G.R. No.
186983 February 22, 2012 The above incontestability clause precludes the insurer from disowning liability under the
MA. LOURDES S. FLORENDO, Petitioner,
vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE, Respondents.
FACTS:
Manuel Florendo filed an application for comprehensive pension plan with respondent
Philam Plans, Inc. (Philam Plans) Manuel signed the application and left to Perla the task of
supplying the information needed in the application. Respondent Ma. Celeste Abcede,
Perla’s daughter, signed the application as sales counselor. Philam Plans issued Pension
Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary.
In time, Manuel paid his quarterly premiums. Eleven months later, Manuel died of blood
poisoning. Subsequently, Lourdes filed a claim with Philam Plans for the payment of the
benefits under her husband’s plan but Philam Plans declined her claim prompting her to file
the present action against the pension plan company before the Regional Trial Court (RTC)
of Quezon City and ruled in favor of Ma. Lourdes. However, the Court of Appeals then
reversed the RTC decision. Hence this appeal.
ISSUE:
Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under
the insurance plan despite consideration that her husband Manuel concealed the true
condition of his health.
RULING:
The Supreme Court answers this to the negative and the AFFIRMED in its entirety the
decision of the Court of Appeals.
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.
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, 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.
G.R. No. 194320 February 1, 2012
MALAYAN INSURANCE CO., INC., Petitioner, vs.RODELIO ALBERTO and ENRICO
ALBERTO REYES, Respondents.
FACTS:
At around 5 o’clock in the morning of December 17, 1995, an accident occurred at the
corner of EDSA and Ayala Avenue, Makati City, involving four (4) vehicles, to wit: (1) a
Nissan Bus operated by Aladdin Transit with plate number NYS 381; (2) an Isuzu Tanker
with plate number PLR 684; (3) a Fuzo Cargo Truck with plate number PDL 297; and (4) a
Mitsubishi Galant with plate number TLM 732.
Based on the Police Report issued by the on-the-spot investigator, Senior Police Officer 1
Alfredo M. Dungga (SPO1 Dungga), the Isuzu Tanker was in front of the Mitsubishi Galant
with the Nissan Bus on their right side shortly before the vehicular incident. All three (3)
vehicles were at a halt along EDSA facing the south direction when the Fuzo Cargo Truck
simultaneously bumped the rear portion of the Mitsubishi Galant and the rear left portion of
the Nissan Bus. Due to the strong impact, these two vehicles were shoved forward and the
front left portion of the Mitsubishi Galant rammed into the rear right portion of the Isuzu
Tanker.
Previously, particularly on December 15, 1994, Malayan Insurance issued Car Insurance
Policy in favor of First Malayan Leasing and Finance Corporation (the assured), insuring the
aforementioned Mitsubishi Galant against third party liability, own damage and theft, among
others. Having insured the vehicle against such risks, Malayan Insurance claimed in its
Complaint dated October 18, 1999 that it paid the damages sustained by the assured
amounting to PhP 700,000.
Maintaining that it has been subrogated to the rights and interests of the assured by
operation of law upon its payment to the latter, Malayan Insurance sent several demand
letters to respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes), the
registered owner and the driver, respectively, of the Fuzo Cargo Truck, requiring them to
pay the amount it had paid to the assured. When respondents refused to settle their liability,
Malayan Insurance was constrained to file a complaint for damages for gross negligence
against respondents.
The trial court ruled in favor of Malayan Insurance and declared respondents liable for We have held that payment by the insurer to the insured operates as an equitable
damages. assignment to the insurer of all the remedies that the insured may have against the third
party whose negligence or wrongful act caused the loss. The right of subrogation is not
The CA, reversed and set aside the Decision of the trial court and ruled in favor of dependent upon, nor does it grow out of, any privity of contract. It accrues simply upon
respondents, disposing: payment by the insurance company of the insurance claim. The doctrine of subrogation has
its roots in equity. It is designed to promote and to accomplish justice; and is the mode that
equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and
The Issue: Whether there is a valid subrogation? good conscience, ought to pay.

Ruling: Considering the above ruling, it is only but proper that Malayan Insurance be subrogated to
the rights of the assured.
Malayan Insurance contends that there was a valid subrogation in the instant case, as
evidenced by the claim check voucher and the Release of Claim and Subrogation Receipt
17. FIRST LEPANTO-TAISHO INSURANCE CORP. v. CHEVRON PHILIPPINES, INC.
presented by it before the trial court. Respondents, however, claim that the documents (2012) (Classes-Suretyship)
presented by Malayan Insurance do not indicate certain important details that would show
proper subrogation.
