G.R. Nos.

152505-06 September 13, 2007

of its obligations under the construction agreement.

PRUDENTIAL GUARANTEE and ASSURANCE, INC., petitioner,

vs.
EQUINOX LAND CORPORATION, respondent.

On March 17, 1997, Equinox and JMarc signed the contract

and related documents. Under the terms of the contract,
JMarc would supply all the labor, materials, tools, equipment,
and supervision required to complete the project.

FACTS:
Sometime in 1996, Equinox Land Corporation (Equinox),
respondent, decided to construct five (5) additional floors to
its existing building, the Eastgate Centre, located at 169 EDSA,
Mandaluyong City. It then sent invitations to bid to various
building contractors. Four (4) building contractors, including
JMarc Construction & Development Corporation (JMarc),
responded.

In accordance with the terms of the contract, Equinox paid

JMarc a downpayment of P9,250,000.00 equivalent to 25% of
the contract price.
JMarc did not adhere to the terms of the contract. It failed to
submit the required monthly progress billings for the months
of March and April 1997. Its workers neglected to cover the
drainpipes, hence, they were clogged by wet cement. This
delayed the work on the project.

Finding the bid of JMarc to be the most advantageous,

Equinox offered the construction project to it. On February 22,
1997, JMarc accepted the offer. Two days later, Equinox
formally awarded to JMarc the contract to build the extension
for a consideration of P37,000,000.00.

On May 23, 1997, JMarc requested an unscheduled cash

advance of P300,000.00 from Equinox, explaining it had
encountered cash problems. Equinox granted JMarcs request
to prevent delay.

On February 24, 1997, JMarc submitted to Equinox two (2)

bonds, namely: (1) a surety bond issued by Prudential
Guarantee and Assurance, Inc. (Prudential), herein petitioner,
in the amount of P9,250,000.00 to guarantee the unliquidated
portion of the advance payment payable to JMarc; and (2) a
performance bond likewise issued by Prudential in the amount
of P7,400,000.00 to guarantee JMarcs faithful performance

On May 31, 1997, JMarc submitted its first progress billing

showing that it had accomplished only 7.3825% of the
construction work estimated at P2,731,535.00. After
deducting the advanced payments, the net amount payable to
JMarc was only P1,285,959.12. Of this amount, Equinox paid
JMarc only P697,005.12 because the former paid EXAN
P588,954.00 for concrete mix.

Shortly after Equinox paid JMarc based on its first progress

billing, the latter again requested an advanced payment of
P150,000.00. Again Equinox paid JMarc this amount.
Eventually, Equinox found that the amount owing to JMarcs
laborers was only P121,000.00, not P150,000.00.
In June 1997, EXAN refused to deliver concrete mix to the
project site due to JMarcs recurring failure to pay on time.
Faced with a looming delay in the project schedule, Equinox
acceded to EXANs request that payments for the concrete
mix should be remitted to it directly.
On June 30, 1997, JMarc submitted its second progress billing
showing that it accomplished only 16.0435% of the project
after 4 months of construction work. Based on the contract
and its own schedule, JMarc should have accomplished at
least 37.70%.
Faced with the problem of delay, Equinox formally gave JMarc
one final chance to take remedial steps in order to finish the
project on time. However, JMarc failed to undertake any
corrective measure. Consequently, on July 10, 1997, Equinox
terminated its contract with JMarc and took over the project.
On the same date, Equinox sent Prudential a letter claiming
relief from JMarcs violations of the contract.
On July 11, 1997, the work on the project stopped. The
personnel of both Equinox and JMarc jointly conducted an

inventory of all materials, tools, equipment, and supplies at

the construction site. They also measured and recorded the
amount of work actually accomplished. As of July 11, 1997,
JMarc accomplished only 19.0573% of the work or a shortage
of 21.565% in violation of the contract.
The cost of JMarcs accomplishment was only P7,051,201.00.
In other words, Equinox overpaid JMarc in the sum of
P3,974,300.25 inclusive of the 10% retention on the first
progress billing amounting to P273,152.50. In addition,
Equinox also paid the wages of JMarcs laborers, the billings
for unpaid supplies, and the amounts owing to subcontractors
of JMarc in the total sum of P664,998.09.
On August 25, 1997, Equinox filed with the Regional Trial
Court (RTC), Branch 214, Mandaluyong City a complaint for
sum of money and damages against JMarc and Prudential.
Equinox prayed that JMarc be ordered to reimburse the
amounts corresponding to its (Equinox) advanced payments
and unliquidated portion of its downpayment; and to pay
damages. Equinox also prayed that Prudential be ordered to
pay its liability under the bonds.
In its answer, JMarc alleged that Equinox has no valid ground
for terminating their contract. For its part, Prudential denied
Equinoxs claims and instituted a cross-claim against JMarc
for any judgment that might be rendered against its bonds.
During the hearing, Prudential filed a motion to dismiss the

complaint on the ground that pursuant to Executive Order No.

1008, it is the CIAC which has jurisdiction over it.
On February 12, 1999, the trial court granted Prudentials
motion and dismissed the case.
On May 19, 1999, Equinox filed with the CIAC a request for
arbitration, docketed as CIAC Case No. 17-99. Prudential
submitted a position paper contending that the CIAC has no
jurisdiction over it since it is not a privy to the construction
contract between Equinox and JMarc; and that its surety and
performance bonds are not construction agreements, thus,
any action thereon lies exclusively with the proper court.
On December 21, 1999, the CIAC rendered its Decision in favor
of Equinox and against JMarc and Prudential.
Thereupon, Prudential filed with the Court of Appeals a
petition for review, docketed as CA-G.R. SP No. 56491.
Prudential alleged that the CIAC erred in ruling that it is bound
by the terms of the construction contract between Equinox
and JMarc and that it is solidarily liable with JMarc under its
bonds.
Equinox filed a motion for reconsideration on the ground that
there is an error in the computation of its claim for
unliquidated damages; and that it is entitled to an award of
liquidated damages.

