31 La Razon Social "Go Tiaoco y Hermanos" vs.

Union was due to a defect in one of the drain pipes of the ship and
Insurance Society of Canton Ltd. [GR 13983, 1 September concluded that the loss was not covered by the policy of insurance.
1919] First Division, Street (J): 6 concur, 1 dissents Judgment was accordingly entered in favor of Union Insurance and
Go Tiaoco Brothers appealed.
Facts: A cargo of rice belonging to the Go Tiaoco Brothers, was Issue [1]: Whether perils of the sea includes entrance of water
transported in the early days of May, 1915, on the steamship into the ships hold through a defective pipe.
Hondagua from the port of Saigon to Cebu. On discharging the rice Held [1]: NO. It is determined that the words "all other perils,
from one of the compartments in the after hold, upon arrival at losses, and misfortunes" are to be interpreted as covering risks
Cebu, it was discovered that 1,473 sacks had been damaged by which are of like kind (ejusdem generis) with the particular risks
sea water. The loss so resulting to the owners of rice, after proper which are enumerated in the preceding part of the same clause of
deduction had been made for the portion saved, was P3,875. The the contract. According to the ordinary rules of construction these
policy of insurance, covering the shipment, was signed upon a form words must be interpreted with reference to the words which
long in use among companies engaged in maritime insurance. It immediately precede them. They were no doubt inserted in order
purports to insure the cargo from the following among other risks: to prevent disputes founded on nice distinctions. Their office is to
"Perils . . . of the seas, men, of war, fire, enemies, pirates, rovers, cover in terms whatever may be within the spirit of the cases
thieves, .jettisons, . . . barratry of the master and mariners, and of previously enumerated, and so they have a greater or less effect as
all other perils, losses, and misfortunes that have or shall come to a narrower or broader view is taken of those cases. For example, if
the hurt, detriment, or damage of the said goods and merchandise the expression "perils of the seas" is given its widest sense the
or any part thereof." It was found out that the drain pipe which general words have little or no effect as applied to that case. If on
served as a discharge from the water closet passed down through the other hand that expression is to receive a limited construction
the compartment where the rice in question was stowed and and loss by perils of the seas is to be confined to loss ex marine
thence out to sea through the wall of the compartment, which was tempestatis discrimine, the general words become most important.
a part of the wall of the ship. The joint or elbow where the pipe But still, when they first became the subject of judicial
changed its direction was of cast iron; and in course of time it had construction, they have always been held or assumed to be
become corroded and abraded until a longitudinal opening had restricted to cases "akin to" or "resembling" or "of the same kind
appeared in the pipe about one inch in length. This hole had been as" those specially mentioned. I see no reason for departing from
in existence before the voyage was begun, and an attempt had this settled rule. In marine insurance it is above all things
been made to repair it by filling with cement and bolting over it a necessary to abide by settled rules and to avoid anything like novel
strip of iron. The effect of loading the boat was tosubmerge the refinements or a new departure. It must be considered to be
vent, or orifice, of the pipe until it was about 18 inches or 2 feet settled, furthermore, that a loss which, in the ordinary course of
below the level of the sea. As a consequence the sea water rose in events, results from the natural and inevitable action of the sea,
the pipe. Navigation under these conditions resulted in the washing from the ordinary wear and tear of the ship, or from the negligent
out of the cement-filling from the action of the sea water, thus failure of the ship's owner to provide the vessel with proper
permitting the continued flow of the salt water into the equipment to convey the cargo under ordinary conditions, is not a
compartment of rice. An action on a policy of marine insurance peril of the sea. Such a loss is rather due to what has been aptly
issued by the Union Insurance Society of Canton, Ltd., upon the called the "peril of the ship." The insurer undertakes to insure
cargo of rice belonging to the Go Tiaoco Brothers was filed. The against perils of the sea and similar perils, not against perils of the
trial court found that the inflow of the sea water during the voyage ship. There must, in order to make the insurer liable, be "some
casualty, something which could not be foreseen as one of the results from the natural and inevitable action of the sea, from the
necessary incidents of the adventure. The purpose of the policy is ordinary wear and tear of the ship, or from the negligent failure of
to secure an indemnity against accidents which may happen, not the ship's owner to provide the vessel with proper equipment to
against events which must happen." Herein, the entrance of the convey the cargo under ordinary conditions, is not a peril of the
sea water into the ship's hold through the defective pipe already sea. Such a loss is rather due to what has been aptly called the
described was not due to any accident which happened during the 'peril of the ship.' The insurer undertakes to insure against perils of
voyage, but to the failure of the ship's owner properly to repair a the sea and similar perils, not against perils of the ship. As was
defect of the existence of which he was apprised. The loss was well said by Lord Herschell in Wilson, Sons & Co. v. Owners of
therefore more analogous to that which directly results from simple Cargo per the Xantho ([1887], 12 A. C., 503, 509), there must, in
unseaworthiness than to that which results from perils of the sea. order to make the insurer liable, be 'some casualty, something
which could not be foreseen as one of the necessary incidents of
Issue [2]: Whether the loss of the cargo was due to the perils of the adventure. The purpose of the policy is to secure an indemnity
the ship rather than the perils of the sea. Held [2]: PERILS OF THE against accidents which may happen, not against events which
SHIP. At the time Mable 10 sank, there was no typhoon but must happen.
ordinary strong wind and waves, a condition which is natural and
normal in the open sea. The evidence shows that the sinking of 33 Filipino Merchants Insurance Co. Inc. vs. Court of
Mable 10 was due to improper loading of the logs on one side so Appeals [GR 85141, 28 November 1989] Second Division,
that the barge was tilting on one side and for that it did not Regalado (J): 3 concur, 1 on leave
navigate on even keel; that it was no longer seaworthy that was
why it developed leak; that the personnel of the tugboat and the Facts: In December 1976, Choa Tiek Seng insured said shipment
barge committed a mistake when it turned loose the barge from with Filipino Merchants Insurance Company (FMICI) under cargo
the tugboat east of Cabuli point where it was buffeted by storm Policy M-2678 for the sum of P267,653.59 for the goods described
and waves, while the tugboat proceeded to west of Cabuli point as 600 metric tons of fishmeal in new gunny bags of 90 kilos each
where it was protected by the mountain side from the storm and from Bangkok, Thailand to Manila against all risks under warehouse
waves coming from the east direction. In fact, in Roque's and to warehouse terms. Actually, what was imported was 59.940
Ong's complaint, it is alleged that the barge Mable 10 of MBLC metric tons not 600 tons at $395.42 a ton CNF Manila. The
developed a leak which allowed water to come in and that one of fishmeal in 666 new gunny bags were unloaded from the ship on
the hatches of said barge was negligently left open by the person 11 December 1976 at Manila unto the arrastre contractor E. Razon,
in charge thereof causing more water to come in", and that "he Inc. and FMICI's surveyor ascertained and certified that in such
loss of their cargo was due to the fault, negligence, and/or lack of discharge 105 bags were in bad order condition as jointly surveyed
skill of MBLC and/or MBLC's representatives on barge Mable 10. It by the ship's agent and the arrastre contractor. The condition of
is quite unmistakable that the loss of the cargo was due to the the bad order was reflected in the turn over survey report of Bad
perils of the ship rather than the perils of the sea. The facts clearly Order cargoes 120320 to 120322, consisting of 3 pages. The cargo
negate Roque's and Ong's claim under the insurance policy. In the was also surveyed by the arrastre contractor before delivery of the
case of Go Tiaoco y Hermanos v. Union Ins. Society of Canton, the cargo to the consignee and the condition of the cargo on such
Court had occasion to elaborate on the term "perils of the ship" delivery was reflected in E. Razon's Bad Order Certificates 14859,
when it ruled that "It must be considered to be settled, 14863 and 14869 covering a total of 227 bags in bad order
furthermore, that a loss which, in the ordinary course of events, condition. FMICI's surveyor has conducted a final and detailed
survey of the cargo in the warehouse for which he prepared a deemed to extend to cover loss, damage, or expense proximately
survey report with the findings on the extent of shortage or loss on caused by delay or inherent vice or nature of the subject-matter
the bad order bags totalling 227 bags amounting to 12,148 kilos. insured. Claims recoverable hereunder shall be payable irrespective
Based on said computation, Choa made a formal claim against of percentage." An "all risks policy" should be read literally as
FMICI for P51,568.62 the computation of which claim is contained meaning all risks whatsoever and covering all losses by an
therein. A formal claim statement was also presented by the Choa accidental cause of any kind. The terms "accident" and
against the vessel dated 21 December 1976, but FMICI refused to "accidental", as used in insurance contracts, have not acquired any
pay the claim. Consequently, an action was brought by the technical meaning. They are construed by the courts in their
consignee (Choa Tiek Seng) of the shipment of fishmeal loaded on ordinary and common acceptance. Thus, the terms have been
board the vessel SS Bougainville and unloaded at the Port of Manila taken to mean that which happens by chance or fortuitously,
on or about 11 December 1976 and seeks to recover from FMICI without intention and design, and which is unexpected, unusual
the amount of P51,568.62 representing damages to said shipment and unforeseen. An accident is an event that takes place without
which has been insured by FMICI under Policy M-2678. FMICI one's foresight or expectation; an event that proceeds from an
brought a third party complaint against third party defendants unknown cause, or is an unusual effect of a known cause and,
Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc. therefore, not expected. The very nature of the term "all risks"
seeking judgment against the third party defendants in case must be given a broad and comprehensive meaning as covering
judgment is rendered against FMICI. The court below, after trial on any loss other than a wilful and fraudulent act of the insured. This
the merits, rendered judgment in favor of Choa, ordering FMICI to is pursuant to the very purpose of an "all risks" insurance to give
pay Choa the sum of P51,568.62 with interest at legal rate from protection to the insured in those cases where difficulties of logical
the date of the filing of the complaint; and, on the third party explanation or some mystery surround the loss or damage to
complaint, the third party defendant Compagnie Maritime Des property. An "all risks" policy has been evolved to grant greater
Chargeurs Reunis and third party defendant E. Razon, Inc. are protection than that afforded by the "perils clause," in order to
ordered to pay FMICI jointly and severally reimbursement of the assure that no loss can happen through the incidence of a cause
amounts paid by FMICI with legal interest from the date of such neither insured against nor creating liability in the ship; it is written
payment until the date of such reimbursement; without against all losses, that is, attributable to external causes. The term
pronouncement as to costs. On appeal, and on 18 July 1988, the "all risks" cannot be given a strained technical meaning, the
Court of Appeals affirmed the decision of the lower court insofar as language of the clause under the Institute Cargo Clauses being
the award on the complaint is concerned and modified the same unequivocal and clear, to the effect that it extends to all
with regard to the adjudication of the third-party complaint. A damages/losses suffered by the insured cargo except (a) loss or
motion for reconsideration of the aforesaid decision was denied, damage or expense proximately caused by delay, and (b) loss or
hence FMICI filed the petition for review. damage or expense proximately caused by the inherent vice or
Issue [1]: Whether an "all risks" marine policy has a technical nature of the subject matter insured.
meaning in insurance in that before a claim can be compensable it Issue [2]: Whether the failure of Choa to adduce evidence,
is essential that there must be "some fortuity," "casualty" or showing that the alleged loss to the cargo in question was due to a
"accidental cause" to which the alleged loss is attributable. fortuitous event, precludes his right to recover from the insurance
Held [1]: NO. The "all risks clause" of the Institute Cargo Clauses policy.
read as follows "5. This insurance is against all risks of logs or Held [2]: NO. Although generally, the burden of proof is upon the
damage to the subject-matter insured but shall in no case be insured to show that a loss arose from a covered peril, under an
"all risks" policy the burden is not on the insured to prove the the weakness of the bags themselves. Had there been such a
precise cause of loss or damage for which it seeks compensation. showing that spillage would have been a certainty, there may have
The insured under an "all risks insurance policy" has the initial been good reason to plead that there was no risk covered by the
burden of proving that the cargo was in good condition when the policy (See Berk vs. Style [1956] cited in Marine Insurance Claims,
policy attached and that the cargo was damaged when unloaded p. 125). Under an all risks policy, it was sufficient to show that
from the vessel; thereafter, the burden then shifts to the insurer to there was damage occasioned by some accidental cause of any
show the exception to the coverage. As held in Paris-Manila kind, and there is no necessity to point to any particular cause.
Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that Contracts of insurance are contracts of indemnity upon the terms
the insurance company has the burden of proving that the loss is and conditions specified in the policy. The agreement has the force
caused by the risks excepted and for want of such proof, the of law between the parties. The terms of the policy constitute the
company is liable. Coverage under an "all risks" provision of a measure of the insurer's liability. If such terms are clear and
marine insurance policy creates a special type of insurance which unambiguous, they must be taken and understood in their plain,
extends coverage to risks not usually contemplated and avoids ordinary and popular sense.
putting upon the insured the burden of establishing that the loss Issue [4]: Whether the consignee (Choa) has an insurable interest
was due to the peril falling within the policy's coverage; the insurer in said goods.
can avoid coverage upon demonstrating that a specific provision Held [4]: Choa, as consignee of the goods in transit under an
expressly excludes the loss from coverage. A marine insurance invoice containing the terms under "C & F Manila," has insurable
policy providing that the insurance was to be "against all risks" interest in said goods. Section 13 of the Insurance Code defines
must be construed as creating a special insurance and extending to insurable interest in property as every interest in property, whether
other risks than are usually contemplated, and covers all losses real or personal, or any relation thereto, or liability in respect
except such as arise from the fraud of the insured. The burden of thereof, of such nature that a contemplated peril might directly
the insured, therefore, is to prove merely that the goods he damnify the insured. In principle, anyone has an insurable interest
transported have been lost, destroyed or deteriorated. Thereafter, in property who derives a benefit from its existence or would suffer
the burden is shifted to the insurer to prove that the loss was due loss from its destruction whether he has or has not any title in, or
to excepted perils. To impose on the insured the burden of proving lien upon or possession of the property. Insurable interest in
the precise cause of the loss or damage would be inconsistent with property may consist in (a) an existing interest; (b) an inchoate
the broad protective purpose of "all risks" insurance. interest founded on an existing interest; or (c) an expectancy,
Issue [3]: Whether the insurer is liable coupled with an existing interest in that out of which the
Held [3]: There being no showing that the loss was caused by any expectancy arises. As vendee/consignee of the goods in transit has
of the excepted perils, the insurer is liable under the policy. It is such existing interest therein as may be the subject of a valid
believed that in the absence of any showing that the contract of insurance. His interest over the goods is based on the
losses/damages were caused by an excepted peril, i.e. delay or the perfected contract of sale. The perfected contract of sale between
inherent vice or nature of the subject matter insured, and there is him and the shipper of the goods operates to vest in him an
no such showing, the loss was covered by the policy. Herein, there equitable title even before delivery or before he performed the
is no evidence presented to show that the condition of the gunny conditions of the sale. The contract of shipment, whether under
bags in which the fishmeal was packed was such that they could F.O.B., C.I.F., or C. & F. as in the present case, is immaterial in the
not hold their contents in the course of the necessary transit, much determination of whether the vendee has an insurable interest or
less any evidence that the bags of cargo had burst as the result of not in the goods in transit. The perfected contract of sale even
without delivery vests in the vendee an equitable title, an existing Issue: Whether or not Steamship Mutual is a Protection and
interest over the goods sufficient to be the subject of insurance. Indemnity Club engaged in the insurance business in the
Further, Article 1523 of the Civil Code provides that where, in Philippines
pursuance of a contract of sale, the seller is authorized or required
to send the goods to the buyer, delivery of the goods to a carrier, Held: Steamship Mutual as a P & I Club is a mutual insurance
whether named by the buyer or not, for, the purpose of company engaged in the marine insurance business.
transmission to the buyer is deemed to be a delivery of the goods
to the buyer, the exceptions to said rule not obtaining in the An insurance contract is a contract of indemnity. This means that
present case. The Court has heretofore ruled that the delivery of one party undertakes for a consideration to indemnify another
the goods on board the carrying vessels partake of the nature of party against loss, damage, or liability arising from an unknown or
actual delivery since, from that time, the foreign buyers assumed contingent event. While to determine if a contract is an insurance
the risks of loss of the goods and paid the insurance premium contract we can look at the nature of the promise, the act to be
covering them. C & F contracts are shipment contracts. The term performed, exact nature of the agreement in view of the entire
means that the price fixed includes in a lump sum the cost of the occurrence, contingency or circumstance where the performance is
goods and freight to the named destination. It simply means that mandated. The label is not controlling. While under Section 2(2) of
the seller must pay the costs and freight necessary to bring the the Insurance Code the phrase doing an insurance business
goods to the named destination but the risk of loss or damage to constitutes the following: 1) making or proposing to make, as
the goods is transferred from the seller to the buyer when the insurer, any insurance contract; 2) making or proposing to make,
goods pass the ship's rail in the port of shipment. as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the
White Gold Marine Service Inc. vs. Pioneer Insurance and surety; 3) doing any kind of business, including a reinsurance
Surety Co. business, specifically recognized as constituting the doing of an
Post under case digests, Commercial Law at Tuesday, February 21, insurance business within the meaning of this code; 4) doing or
2012 proposing to do any business in substance to any of the foregoing
Facts: Petitioner White Gold bought a protection and indemnity in a manner designed to evade the provision of this code.
coverage for its ships from Steamship Mutual through Respondent
Pioneer. Certificates and receipts thus were given. However, Taking all of these in to consideration, Steamship Mutual engaged
Petitioner failed to fulfill its payments thus Steamship refused to in marine insurance business undertook to indemnify Petitioner
renew its coverage. Steamship then filed for collection against White Gold against marine losses as enumerated under sec. 99 of
Petitioner for recovery of unpaid balance. Thereafter, Petitioner the Insurance Code. It is immaterial whether profit is derived from
also filed a complaint against Steamship and Respondent before making insurance contract and that no separate or direct
the Insurance Commission for violations (186,187 for Steamship consideration is received since these does not preclude the
and 299,300,301 in relation to 302 and 303 for Respondent) of the existence of an insurance business.
Insurance Code-license requirements as an Insurance company for
the former and as insurance agent for the latter. Said commission NOTES:
dismissed the complaint which decision was affirmed by the CA. *Mutual Insurance company- cooperative enterprise where the
members are both the insurer and insured.
*Protection and Indemnity Club- a form of insurance against third P1,750, the plaintiffs brought this action. The Rehabilitation
party liability where the third party is anyone other than the P & I Finance Corporation, successor to the Agricultural and Industrial
Club and its members. Bank, was allowed to intervene to recover P10,745.06, together
with a daily interest thereon of P1.77 from 18 January 1950 until
the (late of payment thereof, from the plaintiffs, should they be
successful in their claim against either the defendant or the
G.R. No. L-6106-07 April 18, 1958 insurance company, against which an action was also brought by
MADRIGAL, TIANGCO and CO., plaintiff-appellant, the plaintiff to recover the amount for which the motor launch was
vs. insured under a policy issued by the insurance company. As the
HANSON, ORTH and STEVENSON, INC., defendant-appellee. intervenor has not appealed from the judgment dismissing its
MADRIGAL, TIANGCO and CO., ET AL., plaintiffs-appellants, complaint, the same is no longer involved in these appeals.
vs. The defendant in his answer denies liability for the sinking of the
ROMAN MABANTA, defendant-appellant. motor launch and claims in a counterclaim P5,000 for unrealized
REHABILITATION FINANCE CORPORATION, intervenor. profits; P2,500 for equipment and fishing tackle; P1,086.16 for the
San Juan, Africa, Yigo and Benedicto for appellants. cost of repairs of four sets of nets and the value of the new ropes;
Nicodemus L. Dasig for appellee. and P1,485.28 for the value of 5 blocks of ice, 2,754 gallons of
Nicodemus L. Dasig and Ramon Mabanta, Jr. for defendant and crude oil, 3 drums of motor oil and 300 fish boxes.
appellant. After hearing the Court rendered judgment dismissing the
Sixto de la Costa for intervenor. complaint without pronouncement as to costs, on the ground that
PADILLA, J.: although it found that there had been delivery of the motor launch
On 6 January 1948, for and in consideration of the sum of P1,750 to the defendant, yet she was unseaworthy. For the same reason
to be paid monthly as rental, a motor launch named "Isla Verde" the action against Hanson, Orth and Stevenson, Inc. to recover the
owned by the plaintiffs was chartered by the defendant for six amount for which the motor launch was insured under a policy
months from the date of actual delivery and acceptance, under and issued by it was dismissed with costs against the plaintiff. From the
by virtue of a contract which, among other terms, required delivery judgment rendered in civil case No. 4616 of the Court of First
thereof on 20 January 1948, in seaworthy condition together with Instance of Manila, both the plaintiffs and the defendant have
the necessary documents to enable her to navigate. Delivery of the appealed (G.R. No. L-6107); and from that rendered in civil case
motor launch was not made as agreed upon, because it was on 12 No. 5756 of the same Court the plaintiff also has appealed (G.R.
January 1948 only that the motor launch was dry docked at No. L-6106).
