Professional Documents
Culture Documents
POLICY
67.
68.
Facts:
An open fire insurance policy, was issued to Paramount Shirt
Manufacturing by Oriental Assurance Corporation to indemnify
P61,000.00, caused by fire to the factorys stocks, materials and
supplies.
The insured was a debtor of Pacific Banking in the amount of
(P800,000.00) and the goods described in the policy were held in
trust by the insured for Pacific Banking under trust receipts.
The policy was endorsed to Pacific Banking as mortgagee/ trustor of
the properties insured, with the knowledge and consent of private
respondent to the effect that "loss if any under this policy is payable
to the Pacific Banking Corporation".
A fire broke out on the premises destroying the goods contained in
the building.
The bank sent a letter of demand to Oriental for indemnity.
The company wasnt ready to give since it was awaiting the
adjusters report.
The company then made an excuse that the insured had not filed
any claim with it, nor submitted proof of loss which is a clear
violation of Policy Condition No.11, as a result, determination of the
liability of private respondent could not be made.
Pacific Banking filed in the trial court an action for a sum of money
for P61,000.00 against Oriental Assurance.
69.
- More importantly, the insurer's liability was for "total loss only." A
total loss may be either actual or constructive (Sec. 129, Insurance
Code). An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being
broken up;
(c) Any damage to the thing which renders it valueless to the
owner for the purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the
possession, at the port of destination, of the thing insured.
(Section 130, Insurance Code).
- A constructive total loss is one which gives to a person insured a
right to abandon, under Section 139 of the Insurance Code. This
provision reads:
SECTION 139. A person insured by a contract of marine insurance
may abandon the thing insured, or any particular portion thereof
separately valued by the policy, or otherwise separately insured,
and recover for a total loss thereof, when the cause of the loss is a
peril injured against,
(a) If more than three-fourths thereof in value is actually lost, or
would have to be expended to recover it from the peril;
(b) If it is injured to such an extent as to reduce its value more
than three-fourths;
xxx xxx xxx
Page 4 of 154
70.
YES.
Page 6 of 154
71.
Page 7 of 154
!
ISSUE
WON the binding deposit receipt constituted a temporary
contract of the life insurance in question
!
HELD
NO
- The binding deposit receipt is merely a provisional contract
and only upon compliance with the ff conditions: (1) that the
company be satisfied that the applicant was insurable on
standard rates (2) that if the company does not accept the
application and offers a different policy, the insurance contract
shall not be binding until the applicant accepts the new policy
(3) that if the applicant is not found to be insurable on standard
rates and the application is disapproved, the insurance shall not be
in force at any time and the premium be returned to the applicant.
Page 8 of 154
FACTS:
expressed or implied exists. We, therefore, agree with the trial court
that no cause of action exists in favor of the appellants in so far as
the proceeds of insurance are concerned. The appellants' claim, if
at all, is merely equitable in nature and must be made effective
through Enrique Mora who entered into a contract with the
Bonifacio Bros. Inc. This conclusion is deducible not only from the
principle governing the operation and effect of insurance contracts
in general, but is clearly covered by the express provisions of
section 50 of the Insurance Act which read:
In this connection, this Court has laid down the rule that the fairest
test to determine whether the interest of a third person in a
contract is a stipulation pour autrui or merely an incidental
interest, is to rely upon the intention of the parties as disclosed by
their contract.4 In the instant case the insurance contract does not
contain any words or clauses to disclose an intent to give any
benefit to any repairmen or materialmen in case of repair of the
car in question. The parties to the insurance contract omitted such
stipulation, which is a circumstance that supports the said
conclusion. On the other hand, the "loss payable" clause of the
insurance policy stipulates that "Loss, if any, is payable to H.S.
Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which
they intended to benefit.
Page 12 of 154
Held:
1. YES
2. While the general rule is that only parties to a contract may
bring an action based thereon, one exception is found
under Article 1311 of the Civil Code.
3. It provides that If a contract should contain some stipulation
in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor
before its revocation.
4. These are contracts pour autrui wherein enforcement of a
contract may be demanded by a third party for whose
benefit it was made, although not a party to the contract.
5. In this case, the policy contained a stipulation which states
the following: Section I Liability to Passengers. 1. The
Company will, subject to the Limits of Liability and under
the Terms of this Policy, indemnify the Insured in the event
of accident caused by or arising out of the use of Motor
Vehicle against all sums which the Insured will become
legally liable to pay in respect of: Death or bodily injury to
any fare-paying passenger including the Driver ... who is
riding in the Motor Vehicle insured at the time of accident
or injury.
6. Another stipulation provides that In the event of death of
any person entitled to indemnity under this Policy, the
Company will, in respect of the liability incurred by such
person, indemnify his personal representatives in terms of
and subject to the limitations of this Policy, provided, that
such representatives shall, as though they were the Insured,
observe, fulfill and be subject to the Terms of this Policy
insofar as they can apply.
7. Pursuant to these stipulations, the Company "will
indemnify any authorized Driver who is driving the Motor
Vehicle" of the Insured and, in the event of death of said
Page 13 of 154
75.
the Del Rosario the sum of P81,093.65, with interest at 6 per cent
per annum from May 13, 1921, until paid.
76.
Issue:
Page 15 of 154
77.
TEAL MOTOR V . ORIENT INSURANCE , 59 PHIL. 809
Facts:
Ruling:
The insurer is liable for the whole amount.
The policy issued to PURDC is an open policy and is subject
to the express condition that in the event of loss, whether
total or partial, it is understood that the amount of the loss
shall be subject to appraisal and the liability of the
company, if established, shall be limited to the actual loss,
subject to the applicable terms, conditions, warranties and
clauses of the policy, and in no case shall exceed the
amount of the policy.
o An open policy is one in which the value of the thing
insured is not agreed upon but is left to be
ascertained in case of loss
There is no evidence on record that the building was worth
P5.8M at the time of the loss; only Devt Insurance says so,
and it does not back up its self-serving estimate with any
independent corroboration.
Since the building was insured at P2.5M, this must be
considered the value of the building on the day the fire
occurred.
The actual loss has been ascertained in this case and the
Court will respect such factual determination in the absence
of proof that it was arrived at arbitrarily. There is no such
showing.
Applying the open policy clause as expressly agreed upon by
the parties in their contract, the Court holds that PURDC is
entitled to the payment of indemnity in the total amount of
P508,867.
all
78.
Issue:
Whether or NOT the claims were filed on time?
Ruling:
The Supreme Court held that the case was filed out of time. Plaintiff
was given such time as it deemed necessary to formulate and
present its claim of loss. That claim was investigated by the
adjusters for several months, and under the contract of insurance,
the insured had three months after rejection in which to bring suit.
The issues were virtually joined on the presentation of the claims
and their rejection by the companies in writing, and three months
thereafter is not an unreasonably short time to draft and file in
court an appropriate complaint on a contract of fire insurance.
Ratio:
A provision requiring presentation of claim within three months
after the fire, and the bringing of action within three months after
refusal of claim is valid.
December 30, 1954 - the Angs executed the first claim form
together with all the necessary papers (books of accounts of
the insured for the year 1953-1954 and a clearance from
the Philippine Constabulary and the police), and they were
all forwarded to the Manila Adjustment Company, Fulton's
adjusters.
May 11, 1956 Angs filed 1 case to assert the claim but
against Paramount Surety and Insurance Company (Fultons
agent).
Whether the Angs may validly claim on the policy even with the
prohibition on Paragraph 13 of the policy.
NO.
st
February 12, 1959 REPLY OF ANGS: The 1st case was filed
May 11, 1956 but was dismissed without prejudice on
September 3, 1957. That period between May 11, 1956 to
September 3, 1957 must be deducted from the prescriptive
period of 12 months.
CFI 2nd case in favor of Angs (ordering Fulton to pay the
Angs the sum of P10,000.00, with interest, and an
ISSUE
SC HELD
The basic error committed by the trial court is its view that the filing
of the action against the agent of the defendant company was
"merely a procedural mistake of no significance or consequence,
which may be overlooked." The condition contained in the
insurance policy that claims must be presented within one year
after rejection is not merely a procedural requirement. The
condition is an important matter, essential to a prompt settlement
of claims against insurance companies, as it demands that insurance
suits be brought by the insured while the evidence as to the origin
and cause of destruction have not yet disappeared. It is in the
nature of a condition precedent to the liability of the insurer, or in
other terms, a resolutory cause, the purpose of which is to
terminate all liabilities in case the action is not filed by the insured
within the period stipulated.
The bringing of the action against the Paramount Surety &
Insurance Company, the agent of the defendant Company cannot
have any legal effect except that of notifying the agent of the claim.
Beyond such notification, the filing of the action can serve no other
purpose. There is no law giving any effect to such action upon the
principal. Besides, there is no condition in the policy that the action
Page 18 of 154
79.