On February 2, 2000, the CIAC amended its Award by reducing

the total liability of JMarc to Equinox to P4,060,780.21, plus
attorneys fees of P100,000 or P4,160,780.21, and holding that
Prudentials liability to Equinox on the surety and performance
bonds should not exceed the said amount of P4,160,780.21,
payable by JMarc and Prudential jointly and severally.
Dissatisfied, Equinox filed with the Court of Appeals a petition
for review, docketed as CA-G.R. SP No. 57335. This case was
consolidated with CA-G.R. SP No. 56491 filed by Prudential.
On November 23, 2001, the Court of Appeals rendered its
Decision in CA-G.R. SP No. 57335 and CA-G.R. SP No. 56491,
the dispositive portion of which reads:
WHEREFORE, the Amended Decision dated February 2, 2000 is
AFFIRMED with MODIFICATION in paragraph 4 in the Award
by holding JMarc liable for unliquidated damages to Equinox
in the amount of P5,358,167.09 and in paragraph 9 thereof by
increasing the total liability of JMarc to Equinox to
P5,958,167.09 (in view of the additional award of P500,000.00
as nominal and temperate damages and P100,000.00 in
attorneys fees), and AFFIRMED in all other respects.
SO ORDERED.
Prudential seasonably filed a motion for reconsideration but it
was denied by the Court of Appeals. Hence, this petition.

ISSUE:
Whether the Court of Appeals erred in (1) upholding the
jurisdiction of the CIAC over the case; and (2) finding
Prudential solidarily liable with JMarc for damages.
RULINGS:
On the first issue, after having voluntarily invoked before the
RTC the jurisdiction of CIAC, Prudential is estopped to
question its jurisdiction. As we held in Lapanday Agricultural &
Development Corporation v. Estita,5 the active participation
of a party in a case pending against him before a court or a
quasi-judicial body is tantamount to a recognition of that
courts or quasi-judicial bodys jurisdiction and a willingness to
abide by the resolution of the case and will bar said party from
later on impugning the courts or quasi-judicial bodys
jurisdiction.
Moreover, in its Reply to Equinoxs Opposition to the Motion
to Dismiss before the RTC, Prudential, citing Philippine
National Bank v. Pineda6 and Finman General Assurance
Corporation v. Salik,7 argued that as a surety, it is considered
under the law to be the same party as the obligor in relation
to whatever is adjudged regarding the latters obligation.
Therefore, it is the CIAC which has jurisdiction over the case
involving a construction contract between Equinox and
JMarc. Such an admission by Prudential binds it and it cannot
now claim otherwise.

Anent the second issue, it is not disputed that Prudential

entered into a suretyship contract with JMarc. Section 175 of
the Insurance Code defines a suretyship as "a contract or
agreement whereby a party, called the suretyship, guarantees
the performance by another party, called the principal or
obligor, of an obligation or undertaking in favor of a third
party, called the obligee. It includes official recognizances,
stipulations, bonds, or undertakings issued under Act 5368, as
amended." Corollarily, Article 2047 of the Civil Code provides
that suretyship arises upon the solidary binding of a person
deemed the surety with the principal debtor for the purpose
of fulfilling an obligation.
In Castellvi de Higgins and Higgins v. Seliner, the SC held that
while a surety and a guarantor are alike in that each promises
to answer for the debt or default of another, the surety
assumes liability as a regular party to the undertaking and
hence its obligation is primary.
In Security Pacific Assurance Corporation v. Tria-Infante, the
SC reiterated the rule that while a contract of surety is
secondary only to a valid principal obligation, the suretys
liability to the creditor is said to be direct, primary, and
absolute. In other words, the surety is directly and equally
bound with the principal. Thus, Prudential is barred from
disclaiming that its liability with JMarc is solidary.
Thus, the petition is denied.

DBP vs RADIO MINDANAO NETWORK

G.R. NO. 147039 January 27, 2006
FACTS:
Radio Mindanao owns several broadcasting stations all over
the country. Provident covered Insurance Corporation covered
respondents transmitter equipment and generating set for
the amount of P13.550M under fire insurance policy, while
DBP covered respondents transmitters transmitter, furniture,
fixture and other transmitter facilities for the amount of
P5,883,650.00 under a fire insurance policy also.
In the evening of July 27, 1988, respondents radio station
located in SSS Building, Bacolod City, was razed by fire causing
damage in the amount of P1,044,040.00. Respondent sought
recovery under the two insurance policies but the claims were
denied on the ground that the cause of loss was an excepted
risk excluded under condition no. 6 (c) and (d), to wit:

(d) Mutiny, riot, military or popular rising, insurrection,

rebellion, revolution, military or usurped power.
The insurance companies maintained that the evidence
showed that the fire was caused by members of the
Communist Party of the Philippines/New Peoples Army
(CPP/NPA); and consequently, denied the claims. Hence,
respondent was constrained to file a civil case against
petitioner and Provident.
RTC rendered decision in favor of respondent. Provident was
directed to pay plaintiff the amount of P450,000 representing
the value of the destroyed property insured under the fire
insurance and DBP was ordered to pay the sum of
P602,600.00 representing the value of the destroyed property
under its fire insurance policy.
Both insurance companies appealed to CA but the latter
affirmed the decision of RTC with modification as to the
interest (dati 12%, ginawa ng CA na 6%).
ISSUE:

6. This insurance does not cover any loss or damage

occasioned by or through or in consequence, directly or
indirectly, of any of the following consequences, namely:
(c) War, invasion, act of foreign enemy, hostilities, or warlike
operations (whether war be declared or not), civil war.

