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G.R. No.

198588

July 11, 2012

UNITED MERCHANTS CORPORATION, Petitioner, vs. COUNTRY BANKERS INSURANCE CORPORATION, Respondent. DECISION CARPIO, J.: The Case This Petition for Review on Certiorari1 seeks to reverse the Court of Appeals Decision2 dated 16 June 2011 and its Resolution3 dated 8 September 2011 in CA-G.R. CV No. 85777. The Court of Appeals reversed the Decision4 of the Regional Trial Court (RTC) of Manila, Branch 3, and ruled that the claim on the Insurance Policy is void. The Facts The facts, as culled from the records, are as follows: Petitioner United Merchants Corporation (UMC) is engaged in the business of buying, selling, and manufacturing Christmas lights. UMC leased a warehouse at 19-B Dagot Street, San Jose Subdivision, Barrio Manresa, Quezon City, where UMC assembled and stored its products. On 6 September 1995, UMCs General Manager Alfredo Tan insured UMCs stocks in trade of Christmas lights against fire with defendant Country Bankers Insurance Corporation (CBIC) for P15,000,000.00. The Fire Insurance Policy No. F-HO/95-576 (Insurance Policy) and Fire Invoice No. 12959A, valid until 6 September 1996, states: AMOUNT OF INSURANCE: FIFTEEN MILLION PESOS PHILIPPINE CURRENCY

xxx PROPERTY INSURED: On stocks in trade only, consisting of Christmas Lights, the properties of the Assured or held by them in trust, on commissions, or on joint account with others and/or for which they are responsible in the event of loss and/or damage during the currency of this policy, whilst contained in the building of one lofty storey in height, constructed of concrete and/or hollow blocks with portion of galvanized iron sheets, under galvanized iron rood, occupied as Christmas lights storage.5 On 7 May 1996, UMC and CBIC executed Endorsement F/96-154 and Fire Invoice No. 16583A to form part of the Insurance Policy. Endorsement F/96-154 provides that UMCs stocks in trade were insured against additional perils, to wit: "typhoon, flood, ext. cover, and full earthquake." The sum insured was

also increased to P50,000,000.00 effective 7 May 1996 to 10 January 1997. On 9 May 1996, CBIC issued Endorsement F/96-157 where the name of the assured was changed from Alfredo Tan to UMC. On 3 July 1996, a fire gutted the warehouse rented by UMC. CBIC designated CRM Adjustment Corporation (CRM) to investigate and evaluate UMCs loss by reason of the fire. CBICs reinsurer, Central Surety, likewise requested the National Bureau of Investigation (NBI) to conduct a parallel investigation. On 6 July 1996, UMC, through CRM, submitted to CBIC its Sworn Statement of Formal Claim, with proofs of its loss. On 20 November 1996, UMC demanded for at least fifty percent (50%) payment of its claim from CBIC. On 25 February 1997, UMC received CBICs letter, dated 10 January 1997, rejecting UMCs claim due to breach of Condition No. 15 of the Insurance Policy. Condition No. 15 states: If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or anyone acting in his behalf to obtain any benefit under this Policy; or if the loss or damage be occasioned by the willful act, or with the connivance of the Insured, all the benefits under this Policy shall be forfeited.6 On 19 February 1998, UMC filed a Complaint7 against CBIC with the RTC of Manila. UMC anchored its insurance claim on the Insurance Policy, the Sworn Statement of Formal Claim earlier submitted, and the Certification dated 24 July 1996 made by Deputy Fire Chief/Senior Superintendent Bonifacio J. Garcia of the Bureau of Fire Protection. The Certification dated 24 July 1996 provides that: This is to certify that according to available records of this office, on or about 6:10 P.M. of July 3, 1996, a fire broke out at United Merchants Corporation located at 19-B Dag[o]t Street, Brgy. Manresa, Quezon City incurring an estimated damage of Fifty-Five Million Pesos (P55,000,000.00) to the building and contents, while the reported insurance coverage amounted to Fifty Million Pesos (P50,000,000.00) with Country Bankers Insurance Corporation. The Bureau further certifies that no evidence was gathered to prove that the establishment was willfully, feloniously and intentionally set on fire. That the investigation of the fire incident is already closed being ACCIDENTAL in nature.8 In its Answer with Compulsory Counterclaim9 dated 4 March 1998, CBIC admitted the issuance of the Insurance Policy to UMC but raised the following defenses: (1) that the Complaint states no cause of action; (2) that UMCs claim has already prescribed; and (3) that UMCs fire claim is tainted with fraud. CBIC alleged that UMCs claim was fraudulent because UMCs Statement of Inventory showed that it had no stocks in trade as of 31 December 1995, and that UMCs suspicious purchases for the year 1996 did not even amount to P25,000,000.00. UMCs GIS and Financial Reports further revealed that it had insufficient capital, which meant UMC could not afford the alleged P50,000,000.00 worth of stocks in trade.

In its Reply10 dated 20 March 1998, UMC denied violation of Condition No. 15 of the Insurance Policy. UMC claimed that it did not make any false declaration because the invoices were genuine and the Statement of Inventory was for internal revenue purposes only, not for its insurance claim. During trial, UMC presented five witnesses. The first witness was Josie Ebora (Ebora), UMCs disbursing officer. Ebora testified that UMCs stocks in trade, at the time of the fire, consisted of: (1) raw materials for its Christmas lights; (2) Christmas lights already assembled; and (3) Christmas lights purchased from local suppliers. These stocks in trade were delivered from August 1995 to May 1996. She stated that Straight Cargo Commercial Forwarders delivered the imported materials to the warehouse, evidenced by delivery receipts. However, for the year 1996, UMC had no importations and only bought from its local suppliers. Ebora identified the suppliers as Fiber Technology Corporation from which UMC bought stocks worth P1,800,000.00 on 20 May 1996; Fuze Industries Manufacturer Philippines from which UMC bought stocks worth P19,500,000.00 from 20 January 1996 to 23 February 1996; and Tomco Commercial Press from which UMC bought several Christmas boxes. Ebora testified that all these deliveries were not yet paid. Ebora also presented UMCs Balance Sheet, Income Statement and Statement of Cash Flow. Per her testimony, UMCs purchases amounted to P608,986.00 in 1994; P827,670.00 in 1995; and P20,000,000.00 in 1996. Ebora also claimed that UMC had sales only from its fruits business but no sales from its Christmas lights for the year 1995. The next witness, Annie Pabustan (Pabustan), testified that her company provided about 25 workers to assemble and pack Christmas lights for UMC from 28 March 1996 to 3 July 1996. The third witness, Metropolitan Bank and Trust Company (MBTC) Officer Cesar Martinez, stated that UMC opened letters of credit with MBTC for the year 1995 only. The fourth witness presented was Ernesto Luna (Luna), the delivery checker of Straight Commercial Cargo Forwarders. Luna affirmed the delivery of UMCs goods to its warehouse on 13 August 1995, 6 September 1995, 8 September 1995, 24 October 1995, 27 October 1995, 9 November 1995, and 19 December 1995. Lastly, CRMs adjuster Dominador Victorio testified that he inspected UMCs warehouse and prepared preliminary reports in this connection. On the other hand, CBIC presented the claims manager Edgar Caguindagan (Caguindagan), a Securities and Exchange Commission (SEC) representative, Atty. Ernesto Cabrera (Cabrera), and NBI Investigator Arnold Lazaro (Lazaro). Caguindagan testified that he inspected the burned warehouse on 5 July 1996, took pictures of it and referred the claim to an independent adjuster. The SEC representatives testimony was dispensed with, since the parties stipulated on the existence of certain documents, to wit: (1) UMCs GIS for 1994-1997; (2) UMCs Financial Report as of 31 December 1996; (3) SEC Certificate that UMC did not file GIS or Financial Reports for certain years; and (4) UMCs Statement of Inventory as of 31 December 1995 filed with the BIR. Cabrera and Lazaro testified that they were hired by Central Surety to investigate UMCs claim. On 19 November 1996, they concluded that arson was committed based from their interview with barangay officials and the pictures showing that blackened surfaces were present at different parts of the warehouse. On cross-examination, Lazaro admitted that they did not conduct a forensic investigation of the warehouse, nor did they file a case for arson.

For rebuttal, UMC presented Rosalinda Batallones (Batallones), keeper of the documents of UCPB General Insurance, the insurer of Perfect Investment Company, Inc., the warehouse owner. When asked to bring documents related to the insurance of Perfect Investment Company, Inc., Batallones brought the papers of Perpetual Investment, Inc. The Ruling of the Regional Trial Court On 16 June 2005, the RTC of Manila, Branch 3, rendered a Decision in favor of UMC, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and ordering defendant to pay plaintiff: a) the sum of P43,930,230.00 as indemnity with interest thereon at 6% per annum from November 2003 until fully paid; b) the sum of P100,000.00 for exemplary damages; c) the sum of P100,000.00 for attorneys fees; and d) the costs of suit. Defendants counterclaim is denied for lack of merit. SO ORDERED.11 The RTC found no dispute as to UMCs fire insurance contract with CBIC. Thus, the RTC ruled for UMCs entitlement to the insurance proceeds, as follows: Fraud is never presumed but must be proved by clear and convincing evidence. (see Alonso v. Cebu Country Club, 417 SCRA 115 [2003]) Defendant failed to establish by clear and convincing evidence that the documents submitted to the SEC and BIR were true. It is common business practice for corporations to have 2 sets of reports/statements for tax purposes. The stipulated documents of plaintiff (Exhs. 2 8) may not have been accurate. The conflicting findings of defendants adjuster, CRM Adjustment [with stress] and that made by Atty. Cabrera & Mr. Lazaro for Central Surety shall be resolved in favor of the former. Definitely the formers finding is more credible as it was made soon after the fire while that of the latter was done 4 months later. Certainly it would be a different situation as the site was no longer the same after the clearing up operation which is normal after a fire incident. The Christmas lights and parts could have been swept away. Hence the finding of the latter appears to be speculative to benefit the reinsurer and which defendant wants to adopt to avoid liability. The CRM Adjustment report found no arson and confirmed substantial stocks in the burned warehouse (Exhs. QQQ) [underscoring supplied]. This is bolstered by the BFP certification that there was no proof of arson and the fire was accidental (Exhs. PPP). The certification by a government agency like BFP is presumed to be a regular performance of official duty. "Absent convincing evidence to the contrary, the

