MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES
UNION (MMPSEU) v. MITSUBISHI MOTORS PHILIPPINES
CORPORATION
G.R. No. 175773
Petitioners: Eljohn Marin
Respondents: Court of Appeals and Nino Maurin (private respondent)
Date of Promulgation: June 17, 2013
Facts:
 The parties’ CBA provides for the hospitalization insurance
benefits for the covered dependents.
 Each employee shall pays one hundred pesos (₱100.00) per
month through salary deduction as his share in the payment of
the insurance premium for the above coverage with the
balance of the premium to be paid by the company.
 One of the stipulations in said CBA is that “d. Payment shall be
direct to the hospital and doctor and must be covered by
actual billings.”
 It is further added in the agreement that “the hospitalization
expenses must be covered by actual hospital and doctor’s
bills and any amount in excess of the above mentioned
level of benefits will be for the account of the employee.”
 On separate occasions, three members of MMPSEU, namely,
Ernesto Calida (Calida), Hermie Juan Oabel (Oabel) and
Jocelyn Martin (Martin), filed claims for reimbursement of
hospitalization expenses of their dependents.
 In the case of Calida, the medical expenses incurred totalled
₱29,967.10. Of this amount, ₱9,000.00 representing
professional fees was paid by MEDICard Philippines, Inc.
(MEDICard) which provides health maintenance to Lanie.
MMPC only paid ₱12,148.63. It did not pay the ₱9,000.00
already paid by MEDICard and the ₱6,278.47 not covered by
official receipts.
 In the case of Martin, they incurred medical expenses
amounting to ₱9,101.30. MEDICard paid ₱8,496.00.
Consequently, MMPC only paid ₱288.40,16 after deducting
from the total medical expenses the amount paid by
MEDICard and the ₱316.90 discount given by the hospital.
 Claiming that under the CBA, they are entitled to hospital
benefits which should not be reduced by the amounts paid by
MEDICard and by Prosper, Calida, Oabel and Martin asked for
reimbursement from MMPC.
 However, MMPC denied the claims contending that double
insurance would result if the said employees would receive
from the company the full amount of hospitalization expenses
despite having already received payment of portions thereof
from other health insurance providers.
 MMPSEU referred the dispute to the National Conciliation and
Mediation Board and requested for preventive mediation.
 The case was referred to Voluntary Arbitrator Rolando
Capocyan for resolution of the issue involving the
interpretation of the subject CBA provision.
 Meanwhile, the parties separately sought for a legal opinion
from the Insurance Commission relative to the issue at hand.
 However, the Office of the Insurance Commission opted not to
render an opinion, based on MMPC’s letter, on the matter as
the same may become the subject of a formal complaint
before it.
 On the other hand, when queried by MMPSEU, the Insurance
Commission, through Atty. Richard David C. Funk II of the
Claims Adjudication Division, rendered an opinion contained in
a letter that “the courts have uniformly held that an insured is
entitled to receive the insurance benefits without regard to the
amount of total benefits provided by other insurance. The
result is consistent with the public policy underlying the
collateral source rule – that is, x x x the courts have usually
concluded that the liability of a health or accident insurer is not
reduced by other possible sources of indemnification or
compensation.”
 Voluntary Arbitrator: in favor of MMPSEU. It held that the
employees may demand simultaneous payment from both the
CBA and their dependents’ separate health insurance without
resulting to double insurance, since separate premiums were
paid for each contract. He also noted that the CBA does not
prohibit reimbursement in case there are other health insurers.
 CA: in favor of MMPC. It ruled that despite the lack of a
provision which bars recovery in case of payment by other
insurers, the wordings of the subject provision of the CBA
showed that the parties intended to make MMPC liable only for
expenses actually incurred by an employee’s qualified
dependent.
 MR is denied.
  Hence, this Petition.
Issue/s: (1) WON the collateral source rule is applicable to the case
at bar
(2) WON the conditions set in the CBA limits MPPC’s liability
(3) WON Samsel v. Allstate Insurance Co. is applicable to the
case
(4) WON there will be unjust enrichment if reimbursement of
amounts paid under other insurance policies shall not be allowed
Held: NO. It is not applicable. The Voluntary Arbitrator based his
ruling on the opinion of Atty. Funk that the employees may recover
benefits from different insurance providers without regard to the
amount of benefits paid by each. According to him, this view is
consistent with the theory of the collateral source rule.
As part of American personal injury law, the collateral source rule was
originally applied to tort cases wherein the defendant is prevented
from benefiting from the plaintiff’s receipt of money from other
sources.38 Under this rule, if an injured person receives
compensation for his injuries from a source wholly independent of the
tortfeasor, the payment should not be deducted from the damages
which he would otherwise collect from the tortfeasor.
The Court went on to explain that although the rule appears to allow a
double recovery, the collateral source will have a lien or subrogation
right to prevent such a double recovery. In Mitchell v. Haldar, the
collateral source rule was rationalized by the Supreme Court of
Delaware:
The collateral source rule is ‘predicated on the theory that a tortfeasor
has no interest in, and therefore no right to benefit from monies
received by the injured person from sources unconnected with the
defendant’. According to the collateral source rule, ‘a tortfeasor has no
right to any mitigation of damages because of payments or
compensation received by the injured person from an independent
source.’ The rationale for the collateral source rule is based upon the
quasi-punitive nature of tort law liability. It has been explained as
follows:
Thus, the tortfeasor is required to bear the cost for the full value of his
or her negligent conduct even if it results in a windfall for the innocent
plaintiff.
As seen, the collateral source rule applies in order to place the
responsibility for losses on the party causing them. Thus, it finds no
application to cases involving no-fault insurances under which
the insured is indemnified for losses by insurance companies,
regardless of who was at fault in the incident generating the
losses. Here, it is clear that MMPC is a no-fault insurer. Hence, it
cannot be obliged to pay the hospitalization expenses of the
dependents of its employees which had already been paid by
separate health insurance providers of said dependents.
(2). Yes. The conditions set forth in the CBA provision indicate an
intention to limit MMPC’s liability only to actual expenses incurred by
the employees’ dependents, that is, excluding the amounts paid by
dependents’ other health insurance providers.
The condition that payment should be direct to the hospital and doctor
implies that MMPC is only liable to pay medical expenses actually
shouldered by the employees’ dependents. It follows that MMPC’s
liability is limited, that is, it does not include the amounts paid by other
health insurance providers. This condition is obviously intended to
thwart not only fraudulent claims but also double claims for the same
loss of the dependents of covered employees.
The terms of the subject provision are clear and provide no room
for any other interpretation. As there is no ambiguity, the terms
must be taken in their plain, ordinary and popular sense.
Consequently, MMPSEU cannot rely on the rule that a contract of
insurance is to be liberally construed in favor of the insured.
(3) No. It is not applicable. MMPSEU cannot rely on Samsel v.
Allstate Insurance Co. where the Supreme Court of Arizona allowed
the insured to enjoy medical benefits under an automobile policy
insurance despite being able to also recover from a separate health
insurer.
In that case, the Allstate automobile policy does not contain any
clause restricting medical payment coverage to expenses actually
paid by the insured nor does it specifically provide for reduction of
medical payments benefits by a coordination of benefits. However, in
the case before us, the dependents’ group hospitalization insurance
provision in the CBA specifically contains a condition which limits
MMPC’s liability only up to the extent of the expenses that should be
paid by the covered employee’s dependent to the hospital and doctor.
This is evident from the portion which states that "payment by MMPC
shall be direct to the hospital and doctor." In contrast, the Allstate
automobile policy expressly gives Allstate the authority to pay directly
to the insured person or on the latter’s behalf all reasonable expenses
actually incurred.

