Pan Malayan Insurance Corporation v.

Court of Appeals (Ana ♥)

G.R. No. 81026 | April 3, 1990 | J. Cortes

Facts:
1. Canlubang Automotive Resources Corp. obtained from PanMalay a motor vehicle insurance policy for its Mitsubishi Colt Lancer.
2. While the policy was still in effect, the insured car was allegedly hit by a pick-up owned by Erlinda Fabie but driven by another
person. The car suffered damages in the amount of P42K.
3. PanMalay defrayed the cost of repair of the insured car. It then demanded reimbursement from Fabie and her driver of said amount,
but to no avail.
4. PanMalay filed a complaint for damages with the RTC of Makati against Fabie and the driver. It averred that the damages caused to
the insured car was settled under the “own damage” coverage of the insurance policy.
5. Private respondents filed a motion to dismiss alleging that PanMalay had no cause of action since the “won damage” clause of the
policy precluded subrogation under Art. 2207 of the Civil Code. They contended that indemnification under said article is on the
assumption that there was no wrongdoer or no 3rd pa rty a t fault.
6. The RTC dismissed PanMalay’s complaint and ruled that payment under the “own damage” clause was an admission by the insurer
that the damage was caused by the assured and/or its representatives.
7. CA affirmed but on different ground. Applying the ejusdem generis rule, CA held that Section III-I of the policy, which was the basis
for the settlement of the claim against insurance, did not cover damage arising from collision or overturning due to the negligence of
3rd parties as one of the insurable risks.

Issue:
Was PanMalay subrogated to the rights of Canlubang against the driver and his employer?

Held:
Yes.

Decision:
The Supreme Court remanded the case back to the trial court.

Ruling:
Right of Subrogation of the Insurer
 Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured, will
be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to
pay.
 Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss.
 The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim.
It accrues simply upon payment of the insurance claim by the insurer.
There are three exceptions to this rule:
1. where the assured by his own act releases the wrongdoer or third party liable for the loss or damage
2. where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the
assured's claim for loss
3. where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment"

None of these exceptions are present in this case.

As to the trial court’s ruling:

When PanMalay utilized the phrase "own damage" — a phrase which is not found in the insurance policy — to define the basis for its
settlement of Canlubang's claim under the policy, it simply meant that it had assumed to reimburse the costs for repairing the damage to the
insured vehicle. It is in this sense that the so-called "own damage" coverage under Section III of the insurance policy is differentiated from
Sections I and IV-1 which refer to "Third Party Liability" coverage (liabilities arising from the death of, or bodily injuries suffered by, third
parties) and from Section IV-2 which refer to "Property Damage" coverage (liabilities arising from damage caused by the insured vehicle to the
properties of third parties).

As to the Court of Appeals’ ruling:

The Court of Appeals' ruling on the coverage of insured risks stems from an erroneous interpretation of the provisions of the policy. It violates
a fundamental rule on the interpretation of property insurance contracts where interpretation should be liberally in favor of the assured and
strictly against the insurer in cases of disagreement between the parties. The meaning advanced by PanMalay regarding the coverage of the
policy is undeniable more beneficial to Canlubang than that insisted upon by the CA. In any case, the very parties to the policy were not shown
to be in disagreement regarding the meaning and coverage of Section III-I. Hence, it was improper for CA to assert its own interpretation of the
contract that is contrary to the clear understanding and intention of the parties to it.

* Even assuming for the sake of argument that the insurance policy does not cover damage to the insured vehicle caused by negligent acts of
third parties, and that PanMalay's settlement of Canlubang's claim for damages allegedly arising from a collision due to private respondents'
negligence would amount to unwarranted or "voluntary payment", insurer may still recover from the third party responsible for the damage
to the insured property under Article 1236 of the Civil Code.

014 National Union Fire Insurance Company v. Stolt-Nielsen

GR No. 87958; April 26, 1990

EMERGENCY RECIT: United Coconut Chemicals (SHIPPER) shipped distilled fatty acid on board MT “StoltSceptre” (CARRIER). The shipment was
insured under a marine cargo policy with National Union Fire Insurance Co (INSURER). Upon receipt of the cargo by the consignee in
Netherlands, it was totally contaminated. Hence, claim was made on the INSURER of the cargo. The INSURER as subrogee filed a claim for
damages against the CARRIER with RTC Manila. The CARRIER invoked that arbitration must be done pursuant to the Charter. The INSURER
opposed, arguing that the provision on arbitration was not included in the Bill of Lading. SC: The INSURER cannot avoid the binding effect of
the arbitration clause. By subrogation, it became privy to the Charter Party as fully as the SHIPPER before the latter was indemnified, because
as subrogee it stepped into the shoes of the SHIPPER and is subrogated merely to the latter's rights.

