G.R. No.
L-9374 February 16, 1915 The defendant claim that the redemption of the real estate sold by his
FRANCISCO DEL VAL, ET AL., plaintiffs-appellants, vs. ANDRES DEL VAL,
defendant-appellee.
The plaintiffs and defendant are the only heirs at law and next of kin of
Gregorio Nacianceno del Val, who died in Manila on August 4, 1910,
intestate; that an administrator was appointed for the estate of the
deceased, and, after a partial administration, it was closed and the
administrator discharged; that during the lifetime of the deceased he took
out insurance on his life for the sum of P40,000 and made it payable to the
defendant as sole beneficiary; that after his death the defendant collected
the face of the policy; that of said policy he paid the sum of P18,365.20 to
redeem certain real estate which the decedent had sold to third persons
with a right to repurchase; that the redemption of said premises was made
by the attorney of the defendant in the name of the plaintiff and the
defendant as heirs of the deceased vendor; that the redemption of said
premises they have had the use and benefit thereof; that during that time
the plaintiffs paid no taxes and made no repairs.
It further appears that the defendant, on the death of the deceased, took
possession of most of his personal property, and that he has also the
balance on said insurance policy amounting to P21,634.80.
Plaintiffs contend that the amount of the insurance policy belonged to the
estate of the deceased and not to the defendant personally; that,
therefore, they are entitled to a partition not only of the real and personal
property, but also of the P40,000 life insurance. The complaint prays a
partition of all the property, both real and personal, left by the deceased;
that the defendant account for P21,634.80, and that that sum be divided
equally among the plaintiffs and defendant along with the other property
of deceased.
father was made in the name of the plaintiffs and himself instead of in his
name alone without his knowledge or consent; and that it was not his
intention to use the proceeds of the insurance policy for the benefit of any
person but himself, he alleging that he was and is the sole owner thereof
and that it is his individual property. He, therefore, asks that he be declared
the owner of the real estate redeemed by the payment of the P18,365.20,
the owner of the remaining P21,634.80, the balance of the insurance
policy, and that the plaintiff's account for the use and occupation of the
premises so redeemed since the date of the redemption.
ISSUE:
WON the proceeds of the life-insurance policy belong exclusively to the
defendant as his individual and separate property
HELD: YES
That the proceeds of an insurance policy belong exclusively to the
beneficiary and not to the estate of the person whose life was insured, and
that such proceeds are the separate and individual property of the
beneficiary, and not of the heirs of the person whose life was insured, is
the doctrine in America. We believe that the same doctrine obtains in
these Islands by virtue of section 428 of the Code of Commerce, which
reads:
The amount which the underwriter must deliver to the person insured, in
fulfillment of the contract, shall be the property of the latter, even against
the claims of the legitimate heirs or creditors of any kind whatsoever of the
person who effected the insurance in favor of the former.
It is claimed by the attorney for the plaintiffs that the section just quoted is
subordinate to the provisions of the Civil Code as found in article 1035. This
article reads:
An heir by force of law surviving with others of the same character to a
succession must bring into the hereditary estate the property or securities
he may have received from the deceased during the life of the same, by
way of dowry, gift, or for any good consideration, in order to compute it in
fixing the legal portions and in the account of the division.
Counsel also claim that the proceeds of the insurance policy were a
donation or gift made by the father during his lifetime to the defendant
and that, as such, its ultimate destination is determined by those provisions
of the Civil Code which relate to donations, especially article 819. This
article provides that "gifts made to children which are not betterments
shall be considered as part of their legal portion."
We cannot agree with these contentions. The contract of life insurance is a
special contract and the destination of the proceeds thereof is determined
by special laws which deal exclusively with that subject. The Civil Code has
no provisions which relate directly and specifically to life- insurance
contracts or to the destination of life insurance proceeds. That subject is
regulated exclusively by the Code of Commerce which provides for the
terms of the contract, the relations of the parties and the destination of
the proceeds of the policy.
The proceeds of the life-insurance policy being the exclusive property of
the defendant and he having used a portion thereof in the repurchase of
the real estate sold by the decedent prior to his death with right to
repurchase, and such repurchase having been made and the conveyance
taken in the names of all of the heirs instead of the defendant alone,
plaintiffs claim that the property belongs to the heirs in common and not
to the defendant alone.
We are not inclined to agree with this contention unless the fact appear or
be shown that the defendant acted as he did with the intention that the
other heirs should enjoy with him the ownership of the estate — in other
words, that he proposed, in effect, to make a gift of the real estate to the
other heirs. If it is established by the evidence that that was his intention
and that the real estate was delivered to the plaintiffs with that
understanding, then it is probable that their contention is correct and that
they are entitled to share equally with the defendant therein. If, however, it
appears from the evidence in the case that the conveyances were taken in
the name of the plaintiffs without his knowledge or consent, or that it was
not his intention to make a gift to them of the real estate, then it belongs
to him. If that facts are as stated, he has two remedies. The one is to
compel the plaintiffs to reconvey to him and the other is to let the title
stand with them and to recover from them the sum he paid on their behalf.
G.R. No. L-34583 October 22, 1931
THE BANK OF THE PHILIPPINE ISLANDS, administrator of the estate of the
late Adolphe Oscar Schuetze, plaintiff-appellant, vs. JUAN POSADAS, JR.,
Collector of Internal Revenue, defendant-appellee.
1. Rosario Gelano Vda. de Schuetze, window of Adolphe Oscar Schuetze, is
a resident of Germany;
7. That on December 3, 1927, the late Adolphe Oscar Schuetze coming
from Java, and with the intention of going to Bremen, landed in the
Philippine Islands where he met his death on February 2, 1928;
8. That on March 31, 1926, the said Adolphe Oscar Schuetze, while in
Germany, executed a will, in accordance with its law, wherein plaintiff was
named his universal heir;
10. That the deceased at the time of his death was possessed of personal
property consisting of shares of stock in nineteen (19) domestic
corporations;
11. That the fair market value of all the property in the Philippine Islands
left by the deceased at the time of his death was P217,560.38;
12. That the Bank of the Philippine Islands, as administrator of the estate of
the deceased rendered its final account on June 19, 1929, and that said
estate was closed on July 16, 1929;
13. That among the personal property of the deceased was found life-
insurance policy issued at Manila, for the sum of $10,000 by the Sun Life
Assurance Company of Canada, Manila branch;
14. That in the insurance policy the estate of the said Adolphe Oscar
Schuetze was named the beneficiary without any qualification whatsoever;
15. That for five consecutive years, the deceased Adolphe Oscar Schuetze
paid the premiums of said policy;
16. That on or about the year 1918, the Sun Life Assurance Company of
Canada, Manila branch, transferred said policy to the Sun Life Assurance
Company of Canada, London branch;
17. That due to said transfer the said Adolphe Oscar Schuetze from 1918 to
the time of his death paid the premiums of said policy to the Sun Life
Assurance Company of Canada, London Branch;
18. That the sole and only heir of the deceased Adolphe Oscar Schuetze is
his widow, the plaintiff herein;
19. That at the time of the death of the deceased and at all times
thereafter including the date when the said insurance policy was paid, the
insurance policy was in the hands of the Head Office of the Sun Life
Assurance Company of Canada, at Montreal, Canada;
20. That on July 13, 1928, the Bank of the Philippine Islands as
administrator of the decedent's estate received from the Sun Life
Assurance Company of Canada, Manila branch, the sum of P20,150
representing the proceeds of the insurance policy;
21. That the Bank of the Philippine Islands delivered to the plaintiff herein
the said sum of P20,150;
22. That the herein defendant on or about July 5, 1929, imposed an
inheritance tax upon the transmission of the proceeds of the policy in
question in the sum of P20,150 from the estate of the late Adolphe Oscar
Schuetze to the sole heir of the deceased, or the plaintiff herein;
23. That BPI, having been demanded by the herein defendant to pay
inheritance tax amounting to the sum of P1,209, paid to the defendant
under protest the above-mentioned sum;
24. Said defendant refuses to refund to plaintiff the above mentioned sum
of P1,209;
ISSUE:
WON the plaintiff is entitled to the proceeds of the insurance.