(4) NO. To constitute unjust enrichment, it must be shown that a party

was unjustly enriched in the sense that the term unjustly could mean
illegally or unlawfully. A claim for unjust enrichment fails when the
person who will benefit has a valid claim to such benefit.

The CBA has provided for MMPC’s limited liability which extends only
up to the amount to be paid to the hospital and doctor by the
employees’ dependents, excluding those paid by other insurers.
Consequently, the covered employees will not receive more than what
is due them.

Moreover, since the subject CBA provision is an insurance

contract, the rights and obligations of the parties must be
determined in accordance with the general principles of
insurance law. Being in the nature of a non-life insurance
contract and essentially a contract of indemnity, the CBA
provision obligates MMPC to indemnify the covered employees’
medical expenses incurred by their dependents but only up to
the extent of the expenses actually incurred. This is consistent
with the principle of indemnity which proscribes the insured from
recovering greater than the loss. Indeed, to profit from a loss will
lead to unjust enrichment and therefore should not be countenanced.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO
G.R. No. L-44059
Petitioners:
Respondent:
Date of Promulgation: October 28, 1977
Ponente: MARTIN
Facts:
 Buenaventura Cristor Ebrado was issued by The Life
Assurance Co., Ltd., Policy No. 009929 on a whole-life for
P5,882.00 with a, rider for Accidental Death for the same
amount.
 He designated Carponia T. Ebrado as the revocable
beneficiary in his policy.
 Buenaventura died as he was hit by a failing branch of a tree.
As the policy was in force, The Insular Life Assurance Co., Ltd.
Was liable to pay the coverage in the total amount of
P11,745.73.
 Carponia T. Ebrado 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, Carponia
T. Ebrado.
 In doubt as to whom the insurance proceeds shall be paid, the
insurer, The Insular Life Assurance Co., Ltd. commenced an
action for Interpleader before the CFI.
 CFI: Carponia T. Ebrado is disqualified from becoming
beneficiary of the insured Buenaventura Cristor Ebrado. 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.
 CA: the Appellate Court certified the case to Us as involving
only questions of law.
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 the death of the latter
Held: NO. Section 50 of the Insurance Act which provides that "the
insurance shall be applied exclusively to the proper interest of the
person in whose name it is made" cannot be validly seized upon to
hold that the mm includes the beneficiary. The word "interest"
highly suggests that the provision refers only to the "insured"
and not to the beneficiary, since a contract of insurance is
personal in character. Otherwise, the prohibitory laws against illicit
relationships especially on property and descent will be rendered
nugatory, as the same could easily be circumvented by modes of
insurance. Rather, the general rules of civil law should be applied
to resolve this void in the Insurance Law.
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 a fife
insurance policy by the person who cannot make a donation to him. 4
Common-law spouses are, definitely, barred from receiving donations
from each other. Article 739 of the new Civil Code provides:
The following donations shall be void:
1. Those made between persons who were guilty of adultery or
concubinage at the time of donation;
Those made between persons found guilty of the same criminal
offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants or
ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity
may be brought by the spouse of the donor or donee; and the guilt of
the donee may be proved by preponderance of evidence in the same
action.
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 of the new Civil Code should equally
operate in life insurance contracts.

Policy considerations and dictates of morality rightly justify the

institution of a barrier between common law spouses in record to
Property relations since such hip ultimately encroaches upon the
nuptial and filial rights of the legitimate family.