FACTS:

 On 9 January 1985, United Coconut Chemicals, Inc. shipped 404.774 metric tons of distilled C6-C18 fatty acid on board MT "Stolt
Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc., from Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at
Rotterdam, Netherlands, covered by Tanker Bill of Lading BL No. BAT-1.
 The shipment was insured under a marine cargo policy with Petitioner National Union Fire Insurance Company of Pittsburg
(hereinafter referred to as INSURER), a non-life American insurance corporation, through its settling agent in the Philippines, the
American International Underwriters (Philippines), Inc., the other petitioner herein.
 Upon receipt of the cargo by the consignee in the Netherlands, it was found to be discoloured and totally contaminated. Hence, a
claim was made on the Insurer of the cargo. The insurer as subrogee filed a claim for damages against the carrier with the RTC of
Manila.
 The carrier filed a motion to dismiss on the ground that the case was arbritrable and pursuant to the charter party as embodied in
the bill of lading, arbitration must be done. The insurer opposed the motion by arguing that the provision on arbitration was not
included in the bill of lading and even if it was included, it was nevertheless unjust and unreasonable.
 The RTC denied the motion but upon reconsideration, the resolution on the motion to dismiss was suspended or deferred.
 The carrier then filed a petition for review on certiorari with preliminary injunction/TRO which was granted by the CA.

ISSUE: Are the terms of the Charter Party, particularly the provision on arbitration, binding on the INSURER?

HELD: Yes. The pertinent portion of the Bill of Lading in issue provides in part:

xxx [A]ll the terms whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the
rights of the parties concerned in this shipment.xxx

The provision on arbitration in the Charter Party reads:

4. Arbitration. Any dispute arising from the making, performance or termination of this Charter Party shall be settled in New York,
Owner and Charterer each appointing an arbitrator, who shall be a merchant, broker or individual experienced in the shipping
business; the two thus chosen, if they cannot agree, shall nominate a third arbitrator who shall be an admiralty lawyer. Such
arbitration shall be conducted in conformity with the provisions and procedure of the United States arbitration act, and a judgment
of the court shall be entered upon any award made by said arbitrator. Nothing in this clause shall be deemed to waive Owner's right
to lien on the cargo for freight, deed of freight, or demurrage.

Clearly, the Bill of Lading incorporates by reference the terms of the Charter Party. It is settled law that the charter may be made part of the
contract under which the goods are carried by an appropriate reference in the Bill of Lading. As the respondent Appellate Court found, the
INSURER "cannot feign ignorance of the arbitration clause since it was already charged with notice of the existence of the charter party due to
an appropriate reference thereof in the bill of lading and, by the exercise of ordinary diligence, it could have easily obtained a copy thereof
either from the shipper or the charterer.

We hold, therefore, that the INSURER cannot avoid the binding effect of the arbitration clause. By subrogation, it became privy to the Charter
Party as fully as the SHIPPER before the latter was indemnified, because as subrogee it stepped into the shoes of the SHIPPER-ASSURED and is
subrogated merely to the latter's rights. It can recover only the amount that is recoverable by the assured. And since the right of action of the
SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which includes by reference the terms of the Charter Party, necessarily, a
suit by the INSURER is subject to the same agreements. It has not been shown that the arbitral clause in question is null and void, inoperative,
or incapable of being performed. Nor has any conflict been pointed out between the Charter Party and the Bill of Lading.
 St. Paul Fire & Marine Insurance Co. vs. Macondray & Co., Inc
G.R. No. L – 27796
March 25, 1976

