SMITH, BELL & CO., INC. V. C.A.
& JOSEPH solidarily liable for the obligations of its disclosed
BENGZONCHUAG.R. No. 110668 February 6,
1997
FACTS:
1 Chua, doing business under the style of Tic
Hin Chiong, Importer, bought and imported to the
Philippines from the firm Chin Gact Co., Ltd. of
Taipei; Taiwan, 50 metric tons of Dicalcium
Phosphate. Shipment was insured by the defendant
First Insurance Co. for US$19,500.00 "against all
risks" at port of departure, with the note "Claim, if
any, payable in U.S. currency at Manila and with
defendant Smith, Bell, and Co. stamped at the
lower left side of the policy as "Claim Agent."
2. The cargo arrived at the Port of Manila.
Thereafter, the entire cargo was discharged to the
local arrastre contractor, Metroport Services Inc.
with a number of the cargo in apparent bad order
condition.
3. Chua filed with Smith, Bell, and Co., Inc. a
formal statement of claim with proof of loss and a
demand for settlement of the corresponding value
of the losses.
4. After purportedly conveying the claim to its
principal, Smith, Bell, and Co., Inc. informed the
plaintiff that its principal offered only50% of the
claim, on the alleged ground of discrepancy
between the amounts contained in the shipping
agent's reply to the claimant with that of Metro
ports.
5. The offer not being acceptable to the
plaintiff, the latter wrote Smith, Bell, & Co.
expressing his refusal to the "redress" offer,
contending that the discrepancy was a result of loss
from vessel to arrastre to consignees' warehouse,
which losses were still within the "all risk" insurance
cover. No settlement of the claim having been
made, the plaintiff then caused the instant case to
be filed.
6. Denying any liability, defendant-appellant
averred in its answer that it is merely a claim agent
of defendant insurance company and as such
agent, it is not personally liable under the policy in
which it has not even taken part of.
RTC rendered a decision against smith-Bell, ruling
that since it is admittedly a claim agent of the
foreign insurance firm doing business in the
Philippines justice is better served if said agent is
made liable without prejudice to its right of action
against its principal, the insurance firm.
ISSUE: WON the petitioner, in its capacity as
resident agent be held solidarily liable with the
foreign insurer?
HELD:
1 The Court said NO. Petitioner, undisputedly
a settling agent acting within the scope of its
authority, cannot be held personally and/or
principal merely because there is allegedly a need
for a speedy settlement of the claim of private
respondent.
2. The court held that the scope and extent of
the functions of an adjustment and settlement
agent do not include personal liability. His functions
are merely to settle and adjusts claims in behalf of
his principal. The recourse of the insured is to press
his claim against the principal.
3. Under Article 1207 of the Civil Code clearly
provides that "there is a solidary liability only when
the obligation expressly so states, or when the law
or the nature of the obligation requires solidarity."
4. The well-entrenched rule is that solidary
obligation cannot lightly be inferred. It must be
positively and clearly expressed.
5. The contention that, in the end, it would
really be First Insurance Company, Ltd. which
would be held liable cannot be accepted.
6. Because it would inflict injustice upon
petitioner which would be made to advance the
funds to settle the claim without any assurance that
it can collect from the principal which disapproved
such claim, in the first place.
6. Also the Insurance Code is quite clear as to
the Purpose and role of a resident agent. Such
agent, as a representative of the foreign insurance
company, is tasked only to receive legal processes
on behalf of its principal and not to answer
personally for any insurance claims.
Here the agent cannot be sued nor held liable
whether singly or solidarily with its principal. Every
cause of action ex contractu must be founded upon
a contract, oral or written, either express or implied.
The only "involvement" of petitioner in the subject
contract of insurance was having its name stamped
at the bottom left portion of the policy as "Claim
Agent. "Without anything else to back it up, such
stamp cannot even be deemed by the remotest
interpretation to mean that petitioner participated in
the preparation of said contract. Hence, there is
no privity of contract, and correspondingly there
can be no obligation or liability, and thus no Cause
of action against petitioner attaches.Under Article
1311 of the Civil Code, contracts are binding
onlyupon the parties (and their assigns and heirs)
who execute them.
The subject cargo insurance was between the First
Insurance Company, Ltd. and the Chin Gact Co.,
Ltd., both of Taiwan, and was signed in Taipei,
Taiwan by the president of the First Insurance
Company, Ltd. and the president of the Chin Gact
Co., Ltd. 18 There is absolutely nothing in the
contract which mentions the personal liability of
petitioner.
PACIFIC BANKING CORPORATION and
CHESTER G. BABST, petitioners,
vs.
