INSURANCE

G.R. No. L-16215 June 29, 1963

SIMEON DEL ROSARIO, plaintiff-appellee, vs. THE EQUITABLE INSURANCE AND CASUALTY CO., INC., defendant-appellant. PAREDES, J.: On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal Accident PolicyNo. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein plaintiff-appellee, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death of the insured. The pertinent provisions of the Policy, recite: Part I. Indemnity For Death If the insured sustains any bodily injury which is effected solely through violent, external, visible and accidental means, and which shall result, independently of all other causes and within sixty (60) days from the occurrence thereof, in the Death of the Insured, the Company shall pay the amount set opposite such injury: Section 1. Injury sustained other than those specified below unless excepted hereinafter. . . . . . . . P1,000.00 Section 2. Injury sustained by the wrecking or disablement of a railroad passenger car or street railway car in or on which the Insured is travelling as a farepaying passenger. . . . . . . . P1,500.00 Section 3. Injury sustained by the burning of a church, theatre, public library or municipal administration building while the Insured is therein at the commencement of the fire. . . . . . . . Section 4. Injury sustained by the wrecking or disablement of a regular passenger elevator car in which the Insured is being conveyed as a passenger (Elevator in mines excluded) P2,500.00 Section 5. Injury sustained by a stroke of lightning or by a cyclone. . . . . . . .

P2,000.00

P3,000.00

xxx

xxx

xxx

Part VI. Exceptions This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability, Hospital fees, or Loss of Time, caused to the insured: . . . (h) By drowning except as a consequence of the wrecking or disablement in the Philippine waters of a passenger steam or motor vessel in which the Insured is travelling as a farepaying passenger; . . . . A rider to the Policy contained the following: IV. DROWNING It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy is hereby waived by the company, and to form a part of the provision covered by the policy. On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the motor launch "ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios Jayme, were forced to jump off said

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launch on account of fire which broke out on said vessel, resulting in the death of drowning, of the insured and beneficiary in the waters of Jolo. 1wph1.t On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for payment with defendant company, and on September 13, 1957, defendant company paid to him (plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of the policy. The receipt signed by plaintiff reads RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO., INC., the sum of PESOS ONE THOUSAND (P1,000.00) Philippine Currency, being settlement in full for all claims and demands against said Company as a result of an accident which occurred on February 26, 1957, insured under out ACCIDENT Policy No. 7136, causing the death of the Assured. In view of the foregoing, this policy is hereby surrendered and CANCELLED. LOSS COMPUTATION Amount __________ vvvvv of Insurance P1,000.00

On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but informing said company that said amount was not the correct one. Atty. Francisco claimed The amount payable under the policy, I believe should be P1,500.00 under the provision of Section 2, part 1 of the policy, based on the rule of pari materia as the death of the insured occurred under the circumstances similar to that provided under the aforecited section. Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner, who rendered an opinion that the liability of the company was only P1,000.00, pursuant to Section 1, Part I of the Provisions of the policy (Exh. F, or 3). Because of the above opinion, defendant insurance company refused to pay more than P1,000.00. In the meantime, Atty. Vicente Francisco, in a subsequent letter to the insurance company, asked for P3,000.00 which the Company refused, to pay. Hence, a complaint for the recovery of the balance of P2,000.00 more was instituted with the Court of First Instance of Rizal (Pasay City, Branch VII), praying for it further sum of P10,000.00 as attorney's fees, expenses of litigation and costs. Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is set forth in the complaint had already been released, plaintiff having received the full amount due as appearing in policy and as per opinion of the Insurance Commissioner. An opposition to the motion to dismiss, was presented by plaintiff, and other pleadings were subsequently file by the parties. On December 28, 1957, the trial court deferred action on the motion to dismiss until termination of the trial of the case, it appearing that the ground thereof was not indubitable. In the Answer to the complaint, defendant company practically admitted all the allegations therein, denying only those which stated that under the policy its liability was P3,000.00. On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent portions of which read xxx xxx xxx Since the contemporaneous and subsequent acts of the parties show that it was not their intention that the payment of P1,000.00 to the plaintiff and the signing of the loss receipt exhibit "1" would be considered as releasing the defendant completely from its liability on the policy in question, said intention of the parties should prevail over the contents of the loss receipt "1" (Articles 1370 and 1371, New Civil Code). ". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to P3,000.00 as indemnity for the death of the insured. The insured died of drowning. Death by drowning is covered by the policy the pertinent provisions of which reads as follows: xxx xxx xxx

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"Part I of the policy fixes specific amounts as indemnities in case of death resulting from "bodily injury which is effected solely thru violence, external, visible and accidental means" but, Part I of the Policy is not applicable in case of death by drowning because death by drowning is not one resulting from "bodily injury which is affected solely thru violent, external, visible and accidental means" as "Bodily Injury" means a cut, a bruise, or a wound and drowning is death due to suffocation and not to any cut, bruise or wound." xxx xxx xxx

Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for recovery apart from the bodily injury because death by bodily injury is covered by Part I of the policy while death by drowning is covered by Part VI thereof. But while the policy mentions specific amounts that may be recovered for death for bodily injury, yet, there is not specific amount mentioned in the policy for death thru drowning although the latter is, under Part VI of the policy, a ground for recovery thereunder. Since the defendant has bound itself to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but the policy does not positively state any definite amount that may be recovered in case of death by drowning, there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to allow greater indemnity. xxx xxx xxx . . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the amount of P1,000.00 to the plaintiff so that there still remains a balance of P2,000.00 of the amount to which plaintiff is entitled to recover under the policy Exhibit "A". The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation. However, since it is evident that the defendant had not acted in bad faith in refusing to pay plaintiff's claim, the Court cannot award plaintiff's claim for attorney's fees and expenses of litigation. IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision dated July 21, 1958 and hereby renders judgment, ordering the defendant to pay plaintiff the sum of Two Thousand (P2,000.00) Pesos and to pay the costs. The above judgment was appealed to the Court of Appeals on three (3) counts. Said Court, in a Resolution dated September 29, 1959, elevated the case to this Court, stating that the genuine issue is purely legal in nature. All the parties agree that indemnity has to be paid. The conflict centers on how much should the indemnity be. We believe that under the proven facts and circumstances, the findings and conclusions of the trial court, are well taken, for they are supported by the generally accepted principles or rulings on insurance, which enunciate that where there is an ambiguity with respect to the terms and conditions of the policy, the same will be resolved against the one responsible thereof. It should be recalled in this connection, that generally, the insured, has little, if any, participation in the preparation of the policy, together with the drafting of its terms and Conditions. The interpretation of obscure stipulations in a contract should not favor the party who cause the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance company. . . . . 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 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," (29 Am. Jur. 181) and the reason for this rule is that the "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 expert and legal advisers employed by, and acting exclusively in the interest of, the insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151, Dec. 16, 1955. . . . . Where two interpretations, equally fair, of languages used in an insurance policy may be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749). At any event, the policy under consideration, covers death or disability by accidental means, and the appellant insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the insured.

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In view of the conclusions reached, it would seem unnecessary to discuss the other issues raised in the appeal. The judgment appealed from is hereby affirmed. Without costs. G.R. No. L-23491 July 31, 1968

TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET AL., plaintiffs-appellees, vs. THE CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant. FERNANDO, J.: The principal legal question in this appeal from a lower court decision, ordering defendant-appellant The Capital Insurance & Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi Co., Inc. as well as plaintiffs-appellees, widow and children of the deceased Alfredo Monje, who, in his lifetime, was employed as a taxi driver of such plaintiff-appellee, "the sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint until fully paid," with P500.00 as attorney's fees and the costs of the suit, is whether or not a provision in the insurance contract that defendant-appellant will indemnify any authorized driver provided that [he] is not entitled to any indemnity under any other policy, it being shown that the deceased was paid his workman's compensation from another insurance policy, should defeat such a right to recover under the insurance contract subject of this suit. The lower court answered in the negative. Its holding cannot be successfully impugned. The appealed decision stated at the outset that the motion for judgment on the pleadings filed by the plaintiffs was granted, the defendant having no objection and the issue presented being capable of resolution without the need of presenting any evidence. Then the decision continues: "Alfredo Monje, according to the complaint, was employed as taxi driver by the plaintiff Taurus Taxi Co., Inc. On December 6, 1962, the taxi he was driving collided with a Transport Taxicab at the intersection of Old Sta. Mesa and V. Mapa Streets, Manila, resulting in his death. At the time of the accident, there was subsisting and in force Commercial Vehicle Comprehensive Policy No. 101, 737 ... issued by the defendant to the Taurus Taxi Co., Inc. The amount for which each passenger, including the driver, is insured is P5,000.00. After the issuance of policy No. 101, 737, the defendant issued the Taurus Taxi Co., Inc. Indorsement No. 1 which forms 1 part of the policy ... " Reference was then made to plaintiff-appellee Felicitas Monje being the widow of the taxi driver, the other plaintiffs-appellees with the exception of the Taurus Taxi Co., Inc., being the children of the couple. After which it was noted that plaintiff Taurus Taxi Co., Inc. made representations "for the payment of the insurance benefit corresponding to her and her children since it was issued in its name, benefit corresponding to her and her children, ... but 2 despite demands ... the defendant refused and still refuses to pay them." On the above facts, the liability apparently clear, the defenses interposed by defendant insurance company being in the opinion of the lower court without merit, the aforesaid judgment was rendered. This being a direct appeal, to us on questions of law, the facts as found by the lower court cannot be controverted. Defendant-appellant Capital Insurance & Surety Co. Inc. alleged as the first error of the lower court its failure to hold "that in view of the fact that the deceased Alfredo Monje was entitled to indemnity under another insurance policy issued by Ed. A. Keller Co., Ltd., the heirs of the said deceased are not entitled to indemnity under the insurance policy issued by appellant for the reason that the latter policy contains a stipulation that "the company will indemnify any authorized driver 3 provided that such authorized driver is not entitled to indemnity under any other policy." " In the discussion of the above error, defendant-appellant stated the following: "The facts show that at the time of his death, the deceased Alfredo Monje, as authorized driver and employee of plaintiff Taurus Taxi Co., Inc., was entitled to indemnity under another insurance policy, then subsisting, which was Policy No. 50PH-1605 issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi Co., Inc. As a matter of fact, the indemnity to which the deceased Alfredo Monje was entitled under the said Policy No. 50PH-1605 was paid by Ed. A. Keller Co., Ltd. to the heirs of Alfredo Monje on December 28, 1962, as evidenced by the records of W.C.C. Case No. A88637 entitled "Felicitas V. Monje, et al. vs. Taurus Taxi Co., Inc.", Regional Office No. 4, Department 4 of Labor, Manila ... " The above defense, based on a fact which was not disputed, was raised and rightfully rejected by the lower court. From its own version, defendant-appellant would seek to escape liability on the plea that the workman's compensation to which the deceased driver was rightfully entitled was settled by the employer through a policy issued by another insurance firm. What was paid therefore was not indemnity but compensation.