Whether or not the insurance companies are liable to pay

Radio Mindanao Network under their respective insurance
policies

HELD:
Yes. In insurance cases, where a risk is excepted by the terms
of a policy which insures against other perils or hazards, loss
from such a risk constitutes a defense which the insurer may
urge, since it has not assumed that risk, and from this it
follows that an insurer seeking to defeat a claim because of an
exception or limitation in the policy has the burden of proving
that the loss comes within the purview of the exception or
limitation set up. If a proof is made of a loss apparently within
a contract of insurance, the burden is upon the insurer to
prove that the loss arose from a cause of loss which is
excepted or for which it is not liable, or from a cause which
limits its liability.
Consequently, it is sufficient for private respondent to prove
the fact of damage or loss. Once respondent makes out a
prima facie case in its favor, the duty or the burden of
evidence shifts to petitioner to controvert respondents prima
facie case. In this case, since petitioner alleged an excepted
risk, then the burden of evidence shifted to petitioner to
prove such exception. It is only when petitioner has
sufficiently proven that the damage or loss was caused by an
excepted risk does the burden of evidence shift back to
respondent who is then under a duty of producing evidence to
show why such excepted risk does not release petitioner from
any liability. Unfortunately for petitioner, it failed to discharge
its primordial burden of proving that the damage or loss was
caused by an excepted risk.

Petitioner however, insists that the evidence on record

established the identity of the author of the damage. It argues
that the trial court and the CA erred in not appreciating the
reports of witnesses Lt. Col Torres and SFO II Rochar that the
bystanders they interviewed claimed that the perpetrators
were members of the CPP/NPA as an exception to the hearsay
rule as part of res gestae.
The Court is not convinced to accept the declarations as part
of res gestae. While it may concede that these statements
were made by the bystanders during a startling occurrence, it
cannot be said however, that these utterances were made
spontaneously by the bystanders and before they had the
time to contrive or devise a falsehood. Both SFO III Rochar and
Lt. Col. Torres received the bystanders statements while they
were making their investigations during and after the fire. It is
reasonable to assume that when these statements were noted
down, the bystanders already had enough time and
opportunity to mill around, talk to one another and exchange
information, not to mention theories and speculations, as is
the usual experience in disquieting situations where hysteria is
likely to take place. It cannot therefore be ascertained
whether these utterances were the products of truth. That the
utterances may be mere idle talk is not remote.
While the documentary evidence presented by petitioner, i.e.,
(1) the police blotter; (2) the certification from the Bacolod
Police Station; and (3) the Fire Investigation Report may be
considered exceptions to the hearsay rule, being entries in

official records, nevertheless, as noted by the CA, none of

these documents categorically stated that the perpetrators
were members of the CPP/NPA. Rather, it was stated in the
police blotter that: "a group of persons accompanied by one
(1) woman all believed to be CPP/NPA more or less 20
persons suspected to be CPP/NPA," while the certification
from the Bacolod Police station stated that " some 20 or
more armed men believed to be members of the New
Peoples Army NPA," and the fire investigation report
concluded that "(I)t is therefore believed by this Investigating
Team that the cause of the fire is intentional, and the armed
men suspected to be members of the CPP/NPA where (sic) the
ones responsible " suspicion alone is not sufficient,
preponderance of evidence being the quantum of proof. All
these documents show that indeed, the "suspected" executor
of the fire were believed to be members of the CPP/NPA. But
suspicion alone is not sufficient, preponderance of evidence
being the quantum of proof.
**DISMISSED
PHILIPPINE PRYCE ASSURANCE CORPORATION vs. THE COURT
OF APPEALS
FACTS:
1.Petitioner was the butt of the complaint for collection of
sum of money, filed by respondent, Gegroco, Inc. before
Makati RTC. The complaint alleged that petitioner issued two

surety bonds in behalf of its principal Sagum General

Merchandise for 500,000.00 and 1,000,000.00.
2.In its Answer petitioner admitted having executed the said
bonds, but denied liability because allegedly
1) the checks which were to pay for the premiums bounced
and were dishonored hence there is no contract to speak of
between petitioner and its supposed principal; and
2) that the bonds were merely to guarantee payment of its
principal's obligation, thus, excussion is necessary.
3. A decision was rendered by the trial court in favor of the
plaintiff (Geroco) and against the defendant (Pryce) to pay the
amount of P1,500,000.00 representing the principal of the
amount due, plus legal interest thereon from April 7, 1988,
until date of payment; and P20,000.00 as and for attorney's
fees.
4.Petitioner's "Motion for Reconsideration and New Trial"
having been denied it elevated its case to the Court of Appeals
which however, affirmed the decision of the trial court as well
as the latter's order.
ISSUE : Whether or not Petitioner should be liable for the
surety bond that it issued as payment for the premium.

HELD: Yes. There is reason to believe that petitioner does not

really have a good defense. Petitioner hinges its defense on
two arguments, namely: a) that the checks issued by its
principal which were supposed to pay for the premiums,
bounced, hence there is no contract of surety to speak of; and
2) that as early as 1986 and covering the time of the Surety
Bond, Interworld Assurance Company (now Phil. Pryce) was
not yet authorized by the insurance Commission to issue such
bonds.
The Insurance Code states that:
Sec. 177. The surety is entitled to payment of the premium as
soon as the contract of suretyship or bond is perfected and
delivered to the obligor. No contract of suretyship or bonding
shall be valid and binding unless and until the premium
therefor has been paid, except where the obligee has

In the first place, petitioner, in its answer, admitted to have

issued the bonds subject matter of the original action.
Secondly, the testimony of Mr. Leonardo T. Guzman, witness
for the respondent, reveals that they have received and
accepted the two surety bonds issued by the petitioner.
On the other hand, petitioner's defense that it did not have
authority to issue a Surety Bond when it did is an admission of
fraud committed against respondent. No person can claim
benefit from the wrong he himself committed. A
representation made is rendered conclusive upon the person
making it and cannot be denied or disproved as against the
person relying thereon.
DECISION OF CA AFFIRMED.
G.R. No. 158085 October 14,2005

accepted the bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the premium has
been paid by the obligor to the surety. . . .