Malabon to undergo repairs; and on 28 January 1948 she was The plaintiffs contend that, as found by the trial court, there was
transferred to the dock of the defendant near the Hospicio de San delivery of the motor launch to the defendant and that this finding
Jose of the Isla Convalesencia and there some additional not having been appealed by the defendant is now final. On the
improvements were made on the motor launch. On the 29th, other hand, the defendant claims that the sinking of the motor
manned by a complement engaged by the defendant, the motor launch off the coast of Limay, Bataan, was due to her
launch was put to sea and at 5:00 o'clock a.m. of the following day unseaworthiness and not to the incompetence or negligence of the
she sank off the coast of Limay, province of Bataan, becoming a complement engaged by him (defendant) to man her.
total loss. To recover P50,000, the estimated value of the motor The preponderance of evidence leans towards the conclusion that
launch with all equipment and tackle and a monthly rental of there was no delivery of the motor launch in accordance with the
terms of the contract, because there was no license issued by the motor launch (Exhibit 13-C). The plaintiffs argue and contend that
Bureau of Customs, the license of the motor launch having expired the board did not have jurisdiction to make such finding and that it
on 6 June 1947 (Exhibit E) and the special permit, on 15 December was a mere conjecture. The cause of the sinking of the motor
1947 (Exhibits F and 12); there was no license issued by the launch was connected with the responsibility of the patron for the
Bureau Fisheries authorizing the motor launch to engage in deep sinking thereof. It is true that nobody saw the underneath
sea fishing; and the defendant refused to sign a document, dated plankings give way; but this fact may be inferred from the
28 January 1948 purporting to acknowledge receipt or acceptance established facts that there was no typhoon; that there were no big
of the motor launch and to waive the delivery thereof on 20 waves; that the motor launch did not touch bottom or hit anything
January 1948 ( Exhibit 3) in accordance with the terms of the before she sank; and that the water was bubbling in the engine
contract (Exhibit A). Nevertheless, even if the motor launch was room.
not delivered on the date agreed upon, the fact that the defendant The plaintiff s further contend that the motor launch was put to sea
took possession thereof when she was put to on 29 January 1948; on 29 January 1948 an uneven keel; that she was not properly
and that if on that trip the motor launch sank due to the negligence loaded, because the oil weighing 11 tons and water weighing 1 or 2
or incompetence of thepatron, engineer, or crew engaged by the tons were placed at the astern, whereas only a few blocks of ice
defendant to manger, provided that she was seaworthy, the weighing 1,500 pounds were at the prow of the motor launch; that
defendant would still be responsible for the sinking of the motor this unbalanced loading became worse because of the fishing nets
launch, because he has to answer for the negligent acts of his attached to the rear of the motor launch, of the weight of the chain
agents. Hence whether there was actual delivery or it was merely a which was 140 kilos, of the stones which was 40 kilos and of
trial run becomes unimportant if the motor launch was the aldake which could be carried only by four persons if not wet
unseaworthy. Again the preponderance of evidence leans toward and by six if wet. They conclude that the uneven keel of the motor
the conclusion that the motor launch was unseaworthy. And this launch constitutes negligence on the part of the complement and
conclusion is supported by the fact that there was no typhoon; that the direct cause of the sinking thereof. The fact that the motor
the waves were those that were caused by the monsoon winds of launch was run and operated for 17 hours in the bay without
the season (Exhibit 13-E) ; and that the or hit anything during her mishap is strong proof that the cause of the sinking was not the
cruise in the bay (Exhibit 13-C). The claim of the plaintiffs that the uneven keel. It was a different cause which as above stated is
big waves of the sea filled the engine room with water, one and inferred from established facts which need not be restated.
one-half or two feet high, as a result of which the engine stopped, Another contention is that the motor launch was thoroughly
and that the water could not be pumped out by the bilge pump, repaired and overhauled. But such repair did not include the hull. If
cannot be believed, because according to Pedro Ala and Eugenio only water entered the engine room through the tail shaft, it would
Maraginot they saw the water bubbling in the engine room (pp. not have been bubbling and could have been pumped out easily.
738, 808, t.s.n.) and this testimony is corroborated by Zoilo Belale, As to the claim of the defendant in his counterclaim, the trial court
the patron, who said that he thought the water entered the engine made the following pronouncements.
room through the tail shaft but that he was wondering why it was With respect to the counterclaim of the defendant, the Court
filled with water so soon (Exhibit 13-B, p. 3). This was also found agrees with the plaintiffs that the amount of P5,000 cannot be
by the board of inquiry of the Bureau of Customs that investigated recovered. As to the amount of P2,500, the represents the
the sinking of the motor launch with a view to finding the purchase price of the by the plaintiffs to the defendant. Under the
responsibility of the patron. For, that reason the board exonerated defendant is not entitled to the refund of said amount. As to the
the patron from any negligence arising from the sinking of the repairs made on old equipment and the acquisition of new ones,
the charter party being silent about the same, the defendant ignored the demand. Another letter was sent to Pioneer claiming
cannot recover their cost from the plaintiffs. the full amount of P100,000.00 under the insurance policy but
We agree to this pronouncement of the trial court. Pioneer refused to pay on the ground that its liability depended
The finding that the motor launch was unseaworthy at the time she upon the "Total loss by Total Loss of Vessel only". Hence, Roque
sank precludes recovery by the plaintiffs of the amount for which and Ong commenced Civil Case 86599 against MBLC and Pioneer
the motor launch was insured under the policy issued by the Pioneer. During the initial stages of the hearing, MBLC informed the
insurance company (paragraph 7 of the Marine Hull Policy, Annex A trial court that it had salvaged part of the logs. The court ordered
to the complaint filed in civil case No. 5756). them to be sold to the highest bidder with the funds to be
The judgments appealed from are affirmed, without deposited in a bank in the name of Civil Case 86599. After hearing,
pronouncement as to costs. the trial court found in favor of Roque and Ong, condemning MBLC
and Pioneer to pay Roque and Ong, jointly and severally, the sum
of P100,000.00; sentencing MBLC to pay Roque and Ong, in
addition, the sum of P50,000.00, plus P12,500.00, that the latter
30 Roque vs. Intermediate Appellate Court [GR L-66935, 11 advanced to the former as down payment for transporting the logs
November 1985] First Division, Gutierrez (J): 5 concur, 1 on in question; ordering the counterclaim of Pioneer against Roque
leave and Ong, dismissed, for lack of merit, but as to its cross-claim
Facts: against its MBLC, the latter is ordered to reimburse the former for
On 19 February 1972, the Manila Bay Lighterage Corporation whatever amount it may pay Roque and Ong as such surety;
(MBLC) a common carrier, entered into a contract with Isabela ordering the counterclaim of MBLC against Roque and Ong, for lack
Roque (doing business under the name and style of Isabela Roque of merit; dismissing Roque's and Ong's claim of not less than
Timber Enterprises) and Ong Chiong whereby the former would P100,000.00 and P75,000.00 as exemplary damages, for lack of
load and carry on board its barge Mable 10 about 422.18 cubic merit; granting Roque's and Ong's claim for attorney's fees in the
meters of logs from Malampaya Sound, Palawan to North Harbor, sum of P10,000.00; ordering MBLC and Pioneer to pay the costs;
Manila. Roque and Ong insured the logs against loss for and holding that the sum of P150,000.00 award to Roque and Ong,
P100,000.00 with the Pioneer Insurance and Surety Corporation shall bear interest of 6% from 25 March 1975, until amount is fully
(Pioneer). On 29 February 1972, Roque and Ong loaded on the paid. Pioneer appealed to the Intermediate Appellate Court. MBLC
barge, 811 pieces of logs at Malampaya Sound, Palawan for did not appeal, as allegedly, the transportation company is no
carriage and delivery to North Harbor, Port of Manila, but the longer doing business and is without funds. On 30 January 1984,
shipment never reached its destination because Mable 10 sank with the appellate court modified the trial court's decision and absolved
the 811 pieces of logs somewhere off Cabuli Point in Palawan on its Pioneer from liability after finding that there was a breach of
way to Manila. The barge where the logs were loaded was implied warranty of seaworthiness on the part of Roque and Ong
apparently not seaworthy such that it developed a leak. One of the and that the loss of the insured cargo was caused by the "perils of
hatches was left open causing water to enter the barge and the ship" and not by the "perils of the sea". It ruled that the loss is
because the barge was not provided with the necessary cover or not covered by the marine insurance policy. After the appellate
tarpaulin, the ordinary splash of sea waves brought more water court denied their motion for reconsideration, Roque and Ong filed
inside the barge. On 8 March 1972, Roque and Ong wrote a letter the petition for certiorari.
to MBLC demanding payment of P150,000.00 for the loss of the Issue [1]: Whether there is a warranty of seaworthiness by the
shipment plus P100,000.00 as unrealized profits but the latter cargo owner in cases of marine cargo insurance.
Held [1]: YES. There is no dispute over the liability of the common specifically provides that the insurer answers not only for the perils
carrier MBLC. In fact, it did not bother to appeal the questioned of the sea but also provides for coverage of perils of the ship. The
decision. However, Roque and Ong state that MBLC has ceased Court was constrained to apply Section 113 of the Insurance Code
operating as a firm and nothing may be recovered from it. They to the facts of this case. "In marine cases, the risks insured against
are, therefore, trying to recover their losses from the insurer. The are 'perils of the sea' (Chute v. North River Ins. Co., Minn. 214 NW
liability of the insurance company is governed by law. Section 113 472, 55 ALR 933). The purpose of such insurance is protection
of the Insurance Code provides that "In every marine insurance against contingencies and against possible damages and such a
upon a ship or freight, or freightage, or upon any thing which is the policy does not cover a loss or injury which must inevitably take
subject of marine insurance, a warranty is implied that the ship is place in the ordinary course of things. There is no doubt that the
seaworthy." Section 99 of the same Code also provides in part that term 'perils of the sea' extends only to losses caused by sea
"Marine insurance includes: (1) Insurance against loss of or damage, or by the violence of the elements, and does not embrace
damage to: (a) Vessels, craft, aircraft, vehicles, goods, freights, all losses happening at sea. They insure against losses from
cargoes, merchandise..." From the above-quoted provisions, there extraordinary occurrences only, such as stress of weather, winds
can be no mistaking the fact that the term "cargo" can be the and waves, lightning, tempests, rocks and the like. These are
subject of marine insurance and that once it is so made, the understood to be the 'perils of the sea' referred in the policy, and
implied warranty of seaworthiness immediately attaches to not those ordinary perils which every vessel must encounter. 'Perils
whoever is insuring the cargo whether he be the shipowner or not. of the sea' has been said to include only such losses as are of
As ruled in the case of Go Tiaoco y Hermanos v. Union Insurance extraordinary nature, or arise from some overwhelming power,
Society of Canton (40 Phil. 40), "it is universally accepted that in which cannot be guarded against by the ordinary exertion of
every contract of insurance upon anything which is the subject of human skill and prudence. Damage done to a vessel by perils of
marine insurance, a warranty is implied that the ship shall be the sea includes every species of damages done to a vessel at sea,
seaworthy at the time of the inception of the voyage. This rule is as distinguished from the ordinary wear and tear of the voyage,
accepted in our own Insurance Law (Act No. 2427, sec. 106)." and distinct from injuries suffered by the vessel in consequence of
Moreover, the fact that the unseaworthiness of the ship was her not being seaworthy at the outset of her voyage (as in this
unknown to the insured is immaterial in ordinary marine insurance case). It is also the general rule that everything which happens
and may not be used by him as a defense in order to recover on thru the inherent vice of the thing, or by the act of the owners,
the marine insurance policy. As was held in Richelieu and Ontario master or shipper, shall not be reputed a peril, if not otherwise
Nav. Co. v. Boston Marine, Inc., Co. (136 U.S. 406), "the exception borne in the policy. (14 RCL on 'Insurance', Sec. 384, pp. 1203-
of losses occasioned by unseaworthiness was in effect a warranty 1204; Cia. de Navegacion v. Firemen's Fund Ins. Co., 277 US 66,
that a loss should not be so occasioned, and whether the fact of 72 L. ed. 787, 48 S. Ct. 459)."
unseaworthiness were known or unknown would be immaterial." Issue [2]: Whether the loss of the cargo was due to the perils of
Since the law provides for an implied warranty of seaworthiness in the ship rather than the perils of the sea.
every contract of ordinary marine insurance, it becomes the Held [2]: PERILS OF THE SHIP. At the time Mable 10 sank, there
obligation of a cargo owner to look for a reliable common carrier was no typhoon but ordinary strong wind and waves, a condition
which keeps its vessels in seaworthy condition. The shipper of which is natural and normal in the open sea. The evidence shows
cargo may have no control over the vessel but he has full control in that the sinking of Mable 10 was due to improper loading of the
the choice of the common carrier that will transport his goods. Or logs on one side so that the barge was tilting on one side and for
the cargo owner may enter into a contract of insurance which that it did not navigate on even keel; that it was no longer
seaworthy that was why it developed leak; that the personnel of BELLOSILLO, J.:
the tugboat and the barge committed a mistake when it turned This case deals with the liability, if any, of a shipowner for loss of
loose the barge from the tugboat east of Cabuli point where it was cargo due to its failure to observe the extraordinary diligence
buffeted by storm and waves, while the tugboat proceeded to west required by Art. 1733 of the Civil Code as well as the right of the
of Cabuli point where it was protected by the mountain side from insurer to be subrogated to the rights of the insured upon payment
the storm and waves coming from the east direction. In fact, in of the insurance claim.