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Since what is prohibited by the insurance policy in question is that any "authorized driver of plaintiff Taurus Taxi Co., Inc." should not be "entitled to any indemnity under any policy", it would appear indisputable that the obligation of defendantappellant under the policy had not in any wise been extinguished. It is too well-settled to need the citation of authorities that what the law requires enters into and forms part of every contract. The Workmen's Compensation Act, explicitly requires that an employee suffering any injury or death arising out of or in the course of employment be compensated. The fulfillment of such statutory obligation cannot be the basis for evading the clear, explicit and mandatory terms of a policy. In the same way as was held in Benguet Consolidated, Inc. v. Social Security System that sickness benefits under the Social Security Act may be recovered simultaneously with disability benefits under the Workmen's Compensation Act, the previous payment made of the compensation under such legislation is no obstacle by virtue of a clause like that invoked by defendant-appellant to the payment of indemnity under the insurance policy. Assuming however that there is a doubt concerning the liability of defendant-appellant insurance firm, nonetheless, it should be resolved against its pretense and in favor of the insured. It was the holding in Eagle Star Insurance, Ltd. v. Chia 6 Yu that courts are to regard "with extreme jealousy" limitations of liability found in insurance policies and to construe them in such a way as to preclude the insurer from non-compliance with his obligation. In other words, to quote a noted authority on the subject, "a contract of insurance couched in language chosen by the insurer is, if open to the construction contended for by the insured, to be construed most strongly, or strictly, against the insurer and liberally in favor of the 7 contention of the insured, which means in accordance with the rule contra proferentem." Enough has been said therefore to dispose of the first assigned error. The point is made in the second alleged error that the lower court ought to have held "that by joining the heirs of Alfredo Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc. committed a breach of policy condition and thus forfeited whatever 8 benefits, if any, to which it might be entitled under appellant's policy." The basis for such an allegation is one of the conditions set forth in the policy. Thus: " "5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company which shall be entitled if it so desires to take over and conduct in his name the defense or settlement of any claim or to prosecute in his name for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings and in the settlement of any claim 9 and the Insured shall give all such information and assistance as the Company may require ... " Such a plea is even less persuasive. It is understandable then why the lower court refused to be swayed by it. The plaintiff Taurus Taxi Co., inc. had to join the suit on behalf of the real beneficiaries, the heirs of the deceased driver, who are the other plaintiffs as it was a party to the policy. Moreover, as noted in the decision appealed from: "The institution of the action cannot possibly be construed as an admission, offer, promise, or payment by the company, for it merely seeks to enforce, by court action, the only legal remedy available to it, its rights under the contract of insurance to which it is a party. To consider, furthermore, the commencement of an action by the insured, alone or with others, as a breach of the policy, resulting in forfeiture of the benefits thereunder, to place in the hands of the insurer the power to nullify at will the whole contract of insurance by the 10 simple expedient of refusing to make payment and compelling the insured to bring a suit to enforce the policy." To so construe the policy to yield a contrary result is to put a premium on technicality. If such a defense is not frowned upon and rejected, the time will come when the confidence on the part of the public in the good faith of insurance firms would be minimized, if not altogether lost. Such a deplorable consequence ought to be avoided and a construction of any stipulation that would be fraught with such a risk repudiated. What the lower court did then cannot be characterized as error. The third error assigned, namely, that the lower court should have considered the filing of the complaint against defendant-appellant as unjust and unwarranted, is, in the light of the above, clearly without merit. WHEREFORE, the appealed decision of the lower court ordering defendant-appellant "to pay the plaintiffs the sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint until fully paid, P500.00 as attorney's 11 fees," with costs is affirmed. Costs against defendant-appellant.
5

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G.R. No. L-25920 January 30, 1970 CCC INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS (Fourth Division) and CARLOS F. ROBES, respondents. REYES, J.B.L., J.: Petition for review of the decision of the Court of Appeals, affirming that of the Court of First Instance of Rizal (Quezon City) allowing insurance indemnification of plaintiff for his damaged car and the payment of attorney's fees. The following facts are not in dispute: On 1 March 1961, 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 (Policy No. M1156). On 25 June 1961, and during the effectivity of the policy, 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. As the insurance company refused either to pay for the repair or to cause the restoration of the car to its original condition, Robes instituted Civil Case No. Q-6063 in the Court of First Instance of Rizal for recovery not only of the amount necessary for the repair of the insured car but also of actual and moral damages, attorneys' fees and costs. Resisting plaintiff's claim, 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." After due hearing, judgment was rendered for the plaintiff, and defendant insurer was ordered to pay unto the former the cost of repair of the car in the sum of P5,031.28; the sum of P150.00, for the hauling and impounding of the car at the repair shop; P2,000.00 as actual damages; and P1,000.00 as attorneys' fees, plus costs. The insurance company went to the Court of Appeals, raising inter alia the questions of the qualification of plaintiff's driver to operate the insured vehicle and the correctness of the trial court's award to plaintiff of the amount of P5,013.28 as cost of repairs, and of actual damages and attorneys' fees. In its decision of 31 January 1966, the Court of Appeals affirmed the ruling of the lower court except the award of actual damages in the sum of P2,000.00, which was eliminated on the ground that it was too speculative. Not content, the insurance company filed the present petition for review of the aforesaid decision of the Court of Appeals on two grounds: (1) that the proceedings observed in the trial court were irregular and invalid; and (2) that the damage to the insured car was not covered by the insurance policy because at the time of the accident it was being driven by one who was not an authorized driver. The second issue constitutes the main contention of herein appellant, and will be considered first. It is vigorously urged by the insurer that the one driving the insured vehicle at the time of the accident was not an authorized driver thereof within the purview of the following provision of the insurance policy: AUTHORIZED DRIVER: Any of the following: (a) The insured; (b) Any person driving on the Insured's order or with his permission, provided that the person driving is permitted in accordance with licensing laws or regulations to drive the motor vehicle covered by this Policy, or has been so permitted and is not disqualified by order of a court of law or by reason of any enactment or regulation from driving such Motor Vehicle. (Emphasis ours) It has been found as a fact by the Court of Appeals that Domingo Reyes, the, driver who was at the wheel of the insured car at the time of the accident, does not know how to read and write; that he was able to secure a driver's license, without passing any examination therefor, by paying P25.00 to a certain woman; and that the Cavite agency of the Motor Vehicles Office has certified not having issued Reyes' purported driver's license No. 271703 DP.

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In holding that the damage sustained by the car comes within the coverage of the insurance policy, the Court of Appeals argued that since Reyes' purported driver's license (Exhibit "A") bears all the earmarks of a duly issued license, then it is a public document, and petitioner insurance company then has the burden of disproving its genuineness, which the latter has failed to do. In this respect the Court of Appeals ruled: ... . The fact that the Cavite Agency of the Motor Vehicles Office states that Driver's License No. 271703 DP was not issued by that office, does not remove the possibility that said office may have been mistaken or that said license was issued by another agency. Indeed Exhibit 13 shows that a certain Gloria Presa made the notation thereon "no license issued" and which notation was the basis of the 1st Indorsement, Exhibit 12, signed by the MVO Cavite City Agency's officer-in-charge. Neither Gloria Presa nor the officer-in-charge Marciano A. Monzon was placed on the witness stand to be examined in order to determine whether said license is indeed void. As it is, as heretofore pointed out, the fact remains that Domingo Reyes is in possession of a driver's license issued by the Motor Vehicles Office which on its face appears to have been regularly issued. In effect, the Court of Appeals found that the driver's license No. 271703 DP was genuine, that is, one really issued by the Motor Vehicles Office or its authorized deputy; and this finding of fact is now conclusive and may not be questioned in this appeal. Nevertheless, the appellant insurer insists that, under the established facts of this case, Reyes, being admittedly one who cannot read and write, who has never passed any examination for drivers, and has not applied for a license from the duly constituted government agency entrusted with the duty of licensing drivers, cannot be considered an authorized driver. The fatal flaw in appellant's argument is that it studiously ignores the provisions of law existing at the time of the mishap. Under Section 24 of the Revised Motor Vehicles Law, Act 3992 of the Philippine Legislature, as amended by Republic 1 Acts Nos. 587, 1204 and 2863, An examination or demonstration to show any applicant's ability to operate motor vehicles may also be required in the discretion of the Chief, Motor Vehicles Office or his deputies. (Emphasis supplied) and reinforcing such discretion, Section 26 of the Act prescribes further: SEC. 26. Issuance of chauffeur's license; professional badge: If, after examination, or without the same, the Chief, Motor Vehicles Office or his deputies, believe the applicant to possess the necessary qualifications and knowledge, they shall issue to such applicant a license to operate as chauffeur ... (Emphasis supplied) It is thus clear that the issuance of a driving license without previous examination does not necessarily imply that the license issued is invalid. As the law stood in 1961, when the claim arose, the examinations could be dispensed with in the discretion of the Motor Vehicles Office official officials. Whether discretion was abused in issuing the license without examination is not a proper subject of inquiry in these proceedings, though, as a matter of legislative policy, the discretion should be eliminated. There is no proof that the owner of the automobile knew that the circumstance surrounding such issuance showed that it was irregular. The issuance of the license is proof that the Motor Vehicles Office official considered Reyes, the driver of the insuredappellee, qualified to operate motor vehicles, and the insured was entitled to rely upon such license. In this connection, it 2 should be observed that the chauffeur, Reyes, had been driving since 1957, and without mishap, for all the record shows. Considering that, as pointed out by the Court of Appeals, the weight of authority is in favor of a liberal interpretation of the insurance policy for the benefit of the party insured, and strictly against the insurer, We find no reason to diverge from the conclusion reached by the Court of Appeals that no breach was committed of the above-quoted provision of the policy. The next issue assigned is anchored on the fact that the decision of the trial court was based on evidence presented to and received by the clerk of court who acted as commissioner, although allegedly, there was no written court order constituting him as such commissioner, no written request for his commission was made by the parties; he did not take an oath prior to entering into the discharge of his commission; no written report of his findings was ever submitted to the court; and no notice thereof was sent to the parties, contrary to the specific provisions of Rule 33 of the Rules of Court. Actually there is nothing basically wrong with the practice of delegating to a commissioner, usually the clerk of court, who is a duly sworn court officer, the reception of both parties and for him to submit a report thereon to the court. In fact, this 3 procedure is expressly sanctioned by Revised Rule 33 of the Rules of Court. Petitioner's objection in this case, however,