REPUBLIC OF THE PHILIPPINES

The above provision outrightly negates petitioner's first

defense. In a desperate attempt to escape liability, petitioner
further asserts that the above provision is not applicable
because the respondent allegedly had not accepted the surety
bond, hence could not have delivered the goods to Sagum
Enterprises. This statement clearly intends to muddle the facts
as found by the trial court and which are on record.

SUNLIFE ASSURANCE COMPANY OF CANADA.

- versus

Note: guys this case is more of tax. Sobrang hirap ako while
digesting it please bear with me. :/ Ang feeling kong important
here is ung idea about MUTUAL LIFE INSURANCE COMPANY.

Facts:
Sun Life is a mutual life insurance company organized and
existing under the laws of Canada. It is registered and
authorized to engage in business in the Philippines as a mutual
life insurance company. Sun Life paid with the [Commissioner
of Internal Revenue] (CIR) its insurance premium tax and
Documentary Stamp tax.
Later on, Court of Tax Appeals rendered its decision which are
purely cooperative companies and are exempt from the
payment of premium tax and DST. Sun Life surmised that
being a mutual life insurance company, it was likewise exempt
from the payment of premium tax and DST.
Sun Life filed with the CIR an administrative claim for tax
credit of its alleged erroneously paid premium tax and DST.
For failure of the CIR to act upon the administrative claim for
tax credit and with the 2-year period to file a claim for tax
credit or refund dwindling away and about to expire, Sun Life
filed with the CTA a petition for review. In its petition, it
prayed for the issuance of a tax credit certificate.

its members; and, lastly, it has for its purpose the mutual
protection of its members and not for profit or gain.
The CIR, then respondent, raised many special and affirmative
defenses but CTA found in favor of Sun Life.
Seeking reconsideration of the decision of the CTA, the CIR
argued that Sun Life ought to have registered, foremost, with
the Cooperative Development Authority before it could enjoy
the exemptions from premium tax and DST extended to purely
cooperative companies or associations under sections 121 and
199 of the Tax Code. For its failure to register, it could not
avail of the exemptions prayed for.
Moreover, the CIR alleged that Sun Life failed to prove that
ownership of the company was vested in its members who are
entitled to vote and elect the Board of Trustees among
[them]. The CIR further claimed that change in the 1997 Tax
Code subjecting mutual life insurance companies to the
regular corporate income tax rate reflected the legislatures
recognition that these companies must be earning profits.
The CTA denied the CIRs motion for reconsideration.

Sun Life stood firm on its contention that it is a mutual life

insurance company vested with all the characteristic features
and elements of a cooperative company or association as
defined in section 121 of the Tax Code. Primarily, the
management and affairs of Sun Life were conducted by its
members; secondly, it is operated with money collected from

CIR comes to this court via this petition on the sole ground
that respondent does not fall under the exception provided
for under Section 121 (now 123) of the Tax Code to be
exempted from premium tax and DST and be entitled to the
refund.

Ruling of the Court of Appeals

Upholding the CTA,CA reasoned that respondent was a purely
cooperative corporation duly licensed to engage in mutual life
insurance business in the Philippines. Thus, respondent was
deemed exempt from premium and documentary stamp
taxes, because its affairs are managed and conducted by its
members with money collected from among themselves,
solely for their own protection, and not for profit. Its members
or policyholders constituted both insurer and insured who
contribute, by a system of premiums or assessments, to the
creation of a fund from which all losses and liabilities were
paid. The dividends it distributed to them were not profits, but
returns of amounts that had been overcharged them for
insurance.
For having satisfactorily shown with substantial evidence that
it had erroneously paid and seasonably filed its claim for
premium and documentary stamp taxes, respondent was
entitled to a refund, the CA ruled.
Hence, this Petition.
Issues:
Whether or not respondent is a purely cooperative company
or association and conducted solely by the members thereof
for the exclusive benefit of each member and not for profit.

Whether or not respondent is exempted from payment of tax

on life insurance premiums and documentary stamp tax.
Held:
First Issue:
The Tax Code defines a cooperative as an association
conducted by the members thereof with the money collected
from among themselves and solely for their own protection
and not for profit. Without a doubt, respondent is a
cooperative engaged in a mutual life insurance business.
First, it is managed by its members.
A stock insurance company doing business in the Philippines
may alter its organization and transform itself into a mutual
insurance company. Respondent has been mutualized or
converted from a stock life insurance company to a nonstock
mutual life insurance corporation pursuant to Section 266 of
the Insurance Code of 1978. On the basis of its bylaws, its
ownership has been vested in its member-policyholders who
are each entitled to one vote;] and who, in turn, elect from
among themselves the members of its board of trustees.
Being the governing body of a nonstock corporation, the
board exercises corporate powers, lays down all corporate
business policies, and assumes responsibility for the efficiency
of management.

Second, it is operated with money collected from its

members.

Note: these are important points about Mutual Life Insurance

Company. I cannot cut it down. SCRA based din ako.

Since respondent is composed entirely of members who are

also its policyholders, all premiums collected obviously come
only from them. The member-policyholders constitute both
insurer and insured who contribute, by a system of
premiums or assessments, to the creation of a fund from
which all losses and liabilities are paid. The premiums pooled
into this fund are earmarked for the payment of their
indemnity and benefit claims.

A mutual life insurance company is conducted for the benefit

of its member-policyholders, who pay into its capital by way of
premiums. To that extent, they are responsible for the
payment of all its losses. The cash paid in for premiums and
the premium notes constitute their assets x x x. In the event
that the company itself fails before the terms of the policies
expire, the member-policyholders do not acquire the status of
creditors. Rather, they simply become debtors for whatever
premiums that they have originally agreed to pay the
company, if they have not yet paid those amounts in full, for
*m+utual companies x x x depend solely upon x x x
premiums. Only when the premiums will have accumulated
to a sum larger than that required to pay for company losses
will the member-policyholders be entitled to a pro rata
division thereof as profits. Contributing to its capital, the
member-policyholders of a mutual company are obviously
also its owners. Sustaining a dual relationship inter se, they
not only contribute to the payment of its losses, but are also
entitled to a proportionate share. and participate alike in its
profits and surplus.