The case of E. Macias & Co. vs. China Fire Insurance Co. has settled
the issue presented by the appellees in the case at bar definitely
against their claim. In that case, We declared that the contractual
station in an insurance policy prevails over the statutory
limitation, as well as over the exceptions to the statutory limitations
that the contract necessarily supersedes the statute (of limitations)
and the limitation is in all phases governed by the former. (E. Macias
& Co. vs. China Fire Insurance & Co., 46 Phil. pp. 345-353). As stated
in said case and in accordance with the decision of the Supreme
Court of the United States in Riddlesbarger vs. Hartford Fire
Insurance Co. (7 Wall., 386), the rights of the parties flow from the
contract of insurance, hence they are not bound by the statute of
limitations nor by exemptions thereto. In the words of our own
law, their contract is the law between the parties, and their
agreement that an action on a claim denied by the insurer must be
brought within one year from the denial, governs, not the rules on
the prescription of actions.
The judgment appealed from is hereby set aside and the case
dismissed, with costs against the plaintiffs-appellees.
APPEAL GRANTED.
FACTS:
ISSUES:
(1)WON the filing of a motion for reconsideration interrupts the 12
months prescriptive period to contest the denial of the insurance
claim; and (2)WON the rejection of the claim shall be deemed final
only of it contains words to the effect that the denial is final;
HELD:
(1) No. In this case, Condition 27 of the Insurance Policy of the
parties reads:
27. Action or suit clause - If a claim be made and rejected and an
action or suit be not commenced either in the Insurance
Commission or in any court of competent jurisdiction within twelve
(12) months from receipt of notice of such rejection, or in case of
arbitration taking place as provided herein, within twelve (12)
Page 19 of 154
It also begs to ask, when does the cause of action accrue? The
insureds cause of action or his right to file a claim either in the
Insurance Commission or in a court of competent jurisdiction
commences from the time of the denial of his claim by the Insurer,
either expressly or impliedly. But the rejection referred to should be
construed as the rejection in the first instance (i.e. at the first
occasion or for the first time), not rejection conveyed in a resolution
of a petition for reconsideration. Thus, to allow the filing of a
motion for reconsideration to suspend the running of the
prescriptive period of twelve months, a whole new body of rules on
the matter should be promulgated so as to avoid any conflict that
may be brought by it, such as:
a.whether the mere filing of a plea for reconsideration of a denial is
sufficient or must it be supported by arguments/affidavits/material
evidence;
b.how many petitions for reconsideration should be permitted?
(2) No. The Eagle Star case cited by Tan to defend his theory that
the rejection of the claim shall be deemed final only of it contains
words to the effect that the denial is final is inapplicable in the
instant case. Final rejection or denial cannot be taken to mean the
rejection of a petition for reconsideration. The Insurance policy in
the Eagle Star case provides that the insured should file his claim,
first, with the carrier and then with the insurer. The final rejection
being referred to in said case is the rejection by the insurance
company.
Page 20 of 154
Facts:
On October 21, 1963, an Open Fire Policy was issued to the
Paramount Shirt Manufacturing Co. (insured) by which private
respondent Oriental Assurance bound itself to indemnify the
insured for any los or damage, not exceeding P61,000.00, caused
by fire to its property consisting of stocks, materials and supplies
usual to a shirt factory while contained in the first to third floors
of the building where they are located for a period of one year
starting October 21, 1964.
At the time the policy was issued, Paramount Shirt was a debtor
of Pacific Bank amounting to P800,000.00. Goods in the
said policy were held in trust by Paramount for Pacific Bank
under trust receipts. Said policy was duly endorsed to the
petitioner bank as mortgagee/trustor of the properties insured,
with the knowledge and consent of private respondent to the
effect that loss if any under this policy is payable to the (Pacific
Bank)".
While the aforesaid policy was in full fore and effect, a fire broke
out on the subject premises destroying the goods contained in
its ground and second floors. Pacific Bank sent a letter of
demand to Oriental Assurance for indemnity, but the latter
wasnt ready to give since it was awaiting the adjusters report. It
then made an excuse that the insured had not filed any claim
with it, nor submitted proof of loss which is a clear violation of
Policy Condition No.11, as a result, determination of the liability
of private respondent could not be made.
Pacific Banking filed in the trial court an action for a sum of
money for P61,000.00 against Oriental Assurance. At the trial,
Pacific Bank presented communications of the insurance
adjuster to Asian Surety revealing undeclared co-insurances with
the following: P30,000 with Wellington Insurance; P25,000 with
Empire Surety and P250,000 with Asian Surety undertaken by
insured Paramount on the same property covered by its policy
with Oriental whereas the only co-insurances declared in the
subject policy are those of P30,000.00 with Malayan P50,000.00
with South Sea and P25.000.00 with Victory.
The defense of fraud, in the form of non-declaration of coinsurances which was not pleaded in the answer, was also not
pleaded in the Motion to Dismiss. The trial court denied the
respondents motion. Oriental filed another motion to include
additional evidence of the co-insurance which could amount to
fraud. The trial court rendered judgment making Oriental
Assurance liable for P61,000.00, but the Court of Appeals
reversed the RTC decision.
Issues:
1. Whether or not the unrevealed co-insurances violated policy
conditions no. 3?
2. Whether or not the insured failed to file the required proof of
loss prior to court action?
Page 21 of 154
can sue the insurer. Where the contract is for indemnity against
actual loss or payment, then third persons cannot proceed against
the insurer, the contract being solely to reimburse the insured for
liability actually discharged by him thru payment to third persons,
said third persons' recourse being thus limited to the insured alone.
But in the case at bar, there was no contract shown. What then was
the basis of the RTC and the CA to say that the insurance contract
was a third-party liability insurance policy? Consequently, the trial
court was confused as it did not distinguish between the private
respondent's cause of action against the owner and the driver of
the Lady Love taxicab and his cause of action against petitioner. The
former is based on torts and quasi-delicts while the latter is based
on contract.
FACTS
An old lady was hit by a taxicab. The taxicab was later identified and
a case was filed against the driver and owner. Later, an amendment
was filed to include the insurance company. RTC and CA ordered
that the owner, driver as well as the insurance company be held
solidarily liable.
ISSUE
WON RTC and CA erred
HELD
YES
Where the contract provides for indemnity against liability
to third persons, then third persons to whom the insured is liable
Page 23 of 154
FACTS:
Page 24 of 154
RATIO:
Jurisprudence
Suit is the prosecution or pursuit of some claim or demand in a
court of justice or any proceeding in a court of justice in which a
plaintiff pursues his remedy to recover a right or claim. (Emphasis
supplied.)
ISSUE
Whether or not the provision of a fidelity bond that no action shall
be had or maintained thereon unless commenced within one year
from the making of a claim for the loss upon which the action is
based, is valid or void? VOID
HELD
Consequently, the condition of the bond in question, limiting the
period for bringing action thereon, is subject to the provisions of
Section 61-A of the Insurance Act (No. 2427), as amended by Act
4101 of the pre-Commonwealth Philippine Legislature, prescribing
that
SEC. 61-A A condition, stipulation or agreement in any policy of
insurance, limiting the time for commencing an action thereunder
to a period of less than one year from the time when the cause of
action accrues is void.
The cause of action does not accrue until the party obligated
refuses, expressly or impliedly, to comply with its duty (in this case,
to pay the amount of the bond). The year for instituting action in
court must be reckoned, therefore, from the time of appellee's
refusal to comply with its bond; it can not be counted from the
creditor's filing of the claim of loss, for that does not import that the
surety company will refuse to pay.
In so far, therefore, as condition eight of the bond requires action to
be filed within one year from the filing of the claim for loss, such
stipulation contradicts the public policy expressed in Section 61-A
of the Philippine Insurance Act. Condition eight of the bond,
therefore, is null and void, and the appellant is not bound to comply
with its provisions.
Page 26 of 154
85.
Facts:
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 MALAYAN 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?
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 risk as she was bound to first check his authority
to receive it.
Page 30 of 154
WARRANTIES
Page 31 of 154
88. QUA CHEE GAN V. LAW UNION AND ROCK INSURANCE , 98 PHIL
85 (1955)
QUA CHEE GAN vs LAW UNION AND ROCK INSURANCE represented
by agent, Warner, Barnes and Co., Ltd. (December 17, 1955)
FACTS:
Before the last war, Qua Chee Gan owned four warehouses
or bodegas in Tabaco, Albay, used for the storage of stocks
of copra and of hemp, baled and loose, in which the he
dealth extensively. They had been insured with Law Union
and Rock Insurance since 1937, and the loss made payable
to the Philippine National Bank as mortgage of the hemp
and crops, to the extent of its interest.
On June, 1940, the insurance stood as follows:
Policy No.
Property Insured
Amount
2637164
Bodega No. 1 (Building)
P15,000.00
(Exhibit "LL")
2637165
Bodega No. 2 (Building)
10,000.00
(Exhibit "JJ")
Bodega No. 3 (Building)
25,000.00
Bodega No. 4 (Building)
10,000.00
Hemp Press moved by steam
5,000.00
engine
2637345
Merchandise contents (copra and
150,000.00
(Exhibit "X")
empty sacks of Bodega No. 1)
2637346
Merchandise contents (hemp) of
150,000.00
(Exhibit "Y")
Bodega No. 3
2637067
Merchandise contents (loose
5,000.00
(Exhibit "GG") hemp) of Bodega No. 4
Total
P370,000.00
Page 33 of 154
protected, with not less than 100 feet of hose piping and
nozzles for every two hydrants kept under cover in
convenient places, the hydrants being supplied with water
pressure by a pumping engine, or from some other source,
capable of discharging at the rate of not less than 200
gallons of water per minute into the upper story of the
highest building protected, and a trained brigade of not less
than 20 men to work the same.