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is directed not against its referral to the clerk of court but against the alleged non-observance of the prescribed steps in connection with such delegation. We find no cause sufficient to invalidate the proceedings had in the trial court. We note that this issue was brought up by the appellant insurance company or the first time only in its motion for reconsideration filed in the Court of Appeals. It was not raised in the trial court, where the defect could still be remedied. This circumstance precludes ventilation of the issue of validity of the hearing at this stage; for, if such irregularity is to vitiate the proceeding, the question should have been 4 seasonably raised, i.e., either before the parties proceeded with the hearing or before the court handed down its ruling. It 5 is a procedural point that can be waived by consent of the parties, express or implied. For the same reason, appellant cannot insist now on the annulment of the proceeding on the basis of alleged lack of written consent of the parties to the commission, or of an order appointing the clerk as commissioner, or of notice of the submission of his report to the court. Furthermore, appellant has presented no proof that the clerk of court committed any mistake or abuse in the performance of the task entrusted to him, or that the trial court was not able to properly appreciate the evidence in the case because it was received by another person. If indeed there were errors at all, they would be non6 prejudicial and could not justify the holding of a new trial, as urged by herein petitioner. WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against appellant CCC Insurance Corporation.

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G.R. No. L-28772, September 21, 1983 ASSOCIATION OF BAPTISTS FOR WORLD EVANGELISM, INC., PLAINTIFF-APPELLEE, VS. FIELDMEN'S INSURANCE CO., INC., DEFENDANTAPPELLANT. RESOLUTION MELENCIO-HERRERA, J.: This case for "Indemnity for Damages and Attorney's Fees" was elevated to this Tribunal by the then Court of Appeals on a question of law. The Stipulation of Facts submitted by the parties before the Court of First Instance of Davao, Branch I, in Case No. 3789, reads as follows: "COMES the parties in the above-entitled case, through their respective counsels and to this Honorable Court respectfully submit the following stipulations of facts: '1. That plaintiff is a religious corporation duly organized and registered under the laws of the Philippines, while defendant is also a domestic corporation duly organized and existing under the laws of the Philippines; '2. That plaintiff, having an insurable interest in a Chevrolet Carry-all, 1955 Model, with Motor No. 032433272555 and Plate No. E-73317 covered by Registration Certificate No. 288141 Rizal, issued by the Davao Motor Vehicles Office Agency No. 20 and owned by Reverend Clinton Bonnel, insured said vehicle with the defendant under Fieldmen's Insurance Co., Inc. Private Car Comprehensive Policy No. 22 Jl 1107, attached hereto as Annex 'A' to 'A-2' against loss or damage up to the amount of P5,000.00; '3. That in the latter part of 1961, through plaintiff's representative, Dr. Antonio Lim, the aforementioned Chevrolet Carry-all was placed at the Jones Monument Mobilgas Service Station at Davao City, under the care of said station's operator, Rene Te so that said carry-all could be displayed as being for sale, with the understanding that the latter or any of his station boys would receive a 2% commission should they sell said vehicle. '4. That on the night of January 18, 1962, Romeo Catiben one of the boys at the aforementioned Jones Monument Service Station and a nephew of the wife of Rene Te who is residing with them, took the aforementioned chevrolet carry-all for a joy ride to Toril, Davao City, without the prior permission, authority or consent of either the plaintiff or its representative Dr. Antonio Lim, or of Rene Te, and on its way back to Davao City, said vehicle, due to some mechanical defect accidentally bumped an electric post causing actual damages valued at P5,518.61. '5. That the issue before the Honorable Court is whether or not for the damage to the abovementioned Chevrolet Carry-all to be compensable under the aforementioned Fieldmen's Private Car Comprehensive Policy No. 22 JL11107, there must be a prior criminal conviction of Romeo Catiben for theft. 'WHEREFORE, it is respectfully prayed that this Honorable Court render judgment on the facts and issues above stipulated after the parties shall have submitted their respective memoranda." The Trial Court rendered judgment based on the facts stipulated and ordered defendant insurance company to pay plaintiff association the amount of P5,000.00 as indemnity for the damage sustained by the vehicle, P2,000.00 for attorney's fees, and costs. Dissatisfied, the insurance company interposed an appeal to the Appellate Court, docketed as CA-G.R. No. 33543-R, which as above stated, elevated it to this instance. We affirm. The Comprehensive Policy issued by the insurance company includes loss of or damage to the motor vehicle by "burglary x x x or theft." It is settled that the act of Catiben in taking the vehicle for a joy ride to Toril, Davao City, constitutes theft within the meaning of the insurance policy and that recovery for damage to the car is not barred by the illegal use of the car by one of the station boys."x x x where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be they employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban without the owner's consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in Article 308 of the Revised Penal Code, viz. '(W)ho are liable for theft. - Theft is committed by any person who, with intent to gain but without violence against or intimidation of persons nor force upon things, shall take personal property of another without the latter's consent,' for purposes of recovering the loss under the policy in question."

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"x x x the Court sustains as the better view that which holds that when a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C. Aquino cites in his work Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it 'hurto de uso.'[1] There need be no prior conviction for the crime of theft to make an insurer liable under the theft clause of the policy. Upon the facts stipulated by the parties it is admitted that Catiben had taken the vehicle for a joy ride and while the same was in his possession he bumped it against an electric post resulting in damages. That act is theft within a policy of insurance. In a civil action for recovery on an automobile insurance, the question whether a person using a certain automobile at the time of the accident stole it or not is to be determined by a fair preponderance of evidence and not by the rule of criminal law requiring proof of guilt beyond reasonable doubt.[2] Besides, there is no provision in the policy requiring prior criminal conviction for theft. ACCORDINGLY, finding no error in the judgment appealed from, the same is hereby affirmed. Costs against defendant Fieldmen's Insurance Co., Inc. SO ORDERED.

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G.R. No. L-28866 March 17, 1972 FE DE JOYA LANDICHO, in her own behalf and as judicial guardian of her minor children, RAFAEL J. LANDICHO and MA. LOURDES EUGENIA LANDICHO,plaintiffs-appellees, vs. GOVERNMENT SERVICE INSURANCE SYSTEM,defendant-appellant. . CONCEPCION, C.J.:p Appeal of the Government Service Insurance System hereinafter referred to as GSIS, for the sake of brevity from a decision of the Court of First Instance of Manila directing said defendant to pay to the plaintiffs-appellees, Fe de Joya Landicho and her minor children, Rafael J. and Maria Lourdes Eugenia, both surnamed Landicho, the sum of P15,800, with interest thereon, at the legal rate, from September 26, 1967, until fully paid, in addition to the sum of P1,000, as and for attorney's fees, and the costs. The facts are not in dispute. On June 1, 1964, the GSIS issued in favor of Flaviano Landicho, a civil engineer of the Bureau of Public Works, stationed at Mamburao, Mindoro Occidental, optional additional life insurance policyNo. OG136107 in the sum of P7,900. The policy states on its face: This insurance is granted subject to the terms and conditions hereinafter set forth and in consideration of the "Information" therefor and of the payment on the day this Policy takes effect of the monthly premiums stated above, due from and payable by the Insured, and the like payments on the last day of every month during the lifetime of the Insured until maturity of this Policy or until prior death of the Insured. On page 2 of said policy, condition No. 1 provides, in part: . 1. PAYMENT OF PREMIUMS: . ... . Premiums are due and payable at the Office of the System in Manila or at any of its branches. When any premium or installment thereof remains unpaid after its due date, such due date is the date of default in payment of premiums. The mere possession of this Policy does not imply that it is in force unless the premiums due thereon are paid on time or the policy has sufficient cash value to keep it in force. Condition No. 18, on page 8 of the policy, is of the following tenor: . 18. ENTIRE CONTRACT IN THIS POLICY: . This Policy together with the "Information" sheet signed by the Insured, a copy of which is attached hereto, is issued under the provisions of Commonwealth Act No. 186, as amended, and constitutes the entire contract. All statements made by the Insured shall, in the absence of fraud, be deemed representations and no warranties, and no statement shall void the Policy or be used as a defense to claim hereunder unless it be contained in written information and a copy of such information be endorsed upon or attached to the Policy when issued. Before the issuance of said policy, the insured had filed an application, by filing and signing a printed form of the GSIS on the basis of which the policy was issued. Paragraph 7 of said application States: 7. I hereby declare that all the above statements and answers as well as those I may make to the System's Medical Examiner in continuation of this application, to be true and co direct to the best of my knowledge and belief, and I hereby agree as follows: . a. That this declaration, with the answers to be given by me to the Medical Officer, shall be made the basis the policy and form part of the same; . b. That acceptance of my policy issued on this application will constitute a ratification by me of any correction or addition to this application made by the System; .