Third, it is licensed for the mutual protection of its members,

not for the profit of anyone.
The director of commerce had already issued a license to
respondent -- a corporation organized and existing under the
laws of Canada -- to engage in business in the Philippines.
Pursuant to Section 225 of Canadas Insurance Companies Act,
the Canadian minister of state (for finance and privatization)
also declared in its Amending Letters Patent that respondent
would be a mutual company effective June 1, 1992. In the
Philippines, the insurance commissioner also granted it annual
Certificates of Authority to transact life insurance business.
What is Mutual life insurance Company?
(For Insurance purposes)

Certainly, many factors are considered in calculating the

insurance premium. Since they vary with the kind of insurance
taken and with the group of policyholders insured, any excess
in the amount anticipated by a mutual company to cover the
cost of providing for the insurance over its actual realized cost

will also vary. If a member-policyholder receives an excess

payment, then the apportionment must have been based
upon a calculation of the actual cost of insurance that the
company has provided for that particular memberpolicyholder. Accordingly, in apportioning divisible surpluses,
any mutual company uses a contribution method that aims to
distribute those surpluses among its member-policyholders, in
the same proportion as they have contributed to the surpluses
by their payments.
Sharing in the common fund, any member-policyholder may
choose to withdraw dividends in cash or to apply them in
order to reduce a subsequent premium, purchase additional
insurance, or accelerate the payment period. Although the
premium made at the beginning of a year is more than
necessary to provide for the cost of carrying the insurance, the
member-policyholder will nevertheless receive the benefit of
the overcharge by way of dividends, at the end of the year
when the cost is actually ascertained. The declaration of a
dividend upon a policy reduces pro tanto the cost of insurance
to the holder of the policy. That is its purpose and effect.
A stipulated insurance premium cannot be increased, but
may be lessened annually by so much as the experience of the
preceding year has determined it to have been greater than
the cost of carrying the insurance x x x.+ The difference
between that premium and the cost of carrying the risk of loss
constitutes the so-called dividend which, however, is not in
any real sense a dividend. It is a technical term that is well

understood in the insurance business to be widely different

from that to which it is ordinarily attached.
The so-called dividend that is received by memberpolicyholders is not a portion of profits set aside for
distribution to the stockholders in proportion to their
subscription to the capital stock of a corporation. One, a
mutual company has no capital stock to which subscription is
necessary; there are no stockholders to speak of, but only
members. And, two, the amount they receive does not
partake of the nature of a profit or income. The quasiappearance of profit will not change its character. It remains
an overpayment, a benefit to which the member-policyholder
is equitably entitled.
Verily, a mutual life insurance corporation is a cooperative
that promotes the welfare of its own members. It does not
operate for profit, but for the mutual benefit of its memberpolicyholders. They receive their insurance at cost, while
reasonably and properly guarding and maintaining the
stability and solvency of the company. The economic benefits
filter to the cooperative members. Either equally or
proportionally, they are distributed among members in
correlation with the resources of the association utilized.
Whether Respondent Is Exempted from Premium Taxes and
DST

RULING:

G.R. No. L-5642 February 25, 1954

Having determined that respondent is a cooperative that does

not have to be registered with the CDA (Cooperative
Development Authority), we hold that it is entitled to
exemption from both premium taxes and documentary stamp
taxes (DST).

HERMINIA Q. KANAPI, plaintiff-appellant, vs. THE INSULAR LIFE

ASSURANCE CO., LTD., defendant-appellee.

The Tax Code is clear. On the one hand, Section 121 of the
Code exempts cooperative companies from the 5 percent
percentage tax on insurance premiums. On the other hand,
Section 199 also exempts from the DST, policies of insurance
or annuities made or granted by cooperative companies.
Being a cooperative, respondent is thus exempt from both
types of taxes.

REYES, J.:

Having been seasonably filed and amply substantiated, the

claim for exemption representing percentage taxes on
insurance premiums and documentary stamp taxes on policies
of insurance or annuities that were paid by respondent is in
order. Thus, the grant of a tax credit certificate to respondent
as ordered by the appellate court was correct.

Jose Aguirre and Alfredo Catalico for appellant. Araneta and

Araneta for appellee.

This is an action on a life insurance policy.

FACTS:
On August 1, 1848, the defendant insurance company issued a
policy on the life of plaintiff's husband, Henry G. Kanapi,
whereby defendant undertook to pay to plaintiff as
beneficiary, upon the death of the insured, the sum of P5,000
if the death be due to natural causes and an additional P5,000
if the death be due to accidental means, payment of this
additional sum being provided for in the "Accidental Death
Benefit Policy Clause" appended to and forming part of the
policy but expressly made subject to the exception that the
clause would not apply where death resulted from injury
"intentionally inflicted by a third party." During the life of the
policy, the insured died from a bullet wound inflicted, without
provocation, by one Conrado Quemosing, who, as author of
the killing, was found guilty of murder and sentenced to

prison.Upon receiving proof of the insured's death, defendant

paid plaintiff P5,000, but refused to pay the additional P5,000
claimed upon the accidental death benefit clause on the
ground that, as the injured died from an injury intentionally
inflicted by a third party, the clause did not apply. The present
action is for the recovery of the additional sum.
Upholding defendant's stand, the lower court dismissed the
action, whereupon plaintiff appealed to this Court, and the
question for us to determine is whether plaintiff is entitled to
the additional P5,000 claimed under the accident benefit
clause of the policy
Issue:
Whether or not plaintiff is entitled to claim the additional
benefits under the accident benefit clause of the policy.
Held:
Kagaguhan! This clause provide for the payment of the sum
upon proof "that the death of the Insured resulted directly
from bodily injury affected through external and violent
means sustained in an accident . . . and independently of all
other clauses." But far from proving that the insured died
from bodily injury sustained in an accident, the agreed facts
are to the effect that the insured was murdered, thus making
it indisputable that his death resulted from injury
"intentionally inflicted by a third party"; which is one of the