presumption of regularity in the performance of official functions has to be upheld." (People vs. Lapira, 255 SCRA 85) The report of UCPB General Insurances adjuster also found no arson so that the burned warehouse owner PIC was indemnified.12 Hence, CBIC filed an appeal with the Court of Appeals (CA). The Ruling of the Court of Appeals On 16 June 2011, the CA promulgated its Decision in favor of CBIC. The dispositive portion of the Decision reads: WHEREFORE, in view of the foregoing premises, the instant appeal is GRANTED and the Decision of the Regional Trial Court, of the National Judicial Capital Region, Branch 3 of the City of Manila dated June 16, 2005 in Civil Case No. 98-87370 is REVERSED and SET ASIDE. The plaintiff-appellees claim upon its insurance policy is deemed avoided. SO ORDERED.13 The CA ruled that UMCs claim under the Insurance Policy is void. The CA found that the fire was intentional in origin, considering the array of evidence submitted by CBIC, particularly the pictures taken and the reports of Cabrera and Lazaro, as opposed to UMCs failure to explain the details of the alleged fire accident. In addition, it found that UMCs claim was overvalued through fraudulent transactions. The CA ruled: We have meticulously gone over the entirety of the evidence submitted by the parties and have come up with a conclusion that the claim of the plaintiff-appellee was indeed overvalued by transactions which were fraudulently concocted so that the full coverage of the insurance policy will have to be fully awarded to the plaintiff-appellee. First, We turn to the backdrop of the plaintiff-appellees case, thus, *o+n September 6, 1995 its stocks-intrade were insured for Fifteen Million Pesos and on May 7, 1996 the same was increased to 50 Million Pesos. Two months thereafter, a fire gutted the plaintiff-appellees warehouse. Second, We consider the reported purchases of the plaintiff-appellee as shown in its financial report dated December 31, 1996 vis--vis the testimony of Ms. Ebora thus: 1994 - P608,986.00 1995 - P827,670.00 1996 - P20,000,000.00 (more or less) which were purchased for a period of one month. Third, We shall also direct our attention to the alleged true and complete purchases of the plaintiffappellee as well as the value of all stock-in-trade it had at the time that the fire occurred. Thus:

Exhibit

Source

Amount (pesos) 19,550,400.00

Dates Covered

Exhs. "P"-"DD", inclusive

Fuze Industries Manufacturer Phils.

January 20, 1996 January 31, 1996 February 12, 1996 February 20, 1996 February 23, 1996 December 19, 1995 January 24, 1996 February 21, 1996 November 24, 1995 January 13, 1996 January 19, 1996 January 26, 1996 February 3, 1996 February 13, 1996 February 20, 1996 February 27, 1996 April 3, 1996 April 12, 1996

Exhs. "EE"-"HH", inclusive

Tomco Commercial Press

1,712,000.00

Exhs. "II"-"QQ", inclusive

Precious Belen Trading

2,720,400.00

Exhs. "RR"-

Wisdom Manpower

361,966.00

"EEE", inclusive

Services

April 19, 1996 April 26, 1996 May 3, 1996 May 10, 1996 May 17, 1996 May 24, 1996 June 7, 1996 June 14, 1996 June 21, 1996 June 28, 1996 July 5, 1996 15,159,144.71 May 29, 1995 June 15, 1995 July 5, 1995 September 4, 1995 October 2, 1995 October 27, 1995 January 8, 1996 March 19, 1996 June 15, 1995 June 28, 1995 August 1, 1995 September 4, 1995 September 8, 1995 September 11, 1995 October 30, 199[5] November 10, 1995 December 21, 1995

Exhs. "GGG""NNN", inclusive

Costs of Letters of Credit for imported raw materials

Exhs. "GGG-11" - "GGG-24", "HHH-12", "HHH-22", "III-11", "III-14", "JJJ-13", "KKK-11", "LLL-5"

SCCFI statements of account

384,794.38

TOTAL

44,315,024.31

Fourth, We turn to the allegation of fraud by the defendant-appellant by thoroughly looking through the pieces of evidence that it adduced during the trial. The latter alleged that fraud is present in the case at bar as shown by the discrepancy of the alleged purchases from that of the reported purchases made by plaintiff-appellee. It had also averred that fraud is present when upon verification of the address of Fuze Industries, its office is nowhere to be found. Also, the defendant-appellant expressed grave doubts as to the purchases of the plaintiff-appellee sometime in 1996 when such purchases escalated to a high 19.5 Million Pesos without any contract to back it up.14 On 7 July 2011, UMC filed a Motion for Reconsideration,15 which the CA denied in its Resolution dated 8 September 2011. Hence, this petition. The Issues UMC seeks a reversal and raises the following issues for resolution: I. WHETHER THE COURT OF APPEALS MADE A RULING INCO[N]SISTENT WITH LAW, APPLICABLE JURISPRUDENCE AND EVIDENCE AS TO THE EXISTENCE OF ARSON AND FRAUD IN THE ABSENCE OF "MATERIALLY CONVINCING EVIDENCE." II. WHETHER THE COURT OF APPEALS MADE A RULING INCONSISTENT WITH LAW, APPLICABLE JURISPRUDENCE AND EVIDENCE WHEN IT FOUND THAT PETITIONER BREACHED ITS WARRANTY.16 The Ruling of the Court At the outset, CBIC assails this petition as defective since what UMC ultimately wants this Court to review are questions of fact. However, UMC argues that where the findings of the CA are in conflict with those of the trial court, a review of the facts may be made. On this procedural issue, we find UMCs claim meritorious. A petition for review under Rule 45 of the Rules of Court specifically provides that only questions of law may be raised. The findings of fact of the CA are final and conclusive and this Court will not review them on appeal,17 subject to exceptions as when the findings of the appellate court conflict with the findings of the trial court.18 Clearly, the present case falls under the exception. Since UMC properly raised the conflicting findings of the lower courts, it is proper for this Court to resolve such contradiction. Having settled the procedural issue, we proceed to the primordial issue which boils down to whether UMC is entitled to claim from CBIC the full coverage of its fire insurance policy.

UMC contends that because it had already established a prima facie case against CBIC which failed to prove its defense, UMC is entitled to claim the full coverage under the Insurance Policy. On the other hand, CBIC contends that because arson and fraud attended the claim, UMC is not entitled to recover under Condition No. 15 of the Insurance Policy. Burden of proof is the duty of any party to present evidence to establish his claim or defense by the amount of evidence required by law,19 which is preponderance of evidence in civil cases.20 The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment.21 Particularly, in insurance cases, once an insured makes out a prima facie case in its favor, the burden of evidence shifts to the insurer to controvert the insureds prima facie case.22 In the present case, UMC established a prima facie case against CBIC. CBIC does not dispute that UMCs stocks in trade were insured against fire under the Insurance Policy and that the warehouse, where UMCs stocks in trade were stored, was gutted by fire on 3 July 1996, within the duration of the fire insurance. However, since CBIC alleged an excepted risk, then the burden of evidence shifted to CBIC to prove such exception.1wphi1 An insurer who seeks to defeat a claim because of an exception or limitation in the policy has the burden of establishing that the loss comes within the purview of the exception or limitation.23 If loss is proved apparently within a contract of insurance, the burden is upon the insurer to establish that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.24 In the present case, CBIC failed to discharge its primordial burden of establishing that the damage or loss was caused by arson, a limitation in the policy. In prosecutions for arson, proof of the crime charged is complete where the evidence establishes: (1) the corpus delicti, that is, a fire caused by a criminal act; and (2) the identity of the defendants as the one responsible for the crime.25 Corpus delicti means the substance of the crime, the fact that a crime has actually been committed.26 This is satisfied by proof of the bare occurrence of the fire and of its having been intentionally caused.27 In the present case, CBICs evidence did not prove that the fire was intentionally caused by the insured. First, the findings of CBICs witnesses, Cabrera and Lazaro, were based on an investigation conducted more than four months after the fire. The testimonies of Cabrera and Lazaro, as to the boxes doused with kerosene as told to them by barangay officials, are hearsay because the barangay officials were not presented in court. Cabrera and Lazaro even admitted that they did not conduct a forensic investigation of the warehouse nor did they file a case for arson.28 Second, the Sworn Statement of Formal Claim submitted by UMC, through CRM, states that the cause of the fire was "faulty electrical wiring/accidental in nature." CBIC is bound by this evidence because in its Answer, it admitted that it designated CRM to evaluate UMCs loss. Third, the Certification by the Bureau of Fire Protection states that the fire was accidental in origin. This Certification enjoys the presumption of regularity, which CBIC failed to rebut. Contrary to UMCs allegation, CBICs failure to prove arson does not mean that it also failed to prove fraud. Qua Chee Gan v. Law Union29 does not apply in the present case. In Qua Chee Gan,30 the Court