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c. That this application serves as a letter of authority to the Collecting Officer of our Office thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36, beginning the month of May, 1964, and every month thereafter until notice of its discontinuance shall have beenreceived from the System; . d. That the failure to deduct from my salary the month premiums shall not make the policy lapse, however, the premium account shall be considered as indebtedness which, I bind myself to pay the System; . e. That my policy shall be made effective on the first day of the month next following the month the first premium is paid; provided, that it is not more ninety (90) days before or after the date of the medical examination,was conducted if required." . While still under the employment of the Bureau of Public Works, Mr. Landicho met his death, on June 29, 1966, in an airplane crash in Mindoro. Thereupon, Mrs. Landicho, in her own behalf and that of her co-plaintiffs and minor children, Rafael J. and Maria Lourdes Eugenia, filed with the GSIS a claim for P15,800, as the double indemnity due under policy No. OG-136107, because of the untimely death of the insured owing to said accident. The GSIS denied the claim, upon the ground that the policy had never been in force because, pursuant to subdivision (e) of the above-quoted paragraph 7 of the application, the policy "shall be ... effective on the first day of the month next following the month the first premium is paid," and no premium had ever been paid on said policy. Upon refusal of the GSIS to reconsider its stand, this action was filed, September 22, 1967, in the Court of First Instance of Manila, in which the GSIS reiterated its aforementioned defense. Thereafter submitted by both parties for judgment on the pleadings, upon the ground thatthe case involve purely questions of law, said court rendered, in due course, its abovementioned decision, from which the GSIS has taken the present appeal. The main issue therein is whether or not the insurance policy in question has ever been in force, not a single premium having been paid thereon. In support of the affirmative, plaintiffs invoke the stipulation in the policy to the effect that the information contained in the application filed by the insured shall form part of the contract between him and the GSIS, and, especially, subdivisions (c) and (d) of paragraph 7 of said application stating that the same shall serve "as a letter of authority to the Collecting Officer of our Office" the Bureau of Public Works "thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36 beginning the month of May, 1964, and every month thereafter," and that "failure to deduct from my salary the monthly premiums shall notmake the policy lapse, however, the premium account 1 shall be considered as indebtedness which, I" the insured "bind myself to pay the System." The GSIS maintains, however, the negative, relying upon subdivision (e) of the same paragraph No. 7, which provides that the "policy shall be made effective on the first day of the month next following the month the first premium is paid." Under this theory, subdivisions (c) and (d) of said paragraph 7 would not apply unless and until the first premium shall have been actually paid, pursuant to subdivision (e) of the same paragraph. Although it may not be entirely farfetched, this view is not likely to be in accord with the understanding of many, if not most, government employees who obtain an optional additional life insurance policy. As a consequence, the actual receipt by them of their full pay without any deduction for premiums on their optional additional life insurance policies may not impart to them the warning which, otherwise, it would necessarily convey that said policy is not, as yet, in force, for they are liable to believe "that failure to deduct" from the salary of the insured "the monthly premiums shall not" in the language of subdivision (d) "make the policy lapse" and that "the premiums account shall be considered as indebtedness," to be paid or deducted later, because, after all, the so called "payment" of premiums is nothing but a "paper" or "accounting" process, whereby funds are merely transferred, not physically, but constructively, from one office of the government to another. In other words, the language, of subdivisions (c), (d) and (e) is such as to create an ambiguity that should be resolved against the party responsible therefor defendant GSIS, as the party who prepared and furnished the application form and in favor of the party misled thereby, the insured employee. Indeed, our Civil Code provides: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the 2 obscurity. This is particularly true as regards insurance policies, in respect of which it is settled 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" (29 Am. Jur., 181), and the reason for this rule is the "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

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deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company." 3 (44 C.J.S., p. 1174.) . The equitable and ethical considerations justifying the foregoing view are bolstered up by two (2) factors, namely: (a) The aforementioned subdivision (c) states "that this application serves as a letter of authority to the Collecting Officer of our Office" the Bureau of Public Works "thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36." No such deduction was made and, consequently, not even the first premium "paid" because the collecting officer of the Bureau of Public Works was not advised by the GSIS to make it (the deduction) pursuant to said authority. Surely, this omission of the GSIS should not inure to its benefit. . (b) The GSIS had impliedly induced the insured to believe that Policy No . OG-136107 was in force, he having been paid by the GSIS the dividends corresponding to said policy. Had the insured had the slightest inkling that the latter was not, as yet, effective for non-payment of the first premium, he would have, in all probability, caused the same to be forthwith satisfied. WHEREFORE, the decision appealed from should be, it is hereby affirmed, with costs against the defendant-appellant, Government Service Insurance System. It is so ordered. .

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FIRST DIVISION [G.R. No. 138941. October 8, 2001] AMERICAN HOME ASSURANCE COMPANY, petitioner, vs. TANTUCO ENTERPRISES, INC., respondent. DECISION PUNO, J.: Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CA-G.R. CV No. 52221 promulgated on January 14, 1999, which affirmed in toto the Decision of the Regional Trial Court, Branch 53, Lucena City in Civil Case No. 92-51 dated October 16, 1995. Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry. It owns two oil mills. Both are located at its factory compound at Iyam, Lucena City. It appears that respondent commenced its business operations with only one oil mill. In 1988, it started operating its second oil mill. The latter came to be commonly referred to as the new oil mill. The two oil mills were separately covered by fire insurance policies issued by petitioner American Home Assurance [1] Co., Philippine Branch. The first oil mill was insured for three million pesos (P3,000,000.00) under Policy No. 306[2] 7432324-3 for the period March 1, 1991 to 1992. The new oil mill was insured for six million pesos (P6,000,000.00) [3] under Policy No. 306-7432321-9 for the same term. Official receipts indicating payment for the full amount of the [4] premium were issued by the petitioner's agent. A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill. Respondent immediately notified the petitioner of the incident. The latter then sent its appraisers who inspected the burned premises and the properties destroyed. Thereafter, in a letter dated October 15, 1991, petitioner rejected respondents claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the description of the insured establishment referred to another building thus: Our policy nos. 306 -7432321-9 (Ps 6M) and 306-74323244 (Ps 3M) extend insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was under Building [5] No. 14. A complaint for specific performance and damages was consequently instituted by the respondent with the RTC, Branch 53 of Lucena City. On October 16, 1995, after trial, the lower court rendered a Decision finding the petitioner liable on the insurance policy thus: WHEREFORE, judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff: (a) P4,406,536.40 representing damages for loss by fire of its insured property with interest at the legal rate; (b) P80,000.00 for litigation expenses; (c) P300,000.00 for and as attorneys fees; and (d) Pay the costs. [6] SO ORDERED. Petitioner assailed this judgment before the Court of Appeals. The appellate court upheld the same in a Decision promulgated on January 14, 1999, the pertinent portion of which states: WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit and the trial courts Decision dated October 16, 1995 is hereby AFFIRMED in toto. SO ORDERED.
[7]

Petitioner moved for reconsideration. The motion, however, was denied for lack of merit in a Resolution promulgated on June 10, 1999. Hence, the present course of action, where petitioner ascribes to the appellate court the following errors: (1) The Court of Appeals erred in its conclusion that the issue of non -payment of the premium was beyond its [8] jurisdiction because it was raised for the first time on appeal. (2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy.
[9]

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(3) With due respect, the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the [10] principle of estoppel is erroneous. The petition is devoid of merit. The primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil mill is not covered by any insurance policy. According to it, the oil mill insured is specifically described in the policy by its boundaries in the following manner: Front: by a driveway thence at 18 meters distance by Bldg. No. 2. Right: Left: Rear: by an open space thence by Bldg. No. 4. Adjoining thence an imperfect wall by Bldg. No. 4. by an open space thence at 8 meters distance.

However, it argues that this specific boundary description clearly pertains, not to the burned oil mill, but to the other mill. In other words, the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy. What exacerbates respondents predicament, petitioner posits, is that it did not have the supposed wrong description or mistake corrected. Despite the fact that the policy in question was issued way back in 1988, or about three years before the fire, and despite the Important Notice in the policy that Please read and examine the policy and if incorrect, return it immediately for alteration, respondent apparently did not call petitioners attention with respect to the misdescription. By way of conclusion, petitioner argues that respondent is barred by the parole evidence rule from presenting evidence (other than the policy in question) of its self-serving intention (sic) that it intended really to insure the burned oil mill, just as it is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, because it retained the policy without having the same corrected before the fire by an endorsement in accordance with its Condition No. 28. These contentions can not pass judicial muster. In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving [11] effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however [12] inaccurate the description may be. Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. This is obvious from the categorical statement embodied in the policy, extending its protection: On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra, copra cake and copra mills whilst contained in the new oil mill building, situate (sic) at UNNO. ALONG NATIONAL HIGH WAY, [13] BO. IYAM, LUCENA CITY UNBLOCKED. (emphasis supplied.) If the parties really intended to protect the first oil mill, then there is no need to specify it as new . Indeed, it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. As mentioned earlier, the first oil mill is already covered under Policy No. 306-7432324-4 issued by the petitioner. It is unthinkable for respondent to obtain the other policy from the very same company. The latter ought to know that a second agreement over that same realty results in its overinsurance. The imperfection in the description of the insured oil mills boundaries can be attributed to a misunderstanding between the petitioners general agent, Mr. Alfredo Borja, and its policy issuing clerk, who made the error of copying the boundaries of the first oil mill when typing the policy to be issued for the new one. As testified to by Mr.Borja: Atty. G. Camaligan: Q: What did you do when you received the report?