FACTS:
 Winthrop Products, Inc. of New York shipped aboard the SS ‘Tai Ping’, 218 cartons and drums of drugs and medicine which were
consigned to Winthrop Stearns, Inc. Manila Philippines
 Barber Steamship Lines, Inc. issued a Bill of Lading in the name of Winthrop Products, Inc. as shipper, with arrival notice in Manila to
consignee Wintrhop Stearns, Inc. Manila
 The shipment was insured by the shipper against loos and/or damage with St. Paul Fire and Marine Insurance Company
 SS Tai Ping arrived at the Port of Manila and discharged the shipment into the custody of Manila Port Service
 The shipment was discharged complete and in good order with the exception of 1 drum and serveral cartons which were in bad
order condition
 The consignee filed a claim in the amount of P1,109.47 representing the C.I.F value of the damaged drum and cartons of medine
with the carrier and Manila Port Service
 Both the carrier and Manila Port Service refused to pay such claim
 The consignee then filed its claim with the insurer. On the basis of such claim, the insurance company paid to the consignee the
insured value of the lost and damaged goods, including other expenses in connection therewith in the total amount of $1,134.46
 As subrogee of the rights of the shipper and/or cosignee, the insurer instituted with the CFI an action against the defendants for the
recovery of the amount of $1,134.46
 Contention of defendant Manila Port Service:
o The whole cargo was delivered to the consignee in the same condition in which it was received from the carrying vessel
o Their liability is limited to the invoice value of the goods, but in no case more than P500 per package pursuant to their
Management Contract
 Contention of defendants Macondray & Co., Inc, Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen:
o The carrier’s liability for the shipment ceased upon discharge thereof from the ship’s tackle
o If any damage was sustained by the shipment while it was under the control of the vessel, such damage was caused by
insufficinecy of packaging, force majeure and/or perils of the sea
 Lower Court Ruling:
o Defendants Macondray & Co, Barber Steamship Lines Inc and Wilhel Wilhelmsen to pay plaintiff, jointly and severally
P300
o Defendant Manila Port Service to pay plaintiff P809.67
o (Total P1109.67)
 Contention of St. Paul Fire & Marine Insurance Co.:
o As subrogee of the consignee, it should be entitled to recover from defendants the amount of $1,134.46 which it actually
paid to the consignee and which represents the value of the lost and damaged shipment as well as other legitimate
expenses
 Contention of Defendants:
o Their liabilty is limited to the C.I.F. value of the goods, pursuant to contract of sea carriage embodied in the bill of lading
o That the consignee’s claim against the carrier and arrastre operators was only for the sum of P1,109.67

ISSUES:

1. Whether or not, in case of loss or damage, the liability of the carrier to the consignee is limited to the C.I.F value of the goods which
were lost or damaged
2. Whether the insurer who has paid the claim in dollars to the consignee should be reimbursed in its peso equivalent on the date of
discharge of the cargo or on the date of the decision

HELD:
1. Yes
 The liabilities of the dendants with respect to the lost or damaged shipments are expressly limited to the C.I.F. value of
the goodsas per contract of sea carriage emobodied in the bill of lading
 It reads:
o “The limitation of liability xxx shall inure not only to the benefit of the carrier xxx but also to the benefit of any
independent contractor performing services xxx”
 The shipper and consignee are, therefore, bound by such stipulations
 It is for this reason that the consignee filed its claim against the defendant on the basis of the C.I.F. value of the lost or
dagmaged goods in the aggregate amount of P1,109.67

2. On the date of the discharge of the cargo

  The plaintiff, as insurer, after paying the claim of the insured for damages under the insurance, is subrogated merely to
the rights of the assured
 As subrogee, it can recover only the amount that is recoverable by the latter
 Since the right of the assured is limited or restricted by the provisions in the bill of lading, as suit by the insurer as
subrogee necessarily is subject to like limitations and restrictions

CEBU SHIPYARD AND ENGINEERING WORKS, INC. v. WILLIAM LINES, INC. and PRUDENTIAL GUARANTEE and ASSURANCE COMPANY, INC.

Construction/Interpretation of Insurance Contracts | May 5, 1999 | Purisima, J.