dismissed the allegation of fraud based on the dismissal of the arson case against the insured, because the evidence was identical in both cases, thus: While the acquittal of the insured in the arson case is not res judicata on the present civil action, the insurers evidence, to judge from the decision in the criminal case, is practically identical in both cases and must lead to the same result, since the proof to establish the defense of connivance at the fire in order to defraud the insurer "cannot be materially less convincing than that required in order to convict the insured of the crime of arson" (Bachrach vs. British American Assurance Co., 17 Phil. 536). 31 In the present case, arson and fraud are two separate grounds based on two different sets of evidence, either of which can void the insurance claim of UMC. The absence of one does not necessarily result in the absence of the other. Thus, on the allegation of fraud, we affirm the findings of the Court of Appeals. Condition No. 15 of the Insurance Policy provides that all the benefits under the policy shall be forfeited, if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, to wit: 15. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or anyone acting in his behalf to obtain any benefit under this Policy; or if the loss or damage be occasioned by the willful act, or with the connivance of the Insured, all the benefits under this Policy shall be forfeited. In Uy Hu & Co. v. The Prudential Assurance Co., Ltd.,32 the Court held that where a fire insurance policy provides that "if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or anyone acting on his behalf to obtain any benefit under this Policy," and the evidence is conclusive that the proof of claim which the insured submitted was false and fraudulent both as to the kind, quality and amount of the goods and their value destroyed by the fire, such a proof of claim is a bar against the insured from recovering on the policy even for the amount of his actual loss. In the present case, as proof of its loss of stocks in trade amounting to P50,000,000.00, UMC submitted its Sworn Statement of Formal Claim together with the following documents: (1) letters of credit and invoices for raw materials, Christmas lights and cartons purchased; (2) charges for assembling the Christmas lights; and (3) delivery receipts of the raw materials. However, the charges for assembling the Christmas lights and delivery receipts could not support its insurance claim. The Insurance Policy provides that CBIC agreed to insure UMCs stocks in trade. UMC defined stock in trade as tangible personal property kept for sale or traffic.33 Applying UMCs definition, only the letters of credit and invoices for raw materials, Christmas lights and cartons may be considered. The invoices, however, cannot be taken as genuine. The invoices reveal that the stocks in trade purchased for 1996 amounts to P20,000,000.00 which were purchased in one month. Thus, UMC needs to prove purchases amounting to P30,000,000.00 worth of stocks in trade for 1995 and prior years.

However, in the Statement of Inventory it submitted to the BIR, which is considered an entry in official records,34 UMC stated that it had no stocks in trade as of 31 December 1995. In its defense, UMC alleged that it did not include as stocks in trade the raw materials to be assembled as Christmas lights, which it had on 31 December 1995. However, as proof of its loss, UMC submitted invoices for raw materials, knowing that the insurance covers only stocks in trade. Equally important, the invoices (Exhibits "P"-"DD") from Fuze Industries Manufacturer Phils. were suspicious. The purchases, based on the invoices and without any supporting contract, amounted to P19,550,400.00 worth of Christmas lights from 20 January 1996 to 23 February 1996. The uncontroverted testimony of Cabrera revealed that there was no Fuze Industries Manufacturer Phils. located at "55 Mahinhin St., Teachers Village, Quezon City," the business address appearing in the invoices and the records of the Department of Trade & Industry. Cabrera testified that: A: Then we went personally to the address as I stated a while ago appearing in the record furnished by the United Merchants Corporation to the adjuster, and the adjuster in turn now, gave us our basis in conducting investigation, so we went to this place which according to the records, the address of this company but there was no office of this company. Q: You mentioned Atty. Cabrera that you went to Diliman, Quezon City and discover the address indicated by the United Merchants as the place of business of Fuze Industries Manufacturer, Phils. was a residential place, what then did you do after determining that it was a residential place? A: We went to the owner of the alleged company as appearing in the Department of Trade & Industry record, and as appearing a certain Chinese name Mr. Huang, and the address as appearing there is somewhere in Binondo. We went personally there together with the NBI Agent and I am with them when the subpoena was served to them, but a male person approached us and according to him, there was no Fuze Industries Manufacturer, Phils., company in that building sir.35 In Yu Ban Chuan v. Fieldmens Insurance, Co., Inc.,36 the Court ruled that the submission of false invoices to the adjusters establishes a clear case of fraud and misrepresentation which voids the insurers liability as per condition of the policy. Their falsity is the best evidence of the fraudulent character of plaintiffs claim.37 In Verendia v. Court of Appeals,38 where the insured presented a fraudulent lease contract to support his claim for insurance benefits, the Court held that by its false declaration, the insured forfeited all benefits under the policy provision similar to Condition No. 15 of the Insurance Policy in this case. Furthermore, UMCs Income Statement indicated that the purchases or costs of sales are P827,670.00 for 1995 and P1,109,190.00 for 1996 or a total of P1,936,860.00.39 To corroborate this fact, Ebora testified that: Q: Based on your 1995 purchases, how much were the purchases made in 1995? A: The purchases made by United Merchants Corporation for the last year 1995 is P827,670.[00] sir Q: And how about in 1994?

A: In 1994, its P608,986.00 sir. Q: These purchases were made for the entire year of 1995 and 1994 respectively, am I correct? A: Yes sir, for the year 1994 and 1995.40 (Emphasis supplied) In its 1996 Financial Report, which UMC admitted as existing, authentic and duly executed during the 4 December 2002 hearing, it had P1,050,862.71 as total assets and P167,058.47 as total liabilities.41 Thus, either amount in UMCs Income Statement or Financial Reports is twenty-five times the claim UMC seeks to enforce. The RTC itself recognized that UMC padded its claim when it only allowed P43,930,230.00 as insurance claim. UMC supported its claim of P50,000,000.00 with the Certification from the Bureau of Fire Protection stating that "x x x a fire broke out at United Merchants Corporation located at 19-B Dag[o]t Street, Brgy. Manresa, Quezon City incurring an estimated damage of Fifty- Five Million Pesos (P55,000,000.00) to the building and contents x x x." However, this Certification only proved that the estimated damage of P55,000,000.00 is shared by both the building and the stocks in trade. It has long been settled that a false and material statement made with an intent to deceive or defraud voids an insurance policy.42 In Yu Cua v. South British Insurance Co.,43 the claim was fourteen times bigger than the real loss; in Go Lu v. Yorkshire Insurance Co,44 eight times; and in Tuason v. North China Insurance Co.,45 six times. In the present case, the claim is twenty five times the actual claim proved. The most liberal human judgment cannot attribute such difference to mere innocent error in estimating or counting but to a deliberate intent to demand from insurance companies payment for indemnity of goods not existing at the time of the fire.46 This constitutes the so-called "fraudulent claim" which, by express agreement between the insurers and the insured, is a ground for the exemption of insurers from civil liability.47 In its Reply, UMC admitted the discrepancies when it stated that "discrepancies in its statements were not covered by the warranty such that any discrepancy in the declaration in other instruments or documents as to matters that may have some relation to the insurance coverage voids the policy."48 On UMCs allegation that it did not breach any warranty, it may be argued that the discrepancies do not, by themselves, amount to a breach of warranty. However, the Insurance Code provides that "a policy may declare that a violation of specified provisions thereof shall avoid it."49 Thus, in fire insurance policies, which contain provisions such as Condition No. 15 of the Insurance Policy, a fraudulent discrepancy between the actual loss and that claimed in the proof of loss voids the insurance policy. Mere filing of such a claim will exonerate the insurer.50 Considering that all the circumstances point to the inevitable conclusion that UMC padded its claim and was guilty of fraud, UMC violated Condition No. 15 of the Insurance Policy. Thus, UMC forfeited whatever benefits it may be entitled under the Insurance Policy, including its insurance claim.

While it is a cardinal principle of insurance law that a contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company,51 contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used.52 If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. Courts are not permitted to make contracts for the parties; the function and duty of the courts is simply to enforce and carry out the contracts actually made.53 WHEREFORE, we DENY the petition. We AFFIRM the 16 June 2011 Decision and the 8 September 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 85777. SO ORDERED.

G.R. No. 137775. March 31, 2005 FGU INSURANCE CORPORATION, Petitioners, vs. THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO TO, Respondents. G.R. No. 140704. March 31, 2005 ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO TO, Petitioners, vs. THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and FGU INSURANCE CORP., Respondents. DECISION CHICO-NAZARIO, J.: Before Us are two separate Petitions for review assailing the Decision1 of the Court of Appeals in CA-G.R. CV No. 49624 entitled, "San Miguel Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang, and Co To, Defendants-Appellants, ThirdParty Plaintiffs versus FGU Insurance Corporation, Third-Party Defendant-Appellant," which affirmed in toto the decision2 of the Regional Trial Court of Cebu City, Branch 22. The dispositive portion of the Court of Appeals decision reads: WHEREFORE, for all the foregoing, judgment is hereby rendered as follows: 1) Ordering defendants to pay plaintiff the sum of P1,346,197.00 and an interest of 6% per annum to be reckoned from the filing of this case on October 2, 1990; 2) Ordering defendants to pay plaintiff the sum of P25,000.00 for attorneys fees and an additional sum of P10,000.00 as litigation expenses; 3) With cost against defendants. For the Third-Party Complaint: 1) Ordering third-party defendant FGU Insurance Company to pay and reimburse defendants the amount of P632,700.00.3 The Facts Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO, the following cargoes: Bill of Lading No. Shipment Destination 1 25,000 cases Pale Pilsen Estancia, Iloilo 350 cases Cerveza Negra Estancia, Iloilo 2 15,000 cases Pale Pilsen San Jose, Antique 200 cases Cerveza Negra San Jose, Antique The consignee for the cargoes covered by Bill of Lading No. 1 was SMCs Beer Marketing Division (BMD)Estancia Beer Sales Office, Estancia, Iloilo, while the consignee for the cargoes covered by Bill of Lading No. 2 was SMCs BMD-San Jose Beer Sales Office, San Jose, Antique. The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30 September 1979. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique. When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over the area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to transfer the barge to a safer place because the vessel might not be able to withstand the big waves. ANCOs representative did not heed the request because he was confident that the barge could withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator. At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barges rope attached to the wharf was cut off by the big waves. At around midnight, the barge run aground and was broken and the cargoes of beer in the barge were swept away. As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00). As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-

Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as attorneys fees. Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a second amended complaint which was admitted by the Court impleading the surviving partner, Co To and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang. The substituted defendants adopted the original answer with counterclaim of ANCO "since the substantial allegations of the original complaint and the amended complaint are practically the same." ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed loaded on the vessel belonging to ANCO. It claimed however that it had an agreement with SMC that ANCO would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk the vessel in which they were loaded, they should not be held liable. ANCO further asserted that there was an agreement between them and SMC to insure the cargoes in order to recover indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591. Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that before the vessel of ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the extent of Twenty Thousand (20,000) cases, were insured with FGU for a total amount of Eight Hundred FiftyEight Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance Policy No. 29591. ANCO further alleged that on or about 02 October 1979, by reason of very strong winds and heavy waves brought about by a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or destroyed. According to ANCO, the loss of said cargoes occurred as a result of risks insured against in the insurance policy and during the existence and lifetime of said insurance policy. ANCO went on to assert that in the remote possibility that the court will order ANCO to pay SMCs claim, the third-party defendant corporation should be held liable to indemnify or reimburse ANCO whatever amounts, or damages, it may be required to pay to SMC. In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the said insurance policy. According to FGU, it is only liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the following: a) total loss of the entire shipment; b) loss of any case as a result of the sinking of the vessel; or c) loss as a result of the vessel being on fire.

Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss and/or destruction. Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual, moral, and exemplary damages and attorneys fees. The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on ANCOs part, through their representatives, to observe the degree of diligence required that would exonerate them from liability. The trial court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment. With respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes. According to the trial court: . . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken and the beer cargoes on the said barge were swept away. It is the sense of this Court that the risk insured against was the cause of the loss. ... Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of the policy was only for P858,500.00, defendants as assured, therefore, were considered co-insurers of third-party defendant FGU Insurance Corporation to the extent of 975,405.00 value of the cargo. Consequently, inasmuch as there was partial loss of only P1,346,197.00, the assured shall bear 53% of the loss4 [Emphasis ours] The appellate court affirmed in toto the decision of the lower court and denied the motion for reconsideration and the supplemental motion for reconsideration. Hence, the petitions. The Issues In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1) Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the insurance contract considering the circumstances surrounding the loss of the cargoes; and 2) Whether or not the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies in the instant case. In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court based on the following assignments of error: 1) The Court of Appeals committed grave abuse of discretion in affirming the findings of the lower court that the negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of the cargoes; and 2) The respondent court acted with grave abuse of discretion when it ruled that the appeal was without merit despite the fact that said court had accepted the decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme Court, as res judicata.

Ruling of the Court First, we shall endeavor to dispose of the common issue raised by both petitioners in their respective petitions for review, that is, whether or not the doctrine of res judicata applies in the instant case. It is ANCOs contention that the decision in Civil Case No. R-19341,5 which was decided in its favor, constitutes res judicata with respect to the issues raised in the case at bar. The contention is without merit. There can be no res judicata as between Civil Case No. R-19341 and the case at bar. In order for res judicata to be made applicable in a case, the following essential requisites must be present: 1) the former judgment must be final; 2) the former judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; 3) the former judgment must be a judgment or order on the merits; and 4) there must be between the first and second action identity of parties, identity of subject matter, and identity of causes of action.6 There is no question that the first three elements of res judicata as enumerated above are indeed satisfied by the decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due to the absence of the last essential requisite of identity of parties, subject matter and causes of action. The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants, with the latter merely impleading FGU as third-party defendant. The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter of litigation is the loss of the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to deliver to SMCs consignees the lost cargo. Otherwise stated, the controversy in the first case involved the rights and liabilities of the shipowner vis--vis that of the insurer, while the present case involves the rights and liabilities of the shipper vis--vis that of the shipowner. Specifically, Civil Case No. R-19341 was an action for Specific Performance and Damages based on FGU Marine Hull Insurance Policy No. VMF-MH-13519 covering the vessel D/B Lucio, while the instant case is an action for Breach of Contract of Carriage and Damages filed by SMC against ANCO based on Bill of Lading No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU under Insurance Policy No. MA-58486, should the former be held liable to pay SMC. Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former, the third-party complaint arose from the insurance contract covering the cargoes on board the D/B Lucio. The doctrine of res judicata precludes the re-litigation of a particular fact or issue already passed upon by a court of competent jurisdiction in a former judgment, in another action between the same parties based on a different claim or cause of action. The judgment in the prior action operates as estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or

judgment was rendered.7 If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit.8 Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only findings with respect to matters passed upon by the court in the former judgment are conclusive in the disposition of the instant case. A careful perusal of the decision in Civil Case No. R-19341 will reveal that the pivotal issues resolved by the lower court, as affirmed by both the Court of Appeals and the Supreme Court, can be summarized into three legal conclusions: 1) that the D/B Lucio before and during the voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the reglementary period; and 3) that the vessel D/B Lucio was a constructive total loss. Said decision, however, did not pass upon the issues raised in the instant case. Absent therein was any discussion regarding the liability of ANCO for the loss of the cargoes. Neither did the lower court pass upon the issue of the alleged negligence of the crewmembers of the D/B Lucio being the cause of the loss of the cargoes owned by SMC. Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals that there is res judicata. Anent ANCOs first assignment of error, i.e., the appellate court committed error in concluding that the negligence of ANCOs representatives was the proximate cause of the loss, said issue is a question of fact assailing the lower courts appreciation of evidence on the negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule, findings of fact of lower courts, particularly when affirmed by the appellate court, are deemed final and conclusive. The Supreme Court cannot review such findings on appeal, especially when they are borne out by the records or are based on substantial evidence.9 As held in the case of Donato v. Court of Appeals,10 in this jurisdiction, it is a fundamental and settled rule that findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.11 It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion.12 A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained by the appellate court, that ANCOs representatives failed to exercise the extraordinary degree of diligence required by the law to exculpate them from liability for the loss of the cargoes. First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.

Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine of its own and could not maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO left it to fend for itself notwithstanding the fact that as the two vessels arrived at the port of San Jose, Antique, signs of the impending storm were already manifest. As stated by the lower court, witness Mr. Anastacio Manilag testified that the captain or patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it reached San Jose, Antique, despite the fact that there were already big waves and the area was already dark. This is corroborated by defendants own witness, Mr. Fernando Macabueg.13 The trial court continued: At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant could have placed D/B Lucio in a very safe location before they left knowing or sensing at that time the coming of a typhoon. The presence of big waves and dark clouds could have warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a barge, without its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by itself. Had the patron or captain of M/T ANCO, the representative of the defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the cargo of the plaintiff could not have occurred. In short, therefore, defendants through their representatives, failed to observe the degree of diligence required of them under the provision of Art. 1733 of the Civil Code of the Philippines.14 Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of respondents SMC and FGU that "the crewmembers of D/B Lucio should have left port at the onset of the typhoon is like advising the fish to jump from the frying pan into the fire and an advice that borders on madness."15 The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San Jose, Antique, during the time in question. The other vessels were transferred and temporarily moved to Malandong, 5 kilometers from wharf where the barge remained.16 Clearly, the transferred vessels were definitely safer in Malandong than at the port of San Jose, Antique, at that particular time, a fact which petitioners failed to dispute ANCOs arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang, a fortuitous event (caso fortuito), and there was no fault or negligence on their part. In fact, ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of the cargoes but their efforts proved no match to the forces unleashed by the typhoon which, in petitioners own words was, by any yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of which petitioners could not be held liable for.17 The Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . . Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; ... Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods . . . (Emphasis supplied) Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability)18 by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable. It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.19 In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have had the foresight not to leave the barge alone considering the pending storm. While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape liability to respondent SMC. The records clearly show the failure of petitioners representatives to exercise the extraordinary degree of diligence mandated by law. To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss.20 There must have been no contributory negligence on the part of the common carrier. As held in the case of Limpangco Sons v. Yangco Steamship Co.:21 . . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of

God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excused.22 Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMCs representatives to have the barge transferred to a safer place, as was done by the other vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the cargoes. We now come to the issue of whether or not FGU can be held liable under the insurance policy to reimburse ANCO for the loss of the cargoes despite the findings of the respondent court that such loss was occasioned by the blatant negligence of the latters employees. One of the purposes for taking out insurance is to protect the insured against the consequences of his own negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents constitute no defense on the part of the insurer.23 This rule however presupposes that the loss has occurred due to causes which could not have been prevented by the insured, despite the exercise of due diligence. The question now is whether there is a certain degree of negligence on the part of the insured or his agents that will deprive him the right to recover under the insurance contract. We say there is. However, to what extent such negligence must go in order to exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case. When evidence show that the insureds negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated. In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,24 the United States Supreme Court held that: The ordinary negligence of the insured and his agents has long been held as a part of the risk which the insurer takes upon himself, and the existence of which, where it is the proximate cause of the loss, does not absolve the insurer from liability. But willful exposure, gross negligence, negligence amounting to misconduct, etc., have often been held to release the insurer from such liability.25 [Emphasis ours] ... In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the owners of an insured vessel attempted to put her across the bar at Hatteras Inlet. She struck on the bar and was wrecked. The master knew that the depth of water on the bar was such as to make the attempted passage dangerous. Judge Clifford held that, under the circumstances, the loss was not within the protection of the policy, saying: Authorities to prove that persons insured cannot recover for a loss occasioned by their own wrongful acts are hardly necessary, as the proposition involves an elementary principle of universal application. Losses may be recovered by the insured, though remotely occasioned by the negligence or misconduct

of the master or crew, if proximately caused by the perils insured against, because such mistakes and negligence are incident to navigation and constitute a part of the perils which those who engage in such adventures are obliged to incur; but it was never supposed that the insured could recover indemnity for a loss occasioned by his own wrongful act or by that of any agent for whose conduct he was responsible.26 [Emphasis ours] From the above-mentioned decision, the United States Supreme Court has made a distinction between ordinary negligence and gross negligence or negligence amounting to misconduct and its effect on the insureds right to recover under the insurance contract. According to the Court, while mistake and negligence of the master or crew are incident to navigation and constitute a part of the perils that the insurer is obliged to incur, such negligence or recklessness must not be of such gross character as to amount to misconduct or wrongful acts; otherwise, such negligence shall release the insurer from liability under the insurance contract. In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit: There was blatant negligence on the part of the employees of defendants-appellants when the patron (operator) of the tug boat immediately left the barge at the San Jose, Antique wharf despite the looming bad weather. Negligence was likewise exhibited by the defendants-appellants representative who did not heed Macabuags request that the barge be moved to a more secure place. The prudent thing to do, as was done by the other sea vessels at San Jose, Antique during the time in question, was to transfer the vessel to a safer wharf. The negligence of the defendants-appellants is proved by the fact that on 01 October 1979, the only simple vessel left at the wharf in San Jose was the D/B Lucio.27 [Emphasis ours] As stated earlier, this Court does not find any reason to deviate from the conclusion drawn by the lower court, as sustained by the Court of Appeals, that ANCOs representatives had failed to exercise extraordinary diligence required of common carriers in the shipment of SMCs cargoes. Such blatant negligence being the proximate cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) This Court, taking into account the circumstances present in the instant case, concludes that the blatant negligence of ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance contract. WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February 1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party complaint. SO ORDERED.