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A: I told them as will be shown by the map the intention really of Mr. Edison Tantuco is to cover the new oil mill that is why when I presented the existing policy of the old policy, the policy issuing clerk just merely ( sic) copied the wording from the old policy and what she typed is that the description of the boundaries from the old policy was copied but she inserted covering the new oil mill and to me at that time the important thing is that it covered the new oil mill because it is just within one compound and there are only two oil mill [s] and so just enough, I had the policy prepared. In fact, two policies were prepared having the same date one for the old [14] one and the other for the new oil mill and exactly the same policy period, sir. (emphasis supplied)

It is thus clear that the source of the discrepancy happened during the preparation of the written contract. These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule. Under the Rules of Court, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading, among others, its failure to express the true intent and agreement of the [15] parties thereto. Here, the contractual intention of the parties cannot be understood from a mere reading of the instrument. Thus, while the contract explicitly stipulated that it was for the insurance of the new oil mill, the boundary description written on the policy concededly pertains to the first oil mill. This irreconcilable difference can only be clarified by admitting evidence aliunde, which will explain the imperfection and clarify the intent of the parties. Anent petitioners argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, we find that the same proceeds from a wrong assumption. Evidence on record reveals that respondents operating manager, Mr. Edison Tantuco, notified Mr. Borja (the petitioners agent with whom respondent negotiated for the contract) about the inaccurate description in the policy. However, Mr. Borja assured Mr. Tantuco that the use of the adjective new will distinguish the insured property. The assurance convinced respondent that, despite the impreciseness in the specification of the boundaries, the insurance will cover the new oil mill. This can be seen from the testimony on cross of Mr. Tantuco: "ATTY. SALONGA: Q: You mentioned, sir, that at least in so far as Exhibit A is concern you have read what the policy contents.(sic) Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the boundaries of the property insured by the insurance policy Exhibit A, will you tell us as the manager of the company whether the boundaries stated in Exhibit A-2 are the boundaries of the old (sic) mill that was burned or not. A: It was not, I called up Mr. Borja regarding this matter and he told me that what is important is the word new oil mill. Mr. Borja said, as a matter of fact, you can never insured ( sic) one property with two (2) policies, [16] you will only do that if you will make to increase the amount and it is by indorsement not by another policy, sir."

We again stress that the object of the court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. In determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In [17] determining the intent of the parties to the contract, the courts will consider the purpose and object of the contract. In a further attempt to avoid liability, petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium and breach of the Fire Extinguishing Appliances Warranty. The amount of the premium stated on the face of the policy was P89,770.20. From the admission of respondents own witness, Mr. Borja, which the petitioner cited, the former only paid it P75,147.00, leaving a difference of P14,623.20. The deficiency, petitioner argues, suffices to invalidate the policy, in accordance with Section 77 of the [18] Insurance Code. The Court of Appeals refused to consider this contention of the petitioner. It held that this issue was raised for the [19] first time on appeal, hence, beyond its jurisdiction to resolve, pursuant to Rule 46, Section 18 of the Rules of Court. Petitioner, however, contests this finding of the appellate court. It insists that the issue was raised in paragraph 24 of its Answer, viz.: 24. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date. Petitioner adds that the issue was the subject of the cross-examination of Mr. Borja, who acknowledged that the paid amount was lacking by P14,623.20 by reason of a discount or rebate, which rebate under Sec. 361 of the Insurance Code is illegal.

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The argument fails to impress. It is true that the asseverations petitioner made in paragraph 24 of its Answer ostensibly spoke of the policys condition for payment of the renewal premium on time and respondents non -compliance with it. Yet, it did not contain any specific and definite allegation that respondent did not pay the premium, or that it did not pay the full amount, or that it did not pay the amount on time. Likewise, when the issues to be resolved in the trial court were formulated at the pre-trial proceedings, the question of the supposed inadequate payment was never raised. Most significant to point, petitioner fatally neglected to present, during the whole course of the trial, any witness to testify that respondent indeed failed to pay the full amount of the premium. The thrust of the cross-examination of Mr. Borja, on the other hand, was not for the purpose of proving this fact. Though it briefly touched on the alleged deficiency, such was made in the course of discussing a discount or rebate, which the agent apparently gave the respondent. Certainly, the whole tenor of Mr. Borjas testimony, both during direct and cross examinations, implicitly assumed a valid and subsisting insurance policy. It must be remembered that he was called to the stand basically to demonstrate that an existing policy issued by the petitioner covers the burned building. Finally, petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty. The said warranty provides: WARRANTED that during the currency of this Policy, Fire Extinguishing Appliances as mentioned below shall be maintained in efficient working order on the premises to which insurance applies: - PORTABLE EXTINGUISHERS - INTERNAL HYDRANTS - EXTERNAL HYDRANTS - FIRE PUMP - 24-HOUR SECURITY SERVICES BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss [20] which may occur. Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. This fact was admitted by the oil mills expeller operator, Gerardo Zarsuela. Again, the argument lacks merit. We agree with the appellate courts conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein. Additionally, we find that neither did it require that the appliances are restricted to those mentioned in the warranty. In other words, what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property, fire fighting equipments such as, but not limited to, those identified in the list, which will serve as the oil mil ls first line of defense in case any part of it bursts into flame. To be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be found the [21] [22] following devices: numerous portable fire extinguishers, two fire hoses, fire hydrant, and an emergency fire [23] engine. All of these equipments were in efficient working order when the fire occurred. It ought to be remembered that not only are warranties strictly construed against the insurer, but they should, [24] likewise, by themselves be reasonably interpreted. That reasonableness is to be ascertained in light of the factual conditions prevailing in each case. Here, we find that there is no more need for an internal hydrant considering that inside the burned building were: (1) numerous portable fire extinguishers, (2) an emergency fire engine, and (3) a fire hose which has a connection to one of the external hydrants. IN VIEW WHEREOF, finding no reversible error in the impugned Decision, the instant petition is hereby DISMISSED. SO ORDERED.

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G.R. No. L-21380 May 20, 1966 MISAMIS LUMBER CORPORATION, plaintiff and appellee, vs. CAPITAL INSURANCE and SURETY CO., INC., defendant and appellant. REYES, J.B.L., J.: Plaintiff-appellee Misamis Lumber Corporation, under its former name, Lanao Timber Mills, Inc., insured its Ford Falcon motor car for the amount of P14,000 with the defendant-appellant, Capital Insurance & Surety Company, Inc. The pertinent provisions of the policy provided, as follows: 1. The Company will subject to the Limits of Liability indemnify the Insured against loss or damage to the Motor Vehicle and its accessories and spare parts whilst thereon. 2. (a) by accidental collision or overturning or collision or overturning consequent when mechanical breakdown or consequent upon wear and tear. xxx xxx xxx

3. At its option, the Company may pay in cash the amount of the loss or damage or may repair, reinstate or replace the Motor Vehicle or any part thereof or its accessories or spare parts. The liability of the Company shall not exceed the value of the parts lost or damaged and the reasonable cost of fitting such parts or the value of the Motor Vehicle at the time of the loss or damage whichever is the loss. The Insured's estimate of value stated in the schedule shall be the maximum amount payable by the Company in respect of any claim for loss or damage.1wph1.t xxx xxx xxx

4. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for which the Company may be liable under this policy provided that: (a) the estimated cost of such repair does not exceed the authorized Repair Limit. (b) a detailed estimate of the cost is forwarded to the Company without delay. and providing also that the authorized repair limit is P150.00. At around eleven o'clock in the evening of 25 November 1961, and while the above-mentioned insurance policywas in force, the insured car, while traveling along in Aurora Boulevard in front of the Pepsi-Cola plant in Quezon City, passed over a water hole which the driver did not see because an oncoming car did not dim its light. The crankcase and flywheel housing of the car broke when it hit a hollow block lying alongside the water hole. At the instance of the plaintiff-appellee, the car was towed and repaired by Morosi Motors at its shop at 1906 Taft Avenue Extension at a total cost of P302.27. On 29 November 1961, when the repairs on the car had already been made, the plaintiff-appellee made a report of the accident to the defendant-appellant Capital Insurance & Surety Company. Since the defendant-appellant refused to pay for the total cost of to wage and repairs, suit was filed in the municipal court originally. The case before Us is now a direct appeal on a point of law from the judgment of the Court of First Instance of Manila finding for the plaintiff and against the defendant-insurer in its Civil Case No. 51757. Per our resolution on 13 February 1964, it was resolved to proceed with the case without the appellee's brief, which was filed late. The defendant-appellant admits liability in the amount of P150, but not for any excess thereof.

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The lower court did not exonerate the said appellant for the excess because, according to it, the company's absolution would render the insurance contract one-sided and that the said insurer had not shown that the cost of repairs in the sum of P302.27 is unreasonable, excessive or padded, nor had it shown that it could have undertaken the repairs itself at less expense. The above reasoning is beside the point, because the insurance policy stipulated in paragraph 4 that if the insured authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to P150.00. The literal meaning of this stipulation must control, it being the actual contract, expressly and plainly provided for in the policy (Art. 1370, Civil Code; Young vs. Midland Textile Ins. Co., 30 Phil. 617; Ty vs. First Nat. Surety & Assur. Co., Inc., L-16138-45, 29 April 1961). The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of the policy is clear and specific and leaves no room for interpretation. The interpretation given is even unjustified because it opposes what was specifically stipulated. Thus, it will be observed that the policy drew out not only the limits of the insurer's liability but also the mechanics that the insured had to follow to be entitled to full indemnity of repairs. The option to undertake the repairs is accorded to the insurance company per paragraph 2. The said company was deprived of the option because the insured took it upon itself to have the repairs made, and only notified the insurer when the repairs were done. As a consequence, paragraph 4, which limits the company's liability to P150.00, applies. The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties. Finally, to require the insurer to prove that the cost of the repairs ordered by the insured is unreasonable, as the appealed decision does, when the insurer was not given an opportunity to inspect and assess the damage before the repairs were made, strikes Us as contrary to elementary justice and equity. For the foregoing reasons, the appealed decision is hereby modified by ordering the defendant-appellant Capital Insurance & Surety Company, Inc. to pay not more than P150.00 to the plaintiff-appellee Misamis Lumber Corporation. Each party shall bear its own costs and attorney's fees.