THE COURT OF APPEALS, JOSEPH C. HART
and ELEANOR HART, respondents.
FACTS:
1 The Insular Farms Inc. in which the private
respondent where one of the stockholders
borrowed P 250,000.00 from Pacific Banking
Corporation Due to financial difficulties.
2. On July 31, 1956 Insular Farms Inc.
executed a Promissory Note of P 250,000.00 to the
bank payable in five equal annual instalments, the
first instalment payable on or before July 1957.
Said note provided that upon default in the payment
of any instalment, all other instalments shall
become due and payable.
3. This loan was effected and the money
released without any security except for the
Continuing Guaranty executed on July 18, 1956, of
John Clarkin, who owned seven and half percent of
the capital stock of the bank, and his wife Helen.
4. Unfortunately, the business floundered.
Nevertheless, petitioner and its then Executive Vice
President, petitioner Chester Babst, did not
demand payment for the initial July 1957
installment nor of the entire obligation, but instead
opted for more collateral in addition to the guaranty
of Clarkin.
5. As the business further deteriorated and the
situation became desperate, Hart agreed to
Clarkin's proposal that all Insular Farms shares of
stocks be pledged to petitioner bank in lieu of
additional collateral and to insure an extension of
the period to pay the July 1957 installment. Said
pledge was executed on February 19, 1958.
6. March 4, 1958, the petitioners wrote Insular
Farms Inc. giving the latter 48 hours to pay its
entire obligation.
7. On March 7, 1958, Hart received notice that
the pledged shares of stocks of Insular Farms Inc.
would be sold at public auction to satisfy Insular
Farms' obligation.
8. The private respondents contend that the
sale by petitioners of the shares of stock of private
respondent to the Pacific Farms is void on the
ground that when said shares were pledged to the
bank it was done to cause an indefinite extension of
time to pay their obligation and also they observed
that no demand was made by the bank for its
payment. The bank merely asked for more
collateral.
.
9. The petitioners replied that the payment of a
note may be extended by an oral agreement, but
that agreement to extend the time of payment in
order to be valid must be for a definite time.
ISSUE: Whether or not the indefinite extension of
time with respect to the payment of the loan is valid
RULING:
1 The Supreme Court said Yes, the general
rule is that an agreement to extend the time of
payment, in order to be valid, must be for a definite
time, but it is not absolute and admits of
qualifications and exceptions which is although it
seems that no precise date be fixed, it being
sufficient that the time can be readily determined.
2. Now in case the period of extension is not
precise, the provisions of Article 1197 of the Civil
Code should apply. In this case, there was an
agreement to extend the payment of the loan,
including the first installment which was due on or
before July 1957.
3. The court is well convinced that Hart had
been given the assurance by the conduct of the
petitioner, that payment would not as yet be
pressed, and under 1197 of the Civil Code, the
meaning must be that there having been intended a
period to pay, modifying the fixed period in original
promissory note, now, the cause of action of
petitioner would have been to ask the Courts for the
fixing of the term;
4. In this case the pledge constituted on
February 19, 1958 on the shares of stocks of
respondent was sufficient consideration for the
extension, considering that this pledge was the
additional collateral required by the petitioners in
addition to the continuing guarantee of Clarkin.
The Court of Appeals noted that no demand for
payment of the P50,000.00 was made right after it
allegedly fell due. It was only on March 4, 1958 or
13 days after the execution of the pledge
instrument on February 19,1958 that PBC
presented its demand for payment to Insular
Farms.

ROLANDO T. CATUNGAL, JOSE T. CATUNGAL,
JR., CAROLYN T. CATUNGAL and ERLINDA
CATUNGAL-WESSEL, Petitioners,
vs.
ANGEL S. RODRIGUEZ, Respondent.
Facts:
1 Agapita T. Catungal (Agapita) owned a
parcel of land in her name situated in the Barrio of
Talamban, Cebu City. Agapita, with the consent of
her husband Jose, entered into a Contract to Sell
with respondent Rodriguez. Subsequently, the
Contract to Sell was purportedly "upgraded" into a
Conditional Deed of Sale.
2. It was agreed that P25,000,000.00 shall be
payable in instalments after the VENDEE have
successfully negotiated, secured and provided a
Road Right of Way. Also in the provision it was
stipulated that the Road Right of Way shall be the
responsibility of the VENDEE to secure and any or
all cost relative to the acquisition thereof shall be
borne solely by the VENDEE. He shall, however, be
accorded with enough time necessary for the
success of his endeavor, granting him a free hand
in negotiating for the passage.