SUMMARY: William Lines insured its M/V Manila City under Prudential Guarantee for hull and machinery. Policy contained clause providing
that loss/damage caused by negligence of charterers or repairers are excluded from coverage. William Lines brought the vessel to Cebu
Shipyard for annual dry-docking and repair. The two executed contracts stipulating the liabilities of both parties, including that the insurance
on the vessel should be maintained by the owner during period of the contract. After the vessel was transferred to the docking quay, it caught
fire and sank, resulting to its eventual total loss. Cebu Shipyard claims that it is a co-assured under the Marine Hull Insurance Policy by virtue
of Clause 20, and therefore no subrogation can be made by Prudential. SC held that it is not and the petition was denied.
DOCTRINE: Intention of parties to make each other co-assured is to be gleaned from the insurance policy itself and not from any other
contract because the policy denominates the assured and the beneficiaries.
FACTS:

 Cebu Shipyard and Engineering Works, Inc. (CSEW) is engaged in the business of dry-docking and repairing of marine vessels while
the Prudential Guarantee and Assurance, Inc. (Prudential) is in the non-life insurance business.
 William Lines, Inc. is in the shipping business. It was the owner of M/V Manila City, a luxury passenger-cargo vessel, which caught
fire and sank.
 At the time of the unfortunate occurrence sued upon, subject vessel was insured with Prudential for P45M for hull and machinery.
The Hull Policy included an “Additional Perils (INCHMAREE)” Clause covering loss of or damage to the vessel through the negligence
of, among others, ship repairmen
 Petitioner CSEW was also insured by Prudential for third party liability under a Shiprepairer’s Legal Liability Insurance Policy. The
policy was for P10 million only, under the limited liability clause
 On Feb. 5, 1991, William Lines, Inc. brought its vessel, M/V Manila City, to the Cebu Shipyard in Lapulapu City for annual dry-docking
and repair.
 On Feb. 6, 1991, an arrival conference was held between representatives of William Lines, Inc. and CSEW to discuss the work to be
undertaken on the M/V Manila City. The contracts, denominated as Work Orders, were signed thereafter., with the following
stipulations:

o 10. The Contractor shall replace at its own work and at its own cost any work or material which can be shown to be
defective and which is communicated in writing
o 20. The insurance on the vessel should be maintained by the customer and/or owner of the vessel during the period the
contract is in effect.
o The total liability of the Contractor to the Customer or of any sub-contractor shall be limited in respect of any defect or
event to the sum of 1M.
 While the M/V Manila City was undergoing dry-docking and repairs within the premises of CSEW, the master, officers and crew of
M/V Manila City stayed in the vessel, using their cabins as living quarters. Other employees hired by William Lines to do repairs and
maintenance work on the vessel were also present during the dry-docking.
 On February 16, 1991, after subject vessel was transferred to the docking quay, it caught fire and sank, resulting to its eventual total
loss
 On February 21, 1991, William Lines, Inc. filed a complaint for damages against CSEW, alleging that the fire which broke out in M/V
Manila City was caused by CSEWs negligence and lack of care.
 Prudential was impleaded as co-plaintiff, after it paid William Lines, Inc. the value of the hull and machinery insurance on the M/V
Manila City. As a result of such payment Prudential was subrogated to the claim of P45 million, representing the value of the
said insurance it paid.
 Trial Court: CSEW to pay William Lines and Prudential (45M)
 CA: Affirmed TC. Ordered the partial dismissal of the case insofar as CSEW and William Lines were concerned.
 CSEW claims that the insurance policy does not cover loss resulting from the fault of negligent charterers that are assured in the
same policy and by virtue of clause 20, it is deemed a co-assured.

ISSUE/S & RATIO:

1. WON CSEW is co-assured, thus losses caused by it are not covered by the policy- NO
a. The fact that clause 20 benefited petitioner, does not automatically make it a co-assured of William Lines.
 b.Intention of parties to make each other co-assured is to be gleaned from the insurance policy itself and not from any
other contract because the policy denominates the assured and the beneficiaries.
c. Prudential named only William Lines, Inc. as the assured. There was no manifestation of any intention of William Lines Inc
to make CSEW a co-assured. When the terms of a contract are clear, its stipulations control.
d. If CSEW were deemed co-assured, it would nullify any claim of William Lines Inc. No shipowner would agree to make
shiprepairer a co-assured because any claim it has under the policy would be invalidated. Such result could not have been
intended by William Lines Inc.
2. WON CSEW had “management and supervisory control“ of the ship at the time the fire broke out- YES

a. The factual findings by the CA are conclusive on the parties and are not reviewable by this Court.
3. WON the doctrine of res ipsa loquitur applies against the crew- YES
a. For the doctrine of res ipsa loquitur to apply to a given situation, the following conditions must concur: (1) the accident
was of a kind which does not ordinarily occur unless someone is negligent; and (2) that the instrumentality or agency
which caused the injury was under the exclusive control of the person charged with negligence.
b. The facts and evidence reveal the presence of these conditions. First, the fire would not have happened in the ordinary
course of things if reasonable care and diligence had been exercised.
4. WON the provisions limiting CSEW’s liability for negligence to a maximum of Php 1 million are valid- NO
a. Although contracts of adhesion have been consistently upheld as valid, reliance on such contracts cannot be favored
especially where the facts and circumstances warrant that subject stipulations be disregarded. Tthe facts and
circumstances vis-a-vis the nature of the provision sought to be enforced should be considered, bearing in mind the
principles of equity and fair play.