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G.R. No. L-27932 October 30, 1972 UNION MANUFACTURING CO., INC. and the REPUBLIC BANK, plaintiffs, REPUBLIC BANK, plaintiff-appellant, vs. PHILIPPINE GUARANTY CO., INC., defendant-appellee. FERNANDO, J.:p In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the lower court and now appellee, was able to avoid liability upon proof that there was a violation of a warranty. There was no denial thereof from the insured, Union Manufacturing Co., Inc. With such a legally crippling blow, the effort of the Republic Bank, the main plaintiff and now the sole appellant, to recover on such policy as mortgagee, by virtue of the cover note in the insurance policy providing that it is entitled to the payment of loss or damages as its interest may appear, was in vain. The defect being legally incurable, its appeal is likewise futile. We affirm. As noted in the decision, the following facts are not disputed: "(1) That on January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans, overdrafts and other credit accommodations from the Republic Bank in the total sum of P415,000.00 with interest at 9% per annum from said date and to secure the payment thereof, said Union Manufacturing Co., Inc. executed a real and chattel mortgages on certain properties, which are more particularly described and listed at the back of the mortgage contract ...; (2) That as additional condition of the mortgage contract, the Union Manufacturing Co., Inc. undertook to secure insurance coverage over the mortgaged properties for the same amount of P415,000.00 distributed as follows: (a) Buildings, P30,000.00; (b) Machineries, P300,000.00; and (c) Merchandise Inventory, P85,000.00, giving a total of P415,000.00; (3) That as Union Manufacturing Co., Inc. failed to secure insurance coverage on the mortgaged properties since January 12, 1962, despite the fact that Cua Tok, its general manager, was reminded of said requirement, the Republic Bank procured from the defendant, Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for P500,000.00 over the properties of the Union Manufacturing Co., Inc., as described in defendant's 'Cover Note' dated September 25, 1962, with the annotation that loss or damage, if any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendant's FireInsurance Policy Form; (4) That on September 27, 1962, Fire Insurance Policy No. 43170 ... was issued for the sum of P500,000.00 in favor of the assured, Union Manufacturing Co., Inc., for which the corresponding premium in the sum of P8,328.12, which was reduced to P6,688.12, was paid by the Republic Bank to the defendant, Philippine Guaranty Co., Inc. ...; (5) That upon the expiration of said fire policy on September 25, 1963, the same was renewed by the Republic Bank upon payment of the corresponding premium in the same amount of P6,663.52 on September 26, 1963; (6) That in the corresponding voucher ..., it appears that although said renewal premium was paid by the Republic Bank, such payment was for the account of Union Manufacturing Co., Inc. and that the cash voucher for the payment of the first premium was paid also by the Republic Bank but for the account Union Manufacturing Co., Inc.; (7) That sometime on September 6, 1964, a fire occurred in the premises of the Union Manufacturing Co., Inc.; (8) That on October 6, 1964, the Union Manufacturing Co., Inc. filed its fire claim with the defendant Philippine Guaranty Co., Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 27, 1964 ..., on the following grounds: 'a. Policy Condition No. 3 and/or the 'Other Insurance Clause' of the policy violated because you did not give notice to us the other insurance which you had taken from New India for P80,000.00, Sincere Insurance for P25,000.00 and Manila Insurance for P200,000.00 with the result that these insurances, of which we became aware of only after the fire, were not endorsed on our policy; and (b) Policy Condition No. 11 was not complied with because you have failed to give to our representatives the required documents and other proofs with respect to your claim and matters touching on our liability, if any, and the amount of such liability'; (9) That as of September, 1962, when the defendant Philippine Guaranty Co., issued Fire Insurance Policy No. 43170 ... in the sum of P500,000.00 to cover the properties of the Union Manufacturing Co., Inc., the same properties were already covered by Fire Policy No. 1533 of the Sincere Insurance Company for P25,000.00 for the period from October 7, 1961 to October 7, 1962 ...; and by insurance policies Nos. F-2314 ... and F2590 ... of the Oceanic Insurance Agency for the total sum of P300,000.00 and for periods respectively, from January 27, 1962 to January 27, 1963, and from June 1, 1962 to June 1, 1963; and (10) That when said defendant's Fire Insurance Policy No. 43170 was already in full force and effect, the Union Manufacturing Co., Inc. without the consent of the defendant, Philippine Guaranty Co., Inc., obtained other insurance policies totalling P305,000.00 over the same properties prior to the fire, to wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd., for P80,000.00 for the period from May 27, 1964 to May 27, 1965 ...; (2) Fire Policy No. 3702 of the Sincere Insurance Company for P25,000.00 for the period from October 7, 1963 to October 7, 1964 ...; and (3) Fire Policy No. 6161 of Manila Insurance Co. for P200,000.00 for the 1 2 3 period from May 15, 1964 to May 15, 1965 ... ." There is in the cover note and in the fire insurance policy the following 4 warranty: "[Co- Insurance Declared]: Nil."

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Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may appear subject to the terms and conditions, clauses and warranties" of the policy was expressed in the appealed decision thus: "However, inasmuch as the Union Manufacturing Co., Inc. has violated the condition of the policy to the effect that it did not reveal the existence of other insurance policies over the same properties, as required by the warranty appearing on the face of the policy issued by the defendant and that on the other hand said Union Manufacturing Co., Inc. represented that there were no other insurance policies at the time of the issuance of said defendant's policy, and it appearing furthermore that while the policy of the defendant was in full force and effect the Union Manufacturing Co., Inc. secured other fire insurance policies without the written consent of the defendant endorsed on the policy, the conclusion is inevitable that both the Republic Bank and Union Manufacturing Co., Inc. cannot recover from the same policy of the defendant because the 5 same is null and void." The tone of confidence apparent in the above excerpts from the lower court decision is understandable. The conclusion reached by the lower court finds support in authoritative precedents. It is far from easy, therefore, for appellant Republic Bank to impute to such a decision a failure to abide by the law. Hence, as noted at the outset, the appeal cannot prosper. An affirmance is indicated. It is to Santa Ana v. Commercial Union Assurance Co., a 1930 decision, that one turns to for the first explicit formulation as to the controlling principle. As was made clear in the opinion of this Court, penned by Justice Villa-Real: "Without deciding whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and 7 8 void." The next year, in Ang Giok Chip v. Springfield Fire & Marine Ins. Co., the conformity of the insured to the terms of the policy, implied from the failure to express any disagreement with what is provided for, was stressed in these words of the ponente, Justice Malcolm: "It is admitted that the policy before us was accepted by the plaintiff. The receipt of this policy by the insured without objection binds both the acceptor and the insured to the terms thereof. The insured may not thereafter be heard to say that he did not read the policy or know its terms, since it is his duty to read his policy and it will 10 be assumed that he did so." 9 As far back as 1915, in Young v. Midland Textile Insurance Company , it was categorically set forth that as a condition precedent to the right of recovery, there must be compliance on the part of the insured with the terms of the policy. As stated in the opinion of the Court through Justice Johnson: "If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The function and duty of the courts consist simply in enforcing and carrying out the contracts actually made. While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular 11 sense." More specifically, there was a reiteration of this Santa Ana ruling in a decision by the then Justice, later Chief 12 Justice, Bengzon, in General Insurance & Surety Corp. v. Ng Hua. Thus: "Theannotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. (Sec. 69, Insurance Act) Such misrepresentation is fatal in the light of our views in Santa Ana v. Commercial Union Assurance 13 Company, Ltd. ... . The materiality of non-disclosure of other insurance policies is not open to doubt." As a matter of 14 fact, in a 1966 decision, Misamis Lumber Corp. v. Capital Ins. & Surety Co., Inc. , Justice J.B.L. Reyes, for this Court, made manifest anew its adherence to such a principle in the face of an assertion that thereby a highly unfavorable provision for the insured would be accorded recognition. This is the language used: "The insurance contract may be rather onerous ('one sided', as the lower court put it), but that in itself does not justify the abrogation of its express terms, terms 15 which the insured accepted or adhered to and which is the law between the contracting parties." There is no escaping the conclusion then that the lower court could not have disposed of this case in a way other than it did. Had it acted otherwise, it clearly would have disregarded pronouncements of this Court, the compelling force of which cannot be denied. There is, to repeat, no justification for a reversal. WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No costs.
6

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G.R. No. L-16138 April 29, 1961 DIOSDADO C. TY, plaintiff-appellant, vs. FIRST NATIONAL SURETY & ASSURANCE CO., INC., defendant-appellee. x---------------------------------------------------------x xxxx LABRADOR, J.: Appeal from a judgment of the Court of First Instance of Manila, Hon. Gregorio S. Narvasa, presiding, dismissing the actions filed in the above-entitled cases. The facts found by the trial court, which are not disputed in this appeal, are as follows: At different times within a period of two months prior to December 24, 1953, the plaintiff herein Diosdado C. Ty, employed as operator mechanic foreman in the Broadway Cotton Factory, in Grace Park, Caloocan, Rizal, at a monthly salary of P185.00, insured himself in 18 local insurance companies, among which being the eight above named defendants, which issued to him personal accident policies, upon payment of the premium of P8.12 for each policy. Plaintiff's beneficiary was his employer, Broadway Cotton Factory, which paid the insurance premiums. On December 24, 1953, a fire broke out which totally destroyed the Broadway Cotton Factory. Fighting his way out of the factory, plaintiff was injured on the left hand by a heavy object. He was brought to the Manila Central University hospital, and after receiving first aid there, he went to the National Orthopedic Hospital for treatment of his injuries which were as follows: 1. Fracture, simple, proximal phalanx index finger, left; 2. Fracture, compound, comminuted, proximal phalanx, middle finger, left and 2nd phalanx, simple; 3. Fracture, compound, comminute phalanx, 4th finger, left; 4. Fracture, simple, middle phalanx, middle finger, left; 5. Lacerated wound, sutured, volar aspect, small finger, left; 6. Fracture, simple, chip, head, 1st phalanx, 5th digit, left. He underwent medical treatment in the Orthopedic Hospital from December 26, 1953 to February 8, 1954. The above-described physical injuries have caused temporary total disability of plaintiff's left hand. Plaintiff filed the corresponding notice of accident and notice of claim with all of the abovenamed defendants to recover indemnity under Part II of the policy, which is similarly worded in all of the policies, and which reads pertinently as follows: INDEMNITY FOR TOTAL OR PARTIAL DISABILITY If the Insured sustains any Bodily Injury which is effected solely through violent, external, visible and accidental means, and which shall not prove fatal but shall result, independently of all other causes and within sixty (60) days from the occurrence thereof, in Total or Partial Disability of the Insured, the Company shall pay, subject to the exceptions as provided for hereinafter, the amount set opposite such injury: PARTIAL DISABILITY LOSS OF: xxx xxx xxx Either hand ............................................................................ P650.00 xxx xxx xxx

... The loss of a hand shall mean the loss by amputation through the bones of the wrist.... Defendants rejected plaintiff's claim for indemnity for the reason that there being no severance of amputation of the left hand, the disability suffered by him was not covered by his policy. Hence, plaintiff sued the defendants in the Municipal Court of this City, and from the decision of said Court dismissing his complaints, plaintiff appealed to this Court. (Decision of the Court of First Instance of Manila, pp. 223-226, Records).