Roque's and Ong's complaint, it is alleged that the barge Mable 10 On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on
of MBLC developed a leak which allowed water to come in and that board MV Asilda, a vessel owned and operated by respondent
one of the hatches of said barge was negligently left open by the Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter
person in charge thereof causing more water to come in", and that Coca-Cola softdrink bottles to be
"he loss of their cargo was due to the fault, negligence, and/or lack transported from Zamboanga City to Cebu City for consignee Coca-
of skill of MBLC and/or MBLC's representatives on barge Mable 10. Cola Bottlers Philippines, Inc., Cebu.[1] The shipment was insured
It is quite unmistakable that the loss of the cargo was due to the with petitioner Philippine American General Insurance Co., Inc.
perils of the ship rather than the perils of the sea. The facts clearly (PHILAMGEN for brevity), under Marine Open Policy No. 100367-
negate Roque's and Ong's claim under the insurance policy. In the PAG.
case of Go Tiaoco y Hermanos v. Union Ins. Society of Canton, the MV Asilda left the port of Zamboanga in fine weather at eight
Court had occasion to elaborate on the term "perils of the ship" oclock in the evening of the same day. At around eight forty-five
when it ruled that "It must be considered to be settled, the following morning, 7 July 1983, the vessel sank in the waters
furthermore, that a loss which, in the ordinary course of events, of Zamboanga del Norte bringing down her entire cargo with her
results from the natural and inevitable action of the sea, from the including the subject 7,500 cases of 1-liter Coca-Cola softdrink
ordinary wear and tear of the ship, or from the negligent failure of bottles.
the ship's owner to provide the vessel with proper equipment to On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc.,
convey the cargo under ordinary conditions, is not a peril of the Cebu plant, filed a claim with respondent FELMAN for recovery of
sea. Such a loss is rather due to what has been aptly called the damages it sustained as a result of the loss of its softdrink bottles
'peril of the ship.' The insurer undertakes to insure against perils of that sank withMV Asilda. Respondent denied the claim thus
the sea and similar perils, not against perils of the ship. As was prompting the consignee to file an insurance claim with
well said by Lord Herschell in Wilson, Sons & Co. v. Owners of PHILAMGEN which paid its claim of P755,250.00.
Cargo per the Xantho ([1887], 12 A. C., 503, 509), there must, in Claiming its right of subrogation PHILAMGEN sought recourse
order to make the insurer liable, be 'some casualty, something against respondent FELMAN which disclaimed any liability for the
which could not be foreseen as one of the necessary incidents of loss. Consequently, on 29 November 1983 PHILAMGEN sued the
the adventure. The purpose of the policy is to secure an indemnity shipowner for sum of money and damages.
against accidents which may happen, not against events which In its complaint PHILAMGEN alleged that the sinking and total loss
must happen. of MV Asilda and its cargo were due to the vessels unseaworthiness
as she was put to sea in an unstable condition. It further alleged
THE PHILIPPINE AMERICAN GENERAL INSURANCE that the vesselwas improperly manned and that its officers were
COMPANY, INC., petitioner, vs. COURT OF APPEALS and grossly negligent in failing to take appropriate measures to proceed
FELMAN SHIPPING LINES, respondents. to a nearby port or beach after the vessel started to list.
DECISION
On 15 February 1985 FELMAN filed a motion to dismiss based on appellate court denied the claim of PHILAMGEN on the ground that
the affirmative defense that no right of subrogation in favor of the assureds implied warranty of seaworthiness was not complied
PHILAMGEN was transmitted by the shipper, and that, in any with. Perfunctorily, PHILAMGEN was not properly subrogated to the
event, FELMAN had abandoned all its rights, interests and rights and interests of the shipper. Furthermore, respondent court
ownership over MV Asilda together with her freight and held that the filing of notice of abandonment had absolved the
appurtenances for the purpose of limiting and extinguishing its shipowner/agent from liability under the limited liability rule.
liability under Art. 587 of the Code of Commerce.[2] The issues for resolution in this petition are: (a) whether MV
On 17 February 1986 the trial court dismissed the complaint of Asilda was seaworthy when it left the port of Zamboanga; (b)
PHILAMGEN. On appeal the Court of Appeals set aside the whether the limited liability under Art.
dismissal and remanded the case to the lower court for trial on the 587 of the Code of Commerce should apply; and, (c) whether
merits. FELMAN filed a petition for certiorari with this Court but it PHILAMGEN was properly subrogated to the rights and legal
was subsequently denied on 13 February 1989. actions which the shipper had against FELMAN, the shipowner.
On 28 February 1992 the trial court rendered judgment in favor of MV Asilda was unseaworthy when it left the port of Zamboanga. In
FELMAN.[3] It ruled that MV Asilda was seaworthy when it left the a joint statement, the captain as well as the chief mate of the
port of Zamboanga as confirmed by certificates issued by the vessel confirmed that the weather was fine when they left the port
Philippine Coast Guard and the shipowners surveyor attesting to its of Zamboanga.According to them, the vessel was carrying 7,500
seaworthiness. Thus the loss of the vessel and its entire shipment cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds,
could only be attributed to either a fortuitous event, in which case, 200 empty CO2 cylinders and an undetermined quantity of empty
no liability should attach unless there was a stipulation to the boxes for fresh eggs. They loaded the empty boxes for eggs and
contrary, or to the negligence of the captain and his crew, in which about 500 cases of Coca-Cola bottles on deck.[4] The ship captain
case, Art. 587 of the Code of Commerce should apply. stated that around four oclock in the morning of 7 July 1983 he
The lower court further ruled that assuming MV Asilda was was awakened by the officer on duty to inform him that the vessel
unseaworthy, still PHILAMGEN could not recover from FELMAN had hit a floating log. At that time he noticed that the weather had
since the assured (Coca-Cola Bottlers Philippines, Inc.) had deteriorated with strong southeast winds inducing big waves. After
breached its implied warranty on the vessels thirty minutes he observed that the vessel was listing slightly to
seaworthiness. Resultantly, the payment made by PHILAMGEN to starboard and would not correct itself despite the heavy rolling and
the assured was an undue, wrong and mistaken payment. Since it pitching. He then ordered his crew to shift the cargo from
was not legally owing, it did not give PHILAMGEN the right of starboard to portside until the vessel was balanced. At about seven
subrogation so as to permit it to bring an action in court as a oclock in the morning, the master of the vessel stopped the engine
subrogee. because the vessel was listing dangerously to portside. He ordered
On 18 March 1992 PHILAMGEN appealed the decision to the Court his crew to shift the cargo back to starboard. The shifting of cargo
of Appeals. On 29 August 1994 respondent appellate court took about an hour afterwhich he rang the engine room to resume
rendered judgment finding MV Asilda unseaworthy for being top- full speed.
heavy as 2,500 cases of Coca-Cola softdrink bottles were At around eight forty-five, the vessel suddenly listed to portside
improperly stowed on deck. In other words, while the vessel and before the captain could decide on his next move, some of the
possessed the necessary Coast Guard certification indicating its cargo on deck were thrown overboard and seawater entered the
seaworthiness with respect to the structure of the ship itself, it was engine room and cargo holds of the vessel. At that instance, the
not seaworthy with respect to the cargo. Nonetheless, the master of the vessel ordered his crew to abandon ship. Shortly
thereafter, MV Asilda capsized and sank. He ascribed the heavy when she departed from the Port of Zamboanga. Her having
sinking to the entry of seawater through a hole in the hull caused capsized and eventually sunk was bound to happen and was
by the vessels collision with a partially submerged log.[5] therefore in the category of an inevitable occurrence (underscoring
The Elite Adjusters, Inc., submitted a report regarding the sinking supplied).[6]
of MV Asilda. The report, which was adopted by the Court of We subscribe to the findings of the Elite Adjusters, Inc., and the
Appeals, reads - Court of Appeals that the proximate cause of the sinking of MV
We found in the course of our investigation that a reasonable Asilda was its being top-heavy. Contrary to the ship captains
explanation for the series of lists experienced by the vessel that allegations, evidence shows that approximately 2,500 cases of
eventually led to her capsizing and sinking, was that the vessel softdrink bottles were stowed on deck. Several days after MV
was top-heavy which is to say that while the vessel may not have Asilda sank, an estimated 2,500 empty Coca-Cola plastic cases
been overloaded, yet the distribution or stowage of the cargo on were recovered near the vicinity of the sinking. Considering that
board was done in such a manner that the vessel was in top-heavy the ships hatches were properly secured, the empty Coca-Cola
condition at the time of her departure and which condition cases recovered could have come only from the vessels deck
rendered her unstable and unseaworthy for that particular voyage. cargo. It is settled that carrying a deck cargo raises the
In this connection, we wish to call attention to the fact that this presumption of unseaworthiness unless it can be shown that the
vessel was designed as a fishing vessel x x x x and it was not deck cargo will not interfere with the proper management of the
designed to carry a substantial amount or quantity of cargo on ship. However, in this case it was established that MV Asilda was
deck. Therefore, we believe strongly that had her cargo been not designed to carry substantial amount of cargo on deck.The
confined to those that could have been accommodated under deck, inordinate loading of cargo deck resulted in the decrease of the
her stability would not have been affected and the vessel would not vessels metacentric height[7] thus making it unstable. The strong
have been in any danger of capsizing, even given the prevailing winds and waves encountered by the vessel are but the ordinary
weather conditions at that time of sinking. vicissitudes of a sea voyage and as such merely contributed to its
But from the moment that the vessel was utilized to load heavy already unstable and unseaworthy condition.
cargo on its deck, the vessel was rendered unseaworthy for the On the second issue, Art. 587 of the Code of Commerce is not
purpose of carrying the type of cargo because the weight of the applicable to the case at bar.[8] Simply put, the ship agent is liable
deck cargo so decreased the vessels metacentric height as to cause for the negligent acts of the captain in the care of
it to become unstable. goods loaded on the vessel. This liability however can be limited
Finally, with regard to the allegation that the vessel encountered through abandonment of the vessel, its equipment and freightage
big waves, it must be pointed out that ships are precisely designed as provided in Art. 587. Nonetheless, there are exceptional
to be able to navigate safely even during heavy weather and circumstances wherein the ship agent could still be held
frequently we hear of ships safely and successfully weathering answerable despite the abandonment, as where the loss or injury
encounters with typhoons and although they may sustain some was due to the fault of the shipowner and the captain. [9] The
amount of damage, the sinking of ship during heavy weather is not international rule is to the effect that the right of abandonment of
a frequent occurrence and is not likely to occur unless they are vessels, as a legal limitation of a shipowners liability, does not
inherently unstable and unseaworthy xx x x apply to cases where the injury or average was occasioned by the
We believe, therefore, and so hold that the proximate cause of the shipowners own fault.[10] It must be stressed at this point that Art.
