the language used must be remedied by an adherence to its avowed objective. 4. We do not think that a conviction for adultery or concubinage is exacted before the disabilities mentioned in Article 739 may effectuate. More specifically, with record to the disability on "persons who were guilty of adultery or concubinage at the time of the donation," Article 739 itself provides: +.wph!1 In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the donee may be proved by preponderance of evidence in the same action. The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On the contrary, the law plainly states that the guilt of the party may be proved "in the same acting for declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded. In the caw before Us, the requisite proof of common-law relationship between the insured and the beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial conference of the case. It case agreed upon and stipulated therein that the deceased insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate children; that during his lifetime, the deceased insured was living with his common-law wife, Carponia Ebrado, with whom he has two children. These stipulations are nothing less thanjudicial admissions which, as a consequence, no longer require proof and cannot be contradicted. 8 A fortiori, on the basis of these admissions, a judgment may be validly rendered without going through the rigors of a trial for the sole purpose of proving the illicit liaison between the insured and the beneficiary. In fact, in that pretrial, the parties even agreed "that a decision be rendered based on this agreement and stipulation of facts as to who among the two claimants is entitled to the policy." ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life insurance policy. As a consequence, the proceeds of the policy are hereby held payable to the estate of the deceased insured. Costs against Carponia T. Ebrado. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-2910 June 29, 1951

THE MANUFACTURERS LIFE INSURANCE CO., plaintiff-appellant, vs. BIBIANO L. MEER, in the capacity as Collector of Internal Revenue, defendant-appellee. Camus, Zavalla, Bautista and Nueves for appellant. First Assistant Solicitor General Roberto A. Gianzon, Office of the Solicitor Felix V. Makasiar and Solicitor Jose P. Alejandro for appellee.

BENGZON, J.: Appeal from a decision of the Honorable Buenaventura Ocampo, then judge of the Manila court of first instance, dismissing plaintiff's complaint to recover money paid under protest for taxes. The case was submitted upon a stipulation of facts, supplemented by documentary evidence. The plaintiff, the Manufacturer Life Insurance Company in a corporation duly organized in Canada with head office at Toronto. It is duly registered and licensed to engage in life insurance business in the Philippines, and maintains a branch office in Manila. It was engaged in such business in the Philippines for more than five years before and including the year 1941. But due to the exigencies of the war it closed the branch office at Manila during 1942 up to September 1945. In the course of its operations before the war, plaintiff issued a number of life insurance policies in the Philippines containing stipulations referred to as non-forfeiture clauses, as follows: '8. Automatic Premium Loan. This Policy shall not lapse for non-payment of any premium after it has been three full years in force, if, at the due date of such premium, the Cash Value of this Policy and of any bonus additions and dividends left on accumulation (after deducting any indebtedness to the Company and the interest accrued thereon) shall exceed the amount of said premium. In which event the company will, without further request, treat the premium then due as paid, and the amount of such premium, with interest from its actual due date at six per cent per annum, compounded yearly, and one per cent, compounded yearly, for expenses, shall be a first lien on this Policy in the Company's favour in priority to the claim of any assignee or any other person. The accumulated lien may at any time, while the Policy is in force, be paid in whole or in part. "When the premium falls due and is not paid in cash within the month's grace, if the Cash Value of this policy and of any bonus addition and dividends left on accumulation (after deducting any accumulated indebtedness) be less than the premium then due, the Company will, without further requests, continue this insurance in force for a period .. . . "10. Cash and Paid-Up Insurance Values. At the end of the third policy year or thereafter, upon the legal surrender of this Policy to the Company while there is no default in premium payments or within two months after the due date of the premium in default, the Company will (1) grant a cash value as specified in Column (A) increased by the cash value of any bonus additions and dividends left on accumulation, which have been alloted to this Policy, less all indebtedness to the Company on this Policy on the date of such surrender, or (2) endorse this Policy as a Non-Participating Paid-up Policy for the amount as specified in Column (B) of the Table of Guaranteed Values . . .. "11. Extended Insurance. After the premiums for three or more full years have been paid hereunder in cash, if any subsequent premium is not paid when due, and there is no indebtness to the Company, on the written request of the Insured . . .. From January 1, 1942 to December 31, 1946 for failure of the insured under the above policies to pay the corresponding premiums for one or more years, the plaintiff's head office of Toronto, applied the provision of the automatic premium loan clauses; and the net amount of premiums so advanced or loaned totalled P1,069,254.98. On this sum the defendant Collector of Internal Revenue assessed P17,917.12 which plaintiff paid supraprotest . The assessment was made pursuant to section 255 of the National Internal Revenue Code as amended. which partly provides: SEC. 255. Taxes on insurance premiums. There shall be collected from every person, company, or corporation (except purely cooperative companies or associations) doing

business of any sort in the Philippines a tax of one per centum of the total premiums collected .. whether such premiums are paid in money, notes credits, or any substitute for money but premiums refunded within six months after payment on account of rejection of risk or returned for other reason to person insured shall not be included in the taxable receipts . . .. It is the plaintiff's contention that when it made premium loans or premium advances, as above stated, by virtue of the non-forfeiture clauses, it did not collect premiums within the meaning of the above sections of the law, and therefore it is not amendable to the tax therein provided. The plaintiff conveniently divides that issue into five minor issues, to wit: (a) Whether or not premium advances made by plaintiff-appellant under the automatic premium loan clause of its policies are "premium collected" by the Company subject to tax; (b) Whether or not, in the application of the automatic premium loan clause of plaintiffappellant's policies, there is "payment in money, notes, credit, or any substitutes for money"; (c) Whether or not the collection of the alleged deficiency premium taxes constitutes double taxation; (d) Whether the making of premium advances, granting for the sake of argument that it amounted to collection of premiums, were done in Toronto, Canada, or in the Philippines; and (e) Whether or not the fact that plaintiff-appellant was not doing business in the Philippines during the period from January 1, 1942 to September 30, 1945, inclusive, exempts it from payment of premium taxes corresponding to said period. These points will be considered in their order. The first two may best taken up together in the light of a practical illustration offered by appellant: "Suppose that "A" years of age, secures a 20-years endowment policy for P5,000 from plaintiffappellant Company and pays an annual premium of P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on this amount plaintiff-appellant pays the corresponding taxes under section 255 of the National Internal Revenue Code. Suppose also that the cash value of said policy after the payment of the 10th annual premium amounts to P1,000." When on the eleventh year the annual premium fell due and the insured remitted no money within the months grace, the insurer treated the premium then over due as paid from the cash value, the amount being loan to the policyholder1 who could discharged it at anytime with interest at 6 per cent. The insurance contract, therefore, continued in force for the eleventh year. Under the circumstances described, did the insurer collect the amount of P250 as the annual premium for the eleventh year on the said policy? The plaintiff says no; but the defendant and the lower court say yes. The latter have, in our opinion, the correct view. In effect the Manufacturers Life Insurance Co. loaned to "A" on the eleventh year, the sum of P250 and the latter in turn paid with that sum the annual premium on his policy. The Company therefore collected the premium for the eleventh year. "How could there be such a collection "plaintiff argues "when as a result thereof, insurer becomes a creditor, acquires a lien on the policy and is entitled to collect interest on the amount of the unpaid premiums?".

Wittingly, the "premium" and the "loan" have been interchanged in the argument. The insurer "became a creditor"of the loan, but not of the premium that had already been paid. And it is entitled to collect interest on the loan, not on the premium. In other words, "A" paid the premium for the eleventh; but in turn he became a debtor of the company for the sum of P250. This debt he could repay either by later remitting the money to the insurer or by letting the cash value compensate for it. The debt may also be deducted form the amount of the policy should "A" die thereafter during the continuance of the policy. Proceeding along the same line of argument counsel for plaintiff observes "that there is no change, much less an increase, in the amount of the assets of plaintiff-appellant after the application of the automatic premium loan clause. Its assets remain exactly the same after making the advances in question. It being so, there could have been no collection of premium . . .. "We cannot assent to this view, because there was an increase. There was thenew credit for the advances made. True, the plaintiff could not sue the insured to enforce that credit. But it has means of satisfaction out of the cash surrender value. Here again it may be urged that if the credit is paid out of the cash surrender value, there were no new funds added to the company's assets. Cash surrender value "as applied to life insurance policy, is the amount of money the company agrees to pay to the holder of the policy if he surrenders it and releases his claims upon it. The more premiums the insured has paid the greater will be the surrender value; but the surrender value is always a lesser sum than the total amount of premiums paid." (Cyclopedia Law Dictionary 3d. ed. 1077.) The cash value or cash surrender value is therefore an amount which the insurance company holds in trust2 for the insured to be delivered to him upon demand. It is therefore a liability of the company to the insured. Now then, when the company's credit for advances is paid out of the cash value or cash surrender value, that value and the company's liability is thereby dismissed pro tanto. Consequently, the net assets of the insurance companyincreased corresponding; for it is plain mathematics that the decrease of a person's liabilities means a corresponding increase in his net assets. Nevertheless let us grant for the nonce that the operation of the automatic loan provision contributed no additional cash to the funds of the insurer. Yet it must be admitted that the insurer agreed to consider the premium paid on the strength of the automatic loan. The premium was therefore paid by means of a "note" or "credit" or "other substitute for money" and the taxis due because section 255 above quoted levies taxes according to the total premiums collected by the insurer "whether such premiums are paid in money, notes, credits or any substitutes for money. In connection with the third issue, appellant refers to its example about "A" who failed to pay the premium on the eleventh year and the insurer advanced P250 from the cash value. Then it reasons out that "if the amount P250 is deducted from the cash value of P1,000 of the policy, then taxing this P250 anew as premium collected, as was done in the present case, will amount to double taxation since taxes had already been collected on the cash value of P1,000 as part of the P2,500 collected as premiums for the first ten years." The trouble with the argument is that it assumes all advances are necessarily repaid from the cash value. That is true in some cases. In others the insured subsequently remits the money to repay the advance and to keep unimpaired the cash reserve of his policy. As to a matter of fact of the total amount advanced (P1,069,254.998) P158,666.63 had actually been repaid at the time of assessment notice. Besides, the premiums paid and on which taxes had already been collected, were those for the ten years. The tax demanded is on the premium for the eleventh year. In any event there is no constitutional prohibition against double taxation.