On July 21, 1940, fire broke out near the Bodegas and last
for almost one week which completely destroyed Bodegas
1,2 and 4.
Qua Chee Gan claims 398,562.81 (reduced to 370,000, the
amount in the insurance). Fire adjusters conducted an
investigation. Law Union resisted the payment claiming
violation of warranties and conditions, filing of fraudulent
claims, and that the fire had been deliberately caused by
the insured/other persons in connivance.
Qua Chee Gan and Qua Chee Pao (brother)were tried for
Arson but the trial court acquitted them.
Qua Chee Gan then filed a civil case to claim the proceeds of
the fire insurance policies. CFI ruled in favour of him. PNB
filed a complaint in intervention but it was dismissed
because Qua Chee Gan managed to pay his indebtedness.
Page 36 of 154
Page 37 of 154
Issues
1. Whether or not Trans-Asia violated its warranty to maintain
the vessel.
o NO.
2. Whether or not the loan agreement as evidenced by the
trust receipt was a form of subrogation.
o Yes.
Ruling:
First Issue
Page 38 of 154
Page 40 of 154
PREMIUM
o
91. ARCE V. CAPITAL INSURANCE , 117 SCRA 63 (1982)
COMPANY/INSURER: Capital Insurance
Issue
Facts
Whether or not the insurer can be held liable despite the nonpayment of the premiums
Held and Ratio
No
Relevant Provisions
Insurance Code
SEC. 72. An insurer is entitled to payment of premium as soon as the
thing insured is exposed to the perils insured against, unless there is
clear agreement to grant credit extension for the premium due. No
policy issued by an insurance company is valid and binding unless
and until the premium thereof has been paid
Contract Stipulation
IT IS HEREBY DECLARED AND AGREED that not. withstanding
anything to the contrary contained in the within policy, this
insurance will be deemed valid and binding upon the Company only
when the premium and documentary stamps therefor have actually
been paid in full and duly acknowledged in an official receipt signed
by an authorized official/representative of the Company,
Page 41 of 154
HELD:
NO. Reversed
Petitioners Claims
Petitioner argues that where the premiums is not actually
paid in full, the policy would only be effective if there is an
acknowledgment in the policy of the receipt of premium
pursuant to Sec. 78 of the Insurance Code. The absence of
an express acknowledgment in the policies of such receipt
of the corresponding premium payments, and petitioner's
failure to pay said premiums on or before the effective
dates of said policies rendered them invalid. Petitioner thus
concludes that there cannot be a perfected contract of
insurance upon mere partial payment of the premiums
because under Sec. 77 of the Insurance Code, no contract of
insurance is valid and binding unless the premium thereof
has been paid, notwithstanding any agreement to the
contrary.
ISSUE
WON payment by installment of the premiums due on an
insurance policy invalidates the contract of insurance
Page 44 of 154
HELD
Ratio Where the risk is entire and the contract is indivisible,
the insured is not entitled to a refund of the premiums paid
if the insurer was exposed to the risk insured for any period,
however brief or momentary.
Reasoning
- The obligation to pay premiums when due is ordinarily as
indivisible obligation to pay the entire premium. Here, the
parties herein agreed to make the premiums payable in
installments, and there is no pretense that the parties never
envisioned to make the insurance contract binding between
them. And the insured never informed the insurer that it
was terminating the policy because the terms were
unacceptable.
Insurer: Fortune
Insured: Violeta Tibay and/or Nicolas Ronaldo
Property Insured: 2 storey residential building located in
Makati
Insurance Contract: Fire Insurance Policy for 600,000php
Total Amount of Premium: 2,983.50php but Tibay only paid
600php thus leaving a balance.
Building completely destroyed by fire and two days after,
Tibay paid the unpaid premium and filed with Fortune a
claim on fire insurance policy.
ISSUE:
HELD:
NO
The consideration is the premium, which must be paid at
the time and in the way and manner specified in the policy,
if not paid, the policy will lapse and be forfeited by its own
terms.
Clearly the policy provides for payment in FULL
The premium has only been partially paid and balance paid
only after the peril insured against occurred thus contract
did not take effect and insured cannot collect at all on the
policy. But the controversy lies in the phrase unless and
until the premium thereof has been paid.
FACTS !
- On June 7, 1981, Malayan Insurance Co. (MICO), issued fire
insurance for the amount of P14,000 on the property of private
respondent, Pinca, effective July 1981-1982. MICO later allegedly
cancelled the policy for non-payment of the premium and sent a
notice to Pinca. On Dec. 24 Adora, an agent of MICO, received
Pinca's payment, which was remitted to MICO. On Jan. 18, 1982,
Pinca's property was completely burned. On Feb. 5, MICO
returned Pinca's payment to Adora on the ground that her
policy had been cancelled; the latter refused to accept it. Her
demand for payment having been rejected by MICO, Pinca went to
the Insurance Commission. Public respondent Arnaldo, the
Insurance Commissioner, sustained Pinca, hence this petition
from MICO. Records show MICO received Arnaldo's decision on
Page 46 of 154
ISSUES
Procedural
1. WON the petition should be dismissed for late filing
Substantive
2. WON there was a valid insurance contract at the time of the loss
3. WON Adora was authorized to receive such payment
4. WON an adjuster is indispensable in the valuation of the loss
HELD
Procedural
1. YES - Petitioner invokes Sec 416 of the Insurance Code which
grants it 30 days from notice of the Insurance Commission within
which to appeal by certiorari with the Court. MICO filed its MFR on
April 25, 15 days after the notice; the reglementary period began to
run again after June 13. Since the petition was filed only on July 2, it
was tardy by 4 days. Alternatively it invokes Rule 45 of the Rules of
Court for certiorari but the petition still exceeds the 15 day limit
from the June 13 notice. -Respondents, on the other hand, invoke
Sec. 39 of B.P. 129 which pegs the period for appeal from decisions
Substantive
2. YES - A valid cancellation requires the following conditions based
on Sections 64-65 of the Code: prior notice which must be based on
the occurrence of one or more of the grounds mentioned in Sec 64
(in this case, non-payment of premium), after the effective date of
the policy; the notice must be written and mailed to the address on
the policy; it must state the ground(s) for cancellation and the
insurer must furnish details upon the request of the insured. - It
is undisputed that payment of premium was made. Petitioner relies
heavily on Sec 77 of the Insurance Code to contest this, the
said provision requiring payment of premium as soon as the
thing is exposed to the peril insured against and that the policy
is invalid without it. However, this is not applicable in the
instant case as payment was eventually made. It is to be noted that
the premium invoice was stamped "Payment Received#,
indicating an understanding between the parties that payment
could be made later. This is furthered by the fact that Adora had
earlier told her to call him anytime she was ready with her payment.
The Court also finds it strange that MICO only sought to return
Pinca's Jan. 15 payment only on Feb. 5, long after her house had
burned downthis makes petitioner's motives highly suspect. MICO claims to have sent a notice to Pinca, who flatly denied
receiving one. Pinca did not have to prove this since the strict
Page 47 of 154
premium for renewal of the policies was tendered on July 13, 1992,
a month after the fire occurred on June 13, 1992. The assured did
not even give the insurer a notice of loss within a reasonable time
after occurrence of the fire.
Page 49 of 154
4. Fire broke out and consumed the new oil mill. Respondent
Tantuco immediately informed the petitioner of the incident.
HELD:
ISSUE:
Page 50 of 154
Facts:
1. This case involves an insured's claim for refund of the first
premium on the endowment policy on his life, upon being
notified by the insurer that the policy never took effect
despite the premium payment.
2. Teodoro Cortez applied for a 20-year endowment policy for
30,000.
3. His application was accepted, approved and a policy was
issued.
4. The policy was delivered to him by the underwriter
Margarita Seiga.
5. The effective date indicated on the face of the policy in
question was December 25, 1972. The annual premium was
P1,416.60. Mrs. Siega assured him that the first premium
may be paid within the grace period of thirty (30) days from
date of delivery of the policy
6. The first premium was then paid in 3 installments.
7. In a letter dated June 1, 1973 (Exh. E), defendant advised
plaintiff that Policy No. 221944 (Exh. A) was not in force. To
make it enforceable and operative, plaintiff was asked to
remit the balance of P1,015.60 to complete his initial annual
premium due December 15, 1972, and to see Dr. Felipe V.
Remollo for another full medical examination at his own
expense.
8. Cortez' reaction to the company's act was to immediately
inform it that he was cancelling the policy and he
demanded the return of his premium plus damages.