sinking of the M/V Asilda was her condition of unseaworthiness 587 speaks only of situations where the fault or negligence is
arising from her having been top- committed solely by the captain. Where the shipowner is likewise
to be blamed, Art. 587 will not apply, and such situation will be owner to look for a reliable common carrier which keeps
covered by the provisions of the Civil Code on common carrier.[11] its vessels in seaworthy condition. He may have no control
It was already established at the outset that the sinking of MV over the vessel but he has full control in the selection of the
Asilda was due to its unseaworthiness even at the time of its common carrier that will transport his goods. He also has full
departure from the port of Zamboanga. It was top-heavy as an discretion in the choice of assurer that will underwrite a particular
excessive amount of cargo was loaded on deck. Closer supervision venture.
on the part of the shipowner could have prevented this fatal We need not belabor the alleged breach of warranty of
miscalculation. As such, FELMAN was equally negligent. It cannot seaworthiness by the assured as painstakingly pointed out by
therefore escape liability through the expedient of filing a notice of FELMAN to stress that subrogation will not work in this case. In
abandonment of the vessel by virtue of Art. 587 of the Code of policies where the law will generally imply a warranty of
Commerce. seaworthiness, it can only be excluded by terms in writing in the
Under Art 1733 of the Civil Code, (c)ommon carriers, from the policy in the clearest language.[13] And where the policy stipulates
nature of their business and for reasons of that the seaworthiness of the vessel as between the assured and
public policy, are bound to observe extraordinary diligence in the the assurer is admitted, the question of seaworthiness cannot be
vigilance over the goods and for the safety of the raised by the assurer without showing concealment or
passengers transported by them, according to all the misrepresentation by the assured.[14]
circumstances of each case x x x x" In the event of loss of goods, The marine policy issued by PHILAMGEN to the Coca-Cola bottling
common carriers are presumed to have acted negligently. FELMAN, firm in at least two (2) instances has dispensed with the usual
the shipowner, was not able to rebut this presumption. warranty of worthiness. Paragraph 15 of the Marine Open Policy
In relation to the question of subrogation, respondent appellate No. 100367-PAG reads (t)he liberties as per Contract of
court found MV Asilda unseaworthy with reference to the cargo and Affreightment the presence of the Negligence Clause and/or Latent
therefore ruled that there was breach of warranty of seaworthiness Defect Clause in the Bill of Lading and/or Charter Party and/or
that rendered the assured not entitled to the payment of is claim Contract of Affreightment as between the Assured and
under the policy. Hence, when PHILAMGEN paid the claim of the the Company shall not prejudice the insurance. The seaworthiness
bottling firm there was in effect a voluntary payment and no right of the vessel as between the Assured and the Assurers is hereby
of subrogation accrued in its favor. In other words, when admitted.[15]
PHILAMGEN paid it did so at its own risk. The same clause is present in par. 8 of the Institute Cargo
It is generally held that in every marine insurance policy the Clauses (F.P.A.) of the policy which states (t)he seaworthiness of
assured impliedly warrants to the assurer that the vessel is the vessel as between the Assured and Underwriters in hereby
seaworthy and such warranty is as much a term of the contract as admitted x x x x"[16]
if expressly written on the face of the policy.[12] Thus Sec. 113 of The result of the admission of seaworthiness by the assurer
the Insurance Code provides that (i)n every marine insurance upon PHILAMGEN may mean one or two things: (a) that the warranty of
a ship or freight, or freightage, or upon anything which is the the seaworthiness is to be taken as fulfilled; or, (b) that the risk of
subject of marine insurance, a warranty is implied that the ship is unseaworthiness is assumed by the insurance company.[17] The
seaworthy. Under Sec. 114, a ship is seaworthy when reasonably insertion of such waiver clauses in cargo policies is in recognition of
fit to perform the service, and to the realistic fact that cargo owners cannot control the state of the
encounter the ordinary perils of the voyage, contemplated by the vessel. Thus it can be said that with such categorical
parties to the policy. Thus it becomes the obligation of the cargo waiver, PHILAMGEN has accepted the risk of unseaworthiness so
that if the ship should sink by unseaworthiness, as what occurred of judicial demand, pursuant to Arts. 2212 and 2213 of the Civil
in this case, PHILAMGEN is liable. Code.[20]
Having disposed of this matter, we move on to the legal basis for SO ORDERED.
subrogation. PHILAMGENs action against FELMAN is squarely
sanctioned by Art. 2207 of the Civil Code which provides: November 22, 1921
Art. 2207. If the plaintiffs property has been insured, and he has G.R. No. 16473
received indemnity from the insurance company for the injury or PHILIPPINE MANUFACTURING CO., plaintiff-appellant,
loss arising out of the wrong or breach of contract complained of, vs.
the insurance company shall be subrogated to the rights of the UNION INSURANCE SOCIETY OF CANTON, LTD., defendant-
insured against the wrongdoer or the person who has violated the appellee.
contract. If the amount paid by the insurance company does not Crossfield & O'Brien for appellant.
fully cover the injury or loss, the aggrieved party shall be entitled Fisher & DeWitt for appellee.
to recover the deficiency from the person causing the loss or JOHNS, J.:
injury. The plaintiff is a corporation duly organized under the laws of the
In Pan Malayan Insurance Corporation v. Court of Appeals,[18] we Philippine Islands with its principal office and place of business at
said that payment by the assurer to the assured operates as an Manila, and at the times alleged was the owner of the steel tank
equitable assignment to the assurer of all the remedies lighter named Philmaco. The defendant is an insurance company
which the assured may have against the third party whose organized under the laws of Hongkong and duly authorized to
negligence or wrongful act caused the loss. The right of transact business here.
subrogation is not dependent upon, nor does it grow out of any July, 1917, the defendant insured the plaintiff's lighter for the sum
privity of contract or upon payment by the insurance company of of P16,000, and issued its policy for such insurance, which recites
the insurance claim. It accrues simply upon payment by the that the steel tank lighter Philmaco is insured "for and during the
insurance company of the insurance claim. space of twelve calendar-months from July 6, 1917 to July 5, 1918,
The doctrine of subrogation has its roots in equity. It is designed to both dates inclusive, upon the hull, machinery, tackle, apparel,
promote and to accomplish justice and is the mode which equity boats or other furniture of the good ship or vessel", and that "the
adopts to compel the ultimate payment of a debt by one who in assured is and shall be rated and valued on hull, engine and
justice, equity and good conscience ought to pay. [19] Therefore, the pumping machinery, whereof this policy insures pesos sixteen
payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, thousand, P. I. C. Warranted against the absolute total loss of the
Inc., gave the former the right to bring an action as subrogee lighter only. Warranted trading between Bitas, Tondo, or Pasig
against FELMAN. Having failed to rebut the presumption of fault, River and steamers in the Bay of Manila or harbor." In
the liability of FELMAN for the loss of the 7,500 cases of 1-liter consideration thereof, the plaintiff paid the defendant P960 as a
Coca-Cola softdrink bottles is inevitable. premium for such insurance. About July 1, 1918, and during the
WHEREFORE, the petition is GRANTED. Respondent FELMAN life of the policy and as a result of a typhoon, the lighter was sunk
SHIPPING LINES is ordered to pay petitioner PHILIPPINE in the Manila Bay, of which the plaintiff notified the defendant and
AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred Fifty- demanded payment of the full amount of its policy, which the
five Thousand TwoHundred and Fifty Pesos (P755,250.00) plus defendant refused, and denied its liability. On February 25, 1919,
legal interest thereon counted from 29 November 1983, the date the plaintiff commenced this action and, among other things,
alleged in the complaint:
That during the period of said insurance the said steel tank reconstructed and again placed in commission. The plaintiff having
lighter Philmaco became a total loss by sinking in the waters of the finally raised the lighter, reconstructed and placed it in
Bay of Manila while operating within the places noted in the said commission, and having used a large portion of its hull in such
insurance policy. reconstruction, the defendant claims that the loss was not an
That the loss of the said steel tank lighter was total and the full absolute total loss under the terms and provisions of the policy.
amount for which it was insured upon such loss immediately That plaintiff having reconstructed a new lighter out the remains of
became due and payable, and prayed for judgment for the sum of the old one, it cannot claim or assert that the old one was a total
P16,000, with legal interest and costs. For answer the defendant loss. The defendant did not offer any evidence. The question is
admits the issuance and delivery of the policy, and, as a further thus squarely presented whether, under the facts shown, the loss
and separate defense, alleges that, under its terms, the defendant is an absolute total loss within the terms and provisions of the
was only liable for an absolute total loss, and that there was not a policy. The testimony is conclusive that the hull itself was very
total destruction of the lighter. seriously damaged, and that in the reconstruction of the lighter the
After the testimony was taken, the lower court sustained this damaged hull was repaired, and that the lighter with such repaired
contention and rendered judgment for the defendant, from which hull was eventually placed in commission. Through the violence of
the plaintiff appeals, claiming that the trial court erred in holding the storm and the action of the waves, a large portion of its
that there was not an absolute total loss, and in refusing to hold machinery and other equipment were lost or destroyed.
that policy covered a "constructive total loss, as well as an actual The policy was executed at Manila and the lighter was sunk in the
total loss", and that under the facts, it was entitled to recover the Manila Bay, and under the rule of construction, the physical
full amount of the policy. conditions then and there existing should be read into and become
As a result of a typhoon the vessel was sunk in the Manila Bay in a part of the policy.
front of the Manila Hotel. The plaintiff at once notified the An act revising the insurance laws and regulating insurance
defendant that the lighter was of no value, and offered to abandon business in the Philippine Islands, No. 2427, was enacted by the
the wreck as an absolute total loss to the plaintiff. The defendant Philippine Legislature December 12, 1914, and, under the heading
refused the offer, and instructed plaintiff to salve the wreck, if it of "Loss", contains the following provisions:
was possible to do so. Under such instructions, the plaintiff SEC. 120. A loss may be either total or partial.
employed a third party to proceed with the salvage, which was SEC. 121. Every loss which is not total is partial.
commenced some time in July, 1918. After several attempts and SEC. 122. A total loss may be either actual or constructive.
on September 20, 1918, the storm-beaten hull was finally raised SEC. 123. An actual total loss is caused by:
and between two barges was taken to the Pandacan Slipway. (a) A total destruction of the thing insured;
Upon the evidence for the plaintiff, the trial court found, and upon (b) The loss of the thing by sinking, or by being broken up;
that point the testimony is conclusive, that the cost of salvage and (c) Any damage to the thing which renders it valueless to the
the necessary repairs were substantially equal to the original cost owner for the purpose for which he held it. . . .