G.R. No. 136914

January 25, 2002

COUNTRY BANKERS INSURANCE CORPORATION, petitioner, vs. LIANGA BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVE, INC., respondent. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 dated December 29, 1998 in CA-G.R. CV Case No. 36902 affirming in toto the Decision3 dated December 26, 1991 of the Regional Trial Court of Lianga, Surigao del Sur, Branch 28, in Civil Case No. L-518 which ordered petitioner Country Bankers Insurance Corporation to fully pay the insurance claim of respondent Lianga Bay and Community Multi-Purpose Cooperative, Inc., under Fire Insurance Policy No. F-1397, for loss sustained as a result of the fire that occurred on July 1, 1989 in the amount of Two Hundred Thousand Pesos (P200,000.00), with interest at twelve percent (12%) per annum from the date of filing of the complaint until fully paid, as well as Fifty Thousand Pesos (P50,000.00) as actual damages, Fifty Thousand Pesos (P50,000.00) as exemplary damages, Five Thousand Pesos (P5,000.00) as litigation expenses, Ten Thousand Pesos (P10,000.00) as attorneys fees, and the costs of suit. The facts are undisputed: The petitioner is a domestic corporation principally engaged in the insurance business wherein it undertakes, for a consideration, to indemnify another against loss, damage or liability from an unknown or contingent event including fire while the respondent is a duly registered cooperative judicially declared insolvent and represented by the elected assignee, Cornelio Jamero. It appears that sometime in 1989, the petitioner and the respondent entered into a contract of fire insurance. Under Fire Insurance Policy No. F-1397, the petitioner insured the respondents stocks-intrade against fire loss, damage or liability during the period starting from June 20, 1989 at 4:00 p.m. to June 20, 1990 at 4:00 p.m., for the sum of Two Hundred Thousand Pesos (P200,000.00). On July 1, 1989, at or about 12:40 a.m., the respondents building located at Barangay Diatagon, Lianga, Surigao del Sur was gutted by fire and reduced to ashes, resulting in the total loss of the respondents stocks-in-trade, pieces of furnitures and fixtures, equipments and records. Due to the loss, the respondent filed an insurance claim with the petitioner under its Fire Insurance Policy No. F-1397, submitting: (a) the Spot Report of Pfc. Arturo V. Juarbal, INP Investigator, dated July 1, 1989; (b) the Sworn Statement of Jose Lomocso; and (c) the Sworn Statement of Ernesto Urbiztondo. The petitioner, however, denied the insurance claim on the ground that, based on the submitted documents, the building was set on fire by two (2) NPA rebels who wanted to obtain canned goods, rice and medicines as provisions for their comrades in the forest, and that such loss was an excepted risk under paragraph No. 6 of the policy conditions of Fire Insurance Policy No. F-1397, which provides:

This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following occurrences, namely: xxx xxx xxx

(d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or usurped power. Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise) which are occasioned by or through or in consequence, directly or indirectly, of any of said occurrences shall be deemed to be loss or damage which is not covered by this insurance, except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions. Finding the denial of its claim unacceptable, the respondent then instituted in the trial court the complaint for recovery of "loss, damage or liability" against petitioner. The petitioner answered the complaint and reiterated the ground it earlier cited to deny the insurance claim, that is, that the loss was due to NPA rebels, an excepted risk under the fire insurance policy. In due time, the trial court rendered its Decision dated December 26, 1991 in favor of the respondent, declaring that: Based on its findings, it is therefore the considered opinion of this Court, as it so holds, that the defenses raised by defendant-Country Bankers has utterly crumbled on account of its inherent weakness, incredibility and unreliability, and after applying those helpful tools like common sense, logic and the Courts honest appraisal of the real and actual situation obtaining in this area, such defenses remains (sic) unimpressive and unconvincing, and therefore, the defendant-Country Bankers has to be irreversibly adjudged liable, as it should be, to plaintiff-Insolvent Cooperative, represented in this action by its Assignee, Cornelio Jamero, and thus, ordering said defendant-Country Bankers to pay the plaintiffInsolvent Cooperative, as follows: 1. To fully pay the insurance claim for the loss the insured-plaintiff sustained as a result of the fire under its Fire Insurance Policy No. F-1397 in its full face value of P200,000.00 with interest of 12% per annum from date of filing of the complaint until the same is fully paid; 2. To pay as and in the concept of actual or compensatory damages in the total sum of P50,000.00; 3. To pay as and in the concept of exemplary damages in the total sum of P50,000.00; 4. To pay in the concept of litigation expenses the sum of P5,000.00; 5. To pay by way of reimbursement the attorneys fees in the sum of P10,000.00; and 6. To pay the costs of the suit. For being unsubstantiated with credible and positive evidence, the "counterclaim" is dismissed.

IT IS SO ORDERED. Petitioner interposed an appeal to the Court of Appeals. On December 29, 1998, the appellate court affirmed the challenged decision of the trial court in its entirety. Petitioner now comes before us via the instant petition anchored on three (3) assigned errors,4 to wit: 1. THE HONORABLE COURT OF APPEALS FAILED TO APPRECIATE AND GIVE CREDENCE TO THE SPOT REPORT OF PFC. ARTURO JUARBAL (EXH. 3) AND THE SWORN STATEMENT OF JOSE LOMOCSO (EXH. 4) THAT THE RESPONDENTS STOCK-IN-TRADE WAS BURNED BY THE NPA REBELS, HENCE AN EXCEPTED RISK UNDER THE FIRE INSURANCE POLICY. 2. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER LIABLE FOR 12% INTEREST PER ANNUM ON THE FACE VALUE OF THE POLICY FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID. 3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THE PETITIONER LIABLE FOR ACTUAL AND EXEMPLARY DAMAGES, LITIGATION EXPENSES, ATTORNEYS FEES AND COST OF SUIT. A party is bound by his own affirmative allegations. This is a well-known postulate echoed in Section 1 of Rule 131 of the Revised Rules of Court. Each party must prove his own affirmative allegations by the amount of evidence required by law which in civil cases, as in this case, is preponderance of evidence, to obtain a favorable judgment.5 In the instant case, the petitioner does not dispute that the respondents stocks-in-trade were insured against fire loss, damage or liability under Fire Insurance Policy No. F- 1397 and that the respondent lost its stocks-in-trade in a fire that occurred on July 1, 1989, within the duration of said fire insurance. The petitioner, however, posits the view that the cause of the loss was an excepted risk under the terms of the fire insurance policy. Where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.6 Stated else wise, since the petitioner in this case is defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire insurance policy, it has the burden of proving the facts upon which such excepted risk is based, by a preponderance of evidence.7 But petitioner failed to do so. The petitioner relies on the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo as well as on the Spot Report of Pfc. Arturo V. Juarbal dated July 1, 1989, more particularly the following statement therein:

xxx investigation revealed by Jose Lomocso that those armed men wanted to get can goods and rice for their consumption in the forest PD investigation further disclosed that the perpetrator are member (sic) of the NPA PD end x x x A witness can testify only to those facts which he knows of his personal knowledge, which means those facts which are derived from his perception.8 Consequently, a witness may not testify as to what he merely learned from others either because he was told or read or heard the same. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. Such is the hearsay rule which applies not only to oral testimony or statements but also to written evidence as well.9 The hearsay rule is based upon serious concerns about the trustworthiness and reliability of hearsay evidence inasmuch as such evidence are not given under oath or solemn affirmation and, more importantly, have not been subjected to cross-examination by opposing counsel to test the perception, memory, veracity and articulateness of the out-of-court declarant or actor upon whose reliability on which the worth of the out-of-court statement depends.10 Thus, the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo are inadmissible in evidence, for being hearsay, inasmuch as they did not take the witness stand and could not therefore be crossexamined. There are exceptions to the hearsay rule, among which are entries in official records.11 To be admissible in evidence, however, three (3) requisites must concur, to wit: (a) that the entry was made by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired by him personally or through official information.12 The third requisite was not met in this case since no investigation, independent of the statements gathered from Jose Lomocso, was conducted by Pfc. Arturo V. Juarbal. In fact, as the petitioner itself pointed out, citing the testimony of Pfc. Arturo Juarbal,13 the latters Spot Report "was based on the personal knowledge of the caretaker Jose Lomocso who witnessed every single incident surrounding the facts and circumstances of the case." This argument undeniably weakens the petitioners defense, for the Spot Report of Pfc. Arturo Juarbal relative to the statement of Jose Lomocso to the effect that NPA rebels allegedly set fire to the respondents building is inadmissible in evidence, for the purpose of proving the truth of the statements contained in the said report, for being hearsay. The said Spot Report is admissible only insofar as it constitutes part of the testimony of Pfc. Arturo V. Juarbal since he himself took the witness stand and was available for cross-examination. The portions of his Spot Report which were of his personal knowledge or which consisted of his perceptions and conclusions are not hearsay. The rest of the said report relative to the statement of Jose Lomocso may

be considered as independently relevant statements gathered in the course of Juarbals investigation and may be admitted as such but not necessarily to prove the truth thereof.14 The petitioners evidence to prove its defense is sadly wanting and thus, gives rise to its liability to the respondent under Fire Insurance Policy No. F-1397. Nonetheless, we do not sustain the trial courts imposition of twelve percent (12%) interest on the insurance claim as well as the monetary award for actual and exemplary damages, litigation expenses and attorneys fees for lack of legal and valid basis. Concerning the application of the proper interest rates, the following guidelines were set in Eastern Shipping Lines, Inc. v. Court of Appeals and Mercantile Insurance Co., Inc.:15 I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts, is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. In the said case of Eastern Shipping, the Court further observed that a "forbearance" in the context of the usury law is a "contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable."