On the fourth issue the appellant takes the position that as advances of premiums were made in Toronto, such premiums are deemed to have been paid there not in the Philippines and therefore those payments are not subject to local taxation. The thesis overlooks the actual fact that the loans are made to policyholders in the Philippines, who in turn pay therewith the premium to the insurer thru the Manila branch. Approval of appellants position will enable foreign insurers to evade the tax by contriving to require that premium payments shall be made at their head offices. What is important, the law does not contemplate premiums collected in the Philippines. It is enough that the insurer is doing insurance business in the Philippines, irrespective of the place of its organization or establishment. This brings forth the appellant's last contention that it was "engaged in business" in the Philippines during the years 1942 to September 1945, and that as section 255 applies only to companies "doing insurance business in the Philippines" this tax was improperly demanded. It is our opinion that although during those years the appellant was not open for new business because its branch office was closed, still it was practically and legally, operating in this country by collecting premiums on its outstanding policies, incurring the risks and/or enjoying the benefits consequent thereto, without having previously taken any steps indicating withdrawal in good faith field of economic activity3. As a matter of fact, in objecting to the payment of the tax, plaintiff-appellant never insisted, before the Bureau of Internal Revenue, that it was not engaged in business in this country during those years. Wherefore, finding no prejudicial error in the appealed decisions, we hereby affirm it with costs. Paras, C.J., Feria, Pablo, Padilla, Tuason, Montemayor, Reyes and Jugo, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 76101-02 September 30, 1991 TIO KHE CHIO, petitioner, vs. THE HONORABLE COURT OF APPEALS and EASTERN ASSURANCE AND SURETY CORPORATION,respondents. Rodolfo M. Morelos for petitioner. Ferrer, Mariano, Sangalang & Gatdula for private respondent.

FERNAN, C.J.:p The issue in this petition for certiorari and prohibition is the legal rate of interest to be imposed in actions for damages arising from unpaid insurance claims. Petitioner Tio Khe Chio claims that it should be twelve (12%) per cent pursuant to Articles 243 and 244 of the Insurance Code while

private respondent Eastern Assurance and Surety Corporation (EASCO) claims that it should be six (6%) per cent under Article 2209 of the Civil Code. The facts are as follows: On December 18, 1978, petitioner Tio Khe Chio imported one thousand (1,000) bags of fishmeal valued at $36,000.30 from Agro Impex, U.S.A. Dallas, Texas, U.S.A. The goods were insured with respondent EASCO and shipped on board the M/V Peskov, a vessel owned by Far Eastern Shipping Company. When the goods reached Manila on January 28, 1979, they were found to have been damaged by sea water which rendered the fishmeal useless. Petitioner filed a claim with EASCO and Far Eastern Shipping. Both refused to pay. Whereupon, petitioner sued them before the then Court of First Instance of Cebu, Branch II for damages. EASCO, as the insurer, filed a counterclaim against the petitioner for the recovery of P18,387.86 representing the unpaid insurance premiums. On June 30, 1982, the trial court rendered judgment ordering EASCO and Far Eastern Shipping to pay petitioner solidarily the sum of P105,986.68 less the amount of P18,387.86 for unpaid premiums with interest at the legal rate from the filing of the complaint, the sum of P15,000.00 as attorney's fees and the costs. 1 The judgment became final as to EASCO but the shipping company appealed to the Court of Appeals and was absolved from liability by the said court in AC-G.R. No. 00161, entitled "Tio Khe Chio vs. Eastern Assurance and Surety Corporation." The trial court, upon motion by petitioner, issued a writ of execution against EASCO. The sheriff enforcing the writ reportedly fixed the legal rate of interest at twelve (12%). Respondent EASCO moved to quash the writ alleging that the legal interest to be computed should be six (6%) per cent per annum in accordance with Article 2209 of the Civil Code and not twelve (12%) per cent as insisted upon by petitioner's counsel. In its order of July 30, 1986, the trial court denied EASCO's motion. EASCO then filed a petition for certiorari and prohibition before the Court of Appeals. On July 30, 1986, the Appellate Court rendered the assailed judgment, the dispositive part of which states: WHEREFORE, the order dated July 30, 1986 is hereby SET ASIDE in so far as it fixes the interest at 12% on the principal amount of P87,598.82 from the date of filing of the complaint until the full payment of the amount, and the interest that the private respondent is entitled to collect from the petitioner is hereby reduced to 6% per annum. No pronouncement as to costs. 2 In disputing the aforesaid decision of the Court of Appeals, petitioner maintains that not only is it unjust and unfair but it is also contrary to the correct interpretation of the fixing of interest rates under Sections 243 and 244 of the Insurance Code. And since petitioner's claims is based on an insurance contract, then it is the Insurance Code which must govern and not the Civil Code. We rule for respondent EASCO. The legal rate of interest in the case at bar is six (6%) per annum as correctly held by the Appellate Court. Section 243 of the Insurance Code provides: The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt

by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. Section 244 of the aforementioned Code also provides: In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such undeniable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. In the case at bar, the Court of Appeals made no finding that there was an unjustified refusal or withholding of payment on petitioner's claim. In fact, respondent court had this to say on EASCO's refusal to settle the claim of petitioner: ... EASCO's refusal to settle the claim to Tio Khe Chio was based on some ground which, while not sufficient to free it from liability under its policy, nevertheless is sufficient to negate any assertion that in refusing to pay, it acted unjustifiably. xxx xxx xxx The case posed some genuine issues of interpretation of the terms of the policy as to which persons may honestly differ. This is the reason the trial court did not say EASCO's refusal was unjustified. 3 Simply put, the aforecited sections of the Insurance Code are not pertinent to the instant case. They apply only when the court finds an unreasonable delay or refusal in the payment of the claims. Neither does Circular No. 416 of the Central Bank which took effect on July 29, 1974 pursuant to Presidential Decree No. 116 (Usury Law) which raised the legal rate of interest from six (6%) to twelve (12%) per cent apply to the case at bar as by the petitioner. The adjusted rate mentioned in the circular refers only to loans or forbearances of money, goods or credits and court judgments thereon but not to court judgments for damages arising from injury to persons and loss of property which does not involve a loan. 4 In the case of Philippine Rabbit Bus Lines, Inc. vs. Cruz, G.R. No. 71017, July 28, 1986, 143 SCRA 158, the Court declared that the legal rate of interest is six (6%) per cent per annum, and not twelve (12%) per cent, where a judgment award is based on an action for damages for personal injury, not use or forbearance of money, goods or credit. In the same vein, the Court held in GSIS vs. Court of Appeals, G.R. No. 52478, October 30, 1986, 145 SCRA 311, that the rates under the Usury Law (amended by P.D. 116) are applicable only to interest by way of

compensation for the use or forbearance of money, interest by way of damages is governed by Article 2209 of the Civil Code. Clearly, the applicable law is Article 2209 of the Civil Code which reads: If the obligation consists in the payment of a sum of money and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six per cent per annum. And in the light of the fact that the contending parties did not allege the rate of interest stipulated in the insurance contract, the legal interest was properly pegged by the Appellate Court at six (6%) per cent. WHEREFORE, in view of the foregoing, the petition is DENIED for lack of merit. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-49699 August 8, 1988 PERLA COMPANIA de SEGUROS, INC., petitioner, vs. HON. CONSTANTE A. ANCHETA, Presiding Judge of the Court of First instance of Camarines Norte, Branch III, ERNESTO A. RAMOS and GOYENA ZENAROSA-RAMOS, for themselves and as Guardian Ad Litem for Minors JOBET, BANJO, DAVID and GRACE all surnamed RAMOS, FERNANDO M. ABCEDE, SR., for himself and Guardian Ad Litem for minor FERNANDO G. ABCEDE, JR., MIGUEL JEREZ MAGO as Guardian Ad Litem for minors ARLEEN R. MAGO, and ANACLETA J. ZENAROSA., respondents. Jose B. Sanez for petitioner. James B. Pajares for private respondents.

CORTES, J.: The instant petition for certiorari and prohibition with preliminary injunction concerns the ability of insurers under the "no fault indemnity" provision of the Insurance Code. * On December 27, 1977, in a collision between the IH Scout in which private respondents were riding and a Superlines bus along the national highway in Sta. Elena, Camarines Norte, private respondents sustained physics injuries in varying degrees of gravity. Thus, they filed with the Court of First Instance of Camarines Norte on February 23,1978 a complaint for damages against Superlines, the bus driver and petitioner, the insurer of the bus [Rollo, pp. 27-39.] The bus was insured with petitioner for the amount of P50,000.00 as and for passenger liability and P50,000.00 as and for third party liability. The vehicle in which private respondents were riding was insured with Malayan Insurance Co.

Even before summons could be served, respondent judge issued an order dated March 1, 1978 [Rollo, pp. 40-41], the pertinent portion of which stated: The second incident is the prayer for an order of this court for the Insurance Company, Perla Compania de Seguros, Inc., to pay immediately the P5,000.00 under the "no fault clause" as provided for under Section 378 of the Insurance Code, and finding that the requisite documents to be attached in the record, the said Insurance Company is therefore directed to pay the plaintiffs (private respondents herein) within five (5) days from receipt of this order. Petitioner denied in its Answer its alleged liability under the "no fault indemnity" provision [Rollo, p. 44] and likewise moved for the reconsideration of the order. Petitioner held the position that 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." Respondent judge, however, denied reconsideration. A second motion for reconsideration was filed by petitioner. However, in an order dated January 3, 1979, respondent judge denied the second motion for reconsideration and ordered the issuance of a writ of execution [Rollo, p. 69.] Hence, the instant petition praying principally for the annulment and setting aside of respondent judge's orders dated March 1, 1978 and January 3, 1979. The Court issued a temporary restraining order on January 24,1979 [Rollo pp. 73-74.] The sole issue raised in this petition is whether or not petitioner is the insurer liable to indemnify private respondents under Sec. 378 of the Insurance Code. 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 (i) The indemnity in respect of any one person shall not exceed five thousand pesos; (ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim: (a) Police report of accident, and (b) Death certificate and evidence sufficient to establish the proper payee, or (c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed; (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. [Emphasis supplied.]