Facts:
As noted by Malayan Insurance, respondents had all the opportunity, but failed to object to
the presentation of its evidence. Thus, and as We have mentioned earlier, respondents are 1. Chevron Philippines sued First Lepanto-Taisho Insurance Corp. for payment of
deemed to have waived their right to make an objection. As this Court held in Asian unpaid oil and petroleum purchases made by its distributor Fumitechniks Corp.
Construction and Development Corporation v. COMFAC Corporation: The rule is that
failure to object to the offered evidence renders it admissible, and the court cannot, 2. Fumitechniks applied for and was issued a Surety Bond by First Lepanto.
on its own, disregard such evidence.
a. As stated in the attached rider, the bond was in compliance with the requirement
Note also that when a party desires the court to reject the evidence offered, it must for the grant of a credit line with Chevron to guarantee payment/remittance of the cost of
so state in the form of a timely objection and it cannot raise the objection to the fuel products withdrawn within the stipulated time in accordance with the terms and
evidence for the first time on appeal. Because of a party’s failure to timely object, the conditions of the agreement.
evidence becomes part of the evidence in the case. Thereafter, all the parties are
considered bound by any outcome arising from the offer of evidence properly
3. Fumitechniks defaulted on its obligation to Chevron.
presented.

4. As such, Chevron notified First Lepanto of Fumitechniks’ unpaid purchases.

Bearing in mind that the claim check voucher and the Release of Claim and Subrogation
Receipt presented by Malayan Insurance are already part of the evidence on record, and
since it is not disputed that the insurance company, indeed, paid PhP 700,000 to the a. First Lepanto requested that it be furnished copies of documents such as delivery
assured, then there is a valid subrogation in the case at bar. As explained in Keppel receipts.
Cebu Shipyard, Inc. v. Pioneer Insurance and Surety Corporation:
5. First Lepanto then demanded from Fumitechniks the delivery of documents
Subrogation is the substitution of one person by another with reference to a lawful claim or including, among others, a copy of the agreement secured by the Surety Bond and
right, so that he who is substituted succeeds to the rights of the other in relation to a debt or information such as terms and conditions of any arrangement that Fumitechniks might have
claim, including its remedies or securities. The principle covers a situation wherein an made or ongoing negotiations with Chevron in connection with the settlement of its
insurer has paid a loss under an insurance policy is entitled to all the rights and remedies obligations.
belonging to the insured against a third party with respect to any loss covered by the policy.
It contemplates full substitution such that it places the party subrogated in the shoes of the a. Fumitechniks responded by saying that no such agreement was executed with
creditor, and he may use all means that the creditor could employ to enforce payment. Chevron.
6. First Lepanto then advised Chevron the non-existence of the principal agreement
as confirmed by Fumitechniks.
7. Chevron formally demanded from First Lepanto the payment of its claim under the
surety bond.
a. First Lepanto reiterated its position that without the basic contract subject of the
bond, t cannot act on Chevron’s claim
b. Thus, Chevron sued.
Issues: WON First Lepanto, as surety, is liable to Chevron, the creditor, in the absence of a
written contract with the principal.
Held: NO.
Definition of suretyship. Sec. 175, Insurance Code defines suretyship as a contract or
agreement whereby a party, called the surety, guarantees the performance by
another party, called the principal or obligor, of an obligation or undertaking in favor
of a third party, called the obligee. It arises upon the solidary binding of a person –
deemed the surety – with the principal debtor, for the purpose of fulfilling an
obligation.
Nature. Such undertaking makes a surety agreement an ancillary contract as it presupposes
the existence of a principal contract. Although the contract of a surety is in essence
secondary only to a valid principal obligation, the surety becomes liable for the debt or duty
of another although it possesses no direct or personal interest over the obligations nor does
it receive any benefit therefrom. And notwithstanding the fact that the surety contract is
secondary to the principal obligation, the surety assumes liability as a regular party to the
undertaking.
Extent of liability. The extent of the surety’s liability is determined by the language of the
suretyship contract or bond itself. It cannot be extended by implications beyond the terms of
the contract.