of the lighter and its value as stipulated in the policy. The findings Whatever may be the rule in other jurisdictions, the policy having
did not take into consideration any damages to the plaintiff for been issued at Manila, it must be construed under the terms and
being deprived of the use of the lighter of the interest on the provisions of those sections, and section 122 specifically says that
investment. Although the evidence is clear that the lighter was "a total loss may be either actual or constructive," and that "the
raised and floated to the slipway on September 20, 1918, it does loss of the thing by sinking, or being broken up," is an actual loss
not appear how long it remained there or when it was finally
or that "any damage to the thing which renders it valueless to the The law of Great Britain since the Declaration of Independence is
owner for the purposes for which he held it" is an actual loss. the law of a foreign country, and, like any other foreign law, is
As we construe the record, at the time the lighter was sunk and in matter of fact, which the courts of this country cannot be
the bottom of the bay under the conditions then there existing, it presumed to be acquainted with, or to have judicial knowledge of,
was of no value to the owner, and, if it was of no value to the unless it is pleaded and proved.
owner, it would be a actual total loss. To render it valueless to the The rule that the courts of one country cannot take cognizance of
owner, it is not necessary that there should be an actual or total the law of another without plea and proof has been constantly
loss or destruction of all the different parts of the entire vessel. The maintained at law and in equity, in England and America.
question here is whether, under the conditions then and there That rule was followed by this court in Sy Joc Lieng vs. Encarnacion
existing, and as the lighter laid in the bottom of the bay, was it of (16 Phil., 137, 139), where it says:
any value to the owner. If it was not of any value to the owner, When in a litigation the application of a foreign law, for example
then there was an actual loss or a "total destruction of the thing the law of China, is sought, it is necessary to prove before the
insured" within the meaning of the above sections of Act No. courts of the Islands, in a satisfactory manner, the existence of
2427 of the insurance code. such law as a question of fact; and when proof of such a law is
The lighter was sunk about July 1, 1918. After several futile lacking, it is improper to apply unknown laws to suits pending
attempts, it was finally raised September 20, 1918. It is fair to before the courts of the Islands.
assume that in its then condition much further time would be The notes to the Great Western Insurance Company vs. Fogarty
required to make the necessary repairs and install the new (86 U. S., 216), say:
machinery before it could again be placed in commission. During all In the English practice, a ship is a total loss when she has sustain
that time the owner would be deprived of the use of its vessel or such extensive damage that it would not be reasonably practical to
the interest on its investment. When those questions are repair her. The ordinary measure of prudence which the courts
considered the testimony is conclusive that the cost of salvage, have adopted is this: If the ship, when repaired, will not be worth
repair, and reconstruction was more than the original cost of the the sum which it would be necessary to expend upon her, the
vessel of its value at the time the policy was issued. As found by repairs are, practically speaking, impossible, and it is a case of
the trial court "it is difficult to see how there could have been a total loss. (Citing a number of English authorities.)
more complete loss of the vessel than that which actually After a careful consideration of the important case, we hold that
occurred." Upon the facts that shown here, any other construction the decision of the trial court should be reversed, and that a
would nullify the statute, and, as applied to the conditions existing judgment should be entered here in favor of the plaintiff against
in the Manila Bay, this kind of a policy would be worthless, and the defendant for P16,000, with interest thereon, from February
there would not be any consideration for the premium. 25, 1919, at the rate of 6 per cent per annum, and the costs and
In their able brief, the distinguished counsel for the defendant disbursements of this action in this and the lower court. So
point out that the policy itself provides that it "shall be of as much ordered.
force and effect as the surest writing or policy of insurance made in
London," and contend that the policy should be construed under
the Marine Law of Great Britain, but as to what may be the law
there is not alleged or proven.
In Liverpool and Great Western Steam Co. vs. Phoenix Ins. Co.
(129 U.S., 397; 32 L. ed., 788, 793), the court says:
Malayan Insurance Co, Inc. V CA (1986)
G.R. No. L-59919 November 26, 1986 Oriental v CA G.R. No. 94052 August 9, 1991
J. Melencio-Herrera
Lessons Applicable: Motor Vehicle Liability Insurance - Authorized
Driver Cause (Insurance) Facts:
Laws Applicable: Panama Sawmill shipped 1208 pieces of apitog logs to Manila and
insured the logs with Oriental for the value of Php 1 million. Two
FACTS: barges were loaded with 610 and 598 logs. At
Aurelio Lacson ,owner of a Toyota NP Land Cruiser, Model 1972, sea, typhoons ravaged one of the barges, resulting in the lossof
bearing Plate No. NY-362 and with engine Number F- 497 of 598 of the logs.
374325 insured with Malayan Insurance Co The Insurance contract provided for indemnity under the following
Dec. 1, 1975: Aurelio brought it to the shop of Carlos Jamelo for conditions:
repair Warranted that this Insurance is against TOTAL LOSS ONLY.
Dec. 2, 1975: Rogelio Mahinay, together with Johnny Mahinay, Subject to the following clauses:
Rogelio Macapagong and Rogelio Francisco took and drove the Civil Code Article 1250 Waiver clause
Toyota Land Cruiser and it met an accident with Bo Typhoon warranty clause
Carlos reported the incident to the police and instituted a criminal Omnibus clause.
case for Qualified Theft against his employees Oriental didnt give an indemnity because there wasnt total loss of
Rogelio Mahinay pleaded guilty and was convicted of theft the shipment.
Aurelio was not allowed to claim on the ground that the claim is The sawmill filed a civil case against Oriental and the court
not covered by the policy inasmuch as the driver of the insured ordered it to pay 410,000 as value for the missing logs. The CA
vehicle at the time of the accident was not a duly licensed driver affirmed the lower court judgment but reduced the legal interest.
Trial Court: favored Aurelio Hence this appeal by Oriental.
CA: Affirmed
ISSUE: W/N the taking of the vehicle by another person without Issue:
permission or authority from the owner or person-in-charge thereof Whether or not Oriental Assurance can be held liable under its
is sufficient to place it within the ambit of the word theft in the marine insurance policy based on the theory of a divisiblecontract
policy of insurance and, consequently, a constructive total loss.

Held: No. Petition granted.

HELD: YES.
The damages therefore were sustained in the course of the Ratio:
unlawful taking Perla v CA- The terms of the contract constitute the measure of
Bacolod IFCs interest in the insured vehicle was in the amount of the insurer liability and compliance therewith is a condition
P2,000.00 only compared to plaintiff's P26,000.00 it is well to precedent to the insured's right to recovery from the insurer.
presume that Bacolod IFC did not deem it wise to be impleaded as Whether a contract is entire or severable is a question of intention
party-plaintiff in this case. This inaction on the part of BIFC will to be determined by the language employed by the parties. The
only show that it was not really interested to intervene. policy in question shows that the subject matter insured was the
entire shipment of 2,000 cubic meters of apitong logs. The have sustained a constructive total loss under Section 139(a) of
fact that the logs were loaded on two different barges did not make the Insurance Code.
the contract several and divisibleas to the items insured. The logs
on the two barges were not separately valued or separately FRANCISCO JARQUE, plaintiff-appellee,
insured. Only one premium was paid for the entire shipment, vs.
making for only one cause or consideration. The insurance SMITH, BELL & CO., LTD., ET AL., defendants.
contract must, therefore, be considered indivisible. UNION FIRE INSURANCE CO., appellant.
Also, the insurer's liability was for "total loss only" as stipulated. A Benj. S. Ohnick for appellant.
total loss may be either actual or constructive. An actual total loss Vicente Pelaez for appellee.
under Sec 130 of the Insurance Code is caused by:
(a) A total destruction of the thing insured; OSTRAND, J.:
(b) The irretrievable loss of the thing by sinking, or by being The plaintiff was the owner of the motorboat Pandan and held a
broken up; marine insurance policy for the sum of P45,000 on the boat, the
(c) Any damage to the thing which renders it valueless to the policy being issued by the National Union Fire Insurance Company
owner for the purpose for which he held it; or and according to the provisions of a "rider" attached to the policy,
(d) Any other event which effectively deprives the owner of the the insurance was against the "absolute total loss of the vessel
possession, at the port of destination, of the thing insured. only." On October 31, 1928, the ship ran into very heavy sea off
A constructive total loss, gives to a person insured a right to the Islands of Ticlin, and it became necessary to jettison a portion
abandon and it means: of the cargo. As a result of the jettison, the National Union Fire
SECTION 139. A person insured by a contract of marine Insurance Company was assessed in the sum of P2,610.86 as its
insurance may abandon the thing insured, or any particular portion contribution to the general average. The insurance company,
thereof separately valued by the policy, or otherwise separately insisting that its obligation did not extend beyond the insurance of
insured, and recover for a total loss thereof, when the cause of the the "absolute total loss of the vessel only, and to pay proportionate
loss is a peril injured against, salvage of the declared value," refused to contribute to the
(a) If more than three-fourths thereof in value is actually lost, or settlement of the general average. The present action was
would have to be expended to recover it from the peril; thereupon instituted, and after trial the court below rendered
(b) If it is injured to such an extent as to reduce its value more judgment in favor of the plaintiff and ordered the defendant
than three-fourths National Union Fire Insurance Company to pay the plaintiff the sum
The appellate court considered the cargo in one barge as separate of P2,610.86 as its part of the indemnity for the general average
from the other and ruled that 497 of 598 was more than of the brought about by the jettison of cargo. The insurance company
amount lost, showing a constructive total loss. appealed to this court and assigns as errors (1) "that the lower
The SC, however, said that although the logs were placed in two court erred in disregarding the typewritten clause endorsed upon
barges, they were not separately valued by the policy, nor the policy, Exhibit A, expressly limiting insurer's liability thereunder
separately insured. Of the entirety of 1,208, pieces of logs, only of the total loss of the wooden vessel Pandan and to proportionate
497 pieces thereof were lost or 41.45% of the entireshipment. salvage charges," and (2) "that the lower court erred in concluding
Since the cost of those 497 pieces does not exceed 75% of the that defendant and appellant, National Union Fire Insurance
value of all 1,208 pieces of logs, the shipmentcan not be said to Company is liable to contribute to the general average resulting
from the jettison of a part of said vessel's cargo."
I. As to the first assignment of error, little need be said. The Insurance, 2d ed., sec. 224, page 600; Arnould on Marine
insurance contract, Exhibit A, is printed in the English common Insurance, 9th ed., sec. 73; Marine Equipment Corporation vs.
form of marine policies. One of the clauses of the document Automobile Insurance Co., 24 Fed. (2d), 600; and Marine
originally read as follows: Insurance Company vs. McLahanan, 290 Fed., 685, 688.)