9. RTC Ruled in favour of Cortez
10. CA Affirmed
Issue:
Page 51 of 154
Ruling:
Capital Insurance was held to be liable to Plastic Era
It is clear from the terms of the policy that it is only upon
payment of the premiums that Capital agrees to insure the
properties of Plastic Era against loss or damage in an
amount not exceeding P100K.
The only question/issue is whether there was payment.
The issuance of the postdated check did not produce the
effect of payment.
o The mere delivery of a bill of exchange in payment
of a debt does not immediately effect payment. It
simply suspends the action arising from the original
obligation in satisfaction of which it was delivered,
until payment is accomplished either actually or
presumptively. It shall only produce the effect of
payment when they have been encashed, or when
through the fault of the creditor they have been
impaired.
However, in Capital's acceptance of the promissory note, it
implicitly agreed to modify the tenor of the insurance policy
and in effect, waived the provision that it would only pay for
the loss or damage in case the same occurs after the
payment of the premium.
The insurance policy is silent as to the mode of payment.
Therefore, Capital Insurance is deemed to have accepted
the promissory note in payment of the premium. This
acceptance of the note rendered the policy immediately
operative on the date it was delivered.
Page 54 of 154
LOSS
AUTHORIZED DRIVER:
Any of the following:
101.
Facts:
1. Carlos F. Robes took an insurance, with the CCC Insurance
Corporation, on his Dodge Kingsway car against loss or
damage through accident for an amount not exceeding
P8,000.00
2. The insured vehicle, while being driven by the owner's
driver, became involved in a vehicular collision along Rizal
Avenue Extension, Potrero, Malabon, Rizal. The car was
damaged, and the repair was estimated to cost P5,300.00.
3. The insurance company refused to pay for the repair or
restore the car.
4. The insurance company disclaimed liability for payment,
alleging that there had been violation of the insurance
contract because the one driving the car at the time of the
incident was not an "authorized driver."
5. RTC Ruled for plaintiff and ordered defendant insurer to
pay.
6. The CA affirmed the RTC
Issue:
1.
Held:
Page 55 of 154
CA --- affirmed
HELD: NO, Country Bankers is liable only for the insurance claim
but not for 12% interest, damages and fees.
Since petitioners defense is non-coverage by reason of the
exemption or exception clause in the fire insurance policy, it has the
Page 56 of 154
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
Page 57 of 154
104.
Facts:
Anco Enterprises, a partnership between Ang Gui and Co To, was
W/N Phoenix should be liable for the loss because there was no
explosion which is an exemption from the policy
HELD:
On Sept. 23, 1979, San Miguel Corporation shipped from
YES.
Mandaue City, Cebu on board the D/B Lucio, for towage by M/T
ANCO, the following cargoes:
In the afternoon of the same day, 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
cases of Pale Pilsen and 550 cases of Cerveza Negra. The value
per case of Pale Pilsen was P42.50. The value of a case of
Cerveza Negra was P47.10, hence, SMCs claim against ANCO
amounted P1,346,197.00.
SMC filed a complaint for breach of contract of carriage against
Page 61 of 154
Page 62 of 154
ISSUE: (We will now focus on the final issue raised by MICO, the
proper valuation of the loss incurred.) Whether the valuation fixed
based on the certification issued by the Integrated National Police is
sufficient
HELD: Yes, petition DENIED.
RATIO:
1.
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,
which is not shown here.
Page 63 of 154
2.
3.
4.
Page 64 of 154
107.
HELD
(16 cases only and not 66cases)
The fire was seen by a large number of people, and if it be a
fact that the plaintiff had 66 cases of piece goods in the building at
the time, it was his duty to have offered the evidence of some
disinterested eyewitness as to the identity of the pieces or particles
remaining of the 50 cases, and of the physical facts, for the purpose
of showing that the 50 cases were in the bodega at the time of the
fire.
Although the original entries in plaintiff's books would be
evidence which should have some weight as to the amount of stock
which he had in March, and which he purchased during the months
of April, May, and June, and what he sold during that time, such
entries are of but little, if any, value as to the amount of goods
which he had in the bodega at the time of the fire. In any event,
they are not sufficient to overcome the absence of any evidence of
the physical facts existing after the fire, and the rule of reason that
the 50 cases of goods would not be consumed and completely
wiped out of existence, without leaving some evidence of their
destruction, which could be found among the remains and debris in
the building after the fire.
Here, the facts existing at and after the fire are conclusive
evidence that there were only 16 cases of goods in thebodega at
the time of the fire, and the majority of this court are of the opinion
that plaintiff's claim is not only fraudulent, but that he knew it was
fraudulent at the time it was made, and that, for such reason, he is
not entitled to recover anything.
Page 67 of 154
109.
HELD: NO
RATIO DECIDENDI:
Facts:
DOUBLE INSURANCE
110. STA. ANA V. COMMERCIAL UNION ASSURANCE , 55 PHIL. 329
(1930)
Facts
On the 1st of October, 1925, the plaintiff Ulpiano Santa Ana
took out a three-thousand-peso fire insurance policy on the house
in the Phoenix Assurance Company (Exhibit C), and six-thousandpeso policy in the Guardian Assurance Company, Limited (Exhibit D),
for a period of one year from that date until 4 o'clock in the
afternoon of October 1, 1926, paying the respective premiums of
P97.50 and P196 to said companies through their duly authorized
Philippine agent, Kerr & Company. (Exhibit C and D)
On November 19, 1925, the plaintiff Ulpiano Santa Ana
mortgaged said house to the plaintiff Rafael Garcia for P5,000, for a
period of two years, the contract being drawn up as a retro sale
(Exhibit A) for the sum of P5,000, and the policies issued by the
Phoenix Assurance Company and the Guardian Assurance Company,
Limited, were endorsed to the mortgagee, Rafael Garcia (Exhibits C,
D, and E). On December 16, 1925, the plaintiff Urpiano Santa Ana
reinsured said house with the defendant companies, the Globe and
Rutgers Fire Insurance Company of New York, and the Commercial
Union Assurance Company, Limited of London, through their
common agent duly authorized to represent them in the Philippine
Islands, the Pacific Commercial Company, for the amount of P3,000
each, paying the 90-peso premium due upon each policy, which was
to be effective for one year from the aforementioned date until 4
o'clock in the afternoon of December 16, 1926 (Exhibits B and B-1).
Page 73 of 154
A fire broke out in the building and the store was burned.
Yap filed an insurance claim but Pioneer refused saying
theres a violation of terms and conditions.
CFI and CA: In favour of Oliva Yap
Page 74 of 154
most strictly against those for whose benefits they are inserted, and
most favorably toward those against whom they are intended to
operate. The reason for this is that, except for riders which may
later be inserted, the insured sees the contract already in its final
form and has had no voice in the selection or arrangement of the
words employed therein. On the other hand, the language of the
contract was carefully chosen and deliberated upon by experts and
legal advisers who had acted exclusively in the interest of the
insurers and the technical language employed therein is rarely
understood by ordinary laymen.
With these principles in mind, we are of the opinion that
Condition 3 of the subject policy is not totally free from ambiguity
and must, perforce, be meticulously analyzed. Such analysis leads us
to conclude that (a) the prohibition applies only to double
insurance, and (b) the nullity of the policy shall only be to the extent
exceeding P200,000.00 of the total policies obtained.
The first conclusion is supported by the portion of the
condition referring to other insurance "covering any of the property
or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured," and the portion regarding the
insured's declaration on the subheading CO-INSURANCE that the coinsurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A
double insurance exists where the same person is insured by
several insurers separately in respect of the same subject and
interest. As earlier stated, the insurable interests of a mortgagor
and a mortgagee on the mortgaged property are distinct and
separate. Since the two policies of the PFIC do not cover the same
interest as that covered by the policy of the private respondent, no
double insurance exists. The non-disclosure then of the former
policies was not fatal to the petitioner's right to recover on the
private respondent's policy.
Furthermore, by stating within Condition 3 itself that such
condition shall not apply if the total insurance in force at the time of
loss does not exceed P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a loss not
Page 76 of 154
Issues
1. Whether or not the non-declaration of co-insurances
violates the policy condition which required the insured to
reveal other insurances already effected.
a. Yes.
2. Whether or not failure of the insured to file the required
proof of loss prior to court action.
a. Yes.
Ruling
First Issue
Second Issue
Page 79 of 154
REINSURANCE
115. PIONEER INSURANCE V. COURT OF APPEALS, 175 SCRA 668
(1989)
PIONEER INSURANCE & SURETY CORP V CA, BORMAHECO,
MAGLANA AND LIM G.R. No. 84197
116.
loss strictly within the terms of the original policy has taken
place. This clause does not enable the original underwriter to
recover from his reinsurer to an extent beyond the subscription
of the latter. Wherefore, in view of the foregoing, the petition
is hereby dismissed. No costs.
benefit or favor to the insured, the insured, not being privy to the
reinsurance contract, has no cause of action against the reinsurer. It
is expressly provided in Section 91 the Insurance Act 1 that "(T)he
original insured has no interest in a contract of insurance."