Thus, to determine whether First Lepanto is liable to Chevron under the surety bond, we
need to examine the terms of the contract itself. A reading of the bond shows that it secures
the payment of purchases on credit by Fumitechniks in accordance with the terms and
conditions of the “agreement” it entered into with Chevron. The word “agreement” has
reference to the distributorship agreement, the principal contract and by implication included
the credit agreement in the rider.
But in this case, Chevron has executed written agreements only with its direct customers
but not to distributors like Fumitechniks and it also never relayed the terms and conditions of
its distributorship agreement to First Lepanto after the delivery of the bond.
First Lepanto is not liable as surety. The law is clear that a surety contract should be read
and interpreted together with the contract entered into between the creditor and the
principal (Sec. 176). A surety contract is merely a collateral one, its basis is the principal
contract or undertaking which it secures. Necessarily, the stipulations in such principal
agreement must at least be communicated or made known to the surety.
The bond in this case specifically makes reference to a WRITTEN AGREEMENT. Having
accepted the bond, the creditor is bound by the recital in the surety bond that the terms and
conditions of its distributorship contract be reduced in writing or at the very least
communicated in writing to the surety. Such non-compliance by the creditor impacts not on
the validity or legality of the surety contract but on the creditor’s right to demand
performance.
Petition for review partly granted. CA decision reversed and set aside. RTC decision
dismissing Chevron’s complaint is reinstated.
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. ➢ 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
SEABOARD-EASTERN INSURANCE CO., INC., Respondent. 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.
PARTIES:
➢ Eventually, on October 20, 1993 customs authorities allowed petitioner’s customs
New World International Development – buyer broker, Serbros Carrier Corporation, to withdraw the shipment and deliver the same to
petitioner New World’s job site in Makati City.
DMT Corporation – seller
➢ An examination of the three generator sets in the presence of petitioner New
Advatech – agent of seller World’s representatives, Federal Builders (the project contractor) and surveyors of petitioner
New World’s insurer, Seaboard–Eastern Insurance Company (Seaboard), revealed that all
LEP Profit International – 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
NYK Fil Japan Shipping Corporation (NYK) – shipper, common carrier acknowledged receipt of the demand, both denied liability for the loss.

ACX Ruby – ship ➢ 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,
Marina Port Services, Inc. - arrastre 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
Serbros Carrier Corporation – customs broker
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.
Seaboard–Eastern Insurance Company – Insurer!
➢ On October 11, 1994 petitioner New World filed an action for specific performance
FACTS: and damages against all the respondents before the Regional Trial Court (RTC) of Makati
City, Branch 62, in Civil Case 94-2770
➢ Petitioner New World bought from DMT through its agent, Advatech three
emergency generator sets worth US$721,500.00. RTC:

➢ DMT shipped the generator sets by truck from Wisconsin, United States, to LEP • RTC rendered a decision absolving the various respondents from liability with the
Profit in Chicago, Illinois. From there, the shipment went by train to Oakland, California, exception of NYK.
where it was loaded on S/S California Luna V59, owned and operated by NYK for delivery
to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received the
NYK’s liability
goods in good condition.

• The RTC found that the generator sets were damaged during transit while in the
➢ NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby
care of NYK’s vessel, ACX Ruby. The latter failed to exercise the degree of diligence
V/72 that it also owned and operated.
required of it in the face of a foretold raging typhoon in its path.

➢ On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang

• The RTC ruled, however, that petitioner New World filed its claim against the
whose captain filed a sea protest on arrival at the Manila South Harbor on October 5, 1993
vessel owner NYK beyond the one year provided under the Carriage of Goods by Sea Act
respecting the loss and damage that the goods on board his vessel suffered.
(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.
Seabord’s liability (insurer) - none
• 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.
CA:
• Affirmed RTC except with respect to Insurer Seabord’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.
ISSUES:
G.R. 171468
1. Was the release from liability of DMT, Advatech, LEP, LEP Profit, Marina, and
Serbros who were at one time or another involved in handling the shipment, proper? – YES
G.R. 174241
1) whether or not the Seaboard’s request from petitioner New World for an itemized
list is a reasonable imposition and did not violate the insurance contract between them –
NO, not a reasonable imposition
2) whether or not the the one-year COGSA prescriptive period for marine claims
applies to petitioner New World’s prosecution of its claim against Seaboard, its insurer.
SUPREME COURT:
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.
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 (NYK common carrier) 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. As found by the RTC and the
CA, NYK failed to discharge this burden.