Considering the foregoing, the insurance claim in this case is evidently not a forbearance of money, goods or credit, and thus the interest rate should be as it is hereby fixed at six percent (6%) computed from the date of filing of the complaint. We find no justification for the award of actual damages of Fifty Thousand Pesos (P50,000.00). Wellentrenched is the doctrine that actual, compensatory and consequential damages must be proved, and cannot be presumed.16 That part of the dispositive portion of the Decision of the trial court ordering the petitioner to pay actual damages of Fifty Thousand Pesos (P50,000.00) has no basis at all. The justification, if any, for such an award of actual damages does not appear in the body of the decision of the trial court. Neither is there any testimonial and documentary evidence on the alleged actual damages of Fifty Thousand Pesos (P50,000.00) to warrant such an award. Thus, the same must be deleted. Concerning the award of exemplary damages for Fifty Thousand Pesos (P50,000.00), we likewise find no legal and valid basis for granting the same. Article 2229 of the New Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. They are designed to permit the courts to mould behavior that has socially deleterious consequences, and its imposition is required by public policy to suppress the wanton acts of an offender. However, it cannot be recovered as a matter of right. It is based entirely on the discretion of the court. We find no cogent and valid reason to award the same in the case at bar. With respect to the award of litigation expenses and attorneys fees, Article 2208 of the New Civil Code17 enumerates the instances where such may be awarded and, in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorneys fees as part of damages are not meant to enrich the winning party at the expense of the losing litigant. They are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.18 The award of attorneys fees is the exception rather than the general rule. As such, it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such award. We find none in this case to warrant the award by the trial court of litigation expenses and attorneys fees in the amounts of Five Thousand Pesos (P5,000.00) and Ten Thousand Pesos (P10,000.00), respectively, and therefore, the same must also be deleted. WHEREFORE, the appealed Decision is MODIFIED. The rate of interest on the adjudged principal amount of Two Hundred Thousand Pesos (P200,000.00) shall be six percent (6%) per annum computed from the date of filing of the Complaint in the trial court. The awards in the amounts of Fifty Thousand Pesos (P50,000.00) as actual damages, Fifty Thousand Pesos (P50,000.00) as exemplary damages, Five Thousand Pesos (P5,000.00) as litigation expenses, and Ten Thousand Pesos (P10,000.00) as attorneys fees are hereby DELETED. Costs against the petitioner. SO ORDERED.

G.R. No. 92383 July 17, 1992 SUN INSURANCE OFFICE, LTD., petitioner, vs. THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

CRUZ, J.: The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr. with a face value of P200,000.00. Two months later, he was dead with a bullet wound in his head. As beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was rejected. The petitioner agreed that there was no suicide. It argued, however that there was no accident either. Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on October 6, 1982, at about 10 o'clock in the evening, after his mother's birthday party. According to Nalagon, Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might he loaded. He assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He was dead before he fell. 1 The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained. 2 The petitioner was sentenced to pay her P200,000.00, representing the face value of the policy, with interest at the legal rate; P10,000.00 as moral damages; P5,000.00 as exemplary damages; P5,000.00 as actual and compensatory damages; and P5,000.00 as attorney's fees, plus the costs of the suit. This decision was affirmed on appeal, and the motion for reconsideration was denied. 3 The petitioner then came to this Court to fault the Court of Appeals for approving the payment of the claim and the award of damages. The term "accident" has been defined as follows: The words "accident" and "accidental" have never acquired any technical signification in law, and when used in an insurance contract are to be construed and considered according to the ordinary understanding and common usage and speech of people generally. In-substance, the courts are practically agreed that the words "accident" and "accidental" mean that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The definition that has usually been adopted by the courts is that an accident is an event that takes place without one's foresight or expectation an event that proceeds from an unknown cause, or is an unusual effect of a known case, and therefore not expected. 4 An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some violence or casualty to the injured without his design, consent, or voluntary co-operation. 5

In light of these definitions, the Court is convinced that the incident that resulted in Lim's death was indeed an accident. The petitioner, invoking the case of De la Cruz v. Capital Insurance, 6 says that "there is no accident when a deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs which produces or brings about their injury or death." There was such a happening. This was the firing of the gun, which was the additional unexpected and independent and unforeseen occurrence that led to the insured person's death. The petitioner also cites one of the four exceptions provided for in the insurance contract and contends that the private petitioner's claim is barred by such provision. It is there stated: Exceptions The company shall not be liable in respect of 1. Bodily injury xxx xxx xxx b. consequent upon i) The insured person attempting to commit suicide or willfully exposing himself to needless peril except in an attempt to save human life. To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner contends that the insured willfully exposed himself to needless peril and thus removed himself from the coverage of the insurance policy. It should be noted at the outset that suicide and willful exposure to needless peril are in pari materia because they both signify a disregard for one's life. The only difference is in degree, as suicide imports a positive act of ending such life whereas the second act indicates a reckless risking of it that is almost suicidal in intent. To illustrate, a person who walks a tightrope one thousand meters above the ground and without any safety device may not actually be intending to commit suicide, but his act is nonetheless suicidal. He would thus be considered as "willfully exposing himself to needless peril" within the meaning of the exception in question. The petitioner maintains that by the mere act of pointing the gun to hip temple, Lim had willfully exposed himself to needless peril and so came under the exception. The theory is that a gun is per se dangerous and should therefore be handled cautiously in every case. That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the magazine from the gun and believed it was no longer dangerous. He expressly assured her that the gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The act was precisely intended to assure Nalagon that the gun was indeed harmless. The contrary view is expressed by the petitioner thus:

Accident insurance policies were never intended to reward the insured for his tendency to show off or for his miscalculations. They were intended to provide for contingencies. Hence, when I miscalculate and jump from the Quezon Bridge into the Pasig River in the belief that I can overcome the current, I have wilfully exposed myself to peril and must accept the consequences of my act. If I drown I cannot go to the insurance company to ask them to compensate me for my failure to swim as well as I thought I could. The insured in the case at bar deliberately put the gun to his head and pulled the trigger. He wilfully exposed himself to peril. The Court certainly agrees that a drowned man cannot go to the insurance company to ask for compensation. That might frighten the insurance people to death. We also agree that under the circumstances narrated, his beneficiary would not be able to collect on the insurance policy for it is clear that when he braved the currents below, he deliberately exposed himself to a known peril. The private respondent maintains that Lim did not. That is where she says the analogy fails. The petitioner's hypothetical swimmer knew when he dived off the Quezon Bridge that the currents below were dangerous. By contrast, Lim did not know that the gun he put to his head was loaded. Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed to his own accident. Indeed, most accidents are caused by negligence. There are only four exceptions expressly made in the contract to relieve the insurer from liability, and none of these exceptions is applicable in the case at bar. ** It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor of the assured. There is no reason to deviate from this rule, especially in view of the circumstances of this case as above analyzed. On the second assigned error, however, the Court must rule in favor of the petitioner. The basic issue raised in this case is, as the petitioner correctly observed, one of first impression. It is evident that the petitioner was acting in good faith then it resisted the private respondent's claim on the ground that the death of the insured was covered by the exception. The issue was indeed debatable and was clearly not raised only for the purpose of evading a legitimate obligation. We hold therefore that the award of moral and exemplary damages and of attorney's fees is unjust and so must be disapproved. In order that a person may be made liable to the payment of moral damages, the law requires that his act be wrongful. The adverse result of an action does not per se make the act wrongful and subject the act or to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously. For these the law taxes costs. 7 The fact that the results of the trial were adverse to Barreto did not alone make his act in bringing the action wrongful because in most cases one party will lose; we would be imposing an unjust condition or

limitation on the right to litigate. We hold that the award of moral damages in the case at bar is not justified by the facts had circumstances as well as the law. If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is not the fact of winning alone that entitles him to recover such damages of the exceptional circumstances enumerated in Art. 2208. Otherwise, every time a defendant wins, automatically the plaintiff must pay attorney's fees thereby putting a premium on the right to litigate which should not be so. For those expenses, the law deems the award of costs as sufficient. 8 WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds the petitioner liable to the private respondent in the sum of P200,000.00 representing the face value of the insurance contract, with interest at the legal rate from the date of the filing of the complaint until the full amount is paid, but MODIFIED with the deletion of all awards for damages, including attorney's fees, except the costs of the suit. SO ORDERED.

G.R. No. L-38613 February 25, 1982 PACIFIC TIMBER EXPORT CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and WORKMEN'S INSURANCE COMPANY, INC., respondents.

DE CASTRO, ** J.: This petition seeks the review of the decision of the Court of Appeals reversing the decision of the Court of First Instance of Manila in favor of petitioner and against private respondent which ordered the latter to pay the sum of Pll,042.04 with interest at the rate of 12% interest from receipt of notice of loss on April 15, 1963 up to the complete payment, the sum of P3,000.00 as attorney's fees and the costs 1 thereby dismissing petitioner s complaint with costs. 2 The findings of the of fact of the Court of Appeals, which are generally binding upon this Court, Except as shall be indicated in the discussion of the opinion of this Court the substantial correctness of still particular finding having been disputed, thereby raising a question of law reviewable by this Court 3 are as follows: March 19, l963, the plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan. The defendant issued on said date Cover Note No. 1010, insuring the said cargo of the plaintiff "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE COMPANY, INC. printed Marine Policy form as filed with and approved by the Office of the Insurance Commissioner (Exhibit A). The regular marine cargo policies were issued by the defendant in favor of the plaintiff on April 2, 1963. The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033 (Exhibits B and C, respectively). Policy No. 53 H0 1033 (Exhibit B) was for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board feet (Exhibit C). The total cargo insured under the two marine policies accordingly consisted of 1,395 logs, or the equivalent of 1,195.498 bd. ft. After the issuance of Cover Note No. 1010 (Exhibit A), but before the issuance of the two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. The logs were to be loaded on the 'SS Woodlock' which docked about 500 meters from the shoreline of the Diapitan Bay. The logs were taken from the log pond of the plaintiff and from which they were towed in rafts to the vessel. At about 10:00 o'clock a. m. on March 29, 1963, while the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost or washed away as a result of the accident.