3. If however said Road Right of Way could
not be negotiated, the VENDEE shall give notice to
the VENDOR for them to reassess and solve the
problem by taking other options and should the
situation ultimately prove futile, he shall take steps
to rescind or cancel the herein Conditional Deed of
Sale.
4. The spouses Catungal requested an
advance of P5, 000,000.00 for personal reasons.
Shortly after the respondent refusal to pay the
advance, he learned that the Catungals were
offering the property for sale to third parties.
5. Jose cancelled the contract. Then the
respondent filed for a restraining order a writ of
preliminary injunction.
6. The Catungals alleged that there was
contractual breach and bad faith on the part of
Rodriguez. The petitioners also said that more than
sufficient time had already been given to the
respondent to negotiate the road right of way and
this "enough time" to negotiate, had already lapsed
by the time they demanded the payment of
P5,000,000.00 from respondent.
ISSUE: Whether or not the stipulation to negotiate
and secure a road right of way, had already lapsed
thus justified their act of rescinding the Conditional
Deed of Sale.
Held
1 The Supreme Court said No,
2. It is evident from the language of paragraph
1(b) that the condition precedent (for respondents
obligation to pay the balance of the purchase price
to arise) involves an obligation to do, the
undertaking of respondent to negotiate and secure
a road right of way at his own expense.
3. Paragraph 1(c) Stated: c. That the access
road or Road Right of Way shall be the
responsibility of the VENDEE to secure and any or
all cost relative to the acquisition thereof shall be
borne solely by the VENDEE. He shall, however, be
accorded with enough time necessary for the
success of his endeavor, granting him a free hand
in negotiating for the passage.
4. In the case at bar assuming that the
petitioners were correct that the respondents
obligation to negotiate a road right of way was one
with an uncertain period, their rescission of the
Conditional Deed of Sale would still be
unwarranted.
5. Under Article 1197 of the Civil Code, the
petitioners had a remedy which mandates: That If
the obligation does not fix a period, but from its
nature and the circumstances it can be inferred that
a period was intended, the courts may fix the
duration thereof.
6. Which means the courts shall determine
such period, once fixed by the courts, the period
cannot be changed by them.
7. What the petitioners should have done was
to first file an action in court to fix the period within
which the respondents should accomplish the
successful negotiation of the road right of way.
8. Thus, the petitioners demand for the
respondent to make an additional payment of
P5,000,000.00 was premature and respondents
failure to accede to such demand did not justify the
rescission of the contract.
The provisions of the Conditional Deed of Sale
pertinent to the present dispute are quoted below:
1. The VENDOR for and in consideration of the
sum of TWENTY[-]FIVE MILLION PESOS
(P25,000,000.00) payable as follows:
a. FIVE HUNDRED THOUSAND PESOS
(P500,000.00) downpayment upon the
signing of this agreement, receipt of which
sum is hereby acknowledged in full from the
VENDEE.
b. The balance of TWENTY[-]FOUR
MILLION FIVE HUNDRED THOUSAND
PESOS (P24,500,000.00) shall be payable
in five separate checks, made to the order
of JOSE Ch. CATUNGAL, the first check
shall be for FOUR MILLION FIVE
 HUNDRED THOUSAND PESOS
(P4,500,000.00) and the remaining balance
to be paid in four checks in the amounts of
FIVE MILLION PESOS (P5,000,000.00)
each after the VENDEE have (sic)
successfully negotiated, secured and
provided a Road Right of Way consisting of
12 meters in width cutting across Lot 10884
up to the national road, either by widening
the existing Road Right of Way or by
securing a new Road Right of Way of 12
meters in width. If however said Road Right
of Way could not be negotiated, the
VENDEE shall give notice to the VENDOR
for them to reassess and solve the problem
by taking other options and should the
situation ultimately prove futile, he shall take
steps to rescind or cancel the herein
Conditional Deed of Sale.
c. That the access road or Road Right of
Way leading to Lot 10963 shall be the
responsibility of the VENDEE to secure and
any or all cost relative to the acquisition
thereof shall be borne solely by the
VENDEE. He shall, however, be accorded
with enough time necessary for the success
of his endeavor, granting him a free hand in
negotiating for the passage.
However, having made the observation that
it was desirable for the Catungals to file a separate
action to fix the period for respondent Rodriguezs
obligation to negotiate a road right of way, the Court
finds it necessary to fix said period in these
proceedings.
If still warranted, Rodriguez is given a
period of thirty (30) days from the finality of this
decision to negotiate a road right of way. In the
event no road right of way is secured by Rodriquez
at the end of said period, the parties shall reassess
and discuss other options as stipulated in
paragraph 1(b) of the Conditional Deed of Sale
and, for this purpose, they are given a period of
thirty (30) days to agree on a course of action.