RULING: Petition denied.

D. Subrogation
Article 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or
loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the injury or loss.
Article 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the
obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of
the debtor. He can recover only insofar as the payment has been beneficial to the debtor.

Fireman v Jamila
April 7, 1976
FIREMAN'S FUND INSURANCE COMPANY and FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES
vs.
JAMILA & COMPANY, INC. and FIRST QUEZON CITY INSURANCE CO., INC
AQUINO, J.:
SUMMARY: Jamila supplies security guards to Firestone and assumes their responsibility. When some properties of Firestone were lost due to
connivance of some security guards, Fireman’s Fund as insurer paid Firestone the value of such and is now subrogated to Firestone’s right to
reimbursement. They filed complaint to recover money when Jamila failed to pay. CFI dismissed complaint as to Jamila citing that there is no
cause of action as the latter did not consent to subrogation and there are no allegations in the complaint that Firestone investigated the loss.
Subsequent MRs, F&F argue that their cause of action is on the basis of legal subrogation. SC: There was cause of action on the part of
Fireman’s Fund pursuant to Art. 2207. Payment by the assurer to the assured operates as an equitable assignment to the assurer of all the
remedies which the assured may have against the third party whose negligence or wrongful act caused the loss.
DOCTRINE: Loss or injury for risk must be covered by the policy – Under Article 2207, the cause of the loss or injury must be a risk covered by
the policy to entitle the insurer to the subrogation. Thus, where the insurer pays the insured for a loss which is not a risk covered by the policy,
thereby effecting “voluntary payment,” the insurer has no right of subrogation against the third party liable for the loss. Nevertheless, the
insurer may recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code.
FACTS:
 Jamila or the Veterans Philippine Scouts Security Agency contracted to supply security guards to Firestone. Jamila assumed responsibility
for the acts of its security guards
 First Quezon City Insurance Co., Inc. executed a bond in the sum of P20k to guarantee Jamila's obligations under that contract
 May 18, 1963: Properties of Firestone valued at P11,925 were lost allegedly due to the acts of its employees who connived with Jamila's
security guard
 Fireman's Fund, as insurer, paid to Firestone the amount of the loss and is now subrogated to Firestone's right to get reimbursement from
Jamila
 Jamila and its surety, First Quezon City Insurance Co., Inc., failed to pay the amount of the loss in spite of repeated demands.
 Fireman's Fund and Firestone Tire and Rubber Co instituted this complaint against Jamila for the recovery of the sum of P11,925.00 plus
interest, damages and attorney's fees
 Jamila moved to dismiss the complaint on the ground of lack of cause of action
 o (1) complaint did not allege that Firestone, pursuant to the contractual stipulation quoted in the complaint, had investigated
the loss and that Jamila was represented in the investigation and
o (2) Jamila did not consent to the subrogation of Fireman's Fund to Firestone's right to get reimbursement from Jamila and its
surety.
 CFI: Dismissed the complaint as to Jamila on the second ground that there was no allegation that it had consented to the subrogation
and, therefore, Fireman's Fund had no cause of action against it.
o Also dismissed the complaint as to First Quezon City Insurance Co., Inc. on the ground of res judicata as the same action was
previously filed in a civil case which was dismissed because of the failure of the same plaintiffs and their counsel to appear at
the pre trial.
 Firestone and Fireman's Fund filed MR
 CFI on F&F’s MR: Set aside its order of dismissal. No res judicata as to First Quezon City Insurance Co., Inc. because civil case was
dismissed without prejudice
o However, due to inadvertence, the lower court did not state in its order of September 3, 1966 why it set aside its prior order
dismissing the complaint with respect to Jamila.
 First Quezon City Insurance Co., Inc. filed its answer to the complaint.
 Jamila, upon noticing that the order had obliterated its victory without any reason therefor, filed MR reconsideration
o Invoked the first ground in its original motion to dismiss which had never been passed upon by the lower court that complaint
did not allege that Firestone, pursuant to the contractual stipulation quoted in the complaint, had investigated the loss and
that Jamila was represented in the investigation
 CFI on Jamila’s MR: Granted Jamila's MR. However, it completely ignored the 1st ground but reverted to the second ground (no consent
to subrogation thus no cause of action).
o It did not mention Firestone, the co-plaintiff of Fireman's Fund.
 Firestone and Fireman's Fund filed MR on the ground that Fireman's Fund Insurance Company was suing on the basis of legal subrogation
whereas CFI erroneously predicated its dismissal order on the theory that there was no conventional subrogation because the debtor's
consent was lacking.
o Cited NCC 2207 which provides that "if the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company
shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract".
 CFI on F&F MR: Denied motion.
 F&F filed 2nd MR and called CFI's attention to the fact that the issue of subrogation was of no moment because Firestone, the subrogor
(??), is a party-plaintiff and could sue directly Jamila in its own right.
 CFI on F&F’S 2nd MR: Denied 2nd MR without resolving contention
 Appeal to SC
 F&F: CFI’s dismissal of their complaint is contrary to Article 2207 which provides for legal subrogation.
 JAMILA: Legal subrogation under Art. 2207 requires the debtor's consent
o Legal subrogation takes place in the cases mentioned in NCC 1302 and the instant case is not among the 3 cases enumerated in
that article
o There could be no subrogation in this case because according to F&F, the contract between Jamila and Firestone was entered
into on June 1, 1965 but the loss complained of occurred on May 18, 1963.
ISSUES:
1) Whether the complaint of Firestone as subrogor (???) states a cause of action against Jamila? (Not really)
2) Whether the complaint of Fireman's Fund as subrogee states a cause of action against Jamila? (YES)
3) Whether Jamila should reimburse Fireman’s Fund? (Not decided here)
HELD: CFI Decision's order of dismissal is legally untenable so SET ASIDE with costs against Jamila & Co., Inc.