In Matabuena v. Cervantes, this Court, through Justice Fernando,

said:

“to prohibit donations in favor of the other consort and his

descendants because of and undue and improper pressure and
influence upon the donor, a prejudice deeply rooted in our ancient law
then there is very reason to apply the same prohibitive policy to
persons living together as husband and wife without the benefit of
nuptials.

So long as marriage remains the cornerstone of our family law,

reason and morality alike demand that the disabilities attached to
marriage should likewise attach to concubinage.

In the case before us, the requisite proof of common-law relationship

between the insured and the beneficiary has been conveniently
supplied by the stipulations between the parties in the pre-trial
conference of the case.

These stipulations are nothing less than judicial admissions which, as

a consequence, no longer require proof and cannot be contradicted. A
fortiori, on the basis of these admissions, a judgment may be validly
rendered without going through the rigors of a trial for the sole
purpose of proving the illicit liaison between the insured and the
beneficiary.
SOUTH SEA SURETY AND INSURANCE COMPANY, INC. vs.
HON. COURT OF APPEALS and VALENZUELA HARDWOOD AND
INDUSTRIAL SUPPLY, INC.
G.R. No. 102253
Petitioner: SOUTH SEA SURETY AND INSURANCE COMPANY, INC
Respondent: VALENZUELA HARDWOOD AND INDUSTRIAL
SUPPLY, INC.
Date of Promulgation: June 2, 1995
Ponente: VITUG
Facts:
 Plaintiff Hardwood entered into an agreement with the
defendant Seven Brothers whereby the latter undertook to
load on board its vessel M/V Seven Ambassador, the former's
lauan round logs, numbering 940 at the port of Maconacon,
Isabela for shipment to Manila.
 On 20 January 1984, plaintiff insured the logs, against loss
and/or, damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00 and the latter issued its
Marine Cargo Insurance Policy No. 84/24229.
 On 24 January 1984, the plaintiff gave the check in payment of
the premium on the insurance policy to Mr. Victorio Chua.
 In the meantime, the said vessel M/V Seven Ambassador,
sank on 25 January 1984 resulting in the loss of the plaintiffs
insured logs.
 On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover
payment of the premium and documentary stamps due on the
policy was tendered to the insurer but was not accepted.
 Instead, the South Sea Surety and Insurance Co., Inc.
cancelled the insurance policy it issued as of the date of
inception for non-payment of the premium due in accordance
with Section 77 of the Insurance Code.
 Plaintiff demanded from defendant South Sea Surety and
Insurance Co., Inc. the payment of the proceeds of the policy
but the latter denied liability under the policy.
 Plaintiff likewise filed a formal claim with defendant Seven
Brothers Shipping Corporation for the value of the lost logs but
the latter denied the claim.
 RTC: in favor of plaintiff Hardwood.
 CA: affirmed the judgment of the court a quo only against the
insurance corporation and in absolving the shipping entity from
liability, the appellate court ratiocinated that the court a quo
erred in applying the provisions of the Civil Code on common
carriers to establish the liability of the shipping corporation.
The provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking
to carry a special or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation
exempting the owner from liability even for the negligence of
its agent is valid.
 Hence, this petition.
Issues:
Held: Section 77 of the Insurance Code provides:
Sec. 77. An insurer is entitled to payment of the premium as soon as
the thing insured is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or contract
of insurance issued by an insurance company is valid and binding
unless and until the premium thereof has been paid, except in the
case of a life or an industrial life policy whenever the grace period
provision applies.
Undoubtedly, the payment of the premium is a condition precedent to,
and essential for, the efficaciousness of the contract. The only two
statutorily provided exceptions are (a) in case the insurance coverage
relates to life or industrial life (health) insurance when a grace period
applies and (b) when the insurer makes a written acknowledgment of
the receipt of premium, this acknowledgment being declared by law to
be then conclusive evidence of the premium payment.
Concerning the issue as to whether there is a valid contract of
insurance between plaintiff-appellee and defendant-appellant South
Sea Surety and Insurance Co., Inc., Section 77 of the Insurance Code
explicitly provides that notwithstanding any agreement to the contrary,
no policy issued by an insurance company is valid and binding unless
and until premium thereof has been paid. It is therefore important to
determine whether at the time of the loss, the premium was already
paid.3
No attempt becloud the issues can disguise the fact that the sole
question raised in the instant petition is really evidentiary in nature,
i.e., whether or not Victorio Chua, in receiving the check for the
insurance premium prior to the occurrence of the risk insured against
has so acted as an agent of petitioner. The appellate court, like the
trial court, has found in the affirmative. Said the appellate court:
In the instant case, the Marine Cargo Insurance Policy No. 84/24229
was issued by defendant insurance company on 20 January 1984. At
the time the vessel sank on 25 January 1984 resulting in the loss of
the insured logs, the insured had already delivered to Victorio Chua
the check in payment of premium. But, as Victorio Chua testified, it
was only in the morning of 30 January 1984 or 5 days after the vessel
sank when his messenger tendered the check to defendant South
Sea Surety and Insurance Co., Inc. (TSN, pp. 3-27, 16-17, 22 October
1985).
The pivotal issue to be resolved to determine the liability, of the surety
corporation is whether Mr. Chua acted as an agent of the surety
company or of the insured when he received the check for insurance
premiums.
Appellant surety company insists that Mr. Chua is an administrative
assistant for the past ten years and an agent for less than ten years of
the Columbia Insurance Brokers, Ltd. He is paid a salary as a
administrative assistant and a commission as agent based on the
premiums he turns over to the broker. Appellant therefore argues that
Mr. Chua, having received the insurance premiums as an agent of the
Columbia Insurance Broker, acted as an agent of the insured under
Section 301 of the Insurance Code which provides as follows:
Sec. 301. Any person who for any compensation, commission or other
thing of value, acts, or aids in soliciting, negotiating or procuring the
making of any insurance contract or in placing risk or taking out
insurance, on behalf of an insured other than himself, shall be an
insurance broker within the intent of this Code, and shall thereby
become liable to all the duties requirements, liabilities and penalties to
which an insurance broker is subject.
The appellees, upon the other hand, claim that the second paragraph
of Section 306 of the Insurance Code provide as follows:
Sec. 306. . . . Any insurance company which delivers to an insurance
agent or insurance broker a policy or contract of insurance shall be
deemed to have authorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy of
contract of insurance at the time of its issuance or delivery or which
becomes due thereon.
On cross-examination in behalf of South Sea Surety and Insurance
Co., Inc. Mr. Chua testified that the marine cargo insurance policy for
the plaintiff's logs was delivered to him on 21 January 1984 at his
office to be delivered to the plaintiff.
When the appellant South Sea Surety and Insurance Co., Inc.
delivered to Mr. Chua the marine cargo insurance policy for the
plaintiffs logs, he is deemed to have been authorized by the South
Sea Surety and Insurance Co., Inc. to receive the premium which is
due on its behalf.
When therefore the insured logs were lost, the insured had already
paid the premium to an agent of the South Sea Surety and Insurance
Co., Inc., which is consequently liable to pay the insurance proceeds
under the policy it issued to the insured.4
We see no valid reason to discard the factual conclusions of the
appellate court. Just as so correctly pointed out by private respondent,
it is not the function of this Court to assess and evaluate all over again
the evidence, testimonial and documentary, adduced by the parties
particularly where, such as here, the findings of both the trial court
and the appellate court on the matter coincide.
WHEREFORE, the resolution, dated 01 February 1993, granting due
course to the petition is RECALLED, and the petition is DENIED.
Costs against petitioner.
SO ORDERED.
G.R. No. 186983 February 22, 2012