ISSUE
WON the insured (Artex) has a cause of action against the reinsurer
HELD
NO
- Unless there is a specific grant in, or assignment of, the
reinsurance contract in favor of the insured or a manifest intention
of the contracting parties to the reinsurance contract to grant such
Page 85 of 154
MARINE INSURANCE
118. ROQUE V. INTERMEDIATE APPELLATE COURT, 139 SCRA 596
(1985)
ROQUE V. INTERMEDIATE APPELLATE COURT, 139 SCRA 596 (1985)
Petitioner: Isabela Roque, doing busines under the name and style
of Isabela Roque Timber Enterprises and Ong Chiong
Respondent: Intermediate Appelate Court and Pioneer Insurance
And Surety Corporation
FACTS:
Manila Bay Lighterage Corporation (Manila Bay) a common carrier,
entered into a contract with petitioners whereby the former would
load and cary on board its barge Marble 10 about 422.18 cubic
meters of logs from Malampaya Sound, Palawan to North Harbor
Manila. The petitioners insured the logs against loss for
100,000.00 with respondent Pioneer Insurance and Surety
Corporation (Pioneer).
The petitioner loaded on the barge, 811 pieces of logs at
Malampaya Sound, Palawan for carriage and delivery to North
Harbor, Port of Manila, but the shipment never reached its
destination because Marble 10 sank with the 811 pieces of logs
somewhere off Cabuli Point in Palawan on its way to Manila. As
alleged by the petitioners in their complaint and as found by both
the trial and appellate courts, the barge where the logs were loaded
was not seaworthy such that it developed a leak. The appellate
court further found that one of the hatches was left open causing
water to enter the barge and because the barge was not provided
with the necessary cover or tarpauline, the ordinary splash of
seawaves brought more water inside the barge.
Page 86 of 154
On the contention of the petitioners that the trial court found that
the loss was occasioned by the perils of the sea characterized by the
storm and waves which buffeted the vessel, the records show that
the court ruled otherwise. It stated: x x x The other affirmative
defense of defendant Lighterage, That the supposed loss of the logs
was occasioned by force majeure was not supported by the
evidence. At the time Mable 10 sank, there was no typhoon but
ordinary strong wind and waves, a condition which is natural and
normal in the open sea. The evidence shows that the sinking of
Mable 10 was due to improper loading of the logs on one side so
that the barge was tilting on one side and for that it did not navigate
on even keel; that it was no longer seaworthy that was why it
developed leak; that the personnel of the tugboat and the barge
committed a mistake when it turned loose the barge from the
tugboat east of Cabuli point where it was buffeted by storm and
waves, while the tugboat proceeded to west of Cabuli point where
it was protected by the mountain side from the storm and waves
coming from the east direction. x x x
lt must be considered to be settled, furthermore, that a loss which,
in the ordinary course of events, results from the natural and
inevitable action of the sea, from the ordinary wear and tear of the
ship, or from the negligent failure of the ships owner to provide the
vessel with proper equipment to convey the cargo under ordinary
conditions, is not a peril of the sea. Such a loss is rather due to what
has been aptly called the peril of the ship. The insurer undertakes
to insure against perils of the sea and similar perils, not against
perils of the ship. As was well said by Lord Herschell in Wilson, Sons
& Co. v. Owners of Cargo per the Xantho ([1887], 12 A. C., 503, 509),
there must, in order to make the insurer liable, be some casualty,
something which could not be foreseen as one of the necessary
incidents of the adventure. The purpose of the policy is to secure an
indemnity against accidents which may happen, not against events
which must happen.
Page 87 of 154
The trial court made the ff findings: The drain pipe which
served as a discharge from the water closet passed down through
the compartment where the rice in question was stowed and
thence out to sea through the wall of the compartment, which was
a part of the wall of the ship. The joint or elbow where the pipe
changed its direction was of cast iron; and in course of time it had
become corroded and abraded until a longitudinal opening had
appeared in the pipe about one inch in length. This hole had been in
existence before the voyage was begun, and an attempt had been
made to repair it by filling with cement and bolting over it a strip of
iron. The effect of loading the boat was to submerge the vent, or
orifice, of the pipe until it was about 18 inches or 2 feet below the
level of the sea. As a consequence the sea water rose in the pipe.
Navigation under these conditions resulted in the washing out of
the cement-filling from the action of the sea water, thus permitting
the continued flow of the salt water into the compartment of rice.
Page 88 of 154
120.
dismissing the complaint, the counterclaim and the thirdparty complaint with costs against the petitioner.
Hence, the appeal to the Court of Appeals by petitioner
which, in due course, as aforestated, affirmed the judgment
of the trial court.
A motion for reconsideration of said judgment was denied
by the appellate court in a resolution.
Petitioner now filed this petition for review on certiorari in
this Court.
ISSUES:
WON court erred in holding that an "all risks" coverage covers only
losses occasioned by or resulting from "extra and fortuitous events"
despite the clear and unequivocal definition of the term made and
contained in the policy sued upon.
Held: YES. The decision appealed from is hereby REVERSED AND SET
ASIDE. Respondent Filipinas Merchants Insurance Company, Inc. is
liable.
There is no question that the 403 bags in damaged condition
delivered and received by petitioner.
Nevertheless, on the assumption that the cargo suffered damages,
the appellate court ruled: Even assuming that the cargo indeed
sustained damage, still the appellant cannot hold the appellee
insurance company liable on the insurance policy. In the case at bar,
appellant failed to prove that the alleged damage was due to risks
connected with navigation. A distinction should be made between
"perils of the sea" which render the insurer liable on account of the
loss and/or damage brought about thereof and "perils of the ship"
which do not render the insurer liable for any loss or damage. Perils
of the sea or perils of navigation embrace all kinds of marine
casualties, such as shipwreck, foundering, stranding, collision and
FACTS:
1. The consignee of the shipment of fishmeal loaded on board the
vessel SS Bougainville and unloaded at the Port of Manila on or
about December 11, 1976 and seeks to recover from the defendant
insurance company the amount of P51,568.62 representing
damages to the said shipment.
5. The cargo was also surveyed by the arrastre contractor before the
delivery and a total of 227 bags were in bad order condition.
In the present case, there being no showing that the loss was
caused by any of the excepted perils, the insurer is liable under
the policy.
ISSUE:
Whether or not the insurer is liable under the "all risks policy''?
HELD:
RATIONALE:
A marine insurance policy providing that the insurance was to
be "against all risks" must be construed as creating a special
insurance and extending to other risks than are usually
contemplated, and covers all losses except such as arise from the
fraud of the insured. The burden of the insured, therefore, is to
prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is
shifted to the insurer to prove that the loss was due to
excepted perils. To impose on the insured the burden of
proving the precise cause of the loss or damage would be
Page 93 of 154
122.
10.
11.
12.
13.
123.
Is Caltex liable for damages under the Civil Code? We rule that it is
not. Sulpicio argues that Caltex negligently shipped its highly
combustible fuel cargo aboard an unseaworthy vessel such as the
MT Vector. The charterer of a vessel has no obligation before
transporting its cargo to ensure that the vessel it chartered
complied with all legal requirements. The duty rests upon the
common carrier simply for being engaged in public service.
Page 96 of 154
124.
Issue:
Who should be held liable for the loss
note: i don't know how this involves insurable interest >.< it only
talks about how the owner shall indemnify the charterer
Ruling:
Ouano, the owner of the vessel, is liable to the heirs of the
deceased, and to SMC for the loss of their goods
a charter party is a contract by virtue of which the owner or
the agent of a vessel binds himself to transport
merchandise or persons for a fixed price. It has also been
defined as a contract by virtue of which the owner or the
agent of the vessel leases for a certain price the whole or a
portion of the vessel for the transportation of goods or
persons from one port to another
2 types of charter parties: (1) bareboat or demise: the
charterer mans the vessel with his own people; (2) contract
of affreightment: the owner of the vessel leases part or all
of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel.
Under such contract the ship owner retains the possession,
command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in
return for his payment of the charter hire.
2 types of contract of affreightment: time charter and
voyage charter
**as for insurable interest, Section 100, 103, 105 and 106 provide
for who has an insurable interest in this case
Section 100. The owner of a ship has in all cases an insurable
interest in it, even when it has been chartered by one who
covenants to pay him its value in case of loss; Provided, That in this
case the insurer shall be liable for only that part of the loss which
the insured cannot recover from the charterer
Sec. 103. The owner of a ship has an insurable interest in expected
freightage which according to the ordinary and probable course of
things he would have earned but for the intervention of a peril
insured against or other peril incident to the voyage. (freightage:
the benefit which is to accrue to the owner from the use of the
vessel in the voyage contemplated, ir the benefit derived from the
employment of the ship)
125.
Sec. 105. One who has an interest in the thing from which profits
are expected to proceed has an insurable interest in the profits.
Issue:
Ruling:
Page 100 of 154
The public must of necessity rely on the care and skill of common
carriers in the vigilance over the goods and safety of the passengers,
especially because with the modern development of science and
invention, transportation has become more rapid, more
complicated and somehow more hazardous. For these reasons, a
passenger or a shipper of goods is under no obligation to conduct
an inspection of the ship and its crew, the carrier being obliged by
law to impliedly warrant its seaworthiness.