exceptions to the accident benefit clause, according to which

the benefit shall not apply to death resulting from "(5) Any
injury received . . . (e) that has been inflicted intentionally by a
third party, either with or without provocation on the part of
the Insured, and whether or not the attack or the defense by
the third party was caused by a violation of the law by the
Insured. . . ."
There is nothing to the suggestion that the case comes under
exception 5 (d) or that portion of it which excepts from the
benefit any injury received "in any assault provoked by the
Insured", it being argued that by express mention of provoked
assault an unprovoked one is inferentially excluded. The
inference is not admissible because where the injury is
inflicted without provocation the case comes within the terms
of exception 5 (e), which, is, therefore, the one that should be
applied
Biagtan vs. The Insular Life Assurance Company, LTD|
Makalintal, J.
March 29, 1972|
NATURE
Appeal from CFIs decision
FACTS
- Juan Biagtan was insured with Insular for P5k and a
supplementary contract Accidental Death Benefit clause for
another P5k if "the death of the Insured resulted directly from
bodily injury effected solely through external and violent

means sustained in an accident . . . and independently of all

other causes." The clause, however, expressly provided that it
would not apply where death resulted from an injury
"intentionally inflicted by a third party."
- One night, a band of robbers entered their house. Juan went
out of his room and he was met with 9 knife stabs. He died.
The robbers were convicted of robbery with homicide.
- The family was claiming the additional P5k from Insular
under the Accidental Death Benefit clause. Insular refused on
the ground that the death resulted from injuries intentionally
inflicted by 3rd parties and was therefore not covered.
- Biagtans filed against Insular. CFI ruled in favor of Biagtans.
ISSUES & ARGUMENTS
WON the injuries were intentionally inflicted by a third party?
Yes
RATIONALE
- Whether the robbers had the intent to kill or merely to scare
the victim or to ward off any defense he might offer, it cannot
be denied that the act itself of inflicting the injuries was
intentional.
- The exception in the accidental benefit clause invoked by
the appellant does not speak of the purpose whether
homicidal or not of a third party in causing the injuries, but
only of the fact that such injuries have been "intentionally"
inflicted this obviously to distinguish them from injuries
which, although received at the hands of a third party, are
purely accidental.

- Examples of unintentional:
>> A gun which discharges while being cleaned and kills a
bystander;
>> a hunter who shoots at his prey and hits a person instead;
>> an athlete in a competitive game involving physical effort
who collides with an opponent and fatally injures him as a
result.
- In Calanoc vs. CA: Where a shot was fired and it turned out
afterwards that the watchman was hit in the abdomen, the
wound causing his death, the Court held that it could not be
said that the killing was intentional for there was the
possibility that the malefactor had fired the shot to scare the
people around for his own protection and not necessarily to
kill or hit the victim. A similar possibility is clearly ruled out by
the facts in this case. For while a single shot fired from a
distance, and by a person who was not even seen aiming at
the victim, could indeed have been fired without intent to kill
or injure, nine wounds inflicted with bladed weapons at close
range cannot conceivably be considered as innocent insofar
as such intent is concerned.
- In Hucthcraft's Ex'r vs. Travelers' Ins. Co. (US case): where
the insured was waylaid and assassinated for the purpose of
robbery, the court rendered judgment for the insurance
company and held that while the assassination of the insured
was as to him an unforeseen event and therefore accidental,
"the clause of the proviso that excludes the (insurer's) liability,
in case death or injury is intentionally inflicted by any other
person, applies to this case."

TEEHANKEE [dissent]
- Calanoc v. CA is controlling in this case because the
insurance company wasnt able to prove that the killing was
intentional. (Burden of proof is with the insurance company)
- Insurance, being contracts of adhesion, must be construed
strictly against insurance company in cases of ambiguity.
- The supplementary contract enumerated exceptions. The
only exception which is not susceptible of classification is that
provided in par 5(e), the very exception herein involved, which
would also except injuries "inflicted intentionally by a third
party, either with or without provocation on the part of the
insured, and whether or not the attack or the defense by the
third party was caused by a violation of the law by the
insured."
- This ambiguous clause conflicts with all the other 4
exceptions in the same par 5 particularly that immediately
preceding it in item (d) which excepts injuries received where
the insured has violated the law or provoked the injury, while
this clause, construed as the insurance company now claims,
would seemingly except also all other injuries, intentionally
inflicted by a third party, regardless of any violation of law or
provocation by the insured, and defeat the very purpose of
the policy of giving the insured double indemnity in case of
accidental death by "external and violent means" in the
very language of the policy.'
- It is obvious from the very classification of the exceptions
and applying the rule of noscitus a sociis, that the doubleindemnity policy covers the insured against accidental death,
whether caused by fault, negligence or intent of a third party

which is unforeseen and unexpected by the insured. All the

associated words and concepts in the policy plainly exclude
the accidental death from the coverage of the policy only
where the injuries are self-inflicted or attended by some
proscribed act of the insured or are incurred in some expressly
excluded calamity such as riot, war or atomic explosion.