RATIO:
[F&F’s counsel gratuitously alleged in their brief that Firestone and Jamila entered into a "contract of guard services" on June 1, ‘65. That
allegationwas uncalled for because it is not found in the complaint and so created confusion which did not exist. No copy of the contract was
annexed to the complaint. That confusing statement was an obvious error since it was expressly alleged in the complaint that the loss occurred
on May 18, ‘63. The fact that such an error was committed is another instance substantiating the observation that F&F's counsel had not
exercised due care in the presentation of his case.]

1) Firestone is really a nominal party in this case as it had already been indemnified for the loss which it had sustained. It joined as a party-
plaintiff in order to help Fireman's Fund to recover the amount of the loss from Jamila and First Quezon City Insurance Co., Inc. Firestone had
tacitly assigned to Fireman's Fund its cause of action against Jamila for breach of contract. Sufficient ultimate facts are alleged in the complaint
to sustain that cause of action.

2) Fireman's Fund's action against Jamila is squarely sanctioned by article 2207. As the insurer, Fireman's Fund is entitled to go after the person
or entity that violated its contractual commitment to answer for the loss insured against (PAL vs. Heald Lumber Co).
 CFI erred in applying to this case the rules on novation. F&F in alleging in their complaint that Fireman's Fund "became a party in interest
in this case by virtue of a subrogation right given in its favor by" Firestone, were not relying on the novation by change of creditors as
contemplated in NCC 1291 and 1300 to 1303 but rather on NCC 2207.
 Article 2207 is a restatement of a settled principle of American jurisprudence. Subrogation has been referred to as the doctrine of
substitution. It "is an arm of EQUITY that may guide or even force one to pay a debt for which an obligation was incurred but which was in
whole or in part paid by another" (83 C.J.S. 576).
 "Subrogation is founded on principles of JUSTICE AND EQUITY, and its operation is governed by principles of equity. It rests on the
principle that substantial justice should be attained regardless of form, that is, its basis is the doing of complete, essential, and perfect
justice between all the parties without regard to form"(83 C.J.S. 579- 80)
 Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs Moses). Upon payment of the loss, the insurer is entitled to
be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act
caused the loss (44 Am. Jur. 2nd 745).
 The right of subrogation is of the highest EQUITY. The LOSS IN THE FIRST INSTANCE is that of the INSURED but AFTER reimbursement or
compensation, it becomes the LOSS OF THE INSURER (44 Am. Jur. 2d 746).
 "Although many policies including policies in the standard form, now provide for subrogation, and thus determine the rights of the insurer
in this respect, the equitable right of subrogation as the legal effect of payment inures to the insurer without any formal assignment or
any express stipulation to that effect in the policy" (44 Am. Jur. 2nd 746).
 Stated otherwise, when the insurance company pays for the loss, such payment operates as an equitable assignment to the insurer of
the property and all remedies which the insured may have for the recovery thereof. That right is not dependent upon, nor does it grow
out of, any privity of contract, or upon written assignment of claim, and payment to the insured makes the insurer an assignee in equity
(Shambley v. Jobe-Blackley Plumbing and Heating Co).