MA. LOURDES S. FLORENDO, Petitioner,

vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE,
Respondents.

DECISION

ABAD, J.:

This case is about an insured’s alleged concealment in his pension

plan application of his true state of health and its effect on the life
insurance portion of that plan in case of death.

The Facts and the Case

On October 23, 1997 Manuel Florendo filed an application for

comprehensive pension plan with respondent Philam Plans, Inc.
(Philam Plans) after some convincing by respondent Perla Abcede.
The plan had a pre-need price of ₱997,050.00, payable in 10 years,
and had a maturity value of ₱2,890,000.00 after 20 years.1 Manuel
signed the application and left to Perla the task of supplying the
information needed in the application.2 Respondent Ma. Celeste
Abcede, Perla’s daughter, signed the application as sales counselor.3

Aside from pension benefits, the comprehensive pension plan also

provided life insurance coverage to Florendo.4 This was covered by a
Group Master Policy that Philippine American Life Insurance
Company (Philam Life) issued to Philam Plans.5 Under the master
policy, Philam Life was to automatically provide life insurance
coverage, including accidental death, to all who signed up for Philam
Plans’ comprehensive pension plan.6 If the plan holder died before
the maturity of the plan, his beneficiary was to instead receive the
proceeds of the life insurance, equivalent to the pre-need price.
Further, the life insurance was to take care of any unpaid premium
until the pension plan matured, entitling the beneficiary to the maturity
value of the pension plan.7