HELD:
We are of opinion and so hold: (1) That the proceeds of a life-insurance
policy payable to the insured's estate, on which the premiums were paid by
the conjugal partnership, constitute community property, and belong one-
half to the husband and the other half to the wife, exclusively; (2) that if
the premiums were paid partly with paraphernal and partly conjugal funds,
the proceeds are likewise in like proportion paraphernal in part and
conjugal in part; and (3) that the proceeds of a life-insurance policy payable
to the insured's estate as the beneficiary, if delivered to the testamentary
administrator of the former as part of the assets of said estate under
probate administration, are subject to the inheritance tax according to the
law on the matter, if they belong to the assured exclusively, and it is
immaterial that the insured was domiciled in these Islands or outside.
Hence, the defendant was ordered to return to the plaintiff one-half of the
tax collected upon the amount of P20,150, being the proceeds of the
insurance policy on the life of the late Adolphe Oscar Schuetze, after
deducting the proportional part corresponding to the first premium.
IMPERIAL, J., dissenting:
It is an established and generally recognized principle that in a life-
insurance policy where the insured has named a beneficiary, the proceeds
belong to said beneficiary, and to him alone. "Vested Interest of
Beneficiary. — In practically every jurisdiction it is the rule that in an
ordinary life insurance policy made payable to a beneficiary, and which
does not authorize a change of beneficiary, the named beneficiary has an
absolute, vested interest in the policy from the date of its issuance, delivery
and acceptance, and this is true of a policy payable to the children of the
insured equally, without naming them, or their executors, administrators or
assigns." When in a life-insurance policy the insured's estate is named
beneficiary, the proceeds must be delivered not to the decedent's heirs,
but to his administrator or legal representative. "Policy Payable to Insured,
His Estate, or Legal Representatives. ... Ordinarily the proceeds of a life
insurance policy are payable to the executor or administrator of insured as
assets of his estate where by the terms of the policy the proceeds are
payable to insured, his estate, his legal representatives, his executors or
administrators, his "executors, administrators, or assigns," or even his
"heirs, executors, administrators, or assigns." ..." "Personal Representatives
or Legal Representatives. — While there is some authority to the effect
that "legal representatives" means the persons entitled to the estate of the
insured, and not his executor or administrator, the better view is that
ordinarily the proceeds of such a policy pass to his executor or
administrator."
If the foregoing are the principles which should govern life-insurance
policies with reference to beneficiaries and the right to the proceeds of
such policies, it is evident that Schuetze's estate, and not his widow or the
conjugal partnership, is entitled to the proceeds of said policy exclusively,
and may receive them from the insurer. The parties must have so
understood it when the insurer delivered the net amount of the policy to
the Bank of the Philippine Islands, as judicial administrator of the insured.
The contract of life insurance is a special contract and the destination of
the proceeds thereof is determined by special laws which deal exclusively
with that subject. The Civil Code has no provisions which relate directly and
specially to life insurance contracts or to the destination of life insurance
proceeds. That subject is regulated exclusively by the Code of Commerce
which provides for the terms of the contract, the relations of the parties
and the destination of the proceeds of the policy.
The main point to be decided was not whether the premiums were paid
out of conjugal or personal funds of one of the spouses, but whether or not
the proceeds of the policy became assets of the insured's estate. If it be
admitted that the estate is the sole owner of the aforesaid proceeds, which
cannot be denied, inasmuch as the policy itself names the estate as the
beneficiary, it is beside the point to discuss the nature and origin of the
amounts used to pay the premiums, as the title to the proceeds of the
policy is vested in the insured's estate, and any right the widow might have
should be vindicated in another action. In such a case she might be entitled
to reimbursement of her share in the conjugal funds, but not in the present
case, for she has been instituted the sole testamentary heiress.
From the foregoing, it follows that as the proceeds of the policy belong to
Schuetze's estate, and inasmuch as the inheritance tax is levied upon the
transmission of a deceased person's estate upon, or, on the occasion of his
death, it is clear that the whole proceeds, and not one-half thereof, are
subject to such tax.
G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-
appellants.
On September 1, 1968, Buenaventura Ebrado was issued by The Life
Assurance Co., Ltd., a life insurance policy with a rider for Accidental
Death. Buenaventura C. Ebrado then designated Carponia T. Ebrado as the
beneficiary in his policy.
On October 21, 1969, Buenaventura Ebrado died as a result of an accident
when he was hit by a failing branch of a tree. Carponia then filed with the
insurer a claim for the proceeds of the Policy as the designated beneficiary
therein, although she admits that she and the insured Buenaventura C.
Ebrado were merely living as husband and wife without the benefit of
marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased
insured. She asserts that she is the one entitled to the insurance proceeds,
not the common-law wife.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The
Insular Life Assurance Co., Ltd. commenced an action for Interpleader.
ISSUE:
WON a common-law wife named as beneficiary in the life insurance policy
of a legally married man claim the proceeds thereof in case of death of the
latter?
HELD: NO.
When not otherwise specifically provided for by the Insurance Law, the
contract of life insurance is governed by the general rules of the civil law
regulating contracts. And under Article 2012 of the same Code, "any person
who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of an insurance policy by the person who cannot make a
donation to him. Common-law spouses are, definitely, barred from
receiving donations from each other.
2. In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are founded upon
the same consideration: liberality. A beneficiary is like a donee, because
from the premiums of the policy which the insured pays out of liberality,
the beneficiary will receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 and 2012 of the new Civil
Code should equally operate in life insurance contracts: any person who
cannot receive a donation cannot be named as beneficiary in the life
insurance policy of the person who cannot make the donation. Under
American law, a policy of life insurance is considered as a testament and in
construing it, the courts will, so far as possible treat it as a will and
determine the effect of a clause designating the beneficiary by rules under
which wins are interpreted.
As the trial court pointed out, It is patent from the last paragraph of Art.
739 of the Civil Code that a criminal conviction for adultery or concubinage
is not essential in order to establish the disqualification mentioned therein.
Neither is it also necessary that a finding of such guilt or commission of
those acts be made in a separate independent action brought for the
purpose. The guilt of the donee (beneficiary) may be proved by
preponderance of evidence in the same proceeding (the action brought to
declare the nullity of the donation).
G.R. No. L-2910 June 29, 1951
THE MANUFACTURERS LIFE INSURANCE CO., plaintiff-appellant, vs.
BIBIANO L. MEER, in the capacity as Collector of Internal Revenue,
defendant-appellee.
Manufacturer Life Insurance in a corporation duly organized in Canada with
head office at Toronto. It is duly registered and licensed to engage in life
insurance business in the Philippines, and maintains a branch office in
Manila. It was engaged in such business in the Philippines for more than
five years before and including the year 1941. But due to the exigencies of
the war it closed the branch office at Manila during 1942 up to September
1945.
In the course of its operations before the war, plaintiff issued a number of
life insurance policies in the Philippines containing stipulations referred to
as non-forfeiture clauses, as follows:
'8. Automatic Premium Loan. — This Policy shall not lapse for non-payment
of any premium after it has been three full years in force, if, at the due date
of such premium, the Cash Value of this Policy and of any bonus additions
and dividends left on accumulation (after deducting any indebtedness to
the Company and the interest accrued thereon) shall exceed the amount of
said premium. In which event the company will, without further request,
treat the premium then due as paid, and the amount of such premium,
with interest from its actual due date at six per cent per annum,
compounded yearly, and one per cent, compounded yearly, for expenses,
shall be a first lien on this Policy in the Company's favour in priority to the
claim of any assignee or any other person. The accumulated lien may at
any time, while the Policy is in force, be paid in whole or in part.
"When the premium falls due and is not paid in cash within the month's
grace, if the Cash Value of this policy and of any bonus addition and
dividends left on accumulation (after deducting any accumulated
indebtedness) be less than the premium then due, the Company will,
without further requests, continue this insurance in force for a period .. . .
"10. Cash and Paid-Up Insurance Values. — At the end of the third policy
year or thereafter, upon the legal surrender of this Policy to the Company
while there is no default in premium payments or within two months after
the due date of the premium in default, the Company will (1) grant a cash
value as specified in Column (A) increased by the cash value of any bonus
additions and dividends left on accumulation, which have been alloted to
this Policy, less all indebtedness to the Company on this Policy on the date
of such surrender, or (2) endorse this Policy as a Non-Participating Paid-up
Policy for the amount as specified in Column (B) of the Table of Guaranteed
Values . . ..