3) Whether the plaintiffs would be able to prove their cause of action against Jamila is another question.

CASE 12: F.F. CRUZ and CO., INC., petitioner, vs. THE COURT OF APPEALS, GREGORIO MABLE as substituted by his wife LUZ ALMONTE MABLE
and children DOMING, LEONIDAS, LIGAYA, ELENA, GREGORIO, JR., SALOME, ANTONIO, and BERNARDO all surnamed MABLE, respondents.
(WENCESLAO)

DOCTRINE

Upon payment of the loss incurred by the insured, the insurer is entitled to be subrogated pro tanto to any right of action which the insured
may have against the third person whose negligence or wrongful act caused the loss. Under Art. 2207, the real party in interest with regard to
the indemnity received by the insured is the insurer.

FACTS

 FF Cruz’s furniture manufacturing shop in Caloocan was situated adjacent to private respondent Gregorio Mable’s residence. Mable
first approached Eric Cruz (plant manager of petitioner) to request that a firewall be construcred between the shop and Mable
residence. This request was repeated several times but Cruz fell on deaf ears.
 Sept 6 1974—a fire broke out in FF Cruz’s shop. Petitioner’s employees, who slept in the shop premises tried to put out the fire but
their efforts proved futile. The fire spread to Mable’s house. Both the shop and the house was razed to the ground. The cause of the
conflagration was never discovered.
 Subsequently, Mable filed an action for damages against Cruz. RCFI held for the Mables ordering Cruz to pay for damages.
 CA affirmed CFI decision. MR was filed by Cruz but was denied. Hence, this petition for review on certiorari and eventually submitted
for decision on Jan 1981.
 Petitioner argues that the sum of P35,000 which Mable recovered on the insurance of their house must be deducted from the award
of damages. Also, they argue that the doctrine of res ipsa loquitur must apply in the case,

ISSUE/S

W/N private respondents may still recover from petitioner notwithstanding the indemnity paid by their insurer?

HELD/RATIO

YES!

Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising
out of the wrong or breach of contract complained of, the insurance company is subrogated to the rights of the insured against the wrongdoer
or the person who violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party
shall be entitled to recover the deficiency from the person causing the loss or injury.

The law is clear and needs no interpretation. On the other hand, the insurer may seek reimbursement of the amount it indemnified private
respondents from petitioner. This is the essence of the right to subrogation under Art. 2207. Upon payment of the loss incurred by the insured,
the insurer is entitled to be subrogated to any right of action which the insurer may have against the third person whise negligence or wrongful
act caused the loss. (Fireman’s Fund Insurance Co. v. Jamila & Co.)

Under Art. 2207, the real party in interest with regard to the indemnity received is the insurer. Whether or not the insurer should exercise the
rights of the insured to which it had been subrogated lies solely within the former’s sound discretion. Since the insurer is not a party to this
case, its identity is not of record, and no claim is made on its behalf, the private respondent’s insurer has to claim his right to reimbursement
of the P35,000 paid to the insured.

RULING: CA AFFIRMED. P35000 is reduced rom the damages and the right of the insurer to subrogation and thus seek reimbursement from
petitioner for P35000 is recognized.

NOTES:

Doctrine of Res Ipsa Loquitur (found to be applicable in this case)

 Concept: where the thing which caused the injury complained of is shown to be under the management of the defendant or his servants and
the accident is such as in the ordinary course of things does not happen if those who have its management or control use the proper case, it
affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care.

 Applicability: petitioner failed to construct a firewall between its shop and the residence of private respondents as required by the city
ordinance. Thus, the accident arose from want of care.