Should the discussions of the parties prove futile
after the said thirty (30)-day period, immediately
upon the expiration of said period for discussion,
Rodriguez may (a) exercise his option to rescind
the contract, subject to the return of his
downpayment, in accordance with the provisions of
paragraphs 1(b) and 5 of the Conditional Deed of
Sale or (b) waive the road right of way and pay the
balance of the deducted purchase price as
determined in the RTC Decision dated May 30,
1992.
FELIPE AGONCILLO, and his wife, MARCELA
MARIO, plaintiff-appellees,
vs.
CRISANTO JAVIER, administrator of the estate of
the late Anastasio Alano. FLORENCIO ALANO and
JOSE ALANO, defendants-appellants.
FACTS:
1 In 1897, one Anastasio Cruz incurred a
P2,730.50 loan from Marcela Mario, wife of Felipe
Agoncillo. Cruz however died. Later, in February
1904, the heirs of Cruz, namely: Jose Alano,
Anastasio Alano (for his children), and Florencio
Alano executed a document whereby they
promised to pay Marcela the said debt. The debt is
scheduled to mature on February 27, 1905.
2. In 1908, Anastasio Alano paid P200.00
pesos to Marcela. The payment was received as
payment made on the account of the debt of
Anastacio Alano. Apparently, other than the
P200.00 payment from Anastasio Alano, no other
payment was received from the Alanos.
3. In 1912, Anastasio Alano died. Crisanto
Javier was named as the administrator of Anastasio
Alanos estate.
4. In March 1916, Agoncillo and Marcela filed
a civil case against the Javier as administrator of
Anastasio Alanos estate. Florencio and Jose were
impleaded.
5. Agoncillos claim is barred by the statute of
limitations; that Agoncillo has ten years from the
date of maturity (February 1905) to collect hence
his collection effort in 1916 is already way beyond
the prescriptive period.
6. Agoncillo averred that the payment of
P200.00 by Anastasio Alano in 1908 has tolled the
running of the prescriptive period hence his civil
action in 1916 is still within the 10 year prescriptive
period.
ISSUE: Whether or not Agoncillos claim is barred
by the statute of limitations.
HELD:
1 Yes. One mode of extinguishing an
obligation is by prescription. It cannot be said that
the payment made by Anastasio Alano in 1908
suspended the running of the period of prescription.
2. For one, it is doubtful that he was ever
personally liable to the document executed in
February 1904 because he signed the same on
behalf of his children (Leonina, Anastacio,
Leocadio) who were not made parties to this
case.
3. At any rate, assuming arguendo that it did
toll the running of the statute of limitations, it only
suspended it as regards to him alone and it did not
bind his brothers (Jose and Florencio).
4. This is because there was no showing that
Anastasio Alano made the P200.00 payment with
the authority of Florencio and Jose or for the benefit
of the two. Further, the payment was received by
Marcela as payment made on the account of the
debt of Anastacio Alano.
ONG GUAN CAN and THE BANK OF THE
PHILIPPINE ISLANDS, plaintiffs-appellees,
vs.
THE CENTURY INSURANCE CO., LTD.,
defendant-appellant.
FACTS:
1 A building of the plaintiff was insured against
fire by the defendant in the sum of P30,000, as well
as the goods and merchandise contained in the
sum of P15,000. The house and merchandise
insured were burnt early in the morning of February
28, 1923.
2. The appellant contends that under clause
14 of the conditions of the policies, that it may
rebuild the house burnt.
The clause cites by the appellant is as
follows:
The Company may at its option
reinstate or replace the property
damaged or destroyed, or any part
thereof, instead of paying the
amount of the loss of damages, or
may join with any other Company or
insurers in so doing, but the
Company shall not be bound to
reinstate exactly or completely, but
only as circumstances permit and in
reasonable sufficient manner, and in
no case shall the Company be
bound to expend more in
reinstatement that it would have cost
to reinstate such property as it was
at the time of the occurrence of such
loss or damage, nor more than the
sum insured by the Company
thereon.
3. However the plaintiff did not give his assent
to the proposition, for the reason that the new
house would be smaller and of materials of lower
kind than those employed in the construction of the
house destroyed.
ISSUE: Whether or not the defendant which is the
debtor can compel the plaintiff which is the creditor
to accept the proposal?
RULING:
1 The Supreme Court said No, defendant
cannot compel the plaintiff to accept the proposal?