"11. Extended Insurance. — After the premiums for three or more full years
have been paid hereunder in cash, if any subsequent premium is not paid
when due, and there is no indebtness to the Company, on the written
request of the Insured . . ..
From January 1, 1942 to December 31, 1946 for failure of the insured
under the above policies to pay the corresponding premiums for one or
more years, the plaintiff's head office of Toronto, applied the provision of
the automatic premium loan clauses; and the net amount of premiums so
advanced or loaned totalled P1,069,254.98. On this sum the defendant
Collector of Internal Revenue assessed P17,917.12 — which plaintiff paid
supra protest —. The assessment was made pursuant to section 255 of the
National Internal Revenue Code as amended. which partly provides:
SEC. 255. Taxes on insurance premiums. — There shall be collected from
every person, company, or corporation (except purely cooperative
companies or associations) doing business of any sort in the Philippines a
tax of one per centum of the total premiums collected .. whether such
premiums are paid in money, notes credits, or any substitute for money but
premiums refunded within six months after payment on account of
rejection of risk or returned for other reason to person insured shall not be
included in the taxable receipts . . ..
It is the plaintiff's contention that when it made premium loans or
premium advances, as above stated, by virtue of the non-forfeiture clauses,
it did not collect premiums within the meaning of the above sections of the
law, and therefore it is not amendable to the tax therein provided.
The plaintiff conveniently divides that issue into five minor issues, to wit:
(a) Whether or not premium advances made by plaintiff-appellant under
the automatic premium loan clause of its policies are "premium collected"
by the Company subject to tax;
(b) Whether or not, in the application of the automatic premium loan
clause of plaintiff-appellant's policies, there is "payment in money, notes,
credit, or any substitutes for money";
(c) Whether or not the collection of the alleged deficiency premium taxes
constitutes double taxation;
(d) Whether the making of premium advances, granting for the sake of
argument that it amounted to collection of premiums, were done in
Toronto, Canada, or in the Philippines; and
(e) Whether or not the fact that plaintiff-appellant was not doing business
in the Philippines during the period from January 1, 1942 to September 30,
1945, inclusive, exempts it from payment of premium taxes corresponding
to said period.
These points will be considered in their order. The first two may best taken
up together in the light of a practical illustration offered by appellant:
"Suppose that "A" years of age, secures a 20-years endowment policy for
P5,000 from plaintiff-appellant Company and pays an annual premium of
P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on
this amount plaintiff-appellant pays the corresponding taxes under section
255 of the National Internal Revenue Code. Suppose also that the cash
value of said policy after the payment of the 10th annual premium
amounts to P1,000." When on the eleventh year the annual premium fell
due and the insured remitted no money within the months grace, the
insurer treated the premium then over due as paid from the cash value,
the amount being loan to the policyholder1 who could discharged it at
anytime with interest at 6 per cent. The insurance contract, therefore,
continued in force for the eleventh year.
Under the circumstances described, did the insurer collect the amount of
P250 as the annual premium for the eleventh year on the said policy? The
plaintiff says no; but the defendant and the lower court say yes. The latter
have, in our opinion, the correct view. In effect the Manufacturers Life
Insurance Co. loaned to "A" on the eleventh year, the sum of P250 and the
latter in turn paid with that sum the annual premium on his policy. The
Company therefore collected the premium for the eleventh year.
"How could there be such a collection "plaintiff argues "when as a result
thereof, insurer becomes a creditor, acquires a lien on the policy and is
entitled to collect interest on the amount of the unpaid premiums?".
Wittingly, the "premium" and the "loan" have been interchanged in the
argument. The insurer "became a creditor" of the loan, but not of the
premium that had already been paid. And it is entitled to collect interest on
the loan, not on the premium.
In other words, "A" paid the premium for the eleventh; but in turn he
became a debtor of the company for the sum of P250. This debt he could
repay either by later remitting the money to the insurer or by letting the
cash value compensate for it. The debt may also be deducted form the
amount of the policy should "A" die thereafter during the continuance of
the policy.
Proceeding along the same line of argument counsel for plaintiff observes
"that there is no change, much less an increase, in the amount of the
assets of plaintiff-appellant after the application of the automatic
premium loan clause. Its assets remain exactly the same after making the
advances in question. It being so, there could have been no collection of
premium . . .. "We cannot assent to this view, because there was an
increase. There was the new credit for the advances made. True, the
plaintiff could not sue the insured to enforce that credit. But it has means
of satisfaction out of the cash surrender value.
Here again it may be urged that if the credit is paid out of the cash
surrender value, there were no new funds added to the company's
assets. Cash surrender value "as applied to life insurance policy, is the
amount of money the company agrees to pay to the holder of the policy
if he surrenders it and releases his claims upon it. The more premiums
the insured has paid the greater will be the surrender value; but the
surrender value is always a lesser sum than the total amount of
premiums paid."
The cash value or cash surrender value is therefore an amount which the
insurance company holds in trust2 for the insured to be delivered to him
upon demand. It is therefore a liability of the company to the insured.
Now then, when the company's credit for advances is paid out of the cash
value or cash surrender value, that value and the company's liability is
thereby dismissed pro tanto. Consequently, the net assets of the
insurance company increased corresponding; for it is plain mathematics
that the decrease of a person's liabilities means a corresponding increase
in his net assets.
Nevertheless let us grant for the nonce that the operation of the automatic
loan provision contributed no additional cash to the funds of the insurer.
Yet it must be admitted that the insurer agreed to consider the premium
paid on the strength of the automatic loan. The premium was therefore
paid by means of a "note" or "credit" or "other substitute for money" and
the taxis due because section 255 above quoted levies taxes according to
the total premiums collected by the insurer "whether such premiums are
paid in money, notes, credits or any substitutes for money.
In connection with the third issue, appellant refers to its example about "A"
who failed to pay the premium on the eleventh year and the insurer
advanced P250 from the cash value. Then it reasons out that "if the
amount P250 is deducted from the cash value of P1,000 of the policy, then
taxing this P250 anew as premium collected, as was done in the present
case, will amount to double taxation since taxes had already been collected
on the cash value of P1,000 as part of the P2,500 collected as premiums for
the first ten years." The trouble with the argument is that it assumes all
advances are necessarily repaid from the cash value. That is true in some
cases. In others the insured subsequently remits the money to repay the
advance and to keep unimpaired the cash reserve of his policy.
As to a matter of fact of the total amount advanced (P1,069,254.998)
P158,666.63 had actually been repaid at the time of assessment notice.
Besides, the premiums paid and on which taxes had already been collected,
were those for the ten years. The tax demanded is on the premium for the
eleventh year.
In any event there is no constitutional prohibition against double taxation.
On the fourth issue the appellant takes the position that as advances of
premiums were made in Toronto, such premiums are deemed to have been
paid there — not in the Philippines — and therefore those payments are
not subject to local taxation. The thesis overlooks the actual fact that the
loans are made to policyholders in the Philippines, who in turn pay
therewith the premium to the insurer thru the Manila branch. Approval of
appellants position will enable foreign insurers to evade the tax by
contriving to require that premium payments shall be made at their head
offices. What is important, the law does not contemplate premiums
collected in the Philippines. It is enough that the insurer is doing insurance
business in the Philippines, irrespective of the place of its organization or
establishment.
This brings forth the appellant's last contention that it was "engaged in
business" in the Philippines during the years 1942 to September 1945, and
that as section 255 applies only to companies "doing insurance business in
the Philippines" this tax was improperly demanded.
It is our opinion that although during those years the appellant was not
open for new business because its branch office was closed, still it was
practically and legally, operating in this country by collecting premiums on
its outstanding policies, incurring the risks and/or enjoying the benefits
consequent thereto, without having previously taken any steps indicating
withdrawal in good faith field of economic activity.
As a matter of fact, in objecting to the payment of the tax, plaintiff-
appellant never insisted, before the Bureau of Internal Revenue, that it was
not engaged in business in this country during those years.
G.R. No. 76101-02 September 30, 1991
TIO KHE CHIO, petitioner, vs. THE HONORABLE COURT OF APPEALS and
EASTERN ASSURANCE AND SURETY CORPORATION, respondents.