From a reading of the provision, which is couched in straight-forward and unambiguous language, 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 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. This is very clear from the law. Undoubtedly, in ordering petitioner to pay private respondents the 'no fault indemnity,' respondent judge gravely abused his discretion in a manner that amounts to lack of jurisdiction. The issuance of the corrective writ of certiorari is therefore warranted. WHEREFORE, the petition is GRANTED and respondent judge's order dated March 1, 1978, requiring petitioner to pay private respondents the amount of P5,000.00 as "no fault indemnity' under Sec. 378 of the Insurance Code, and that of January 3, 1979, denying the second motion for reconsideration and issuing a writ of execution, are ANNULLED and SET ASIDE. The temporary restraining order issued by the Court on January 24, 1979 is made permanent. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Footnotes

* P.D. No. 612, as amended by P.D. Nos. 1141,1280 and 1455. In 1978, all insurance laws were consolidated and codified by P.D. No. 1460 into a single code known as the Insurance Code of 1978. Basically, P.D. No. 1460 reenacted P.D. 612, as amended. P.D. No. 1460 was later amended by P.D. No. 1814 and B.P. Blg. 874. ** The Insurance Code uses the General term "occupant" to distinguish from a "passenger," who is "any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle's operator or his agents to ride without fare," and a 'third party," who is "any person other than a passenger as defined in this section" [See. 373] Thus, as used in Sec. 378, "occupant" includes both a "passenger" and a "third party," so long as they are riding in or mounting of dismounting from a motor vehicle.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 98414 February 8, 1993 FIRST QUEZON CITY INSURANCE COMPANY, INC., Petitioner, vs. THE HON. COURT OF APPEALS and DE DIOS MARIKINA TRANSPORTATION CO., Respondents. GRIO-AQUINO, J.: Before the Court is a petition filed by the First Quezon City Insurance Company, Inc., seeking to limit to P12,000.00, the amount specified in the insurance contract, its liability to indemnify the respondent, De Dios Marikina Transportation Company (DMTC, for short), for the damages suffered by a passenger, Jose V. del Rosario, who accidentally fell off the bus.chanroblesvirtualawlibrary chanrobles virtual law library The undisputed facts are: On June 10, 1984, at about 3:00 p.m., after sending off certain seamen at the departure area of then known as Manila International Airport (MIA), Plaintiff Jose V. del Rosario proceeded to the loading and unloading zone for public utility bus stop, which was located in front of the MIA, to wait for a passenger bus bound for Quezon City. While at the bus stop, the plaintiff saw a DMTC bus bearing body No. 236 and plate No. NVU-798 and which, per its signboard, was plying the Pasay to Quezon City (passing Espaa) route. As it approach the bus stop, the bus slowed down with all its doors wide open: while moving at a crawling pace, i.e., as slow as an "ordinary walk," it was taking several passengers, about five or seven of them including the plaintiff, all of whom managed to board the bus while it was already at the bus stop; plaintiff was the last one to board the bus.chanroblesvirtualawlibrary chanrobles virtual law library While the plaintiff was still on the bus' running board with his hand on the bus door's handle bar, the slowly moving bus sped forward at a high speed, as a result of which, the plaintiff lost his balance and fell from the bus. As plaintiff clung instinctively to the handle bar, he was dragged by the bus along the asphalted road for about two (2) seconds. Plaintiff screamed of pain and

anguished even as the other passengers shouted and the bus' driver, Gil Agpalo, an employee of defendant and third-party plaintiff DMTC, abruptly stopped the bus. Then, Gil forthwith fled from the scene, leaving the bus and the injured plaintiff behind.chanroblesvirtualawlibrary chanrobles virtual law library Thereafter, the plaintiff was brought to the Manila Sanitarium and Hospital where he was given immediate medical treatment at the emergency ward. The doctors performed a major surgical operation on plaintiff's right leg. This leg was extensively lacerated: its skin and tissues were exposed and detached from the muscles. Treatment was done under special anesthesia and consisted of debridement or cleaning repair and suturing of the injured tissue. While at the hospital, plaintiff was febrile or feverish for about forty (40) days. On July 12, 1984, a second major surgical operation, i.e., a skin grafting operation, was performed on plaintiff's right leg.chanroblesvirtualawlibrary chanrobles virtual law library Plaintiff was confined at the hospital for a total period of forty (40) days, from June 10, 1984 to August 26, 1984. During his stay at the hospital, plaintiff incurred medical expenses in the total amount of P69,444.41. Plaintiff's medical expenses were advanced by his employer Maglines but he was required to reimburse Maglines on a staggered basis by way of salary deductions. Plaintiff was released from the hospital on August 29, 1984. After his release, he returned to the hospital from time to time for further treatment and checkup. The injuries had left plaintiff with a huge, ugly scar running almost the entire length of his right leg. Also, the plaintiff incurred lost earning by way of unearned salaries amounting to P7,500.00 due to said physical injuries and the consequent hospital confinement.chanroblesvirtualawlibrary chanrobles virtual law library Plaintiff filed on June 26, 1985 the aforesaid complaint against DMTC and its driver, Gil Agpalo. Agpalo was later dropped as a party defendant because he could not be served with summons. Upon filing its answer on August 20, 1985, defendant DMTC filed a third-party complaint against First Quezon City Insurance Co. Inc. Sometime on September 17, 1985 this third-party defendant filed its answer to the third-party complaint.chanroblesvirtualawlibrary chanrobles virtual law library After the trial, the court a quo rendered the appealed decision, the decretal portion of which ordains: WHEREFORE, the judgment is hereby rendered dismissing defendant De Dios Marikina Transportation Co. Inc.'s counterclaim for lack of merit and ordering said defendant to pay plaintiff Jose V. del Rosario: (a) the sum of P76,944.41, as the actual and compensatory damages; (b) the sum of P15,000.00, as moral and exemplary damages; and (c) the sum of P33,641.50 as attorney's fees, as well as to pay the cost of suit; and as regards the third-party complaint herein ordering third-party defendant First Quezon City Insurance Co., Inc. to indemnify third-party plaintiff De Dios Marikina Transportation Co., Inc. in the sum of P12,000.00 with interest thereon at the legal rate from date of filing of the third-party complaint on August 20, 1985, until full payment thereof. Further, there being no satisfactory warrant therefor, the court hereby dismisses the rest of the claims in the complaint and third-party complaint herein. (pp. 11-13, Rollo.) The bus company appealed to the Court of Appeals on February 11, 1991. The Court of Appeals modified the dispositive part of the decision of the trial court as follows: WHEREFORE, with the following modifications, first in appellee's complaint: that the award of attorney's fees be reduced to P5,000.00 and that the cost of suit be deleted; and second, as regards the third-party complaint, that the third-party defendant First Quezon City Insurance Co., Inc., be ordered to indemnify third-party plaintiff DMTC, herein appellant the sum of P50,090.00 with legal interest thereon from date of filing of the third-party complaint on August 20, 1985 until its full payment, the decision appealed from is AFFIRMED in all other respects. No costs. (p. 19, Rollo.)

The insurance company (now the petitioner) filed a motion for reconsideration which was denied in a resolution dated April 22, 1991.chanroblesvirtualawlibrary chanrobles virtual law library Hence, this petition for review, assailing the appellate courts' interpretation of the provision of the insurance contract on the limit of the insurer's liability.chanroblesvirtualawlibrary chanrobles virtual law library We find merit in the petition.chanroblesvirtualawlibrary chanrobles virtual law library The insurance company clearly passed the maximum limit of the petitioner's liability for damages arising from death or bodily injury at P12,000.00 per passenger and its maximum liability per accident at P50,000.00. Since only one passenger was injured in the accident, the insurer's liability for the damages suffered by said passenger is pegged to the amount of P12,000.00 only. What does the limit of P50,000.00 per accident mean? It means that the insurer's liability for any single accident will not exceed P50,000.00 regardless of the number of passengers killed or injured therein. For example, if ten (10) passengers had been injured by the operation of the insured bus, the insurer's liability for the accident would not be P120,000.00 (at the rate of P12,000.00 per passenger) but would be limited to only P50,000.00 for the entire accident, as provided in the insurance contract.chanroblesvirtualawlibrary chanrobles virtual law library The bus company may not recover from the insurance company (herein petitioner) more than P 12,000.00 per passenger killed or injured, or fifty thousand (P50,000.00) pesos per accident even if under the judgment of the court, the erring bus operator will have to pay more than P12,000.00 to each injured passenger. The trial court's interpretation of the insurance contract was the correct interpretation.chanroblesvirtualawlibrary chanrobles virtual law library WHEREFORE, the petition for review is GRANTED. The decision promulgated on February 11, 1991 by the Court of Appeals in CA-G.R. No. 24938, ordering the third-party defendant, First Quezon City Insurance Co., to indemnify the private respondent, De Dios Marikina Transportation Co. Inc. (DMTC), the sum of P50,000.00 for the damages of the passenger Jose V. Del Rosario, is hereby modified by reducing the award to P12,000.00 only. Costs against the private respondent, De Dios Marikina Transportation Co., Inc.chanroblesvirtualawlibrary chanrobles virtual law library SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-60887 November 13, 1991 PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR., OFFICE OF THE PROVINCIAL SHERIFF, PROVINCE OF CEBU, respondents. Hector L. Fernandez for petitioner. Domingo Quibranza and Vicente A. Quibranza for private respondents.

FELICIANO, J.:p The present Petition for Certiorari seeks to annul: (a) the Order dated 6 August 1979 1 which ordered the Provincial Sheriff to garnish the third-party liability insurance policy issued by petitioner Perla Compania de Seguros, Inc. ("Perla") in favor of Nelia Enriquez, judgment debtor in Civil Case No. R-15391; (b) the Order dated 24 October 1979 2 which denied the motion for reconsideration of the 6 August 1979 Order; and (c) the Order dated 8 April 1980 3 which ordered the issuance of an alias writ of garnishment against petitioner. In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in the name of Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City to Danao City. While passing through Liloan, Cebu, the Cimarron PUJ collided with a private jeep owned by the late Calixto Palmes (husband of private respondent Primitiva Palmes) who was then driving the private jeep. The impact of the collision was such that the private jeep was flung away to a distance of about thirty (30) feet and then fell on its right side pinning down Calixto Palmes. He died as a result of cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical injuries on the part of Adeudatus Borbon who was then only two (2) years old. On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes) and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3, claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of private respondent Honorato Borbon, Sr., being distinct and separate from that of co-plaintiff Primitiva Palmes, and the amount thereof falling properly within the jurisdiction of the inferior court, respondent Judge Jose R. Ramolete ordered the Borbon claim excluded from the complaint, without prejudice to its being filed with the proper inferior court. On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private respondent Primitiva Palmes, ordering common carrier Nelia Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as compensatory damages for the death of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages, and P1,000.00 as attorney's fees. The judgment of the trial court became final and executory and a writ of execution was thereafter issued. The writ of execution was, however, returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez was summoned before the trial court for examination on 23 July 1979. She declared under oath that the Cimarron PUJ registered in her name was covered by a third-party liability insurance policy issued by petitioner Perla. Thus, on 31 July 1979, private respondent Palmes filed a motion for garnishment 7 praying that an order of garnishment be issued against the insurance policy issued by petitioner in favor of the judgment debtor. On 6 August 1979, respondent Judge issued an Order 8 directing the Provincial Sheriff or his deputy to garnish the third-party liability insurance policy. Petitioner then appeared before the trial court and moved for reconsideration of the 6 August 1979 Order and for quashal of the writ of garnishment, 9 alleging that the writ was void on the ground that it (Perla) was not a party to the case and that jurisdiction over its person had never been acquired by the trial court by service of summons or by any process. The trial court denied petitioner's motion.10 An Order for issuance of an alias writ of garnishment was subsequently issued on 8 April 1980. 11 More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court on 25 June 1982 alleging grave abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance contract issued by

petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed forthwith for having been filed way out of time but, for reasons which do not appear on the record, was nonetheless entertained. In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be subjected to garnishment or execution to satisfy the judgment in Civil Case No. R-15391 because petitioner was not a party to the case and the trial court did not acquire jurisdiction over petitioner's person. Perla further argues that the writ of garnishment had been issued solely on the basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the effect that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without granting it the opportunity to set up any defenses which it may have under the insurance contract; and that the proceedings taken against petitioner are contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres, et al., 12 which held that under Rule 39, Section 45, the Court "may only authorize" the judgment creditor to institute an action against a third person who holds property belonging to the judgment debtor. We find no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge Ramolete in ordering the garnishment of the judgment debtor's third-party liability insurance. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable to a judgment debtor. 13 In legal contemplation, it is a forced novation by the substitution of creditors: 14the judgment debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the judgment creditor who thereby becomes creditor of the garnishee. Garnishment has also been described as a warning to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiff's suit. 15 In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the judgment debtor is service upon him of the writ of garnishment. The Rules of Court themselves do not require that the garnishee be served with summons or impleaded in the case in order to make him liable. Rule 39, Section 15 provides: Sec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real or personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution . . . Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. (Emphasis supplied). Rule 57, Section 7(e) in turn reads: Sec. 7. Attachment of real and personal property; recording thereof. Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx

(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person owing such debts, or having his possession or under his control such credits or other personal property, or with his agent, a copy of the order, and notice that the debts owing by him to the party against whom attachment is issued, and the credits and other personal property in his possession, or under his control, belonging to said party, are attached in pursuance of such order; xxx xxx xxx (Emphasis supplied) Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court. In Bautista v. Barredo, 16 the Court, through Mr. Justice Bautista Angelo, held: While it is true that defendant Jose M. Barredo was not a party in Civil Case No. 1636 when it was instituted by appellant against the Philippine Ready Mix Concrete Company, Inc., however, jurisdiction was acquired over him by the court and he became a virtual party to the case when, after final judgment was rendered in said case against the company, the sheriff served upon him a writ of garnishment in behalf of appellant. Thus, as held by this Court in the case of Tayabas Land Company vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of the citation, the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. (Emphasis supplied). In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the asset or credit garnished is thereupon subjected to a specific lien: The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court. 18 (Emphasis supplied) In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention. Every interest which the judgment debtor may have in property may be subjected to execution.19 In the instant case, the judgment debtor Nelia Enriquez clearly had an interest in the proceeds of the third-party liability insurance contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is liable. 20 The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise.

From the moment that the insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished like any other credit. 21 Petitioner also contends that in order that it may be held liable under the third-party liability insurance, a separate action should have been commenced by private respondents to establish petitioner's liability. Petitioner invokesEconomic Insurance Company, Inc. vs. Torres, 22 which stated: It is clear from Section 45, Rule 39 that if a persons alleged to have property of the judgment debtor or to be indebted to him claims an interest in the property adverse to him or denies the debt, the court may only authorize the judgment creditor to institute an action against such person for the recovery of such interest or debt. Said section does not authorize the court to make a finding that the third person has in his possession property belonging to the judgment debtor or is indebted to him and to order said third person to pay the amount to the judgment creditor. It has been held that the only power of the court in proceedings supplemental to execution is to niake an order authorizing the creditor to sue in the proper court to recover an indebtedness due to the judgment debtor. The court has no jurisdiction to try summarily the question whether the third party served with notice of execution and levy is indebted to defendant when such indebtedness is denied. To make an order in relation to property which the garnishee claimed to own in his own right, requiring its application in satisfaction of judgment of another, would be to deprive the garnishee of property upon summary proceeding and without due process of law. (Emphasis supplied) But reliance by petitioner on the case of Economic Insurance Company, Inc. v. Torres (supra) is misplaced. The Court there held that a separate action needs to be commenced when the garnishee "claims an interest in the property adverse to him (judgment debtor) or denies the debt." In the instant case, petitioner Perla did not deny before the trial court that it had indeed issued a third-party liability insurance policy in favor of the judgment debtor. Petitioner moreover refrained from setting up any substantive defense which it might have against the insuredjudgment debtor. The only ground asserted by petitioner in its "Motion for Reconsideration of the Order dated August 6, 1979 and to Quash Notice of Garnishment" was lack of jurisdiction of the trial court for failure to implead it in the case by serving it with summons. Accordingly, Rule 39, Section 45 of the Rules of Court is not applicable in the instant case, and we see no need to require a separate action against Perla: a writ of garnishment suffices to hold petitioner answerable to the judgment creditor. If Perla had any substantive defenses against the judgment debtor, it is properly deemed to have waived them by laches. WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and for lack of merit. The assailed Orders of the trial court are hereby AFFIRMED. Costs against petitioner. This Decision is immediately executory. SO ORDERED. Narvasa, CJ., Cruz, Grio-Aquino and Medialdea, JJ., concur.

SECOND DIVISION

[G.R. No. 101439. June 21, 1999]

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner, vs. COURT OF APPEALS (former Tenth Division), VICTORIA JAIME VDA. DE KHO, for herself and minor ROY ROLAND, GLORIA KHO VDA. DE CALABIA for herself and minors MARY GRACE, WILLIE, JR., VOLTAIRE, GLENN, and MAY, all surnamed CALABIA, DANIEL KHO, JOSEFINA KHO, EMERITA KHO APEGO, ANTONIO KHO and TERESITA KHO, respondents. DECISION QUISUMBING, J.: In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Government Service Insurance System (GSIS) assails the January 15, 1991 Decision[1] of the Court of Appeals in CA-G.R. No. 19849, which affirmed in toto the judgment of the Regional Trial Court of Butuan City, Branch II, dated April 30, 1985, stating in part: WHEREFORE, judgment is hereby rendered, as follows: xxx In Civil Case No. 2256: a) Dismissing the complaint against defendant Victor Uy; b) Ordering defendants Mabuhay Insurance and Guaranty Company, Inc., Guillermo Corbeta, NFA and GSIS to pay jointly and severally the following sums of money: i. to pay plaintiff Gloria Kho Vda. de Calabia, the sum of P8,935.06 for doctors fees, medicines, hospitalizations and medical expenses; P2,319.00 for transportation expenses; and P53.30 for telegrams; P10,000.00 for the injuries she sustained; P12,000.00 loss of income for six months. ii. to plaintiff Victoria Kho, the sum of P832.00 for hospitalization and medicines; P10,000.00 for the injuries she sustained; iii. to the heirs of Wellie [Willie] Calabia, Roland Kho and Maxima Uhmad [Ugmad] Vda. de Kho, the sum of P7,500.00 as funeral expenses less P5,000.00 advanced by defendant Victor Uy. iv. to the heirs of Wellie [Willie] Calabia, Sr., heirs of Roland Kho and heirs of Maxima Ugmad Vda. de Kho; P30,000.00 each as compensatory damages. c) To pay plaintiff the sum of P10,000.00 as attorneys fees and expenses of litigation; d) Dismissing defendants counterclaim, and cross-claim; and e) To pay the costs.

That this decision is without prejudice as to the right of Mabuhay Insurance & Guaranty Co., Inc., and NFA to recover from Guillermo Corbeta and GSIS the amounts they may have paid by virtue hereof.[2] For purposes of this review, we deem as also assailed the disposition by the trial court in its Order issued on July 12, 1985, modifying its original decision, by awarding moral damages to the heirs of the deceased victims, as follows: Considering that the dispositive portion of the decision in this case, an award of P10,000.00 each made to plaintiffs Gloria Kho Vda. de Calabia x x x, for injuries they sustained, this award, through [sic] not clearly stated in the decision, is the moral damages the instant motion seeks to obtain. However, the prayer for moral damages for the death of the three (3) persons abovementioned is proper. (citation omitted) In view of the foregoing, the prayer of plaintiffs Gloria Kho Vda. de Calabia and Victoria Kho for an award of moral damages in their favor is hereby denied. However, as for the death of Wellie [Willie] Calabia, Sr., Rolando Kho and Maxima Ugmad Vda. de Kho, an award of moral damages is hereby made, and ordering and directing defendants Mabuhay Insurance and Guaranty Company Inc., Guillermo Corbeta, National Food Authority and Government Service Insurance System to pay jointly and severally the following sums to wit: P10,000.00 to the heirs of Wellie [Willie] Calabia, Sr. P10,000.00 to the heirs of Rolando Kho and P10,000.00 to the heirs of Maxima Ugmad Vda. de Kho xxx IT IS SO ORDERED.[3] The relevant facts as found by the trial court are as follows: National Food Authority (NFA, formerly National Grains Authority) was the owner of a Chevrolet truck which was insured against liabilities for death of and injuries to third persons with the GSIS. On May 9, 1979, at about 7:00 in the evening at Tabon-Tabon, Butuan City, the said truck driven by Guillermo Corbeta collided with a public utility vehicle, a Toyota Tamaraw. The Toyota Tamaraw was owned and operated by Victor Uy, under the name and style of Victory Line. The Tamaraw was a total wreck. All the collision victims were passengers of the Toyota Tamaraw. Five (5) passengers died[4] while ten (10) others sustained bodily injuries. Among those injured were private respondents, Victoria Jaime Vda. de Kho and Gloria Kho Vda. de Calabia. Among the dead were Maxima Ugmad Vda. de Kho, Roland Kho and Willie Calabia, Sr. Three (3) cases were filed with the Court of First Instance of Agusan del Norte and Butuan City. The first, Civil Case No. 2196 for quasi-delict, damages and attorneys fees, was commenced by Uy on June 5, 1979 against NFA and Corbeta. On August 27, 1979, the second, Civil Case No. 2225 for damages, was filed by an injured passenger, Librado Taer, against Uy, the operator of the public utility vehicle, and insurer, Mabuhay Insurance and Guaranty Co. (MIGC). In turn, Uy filed a cross-claim against MIGC and a third-party complaint against Corbeta and NFA. The third, Civil Case No. 2256, was instituted by herein private respondents on November 26, 1979 against the following: NFA and Corbeta for damages due to quasi-delict; GSIS as insurer of the truck; Uy for breach of contract of carriage; and MIGC as insurer of the