On October 30, 1997 Philam Plans issued Pension Plan Agreement
PP430055848 to Manuel, with petitioner Ma. Lourdes S. Florendo, his
wife, as beneficiary. In time, Manuel paid his quarterly premiums.9
Eleven months later or on September 15, 1998, Manuel died of blood
poisoning. Subsequently, Lourdes filed a claim with Philam Plans for
the payment of the benefits under her husband’s plan.10 Because
Manuel died before his pension plan matured and his wife was to get
only the benefits of his life insurance, Philam Plans forwarded her
claim to Philam Life.11
On May 3, 1999 Philam Plans wrote Lourdes a letter,12 declining her
claim. Philam Life found that Manuel was on maintenance medicine
for his heart and had an implanted pacemaker. Further, he suffered
from diabetes mellitus and was taking insulin. Lourdes renewed her
demand for payment under the plan13 but Philam Plans rejected it,14
prompting her to file the present action against the pension plan
company before the Regional Trial Court (RTC) of Quezon City.15
On March 30, 2006 the RTC rendered judgment,16 ordering Philam
Plans, Perla and Ma. Celeste, solidarily, to pay Lourdes all the
benefits from her husband’s pension plan, namely: ₱997,050.00, the
proceeds of his term insurance, and ₱2,890,000.00 lump sum pension
benefit upon maturity of his plan; ₱100,000.00 as moral damages;
and to pay the costs of the suit. The RTC ruled that Manuel was not
guilty of concealing the state of his health from his pension plan
application.
On December 18, 2007 the Court of Appeals (CA) reversed the RTC
decision,17 holding that insurance policies are traditionally contracts
uberrimae fidae or contracts of utmost good faith. As such, it required
Manuel to disclose to Philam Plans conditions affecting the risk of
which he was aware or material facts that he knew or ought to
know.18
Issues Presented
The issues presented in this case are:
1. Whether or not the CA erred in finding Manuel guilty of concealing
his illness when he kept blank and did not answer questions in his
pension plan application regarding the ailments he suffered from;
2. Whether or not the CA erred in holding that Manuel was bound by
the failure of respondents Perla and Ma. Celeste to declare the
condition of Manuel’s health in the pension plan application; and
3. Whether or not the CA erred in finding that Philam Plans’ approval
of Manuel’s pension plan application and acceptance of his premium
payments precluded it from denying Lourdes’ claim.
Rulings of the Court
One. Lourdes points out that, seeing the unfilled spaces in Manuel’s
pension plan application relating to his medical history, Philam Plans
should have returned it to him for completion. Since Philam Plans
chose to approve the application just as it was, it cannot cry
concealment on Manuel’s part. Further, Lourdes adds that Philam
Plans never queried Manuel directly regarding the state of his health.
Consequently, it could not blame him for not mentioning it.19
But Lourdes is shifting to Philam Plans the burden of putting on the
pension plan application the true state of Manuel’s health. She forgets
that since Philam Plans waived medical examination for Manuel, it
had to rely largely on his stating the truth regarding his health in his
application. For, after all, he knew more than anyone that he had been
under treatment for heart condition and diabetes for more than five
years preceding his submission of that application. But he kept those
crucial facts from Philam Plans.
Besides, when Manuel signed the pension plan application, he
adopted as his own the written representations and declarations
embodied in it. It is clear from these representations that he
concealed his chronic heart ailment and diabetes from Philam Plans.
The pertinent portion of his representations and declarations read as
follows:
I hereby represent and declare to the best of my knowledge that:
xxxx
(c) I have never been treated for heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other
physical impairment in the last five years.
(d) I am in good health and physical condition.
If your answer to any of the statements above reveal otherwise,
please give details in the space provided for:
Date of confinement : ____________________________
Name of Hospital or Clinic : ____________________________
Name of Attending Physician : ____________________________
Findings : ____________________________
Others: (Please specify) : ____________________________
x x x x.20 (Emphasis supplied)
Since Manuel signed the application without filling in the details
regarding his continuing treatments for heart condition and diabetes,
the assumption is that he has never been treated for the said illnesses
in the last five years preceding his application. This is implicit from the
phrase "If your answer to any of the statements above (specifically,
the statement: I have never been treated for heart condition or
diabetes) reveal otherwise, please give details in the space provided
for." But this is untrue since he had been on "Coumadin," a treatment
for venous thrombosis,21 and insulin, a drug used in the treatment of
diabetes mellitus, at that time.22
Lourdes insists that Manuel had concealed nothing since Perla, the
soliciting agent, knew that Manuel had a pacemaker implanted on his
chest in the 70s or about 20 years before he signed up for the pension
plan.23 But by its tenor, the responsibility for preparing the application
belonged to Manuel. Nothing in it implies that someone else may
provide the information that Philam Plans needed. Manuel cannot sign
the application and disown the responsibility for having it filled up. If
he furnished Perla the needed information and delegated to her the
filling up of the application, then she acted on his instruction, not on
Philam Plans’ instruction.