The charterer of a vessel has no obligation before transporting its
cargo to ensure that the vessel it chartered complied with all legal
requirements. The duty rests upon the common carrier simply for
Page 101 of 154
FACTS:
RTC --- proximate cause of the loss of the M/V Doa Roberta was
attributable to SMC.
message. Neither Ouano nor his son was available during the entire
time that the vessel set out and encountered foul weather.
Considering that the charter was a contract of affreightment, the
shipowner had the clear duty to ensure the safe carriage and arrival
of goods transported on board its vessels. More specifically, Ouano
expressly warranted in the Time Charter Party that his vessel was
seaworthy.
HELD: YES.
DEFINITION OF SEAWORTHINESS
The evidence does not show that SMC or its employees were
amiss in their duties.
127.
PHILIPPINE AMERICAN GENERAL INSURANCE V. CA, 273 SCRA
262 (1997)
G.R. No. 116940
June 11, 1997
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC.,
petitioner,
vs.
COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.
Nature:
This case deals with the liability, if any, of a shipowner for loss of
cargo due to its failure to observe the extraordinary diligence
required by Art. 1733 of the Civil Code as well as the right of the
insurer to be subrogated to the rights of the insured upon payment
of the insurance claim.
Facts:
Issue:
Whether or not the limited liability under Art. 587 of the Code of
Commerce should apply.
Held:
128.
129.
ORIENTAL ASSURANCE V. COURT OF APPEALS, 200 SCRA 459
(1991)
Oriental Assurance vs. Court of Appeals
G.R. No. 94052 August 9, 1991
FACTS:
Omnibus clause.
ISSUE:
WON Oriental Assurance can be held liable under its marine
insurance policy based on the theory of a divisible contract of
insurance and, consequently, a constructive total loss? NO.
HELD:
Perla v CA- The terms of the contract constitute the measure of the
insurer liability and compliance therewith is a condition precedent
to the insured's right to recovery from the insurer.
Whether a contract is entire or severable is a question of intention
to be determined by the language employed by the parties. The
policy in question shows that the subject matter insured was the
entire shipment of 2,000 cubic meters of apitong logs. The fact that
the logs were loaded on two different barges did not make the
contract several and divisible as to the items insured. The logs on
the two barges were not separately valued or separately insured.
Only one premium was paid for the entire shipment, making for
only one cause or consideration. The insurance contract must,
therefore, be considered indivisible.
Also, the insurer's liability was for "total loss only" as stipulated. A
total loss may be either actual or constructive. An actual total loss
under Sec 130 of the Insurance Code is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken
up;
(c) Any damage to the thing which renders it valueless to the owner
for the purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the
possession, at the port of destination, of the thing insured.
130.
PHILIPPINE HOME ASSURANCE V. COURT OF APPEALS, 257
SCRA 468 (1996)
G.R. No. 106999, June 26, 1996
FACTS:
The SC, however, said that although the logs were placed in two
barges, they were not separately valued by the policy, nor
separately insured. Of the entirety of 1,208, pieces of logs, only 497
pieces thereof were lost or 41.45% of the entire shipment. Since the
cost of those 497 pieces does not exceed 75% of the value of all
1,208 pieces of logs, the shipment can not be said to have sustained
a constructive total loss under Section 139(a) of the Insurance Code.
ISSUE:
Page 110 of 154
RATIO:
(1)
(2)
FIRE INSURANCE
131. PHILIPPINE HOME ASSURANCE V. COURT OF APPEALS, 257 SCRA
468 (1996)
FIRE INSURANCE
Phil Home Assurance v. CA
FACTS
HELD
While the vessel was off Okinawa, Japan, a small flame was
detected on the acetylene cylinder located in the accommodation
area near the engine room on the main deck level. As the crew was
trying to extinguish the fire, the acetylene cylinder suddenly
exploded sending a flash of flame throughout the accommodation
area, thus causing death and severe injuries to the crew and
instantly setting fire to the whole superstructure of the vessel. The
incident forced the master and the crew to abandon the ship.
After the fire was extinguished, the cargoes which were
saved were loaded to another vessel for delivery to their original
ports of destination.
ESLI charged the consignees additional charges or expenses
incurred by the owner of the ship in the salvage operations and in
the transshipment of the goods via a different carrier.
the fact that the acetylene cylinder was checked, tested and
examined and subsequently certified as having complied with the
safety measures and standards by qualified experts before it was
loaded in the vessel only shows to a great extent that negligence
was present in the handling of the acetylene cylinder after it was
loaded and while it was on board the ship. Indeed, had the
respondent and its agents not been negligent in storing the
acetylene cylinder near the engine room, then the same would not
have leaked and exploded during the voyage
There is no merit in the finding of the trial court to which
respondent court erroneously agreed that the fire was not the
fault or negligence of respondent but a natural disaster or
calamity. The records are simply wanting in this regard.
o
Tan Chuco files a claim under an open fire insurance policy
for the alleged loss by fire of certain stock of goods insured
by Yorkshire.
CFI: Evidence did not sustain Yorkshires allegation that Tan
Chuco or his agents had intentionally and fraudulently set
the building on fire
o But was of the opinion that the Tan Chuco failed to
establish the value of the goods he alleges were
destroyed by the fire.
o He submitted fabricated written evidence and false
testimony in support of his claim that the insured
goods actually destroyed were worth more than the
total amount of the insurance thereon.
o CFI was of the opinion that the submitted inventory
was not genuine and was fraudulently prepared.
o Tan Chucos representatives and employees who
were in the building when the fire took place, not
only made no effort to extinguish the fire, or to save
the goods from destruction, but also failed to save
any of the books or papers connected with the
business of which he was in charge ofthose could
have corroborated with the data in the alleged
inventory
o The inventory submitted was dated January 1, not
of custom to Tan Chuco who were of Chinese
decent.
Issue: Whether or not Tan Chuco may claim under the fire
insurance policy?
Held: NO.
We think that the action of the trial court in rejecting the proof
offered by Tan Chuco as to the amount of the loss must be
sustained.
FACTS:
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.
Insurance Commission: favored Pinca
MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora was
authorized to receive it
new insurance, effective on that date and until one year later,
and so taken advantage of the extended period.
Incidentally, Adora had not been informed of the cancellation
either and saw no reason not to accept the said payment
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
make the motives of MICO highly suspicious
CASUALTY INSURANCE
135.
FACTS:
1. Julio Aguilar owner and operator of several jeepneys
insured them with Capital Insurance & Surety Co., Inc.
2. February 20, 1961: Along the intersection of Juan Luna and
Moro streets, City of Manila, the jeepneys operated by
Aguilar driven by Iluminado del Monte and Gervacio
Guingon bumped and Guingon died some days after
3. Iluminado del Monte was charged with homicide thru
reckless imprudence and was penalized 4 months
imprisonment
4. The heirs of Gervacio Guingon filed an action for damages
praying that P82,771.80 be paid to them jointly and
severally by the driver del Monte, owner and operator
Aguilar, and the Capital Insurance & Surety Co., Inc.
5. CFI: Iluminado del Monte and Julio Aguilar jointly and
severally to pay plaintiffs the sum of P8,572.95 as damages
for the death of their father, plus P1,000.00 for attorney's
fees plus costs
6. Capital Insurance and Surety Co., Inc. is hereby sentenced
to pay P5,000 plus P500 as attorney's fees and costs to be
applied in partial satisfaction of the judgment rendered
against Iluminado del Monte and Julio Aguilar in this case
ISSUE:
2. W/N the heirs can sue the insurer and insured jointly? - YES
2. YES
HELD: YES
not have received that blow in the head and would not have
died. The fact that boxing is attended with some risks of
external injuries does not make any injuries received in the
course of the game not accidental. In boxing as in other
equally physically rigorous sports, such as basketball or
baseball, death is not ordinarily anticipated to result. If,
therefore, it ever does, the injury or death can only be
accidental or produced by some unforeseen happening or
event as what occurred in this case.
As to the policy provision enumerating sports events which
are excluded from coverage, death or disablement resulting
from engagement in boxing contests was not declared
outside of the protection of the insurance contract. Failure
of the defendant insurance company to include death
resulting from a boxing match or other sports among the
prohibitive risks leads inevitably to the conclusion that it did
not intend to limit or exempt itself from liability for such
death.
138.
SC affirms CA.
139.
ISSUE
Page 125 of 154
140.
Calanoc v CA
Facts:
The circumstances surrounding the death of Melencio Basilio show
that when he was killed at about seven oclock in the night of
January 25, 1951, he was on duty as watchman of the Manila Auto
Supply at the corner of Avenida Rizal and Zurbaran; that it turned
out that Atty. Antonio Ojeda who had his residence at the corner of
Zurbaran and Oroquieta, a block away from Basilios station, had
come home that night and found that his house was well-lighted,
but with the windows closed; that getting suspicious that there
were culprits in his house, Atty. Ojeda retreated to look for a
policeman and finding Basilio in khaki uniform, asked him to
accompany him to the house with the latter refusing on the ground
that he was not a policeman, but suggesting that Atty. Ojeda should
ask the traffic policeman on duty at the corner of Rizal Avenue and
Zurbaran; that Atty. Ojeda went to the traffic policeman at said
Page 126 of 154
Held: Yes.