Calanoc vs CA
Melencio Basilio was a watchman of the Manila Auto Supply.
He secured a life insurance policy from the Philippine
American Life Insurance Company in the amount of P2,000 to
which was attached a supplementary contract covering death
by accident. On January 25, 1951, he died of a gunshot wound
on the occasion of a robbery committed in the house of Atty.
Ojeda. It turned out that Atty. Antonio Ojeda had come home
and found that his house was well-lighted, but with the
windows closed. Atty. Ojeda retreated to look for a policeman
and finding Basilio in khaki uniform, asked him to accompany
him to the house with the latter refused but suggesting that
Atty. Ojeda should ask the traffic policeman on duty. Atty.
Ojeda went to the traffic policeman and reported the matter,
asking the policeman to come along with him and on the way
to the Ojeda residence, the policeman and Atty. Ojeda passed
by Basilio and invited the latter to come along; that as the
three approached the Ojeda residence a shot was fired; Atty.
Ojeda and the policeman sought cover; that the policeman left
the premises to look for reinforcement; that it turned out

afterwards that Melencio Basilio was hit in the abdomen, the

wound causing his instantaneous death. Upon inquiry Atty.
Ojeda found out that the savings of his children in the amount
of P30 in coins kept in his aparador contained in stockings
were taken away, the aparador having been ransacked. It is
contended in behalf of the company that Basilio was killed
which "making an arrest as an officer of the law" or as a result
of an "assault or murder" committed in the place and
therefore his death was caused by one of the risks excluded by
the supplementary contract which exempts the company from
liability.
Virginia Calanoc, the widow, was paid the sum of P2,000, face
value of the policy, but when she demanded the payment of
the additional sum of P2,000, the company refused alleging
that the deceased died because he was murdered by a person
who took part in the commission of the robbery and while
making an arrest as an officer of the law which contingencies
were expressly excluded in the contract and have the effect of
exempting the company from liability.
Issue: Whether or not the death of the victim comes within
the purviewof the exception clause of the supplementary
policy and exempt the company from liability
Held:
Basilio was a watchman of the Manila Auto Supply which was
a block away from the house of Atty. Ojeda where something

suspicious was happening which caused the latter to ask for

help. While at first he declied the invitation of Atty. Ojeda to
go with him to his residence to inquire into what was going on
because he was not a regular policeman, he later agreed to
come along when prompted by the traffic policeman, and
upon approaching the gate of the residence he was shot and
died. The circumstance that he was a mere watchman and had
no duty to heed the call of Atty. Ojeda should not be taken as
a capricious desire on his part to expose his life to danger
considering the fact that the place he was in duty-bound to
guard was only a block away. In volunteering to extend help
under the situation, he might have thought, rightly or wrongly,
that to know the truth was in the interest of his employer it
being a matter that affects the security of the neighborhood.
He cannot be blamed solely for doing what he believed was in
keeping with his duty as a watchman and as a citizen. And he
cannot be considered as making an arrest as an officer of the
law for certainly he did not go there for that purpose nor was
he asked to do so by the policeman. Much less can it be
pretended that Basilio died in the course of an assault or
murder considering the very nature of these crimes. In any
event, while the act may not excempt the triggerman from
liability for the damage done, the fact remains that the
happening was a pure accident on the part of the victim. The
victim could have been either the policeman or Atty. Ojeda for
it cannot be pretended that the malefactor aimed at the
deceased precisely because he wanted to take his life.
We take note that these defenses are included among the

risks exluded in the supplementary contract which

enumerates the cases which may exempt the company from
liability. While as a general rule "the parties may limit the
coverage of the policy to certain particular accidents and risks
or causes of loss, and may expressly except other risks or
causes of loss therefrom, however, it is to be desired that the
terms and phraseology of the exception clause be clearly
expressed so as to be within the easy grasp and understanding
of the insured, for if the terms are doubtful or obscure the
same must of necessity be interpreted or resolved aganst the
one who has caused the obscurity. And so it has been
generally held that the "terms in an insurance policy, which
are ambiguous, equivacal, or uncertain . . . are to be construed
strictly and most strongly against the insurer, and liberally in
favor of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where a
forfeiture is involved" and the reason for this rule is that 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 experts and
legal advisers employed by, and acting exclusively in the
interest of, the insurance company."
Insurance is, in its nature, complex and difficult for the layman
to understand. Policies are prepared by experts who know and
can anticipate the bearings and possible complications of
every contingency. So long as insurance companies insist upon
the use of ambiguous, intricate and technical provisions,
which conceal rather than frankly disclose, their own

intentions, the courts must, in fairness to those who purchase

insurance, construe every ambiguity in favor of the insured.
An insurer should not be allowed, by the use of obscure
phrases and exceptions, to defeat the very purpose for which
the policy was procured.
G.R. No. L-21574 June 30, 1966
SIMON DE LA CRUZ vs. THE CAPITAL INSURANCE and SURETY
CO., INC
BARRERA, J.:
FACTS:
1) Eduardo de la Cruz employed as a mucker in the ItogonSuyoc Mines, Inc. in Baguio, was the holder of an accident
insurance policy underwritten by the Capital Insurance &
Surety Co., Inc., for the period beginning November 13, 1956
to November 12, 1957.
2) On January 1, 1957, in connection with the celebration of
the New Year, the Itogon-Suyoc Mines, Inc. sponsored a
boxing contest for general entertainment wherein the insured
Eduardo de la Cruz, a non-professional boxer participated. In
the course of his bout with another person, likewise a nonprofessional, of the same height, weight, and size, Eduardo
slipped and was hit by his opponent on the left part of the
back of the head, causing Eduardo to fall, with his head hitting

the rope of the ring. He was brought to the Baguio General

Hospital the following day. The cause of death was reported
as hemorrhage, intracranial, left.
3) Simon de la Cruz, the father of the insured and who was
named beneficiary under the policy, thereupon filed a claim
with the insurance company for payment of the indemnity
under the insurance policy. As the claim was denied, De la
Cruz instituted the action in the CFI Pangasinan for specific
performance. Capital Insurance & Surety Co., Inc. set up the
defense that the death of the insured, caused by his
participation in a boxing contest, was not accidental and,
therefore, not covered by insurance. After due hearing the
court rendered the decision in favor of the De la Cruz which is
the subject of the present appeal.
*INSURERS CONTENTION: while the death of the insured was
due to head injury, said injury was sustained because of his
voluntary participation in the contest. It is claimed that the
participation in the boxing contest was the "means" that
produced the injury which, in turn, caused the death of the
insured. And, since his inclusion in the boxing card was
voluntary on the part of the insured, he cannot be considered
to have met his death by "accidental means".
ISSUE: Whether or not the death of the insured is covered by
the insurance, hence, the insurer is liable to pay?
HELD: YES, the death of the insured is covered by the policy.