Toyota Tamaraw. These cases were consolidated and partially tried by Judge Fortunato A. Vailoces, of the then Court of First Instance of Agusan del Norte and Butuan City. These cases were later on transferred to Branch II of the Regional Trial Court of Butuan City. Trial ensued and on April 30, 1985, the court rendered its decision [5] holding that Corbetas negligence was the proximate cause of the collision. The findings of the trial court stated that the truck which crossed over to the other lane was speeding because after the collision, its left front wheel was detached and the truck traveled for about fifty (50) meters and fell into a ravine. [6] Likewise, the court concluded that if both vehicles had traveled in their respective lanes, the incident would not have occurred.[7] However, the Chevy cargo truck had crossed over to the other lane which, under traffic rules, was the lane of the Toyota Tamaraw.[8] In Civil Case No. 2196, the trial court awarded Uy the total amount of one hundred nine thousand one hundred (P109,100.00) pesos for damages. In Civil Case No. 2225, said court dismissed the case against Uy and ordered MIGC, Corbeta and NFA to pay plaintiff Taer, jointly and severally, the total amount of forty thousand five hundred fifty-nine pesos and ninety four centavos (P40,559.94) for actual, compensatory, and moral damages plus attorneys fees. Damages were likewise awarded to the herein private respondents in Civil Case No. 2256, as earlier mentioned. Corbeta and NFA appealed the decision of the trial court in Civil Case Nos. 2196, 2225, and 2256 to the Court of Appeals. GSIS also elevated the decision in Civil Case No. 2256 to the same appellate court. The appeals were docketed as C.A.-G.R. Nos. 19847, 19848, and 19849. The Court of Appeals agreed with the conclusions of the trial court and ruled as follows: WHEREFORE, in view of the foregoing considerations, and finding no reversible error, the decisions of the Court a quo in Civil Cases Nos. 2196, 2225 and 2256 are hereby AFFIRMED in toto, with costs against the appellants. SO ORDERED.[9] On February 5 and 6, 1991, GSIS and NFA filed their motions for reconsideration respectively, which were denied by the respondent court in its Resolution[10] dated August 13, 1991. On October 4, 1991, only GSIS filed this petition for review on certiorari based on the following assigned errors: 1. The respondent court erred in holding GSIS solidarily liable with NFA. 2. The respondent court erred in holding GSIS liable beyond the terms and conditions of the contract of insurance and the limitations under Insurance Memorandum Circular (IMC) No. 5-78. 3. The respondent court erred in holding GSIS liable without proof that a notice of claim had been filed within six (6) months from the date of the accident. We find pertinent the following issues: 1) Whether the respondent court erred in holding GSIS solidarily liable with the negligent insured/owner-operator of the Chevrolet truck for damages awarded to private respondents which are beyond the limitations of the insurance policy and the Insurance Memorandum Circular No. 5-78. 2) Whether the respondent court failed to consider that the private respondents have no cause of action against the petitioner, allegedly for failure of the victims to file an insurance claim within six (6) months from the date of the accident. Petitioner denies solidary liability with the NFA or the negligent operator of the cargo truck because it claims that they are liable under different obligations. It asserts that the NFAs liability

is based on quasi-delict, while petitioners liability is based on the contract of insurance. Citing articles 1207[11] and 1208[12] of the Civil Code of the Philippines, petitioner states that when there are two or more debtors or two or more creditors, the obligation as a general rule is joint. It claims that the only exceptions are: (1) when there is a stipulation for solidary obligation; (2) when the nature of the obligation requires solidary liability; and (3) when the law declares the obligation to be solidary. However, since neither the provision of the contract nor the insurance law provides for solidary liability, petitioner asserts that the presumption is that its obligation arising from a contract of insurance is joint. Petitioners position insofar as joint liability is concerned is not tenable. It is now established that the injured or the heirs of a deceased victim of a vehicular accident may sue directly the insurer of the vehicle. Note that common carriers are required to secure Compulsory Motor Vehicle Liability Insurance [CMVLI] coverage as provided under Sec. 374[13] of the Insurance Code, precisely for the benefit of victims of vehicular accidents and to extend them immediate relief.[14] As this Court held in Shafer vs. Judge, RTC of Olongapo City, Br. 75:[15] Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of a negligent operation and use of motor vehicles. The victims and/or their defendants [dependents] are assured of immediate financial assistance, regardless of the financial capacity of motor vehicle owners. xxx The injured for whom the contract of insurance is intended can sue directly the insurer. The general purpose of statutes enabling an injured person to proceed directly against the insurer is to protect injured persons against the insolvency of the insured who causes such injury, and to give such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to be liberally construed so that their intended purpose may be accomplished. It has even been held that such a provision creates a contractual relation which inures to the benefit of any and every person who may be negligently injured by the named insured as if such injured person were specifically named in the policy. (S 449 7 Am. Jur., 2d, pp. 118-119)[16] However, although the victim may proceed directly against the insurer for indemnity, the third party liability is only up to the extent of the insurance policy and those required by law. While it is true that where the insurance contract provides for indemnity against liability to third persons, and such third persons can directly[17] sue the insurer, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the insured and/or the other parties found at fault.[18] For the liability of the insurer is based on contract; that of the insured carrier or vehicle owner is based on tort. [19]The liability of GSIS based on the insurance contract is direct, but not solidary with that of the NFA. The latters liability is based separately on Article 2180[20] of the Civil Code.[21] Obviously, the insurer could be held liable only up to the extent of what was provided for by the contract of insurance, in accordance with CMVLI law. At the time of the incident, the schedule of indemnities for death and/or bodily injuries, professional fees, hospital and other charges payable under a CMVLI coverage was provided under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November 10, 1978. As therein provided, the maximum indemnity for death was twelve thousand (P12,000.00) pesos per victim. [22] The schedules for medical expenses were also provided by said IMC, specifically in paragraphs (C) to (G). Consequently, heirs of the victims who died in the May 9, 1979 vehicular incident, could proceed (1) against GSIS for the indemnity of P12,000 for each dead victim, and against NFA and Guillermo Corbeta for any other damages or expenses claimed; or (2) against NFA and Corbeta to pay them all their claims in full.

It follows also that injured victims, Gloria Kho Vda. de Calabia and Victoria Kho, could claim their medical expenses for eight thousand nine hundred thirty-five pesos and six centavos (P8,935.06) and eight hundred thirty-two (P832.00) pesos, from any of the following: GSIS, NFA, or Corbeta. As to the other damages, only NFA or Corbeta may be held liable therefor. Computation of hospital charges and fees for the services rendered to the injured victims was conclusively established by the trial court. The petitioner failed to object to the evidence thereon, when presented by the private respondents during the trial. Thus, these factual bases for the award of damages may no longer be attacked. For generally, findings of the judge who tried the case and heard the witnesses could not be disturbed on appeal, unless there are substantial facts and particular circumstances which have been overlooked but which, if properly considered, might affect the result of the case.[23] Thus, considering the evidence on record including the schedule of indemnities provided under IMC No. 5-78, we find no cogent reason to disturb the computation of medical charges and expenses that justify the award of damages by the trial court. As to the second issue, the petitioner contends that it cannot be held liable without proof nor allegation that the private respondents filed before its office a notice of claim within six (6) months from the date of the accident. This requirement, according to the petitioner, gives the insurer the opportunity to investigate the veracity of the claim, and non-compliance therewith constitutes waiver. Since the claim was not reported to the insurer, the petitioner avers that the presumption is that the victim opted to pursue his claim against the motor vehicle owner or against the tortfeasor. However, in this case the records reveal that on September 7, 1979, the private respondents sent a notice of loss to the petitioner informing the latter of the accident. Included as Exhibit J[24] in the records, this notice constitutes evidence of the loss they suffered by reason of the vehicular collision. They stressed further that the petitioner did not deny receipt of notice of claim during the trial, and it would be too late now to state otherwise. Although merely factual, we need to emphasize that the alleged delay in reporting the loss by the insured and/or by the beneficiaries must be promptly raised by the insurer[25] in objecting to the claims. When the insured presented proof of loss before the trial court, the insurer failed to object to said presentation. The petitioner should have promptly interposed the defense of delay, or belated compliance, concerning the notice of claim. Moreover, the petitioner merely waited for the victims or beneficiaries to file their complaint. As matters stand now, the defense of laches or prescription is deemed waived because of petitioners failure to raise it not only before but also during the hearing.[26] To recapitulate, petitioner seeks a definitive ruling only on the extent of its liability, as insurer of NFA, to those injured or killed in the May 9, 1979 vehicular collision. As found by the trial court, the driver (Guillermo Corbeta), the operator (NFA), and MIGC, are solidarily liable for damages as computed below: SCHEDULE A I. For the Injured Victims 1) Gloria Kho Vda. de Calabia a) Medical expenses b) Transportation and Telegraph Expenses c) Other Compensatory/Moral Damages d) Loss of Income P 8,935.06 2,372.30 10,000.00 12,000.00

Total 2) Victoria Kho a) Medical expenses P 832.00

P 33,307.36

b) Other Compensatory/Moral Damages 10,000.00 Total II. For the Heirs of the Deceased Victims: Compensatory/ Funeral Expenses 1) Heirs of Willie Calabia, Sr. 2) Heirs of Roland Kho 3) Heirs of Maxima Ugmad Vda. de Kho Sub-Total 2,500.00 P 7,500.00 30,000.00 P90,000.00 NIL P90,000.00 _ 10,000.00 P30,000.00 42,500.00 P127,500.00 P 2,500.00 2,500.00 Death Indemnity P30,000.00 30,000.00 Moral Damages P10, 000.00 10,000.00 Total 42,500.00 42,500.00 P10,832.00

Less: Advances by Victor Uy (5,000.00) Balance P2,500.00

(5,000.00) P30,000.00 122,500.00

III. Total Amount of Attorneys Fees

P10,000.00

Note that, the petitioner (GSIS) was impleaded as insurer of NFA. But under the CMVLI law, the petitioner could only be held liable under its contract of insurance. And pursuant to the CMVLI law, its liability is primary, and not dependent on the recovery of judgment from the insured. Hence, GSIS is directly liable to the private respondents, in the following amounts: SCHEDULE B I. Injured Victims 1) Victoria Jaime Vda. de Kho 2) Gloria Kho Vda. de Calabia II. Heirs of Deceased Victims 1) Heirs of Willie Calabia, Sr. 2) Heirs of Roland Kho P Medical expenses 832.00

P 8,935.06 Death Indemnity P 12,000.00 12,000.00

3) Heirs of Maxima Ugmad Vda. de Kho 12,000.00 The balance of the private respondents claims as shown on Schedule A above, must be paid by Corbeta or NFA, or MIGC, the parties found solidarily liable.[27] WHEREFORE, the instant petition is hereby GRANTED, but the decision of the trial court as affirmed by the Court of Appeals is hereby MODIFIED, as follows: 1. Petitioner Government Service Insurance System is ordered to pay (a) twelve thousand pesos (P12,000.00) as death indemnity to each group of heirs of the deceased, Willie Calabia Sr., Roland Kho and Maxima Ugmad Vda. de Kho; (b) eight hundred thirty-two (P832.00) pesos for medical expenses of Victoria Jaime Vda. de Kho; and (c) eight thousand, nine hundred thirty-five pesos and six centavos (P8,935.06) for medical expenses of Gloria Kho Vda. de Calabia. 2. Guillermo Corbeta, National Foods Authority, and Mabuhay Insurance & Guaranty Co., Inc., jointly and severally, are ordered to pay private respondents claims[28] as adjudged by the Regional Trial Court of Butuan City, minus the amounts that GSIS must pay to the injured victims and the heirs of the deceased victims as abovestated. This decision is immediately executory. No pronouncement as to costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 76452 July 26, 1994 PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS REYES, petitioners, vs. HON. ARMANDO ANSALDO, in his capacity as Insurance Commissioner, and RAMON MONTILLA PATERNO, JR., respondents. Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners. Oscar Z. Benares for private respondent.