Ratio:
The circumstances of Basilios death cannot be taken as purely
intentional on the part of Basilio to expose himself to the danger.
There is no proof that his death was the result of intentional killing
because there is the possibility that the malefactor had fired the
shot merely to scare away the people around.
While as a general rule "the parties may limit the coverage of the
policy to certain particular accidents and risks or causes of loss, and
may expressly except other risks or causes of loss therefrom",
however, it is to be desired that the terms and phraseology of the
exception clause be clearly expressed so as to be within the easy
grasp and understanding of the insured, for if the terms are
doubtful or obscure the same must of necessity be interpreted or
resolved against the one who has caused the obscurity. (Article
1377, new Civil Code) And so it has been generally held that the
"terms in an insurance policy, which are ambiguous, equivocal, or
uncertain . . . are to be construed strictly and most strongly against
the insurer, and liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the insured,
especially where a forfeiture is involved", and the reason for this
rule is that he "insured usually has no voice in the selection or
arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by experts and
legal advisers employed by, and acting exclusively in the interest of,
the insurance company."
Insurance is, in its nature, complex and difficult for the layman to
understand. Policies are prepared by experts who know and can
Page 127 of 154
NATURE
Petition for review of CA decision
FACTS
- Ernani TRINOS, deceased husband of respondent Julita, applied for
a health care coverage with Philamcare Health Systems, Inc. In the
standard application form, he answered no to the question: Have
you or any of your family members ever consulted or been treated
for high blood pressure, heart trouble, diabetes, cancer, liver
disease, asthma or peptic ulcer? (If Yes, give details).
- The application was approved for period of one year; upon
termination, it was extended for another 2 years. Amount of
coverage was increased to a maximum sum of P75T per disability.
- During this period, Ernani suffered a HEART ATTACK and was
confined at the Manila Medical Center (MMC) for one month. While
her husband was in the hospital, Julita tried to claim the
hospitalization benefits.
Page 128 of 154
ISSUES
1. WON a health care agreement is an insurance contract (If so,
incontestability clause under the Insurance Code is applicable)
2. WON the HCA can be invalidated on the basis of alleged
concealment
Petitioners Claims
(1) Agreement grants living benefits such as medical check-ups
and hospitalization which a member may immediately enjoy so long
as he is alive upon effectivity of the agreement until its expiration.
(2) Only medical and hospitalization benefits are given under the
agreement without any indemnification, unlike in an insurance
contract where the insured is indemnified for his loss.
(3) HCAs are only for a period of one year; therefore,
incontestability clause does not apply, as it requires effectivity
period of at least 2 yrs.
HELD
YES
Ratio Every person has an insurable interest in the life and health
of himself1. The health care agreement was in the nature of non-life
1 Sec.10. Every person has an insurable interest in the life and health:
Reasoning
- A contract of insurance2 is an agreement whereby one undertakes
for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event.
- An insurance contract exists where the following elements concur:
(a) The insured has an insurable interest;
(b) The insured is subject to a risk of loss by the happening of the
peril;
(c) The insurer assumes the risk;
(d) Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk;
and
(2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might
delay or prevent the performance; and
(4) of any person upon whose life any estate or interest vested in him depends.
2. NO
Ratio Where matters of opinion or judgment are called for,
answers made in good faith and without intent to deceive will not
avoid a policy even though they are untrue; since in such case the
insurer is not justified in relying upon such statement, but is
obligated to make further inquiry.
Reasoning
- The fraudulent intent on the part of the insured must be
established to warrant rescission of the insurance contract. The
right to rescind should be exercised previous to the commencement
of an action on the contract. No rescission was made. Besides, the
cancellation of health care agreements as in insurance policies
requires:
(a) Prior notice of cancellation to insured;
(b) Notice must be based on the occurrence after effective date of
the policy of one or more of the grounds mentioned;
(c) Must be in writing, mailed or delivered to the insured at the
address shown in the policy;
(d) Must state the grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to furnish facts on
which cancellation is based.
FORTUNE VS CA (1995)
G.R. No. 115278 May 23, 1995
Petitioner: FORTUNE INSURANCE AND SURETY CO., INC. (Fortune)
Respondent: PRODUCERS BANK OF THE PHILIPPINES (PBP)
FACTS:
> PBP filed against Fortune a complaint for recovery of the sum of
P725,000.00 under the policy issued by Fortune. The money was
allegedly lost during a robbery of Producer's armored vehicle while
it was in transit to transfer the money from its Pasay City Branch to
its head office in Makati along Taft Avenue.
>The armored car was driven by Benjamin Magalong escorted by
Security Guard Saturnino Atig.
>Driver Magalong was assigned by PRC Management Systems with
the PBP by virtue of an Agreement and Atiga was assigned by
Unicorn Security Services, Inc. by virtue of a contract of Security
Service.
>After an investigation conducted by the Pasay police authorities,
the driver Magalong and guard Atiga were charged, together with
Edelmer Bantigue, Reynaldo Aquino and John Doe, with violation of
P.D. 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City.
>Demands were made by PBP but Fortune refused to pay as the loss
is excluded from the coverage of the insurance policy which is
Page 131 of 154
HELD:
YES.
GENERAL EXCEPTIONS
The company shall not be liable under this policy in
report of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or
criminal act of the insured or any officer, employee,
partner, director, trustee or authorized
representative of the Insured whether acting alone
or in conjunction with others. . . .
8. The plaintiff opposes the contention of the
defendant and contends that Atiga and Magalong
are not its "officer, employee, . . . trustee or
authorized representative . . . at the time of the
robbery.
>RTC & CA: held that there should be recovery. The trial court ruled
that Magalong and Atiga were not employees or representatives of
Producers. The wages and salaries of both Magalong and Atiga are
presumably paid by their respective firms, which alone wields the
power to dismiss them. Neither is the Court prepared to accept the
proposition that driver Magalong and guard Atiga were the
"authorized representatives" of plaintiff.
ISSUE:
>If the terms of the contract are clear and unambiguous, there is no
room for construction and such terms cannot be enlarged or
diminished by judicial construction.
>It was clear that Fortunes intention is to exclude and exempt from
protection and coverage losses arising from dishonest, fraudulent,
or criminal acts of persons granted or having unrestricted access to
Producers' money or payroll. When it used then the term
"employee," it must have had in mind any person who qualifies as
such as generally and universally understood, or jurisprudentially
established in the light of the four standards in the determination of
the employer-employee relationship, or as statutorily declared even
in a limited sense as in the case of Article 106 of the Labor Code
which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who
supplied them to the employer.
CASUALTY INSURANCE
144. MALAYAN INSURANCE CO., INC.,, vs.
ISSUES:
(1) Whether the trial court, as upheld by the Court of Appeals,
was correct in holding petitioner and respondents Sio Choy and
San Leon Rice Mill, Inc. "solidarily liable" to respondent Vallejos; and
RATIONALE:
In order to determine the alleged liability of respondent San Leon
Rice Mill to Malayan, it is important to determine first the nature or
basis of the liability of Malayan to Respondent Vallejos, as
compared to that of respondents Sio and San Leon Rice Mill.
1. No."ONLY" RESPONDENTS SIO CHOY AND SAN LEON RICE
ARE SOLIDARILY LIABLE TO VALLEJOS. MALAYAN IS NOT INCLUDED.
Facts:
1. George Y. Poe (George) while waiting for a ride to work in
front of Capital Garments Corporation, Ortigas Avenue
Extension, Barangay Dolores, Taytay, Rizal, was run over by
a ten-wheeler Isuzu hauler truck
2. The truck was owned by Rhoda Santos (Rhoda), and then
being driven by Willie Labrador (Willie).
3. To seek redress for Georges untimely death, his heirs and
herein petitioners, namely, his widow Emercelinda, and
their children Flerida and Fernando, filed with the RTC a
Complaint for damages
4. Malayan Insurance was named respondent in this case since
they are the insurer of Rhoda Santos over the subject truck.
5. Under the insurance policy of the said truck Malayan binds
itself, among others, to be liable for damages as well as any
bodily injury to third persons which may be caused by the
operation of the insured vehicle.
6. In their answer, Malayan insurance argued that their
liability will only attach if there is a judicial pronouncement
that the insured Rhoda and her driver are liable.
7. They of course argued that the accident was caused by the
negligence of George.
8. RTC Ruled that Rhoda and Malayan are liable solidarily.
9. CA Set aside the RTC decision.
Issue:
1. Whether or not Malayan Insurance should be held solidarily
liable with Rhoda.
Held:
Page 139 of 154
147.
148.
GSIS vs CA
GR No. 101439 June 21, 1999
Facts:
National Food Authority (NFA, formerly National Grains
Authority) owned a Chevrolet truck which was insured
against liabilities for death of and injuries to third persons
with GSIS (third-person liability).
The truck, driven by Corbeta, collided with a public utility
vehicle, a Toyota Tamaraw, owned and operated by Victor
Uy, under the name of "Victory Line." The tamaraw was a
total wreck and all the collision victims were its passengers.