On December 18, 1978, petitioner Tio Khe Chio imported (1,000) bags of
fishmeal valued at $36,000.30 from Agro Impex, U.S.A. The goods were
insured with respondent EASCO and shipped on board the M/V Peskov, a
vessel owned by Far Eastern Shipping Company. When the goods reached
Manila on January 28, 1979, they were found to have been damaged by
sea water which rendered the fishmeal useless. Petitioner filed a claim with
EASCO and Far Eastern Shipping. Both refused to pay. Whereupon,
petitioner sued them. EASCO, as the insurer, filed a counterclaim against
the petitioner for the recovery of the unpaid insurance premiums.
On June 30, 1982, the trial court rendered judgment ordering EASCO and
Far Eastern Shipping to pay petitioner solidarily the sum of P105,986.68
less the amount of P18,387.86 for unpaid premiums with interest at the
legal rate from the filing of the complaint, the sum of P15,000.00 as
attorney's fees and the costs.
The judgment became final as to EASCO but the shipping company
appealed to the Court of Appeals and was absolved from liability.
The trial court, upon motion by petitioner, issued a writ of execution
against EASCO, fixing the legal rate of interest at 12%. EASCO moved to
quash the writ alleging that the legal interest to be computed should be
(6%) per annum in accordance with Article 2209 of the Civil Code. Upon
EASCO’s petition, the CA fixed the same to (6%) per annum.
In disputing the aforesaid decision of the Court of Appeals, petitioner
maintains that not only is it unjust and unfair but it is also contrary to the
correct interpretation of the fixing of interest rates under Sections 243 and
244 of the Insurance Code. And since petitioner's claims is based on an
insurance contract, then it is the Insurance Code which must govern and
not the Civil Code.
ISSUE:
WON the CA is correct in reducing the interest to 6% per annum.
HELD: YES.
The aforecited sections of the Insurance Code are not pertinent to the
instant case. They apply only when the court finds an unreasonable delay
or refusal in the payment of the claims.
Neither does Circular No. 416 of the Central Bank which took effect on July
29, 1974 pursuant to Presidential Decree No. 116 (Usury Law) which raised
the legal rate of interest from six (6%) to twelve (12%) per cent apply to the
case at bar as by the petitioner. The adjusted rate mentioned in the circular
refers only to loans or forbearances of money, goods or credits and court
judgments thereon but not to court judgments for damages arising from
injury to persons and loss of property which does not involve a loan.4
Clearly, the applicable law is Article 2209 of the Civil Code which reads:
If the obligation consists in the payment of a sum of money and the debtor
incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of interest agreed upon, and in the
absence of stipulation, the legal interest which is six per cent per annum.
The contending parties did not allege the rate of interest stipulated in the
insurance contract, hence the legal interest was properly pegged by the
Appellate Court at six (6%) per cent. The legal rate of interest is six (6%) per
cent per annum, and not twelve (12%) per cent, where a judgment award
is based on an action for damages for personal injury, not use or
forbearance of money, goods or credit.
G.R. No. 138737 July 12, 2001
FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs. COURT OF
APPEALS and USIPHIL INCORPORATED, respondents.
On September 15, 1981, private respondent obtained a fire insurance
policy from petitioner (then doing business under the name Summa
Insurance) covering certain properties. Under said policy, petitioner
undertook to indemnify private respondent for any damage to or loss of
said properties arising from fire.
Sometime in 1982, private respondent filed with petitioner an insurance
claim amounting to P987,126.11 for the loss of the insured properties due
to fire. Acting thereon, petitioner appointed Adjuster H.H. Bayne to
undertake the valuation and adjustment of the loss. H.H. Bayne then
required private respondent to file a formal claim and submit proof of loss.
In compliance therewith, private respondent submitted its Sworn
Statement of Loss and Formal Claim, dated July 22, 1982, signed by
Reynaldo Cayetano, private respondent’s Manager. Respondent likewise
submitted Proof of Loss signed by its Accounting Manager Pedro Palallos
and countersigned by H.H. Bayne’s Adjuster F.C. Medina.
Palallos personally followed-up private respondent’s claim with petitioner’s
President Joaquin Ortega. During their meeting, Ortega instructed their
Finance Manager, Rosauro Maghirang, to reconcile the records. Thereafter,
Maghirang and Palallos signed a Statement/Agreement, dated February 28,
1985, which indicated that the amount due respondent was P842,683.40.
Despite repeated demands by private respondent, petitioner refused to
pay the insurance claim. Thus, private respondent was constrained to file a
complaint against petitioner for the unpaid insurance claim. In its Answer,
petitioner maintained that the claim of private respondent could not be
allowed because it failed to comply with Policy Condition No. 13 regarding
the submission of certain documents to prove the loss.
Trial ensued. On July 6, 1994, the trial court rendered judgment in favor of
private respondent. In its judgement, the trial court ordered the defendant,
to pay the plaintiff the sum of P842,683.40 and to pay 24% interest per
annum from February 28, 1985 until fully paid. On appeal, the CA
substantially affirmed the decision of the trial court.
Petitioner thereafter assailed, inter alia, the award in favor of private
respondent of an interest rate of 24% per annum. Since there was allegedly
no express finding that petitioner unreasonably denied or withheld the
payment of the subject insurance claim, then the award of 24% per annum
is not proper. Petitioner opines that the judgment should only bear the
legal interest rate of 12% per annum for the delay in the payment of the
claim.
ISSUE:
WON the judgment should only bear the legal interest rate of 12% per
annum for the delay in the payment of the claim.
HELD: NO.
The 24% interest per annum computed from May 3, 1985 until fully paid, is
authorized by Sections 243 and 244 of the Insurance Code. Notably, under
Section 244, a prima facie evidence of unreasonable delay in payment of
the claim is created by the failure of the insurer to pay the claim within the
time fixed in both Sections 243 and 244. Further, the policy itself obliges
petitioner to pay the insurance claim within thirty days after proof of loss
and ascertainment of the loss made in an agreement between private
respondent and petitioner. In this case, as found by the CA, petitioner and
private respondent signed the agreement indicating that the amount due
private respondent was P842,683.40 on April 2, 1985. Petitioner thus had
until May 2, 1985 to pay private respondent’s insurance.12 For its failure to
do so, the CA and the trial court rightfully directed petitioner to pay, inter
alia, 24% interest per annum in accordance with the above quoted
provisions.
G.R. No. L-49699 August 8, 1988
PERLA COMPANIA de SEGUROS, INC., petitioner, vs. HON. CONSTANTE A.
ANCHETA
On December 27, 1977, in a collision between the IH Scout in which private
respondents were riding and a Superlines bus along the national highway
in Sta. Elena, Camarines Norte, private respondents sustained physics
injuries in varying degrees of gravity. Thus, they filed with the Court of First
Instance of Camarines Norte on February 23,1978 a complaint for damages
against Superlines, the bus driver and petitioner, the insurer of the bus
[Rollo, pp. 27-39.] The bus was insured with petitioner for the amount of
P50,000.00 as and for passenger liability and P50,000.00 as and for third
party liability. The vehicle in which private respondents were riding was
insured with Malayan Insurance Co.
Even before summons could be served, respondent judge issued an order
dated March 1, 1978 [Rollo, pp. 40-41], the pertinent portion of which
stated:
The second incident is the prayer for an order of this court for the
Insurance Company, Perla Compania de Seguros, Inc., to pay immediately
the P5,000.00 under the "no fault clause" as provided for under Section
378 of the Insurance Code, and finding that the requisite documents to be
attached in the record, the said Insurance Company is therefore directed to
pay the plaintiffs (private respondents herein) within five (5) days from
receipt of this order.
Petitioner denied in its Answer its alleged liability under the "no fault
indemnity" provision [Rollo, p. 44] and likewise moved for the
reconsideration of the order. Petitioner held the position that under Sec.