G.R. 174241
1. UNREASONABLE!
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.
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice,
delay in voyage, or vessels unseaworthiness, among others. 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
• Seaboard cannot pretend that the documents are inadequate since they were
precisely the documents listed in its insurance policy.
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.
2..
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.
• New World filed its formal claim for its loss with Seaboard as early as November
16, 1993 or about 11 months before the suit against NYK would have fallen due.
• if Seaboard had processed that claim and paid the same, Seaboard would have
been subrogated to New World’s right to recover from NYK. And it could have then filed the
suit as a subrogee.
• But, Seaboard made an unreasonable demand on February 14, 1994 for an
itemized list 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.
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.
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.
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.
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.
o US$721,500.00 under Policy MA-HO-000266,
o with 24% interest per annum for the duration of delay in accordance with Sections
243 and 244 of the Insurance Code and
o attorney’s fees equivalent to 10% of the insurance proceeds.
o 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.
19. COUNTRY BANKERS INSURANCE CORPORATION VS ANTONIO LAGMAN
GR NO 165487; July 13, 2011
PEREZ J:
FACTS:
Nelson Santos (Santos) applied for a license with the National Food Authority (NFA) to
engage in the business of storing not more than 30,000 sacks of palay valued at
P5,250,000.00 in his warehouse at Barangay Malacampa, Camiling, Tarlac. Under Act No.
3893 or the General Bonded Warehouse Act, as amended, the approval for said license
was conditioned upon posting of a cash bond, a bond secured by real estate, or a bond
signed by a duly authorized bonding company, the amount of which shall be fixed by the
NFA Administrator at not less than thirty-three and one third percent (33 1/3%) of the market
value of the maximum quantity of rice to be received.
Accordingly, Country Bankers Insurance Corporation (Country Bankers) issued Warehouse
Bond No. 03304for P1,749,825.00 on 5 November 1989 and Warehouse Bond No.
02355[for P749,925.00 on 13 December 1989 (1989 Bonds) through its agent, Antonio
Lagman (Lagman). Santos was the bond principal, Lagman was the surety and the Republic
of the Philippines, through the NFA was the obligee. In consideration of these issuances,
corresponding Indemnity Agreements were executed by Santos, as bond principal, together
with Ban Lee Lim Santos (Ban Lee Lim), Rhosemelita Reguine (Reguine) and Lagman, as
co-signors. The latter bound themselves jointly and severally liable to Country Bankers for
any damages, prejudice, losses, costs, payments, advances and expenses of whatever kind
and nature, including attorneys fees and legal costs, which it may sustain as a consequence
of the said bond; to reimburse Country Bankers of whatever amount it may pay or cause to
be paid or become liable to pay thereunder; and to pay interest at the rate of 12% per
annum computed and compounded monthly, as well as to pay attorneys fees of 20% of the
amount due it.
Santos then secured a loan using his warehouse receipts as collateral. When the loan
matured, Santos defaulted in his payment. The sacks of palay covered by the warehouse
receipts were no longer found in the bonded warehouse. By virtue of the surety bonds,
Country Bankers was compelled to pay P1,166,750.37.
Consequently, Country Bankers filed a complaint for a sum of money docketed as Civil
Case No. 95-73048 before the Regional Trial Court (RTC) of Manila. In his Answer, Lagman
alleged that the 1989 Bonds were valid only for 1 year from the date of their issuance, as
evidenced by receipts; that the bonds were never renewed and revived by payment of
premiums; that on 5 November 1990, Country Bankers issued Warehouse Bond No. 03515
(1990 Bond) which was also valid for one year and that no Indemnity Agreement was
executed for the purpose; and that the 1990 Bond supersedes, cancels, and renders no
force and effect the 1989 Bonds.
The bond principals, Santos and Ban Lee Lim, were not served with summons because
they could no longer be found. The case was eventually dismissed against them without
prejudice. The other co-signor, Reguine, was declared in default for failure to file her
answer.
On 21 September 1998, the trial court rendered judgment declaring Reguine and Lagman
jointly and severally liable to pay Country Bankers the amount of P2,400,499.87. CA
reversed the decision of RTC
ISSUE:
Whether the 1989 Bonds have expired and the 1990 Bond novates the 1989 Bonds.