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In view of its finding, the court absolved the defendants from the complaints. Hence this appeal. The main contention of appellant in these cases is that in order that he may recover on the insurance policies issued him for the loss of his left hand, it is not necessary that there should be an amputation thereof, but that it is sufficient if the injuries prevent him from performing his work or labor necessary in the pursuance of his occupation or business. Authorities are cited to the effect that "total disability" in relation to one's occupation means that the condition of the insurance is such that common prudence requires him to desist from transacting his business or renders him incapable of working. (46 C.J.S., 970). It is also argued that obscure words or stipulations should be interpreted against the person who caused the obscurity, and the ones which caused the obscurity in the cases at bar are the defendant insurance companies. While we sympathize with the plaintiff or his employer, for whose benefit the policies were issued, we can not go beyond the clear and express conditions of the insurance policies, all of which define partial disability as loss of either hand by amputation through the bones of the wrist." There was no such amputation in the case at bar. All that was found by the trial court, which is not disputed on appeal, was that the physical injuries "caused temporary total disability of plaintiff's left hand." Note that the disability of plaintiff's hand was merely temporary, having been caused by fracture of the index, the middle and the fourth fingers of the left hand. We might add that the agreement contained in the insurance policies is the law between the parties. As the terms of the policies are clear, express and specific that only amputation of the left hand should be considered as a loss thereof, an interpretation that would include the mere fracture or other temporary disability not covered by the policies would certainly be unwarranted. WHEREFORE, the decision appealed from is hereby affirmed, with costs against the plaintiff-appellant.

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G.R. No. L-15862 July 31, 1961 PAULO ANG and SALLY C. ANG, plaintiffs-appellees, vs. FULTON FIRE INSURANCE CO., ET AL., defendants. LABRADOR, J.: The present action was instituted by the spouses Paulo Ang and Sally C. Ang against the Fulton Fire Insurance Company and the Paramount Surety and Insurance Company, Inc. to recover from them the face value of a fire insurance policy issued in plaintiffs' favor covering a store owned and operated by them in Laoag, Ilocos Norte. From a judgment of the court ordering the defendant Fulton Fire Insurance Co. to pay the plaintiffs the sum of P10,000.00, with interest, and an additional sum of P2,000.00 as attorney's fees, and costs, the defendants have appealed directly to this Court. On September 9, 1953, defendant Fulton Fire Insurance Company issued a policy No. F-4730340, in favor of P. & S Department Store (Sally C. Ang) over stocks of general merchandise, consisting principally of dry goods, contained in a building occupied by the plaintiffs at Laoag, Ilocos Norte. The premium is P500.00 annually. The insurance was issued for one year, but the same was renewed for another year on September 31, 1954. On December 17, 1954, the store containing the goods insured was destroyed by fire. On December 30, following, plaintiffs executed the first claim form. The claim together with all the necessary papers relating thereto, were forwarded to he Manila Adjustment Company, the defendants' adjusters and received by the latter on Jane 8, 1955. On January 12, 1955, the Manila Adjustment Company accepted receipt of the claim and requested the submission of the books of accounts of the insured for the year 19531954 and a clearance from the Philippine Constabulary and the police. On April 6, 1956, the Fulton Fire Insurance Company wrote the plaintiffs that their claim was denied. This denial of the claim was received by the plaintiffs on April 19, 1956. On January 13, 1955, plaintiff Paulo Ang and ten others were charged for arson in Criminal Case No. 1429 in the Justice of the Peace Court of Laoag, Ilocos Norte. The case was remanded for trial to the Court of First Instance of Ilocos Norte and there docketed as Criminal Case No. 2017. The said court in a decision dated December 9, 1957, acquitted plaintiff Paulo Ang of the crime of arson. The present action was instituted on May 5, 1958. The action was originally instituted against both the Fulton Fire Insurance Company and the Paramount Surety and Insurance Company, Inc., but on June 16, 1958, upon motion of the Paramount Surety, the latter was dropped from the complaint. On May 26, 1958, the defendant Fulton Fire Insurance Company filed an answer to the complaint, admitting the existence of the contract of insurance, its renewal and the loss by fire of the department store and the merchandise contained therein, but denying that the loss by the fire was accidental, alleging that it was occasioned by the willful act of the plaintiff Paulo Ang himself. It claims that under paragraph 13 of the policy, if the loss or damage is occasioned by the willful act of the insured, or if the claim is made and rejected but no action is commenced within 12 months after such rejection , all benefits under the policy would be forfeited, and that since the claim of the plaintiffs was denied and plaintiffs received notice of denial on April 18, 1956, and they brought the action only on May 5, 1958, all the benefits under the policy have been forfeited. On February 12, 1959, plaintiffs filed a reply to the above answer of the Fulton Fire Insurance, alleging that on May 11, 1956, plaintiffs had instituted Civil Case No. 2949 in the Court of First Instance of Manila, to assert the claim; that this case was dismissed without prejudice on September 3, 1957 and that deducting the period within which said action was pending, the present action was still within the 12 month period from April 12, 1956. The court below held that the bringing of the action in the Court of First Instance of Manila on May 11, 1956, tolled the running of the 12 month period within which the action must be filed. Said the court on this point: True, indeed, plaintiffs committed a procedural mistake in first suing the agent instead of its principal, the herein defendant, as correctly pointed out by counsel for the defendant, for 'Un agente residente de una compania de seguros extranjera que comercia en las Islas Filipinos no es responsable como mandante ni como mandatario, en virtud de contratas de seguro expendidos a nombre de la compania', (Macias & Co. vs. Warner, Barnes & Co., 43 Phil. 161). But the mistake being merely procedural, and the defendant not having been misled by the error, 'There is nothing sacred about process or pleadings, their forms or contents. Their sole purpose is to facilitate the application of justice to the rival claims of contending parties. They were created not to hinder and delay, but to facilitate and promote the administration of justice (Alonso vs. Villamor, 16 Phil 578.) The complaint, Exh. 'C', was dismissed by the Court without prejudice (Exh. 'H-1') on September 3, 1957, and motion for reconsideration dated September 21, 1957. The instant complaint was filed on May 8, 1958. The Rules of Court (See 132 thereof) is applicable in the computation of time. Now, as correctly pointed out by the plaintiffs'

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counsel, by simple mathematical computation, the present action was filed leas thin nine (9) months after the notice of rejection received by plaintiffs on April 19, 1956, because the filing of the original complaint stopped the running of the period." (Decision, pp. 42-43, R.O.A.) In view of the reasons thus above quoted, the court rendered decision in favor of the plaintiffs. On the appeal before this Court, defendant-appellant argues that the court below erred in holding that the filing of the previous suit tolled or suspended the running of the prescriptive period. The clause subject of the issue is paragraph 13 of the policy, which reads as follows: 13. If the claim be in any respect fraudulent, or if any false declaration is made or used in support thereof, or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy, or, if the loss or damage be occasioned by the willful act or with connivance of the Insured, or, if the claim be made and rejected and an action or suit be not commenced within twelve months after such rejection or (in case of arbitration place in pursuance of the 18th condition of this Policy) within twelve months after the arbitrator or arbitrators or umpire shall have made their award, all benefits under this Policy shall be forfeited. (Emphasis supplied). (Decision. p. 10, R.O.A.). The appellant cites in support of its contention the cases of E. Macias & Co. vs. Warner, Barnes & Co., Ltd., 43 Phil 155; E. Macias & Co. vs. China Fire Insurance Co., 46 Phil. 345 and Castillo etc. vs. Metropolitan Insurance Co., 47 O.G. (September, 1951). In answer to appellant's contention, counsel for appellees contend that the action of the plaintiffs against the defendant had not yet prescribed at the time of the bringing of the action, because the period of prescription was interrupted by the filing of the first action against the Paramount Surety & Insurance Co., in accordance with Article 1155 of the Civil Code. Counsel further argues that the basis of prescription of an action is the abandonment by a person of his right of action or claim, so that any act of said person tending to show his intention not to abandon his right of action or claim, as the filing of the previous action in the case at bar, interrupts the period of prescription. Furthermore, counsel argues, the dismissal of the previous action is without prejudice, which means that plaintiffs have the right to file another complaint against the principal. 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 must be filed against the agent, and this Court can not by interpretation, extend the clear scope of the agreement beyond what is agreed upon by the parties. 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.