QUIASON, J.: This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court, with preliminary injunction or temporary restraining order, to annul and set aside the Order dated November 6, 1986 of the Insurance Commissioner and the entire proceedings taken in I.C. Special Case No. 1-86. We grant the petition.

The instant case arose from a letter-complaint of private respondent Ramon M. Paterno, Jr. dated April 17, 1986, to respondent Commissioner, alleging certain problems encountered by agents, supervisors, managers and public consumers of the Philippine American Life Insurance Company (Philamlife) as a result of certain practices by said company. In a letter dated April 23, 1986, respondent Commissioner requested petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president, to comment on respondent Paterno's letter. In a letter dated April 29, 1986 to respondent Commissioner, petitioner De los Reyes suggested that private respondent "submit some sort of a 'bill of particulars' listing and citing actual cases, facts, dates, figures, provisions of law, rules and regulations, and all other pertinent data which are necessary to enable him to prepare an intelligent reply" (Rollo, p. 37). A copy of this letter was sent by the Insurance Commissioner to private respondent for his comments thereon. On May 16, 1986, respondent Commissioner received a letter from private respondent maintaining that his letter-complaint of April 17, 1986 was sufficient in form and substance, and requested that a hearing thereon be conducted. Petitioner De los Reyes, in his letter to respondent Commissioner dated June 6, 1986, reiterated his claim that private respondent's letter of May 16, 1986 did not supply the information he needed to enable him to answer the letter-complaint. On July 14, a hearing on the letter-complaint was held by respondent Commissioner on the validity of the Contract of Agency complained of by private respondent. In said hearing, private respondent was required by respondent Commissioner to specify the provisions of the agency contract which he claimed to be illegal. On August 4, private respondent submitted a letter of specification to respondent Commissioner dated July 31, 1986, reiterating his letter of April 17, 1986 and praying that the provisions on charges and fees stated in the Contract of Agency executed between Philamlife and its agents, as well as the implementing provisions as published in the agents' handbook, agency bulletins and circulars, be declared as null and void. He also asked that the amounts of such charges and fees already deducted and collected by Philamlife in connection therewith be reimbursed to the agents, with interest at the prevailing rate reckoned from the date when they were deducted. Respondent Commissioner furnished petitioner De los Reyes with a copy of private respondent's letter of July 31, 1986, and requested his answer thereto. Petitioner De los Reyes submitted an Answer dated September 8, 1986, stating inter alia that: (1) Private respondent's letter of August 11, 1986 does not contain any of the particular information which Philamlife was seeking from him and which he promised to submit. (2) That since the Commission's quasi-judicial power was being invoked with regard to the complaint, private respondent must file a verified formal complaint before any further proceedings. In his letter dated September 9, 1986, private respondent asked for the resumption of the hearings on his complaint. On October 1, private respondent executed an affidavit, verifying his letters of April 17, 1986, and July 31, 1986.

In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior Assistant Vice-President and Executive Assistant to the President, asked that respondent Commission first rule on the questions of the jurisdiction of the Insurance Commissioner over the subject matter of the letterscomplaint and the legal standing of private respondent. On October 27, respondent Commissioner notified both parties of the hearing of the case on November 5, 1986. On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice on the following grounds; 1. The Subpoena/Notice has no legal basis and is premature because: (1) No complaint sufficient in form and contents has been filed; (2) No summons has been issued nor received by the respondent De los Reyes, and hence, no jurisdiction has been acquired over his person; (3) No answer has been filed, and hence, the hearing scheduled on November 5, 1986 in the Subpoena/Notice, and wherein the respondent is required to appear, is premature and lacks legal basis. II. The Insurance Commission has no jurisdiction over; (1) the subject matter or nature of the action; and (2) over the parties involved (Rollo, p. 102). In the Order dated November 6, 1986, respondent Commissioner denied the Motion to Quash. The dispositive portion of said Order reads: NOW, THEREFORE, finding the position of complainant thru counsel tenable and considering the fact that the instant case is an informal administrative litigation falling outside the operation of the aforecited memorandum circular but cognizable by this Commission, the hearing officer, in open session ruled as it is hereby ruled to deny the Motion to Quash Subpoena/Notice for lack of merit (Rollo, p. 109). Hence, this petition. II The main issue to be resolved is whether or not the resolution of the legality of the Contract of Agency falls within the jurisdiction of the Insurance Commissioner. Private respondent contends that the Insurance Commissioner has jurisdiction to take cognizance of the complaint in the exercise of its quasi-judicial powers. The Solicitor General, upholding the jurisdiction of the Insurance Commissioner, claims that under Sections 414 and 415 of the Insurance Code, the Commissioner has authority to nullify the alleged illegal provisions of the Contract of Agency. III

The general regulatory authority of the Insurance Commissioner is described in Section 414 of the Insurance Code, to wit: The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, . . . On the other hand, Section 415 provides: In addition to the administrative sanctions provided elsewhere in this Code, the Insurance Commissioner is hereby authorized, at his discretion, to impose upon insurance companies, their directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of any provision of this Code, or any order, instruction, regulation or ruling of the Insurance Commissioner, or any commission of irregularities, and/or conducting business in an unsafe and unsound manner as may be determined by the the Insurance Commissioner, the following: (a) fines not in excess of five hundred pesos a day; and (b) suspension, or after due hearing, removal of directors and/or officers and/or agents. A plain reading of the above-quoted provisions show that the Insurance Commissioner has the authority to regulate the business of insurance, which is defined as follows: (2) The term "doing an insurance business" or "transacting an insurance business," within the meaning of this Code, shall include (a) making or proposing to make, as insurer, any insurance contract; (b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. (Insurance Code, Sec. 2[2]; Emphasis supplied). Since the contract of agency entered into between Philamlife and its agents is not included within the meaning of an insurance business, Section 2 of the Insurance Code cannot be invoked to give jurisdiction over the same to the Insurance Commissioner. Expressio unius est exclusio alterius. With regard to private respondent's contention that the quasi-judicial power of the Insurance Commissioner under Section 416 of the Insurance Code applies in his case, we likewise rule in the negative. Section 416 of the Code in pertinent part, provides: The Commissioner shall have the power to adjudicate claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be used under any contract or reinsurance it may have entered into, or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability,

excluding interest, costs and attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred thousand pesos. A reading of the said section shows that the quasi-judicial power of the Insurance Commissioner is limited by law "to claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, . . ." Hence, this power does not cover the relationship affecting the insurance company and its agents but is limited to adjudicating claims and complaints filed by the insured against the insurance company. While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of the Insurance Code, the provisions of said Chapter speak only of the licensing requirements and limitations imposed on insurance agents and brokers. The Insurance Code does not have provisions governing the relations between insurance companies and their agents. It follows that the Insurance Commissioner cannot, in the exercise of its quasi-judicial powers, assume jurisdiction over controversies between the insurance companies and their agents. We have held in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989), andInvestment Planning Corporation of the Philippines v. Social Security Commission, 21 SCRA 904 (1962), that an insurance company may have two classes of agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company; and (2) registered representatives, who work on commission basis. Under the first category, the relationship between the insurance company and its agents is governed by the Contract of Employment and the provisions of the Labor Code, while under the second category, the same is governed by the Contract of Agency and the provisions of the Civil Code on the Agency. Disputes involving the latter are cognizable by the regular courts. WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986 of the Insurance Commission is SET ASIDE. SO ORDERED.

SECOND DIVISION

[G.R. No. 131399. October 17, 2003]

ANGELITA AMPARO GO, petitioner, vs. OFFICE OF THE OMBUDSMAN, INSURANCE COMMISSIONER EDUARDO T. MALINIS and NORBERTO F. CASTRO, respondents. DECISION AUSTRIA-MARTINEZ, J.: In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Angelita Amparo Go seeks the reversal of the Resolution of the Office of the Ombudsman in OMB-0-96-2225 dismissing her charges against Insurance Commissioner Eduardo T. Malinis and Hearing Officer Norberto F. Castro for Violation of Section 3 [e] of Republic Act No. 3019, otherwise known as Anti-Graft and Corrupt Practices Act, which provides: Sec. 3. Corrupt practices of public officers. -- In addition to acts omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

. . . (e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.
The facts of the case are as follows: Petitioner is the Treasurer and Vice-President of Wear Me Garment Manufacturing Inc. whose business and factory are located in Nadurata St., Grace Park, Caloocan City. Due to a fire onJuly 12, 1993 that gutted down Wear Me Garments factory as well as its machineries and stocks, petitioner filed separate insurance claims against each of the following 14 insurance companies: (1) Prudential Guarentee & Assurance Inc. (2) Oriental Assutance Corporation (3) Cibeles Insurance Corporation (4) Pioneer Asia Insurance Corporation (5) Western Guaranty Corp. (6) Liberty Insurance Corporation (7) Filipino Merchants Insurance Co. (8) Reliance Surety & Insurance Co., Inc. (9) Central Surety & Insurance Co. (10) Phil. British Assurance Corporation (11) Philippine First Insurance Co., Inc. (12) Blue Cross Insurance Co., Inc. (13) Commonwealth Insurance Co. (14) Imperial Insurance Co. Inc. P P P P P P P P P P P P P P 5,000,000.00 3,500,000.00 1,000,000.00 1,500,000.00 2,500,000.00 4,000,000.00 1,000,000.00 500,000.00 2,000,000.00 1,500,000.00 1,500,000.00 2,500,000.00 2,000,000.00 1,278,000.00

which total P29,778,000.00. Feeling that the resolutions of her claims have been unduly delayed, petitioner sought the assistance of the Insurance Commission (Commission for brevity) through her letter dated January 18, 1994.[1] Acting on said letter, the Public Assistance & Information Division of the Commission held a conference on February 15, 1994 wherein petitioner and the insurance