HELD:
NO. The Court of Appeals held that the 1989 bonds were effective only for one (1) year, as
evidenced by the receipts on the payment of premiums

RATIO:
The official receipts in question serve as proof of payment of the premium for one year on
each surety bond. It does not, however, automatically mean that the surety bond is effective
for only one (1) year. In fact, the effectivity of the bond is not wholly dependent on the
payment of premium. Section 177 of the Insurance Code expresses:
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of
suretyship or bond is perfected and delivered to the obligor. No contract of
suretyship or bonding shall be valid and binding unless and until the premium
therefor has been paid, except where the obligee has accepted the bond, in which
case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety:Provided, That if the contract of
suretyship or bond is not accepted by, or filed with the obligee, the surety shall
collect only reasonable amount, not exceeding fifty per centum of the premium due
thereon as service fee plus the cost of stamps or other taxes imposed for the
issuance of the contract or bond: Provided, however, That if the non-acceptance of
the bond be due to the fault or negligence of the surety, no such service fee, stamps
or taxes shall be collected.
Asian Terminals vs. Malayan Insurance Co. Inc.
G.R. No. 171406
4 April 2011
Facts:
Shandong Weifand Soda Ash Plant shipped on board the vessel MV Jinliann I 60,000
plastic bags of soda ash dense from China to Manila. Upon arrival in Manila on November
21, 1995, the stevedores of petitioner Asian Terminals Inc unloaded the bags from the
vessel and brought them to the open storage area for temporary storage and safekeeping.
When the unloading of the bags was completed, it was found out that the more than 2k
bags were in bad order condition. Thus, respondent insurer was compelled to pay
Shandong the insurance proceeds for the lost cargo and subrogated the rights of Shandong
against Asian Terminals.
RTC and Court of Appeals Ruling:
It was found out by the RTC that Asian Terminals was liable for the damage or loss because
the proximate cause of the damage/loss was the negligence of petitioner’s stevedores who
handled the unloading of the cargoes from the vessel. It found out that despite the
admonitions of the two marine cargo surveyors, it still used the steel hooks which pierced
the bags. The Court of Appeals affirmed RTC’s decision.
Petitioner’s contention:
1) There was no cause of action because respondent insurer was not able to produce
the insurance contract or policy covering the subject matter.
2) It also avers that the finding of the RTC and CA that the stevedores were negligent
is contrary to the documentary evidence presented (TOSBOC, the RESBOC, and
the Reporter’s survey. The said documents proved that no additional damage was
sustained by the subject shipment under its custody.
3) Petitioner also contends that amount of damages should not be more than 5K
pursuant to its Management Contract for cargo handling services with PPA. It
contended that the CA should have taken judicial notice of the said contract since it
is an official act of an executive department subject to judicial recognizance.
Issue:
1) Whether non-presentation of insurance contract is fatal to insurer’s cause of action.
2) Whether the proximate cause of the damage or loss was the negligence of the
petitioner’s stevedores.
3) Can the court take judicial notice of the Management Contract?
Held:
1) Non-presentation of the insurance contract or policy is not fatal. Moreover, in this case,
the issue was raised first time with the SC. The subrogation receipt is sufficient enough
to establish not only the relationship of insurer and the assured but also the amount
paid to settle the insurance claims. (Murag dili ni ang main issue)
2) Witness Antonio testified that it was only after all the bags were unloaded that the
actual counting of the bad order bags was made and this was corroborated by marine
cargo surveryor Liceralde. On the other hand, ATI presented its own witness to testify
that a survey was conducted by the shipping company and ATI before the shipment
was turned over to the possession of ATI and that the Turn Over Survey of Bad Order
Cargoes was prepared by ATIs Bad Order (BO) Inspector.
Considering that the shipment arrived on November 21, 1998 and the unloading
operation commenced on said date and was completed on November 26, 1998, while
the Turn Over Survey of Bad Order Cargoes, reflecting a figure of 2,702 damaged
bags, was prepared and signed on November 28, 1998 by ATIs BO Inspector and co-
signed by a representative of the shipping company, the trial courts finding that the
damage to the cargoes was due to the improper handling thereof by ATIs stevedores
cannot be said to be without substantial support from the records.
We thus see no cogent reason to depart from the ruling of the trial court that ATI should
be made liable for the 2,702 bags of damaged shipment. Needless to state, it is
hornbook doctrine that the assessment of witnesses and their testimonies is a matter
best undertaken by the trial court, which had the opportunity to observe the demeanor,
conduct or attitude of the witnesses. The findings of the trial court on this point are
accorded great respect and will not be reversed on appeal, unless it overlooked
 substantial facts and circumstances which, if considered, would materially affect the
result of the case.