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G.R. No. 78860 May 28, 1990 PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HONORABLE COURT OF APPEALS and MILAGROS CAYAS, respondents. FERNAN, C.J.: This is a petition for review on certiorari of the decision of the Court of Appeals affirming in toto the decision of the 2 Regional Trial Court of Cavite, Branch XVI, the dispositive portion of which states: IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant Perla Compania de Seguros, Inc. to pay plaintiff Milagros Cayas the sum of P50,000.00 under its maximum liability as provided for in the insurance policy; and the sum of P5,000.00 as reasonable attorney's fee with costs against said defendant. SO ORDERED.
3 1

Private respondent Milagros Cayas was the registered owner of a Mazda bus with serial No. TA3H4 P-000445 and plate 4 No. PUB-4G-593. Said passenger vehicle was insured with Perla Compania de Seguros, Inc. (PCSI) under policy No. 5 LTO/60CC04241 issued on February 3, 1978. On December 17, 1978, the bus figured in an accident in Naic, Cavite injuring several of its passengers. One of them, 196 year old Edgardo Perea, sued Milagros Cayas for damages in the Court of First Instance of Cavite, Branch docketed as Civil Case No. NC-794; while three others, namely: Rosario del Carmen, Ricardo Magsarili and Charlie Antolin, agreed to a settlement of P4,000.00 each with Milagros Cayas. At the pre-trial of Civil Case No. NC-794, Milagros Cayas failed to appear and hence, she was declared as in default. After 7 trial, the court rendered a decision in favor of Perea with its dispositive portion reading thus: WHEREFORE, under our present imperatives, judgment is hereby rendered in favor of the plaintiffs and against the defendant Milagros Cayas who is hereby ordered to compensate the plaintiff' Edgar Perea with damages in the sum of Ten Thousand (Pl0,000.00) Pesos for the medical predicament he found himself as damaging consequences of defendant Milagros Cayas complete lack of diligence of a good father of a family' when she secured the driving services of one Oscar Figueroa on December, 17, 1978; the sum of Ten Thousand (P10,000.00) Pesos for exemplary damages; the sum of Five Thousand (P5,000.00) Pesos for moral damages; the sum of Seven Thousand (P7,000.00) Pesos for Attorney's fees, under the imperatives of the monetary power of the peso today; With costs against the defendant. SO ORDERED. When the decision in Civil Case No. NC-794 was about to be executed against her, Milagros Cayas filed a complaint against PCSI in the Office of the Insurance Commissioner praying that PCSI be ordered to pay P40,000.00 for all the 8 claims against her arising from the vehicular accident plus legal and other expenses. Realizing her procedural mistake, 9 she later withdrew said complaint. Consequently, on November 11, 1981, Milagros Cayas filed a complaint for a sum of money and damages against PCSI in the Court of First Instance of Cavite (Civil Case No. N-4161). She alleged therein that to satisfy the judgment in Civil 10 Case No. NC-794, her house and lot were levied upon and sold at public auction for P38,200; that to avoid numerous suits and the "detention" of the insured vehicle, she paid P4,000 to each of the following injured passengers: Rosario del Carmen, Ricardo Magsarili and Charlie Antolin; that she could not have suffered said financial setback had the counsel for PCSI, who also represented her, appeared at the trial of Civil Case No. NC-794 and attended to the claims of the three other victims; that she sought reimbursement of said amounts from the defendant, which notwithstanding the fact that her claim was within its contractual liability under the insurance policy, refused to make such re-imbursement; that she suffered moral damages as a consequence of such refusal, and that she was constrained to secure the services of

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counsel to protect her rights. She prayed that judgment be rendered directing PCSI to pay her P50,000 for compensation of the injured victims, such sum as the court might approximate as damages, and P6,000 as attorney's fees. In view of Milagros Cayas' failure to prosecute the case, the court motu propio ordered its dismissal without 11 prejudice. Alleging that she had not received a copy of the answer to the complaint, and that "out of sportsmanship", she did not file a motion to hold PCSI in default, Milagros Cayas moved for the reconsideration of the dismissal order. Said motion for reconsideration was acted upon favorably by the court in its order of March 31, 1982. About two months later, Milagros Cayas filed a motion to declare PCSI in default for its failure to file an answer. The motion was granted and plaintiff was allowed to adduce evidence ex-parte. On July 13, 1982, the court rendered judgment by default ordering PCSI to pay Milagros Cayas P50,000 as compensation for the injured passengers, P5,000 as moral damages and P5,000 as attorney's fees. Said decision was set aside after the PCSI filed a motion therefor. Trial of the case ensued. In due course, the court promulgated a decision in Civil Case No. N-4161, the dispositive portion of which was quoted earlier, finding that: In disavowing its obligation to plaintiff under the insurance policy, defendant advanced the proposition that before it can be made to pay, the liability must first be determined in an appropriate court action. And so plaintiffs liability was determined in that case filed against her by Perea in the Naic CFI. Still, despite this determination of liability, defendant sought escape from its obligation by positing the theory that plaintiff Milagros Cayas lost the Naic case due to her negligence because of which, efforts exerted by defendant's lawyers in protecting Cayas' rights proved futile and rendered nugatory. Blame was laid entirely on plaintiff by defendant for losing the Naic case. Defendant labored under the impression that had Cayas cooperated fully with defendant's lawyers, the latter could have won the suit and thus relieved of any obligation to Perea Defendant's posture is stretching the factual circumstances of the Naic case too far. But even accepting defendant's postulate, it cannot be said, nor was it shown positively and convincingly, that if the Naic case had proceeded on trial on the merits, a decision favorable to Milagros Cayas could have been obtained. Nor was it definitely established that if the pre-trial was undertaken in that case, 12 defendant's lawyers could have mitigated the claim for damages by Perea against Cayas. The court, however, held that inasmuch as Milagros Cayas failed to establish that she underwant moral suffering and mental anguish to justify her prayer for damages, there should be no such award. But, there being proof that she was compelled to engage the services of counsel to protect her rights under the insurance policy, the court allowed attorney's fees in the amount of P5,000. PCSI appealed to the Court of Appeals, which, in its decision of May 8, 1987 affirmed in toto the lower court's decision. Its motion for reconsideration having been denied by said appellate court, PCSI filed the instant petition charging the Court of Appeals with having erred in affirming in toto the decision of the lower court. At the outset, we hold as factual and therefore undeserving of this Court's attention, petitioner's assertions that private respondent lost Civil Case No. NC-794 because of her negligence and that there is no proof that the decision in said case has been executed. Said contentions, having been raised and threshed out in the Court of Appeals and rejected by it, may no longer be addressed to this Court. Petitioner's other contentions are primarily concerned with the extent of its liability to private respondent under the insurance policy. This, we consider to be the only issue in this case. Petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other three (3) injured passengers Rosario del Carmen, Ricardo Magsarili and Charlie Antolin in the amount of P4,000.00 each or a total of P12,000.00. There is merit in petitioner's assertions. The insurance policy involved explicitly limits petitioner's liability to P12,000.00 per person and to P50,000.00 per 13 accident. Pertinent provisions of the policy also state: SECTION I-Liability to the Public

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xxx xxx xxx 3. The Limit of Liability stated in Schedule A as applicable (a) to THIRD PARTY is the limit of the Company's liability for all damages arising out of death, bodily injury and damage to property combined so sustained as the result of any one accident; (b) "per person" for PASSENGER liability is the limit of the Company's liability for all damages arising out of death or bodily injury sustained by one person as the result of any one accident: (c) "per accident" for PASSENGER liability is, subject to the above provisions respecting per person, the total limit of the Company's liability for all such damages arising out of death or bodily injury sustained by two or more persons as the result of any one accident. Conditions Applicable to All Sections xxx xxx xxx 5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company which shall be entitled, if it so desires, to take over and conduct in his (sic) name the defense or settlement of any claim, or to prosecute in his (sic) name for its own benefit any claim for indemnity or damages or otherwise, and shall have full discretion in the conduct of any proceedings in the settlement of any claim, and the insured shall give all such information and assistance as the Company may require. If the Company shall make any payment in settlement of any claim, and such payment includes any amount not covered by this Policy, the Insured shall repay the Company the amount not so covered. We have ruled in Stokes vs. Malayan Insurance Co., Inc., that the terms of the contract constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer. In the case at bar, the insurance policy clearly and categorically placed petitioner's liability for all damages arising out of death or bodily injury sustained by one person as a result of any one accident at P12,000.00. Said amount complied with the minimum fixed by the law then prevailing, Section 377 of Presidential Decree No. 612 (which was retained by P.D. No. 1460, the Insurance Code of 1978), which provided that the liability of land transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use of their vehicles shall not be less than P12,000. In other words, under the law, the minimum liability is P12,000 per passenger. Petitioner's liability under the insurance contract not being less than P12,000.00, and therefore not contrary to law, morals, good customs, public order or public policy, said 15 stipulation must be upheld as effective, valid and binding as between the parties. In like manner, we rule as valid and binding upon private respondent the condition above-quoted requiring her to secure the written permission of petitioner before effecting any payment in settlement of any claim against her. There is nothing unreasonable, arbitrary or objectionable in this stipulation as would warrant its nullification. The same was obviously designed to safeguard the insurer's interest against collusion between the insured and the claimants. In her cross-examination before the trial court, Milagros Cayas admitted, thus: Atty. Yabut: q With respect to the other injured passengers of your bus wherein you made payments you did not secure the consent of defendant (herein petitioner) Perla Compania de Seguros when you made those payments? a I informed them about that q But they did not give you the written authority that you were supposed to pay those claims? a No, sir . l6 It being specifically required that petitioner's written consent be first secured before any payment in settlement of any claim could be made, private respondent is precluded from seeking reimbursement of the payments made to del Carmen, Magsarili and Antolin in view of her failure to comply with the condition contained in the insurance policy. Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application 17 in the present case. Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy. In Phil. American General Insurance 18 Co., Inc vs. Mutuc, we ruled that contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of
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the contracting parties, for contracts are obligatory, no matter what form they may be, whenever the essential requisites for their validity are present. Moreover, we stated in Pacific Oxygen & Acetylene Co. vs. Central Bank ," that the first and fundamental duty of the courts is the application of the law according to its express terms, interpretation being called for only when such literal application is impossible. We observe that although Milagros Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any 20 accident victim or claimant as an instrument of enrichment by reason of an accident. Finally, we find no reason to disturb the award of attorney's fees. WHEREFORE, the decision of the Court of Appeals is hereby modified in that petitioner shall pay Milagros Cayas the amount of Twelve Thousand Pesos (P12,000. 00) plus legal interest from the promulgation of the decision of the lower court until it is fully paid and attorney's fees in the amount of P5,000.00. No pronouncement as to costs. SO ORDERED.
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