378 of the Insurance Code, the insurer liable to pay the P5,000.00 is the
insurer of the vehicle in which private respondents were riding, not
petitioner, as the provision states that "[i]n the case of an occupant of a
vehicle, claim shall lie against the insurer of the vehicle in which the
occupant is riding, mounting or dismounting from." Respondent judge,
however, denied reconsideration. A second motion for reconsideration was
filed by petitioner. However, in an order dated January 3, 1979, respondent
judge denied the second motion for reconsideration and ordered the
issuance of a writ of execution [Rollo, p. 69.] Hence, the instant petition
praying principally for the annulment and setting aside of respondent
judge's orders dated March 1, 1978 and January 3, 1979.
The Court issued a temporary restraining order on January 24,1979 [Rollo
pp. 73-74.]
ISSUE:
whether or not petitioner is the insurer liable to indemnify private
respondents under Sec. 378 of the Insurance Code.
HELD:
The key to the resolution of the issue is of courts e Sec. 378, which
provides:
Sec. 378. Any claim for death or injury to any passenger or third party
pursuant to the provision of this chapter shall be paid without the
necessity of proving fault or negligence of any kind. Provided, That for
purposes of this section —
(i) The indemnity in respect of any one person shall not exceed five
thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall be
sufficient evidence to substantiate the claim:
(a) Police report of accident, and
(b) Death certificate and evidence sufficient to establish the proper
payee, or
(c) Medical report and evidence of medical or hospital disbursement in
respect of which refund is claimed;
(iii) Claim may be made against one motor vehicle only. In the case of an
occupant of a vehicle, claim shall lie against the insurer of the vehicle in
which the occupant is riding, mounting or dismounting from. In any other
case, claim shall lie against the insurer of the directly offending vehicle. In
all cases, the right of the party paying the claim to recover against the
owner of the vehicle responsible for the accident shall be maintained.
[Emphasis supplied.]
From a reading of the provision, which is couched in straight-forward and
unambiguous language, the following rules on claims under the "no fault
indemnity" provision, where proof of fault or negligence is not necessary
for payment of any claim for death Or injury to a passenger or a third party,
are established:
1. A claim may be made against one motor vehicle only.
2. If the victim is an occupant of a vehicle, the claim shall lie against
the insurer of the vehicle. in which he is riding, mounting or dismounting
from.
3. In any other case (i.e. if the victim is not an occupant of a vehicle),
the claim shall lie against the insurer of the directly offending vehicle.
4. In all cases, the right of the party paying the claim to recover
against the owner of the vehicle responsible for the accident shall be
maintained.
The law is very clear — the claim shall lie against the insurer of the vehicle
in which the "occupant" ** is riding, and no other. The claimant is not free
to choose from which insurer he will claim the "no fault indemnity," as the
law, by using the word "shall, makes it mandatory that the claim be made
against the insurer of the vehicle in which the occupant is riding, mounting
or dismounting from.
That said vehicle might not be the one that caused the accident is of no
moment since the law itself provides that the party paying the claim under
Sec. 378 may recover against the owner of the vehicle responsible for the
accident. This is precisely the essence of "no fault indemnity" insurance
which was introduced to and made part of our laws in order to provide
victims of vehicular accidents or their heirs immediate compensation,
although in a limited amount, pending final determination of who is
responsible for the accident and liable for the victims'injuries or death. In
turn, the "no fault indemnity" provision is part and parcel of the Insurance
Code provisions on compulsory motor vehicle ability insurance [Sec. 373-
389] and should be read together with the requirement for compulsory
passenger and/or third party liability insurance [Sec. 377] which was
mandated in order to ensure ready compensation for victims of vehicular
accidents.
Irrespective of whether or not fault or negligence lies with the driver of the
Superlines bus, as private respondents were not occupants of the bus, they
cannot claim the "no fault indemnity" provided in Sec. 378 from petitioner.
The claim should be made against the insurer of the vehicle they were
riding. This is very clear from the law. Undoubtedly, in ordering petitioner
to pay private respondents the 'no fault indemnity,' respondent judge
gravely abused his discretion in a manner that amounts to lack of
jurisdiction. The issuance of the corrective writ of certiorari is therefore
warranted.
G.R. No. L-60887 November 13, 1991
PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HON. JOSE R.
RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR., OFFICE OF
THE PROVINCIAL SHERIFF, PROVINCE OF CEBU, respondents.
In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in
the name of Nelia Enriquez, and driven by Cosme Casas, was travelling
from Cebu City to Danao City. While passing through Liloan, Cebu, the
Cimarron PUJ collided with a private jeep owned by the late Calixto Palmes
(husband of private respondent Primitiva Palmes) who was then driving the
private jeep. The impact of the collision was such that the private jeep was
flung away to a distance of about thirty (30) feet and then fell on its right
side pinning down Calixto Palmes. He died as a result of cardio-respiratory
arrest due to a crushed chest. 4 The accident also caused physical injuries
on the part of Adeudatus Borbon who was then only two (2) years old.
On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto
Palmes) and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed
a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her
husband Leonardo Enriquez) before the then Court of First Instance of
Cebu, Branch 3, claiming actual, moral, nominal and exemplary damages as
a result of the accident.
The claim of private respondent Honorato Borbon, Sr., being distinct and
separate from that of co-plaintiff Primitiva Palmes, and the amount thereof
falling properly within the jurisdiction of the inferior court, respondent
Judge Jose R. Ramolete ordered the Borbon claim excluded from the
complaint, without prejudice to its being filed with the proper inferior
court.
On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor
of private respondent Primitiva Palmes, ordering common carrier Nelia
Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as
compensatory damages for the death of Calixto Palmes, P3,000.00 as
exemplary damages, P5,000.00 as actual damages, and P1,000.00 as
attorney's fees.
The judgment of the trial court became final and executory and a writ of
execution was thereafter issued. The writ of execution was, however,
returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez
was summoned before the trial court for examination on 23 July 1979. She
declared under oath that the Cimarron PUJ registered in her name was
covered by a third-party liability insurance policy issued by petitioner Perla.
Thus, on 31 July 1979, private respondent Palmes filed a motion for
garnishment 7 praying that an order of garnishment be issued against the
insurance policy issued by petitioner in favor of the judgment debtor. On 6
August 1979, respondent Judge issued an Order 8 directing the Provincial
Sheriff or his deputy to garnish the third-party liability insurance policy.
Petitioner then appeared before the trial court and moved for
reconsideration of the 6 August 1979 Order and for quashal of the writ of
garnishment, 9 alleging that the writ was void on the ground that it (Perla)
was not a party to the case and that jurisdiction over its person had never
been acquired by the trial court by service of summons or by any process.
The trial court denied petitioner's motion. 10 An Order for issuance of an
alias writ of garnishment was subsequently issued on 8 April 1980.
More than two (2) years later, the present Petition for Certiorari and
Prohibition was filed with this Court on 25 June 1982 alleging grave abuse
of discretion on the part of respondent Judge Ramolete in ordering
garnishment of the third-party liability insurance contract issued by
petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The
Petition should have been dismissed forthwith for having been filed way
out of time but, for reasons which do not appear on the record, was
nonetheless entertained.
ISSUE:
WON an insurance contract cannot be subjected to garnishment or
execution to satisfy the judgment in Civil Case No. R-15391 because
petitioner was not a party to the case and the trial court did not acquire
jurisdiction over petitioner's person. Perla further argues that the writ of
garnishment had been issued solely on the basis of the testimony of the
judgment debtor during the examination on 23 July 1979 to the effect that
the Cimarron PUJ was covered by a third-party liability insurance issued by
Perla, without granting it the opportunity to set up any defenses which it
may have under the insurance contract; and that the proceedings taken
against petitioner are contrary to the procedure laid down in Economic
Insurance Company, Inc. v. Torres, et al., 12 which held that under Rule 39,
Section 45, the Court "may only authorize" the judgment creditor to
institute an action against a third person who holds property belonging to
the judgment debtor.
We find no grave abuse of discretion or act in excess of or without
jurisdiction on the part of respondent Judge Ramolete in ordering the
garnishment of the judgment debtor's third-party liability insurance.
Garnishment has been defined as a species of attachment for reaching any
property or credits pertaining or payable to a judgment debtor. 13 In legal
contemplation, it is a forced novation by the substitution of creditors: 14
the judgment debtor, who is the original creditor of the garnishee is,
through service of the writ of garnishment, substituted by the judgment
creditor who thereby becomes creditor of the garnishee. Garnishment has
also been described as a warning to a person having in his possession
property or credits of the judgment debtor, not to pay the money or deliver
the property to the latter, but rather to appear and answer the plaintiff's
suit.