Article 1199 states that A person
alternatively bound by different prestations
shall completely perform one of them.
The creditor cannot be compelled to receive
part of one and part of the other
undertaking.
2 In the case at bar it is expressly stated in
the condition that the defendant may either pay the
insured value of house, or rebuild it. Its effect
therefore is to make the obligation of the insurance
company an alternative one.
3. It must be noted that in alternative
obligations, the debtor, the defendant in this case,
must notify the creditor of his election, stating which
of the two prestations he is disposed to fulfill.
4. The notice will give the creditor an
opportunity to express his consent, or to impugn
the election made by the debtor, and only after said
notice shall the election take legal effect when
consented by the creditor, or if impugned by the
creditor (plaintiff), when declared proper by a
competent court.
5. In the instance case, the defendant did not
give a formal notice of its election to rebuild the
house destroyed.
6. Because of that the plaintiff did not give his
assent to the proposition, for the reason that the
new house would be smaller and of materials of
lower kind.
7. The trial judge in his decision said that it
would be an imposition unequitable, as well as
unjust, to compel the plaintiff to accept the
rebuilding of a smaller house with a lower kind of
materials than without offering him an additional
indemnity for the difference in size between the two
houses.
FACTS FROM THE FULLTEXT
On April 19, 1924, the Court of First Instance of
Iloilo rendered a judgment in favor of the plaintiff,
sentencing the defendant company to pay him the
sum of P45,000, the value of certain policies of fire
insurance, with legal interest thereon from February
28, 1923, until payment, with the costs. The
defendant company appealed from this judgment,
and now insists that the same must be modified
and that it must be permitted to rebuild the house
burnt, subject to the alignment of the street where
the building was erected, and that the appellant be
relieved from the payment of the sum in which said
building was insured.
A building of the plaintiff was insured against fire by
the defendant in the sum of P30,000, as well as the
goods and merchandise therein contained in the
sum of P15,000. The house and merchandise
insured were burnt early in the morning of February
28, 1923, while the policies issued by the defendant
in favor of the plaintiff were in force.
The appellant contends that under clause 14 of the
conditions of the policies, it may rebuild the house
burnt, and although the house may be smaller, yet
it would be sufficient indemnity to the insured for
the actual loss suffered by him.
The clause cites by the appellant is as
follows:lawphi1.net
The Company may at its option reinstate or
replace the property damaged or destroyed,
or any part thereof, instead of paying the
amount of the loss of damages, or may join
with any other Company or insurers in so
doing, but the Company shall not be bound
to reinstate exactly or completely, but only
as circumstances permit and in reasonable
sufficient manner, and in no case shall the
Company be bound to expend more in
reinstatement that it would have cost to
reinstate such property as it was at the time
of the occurrence of such loss or damage,
nor more than the sum insured by the
Company thereon.
If this clause of the policies is valid, its effect is to
make the obligation of the insurance company an
alternative one, that is to say, that it may either pay
the insured value of house, or rebuild it. It must be
noted that in alternative obligations, the debtor, the
insurance company in this case, must notify the
creditor of his election, stating which of the two
prestations he is disposed to fulfill, in accordance
with article 1133 of the Civil Code. The object of this
notice is to give the creditor, that is, the plaintiff in
the instant case, opportunity to express his
consent, or to impugn the election made by the
debtor, and only after said notice shall the election
take legal effect when consented by the creditor, or
if impugned by the latter, when declared proper by
a competent court. In the instance case, the record
shows that the appellant company did not give a
formal notice of its election to rebuild, and while the
witnesses, Cedrun and Cacho, speak of the
proposed reconstruction of the house destroyed,
yet the plaintiff did not give his assent to the
proposition, for the reason that the new house
would be smaller and of materials of lower kind
than those employed in the construction of the
house destroyed. Upon this point the trial judge
very aptly says in his decision: "It would be an
imposition unequitable, as well as unjust, to compel
the plaintiff to accept the rebuilding of a smaller
house than the one burnt, with a lower kind of
materials than those of said house, without offering
him an additional indemnity for the difference in
size between the two house, which circumstances
were taken into account when the insurance
applied for by the plaintiff was accepted by the
defendant." And we may add: Without tendering
either the insured value of the merchandise
contained in the house destroyed, which amounts
to the sum of P15,000.itc@alf
We find in the record nothing to justify the reversal
of the finding of the trial judge, holding that the
election alleged by the appellant to rebuild the
house burnt instead of paying the value of the
insurance is improper. To our mind, the judgment
appealed from is in accordance with the merits of
the case and the law, and must be, as is hereby,
affirmed with the cost against the appellant. So
ordered.