companies respective representatives met. The insurers manifested their official stance to deny the claims of petitioner.[2] As a result, the conference was terminated without prejudice to petitioners option to pursue other legal remedies.[3] Petitioner then sought the intercession of several members and committees of the Legislature, such as, then Senate President Edgardo Angara,[4] Senator Heherson Alvarez and the Senate Blue Ribbon Committee[5] and the House Committee on Banks and Financial Intermediaries,[6] accusing the Commission of acting in conspiracy with the insurance companies in denying and delaying her claims.[7] The legislators and the committees sent communications to the Commission regarding petitioners claims.[8] Acting on the matter, the Commission conducted several meetings with petitioner and the insurance companies in order to settle the claims. The Commission apprised the legislators and their committees of the actions taken by the Commission and vehemently denied petitioners accusations.[9] On June 20, 1994, petitioner filed with the Commission a complaint for Revocation and/or Suspension of Licenses against the fourteen insurance companies, docketed as Adm. Case No. RD-156, based on alleged violation by the insurance companies and their respective adjusters of Section 241 (b), (c), (d) and (e) of the Insurance Code, as amended, to wit: SEC. 241. (1) No insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices. Any of the following acts by an insurance company, if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices: ... (b) Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies; (c) Failing to adopt and implement reasonable standards for the the prompt investigation of claims arising under its policies; (d) Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear; or (e) Compelling policyholders to institute suits to recover amounts due under its policies by offering without justifiable reason substantially less than the amount ultimately recovered in suits brought by them. mandating prompt investigation and settlement of claims.[10] Consequently, the Commission informed the concerned legislative bodies that they could not mediate any longer petitioners claims against the insurers because to do so will conflict with its position to maintain strict impartiality in the adjudication of Adm. Case No. RD-156.[11] Preliminary hearings were conducted in Adm. Case No. RD-156. [12] On November 24, 1994, the complaint was amended including therein several adjusters as party-defendants.[13] Petitioner also filed a Joint Affidavit, together with her husband,[14] and a Motion to Admit Amended Complaint and Affidavit in Lieu of Direct Testimony.[15] On February 27, 1995, while Adm. Case No. RD-156 is pending before the Commission, petitioner filed with the Regional Trial Court of Quezon City (Branch 222) a civil case for Specific Performance with Damages, docketed as Civil Case No. Q-95-23135, against the same defendants in Adm. Case No. RD-156.[16] The complaint prayed that defendants be ordered to perform their respective obligations as insurers under the insurance policies and to pay damages and attorneys fees.[17]

On March 28, 1995, the pre-trial in Adm. Case No. RD-156 was terminated and consolidated hearings on the case ensued.[18] In its Order dated May 17, 1995, the Commission admitted petitioners Amended Complaint and Joint Affidavit.[19] Consolidated/joint hearings on the case then proceeded.[20] On motion to dismiss by two of the insurers, the Commission ordered the suspension of Adm. Case No. RD-156 until final determination of Civil Case No. Q-95-23135.[21] The Commission was of the opinion that the administrative case for revocation/suspension of license of respondents and the civil case for specific performance with the Regional Trial Court involve the same set of parties, facts and circumstances; and that the determination by the Commission of the validity of the claims might conflict with that of the court, or vice-versa.[22] Aggrieved, petitioner filed with the Office of the Ombudsman a Complaint-Affidavit against Commissioner Malinis and Hearing Officer Castro of the Regulation Division, charging them of Violation of Section 3 [e] of Rep. Act No. 3019, as herein quoted earlier. In a gist, petitioner alleges in her Complaint-Affidavit, as follows: Some time in March 1994, petitioner went to the office of respondent Commissioner Malinis to discuss her claims and he informed her that he can settle the claims. However, because respondent Malinis did not fulfill his promise, she decided to file Adm. Case No. RD-156, which was raffled to respondent Castro. Petitioner again visited respondent Malinis on May 20, 1994, and the latter told her that he will settle the claims if she gives him 50% of it. In order for petitioner to accede to respondent Malinis demand, he ordered Castro to conduct separate hearings on the claims. Castro admitted to petitioner that it was respondent Malinis who instructed him to conduct separate hearings. Petitioner asked respondent Malinis to consolidate the hearings but instead, Malinis again propositioned that he will settle her claims if petitioner gives him 50%. Respondent Malinis then ordered the suspension of Adm. Case No. RD-156 in his Order dated August 29, 1995, which is patently void since he was not the hearing officer, and the order violates E.O. No. 26 and Insurance Circular Memorandum 1-93 on the early disposition of insurance claims.[23] In his Counter-Affidavit, respondent Malinis denies petitioners allegations.[24] He contends that the Commission attended to petitioners claims as early as January 1994 and that despite the fact that it was beyond the jurisdiction of the Commission and the insurance companies refused to grant the claims, he nevertheless exerted efforts to mediate the dispute.[25] Respondent Castro also denies petitioners accusations. He maintains that he did not tell petitioner that the holding of separate hearings was upon the instructions of Commissioner Malinis, as in fact, records show that joint hearings were held in Adm. Case No. RD-156; and, that the suspension of Adm. Case No. RD-156 was based on a motion to dismiss filed by the insurance companies, after due hearing on the motion.[26] Graft Investigation Officer Ginez-Jabalde recommended the dismissal of the charges against respondents per Resolution dated January 13, 1997. However, Ombudsman Desierto ordered further clarificatory hearings.[27] On March 18, 1997, a clarificatory hearing was held wherein respondent Castro explained that although he scheduled separate hearings, it was because the situation called for it as there were various insurance companies, adjusters and issues involved in the claims.[28] Thereafter, the Ombudsman approved the recommendation of the Graft Investigation Officer to dismiss the charges against respondents.[29] Upon denial by the Ombudsman of her motion for reconsideration,[30] petitioner filed the present petition for review on certiorari. Petitioner raises the following issues: CAN AN ADMINISTRATIVE CASE PENDING BEFORE AN ADMINISTRATIVE TRIBUNAL BE PURSUED UNABATED AND INDEPENDENTLY DESPITE SUBSEQUENT FILING OF A CIVIL

CASE IN A REGULAR COURT OF JUSTICE WHEREIN IN BOTH CASES, IT (sic) INVOLVE THE SAME PARTIES AND RELATIVELY INVOLVE THE SAME INCIDENT? WHETHER THE CONDUCT OF A (sic) SEPARATE HEARINGS FOR EACH RESPONDENTS (sic) CONSISTING OF FOURTEEN (14) INSURANCE COMPANIES AND SIX (6) ADJUSTMENT COMPANIES ON THE ONE HAND AND ONE (1) COMPLAINANT ON THE OTHER HAND, RESORTED BY THE HEARING OFFICER IN AN ADMINISTRATIVE CASE PREDICATED ON THE SAME ISSUE AND THE SAME SET OF FACTS AND CIRCUMSTANCES, AND THE SUBSEQUENT SUSPENSION OF THE PROCEEDINGS THEREON VIOLATES SECTION 16, ARTICLE IV OF THE CONSTITUTION AS WELL AS EXECUTIVE ORDER NO. 26 AND INSURANCE MEMORANDUM CIRCULAR 1-93 MANDATING THE SPEEDY DISPOSITION OF ADMINISTRATIVE CASES.[31] The Court finds the petition devoid of merit. The Ombudsman did not commit any grave abuse of discretion when it found no probable cause and dismissed the Complaint-Affidavit against respondents. The Ombudsman resolved to dismiss the charges against respondents as the latter were able to satisfactorily explain the reason for the holding of separate hearings, i.e., expediency, and the Commission is allowed under its rules of procedure to order the suspension of Adm. Case No. RD-156. The Ombudsman concluded: The conduct of separate hearings and issuance of the Order were all done in the regular performance of duties by the respondents Insurance Commissioner and Hearing Officer respetively (sic). Moreover, they were done within the purview of the rules of procedure governing the functions of the Insurance Commission. Finally, complainant failed to substantiate her charge with any concrete evidence, thus we can simply regard the charge against respondent Eduardo T. Malinis and Norberto F. Castro as if it does not exist at all.[32] Petitioner insists that the filing of Civil Case No. Q-95-23135 before the regular court does not abate or suspend the proceedings in Adm. Case No. RD-156. Petitioner argues further that the holding of separate hearings violates her constitutional right to the speedy disposition of her case. It has been the Courts policy to refrain from interfering with the Ombudsmans exercise of its investigatory and prosecutory powers, unless there are good and compelling reasons to rule otherwise.[33] We find no cogent reason that justifies the reversal of the dismissal of the charges against respondents. In her Affidavits, petitioner alleges that respondent Malinis act of demanding 50% of the insurance claims, instructing respondent Castro to conduct separate hearings, and suspending Adm. Case No. RD-156, caused her undue injury and gave the insurance companies unwarranted benefits, advantage and preference.[34] Aside from such bare allegations, there is nothing on record proving that respondent Malinis in fact demanded such 50%, or that the holding of the separate hearings and the suspension of the proceedings were done in order to coerce petitioner into acceding to Malinis demand. Petitioner argues that respondent Malinis did not deny her accusations and failed to answer the charges against him, indicating therefore the truth of her allegations.[35] Indeed, the general rule is that failure to deny allegations in the complaint results in admission thereof. [36] Such rule, however, is not absolute and admits of exceptions.[37] In Florentino Atillo III vs. Court of Appeals,Amancor, Inc. and Michell Lhuillier,[38] we held that in spite of the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented;[39] or, as in the present case, the absence of evidence for the petitioner to prove her claim.

It is fundamental that upon him who alleges rests the burden of proof;[40] hence, it is incumbent upon petitioner to prove her allegations with competent evidence. [41] She cannot simply rely on respondent Malinis failure to specifically deny her allegations to prove that there was such an illegal proposition. Respondents may not be indicted on mere presumptions. A review of the records shows that petitioner failed to prove her claim such that respondents may not be indicted for the acts complained of. As aptly found by the Ombudsman, there was no concrete evidence presented by petitioner to substantiate her charge.[42] To establish probable cause for Violation of Section 3[e] of R.A. 3019, the following elements must be present: (1) The accused is a public officer or a private person charged in conspiracy with the former; The said public officer commits the prohibited acts during the performance of his or her official duties or in relation to his or her public positions; That he or she causes undue injury to any party, whether the government or a private party; Such undue injury is caused by giving unwarranted benefits, advantage or preference to such parties; and That the public officer has acted with manifest partiality, evident bad faith or gross inexcusable negligence.[43]

(2)

(3)

(4)

(5)

The causing of undue injury or the giving of any unwarranted benefits, advantage or preference through manifest partiality, evident bad faith or gross inexcusable negligence constitutes the very act punished under the foregoing section.[44] Petitioner complains that she found it difficult and burdensome to prosecute her case against the insurers not to mention that she had been rendered despondent by the loss of her business due to conflagration.[45] Such difficulty and burden, however, do not, per se, constitute the undue injury contemplated by law. Jurisprudence has consistently interpreted the term undue injury as synonymous to actual damage.[46] In Llorente, Jr. vs. Sandiganbayan,[47] we explained the concept of undue injury as an element of the offense punishable under Section 3 [e] of Rep. Act No. 3019, to wit: Undue has been defined as more than necessary, not proper, [or] illegal; and injury as any wrong or damage done to another, either in his person, rights, reputation or property[;] [that is, the] invasion of any legally protected interest of another. Actual damage, in the context of these definitions, is akin to that in civil law.