3) [Main issue for Evidence] Petitioner cannot avail of judicial notice.
Sections 1 and 2 of Rule 129 of the Rules of Court provide that:
SECTION 1. Judicial notice, when mandatory. A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of the legislative,
executive and judicial departments of the Philippines, the laws of nature, the
measure of time, and the geographical divisions.
SEC. 2. Judicial notice, when discretionary. A court may take judicial notice of
matters which are of public knowledge, or are capable of unquestionable
demonstration or ought to be known to judges because of their judicial functions.
The Management Contract entered into by petitioner and the PPA is clearly not among the
matters which the courts can take judicial notice of. It cannot be considered an official act of
the executive department. The PPA, which was created by virtue of Presidential Decree No.
857, as amended, is a government-owned and controlled corporation in charge of
administering the ports in the country. Obviously, the PPA was only performing a proprietary
function when it entered into a Management Contract with petitioner. As such, judicial notice
cannot be applied.
Philippine Health Care Providers v CIR G.R. No. 167330 June 12, 2008
J. Corona
Facts:
The petitioner, a prepaid health-care organization offering benefits to its members. The CIR
found that the organization had a deficiency in the payment of the DST under Section 185 of
the 1997 Tax Code which stipulated its implementation:
“On all policies of insurance or bonds or obligations of the nature of indemnity for loss,
damage, or liability made or renewed by any person, association or company or corporation
transacting the business of accident, fidelity, employer's liability, plate, glass,
steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life,
marine, inland, and fire insurance)”
The CIR sent a demand for the payment of deficiency taxes, including surcharges and
interest, for 1996-1997 in the total amount of P224,702,641.18.
The petitioner protested to the CIR, but it didn’t act on the appeal. Hence, the company had
to go to the CTA. The latter declared judgment against them and reduced the taxes. It
ordered them to pay 22 million pesos for deficiency VAT for 1997 and 31 million deficiency
VAT for 1996.
CA denied the company’s appeal an d increased taxes to 55 and 68 million for 1996 to
1997.
Issues: WON a health care agreement in the nature of an insurance contract and therefore
subject to the documentary stamp tax (DST) imposed under Section 185 of Republic Act
8424 (Tax Code of 1997)
Held: Yes. Petition dismissed.
Ratio:
The DST is levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of
specific instruments.
The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the
transaction of the business. In particular, the DST under Section 185 of the 1997 Tax Code
is imposed on the privilege of making or renewing any policy of insurance (except life,
marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss,
damage, or liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent
case of Blue Cross Healthcare, Inc. v. Olivares, this Court ruled that a health
care agreement is in the nature of a non-life insurance policy.
Its health care agreement is not a contract for the provision of medical services. Petitioner
does not actually provide medical or hospital services but merely arranges for the same
It is also incorrect to say that the health care agreement is not based on loss or damage
because, under the said agreement, petitioner assumes the liability and indemnifies its
member for hospital, medical and related expenses (such as professional fees
of physicians). The term "loss or damage" is broad enough to cover the monetary expense
or liability a member will incur in case of illness or injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of
non-life insurance, which is primarily a contract of indemnity.
Similarly, the insurable interest of every member of petitioner's health care program in
obtaining the health care agreement is his own health. Under the agreement, petitioner is
bound to indemnify any member who incurs hospital, medical or any other expense arising
from sickness, injury or other stipulated contingency to the extent agreed upon under the
contract.
EASTERN SHIPPING LINES, INC. v. PRUDENTIAL GUARANTEE AND ASSURANCE,
INC.,
Type of Insurance: Non-life
P.O/Assured: Nissan Motor Philippines, Inc. (consignee)
Insurer: Prudential Guarantee and Assurance Inc
Subject Matter: auto parts of Nissan motor vehicle
Third Party/Wrongdoer: Eastern Shipping and Asian Terminals, Inc. (ATI)
RECIT-READY:
Fifty-six cases of completely knock-down auto parts of Nissan motor vehicle were
loaded on board M/V Apollo Tujuh, a carrier owned and operated by petitioner Eastern
Shipping Lines, Inc. The shipment was consigned to Nissan Motor Philippines, Inc. (Nissan)
and was covered by Bill of Lading No. NMA-1. Upon arrival at the port of Manila, the
shipment was discharged onto the custody of the arrastre operator, Asian Terminals, Inc.