In order that the trial court may validly acquire jurisdiction to bind the
person of the garnishee, it is not necessary that summons be served upon
him. The garnishee need not be impleaded as a party to the case. All that is
necessary for the trial court lawfully to bind the person of the garnishee or
any person who has in his possession credits belonging to the judgment
debtor is service upon him of the writ of garnishment.
The Rules of Court themselves do not require that the garnishee be served
with summons or impleaded in the case in order to make him liable.
Rule 39, Section 15 provides:
Sec. 15. Execution of money judgments. — The officer must enforce an
execution of a money judgment by levying on all the property, real or
personal of every name and nature whatsoever, and which may be
disposed of for value, of the judgment debtor not exempt from
execution . . .
Real property, stocks, shares, debts, credits, and other personal property,
or any interest in either real or personal property, may be levied on in like
manner and with like effect as under a writ of attachment. (Emphasis
supplied).
Rule 57, Section 7(e) in turn reads:
Sec. 7. Attachment of real and personal property; recording thereof. —
Properties shall be attached by the officer executing the order in the
following manner:
(e) Debts and credits, and other personal property not capable of
manual delivery, by leaving with the person owing such debts, or having his
possession or under his control such credits or other personal property, or
with his agent, a copy of the order, and notice that the debts owing by him
to the party against whom attachment is issued, and the credits and other
personal property in his possession, or under his control, belonging to said
party, are attached in pursuance of such order;
Through service of the writ of garnishment, the garnishee becomes a
"virtual party" to, or a "forced intervenor" in, the case and the trial court
thereby acquires jurisdiction to bind him to compliance with all orders and
processes of the trial court with a view to the complete satisfaction of the
judgment of the court. In Bautista v. Barredo, 16 the Court, through Mr.
Justice Bautista Angelo, held:
While it is true that defendant Jose M. Barredo was not a party in Civil Case
No. 1636 when it was instituted by appellant against the Philippine Ready
Mix Concrete Company, Inc., however, jurisdiction was acquired over him
by the court and he became a virtual party to the case when, after final
judgment was rendered in said case against the company, the sheriff
served upon him a writ of garnishment in behalf of appellant. Thus, as held
by this Court in the case of Tayabas Land Company vs. Sharruf, 41 Phil. 382,
the proceeding by garnishment is a species of attachment for reaching
credits belonging to the judgment debtor and owing to him from a stranger
to the litigation. By means of the citation, the stranger becomes a forced
intervenor; and the court, having acquired jurisdiction over him by means
of the citation, requires him to pay his debt, not to his former creditor, but
to the new creditor, who is creditor in the main litigation.
In Rizal Commercial Banking Corporation v. De Castro, 17 the Court
stressed that the asset or credit garnished is thereupon subjected to a
specific lien:
The garnishment of property to satisfy a writ of execution operates as an
attachment and fastens upon the property a lien by which the property is
brought under the jurisdiction of the court issuing the writ. It is brought
into custodia legis, under the sole control of such court.
In the present case, there can be no doubt, therefore, that the trial court
actually acquired jurisdiction over petitioner Perla when it was served with
the writ of garnishment of the third-party liability insurance policy it had
issued in favor of judgment debtor Nelia Enriquez. Perla cannot
successfully evade liability thereon by such a contention.
Every interest which the judgment debtor may have in property may be
subjected to execution. 19 In the instant case, the judgment debtor Nelia
Enriquez clearly had an interest in the proceeds of the third-party liability
insurance contract. In a third-party liability insurance contract, the insurer
assumes the obligation of paying the injured third party to whom the
insured is liable. 20 The insurer becomes liable as soon as the liability of
the insured to the injured third person attaches. Prior payment by the
insured to the injured third person is not necessary in order that the
obligation of the insurer may arise. From the moment that the insured
became liable to the third person, the insured acquired an interest in the
insurance contract, which interest may be garnished like any other credit.
Petitioner also contends that in order that it may be held liable under the
third-party liability insurance, a separate action should have been
commenced by private respondents to establish petitioner's liability.
Petitioner invokes Economic Insurance Company, Inc. vs. Torres, 22 which
stated:
It is clear from Section 45, Rule 39 that if a persons alleged to have
property of the judgment debtor or to be indebted to him claims an
interest in the property adverse to him or denies the debt, the court may
only authorize the judgment creditor to institute an action against such
person for the recovery of such interest or debt. Said section does not
authorize the court to make a finding that the third person has in his
possession property belonging to the judgment debtor or is indebted to
him and to order said third person to pay the amount to the judgment
creditor.
It has been held that the only power of the court in proceedings
supplemental to execution is to niake an order authorizing the creditor to
sue in the proper court to recover an indebtedness due to the judgment
debtor. The court has no jurisdiction to try summarily the question whether
the third party served with notice of execution and levy is indebted to
defendant when such indebtedness is denied. To make an order in relation
to property which the garnishee claimed to own in his own right, requiring
its application in satisfaction of judgment of another, would be to deprive
the garnishee of property upon summary proceeding and without due
process of law. (Emphasis supplied)
But reliance by petitioner on the case of Economic Insurance Company, Inc.
v. Torres (supra) is misplaced. The Court there held that a separate action
needs to be commenced when the garnishee "claims an interest in the
property adverse to him (judgment debtor) or denies the debt." In the
instant case, petitioner Perla did not deny before the trial court that it had
indeed issued a third-party liability insurance policy in favor of the
judgment debtor. Petitioner moreover refrained from setting up any
substantive defense which it might have against the insured-judgment
debtor. The only ground asserted by petitioner in its "Motion for
Reconsideration of the Order dated August 6, 1979 and to Quash Notice of
Garnishment" was lack of jurisdiction of the trial court for failure to
implead it in the case by serving it with summons. Accordingly, Rule 39,
Section 45 of the Rules of Court is not applicable in the instant case, and
we see no need to require a separate action against Perla: a writ of
garnishment suffices to hold petitioner answerable to the judgment
creditor. If Perla had any substantive defenses against the judgment debtor,
it is properly deemed to have waived them by laches.
G.R. No. 101439 June 21, 1999
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner, vs. COURT
OF APPEALS (former Tenth Division), VICTORIA JAIME VDA. DE KHO
National Food Authority (NFA, formerly National Grains Authority) was the
owner of a Chevrolet truck which was insured against liabilities for death of
and injuries to third persons with the GSIS.
On May 9, 1979, at about 7:00 in the evening at Tabon-Tabon, Butuan City,
the said truck driven by Guillermo Corbeta collided with a public utility
vehicle, a Toyota Tamaraw. The Toyota Tamaraw was owned and operated
by Victor Uy, under the name and style of "Victory Line." The Tamaraw was
a total wreck.
All the collision victims were passengers of the Toyota Tamaraw. Five (5)
passengers died 4 while ten (10) others sustained bodily injuries. Among
those injured were private respondents, Victoria Jaime Vda. de Kho and
Gloria Kho Vda. de Calabia. Among the dead were Maxima Ugmad Vda. de
Kho, Roland Kho and Willie Calabia, Sr.
Three (3) cases were filed with the Court of First Instance of Agusan del
Norte and Butuan City. The first, Civil Case No. 2196 for quasi-delict,
damages and attorney's fees, was commenced by Uy on June 5, 1979
against NFA and Corbeta. On August 27, 1979, the second, Civil Case No.
2225 for damages, was filed by an injured passenger, Librado Taer, against
Uy, the operator of the public utility vehicle, and insurer, Mabuhay
Insurance and Guaranty Co. (MIGC). In turn, Uy filed a cross-claim against
MIGC and a third-party complaint against Corbeta and NFA. The third, Civil
Case No. 2256, was instituted by herein private respondents on November
26, 1979 against the following: NFA and Corbeta for damages due to quasi-
delict; GSIS as insurer of the truck; Uy for breach of contract of carriage;
and MIGC as insurer of the Toyota Tamaraw. These cases were consolidated
and partially tried by Judge Fortunate A. Vailoces, of the then Court of First
Instance of Agusan del Norte and Butuan City.