In a letter dated April 4, 1963, the plaintiff informed the defendant about the loss of 'appropriately 32 pieces of log's during loading of the 'SS Woodlock'. The said letter (Exhibit F) reads as follows: April 4, 1963 Workmen's Insurance Company, Inc. Manila, Philippines Gentlemen: This has reference to Insurance Cover Note No. 1010 for shipment of 1,250,000 bd. ft. Philippine Lauan and Apitong Logs. We would like to inform you that we have received advance preliminary report from our Office in Diapitan, Quezon that we have lost approximately 32 pieces of logs during loading of the SS Woodlock. We will send you an accurate report all the details including values as soon as same will be reported to us. Thank you for your attention, we wish to remain. Very respectfully yours, PACIFIC TIMBER EXPORT CORPORATION (Sgd.) EMMANUEL S. ATILANO Asst. General Manager. Although dated April 4, 1963, the letter was received in the office of the defendant only on April 15, 1963, as shown by the stamp impression appearing on the left bottom corner of said letter. The plaintiff subsequently submitted a 'Claim Statement demanding payment of the loss under Policies Nos. 53 HO 1032 and 53 HO 1033, in the total amount of P19,286.79 (Exhibit G). On July 17, 1963, the defendant requested the First Philippine Adjustment Corporation to inspect the loss and assess the damage. The adjustment company submitted its 'Report on August 23, 1963 (Exhibit H). In said report, the adjuster found that 'the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 inasmuch as said policies covered the actual number of logs loaded on board the 'SS Woodlock' However, the loss of 30 pieces of logs is within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00. On September 14, 1963, the adjustment company submitted a computation of the defendant's probable liability on the loss sustained by the shipment, in the total amount of Pl1,042.04 (Exhibit 4). On January 13, 1964, the defendant wrote the plaintiff denying the latter's claim, on the ground they defendant's investigation revealed that the entire shipment of logs covered by the two marines policies No. 53 110 1032 and 713 HO 1033 were received in good order at their point of destination. It was further stated that the said loss may be considered as covered under Cover Note No. 1010 because the said Note had become 'null and void by virtue of the issuance of Marine Policy Nos. 53 HO 1032 and 1033'(Exhibit J-1). The denial of the claim by the defendant was brought by the plaintiff to the attention

of the Insurance Commissioner by means of a letter dated March 21, 1964 (Exhibit K). In a reply letter dated March 30, 1964, Insurance Commissioner Francisco Y. Mandanas observed that 'it is only fair and equitable to indemnify the insured under Cover Note No. 1010', and advised early settlement of the said marine loss and salvage claim (Exhibit L). On June 26, 1964, the defendant informed the Insurance Commissioner that, on advice of their attorneys, the claim of the plaintiff is being denied on the ground that the cover note is null and void for lack of valuable consideration (Exhibit M). 4 Petitioner assigned as errors of the Court of Appeals, the following: I THE COURT OF APPEALS ERRED IN HOLDING THAT THE COVER NOTE WAS NULL AND VOID FOR LACK OF VALUABLE CONSIDERATION BECAUSE THE COURT DISREGARDED THE PROVEN FACTS THAT PREMIUMS FOR THE COMPREHENSIVE INSURANCE COVERAGE THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT NO SEPARATE PREMIUMS ARE COLLECTED BY PRIVATE RESPONDENT ON ALL ITS COVER NOTES. II THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT WAS RELEASED FROM LIABILITY UNDER THE COVER NOTE DUE TO UNREASONABLE DELAY IN GIVING NOTICE OF LOSS BECAUSE THE COURT DISREGARDED THE PROVEN FACT THAT PRIVATE RESPONDENT DID NOT PROMPTLY AND SPECIFICALLY OBJECT TO THE CLAIM ON THE GROUND OF DELAY IN GIVING NOTICE OF LOSS AND, CONSEQUENTLY, OBJECTIONS ON THAT GROUND ARE WAIVED UNDER SECTION 84 OF THE INSURANCE ACT. 5 1. Petitioner contends that the Cover Note was issued with a consideration when, by express stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies. From this undisputed fact, We uphold petitioner's submission that the Cover Note was not without consideration for which the respondent court held the Cover Note as null and void, and denied recovery therefrom. The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner's contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. This is a fact admitted by an official of respondent company, Juan Jose Camacho, in charge of issuing cover notes of the respondent company (p. 33, tsn, September 24, 1965). At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must be deemed to

include the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer. 6 It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations. This had to be so because the risk insured against is not for loss during operations anymore, but for loss during transit, the logs having already been safely placed aboard. This would make no difference, however, insofar as the liability on the cover note is concerned, for the number or volume of logs lost can be determined independently as in fact it had been so ascertained at the instance of private respondent itself when it sent its own adjuster to investigate and assess the loss, after the issuance of the marine insurance policies. The adjuster went as far as submitting his report to respondent, as well as its computation of respondent's liability on the insurance coverage. This coverage could not have been no other than what was stipulated in the Cover Note, for no loss or damage had to be assessed on the coverage arising from the marine insurance policies. For obvious reasons, it was not necessary to ask petitioner to pay premium on the Cover Note, for the loss insured against having already occurred, the more practical procedure is simply to deduct the premium from the amount due the petitioner on the Cover Note. The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was not chargeable against its fault. Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already arisen even before payment of premium. This is how the cover note as a "binder" should legally operate otherwise, it would serve no practical purpose in the realm of commerce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid. 7 2. The defense of delay as raised by private respondent in resisting the claim cannot be sustained. The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made. The undisputed facts show that instead of invoking the ground of delay in objecting to petitioner's claim of recovery on the cover note, it took steps clearly indicative that this particular ground for objection to the claim was never in its mind. The nature of this specific ground for resisting a claim places the insurer on duty to inquire when the loss took place, so that it could determine whether delay would be a valid ground upon which to object to a claim against it. As already stated earlier, private respondent's reaction upon receipt of the notice of loss, which was on April 15, 1963, was to set in motion from July 1963 what would be necessary to determine the cause and extent of the loss, with a view to the payment thereof on the insurance agreement. Thus it sent its adjuster to investigate and assess the loss in July, 1963. The adjuster submitted his report on August 23, 1963 and its computation of respondent's liability on September 14, 1963. From April 1963 to July, 1963, enough time was available for private respondent to determine if petitioner was guilty of delay in communicating the loss to respondent company. In the proceedings that took place later in the Office of the Insurance Commissioner, private respondent should then have raised this ground of delay to avoid

liability. It did not do so. It must be because it did not find any delay, as this Court fails to find a real and substantial sign thereof. But even on the assumption that there was delay, this Court is satisfied and convinced that as expressly provided by law, waiver can successfully be raised against private respondent. Thus Section 84 of the Insurance Act provides: Section 84.Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specifically upon that ground. From what has been said, We find duly substantiated petitioner's assignments of error. ACCORDINGLY, the appealed decision is set aside and the decision of the Court of First Instance is reinstated in toto with the affirmance of this Court. No special pronouncement as to costs. SO ORDERED.

G.R. No. L-67835 October 12, 1987 MALAYAN INSURANCE CO., INC. (MICO), petitioner, vs. GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents.

CRUZ, J.: When a person's house is razed, the fire usually burns down the efforts of a lifetime and forecloses hope for the suddenly somber future. The vanished abode becomes a charred and painful memory. Where once stood a home, there is now, in the sighing wisps of smoke, only a gray desolation. The dying embers leave ashes in the heart. For peace of mind and as a hedge against possible loss, many people now secure fire insurance. This is an aleatory contract. By such insurance, the insured in effect wagers that his house will be burned, with the insurer assuring him against the loss, for a fee. If the house does burn, the insured, while losing his house, wins the wagers. The prize is the recompense to be given by the insurer to make good the loss the insured has sustained. It would be a pity then if, having lost his house, the insured were also to lose the payment he expects to recover for such loss. Sometimes it is his fault that he cannot collect, as where there is a defect imputable to him in the insurance contract. Conversely, the reason may be an unjust refusal of the insurer to acknowledge a just obligation, as has happened many times. In the instant case the private respondent has been sustained by the Insurance Commission in her claim for compensation for her burned property. The petitioner is now before us to dispute the decision, 1 on the ground that there was no valid insurance contract at the time of the loss. The chronology of the relevant antecedent facts is as follows: On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July 22, 1981, until July 22, 1982. 2 On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the corresponding notice to Pinca. 3 On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of MICO. 4 On January 15, 1982, Adora remitted this payment to MICO,together with other payments. 5 On January 18, 1982, Pinca's property was completely burned. 6