(ATI), complete and in good condition, except for four cases. The shipment was then
delivered to the warehouse of Nissan in Quezon City.
Based on the survey report by Tan-Gaute Adjustment Company, Inc., there were
shortage and damage sustained by the shipment were due to pilferage and improper
handling, respectively while in the custody of the vessel and/or Arrastre Contractors.
Respondent Prudential Guarantee and Assurance Inc., as insurer of the shipment against
all risks per Marine Open Policy No. 86-168 and Marine Cargo Risk Note No. 3921/95, paid
Nissan the sum of P1,047,298.34.
Prudential sued Eastern Shipping and ATI for reimbursement claiming that it was
subrogated to the rights of Nissan by virtue of said payment. RTC ruled in favor of
Prudential. Upon appeal, the CA exonerated ATI. CA also ruled that the right of subrogation
accrues upon payment by the insurance company of the insurance claim and that the
presentation of the insurance policy is not indispensable before the appellee may recover in
the exercise of its subrogatory right.
ISSUE:
Whether or not the petitioner should be held liable despite the fact that respondent failed to
submit any insurance policy
HELD: NO
The Marine Risk Note relied upon by respondent as the basis for its claim for
subrogation is insufficient to prove said claim. A marine risk note is not an insurance
policy. It is only an acknowledgment or declaration of the insurer confirming the specific
shipment covered by its marine open policy, the evaluation of the cargo and the chargeable
premium. It is the Marine Open Policy which is the main insurance contract.
Moreover, the marine risk note in the case at bar is questionable because: first, it is
dated on the same day the cargoes arrived at the port of Manila and not during the duration
of the voyage; second, without the Marine Insurance Policy to elucidate on the specifics of
the terms and conditions alluded to in the marine risk note, it would be simply guesswork to
know if the same were complied with.
Furthermore, since respondent alluded to an actionable document in its complaint,
the contract of insurance between it and Nissan, as integral to its cause of action against
petitioner, the Marine Insurance Policy should have been attached to the Complaint. It was
incumbent on respondent Prudential to present in evidence the Marine Insurance Policy,
and having failed in doing so, its claim of subrogation must necessarily fail.
FACTS:
 On November 8, 1995, fifty-six cases of completely knock-down auto parts of Nissan
motor vehicle (cargoes) were loaded on board M/V Apollo Tujuh (carrier)
at Nagoya, Japan, to be shipped to Manila. The shipment was consigned to Nissan
Motor Philippines, Inc. (Nissan) and was covered by Bill of Lading No. NMA-1. The
carrier was owned and operated by petitioner Eastern Shipping Lines, Inc.
 When the carrier arrived at the port of Manila, the shipment was then discharged from
the vessel onto the custody of the arrastre operator, Asian Terminals, Inc. (ATI),
complete and in good condition, except for four cases. The shipment was withdrawn by
Seafront Customs and Brokerage from the pier and delivered to the warehouse of
Nissan in Quezon City.
 A survey of the shipment was made by Tan-Gaute Adjustment Company, Inc.
(surveyor) and based on its report, there were short (missing) items in Cases Nos.
10/A26/T3K and 10/A26/7K and broken/scratched and broken items in Case No.
10/A26/70K; and that (i)n (its) opinion, the shortage and damage sustained by the
shipment were due to pilferage and improper handling, respectively while in the custody
of the vessel and/or Arrastre Contractors.
 Nissan demanded the sum of P1,047,298.34 representing the cost of the damages
sustained by the shipment from petitioner, Eastern Shipping, and ATI,
the arrastre operator. However, the demands were not heeded.
 Respondent Prudential Guarantee and Assurance Inc., as insurer of the shipment
against all risks per Marine Open Policy No. 86-168 and Marine Cargo Risk Note No.
3921/95, paid Nissan the sum of P1,047,298.34.
 Prudential sued Eastern Shipping and ATI for reimbursement of the amount it paid to
Nissan claiming that it was subrogated to the rights of Nissan by virtue of said payment.
 RTC ruled in favor of Prudential. Upon appeal, the CA exonerated ATI and ruled that
Eastern Shipping was solely responsible for the damages caused to the cargoes.