These cases were later on transferred to Branch II of the Regional Trial
Court of Butuan City. Trial ensued and on April 30, 1985, the court
rendered its decision 5 holding that Corbeta's negligence was the
proximate cause of the collision. The findings of the trial court stated that
the truck which crossed over to the other lane was speeding because after
the collision, its left front wheel was detached and the truck traveled for
about fifty (50) meters and fell into a ravine. 6 Likewise, the court
concluded that if both vehicles had traveled in their respective lanes, the
incident would not have occurred. 7 However, the Chevy cargo truck had
crossed over to the other lane which, under traffic rules, was the lane of
the Toyota Tamaraw.
In Civil Case No. 2196, the trial court awarded Uy the total amount of one
hundred nine thousand one hundred (P109,100.00) pesos for damages. In
Civil Case No. 2225, said court dismissed the case against Uy and ordered
MIGC, Corbeta and NFA to pay plaintiff Taer, jointly and severally, the total
amount of forty thousand five hundred fifty-nine pesos and ninety four
centavos (P40,559.94) for actual, compensatory, and moral damages plus
attorney's fees. Damages were likewise awarded to the herein private
respondents in Civil Case No. 2256, as earlier mentioned.
Corbeta and NFA appealed the decision of the trial court in Civil Case Nos.
2196, 2225, and 2256 to the Court of Appeals. GSIS also elevated the
decision in Civil Case No. 2256 to the same appellate court. The appeals
were docketed as C.A.-G.R. Nos. 19847, 19848, and 19849.
The Court of Appeals agreed with the conclusions of the trial court.
On February 5 and 6, 1991, GSIS and NFA filed their motions for
reconsideration respectively, which were denied by the respondent court in
its Resolution 10 dated August 13, 1991.
ISSUES:
1) Whether the respondent court erred in holding GSIS solidarily
liable with the negligent insured/owner-operator of the Chevrolet truck for
damages awarded to private respondents which are beyond the limitations
of the insurance policy and the Insurance Memorandum Circular No. 5-78.
2) Whether the respondent court failed to consider that the private
respondents have no cause of action against the petitioner, allegedly for
failure of the victims to file an insurance claim within six (6) months from
the date of the accident.
HELD:
Petitioner denies solidary liability with the NFA or the negligent operator of
the cargo truck because it claims that they are liable under different
obligations. It asserts that the NFA's liability is based on quasi-delict, while
petitioner's liability is based on the contract of insurance. Citing articles
1207 11 and 1208 12 of the Civil Code of the Philippines, petitioner states
that when there are two or more debtors or two or more creditors, the
obligation as a general rule is joint. It claims that the only exceptions are:
(1) when there is a stipulation for solidary obligation; (2) when the nature
of the obligation requires solidary liability; and (3) when the law declares
the obligation to be solidary. However, since neither the provision of the
contract nor the insurance law provides for solidary liability, petitioner
asserts that the presumption is that its obligation arising from a contract of
insurance is joint.
Petitioner's position insofar as joint liability is concerned is not tenable. It is
now established that the injured or the heirs of a deceased victim of a
vehicular accident may sue directly the insurer of the vehicle. Note that
common carriers are required to secure Compulsory Motor Vehicle Liability
Insurance [CMVLI] coverage as provided under Sec. 374 13 of the Insurance
Code, precisely for the benefit of victims of vehicular accidents and to
extend them immediate relief. 14 As this Court held in Shafter vs. Judge,
RTC of Olongapo City, Br. 75:
Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is
primarily intended to provide compensation for the death or bodily injuries
suffered by innocent third parties or passengers as a result of a negligent
operation and use of motor vehicles. The victims and/or their defendants
[dependents] are assured of immediate financial assistance, regardless of
the financial capacity of motor vehicle owners.
xxx xxx xxx
The injured for whom the contract of insurance is intended can sue directly
the insurer. The general purpose of statutes enabling an injured person to
proceed directly against the insurer is to protect injured persons against
the insolvency of the insured who causes such injury, and to give such
injured person a certain beneficial interest in the proceeds of the policy,
and statutes are to be liberally construed so that their intended purpose
may be accomplished. It has even been held that such a provision creates a
contractual relation which injures to the benefit of any and every person
who may be negligently injured by the named insured as if such injured
person were specifically named in the policy. (S 449 7 Am. Jur., 2d, pp. 118-
119) 16
However, although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the insurance
policy and those required by law. While it is true that where the insurance
contract provides for indemnity against liability to third persons, and such
third persons can directly 17 sue the insurer, the direct liability of the
insurer under indemnity contracts against third party liability does not
mean that the insurer can be held liable in solidum with the insured and/or
the other parties found at fault. 18 For the liability of the insurer is based
on contract; that of the insured carrier or vehicle owner is based on tort.
19 The liability of GSIS based on the insurance contract is direct, but not
solidary with that of the NFA. The latter's liability is based separately on
Article 2180 20 of the Civil Code.
Obviously, the insurer could be held liable only up to the extent of what
was provided for by the contract of insurance, in accordance with CMVLI
law. At the time of the incident, the schedule of indemnities for death
and/or bodily injuries, professional fees, hospital and other charges
payable under a CMVLI coverage was provided under the Insurance
Memorandum Circular (IMC) No. 5-78 which was approved on November
10, 1978. As therein provided, the maximum indemnity for death was
twelve thousand (P12,000.00) pesos per victim. 22 The schedules for
medical expenses were also provided by said IMC, specifically in
paragraphs (C) to (G).
Consequently, heirs of the victims who died in the May 9, 1979 vehicular
incident, could proceed (1) against GSIS for the indemnity of P12,000 for
each dead victim, and against NFA and Guillermo Corbeta for any other
damages or expenses claimed; or (2) against NFA and Corbeta to pay them
all their claims in full.
It follows also that injured victims, Gloria Kho Vda. de Calabia and Victoria
Kho, could claim their medical expenses for eight thousand nine hundred
thirty-five pesos and six centavos (P8,935.06) and eight hundred thirty-two
(P832.00) pesos, from any of the following: GSIS, NFA, or Corbeta. As to the
other damages, only NFA or Corbeta may be held liable therefor.
Computation of hospital charges and fees for the services rendered to the
injured victims was conclusively established by the trial court. The
petitioner failed to object to the evidence thereon, when presented by the
private respondents during the trial. Thus, these factual bases for the
award of damages may no longer be attacked. For generally, findings of the
judge who tried the case and heard the witnesses could not be disturbed
on appeal, unless there are substantial facts and particular circumstances
which have been overlooked but which, if properly considered, might affect
the result of the case. 23 Thus, considering the evidence on record
including the schedule of indemnities provided under IMC No. 5-78, we
find no cogent reason to disturb the computation of medical charges and
expenses that justify the award of damages by the trial court.
As to the second issue, the petitioner contends that it cannot be held liable
without proof nor allegation that the private respondents filed before its
office a notice of claim within six (6) months from the date of the accident.
This requirement, according to the petitioner, gives the insurer the
opportunity to investigate the veracity of the claim, and non-compliance
therewith constitutes waiver. Since the claim was not reported to the
insurer, the petitioner avers that the presumption is that the victim opted
to pursue his claim against the motor vehicle owner or against the
tortfeasor.
However, in this case the records reveal that on September 7, 1979, the
private respondents sent a notice of loss to the petitioner informing the
latter of the accident. Included as "Exihibit J'' 24 in the records, this notice
constitutes evidence of the loss they suffered by reason of the vehicular
collision. They stressed further that the petitioner did not deny receipt of
notice of claim during the trial, and it would be too late now to state
otherwise.
Although merely factual, we need to emphasize that the alleged delay in
reporting the loss by the insured and/or by the beneficiaries must be
promptly raised by the insurer 25 in objecting to the claims. When the
insured presented proof of loss before the trial court, the insurer failed to
object to said presentation. The petitioner should have promptly
interposed the defense of delay, or belated compliance, concerning the
notice of claim. Moreover, the petitioner merely waited for the victims or
beneficiaries to file their complaint. As matters stand now, the defense of
laches or prescription is deemed waived because of petitioner's failure to
raise it not only before but also during the hearing.
To recapitulate, petitioner seeks a definitive ruling only on the extent of its
liability, as insurer of NFA, to those injured or killed in the May 9, 1979
vehicular collision.