Touching the Adventures and Perils which the said National Union II. In the absence of positive legislation to the contrary, the liability
Fire Insurance Company is content to bear, and to take upon them of the defendant insurance company on its policy would, perhaps,
in this Voyage; they are of the Seas, Men-of-War, Fire, Pirates, be limited to "absolute loss of the vessel only, and to pay
Rovers, Thieves, Jettison, Letters of Mart and Countermart, proportionate salvage of the declared value." But the policy was
Surprisals, and Takings at Sea. Arrest, Restraint and Detainments, executed in this jurisdiction and "warranted to trade within the
of all Kings Princes and People of what Nation, Condition or Quality waters of the Philippine Archipelago only." Here the liability for
so ever; Barratry of the Master and Marines, and of all other Perils, contribution in general average is not based on the express terms
Losses and Misfortunes, that have or shall come to the Hurt, of the policy, but rest upon the theory that from the relation of the
Detriment, or Damage of the said Vessel or any part thereof; and parties and for their benefit, a quasi contract is implied by law.
in case of any Loss or Misfortunes, it shall be lawful for the Article 859 of the Code of Commerce is still in force and reads as
Assured, his or their Factors, Servants, or assigns, to sue, labour follows:
and travel for, in and about the Defense. Safeguard, and recovery ART. 859. The underwriters of the vessel, of the freight, and of the
of the said Vessel or any Charges whereof the said Company, will cargo shall be obliged to pay for the indemnity of the gross
contribute, according to the rate and quantity of the sum herein average in so far as is required of each one of these objects
assured shall be of as much force and Virtue as the surest Writing respectively.
or Policy of Insurance made in LONDON. The article is mandatory in its terms, and the insurers, whether for
Attached to the policy over and above the said clause is a "rider" the vessel or for the freight or for the cargo, are bound to
containing typewritten provisions, among which appears in contribute to the indemnity of the general average. And there is
capitalized type the following clause: nothing unfair in that provisions; it simply places the insurer on the
AGAINST THE ABSOLUTE TOTAL LOSS OF THE VESSEL ONLY, AND same footing as other persons who have an interest in the vessel,
TO PAY PROPORTIONATE SALVAGE CHARGES OF TEH DECLARED or the cargo therein at the time of the occurrence of the general
VALUE. average and who are compelled to contribute (art. 812, Code of
At the bottom of the same rider following the type written Commerce).
provisions therein set forth are the following words: "Attaching to In the present case it is not disputed that the ship was in grave
and forming part of the National Union Fire Insurance Co., Hull peril and that the jettison of part of the cargo was necessary. If the
Policy No. 1055." cargo was in peril to the extent of call for general average, the ship
It is a well settled rule that in case repugnance exists between must also have been in great danger, possibly sufficient to cause
written and printed portions of a policy, the written portion its absolute loss. The jettison was therefore as much to the benefit
prevails, and there can be no question that as far as any of the underwriter as to the owner of the cargo. The latter was
inconsistency exists, the above-mentioned typed "rider" prevails compelled to contribute to the indemnity; why should not the
over the printed clause it covers. Section 291 of the Code of Civil insurer be required to do likewise? If no jettison had take place and
Procedure provides that "when an instrument consists partly of if the ship by reason thereof had foundered, the underwriter's loss
written words and partly of a printed form and the two are would have been many times as large as the contribution now
inconsistent, the former controls the latter." (See also Joyce on demanded. lawphil.net
The appealed judgment is affirmed with the cost against the Yes. The defendant may build the house as an alternative
appellant. So ordered. prestation, freeing him from the payment of the sum in which the
A person alternatively bound by different prestations shall building was insured. This conclusion is in line with The Civil Codes
completely perform one of them. Article 1131.
The creditor cannot be compelled to receive part of one and part of Paying the sum in which the building was insured is one of the 2
the other undertaking. (1131) prestations provided in one of the clauses stipulating the conditions
of the policies. Based on the same Article of the Civil Code, the
complete performance of one of them is sufficient to extinguish the
CASE DIGEST: Ong Guan Can v. The Century Insurance Co. obligation. While there are several prestations, only one is due.
(46 PHIL. 592), December 2, 1924
FACTS: G.R. No. L-8405 February 10, 1915
PLAINTIFFS-APPELLEES: Ong Guan Can and the Bank of the FRANCISCO GALIAN, plaintiff-appellant,
Philippine Islands vs.
DEFENDANT-APPELLANT: The Century Insurance Co., LTD. THE STATE ASSURANCE COMPANY, LTD., defendant-appellant.
PONENTE: Villamor, J. Recaredo M.a Calvo for plaintiff.
The plaintiff owned a building that was insured against fire by the Haussermann, Cohn and Fisher for defendant.
defendant in the sum of Php 30,000, including the merchandise TRENT, J.:
therein contained in the sum of Php 15,000. Both the house and This is an action upon an open policy of fire insurance of household
merchandise insured were burned in February 28, 1923 while the effects. The property was insured on January 25, 1912, for P3,000.
policies issued by the defendant in favor of the plaintiff were still in On March 25, 1912, the day following the fire, the insured
force. presented an itemized statement of the goods contained in the
The CFI of Iloilo granted the case in favor of the plaintiff that The house at the time of the fire, the total value of which he claims to
Century Insurance Co. should pay Ong Guan Can the sum of Php be P4,512. The insured property was not a total loss, and some of
45,000 as the total value of the insured house and merchandise. it was afterward sold by the insured at public auction for the net
The Insurance Company appealed that the judgment be modified amount of P120.40 The complaint prays for the recovery of the
to permit it to rebuild the house and that they be relieved from the total amount of the policy less two-thirds of the P120.40, or
payment of the sum in which the building was insured. P2,919.74.
ISSUE: The insurance company interposed a special defense to the effect
Whether the defendant-appellant can rebuild the house burnt as a that the policy had been forfeited by reason of the fact that the
sufficient idemnity to the inured for the actual loss suffered by him. claim presented by the plaintiff was fraudulently false in that (a)
APPLICABLE LAW: the insured had alleged a total loss, (b) that not all the articles
Article 1199: listed in the plaintiff's claim of loss were in the house where and
A person alternatively bound by different prestations shall when the fire occurred, and (c) that the plaintiff had attributed
completely perform one of them. much greater value to the articles included in the list than they
The creditor cannot be compelled to receive part of one and part of were worth.
the other undertaking. (1131) Upon trial there was evidence for the plaintiff that the statement
HELD: presented to the insurance company after the fire was substantially
correct, both in quantities and values. The plaintiff testified that
the statement was prepared from memory immediately after the proceeded to determine that the property was worth P1,500 at the
fire by himself with the assistance of his brother. The defendant time of the fire, based upon an offer of compromise made to the
introduced three witnesses, who were sent to the scene of the fire plaintiff by the defendant company at the figure. This offer was
shortly after it occurred to estimate the value of the property introduced in evidence, it is claimed, without objection by the
contained in the house. From photographs submitted in evidence it defendant company, and the court held that this failure of the
appears that the first floor of the plaintiff's residence was not defendant to object to the admission of the offer of compromise
damaged by the fire at all, but did suffer damage from water and rendered it competent evidence. Thereupon, a judgment in favor of
breakage. In the parlor on the second floor the rattan work on the the plaintiff was entered for P1,500, with interest from the date the
chairs was entirely consumed, but the woodwork was probably only complaint was filed. Both parties excepted to this judgment, and
charred or scorched. The fire did the most damages in the moved for a new trial on the ground that the judgment was
bedroom, where the roof partly fell in. Articles of clothing contained manifestly against the weight of the evidence. These motions being
in the wardrobes in this room are visible in the photograph, they overruled, they have brought the case to this court by separate
having evidently been taken out for inspection after the fire. Mr. bills of exception.
Young testified that upon request of the defendant company he The main issue on this appeal is as to the value of the property.
had examined the contents of the house and estimated the loss at After a careful examination of the evidence, we are of the opinion
P1,000. He said, however, that this was only a casual estimate. that there is no satisfactory evidence that the plaintiff included in
They pulled out a few drawers of the wardrobes and examined his itemized list of property contained in the house at the time of
some of the wearing apparel contained in them. Mr. Dow testified the fire, any property which was not there. The plaintiff prepared
that he made a rough estimate of the damage done. He estimated the list from memory, and absolute accuracy could hardly be
the value of the goods on the first floor at P500, and said that from expected. With regard to the fact that the plaintiff claims there
what he saw of the remains on the upper floor, P1,500 would be a were about 25 chairs in the house, it may be said that the remains
liberal estimate of the damages done. He did not believe that there of 8 chairs may be seen in the photograph (Exhibit 3), and 3 more
was P4,000 worth of property on the second floor. Mr. Laing, agent in the photograph (Exhibit 1). This accounts for nearly half the
of the defendant company, estimated the loss at P1,500. This, he number claimed and the plaintiff asserts that a bundle of chairs
thought, was a very liberal estimate. He appears to have made a was stored on top of some of the wardrobes in the bedroom. The
more careful estimate of the value of the different articles than remaining furniture described is not of an amount or description
either of the other witnesses called by the defendant. He testified which convinces us that the floor space in the plaintiff's dwelling
that nothing had been entirely consumed by the fire. In this he is was too limited to contain all of it, in the absence of something like
contradicted by the plaintiff, who claims that some of the furniture, definite figures as to the size of the house and of the furniture.
even, was totally consumed. From the appearance of the bedroom, The inventory which the plaintiff gives of the wardrobe of himself
as portrayed by the photograph (Exhibit 4), we are inclined to and wife covers an amount and quality of clothing which counsel is
believe that some, at least, of the plaintiff's effects were quite correct in saying is not usually possessed by persons in the
completely destroyed by the fire. station of life of the plaintiff. It may be well to state here that the
The court below declined to consider as competent the testimony evidence shows the plaintiff to have been a cashier of a local
of the plaintiff and his brother as to the value of the property on business house with a salary of P175 per month. In addition to this
the ground that neither was qualified to appraise the property. The he and his wife each had shares of stock in a commercial concerns
testimony of the three experts was also dismissed as not being a which brought them between P25 and P30 per month dividends. He
reliable basis for a findings as to damages. The court then had inherited about P15,000 from his father, and was administrator
of his father's estate. While the family wardrobe denotes what effects furniture, clothing, dishes, kitchen utensils, etc. They are
might be considered a high degree of extravagance, we cannot say with which all people of ordinary education and refinement are
from the evidence before us that there was less or other clothing reasonably familiar. Such articles are on sale in retail shops
than that described by the plaintiff. From the photograph (Exhibit everywhere and the prices are readily available to anyone seeking
4) it is evident that there was considerable clothing which had not the information. Not only this, but most of them are articles which
been consumed and was only damaged by water or smoke. It persons with a reasonably fair income purchase for their own
appears that the plaintiff's claim wherein this extraordinary list of convenience and comfort. Hence, information as to their value
wearing apparel was set forth was submitted to the defendant must necessarily be acquired by all such individuals. While the
before any of the three experts made his examination of the knowledge of some persons on the subject may be greater than
property. The defendant was consequently well aware of the claim that possessed by others, this is true of all other branches of
which the plaintiff intended to make and could very easily have knowledge and equally as true of experts. For these reasons we
made an exact list of the quantity and quality of the clothing which cannot subscribe to the proposition that none but experts can
had not been consumed by the fire, and which would doubtedless testify as to the values of ordinary household articles.
have aided us considerably in determining whether the plaintiff's The knowledge of values in most cases does not depend upon
description of the family clothing was correct. The cross- professional or other special skill; and witnesses without having
examination of the plaintiff at the trial did not develop anything any special experience or training as would entitle them to be
material in the way of contradiction to the list of property called experts, may yet have gained such knowledge of the land, or
submitted by him. other subject under inquiry, as to aid the court or jury in arriving at
As to the values set out opposite the various items in the plaintiff's a conclusion. . . . Persons by their common experience and
list, much the same reasoning must be applied. If furniture or observation necessarily gain some common use by all or nearly all;
clothing of the kind and quality described is not worth the amounts and their evidence as to such values is not excluded by the fact
set out by the plaintiff, it would have been easy for the experts that experts may have more accurate knowledge as to such values.
introduced by the plaintiff to take each item separately and show Obviously the witness must have some means of knowledge as to
wherein and how much the price was erroneous. After an the nature and quality of the articles in question before he is
inspection of each separate article in the list, we are not prepared qualified to express an opinion as to values. It would be an idle
to say that the prices are fabulous. ceremony to allow witnesses to give their opinions in evidence,
The testimony of the three witnesses introduced by the defendant unless they had better means of knowledge as to the subject
we decline to accept for two reasons: First, because it appears that matter of their testimony than the jury might possess in common
some of the plaintiff's property was entirely consumed by the fire with all other persons. The qualification of the witness is, of course,
and some was so badly damaged that it was impossible to judge of a question for the court. (Jones on Ev., sec. 363.)
its value. In the second place, the inspection made by these The plaintiff was intimately acquianted with the articles described
several witnesses was so superficial, in view of their opportunity, by him. He, no doubt, had purchased most of them. One could
that their conclusions do not carry conviction. hardly expected to be in much better position to estimate the value
As to the ruling of the trial court that the plaintiff and his brother of the articles than this. We conclude, therefore, that the
were not qualified to appraise the value of the household effects of preponderance of the evidence is to the effect that the quantity
the former, we must say that we do not agree with the learned trial and quality of the goods contained in the house at the time of the
court on the point. There is nothing in the whole list, except the fire were substantially those described by the plaintiff in his claim
jewelry, but what may be legitimately described as household of loss.