5 passengers dies, while 10 sustained bodily injuries.
3 cases were filed with CFU of Agusan del Norte and Butuan
City:
1. quasi-delict, damages and attorney's fees by Uy;
2. damages by Taer, an injured passenger, against Uy
and insurer Mabuhay Insurance (MIGC), to which
Uy filed a cross-claim against MIGC and third-party
complaint against Corbeta and NFA;
3. actions by heirs and victims of the deceased for
damages due to quasi-delict against NFA and
Corbeta, against GSIS as insurer of the truck, against
Uy for breach of contract of carriage, against MIGC
as insurer of the tamaraw.
RTC: Corbeta's negligence was the proximate cause of the
collision; the truck which crossed over to the other lane was
speeding because after the collision, its left front wheel was
detached and fell into a ravine.
RTC: first case - Uy was awarded 109,100 for damages; 2nd
case - dismissed against Uy, ordered MIGC, Corbeta and
NFA to pay Taer; 3rd case - damages are also awarded to
the heirs and victims.
Page 142 of 154
Issue:
1. Whether GSIS should be held solidarily liable with the negligent
insured/owner-operator of the Chevrolet truck for damages
awarded to private respondents which are beyond the limitations of
the insurance policy and the Insurance Memorandum Circular No. 578
2. Whether the private respondents have no cause of action against
the petitioner, allegedly for failure of the victims to file an insurance
claim within six (6) months from the date of the accident
Ruling:
1. The liability of GSIS is direct, but not solidary with that of the
owner and negligent driver, and its liability is only to the extent of
the insurance policy and those required by law.
Compulsory Motor Vehicle Liability Insurance (third party
liability, or TPL) is primarily intended to provide
compensation for the death or bodily injuries suffered by
innocent third parties or passengers as a result of a
negligent operation and use of motor vehicles. The victims
and/or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor
vehicle owners.
The injured for whom the contract of insurance is intended
can sue directly the insurer. The general purpose of statutes
enabling an injured person to proceed directly against the
insurer is to protect injured persons against the insolvency
of the insured who causes such injury, and to give such
injured person a certain beneficial interest in the proceeds
of the policy, and statutes are to be liberally construed so
that their intended purpose may be accomplished. It has
even been held that such a provision creates a contractual
relation which inures to the benefit of any and every person
SURETYSHIP
150. PHILIPPINE PRYCE ASSURANCE V. COURT OF APPEALS, 230 SCRA
164 (1994)
G.R. No. 107062 February 21, 1994
PHILIPPINE PRYCE ASSURANCE CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, (Fourteenth Division) and GEGROCO,
INC., respondents.
NOCON, J.:
FACTS:
--Petitioner, Interworld Assurance Corporation (now Philippine
Pryce Assurance Corporation), was sued for collection of sum of
money by respondent
Gegroco, Inc.
--The complaint alleged that Pryce issued two surety bonds in behalf
of its principal Sagum General Merchandise for P500,000.00 and
P1,000,000.00
respectively.
--Pryce admitted having executed the said bonds, but denied
liability because allegedly
1) the checks which were to pay for the premiums bounced
and were dishonored hence there is no contract to speak of
between Pryce and its
supposed principal Sagum; and
2) the bonds were merely to guarantee payment of its
principal's obligation, thus, there is a benefit of excussion (a right
under Art. 2066 which only
a guarantor may invoke against the creditor
wherein the guarantor will point out to the creditor all the
debtors properties in the
Philippines sufficient to cover amount of debt).
Facts:
Universal Deep-Sea Fishing Corporation was awarded six (6)
trawl boats by the Reparations Commission as end-user of
reparations goods. These fishing boats, christened the M/S
UNIFISH 1, M/S UNIFISH 2, M/S UNIFISH 3, M/S UNIFISH 4, M/S
UNIFISH 5, and M/S UNIFISH 6, were delivered to Universal two
at a time, f.o.b. Japanese port.
M/S UNIFISH 1 and M/S UNIFISH 2, with an aggregate purchase
price of P536,428.44, were delivered to Universal on November
20, 1958 and the Contract of Conditional Purchase and Sale of
Reparations Goods executed by the parties on February 12, 1960
Page 149 of 154
Ratio:
The payment of premiums on the bonds to the surety company
153.
FACTS:
1. Manila Fidelity & Surety Co., executed and delivered to the
Manila Ylang Ylang Distillery a surety bond, understood to
pay jointly and severally with Arranz as principal, the sum of
P90,000. The surety bond executed by Arranz and the
Manila Fidelity contains the following stipulation:
The surety hereunder waives notice of
default and expressly agrees that it shall not be
necessary for the Manila Ylang Ylang Distillery, Ltd.
to proceed against the Principal upon his default or
to exhaust the property of said Principal, before
proceeding against the surety, the Surety's liability
under this bond being a primary one and shall be
eligible and demandable immediately upon
occurrence of such default.
2. To secure the surety against loss arising from the surety
bond, plaintiff executed a second mortgaged over the
properties which were transferred by the Manila Ylang
Ylang Distillery to Arranza. When the first installment of
P50K became due the surety, Manila Fidelity, did not have
funds to pay the same, and neither did it have funds to pay
the second installment of P40K which became due.
3. Complaint was filed by the Manila Ylang Ylang Distillery and
a supplemental complaint was later filed to include the
second installment of P40K already due. Manila Fidelity had
no funds with which to pay either the P50K or the P40K due
under the agreement and the only amount it was able to
raise was P20K. And that was paid to Manila Ylang Ylang
Distillery on account.
Page 151 of 154
On April 30, 1963 or about five (5) days before the expiration of the
liability on the bond,
P.D. Marchessini and Co., Ltd. and Delgado Shipping Agencies, Inc.,
filed a case in the Court of First Instance of Manila against the
Philippine Merchants Steamship Co., Inc.,
Jose L. Bautista, doing business under the name and style of
"Ronquillo Trading", and the herein appellant Capital Insurance &
Surety Co., Inc. for the sum of $14,800.00 or its equivalent in
Philippine currency, for the loss they allegedly suffered as a direct
consequence of the failure of the defendants to load the stipulated
quantity of 406 U.S. surplus army vehicles.
The appellant was made party defendant because of the bond it
posted in behalf of the appellees. Upon the expiration of the 12
months life of the bond, the appellant made a formal demand for
the payment of the renewal premiums and cost of documentary
stamps for another year in the amount of P1,827.00.
The appellees refused to pay, contending that the liability of the
appellant under the surety bond accrued during the period of
twelve months the said bond was originally in force and before its
expiration and that the defendants-appellees were under no
obligation to renew the surety bond.
The appellant, therefore, filed a complaint to recover the sum of P
l,827.00 against the appellees in the City Court of Manila wherein
said court rendered judgment absolving the appellees from the
complaint. The appellant appealed the judgment to the Court of
First Instance of Manila where the decision of the city court was
affirmed and the complaint dismissed. Its motion for
Page 153 of 154
Issue:
It must be noted that in the surety bond it was stipulated that the
"liability of surety on this bond would expire on May 5, 1963 and
said bond would be cancelled 15 days after its expiration, unless
surety was notified of any existing obligations thereunder."
Wether or not a surety's liability under the bond has accrued, during
the period of twelve months the bond was originally in force and
before its expiration and that herein appellees were under no
obligation to pay the premiums and costs of documentary stamps
for the succeeding period it was in effect?
Held:
Yes.
Ratio:
The bond was given to secure payment by appellees of such
additional freight as would already be due on the cargo when it
actually arrived in Manila. The bond was not executed to secure
obligation or liability which was still to arise after its twelve month
life. While it was true that the lower court held that the bond was
still in effect after its expiry date, the effectivity was not due to a
renewal made by the appellees but because the surety bond
provided that "the liability of the surety will not expire if, as in this
case, it was notified of an existing obligation thereunder".
The meaning of the bond's still being in effect was that, the suit on
the bond instituted by the obligees prior to the expiration of the
"liability" thereunder was only for the purpose of enforcing that
liability and amounted to notice to appellant of an already existing
Under this stipulation the bond expired on the stated date and the
phrase "unless surety was notified of any existing obligations
thereunder" refers to obligations incurred during the term of the
bond.
Under the Indemnity Agreement, the appellees "agreed to pay the
COMPANY the sum of ONE THOUSAND EIGHT HUNDRED ONLY
(P1,800.00) Pesos, Philippine Currency, in advance as premium
thereof for every twelve (12) months or fraction thereof, while this
bond or any renewal or substitution thereof was in effect."
Obviously, the duration of the bond was for "every twelve (12)
months or fraction thereof, while this bond or any renewal or
substitution was in effect." Since the appellees opted not to renew
the contract they cannot be obliged to pay the premiums.
More specifically, where a contract of surety is terminated under its
terms, the liability of the principal for premiums after such
termination ceases notwithstanding the pendency of a lawsuit to
enforce a liability that accrued during its stipulated lifetime. The
appeal was dismissed for lack of merit. The decision of the court a
quo was affirmed.