G.R. No. 76452 July 26, 1994
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS
REYES, petitioners, vs. HON. ARMANDO ANSALDO, in his capacity as
Insurance Commissioner, and RAMON MONTILLA PATERNO, JR.,
respondents.
The instant case arose from a letter-complaint of private respondent
Ramon M. Paterno, Jr. dated April 17, 1986, to respondent Commissioner,
alleging certain problems encountered by agents, supervisors, managers
and public consumers of the (Philamlife) as a result of certain practices by
said company.
In a letter dated April 23, 1986, respondent Commissioner requested
petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president, to
comment on respondent Paterno's letter.
In a letter dated April 29, 1986 to respondent Commissioner, petitioner De
los Reyes suggested that private respondent "submit some sort of a 'bill of
particulars' listing and citing actual cases, facts, dates, figures, provisions of
law, rules and regulations, and all other pertinent data which are necessary
to enable him to prepare an intelligent reply" (Rollo, p. 37). A copy of this
letter was sent by the Insurance Commissioner to private respondent for
his comments thereon.
On May 16, 1986, respondent Commissioner received a letter from private
respondent maintaining that his letter-complaint of April 17, 1986 was
sufficient in form and substance, and requested that a hearing thereon be
conducted.
Petitioner De los Reyes, in his letter to respondent Commissioner dated
June 6, 1986, reiterated his claim that private respondent's letter of May
16, 1986 did not supply the information he needed to enable him to
answer the letter-complaint.
On July 14, a hearing on the letter-complaint was held by respondent
Commissioner on the validity of the Contract of Agency complained of by
private respondent.
In said hearing, private respondent was required by respondent
Commissioner to specify the provisions of the agency contract which he
claimed to be illegal.
On August 4, private respondent submitted a letter of specification to
respondent Commissioner dated July 31, 1986, reiterating his letter of April
17, 1986 and praying that the provisions on charges and fees stated in the
Contract of Agency executed between Philamlife and its agents, as well as
the implementing provisions as published in the agents' handbook, agency
bulletins and circulars, be declared as null and void. He also asked that the
amounts of such charges and fees already deducted and collected by
Philamlife in connection therewith be reimbursed to the agents, with
interest at the prevailing rate reckoned from the date when they were
deducted.
Respondent Commissioner furnished petitioner De los Reyes with a copy of
private respondent's letter of July 31, 1986, and requested his answer
thereto.
Petitioner De los Reyes submitted an Answer dated September 8, 1986,
stating inter alia that:
(1) Private respondent's letter of August 11, 1986 does not contain
any of the particular information which Philamlife was seeking from him
and which he promised to submit.
(2) That since the Commission's quasi-judicial power was being
invoked with regard to the complaint, private respondent must file a
verified formal complaint before any further proceedings.
In his letter dated September 9, 1986, private respondent asked for the
resumption of the hearings on his complaint.
On October 1, private respondent executed an affidavit, verifying his letters
of April 17, 1986, and July 31, 1986.
In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior
Assistant Vice-President and Executive Assistant to the President, asked
that respondent Commission first rule on the questions of the jurisdiction
of the Insurance Commissioner over the subject matter of the letters-
complaint and the legal standing of private respondent.
On October 27, respondent Commissioner notified both parties of the
hearing of the case on November 5, 1986.
On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice
on the following grounds;
1. The Subpoena/Notice has no legal basis and is premature
because:
(1) No complaint sufficient in form and contents has been filed;
(2) No summons has been issued nor received by the respondent De
los Reyes, and hence, no jurisdiction has been acquired over his person;
(3) No answer has been filed, and hence, the hearing scheduled on
November 5, 1986 in the Subpoena/Notice, and wherein the respondent is
required to appear, is premature and lacks legal basis.
II. The Insurance Commission has no jurisdiction over;
(1) the subject matter or nature of the action; and
(2) over the parties involved (Rollo, p. 102).
In the Order dated November 6, 1986, respondent Commissioner denied
the Motion to Quash.
ISSUE:
whether or not the resolution of the legality of the Contract of Agency falls
within the jurisdiction of the Insurance Commissioner.
Private respondent contends that the Insurance Commissioner has
jurisdiction to take cognizance of the complaint in the exercise of its quasi-
judicial powers. The Solicitor General, upholding the jurisdiction of the
Insurance Commissioner, claims that under Sections 414 and 415 of the
Insurance Code, the Commissioner has authority to nullify the alleged
illegal provisions of the Contract of Agency.
HELD:
The general regulatory authority of the Insurance Commissioner is
described in Section 414 of the Insurance Code, to wit:
The Insurance Commissioner shall have the duty to see that all laws
relating to insurance, insurance companies and other insurance matters,
mutual benefit associations and trusts for charitable uses are faithfully
executed and to perform the duties imposed upon him by this Code, . . .
On the other hand, Section 415 provides:
In addition to the administrative sanctions provided elsewhere in this Code,
the Insurance Commissioner is hereby authorized, at his discretion, to
impose upon insurance companies, their directors and/or officers and/or
agents, for any willful failure or refusal to comply with, or violation of any
provision of this Code, or any order, instruction, regulation or ruling of the
Insurance Commissioner, or any commission of irregularities, and/or
conducting business in an unsafe and unsound manner as may be
determined by the the Insurance Commissioner, the following:
(a) fines not in excess of five hundred pesos a day; and
(b) suspension, or after due hearing, removal of directors and/or
officers and/or agents.
A plain reading of the above-quoted provisions show that the Insurance
Commissioner has the authority to regulate the business of insurance,
which is defined as follows:
(2) The term "doing an insurance business" or "transacting an
insurance business," within the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or
activity of the surety; (c) doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing of an insurance
business within the meaning of this Code; (d) doing or proposing to do any
business in substance equivalent to any of the foregoing in a manner
designed to evade the provisions of this Code. (Insurance Code, Sec. 2[2];
Emphasis supplied).
Since the contract of agency entered into between Philamlife and its agents
is not included within the meaning of an insurance business, Section 2 of
the Insurance Code cannot be invoked to give jurisdiction over the same to
the Insurance Commissioner. Expressio unius est exclusio alterius.
With regard to private respondent's contention that the quasi-judicial
power of the Insurance Commissioner under Section 416 of the Insurance
Code applies in his case, we likewise rule in the negative. Section 416 of the
Code in pertinent part, provides:
The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which an insurer may
be answerable under any kind of policy or contract of insurance, or for
which such insurer may be liable under a contract of suretyship, or for
which a reinsurer may be used under any contract or reinsurance it may
have entered into, or for which a mutual benefit association may be held
liable under the membership certificates it has issued to its members,
where the amount of any such loss, damage or liability, excluding interest,
costs and attorney's fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not
exceed in any single claim one hundred thousand pesos.
A reading of the said section shows that the quasi-judicial power of the
Insurance Commissioner is limited by law "to claims and complaints
involving any loss, damage or liability for which an insurer may be
answerable under any kind of policy or contract of insurance, . . ." Hence,
this power does not cover the relationship affecting the insurance company
and its agents but is limited to adjudicating claims and complaints filed by
the insured against the insurance company.
The Insurance Code does not have provisions governing the relations
between insurance companies and their agents. It follows that the
Insurance Commissioner cannot, in the exercise of its quasi-judicial powers,
assume jurisdiction over controversies between the insurance companies
and their agents.
We have held in the cases of Great Pacific Life Assurance Corporation v.
Judico, 180 SCRA 445 (1989), and Investment Planning Corporation of the
Philippines v. Social Security Commission, 21 SCRA 904 (1962), that an
insurance company may have two classes of agents who sell its insurance
policies: (1) salaried employees who keep definite hours and work under
the control and supervision of the company; and (2) registered
representatives, who work on commission basis.
Under the first category, the relationship between the insurance company
and its agents is governed by the Contract of Employment and the
provisions of the Labor Code, while under the second category, the same is
governed by the Contract of Agency and the provisions of the Civil Code on
the Agency. Disputes involving the latter are cognizable by the regular
courts.

While the subject of Insurance Agents and Brokers is discussed under

Chapter IV, Title I of the Insurance Code, the provisions of said Chapter
speak only of the licensing requirements and limitations imposed on
insurance agents and brokers.