Lourdes next points out that it made no difference if Manuel failed to
reveal the fact that he had a pacemaker implant in the early 70s since
this did not fall within the five-year timeframe that the disclosure
contemplated.24 But a pacemaker is an electronic device implanted
into the body and connected to the wall of the heart, designed to
provide regular, mild, electric shock that stimulates the contraction of
the heart muscles and restores normalcy to the heartbeat.25 That
Manuel still had his pacemaker when he applied for a pension plan in
October 1997 is an admission that he remained under treatment for
irregular heartbeat within five years preceding that application.
Besides, as already stated, Manuel had been taking medicine for his
heart condition and diabetes when he submitted his pension plan
application. These clearly fell within the five-year period. More, even if
Perla’s knowledge of Manuel’s pacemaker may be applied to Philam
Plans under the theory of imputed knowledge,26 it is not claimed that
Perla was aware of his two other afflictions that needed medical
treatments. Pursuant to Section 2727 of the Insurance Code,
Manuel’s concealment entitles Philam Plans to rescind its contract of
insurance with him.
Two. Lourdes contends that the mere fact that Manuel signed the
application in blank and let Perla fill in the required details did not
make her his agent and bind him to her concealment of his true state
of health. Since there is no evidence of collusion between them,
Perla’s fault must be considered solely her own and cannot prejudice
Manuel.28
But Manuel forgot that in signing the pension plan application, he
certified that he wrote all the information stated in it or had someone
do it under his direction. Thus:
APPLICATION FOR PENSION PLAN
(Comprehensive)
I hereby apply to purchase from PHILAM PLANS, INC. a Pension
Plan Program described herein in accordance with the General
Provisions set forth in this application and hereby certify that the date
and other information stated herein are written by me or under my
direction. x x x.29 (Emphasis supplied)
 Assuming that it was Perla who filled up the application form,
Manuel is still bound by what it contains since he certified that he
authorized her action. Philam Plans had every right to act on the faith
of that certification.
Lourdes could not seek comfort from her claim that Perla had
assured Manuel that the state of his health would not hinder the
approval of his application and that what is written on his application
made no difference to the insurance company. But, indubitably,
Manuel was made aware when he signed the pension plan application
that, in granting the same, Philam Plans and Philam Life were acting
on the truth of the representations contained in that application. Thus:
DECLARATIONS AND REPRESENTATIONS
xxxx
I agree that the insurance coverage of this application is based on
the truth of the foregoing representations and is subject to the
provisions of the Group Life Insurance Policy issued by THE
PHILIPPINE AMERICAN LIFE INSURANCE CO. to PHILAM PLANS,
INC.30 (Emphasis supplied)
As the Court said in New Life Enterprises v. Court of Appeals:31
It may be true that x x x insured persons may accept policies without
reading them, and that this is not negligence per se. But, this is not
without any exception. It is and was incumbent upon petitioner Sy to
read the insurance contracts, and this can be reasonably expected of
him considering that he has been a businessman since 1965 and the
contract concerns indemnity in case of loss in his money-making trade
of which important consideration he could not have been unaware as
it was precisely the reason for his procuring the same.32
The same may be said of Manuel, a civil engineer and manager of a
construction company.33 He could be expected to know that one
must read every document, especially if it creates rights and
obligations affecting him, before signing the same. Manuel is not
unschooled that the Court must come to his succor. It could
reasonably be expected that he would not trifle with something that
would provide additional financial security to him and to his wife in his
twilight years.
Three. In a final attempt to defend her claim for benefits under
Manuel’s pension plan, Lourdes points out that any defect or
insufficiency in the information provided by his pension plan
application should be deemed waived after the same has been
approved, the policy has been issued, and the premiums have been
collected. 34
The Court cannot agree. The comprehensive pension plan that
Philam Plans issued contains a one-year incontestability period. It
states:
VIII. INCONTESTABILITY
After this Agreement has remained in force for one (1) year, we can
no longer contest for health reasons any claim for insurance under
this Agreement, except for the reason that installment has not been
paid (lapsed), or that you are not insurable at the time you bought this
pension program by reason of age. If this Agreement lapses but is
reinstated afterwards, the one (1) year contestability period shall start
again on the date of approval of your request for reinstatement.35
1âwphi1
The above incontestability clause precludes the insurer from
disowning liability under the policy it issued on the ground of
concealment or misrepresentation regarding the health of the insured
after a year of its issuance.
Since Manuel died on the eleventh month following the issuance of
his plan,36 the one year incontestability period has not yet set in.
Consequently, Philam Plans was not barred from questioning
Lourdes’ entitlement to the benefits of her husband’s pension plan.
WHEREFORE, the Court AFFIRMS in its entirety the decision of the
Court of Appeals in CA-G.R. CV 87085 dated December 18, 2007.
SO ORDERED.
G.R. No. 171468 August 24, 2011

NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC.,

Petitioner,
vs.
NYK-FILJAPAN SHIPPING CORP., LEP PROFIT INTERNATIONAL,
INC. (ORD), LEP INTERNATIONAL PHILIPPINES, INC., DMT
CORP., ADVATECH INDUSTRIES, INC., MARINA PORT
SERVICES, INC., SERBROS CARRIER CORPORATION, and
SEABOARD-EASTERN INSURANCE CO., INC., Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 174241

NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC.,

Petitioner,
vs.
SEABOARD-EASTERN INSURANCE CO., INC., Respondent.

DECISION

ABAD, J.:

These consolidated petitions involve a cargo owner’s right to recover

damages from the loss of insured goods under the Carriage of Goods
by Sea Act and the Insurance Code.

The Facts and the Case

Petitioner New World International Development (Phils.), Inc. (New

World) bought from DMT Corporation (DMT) through its agent,
Advatech Industries, Inc. (Advatech) three emergency generator sets
worth US$721,500.00.

DMT shipped the generator sets by truck from Wisconsin, United

States, to LEP Profit International, Inc. (LEP Profit) in Chicago, Illinois.
From there, the shipment went by train to Oakland, California, where it
was loaded on S/S California Luna V59, owned and operated by NYK
Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New
World in Manila. NYK issued a bill of lading, declaring that it received
the goods in good condition.
NYK unloaded the shipment in Hong Kong and transshipped it to S/S
ACX Ruby V/72 that it also owned and operated. On its journey to
Manila, however, ACX Ruby encountered typhoon Kadiang whose
captain filed a sea protest on arrival at the Manila South Harbor on
October 5, 1993 respecting the loss and damage that the goods on
board his vessel suffered.
Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre
or cargo-handling operator, received the shipment on October 7,
1993. Upon inspection of the three container vans separately carrying
the generator sets, two vans bore signs of external damage while the
third van appeared unscathed. The shipment remained at Pier 3’s
Container Yard under Marina’s care pending clearance from the
Bureau of Customs. Eventually, on October 20, 1993 customs
authorities allowed petitioner’s customs broker, Serbros Carrier
Corporation (Serbros), to withdraw the shipment and deliver the same
to petitioner New World’s job site in Makati City.
An examination of the three generator sets in the presence of
petitioner New World’s representatives, Federal Builders (the project
contractor) and surveyors of petitioner New World’s insurer,
Seaboard–Eastern Insurance Company (Seaboard), revealed that all
three sets suffered extensive damage and could no longer be
repaired. For these reasons, New World demanded recompense for
its loss from respondents NYK, DMT, Advatech, LEP Profit, LEP
International Philippines, Inc. (LEP), Marina, and Serbros. While LEP
and NYK acknowledged receipt of the demand, both denied liability
for the loss.
Since Seaboard covered the goods with a marine insurance policy,
petitioner New World sent it a formal claim dated November 16, 1993.
Replying on February 14, 1994, Seaboard required petitioner New
World to submit to it an itemized list of the damaged units, parts, and
accessories, with corresponding values, for the processing of the
claim. But petitioner New World did not submit what was required of it,
insisting that the insurance policy did not include the submission of
such a list in connection with an insurance claim. Reacting to this,
Seaboard refused to process the claim.
On October 11, 1994 petitioner New World filed an action for specific
performance and damages against all the respondents before the
Regional Trial Court (RTC) of Makati City, Branch 62, in Civil Case
94-2770.
On August 16, 2001 the RTC rendered a decision absolving the
various respondents from liability with the exception of NYK. The RTC
found that the generator sets were damaged during transit while in the
care of NYK’s vessel, ACX Ruby. The latter failed, according to the
RTC, to exercise the degree of diligence required of it in the face of a
foretold raging typhoon in its path.
The RTC ruled, however, that petitioner New World filed its claim
against the vessel owner NYK beyond the one year provided under
the Carriage of Goods by Sea Act (COGSA). New World filed its
complaint on October 11, 1994 when the deadline for filing the action
(on or before October 7, 1994) had already lapsed. The RTC held that
the one-year period should be counted from the date the goods were
delivered to the arrastre operator and not from the date they were
delivered to petitioner’s job site.1
As regards petitioner New World’s claim against Seaboard, its insurer,
the RTC held that the latter cannot be faulted for denying the claim
against it since New World refused to submit the itemized list that
Seaboard needed for assessing the damage to the shipment.
Likewise, the belated filing of the complaint prejudiced Seaboard’s
right to pursue a claim against NYK in the event of subrogation.
On appeal, the Court of Appeals (CA) rendered judgment on January
31, 2006,2 affirming the RTC’s rulings except with respect to
Seaboard’s liability. The CA held that petitioner New World can still
recoup its loss from Seaboard’s marine insurance policy, considering
a) that the submission of the itemized listing is an unreasonable
imposition and b) that the one-year prescriptive period under the
COGSA did not affect New World’s right under the insurance policy
since it was the Insurance Code that governed the relation between
the insurer and the insured.
Although petitioner New World promptly filed a petition for review of
the CA decision before the Court in G.R. 171468, Seaboard chose to
file a motion for reconsideration of that decision. On August 17, 2006
the CA rendered an amended decision, reversing itself as regards the
claim against Seaboard. The CA held that the submission of the
itemized listing was a reasonable requirement that Seaboard asked of
New World. Further, the CA held that the one-year prescriptive period
for maritime claims applied to Seaboard, as insurer and subrogee of
New World’s right against the vessel owner. New World’s failure to
comply promptly with what was required of it prejudiced such right.
Instead of filing a motion for reconsideration, petitioner instituted a
second petition for review before the Court in G.R. 174241, assailing
the CA’s amended decision.
The Issues Presented
The issues presented in this case are as follows:
a) In G.R. 171468, whether or not the CA erred in affirming the RTC’s
release from liability of respondents DMT, Advatech, LEP, LEP Profit,
Marina, and Serbros who were at one time or another involved in
handling the shipment; and
b) In G.R. 174241, 1) whether or not the CA erred in ruling that
Seaboard’s request from petitioner New World for an itemized list is a
reasonable imposition and did not violate the insurance contract
between them; and 2) whether or not the CA erred in failing to rule
that the one-year COGSA prescriptive period for marine claims does
not apply to petitioner New World’s prosecution of its claim against
Seaboard, its insurer.
The Court’s Rulings
In G.R. 171468 --
Petitioner New World asserts that the roles of respondents DMT,
Advatech, LEP, LEP Profit, Marina and Serbros in handling and
transporting its shipment from Wisconsin to Manila collectively
resulted in the damage to the same, rendering such respondents
solidarily liable with NYK, the vessel owner.
But the issue regarding which of the parties to a dispute incurred
negligence is factual and is not a proper subject of a petition for
review on certiorari. And petitioner New World has been unable to
make out an exception to this rule.3 Consequently, the Court will not
disturb the finding of the RTC, affirmed by the CA, that the generator
sets were totally damaged during the typhoon which beset the
vessel’s voyage from Hong Kong to Manila and that it was her
negligence in continuing with that journey despite the adverse