Petitioner may have been fraught with attending and litigating her claims against each of the fourteen insurers as well as the insurance adjusters, individually, but inconvenience is certainly not constitutive of undue injury.[48]
Moreover, petitioner failed to show that the conduct of separate hearings was done by respondents through manifest partiality, evident bad faith or gross inexcusable negligence. Records show that as early as January 1994, when petitioner first brought the matter of the delay in her insurance claims to the Commission, respondent Malinis, upon the request of petitioner, exerted efforts to mediate between her and the insurance companies in order to amicably settle the claims notwithstanding the fact that it was beyond the jurisdictional amount cognizable by the Commission under the Insurance Code, as amended.

Paragraph 1, Section 416 of the Code provides that the Insurance Commissioner shall have the power to adjudicate claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance where the amount of any such loss, damage or liability does not exceed in any single claim one hundred thousand pesos. When the insurance companies made known their official position to deny the claims, respondent Malinis persisted in holding meetings between the parties. It was only after petitioner formally filed a complaint for Revocation and/or Suspension of Licenses with the Commission that settlement discussions were discontinued as it may compromise the Commissions impartiality. [49] These clearly are not indicative of evident bad faith, manifest partiality or gross inexcusable negligence on respondents part. Thus, respondent Malinis cannot be faulted for attempting to mediate among the parties. Records also show that the separate hearings on the case were held only during the early part of the proceedings in Adm. Case No. RD-156, particularly on August 15, 16, 17, 1994, and September 6, 7, 8, 9, 12, 13, 14, 16, 19, 20, 21, 22, 23, 1994. [50] During the clarificatory hearing held before the Office of the Ombudsman, respondent Castro explained that the conduct of separate hearings was necessary because petitioners claims involved several insurance companies, adjusters and peculiar issues for each of the companies.[51] What petitioner conveniently omitted to add is that consolidated/joint hearings were in fact held on August 25, 29, 1994, April 6, 1995, May 12, 1995, June 5, 1995, and July 3, 1995.[52] This negates petitioners allegation that respondents were deliberately holding separate hearings to her prejudice. Notably, it was during the hearing of July 3, 1995 that the motion to dismiss the Amended Complaint was heard and argued before respondent Castro who eventually decided to order the suspension of the proceedings.[53] The fact that the Commission suspended the proceedings due to the pendency of Civil Case No. Q-95-23135 does not constitute an indictable offense under Section 3 [e] of R.A. No. 3019. In Almendras Mining Corporation vs. Office of the Insurance Commission,[54] the Court expounded on the two-fold powers of the Insurance Commission under the Insurance Code, as amended, [55] to wit: . . . the Office of the Insurance Commission is an administrative agency vested with regulatory power as well as with adjudicatory authority. Among the several regulatory or non-quasi-judicial duties of the Insurance Commissioner under the Insurance Code is the authority to issue, or refuse issuance of, a Certificate of Authority to a person or entity desirous of engaging in insurance business in the Philippines, and to revoke or suspend such Certificate of Authority upon a finding of the existence of statutory grounds for such revocation or suspension. The grounds for revocation or suspension of an insurer's Certificate of Authority are set out in Section 241 and in Section 247 of the Insurance Code as amended. The general regulatory authority of the Insurance Commissioner is described in Section 414 of the Insurance Code, as amended, in the following terms: Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, and shall, notwithstanding any existing laws to the contrary, have sole and exclusive authority to regulate the issuance and sale of variable contracts as defined in section two hundred thirty-two and to provide for the licensing of persons selling such contracts, and to issue such reasonable rules and regulations governing the same. ... The adjudicatory authority of the Insurance Commissioner is generally described in Section 416 of the Insurance Code, as amended, which reads as follows:

Sec. 416. The Commissioner shall have the power to adjudicate claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be sued under any contract or reinsurance it may have entered into, or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, excluding interests, cost and attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred thousand pesos. (Emphasis supplied) Under its adjudicatory authority, the Insurance Commission has the original jurisdiction to adjudicate and settle insurance claims and complaints where the amount being claimed does not exceed in any single claim one hundred thousand pesos, as provided in Section 416 of the Code. Such original jurisdiction is concurrent with that of the Metropolitan Trial Courts, the Municipal Trial Courts and the Municipal Circuit Trial Courts.[56] In addition to such adjudicatory power, the Commissioner has the regulatory authority to revoke or suspend the certificate or authority of an insurance company upon finding the legal grounds for such revocation or suspension under Sections 241 and 247 of the Insurance Code. Section 241 is quoted in the early part of herein Decision. Section 247 provides: SEC. 247. If the Commissioner is of the opinion upon examination or other evidence that any domestic or foreign insurance company is in an unsound condition, or that it has failed to comply with the provisions of law or regulations obligatory upon it, or that its condition or methods of business is such as to render its proceedings hazardous to the public or to its policyholders, or that its paid-up capital stock, in the case of a domestic stock company, or its available cash assets, in the case of domestic mutual company, or its security deposits, in the case of a foreign company, is impaired or deficient, or that the margin of solvency required of such company is deficient, the Commissioner is authorized to suspend or revoke all certificates of authority granted to such insurance company, its officers and agents, and no new business shall thereafter be done by such company or for such company by its agent in the Philippines while such suspension, revocation or disability continues or until its authority to do business is restored by the Commission. Before restoring such authority, the Commissioner shall required the company concerned to subject to him a business plan showing the companys estimated receipts and disbursements, as well as the basis therefore, for the next succeeding three years. (As amended by P.D. No. 1455) Petitioner pursued her fire insurance claims through the regular courts when she filed Civil Case No. Q-95-23135 for Specific Performance with Damages with the RTC-Quezon City (Branch 222), her claims being beyond the jurisdiction of the Commission. In resolving petitioners claims, the trial court must therefore determine whether there was unreasonable denial or withholding of the claims by the insurance companies. On the other hand, in Adm. Case No. RD-156 pending before the Insurance Commission, the Commissioner is called upon to determine whether there was unreasonable delay or withholding of the claims, as petitioners action is one for the Revocation and/or Suspension of Licenses on grounds of alleged violations of Section 241 (b), (c), (d) and (e) of the Insurance Code, as amended, on prompt investigation and settlement of claims. The jurisdiction of the Commission in this case is one that calls for the exercise of its regulatory or non-quasi-judicial duty, i.e., the authority to revoke or suspend an insurers certificate of authority.[57] Aside from the revocation/suspension of license, the Insurance Commissioner also has the discretion to impose upon the erring insurance companies and its directors, officers and agents, fines and penalties, as set out in Section 415, viz.: SEC. 415. In addition to the administrative sanction provided elsewhere in this Code, the Insurance Commissioner is hereby authorized, at his discretion, to impose upon insurance companies, their directors and/or officers and/or agents, for any willful failure or refusal to comply

with, or violation of any provision of this Code, or any order, instruction, regulation or ruling of the Insurance Commissioner, or any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner, the following: (a) Fines not in excess of five hundred pesos a day; and (b) Suspension, or after due hearing, removal of directors and/or officers and/or agents.

The findings of the trial court will not necessarily foreclose the administrative case before the Commission, or vice versa. True, the parties are the same, and both actions are predicated on the same set of facts, and will require identical evidence. But the issues to be resolved, the quantum of evidence, the procedure to be followed and the reliefs to be adjudged by these two bodies are different. Petitioners causes of action in Civil Case No. Q-95-23135 are predicated on the insurers refusal to pay her fire insurance claims despite notice, proofs of losses and other supporting documents. Thus, petitioner prays in her complaint that the insurers be ordered to pay the fullinsured value of the losses, as embodied in their respective policies.[58] Petitioner also sought payment of interests and damages in her favor caused by the alleged delay and refusal of the insurers to pay her claims.[59] The principal issue then that must be resolved by the trial court is whether or not petitioner is entitled to the payment of her insurance claims and damages. The matter of whether or not there is unreasonable delay or denial of the claims is merely an incident to be resolved by the trial court, necessary to ascertain petitioners right to claim damages, as prescribed by Section 244 of the Insurance Code. On the other hand, the core, if not the sole bone of contention in Adm. Case No. RD-156, is the issue of whether or not there was unreasonable delay or denial of the claims of petitioner, and if in the affirmative, whether or not that would justify the suspension or revocation of the insurers licenses. Moreover, in Civil Case No. Q-95-23135, petitioner must establish her case by a preponderance of evidence, or simply put, such evidence that is of greater weight, or more convincing than that which is offered in opposition to it.[60] In Adm. Case No. RD-156, the degree of proof required of petitioner to establish her claim is substantial evidence, which has been defined as that amount of relevant evidence that a reasonable mind might accept as adequate to justify the conclusion.[61] In addition, the procedure to be followed by the trial court is governed by the Rules of Court, while the Commission has its own set of rules[63] and it is not bound by the rigidities of technical rules of procedure.[64] These two bodies conduct independent means of ascertaining the ultimate facts of their respective cases that will serve as basis for their respective decisions.
[62]

If, for example, the trial court finds that there was no unreasonable delay or denial of her claims, it does not automatically mean that there was in fact no such unreasonable delay or denial that would justify the revocation or suspension of the licenses of the concerned insurance companies. It only means that petitioner failed to prove by preponderance of evidence that she is entitled to damages. Such finding would not restrain the Insurance Commission, in the exercise of its regulatory power, from making its own finding of unreasonable delay or denial as long as it is supported by substantial evidence. While the possibility that these two bodies will come up with conflicting resolutions on the same issue is not far-fetched, the finding or conclusion of one would not necessarily be binding on the other given the difference in the issues involved, the quantum of evidence required and the procedure to be followed. Moreover, public interest and public policy demand the speedy and inexpensive disposition of administrative cases.[65]

Hence, Adm. Case No. RD-156 may proceed alongside Civil Case No. Q-95-23135. The suspension of Adm. Case No. RD-156 by respondents, albeit erroneous, is not sufficient indicia of evident bad faith, manifest partiality or gross inexcusable negligence. Respondents mistaken sense of prudence and judgment, dictated the suspension of the proceedings. To hold respondents responsible for such error would be nothing short of harassment. For no one called upon to try the facts or interpret the law in the process of administering justice can be infallible in his judgment.[66] WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit. However, in the interest of orderly administration of justice, the Insurance Commission is directed to proceed with immediate dispatch in conducting the hearings of Adm. Case No. RD156 to determine whether or not the licenses of the insurance companies and adjusters may be revoked or suspended as prayed for by petitioner. No costs. SO ORDERED.