On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. But Adora refused to accept it. 7 In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the Insurance Commission. It is because she was ultimately sustained by the public respondent that the petitioner has come to us for relief. From the procedural viewpoint alone, the petition must be rejected. It is stillborn. The records show that notice of the decision of the public respondent dated April 5, 1982, was received by MICO on April 10, 1982. 8 On April 25, 1982, it filed a motion for reconsideration, which was denied on June 4, 1982. 9 Notice of this denial was received by MICO on June 13, 1982, as evidenced by Annex "1" duly authenticated by the Insurance Commission. 10 The instant petition was filed with this Court on July 2, 1982. 11 The position of the petition is that the petition is governed by Section 416 0f the Insurance Code giving it thirty days wthin which to appeal by certiorari to this Court. Alternatively, it also invokes Rule 45 of the Rules of Court. For their part, the public and private respondents insist that the applicable law is B.P. 129, which they say governs not only courts of justice but also quasi-judicial bodies like the Insurance Commission. The period for appeal under this law is also fifteen days, as under Rule 45. The pivotal date is the date the notice of the denial of the motion for reconsideration was received by MICO. MICO avers this was June 18, 1982, and offers in evidence its Annex "B," 12 which is a copy of the Order of June 14, 1982, with a signed rubber-stamped notation on the upper left-hand corner that it was received on June 18, 1982, by its legal department. It does not indicate from whom. At the bottom, significantly, there is another signature under which are the ciphers "6-13-82," for which no explanation has been given. Against this document, the private respodent points in her Annex "1," 13 the authenticated copy of the same Order with a rubber-stamped notation at the bottom thereof indicating that it was received for the Malayan Insurance Co., Inc. by J. Gotladera on "6-13-82." The signature may or may not habe been written by the same person who signed at the bottom of the petitioner's Annex "B." Between the two dates, the court chooses to believe June 13, 1982, not only because the numbers "613-82" appear on both annexes but also because it is the date authenticated by the administrative division of the Insurance Commission. Annex "B" is at worst self-serving; at best, it might only indicate that it was received on June 18, 1982, by the legal department of MICO, after it had been received earlier by some other of its personnel on June 13, 1982. Whatever the reason for the delay in transmitting it to the legal department need not detain us here. Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision of the Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or fifteen days such notice, and the reglementary period began to run again after June 13, 1981, date of its

receipt of notice of the denial of the said motion for reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later, there is no question that it is tardy by four days. Counted from June 13, the fifteen-day period prescribed under Rule 45, assuming it is applicable, would end on June 28, 1982, or also four days from July 2, when the petition was filed. If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed on the fifteenth day after MICO received notice of the decision, only one more day would have remained for it to appeal, to wit, June 14, 1982. That would make the petition eighteen days late by July 2. Indeed, even if the applicable law were still R.A. 5434, governing appeals from administrative bodies, the petition would still be tardy. The law provides for a fixed period of ten days from notice of the denial of a seasonable motion for reconsideration within which to appeal from the decision. Accordingly, that ten-day period, counted from June 13, 1982, would have ended on June 23, 1982, making the petition filed on July 2, 1982, nine days late. Whichever law is applicable, therefore, the petition can and should be dismissed for late filing. On the merits, it must also fail. MICO's arguments that there was no payment of premium and that the policy had been cancelled before the occurence of the loss are not acceptable. Its contention that the claim was allowed without proof of loss is also untenable. The petitioner relies heavily on Section 77 of the Insurance Code providing that: SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. The above provision is not applicable because payment of the premium was in fact eventually made in this case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo Adora. 14 This is important because it suggests an understanding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO. The payment was made on December 24, 1981, and the fire occured on January 18, 1982. One wonders: suppose the payment had been made and accepted in, say, August 1981, would the commencement date of the policy have been changed to the date of the payment, or would the payment have retroacted to July 22, 1981? If MICO accepted the payment in December 1981 and the insured property had not been burned, would that policy not have expired just the same on July 22, 1982, pursuant to its original terms, and not on December 24, 1982? It would seem from MICO's own theory, that the policy would have become effective only upon payment, if accepted and so would have been valid only from December 24, 1981m but only up to July

22, 1981, according to the original terms. In others words, the policy would have run for only eight months although the premium paid was for one whole year. It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's payment and of Adora's authority to receive it. MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that: SEC. 306. xxx xxx xxx Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance shall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon. And it is a well-known principle under the law of agency that: Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal himself; such payment is complete when the money delivered is into the agent's hands and is a discharge of the indebtedness owing to the principal. 15 There is the petitioner's argument, however, that Adora was not authorized to accept the premium payment because six months had elapsed since the issuance by the policy itself. It is argued that this prohibition was binding upon Pinca, who made the payment to Adora at her own riskl as she was bound to first check his authority to receive it. 16 MICO is taking an inconsistent stand. While contending that acceptance of the premium payment was prohibited by the policy, it at the same time insists that the policy never came into force because the premium had not been paid. One surely, cannot have his cake and eat it too. We do not share MICO's view that there was no existing insurance at the time of the loss sustained by Pinca because her policy never became effective for non-payment of premium. Payment was in fact made, rendering the policy operative as of June 22, 1981, and removing it from the provisions of Article 77, Thereafter, the policy could be cancelled on any of the supervening grounds enumerated in Article 64 (except "nonpayment of premium") provided the cancellation was made in accordance therewith and with Article 65. Section 64 reads as follows: SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

(a) non-payment of premium; (b) conviction of a crime arising out of acts increasing the hazard insured against; (c) discovery of fraud or material misrepresentation; (d) discovery of willful, or reckless acts or commissions increasing the hazard insured against; (e) physical changes in the property insured which result in the property becoming uninsurable;or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. As for the method of cancellation, Section 65 provides as follows: SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based. A valid cancellation must, therefore, require concurrence of the following conditions: (1) There must be prior notice of cancellation to the insured; 17 (2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned;18 (3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the policy; 19 (4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based. 20 MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To support this assertion, it presented one of its employees, who testified that "the original of the endorsement and credit memo" presumably meaning the alleged cancellation "were sent the assured by mail through our mailing section" 21 However, there is no proof that the notice, assuming it complied with the other requisites mentioned above, was actually mailed to and received by Pinca. All MICO's offers to show that the cancellation was communicated to the insured is its employee's testimony that the said cancellation was sent "by mail through our mailing section." without more. The petitioner then says that its "stand is enervated (sic) by the legal presumption of regularity and due performance of duty." 22 (not realizing perhaps that "enervated" means "debilitated" not "strengthened"). On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation and who, of course, did not have to prove such denial Considering the strict language of Section 64 that no insurance policy shall be cancelled except upon prior notice, it behooved MICO's to

make sure that the cancellation was actually sent to and received by the insured. The presumption cited is unavailing against the positive duty enjoined by Section 64 upon MICO and the flat denial made by the private respondent that she had received notice of the claimed cancellation. It stands to reason that if Pinca had really received the said notice, she would not have made payment on the original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective on that date and until one year later, and so taken advantage of the extended period. The Court finds that if she did pay on that date, it was because she honestly believed that the policy issued on June 7, 1981, was still in effect and she was willing to make her payment retroact to July 22, 1981, its stipulated commencement date. After all, agent Adora was very accomodating and had earlier told her "to call him up any time" she was ready with her payment on the policy earlier issued. She was obviously only reciprocating in kind when she paid her premium for the period beginning July 22, 1981, and not December 24, 1981. MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid the premium on December 24, 1981, her purpose was "to renew it." As this could not be done by the agent alone under the terms of the original policy, the renewal thereof did not legally bind MICO. which had not ratified it. To support this argument, MICO's cites the following exchange: Q: Now, Madam Witness, on December 25th you made the alleged payment. Now, my question is that, did it not come to your mind that after the lapse of six (6) months, your policy was cancelled? A: I have thought of that but the agent told me to call him up at anytime. Q: So if you thought that your policy was already intended to revive cancelled policy? A: Misleading, Your Honor. Hearing Officer: The testimony of witness is that, she thought of that. Q: I will revise the question. Now, Mrs. Witness, you stated that you thought the policy was cancelled. Now, when you made the payment of December 24, 1981, your intention was to revive the policy if it was already cancelled? A: Yes, to renew it. 23 A close study of the above transcript will show that Pinca meant to renew the policy if it had really been already cancelled but not if it was stffl effective. It was all conditional. As it has not been shown that there was a valid cancellation of the policy, there was consequently no need to renew it but to pay the premium thereon. Payment was thus legally made on the original transaction and it could be, and was, validly received on behalf of the insurer by its agent Adora. Adora. incidentally, had not been informed of the cancellation either and saw no reason not to accept the said payment. The last point raised by the petitioner should not pose much difficulty. The valuation fixed in fire insurance policy is conclusive in case of total loss in the absence of fraud, 24 which is not shown here.

Loss and its amount may be determined on the basis of such proof as may be offered by the insured, which need not be of such persuasiveness as is required in judicial proceedings. 25 If, as in this case, the insured files notice and preliminary proof of loss and the insurer fails to specify to the former all the defects thereof and without unnecessary delay, all objections to notice and proof of loss are deemed waived under Section 90 of the Insurance Code. The certification 26 issued by the Integrated National Police, Lao-ang, Samar, as to the extent of Pinca's loss should be considered sufficient. Notably,MICO submitted no evidence to the contrary nor did it even question the extent of the loss in its answer before the Insurance Commission. It is also worth observing that Pinca's property was not the only building bumed in the fire that razed the commercial district of Lao-ang, Samar, on January 18, 1982. 27 There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment of the loss imperative or indespensable, as MICO suggests. Section 325, which it cites, simply speaks of the licensing and duties of adjusters. We see in this cases an obvious design to evade or at least delay the discharge of a just obligation through efforts bordering on bad faith if not plain duplicity, We note that the motion for reconsideration was filed on the fifteenth day from notice of the decision of the Insurance Commission and that there was a feeble attempt to show that the notice of denial of the said motion was not received on June 13, 1982, to further hinder the proceedings and justify the filing of the petition with this Court fourteen days after June 18, 1982. We also look askance at the alleged cancellation, of which the insured and MICO's agent himself had no knowledge, and the curious fact that although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it presumably had learned of the occurrence of the loss insured against on January 18, 1982. These circumstances make the motives of the petitioner highly suspect, to say the least, and cast serious doubts upon its candor and bona fides. WHEREFORE, the petition is DENIED. The decision of the Insurance Commission dated April 10, 1981, and its Order of June 4, 1981, are AFFIRMED in full, with costs against the petitioner. This decision is immediately executory. SO ORDERED.

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