 Moreover, the CA relying on Delsan Transport Lines, Inc. vs. Court of Appeals, ruled
that the right of subrogation accrues upon payment by the insurance company of the
insurance claim and that the presentation of the insurance policy is not indispensable
before the appellee may recover in the exercise of its subrogatory right.
ISSUE:
Whether or not the petitioner should be held liable despite the fact that respondent
failed to submit any insurance policy
HELD: NO. The Marine Risk Note relied upon by respondent as the basis for its claim
for subrogation is insufficient to prove said claim. It was incumbent on respondent
Prudential to present in evidence the Marine Insurance Policy, and having failed in
doing so, its claim of subrogation must necessarily fail.
 A Marine Risk is not an insurance policy; It is the Marine Open Policy which is
the main insurance contract
- A marine risk note is not an insurance policy. It is only an acknowledgment or declaration
of the insurer confirming the specific shipment covered by its marine open policy, the
evaluation of the cargo and the chargeable premium.
- International Container Terminal Services, Inc. v. FGU Insurance
Corporation (International) on the nature of a marine cargo risk note:
x x x It is the marine open policy which is the main insurance
contract. In other words, the marine open policy is the blanket insurance
to be undertaken by FGU on all goods to be shipped by RAGC during the
existence of the contract, while the marine risk note specifies the
particular goods/shipment insured by FGU on that specific transaction,
including the sum insured, the shipment particulars as well as the
premium paid for such shipment. x x x.[21]
- The Marine Risk Note relied upon by respondent as the basis for its claim for
subrogation is insufficient to prove said claim.
It is undisputed that the cargoes were already on board the carrier as early as
November 8, 1995 and that the same arrived at the port of Manila on November 16, 1995.
It is, however, very apparent that the Marine Cargo Risk Note was issued only
on November 16, 1995. Without a copy of the marine insurance policy, it would be
impossible and simply guesswork to know whether the cargo was insured during the
voyage which started on November 8, 1995. Without the marine insurance policy, it
would be impossible for this Court to know the following: first, the specifics of the Institute
Cargo Clauses A and other terms and conditions per Marine Open Policy-86-168 as alluded
to in the Marine Risk Note; second, if the said terms and conditions were actually complied
with before respondent paid Nissans claim.
 Marine Insurance Policy should have been presented since complaint was based
on an actionable document
- Since respondent alluded to an actionable document in its complaint, the contract
of insurance between it and Nissan, as integral to its cause of action against
petitioner, the Marine Insurance Policy should have been attached to the Complaint.
Even in its formal offer of evidence, respondent alluded to the marine insurance
policy which can stand independent of the Marine Cargo Risk Note. Section 7, Rule 9
of the 1997 Rules of Civil Procedure:
SECTION 7. Action or defense based on document. Whenever an action
or defense is based upon a written instrument or document, the
substance of such instrument or document shall be set forth in the
pleading, and the original or a copy thereof shall be attached to the
pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may, with like effect, be set forth in the pleading.
- It is significant that the date when the alleged insurance contract was constituted cannot
be established with certainty without the contract itself. Said point is crucial because there
can be no insurance on a risk that had already occurred by the time the contract was
executed. Surely, the Marine Risk Note on its face does not specify when the insurance was
constituted.
- In the case of International, the non-presentation of the insurance policy was not fatal
because the loss of the cargo undoubtedly occurred while on board the petitioner's vessel. It
was an exception to the general rule.
In the present case, although the damage to the cargo occurred while the same
was in petitioner’s custody, the Court cannot apply the ruling in International. In contrast,
unlike in International where there was no issue as regards the provisions of the
marine insurance policy, such that the presentation of the contract itself is necessary
for perusal, herein petitioner had repeatedly objected to the non-presentation of the
marine insurance policy and had manifested its desire to know the specific
provisions thereof.
Moreover, and the same is critical, the marine risk note in the case at bar is
questionable because: first, it is dated on the same day the cargoes arrived at the
port of Manila and not during the duration of the voyage; second, without the Marine
Insurance Policy to elucidate on the specifics of the terms and conditions alluded to
in the marine risk note, it would be simply guesswork to know if the same
were complied with.
In conclusion, this Court rules that based on the applicable jurisprudence, because
of the inadequacy of the Marine Cargo Risk Note for the reasons already stated, it was
incumbent on respondent to present in evidence the Marine Insurance Policy, and having
failed in doing so, its claim of subrogation must necessarily fail.

WHEREFORE, premises considered, the petition is GRANTED.