condition which caused petitioner New World’s loss.
That the loss was occasioned by a typhoon, an exempting cause
under Article 1734 of the Civil Code, does not automatically relieve
the common carrier of liability. The latter had the burden of proving
that the typhoon was the proximate and only cause of loss and that it
exercised due diligence to prevent or minimize such loss before,
during, and after the disastrous typhoon.4 As found by the RTC and
the CA, NYK failed to discharge this burden.
In G.R. 174241 --
One. The Court does not regard as substantial the question of
reasonableness of Seaboard’s additional requirement of an itemized
listing of the damage that the generator sets suffered. The record
shows that petitioner New World complied with the documentary
requirements evidencing damage to its generator sets.
The marine open policy that Seaboard issued to New World was an
all-risk policy. Such a policy insured against all causes of conceivable
loss or damage except when otherwise excluded or when the loss or
damage was due to fraud or intentional misconduct committed by the
insured. The policy covered all losses during the voyage whether or
not arising from a marine peril.5
Here, the policy enumerated certain exceptions like unsuitable
packaging, inherent vice, delay in voyage, or vessels
unseaworthiness, among others.6 But Seaboard had been unable to
show that petitioner New World’s loss or damage fell within some or
one of the enumerated exceptions.
What is more, Seaboard had been unable to explain how it could not
verify the damage that New World’s goods suffered going by the
documents that it already submitted, namely, (1) copy of the
Supplier’s Invoice KL2504; (2) copy of the Packing List; (3) copy of
the Bill of Lading 01130E93004458; (4) the Delivery of Waybill
Receipts 1135, 1222, and 1224; (5) original copy of Marine Insurance
Policy MA-HO-000266; (6) copies of Damage Report from Supplier
and Insurance Adjusters; (7) Consumption Report from the Customs
Examiner; and (8) Copies of Received Formal Claim from the
following: a) LEP International Philippines, Inc.; b) Marina Port
Services, Inc.; and c) Serbros Carrier Corporation.7 Notably,
Seaboard’s own marine surveyor attended the inspection of the
generator sets.
Seaboard cannot pretend that the above documents are inadequate
since they were precisely the documents listed in its insurance
policy.8 Being a contract of adhesion, an insurance policy is
construed strongly against the insurer who prepared it. The Court
cannot read a requirement in the policy that was not there.
Further, it appears from the exchanges of communications between
Seaboard and Advatech that submission of the requested itemized
listing was incumbent on the latter as the seller DMT’s local agent.
Petitioner New World should not be made to suffer for Advatech’s
shortcomings.
Two. Regarding prescription of claims, Section 3(6) of the COGSA
provides that the carrier and the ship shall be discharged from all
liability in case of loss or damage unless the suit is brought within one
year after delivery of the goods or the date when the goods should
have been delivered.
But whose fault was it that the suit against NYK, the common carrier,
was not brought to court on time? The last day for filing such a suit fell
on October 7, 1994. The record shows that petitioner New World filed
its formal claim for its loss with Seaboard, its insurer, a remedy it had
the right to take, as early as November 16, 1993 or about 11 months
before the suit against NYK would have fallen due.
In the ordinary course, if Seaboard had processed that claim and paid
the same, Seaboard would have been subrogated to petitioner New
World’s right to recover from NYK. And it could have then filed the suit
as a subrogee. But, as discussed above, Seaboard made an
unreasonable demand on February 14, 1994 for an itemized list of the
damaged units, parts, and accessories, with corresponding values
when it appeared settled that New World’s loss was total and when
the insurance policy did not require the production of such a list in the
event of a claim.
Besides, when petitioner New World declined to comply with the
demand for the list, Seaboard against whom a formal claim was
pending should not have remained obstinate in refusing to process
that claim. It should have examined the same, found it
unsubstantiated by documents if that were the case, and formally
rejected it. That would have at least given petitioner New World a
clear signal that it needed to promptly file its suit directly against NYK
and the others. Ultimately, the fault for the delayed court suit could be
brought to Seaboard’s doorstep.
Section 241 of the Insurance Code provides that no insurance
company doing business in the Philippines shall refuse without just
cause to pay or settle claims arising under coverages provided by its
policies. And, under Section 243, the insurer has 30 days after proof
of loss is received and ascertainment of the loss or damage within
which to pay the claim. If such ascertainment is not had within 60
days from receipt of evidence of loss, the insurer has 90 days to pay
or settle the claim. And, in case the insurer refuses or fails to pay
within the prescribed time, the insured shall be entitled to interest on
the proceeds of the policy for the duration of delay at the rate of twice
the ceiling prescribed by the Monetary Board.
Notably, Seaboard already incurred delay when it failed to settle
petitioner New World’s claim as Section 243 required. 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 Section 243.
Consequently, Seaboard should pay interest on the proceeds of the
policy for the duration of the delay until the claim is fully satisfied at
the rate of twice the ceiling prescribed by the Monetary Board. The
term "ceiling prescribed by the Monetary Board" means the legal rate
of interest of 12% per annum provided in Central Bank Circular 416,
pursuant to Presidential Decree 116.9 Section 244 of the Insurance
Code also provides for an award of attorney’s fees and other
expenses incurred by the assured due to the unreasonable
withholding of payment of his claim.
In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping
Lines, Inc.,10 the Court regarded as proper an award of 10% of the
insurance proceeds as attorney’s fees. Such amount is fair
considering the length of time that has passed in prosecuting the
claim.11 Pursuant to the Court’s ruling in Eastern Shipping Lines, Inc.
v. Court of Appeals,12 a 12% interest per annum from the finality of
judgment until full satisfaction of the claim should likewise be
imposed, the interim period equivalent to a forbearance of
credit.1avvphi1

Petitioner New World is entitled to the value stated in the policy which
is commensurate to the value of the three emergency generator sets
or US$721,500.00 with double interest plus attorney’s fees as
discussed above.

WHEREFORE, the Court DENIES the petition in G.R. 171468 and

AFFIRMS the Court of Appeals decision of January 31, 2006 insofar
as petitioner New World International Development (Phils.), Inc. is not
allowed to recover against respondents DMT Corporation, Advatech
Industries, Inc., LEP International Philippines, Inc., LEP Profit
International, Inc., Marina Port Services, Inc. and Serbros Carrier
Corporation.

With respect to G.R. 174241, the Court GRANTS the petition and
REVERSES and SETS ASIDE the Court of Appeals Amended
Decision of August 17, 2006. The Court DIRECTS Seaboard-Eastern
Insurance Company, Inc. to pay petitioner New World International
Development (Phils.), Inc. US$721,500.00 under Policy MA-HO-
000266, with 24% interest per annum for the duration of delay in
accordance with Sections 243 and 244 of the Insurance Code and
attorney’s fees equivalent to 10% of the insurance proceeds.
Seaboard shall also pay, from finality of judgment, a 12% interest per
annum on the total amount due to petitioner until its full satisfaction.

SO ORDERED.