Hence, the insurer is liable to pay Simon dela Cruz, the

insureds beneficiary.
The terms "accident" and "accidental", as used in insurance
contracts, have been taken to mean that which happen by
chance or fortuitously, without intention and design, and
which is unexpected, unusual, and unforeseen. An accident is
an event that takes place without one's foresight or
expectation an event that proceeds from an unknown
cause, or is an unusual effect of a known cause and, therefore,
not expected.
In the present case, while the participation of the insured in
the boxing contest is voluntary, the injury was sustained when
he slid, giving occasion to the infliction by his opponent of the
blow that threw him to the ropes of the ring. Without this
unfortunate incident, that is, the unintentional slipping of the
deceased, perhaps he could not have received that blow in the
head and would not have died. The fact that boxing is
attended with some risks of external injuries does not make
any injuries received in the course of the game not accidental.
In boxing as in other equally physically rigorous sports, such as
basketball or baseball, death is not ordinarily anticipated to
result. If, therefore, it ever does, the injury or death can only
be accidental or produced by some unforeseen happening or
event as what occurred in this case.
Furthermore, the policy involved herein specifically excluded
from its coverage

(e) Death or disablement consequent upon the Insured

engaging in football, hunting, pigsticking, steeplechasing, poloplaying, racing of any kind, mountaineering, or motorcycling.

spouses Julia and Carlos Surposa, and brothers Christopher,

Charles, Chester and Clifton, all surnamed, Surposa, as
beneficiaries.

Death or disablement resulting from engagement in boxing

contests was not declared outside of the protection of the
insurance contract. Failure of the defendant insurance
company to include death resulting from a boxing match or
other sports among the prohibitive risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from
liability for such death.

While said insurance policy was in full force and effect, the
insured, Carlie Surposa, died on as a result of a stab wound
inflicted by one of the three (3) unidentified men without
provocation and warning on the part of the former as he and
his cousin, Winston Surposa, were waiting for a ride on their
way home along Rizal-Locsin Streets, Bacolod City after
attending the celebration of the "Maskarra Annual Festival."

FINMAN GENERAL ASSURANCE CORPORATION, petitioner,

Thereafter, private respondent and the other beneficiaries of

said insurance policy filed a written notice of claim with the
petitioner insurance company which denied said claim
contending that murder and assault are not within the scope
of the coverage of the insurance policy.Private respondent
filed a complaint with the Insurance Commission. The
Commision ruled in favor of the private respondent. The
appellate court affirmed said decision.

vs.
THE HONORABLE COURT OF APPEALS and JULIA SURPOSA,
respondents.
G.R. No. 100970 September 2, 1992
NOCON, J.:
FACTS:
Deceased Carlie Surposa was insured with petitioner Finman
General Assurance Corporation under Finman General
Teachers Protection Plan Master Policy with his parents,

Hence, petitioner filed this petition alleging grove abuse of

discretion on the par of the appellate court in applying the
principle of "expresso unius exclusio alterius" in a personal
accident insurance policy since death resulting from murder
and/or assault are impliedly excluded in said insurance policy
considering that the cause of death of the insured was not
accidental but rather a deliberate and intentional act of the
assailant in killing the former as indicated by the location of

the lone stab wound on the insured. Therefore, said death

was committed with deliberate intent which, by the very
nature of a personal accident insurance policy, cannot be
indemnified.
ISSUE: WON petitioner is liable to pay the amount of the
policy to the private respondent
HELD:
Yes. The terms "accident" and "accidental" as used in
insurance contracts have not acquired any technical meaning,
and are construed by the courts in their ordinary and common
acceptation. Thus, the terms have been taken to mean that
which happen by chance or fortuitously, without intention and
design, and which is unexpected, unusual, and unforeseen. An
accident is an event that takes place
without one's foresight or expectation an event that
proceeds from an unknown cause, or is an unusual effect of a
known cause and, therefore, not expected.
In the case at bar, it cannot be pretended that Carlie Surposa
died in the course of an assault or murder as a result of his
voluntary act considering the very nature of these crimes. In
the first place, the insured and his companion were on their
way home from attending a festival. They were confronted by
unidentified persons. The record is barren of any circumstance
showing how the stab wound was inflicted. Nor can it be

pretended that the malefactor aimed at the insured precisely

because the killer wanted to take his life. In any event, while
the act may not exempt the unknown perpetrator from
criminal liability, the fact remains that the happening was a
pure accident on the part of the victim. The insured died from
an event that took place without his foresight or expectation,
an event that proceeded from an unusual effect of a known
cause and, therefore, not expected. Neither can it be said that
where was a capricious desire on the part of the accused to
expose his life to danger considering that he was just going
home after attending a festival.
Furthermore, the personal accident insurance policy involved
herein specifically enumerated only ten (10) circumstances
wherein no liability attaches to petitioner insurance company
for any injury, disability or loss suffered by the insured as a
result of any of the stimulated causes. The principle of "
expresso unius exclusio alterius" the mention of one thing
implies the exclusion of another thing is therefore
applicable in the instant case since murder and assault, not
having been expressly included in the enumeration of the
circumstances that would negate liability in said insurance
policy cannot be considered by implication to discharge the
petitioner insurance company from liability for, any injury,
disability or loss suffered by the insured. Thus, the failure of
the petitioner insurance company to include death resulting
from murder or assault among the prohibited risks leads
inevitably to the conclusion that it did not intend to limit or
exempt itself from liability for such death.