Having reached this conclusion, we presume that the defendant which have to do with the ideas which I desire to present in this
company will no longer insist upon the remainder of its points, opinion.
which would, if decided favorably to its contention, tend to reduce The policy on which this action is brought reads as follows:
the total value of the plaintiff's household effects, but not to a This policy of insurance witnesseth that Mr. Francisco Galian, of
figure which would make the company's liability under the policy Manila (hereinafter called the insured), having paid to the
less than that which they would be held liable under the undersigned, as authorized agent of the State Assurance Company,
coinsurance clause of the policy. Limited (hereinafter called the company), the premium as above
We do not understand that the plaintiff at any time alleged a total noted for insuring against loss or damages by fire or lightning as
loss. The list presented by him the day after the fire is designated hereinafter mentioned, the property hereinafter described, in the
as a "Statement of household furniture and personal effects . . . on sum or several sums following, namely:
hand" at the time of the fire. He latter offered to abandon the (Then follows description of the property insured consisting of
remains of the fire, and still later caused these remains to be sold household goods exclusively.)
at public auction. These facts clearly negative the assertion that he The company hereby agrees with the insured (but subject to the
alleged a total loss. conditions on the back hereof, which are to be taken as part of this
Clause 17 of the conditions of the policy reads: "If the property policy) that if the property above described, or any part thereof,
hereby insured shall, at the breaking out of any fire, be collectively shall be destroyed by fire or lightning, at any time between the
of greater value than the sum insured thereon, then the insured 24th January, 1912, and four o'clock in the afternoon of the 24th
shall be considered as being his own insurer for the difference, and January, 1913, or at any time afterwards so long as and during the
shall bear a ratable proportion of the loss accordingly. Every item, period in respect of which the insured or the insured's
if more than one, of the policy shall be separately subject to this representative in interest shall have paid to the company, and in
condition." shall have accepted, the sum required for the renewal of this
The property was worth P4,512. The salvage amounted to policy, on or before the date of renewal in each succeeding
P120.40. This leaves a partial loss amounting to P4,391.60. As the year, the company will, out of its capital stock, and funds, pay or
property was insured for only P3,000, the insurer must bear a make good to the insured the amount of such loss or damage, but
portion of the loss represented by a fraction the numerator of not exceeding in respect of each or any of the several matters
which is the amount of the insurance and the denominator of which above specified, the sum set opposite thereto respectively, and not
is the value of the property at the time of the fire. This entitles the exceeding in the whole the sum of three thousand pesos Philippine
insured to a judgment against the insurrer for 2,919.92. Let currency. And also not exceeding, in any case the amount of the
judgment be entered accordingly, without costs in this instance. So insurable interest therein of the insured at the time of the
ordered. happening of such fire.
Arellano, C. J., Torres, Carson and Araullo, JJ., concur. In witness whereof, this is subscribed by the authorized agent of
the company, this 25th January, 1912.
For Warner, Barnes & Co., Ltd.:
Separate Opinions (Sgd.) J.T. FIGUERAS, Manager.
MORELAND, J., concurring: Per power of attorney.
The facts in this case are fully stated in the foregoing opinion. I As is clear from this policy, which is the contract signed by the
desire to add only one or two other facts appearing in the record parties, the company agrees to pay to the insured whatever loss he
may suffer on the household goods by reason of the causes
mentioned not to exceed P3,000. In other words, the company you P500, although we admit that, for ten years, you have been
agrees to pay all (not a part only) of the loss or damages which the paying premiums on P1,000." Stated concisely, the company
property may suffer to the amount of P3,000. This is the essential pays one-half of what, in the contract signed by both parties, it had
stipulation of the policy, the one on which the minds of the parties agreed to pay.
really met, and, in reality, the only contract to which the signatures By virtue of this clause, therefore, a person who insures his
of the parties are attached. However, when we examine the back property for less than its value is required to become an insurer
of the policy, we find there, in the print, a clause (called clause 17) himself . In other words, unless he insures for full value or more,
by means of which the company withdraws the agreement which he becomes himself an insurer (this is the inexplicable part of
forms the body of the policy, which is signed by the parties and is it), not for his own benefit but for the benefit of the insurance
the one on which the minds of the parties really met, and company. In addition to having bought the goods and paid for
substitutes another in its place wholly different in terms, nature them, he himself insures the uncovered portion so that he may
and effect. This clause is quoted in the opinion of the court and is enjoy the privilege of relieving the company from paying the sum it
as follows: has solemnly agreed to pay and on which sum and for the payment
17. If the property hereby insured shall, at the breaking out of any of which by the company he has been paying premiums since the
fire, be collectively of greater value than the sum insured thereon, insurance was created. This amounts to the proposition that, in
then the insured shall be considered as being his own insurer for order to secure what the company has agreed to pay him, the
the difference, and shall bear a ratable proportion of the loss insured must not only lose P1,000 worth of books but he must
accordingly. Every item, if more than one, of the policy shall be lose all the books he has. To obtain payment for the loss of halfof
separately subject to this condition. his property he must lose all of his property. This is very like the
This clause, if valid between the parties, creates a contracts, as I assertion of an accident insurance company that it would pay the
have stated, different in every conceivable aspect from the insured only half the sum agreed on for the loss of a leg on the
contract of the policy. By virtue of this clause we have this ground that he had escaped with his life. Having lost his leg instead
situation presented: Mr. Rogers has a library of the value of of his life, he should reduce by one-half or more the amounts of
P2,000. Not desiring to incur the expense of insuring it for full the insurance to which he was entitled under the terms of the
value, he insured it against loss or damage by fire to the amount of policy for the loss of a leg. So with the one insured against loss by
P1,000. He paid the insurance premium on P1,000 for ten years. At fire; having had the good fortune to save half of his property, he
the end of that item a fire occurs by which the library is damages must pay for his good fortune by donating to the insurance
in the admitted sum of P1,000. He goes to the insurance company, company one-half of the value of the property saved.
confidently expecting that he will receive the amount of the Whether this condition of affairs is permitted by the laws of the
damage, 1,000, for which his library had been insured and on Philippine Islands now in force I do not stop to inquire. The
which sum he has been paying premiums for ten years. Arriving at question was not directly presented or argued. The validity of the
the office of the company he is informed that the company did not clause creating that condition has been assumed in default of a
agree to pay the full loss suffered but that, by virtue of clause 17 challenge thereto. It is clear, however, that the principle involved
above quoted, it agreed to pay only P500; "For," says the company in sustaining the legality of such a clause provides a method of
to him, "the value of your library was P2,000. We were an insurer payment of loss in insurance cases quite different from that found
for P1,000 and you for the other P1,000. You being a coinsurer in article 428 of the Code of Commerce, which seems to require full
with the company in equal amount, you must stand with the payment of the loss regardless of the value of the property at the
company an equal share of the loss. The loss being P1,000, we pay breaking out of the fire. It is possible, however, that, under article
385, such a clause is legal and enforceable. I have not gone into
the matter deeply, as it seems from a casual reading that such a Tanco Jr. V. Philippine Guaranty Co. (1965)
situation as I have described above will be difficult under section
164 of the new insurance law, which is to take effect on the 1st of G.R. No.L-17312 November 29, 1965
July next. I do not, therefore, undertake, at this time, to pass on Lessons Applicable: Definition and Coverage of Casualty
the question of the validity of the clause, particularly as my Insurance (Insurance)
brethen on the court are unanimous in the opinion that clause 17 is FACTS:
legal and proper. While Tanco's automobile was driven by his brother Manuel Tanco,
I am aware that such clauses are earnestly defended by insurance who at the time didn't have a valid license since it was not renewed
companies. But, in spite of that defense, such clauses are directly until the next week, had a collision with a pick-up delivery van at
opposes to the ordinary meaning of the contract as written and the southern approach of the Jones bridge
signed. Their very existence is unknown in most cases, and were The repairs cost P2,536.99 so he filed a claim against the insurance
known they are not understood. They are violate of the fair intent company which was rejected
of the agreement and, as a natural consequence, deceive the He filed a claim in the Municipal Court of Manila and elevated to
insured in the majority of cases. After an insurance company has the Court of First Instance of Manila on Appeal which favored Tanco
solemnly agreed, in an instrument signed by the parties, to pay an exception clause "the company shall not be liable in respect of any
insured P1,000 if his loss is P1,000, and then, when his loss in accident, loss, damage or liability caused, sustained or incurred ...
admittedly P1,000, offers him only P500, clauses permitting such a whilst (the insured vehicle) is ... being driven by or is for the
result are deception and explanations supporting them without purpose of being driven by him in the charge of any person other
effect. Dissertations on community of interest, ownership in than an Authorized Driver.
common, inability to ascertain which portion of the insured goods Authorized Driver" to be the insured himself and "(b) any person
was destroyed, the protection to all the property by an insurance driving on the Insured's order or with his permission, provided that
on only half, etc., are metaphysical rather than substantial and, in the person driving is permitted in accordance with the licensing or
the great majority of cases, form no party of the contract which the other laws or regulations to drive the Motor Vehicle or has been
insured believes, and has the right to believe, he is entering into. permitted and is not disqualified by order of a court of law or by
When the company agrees to pay the whole loss, one must go reason of any enactment or regulation in that behalf from driving
outside the understanding of the ordinary man to defend the such Motor Vehicle.
payment of only half the loss; and when one is insured by an ISSUE: W/N the Tanco can claim because it was not covered by the
insurance company, common reason fails and explanations are a exemption clause
burden when he is informed that by the act of being insured by the HELD: NO. appealed from is reversed, with costs
insurance company, he became an insurer of the insurance The exclusion clause in the contract invoked by appellant is clear.
company. In making contracts with public corporations citizens are It does not refer to violations of law in general, which indeed would
entitled to plain words with plain meanings. They should not be tend to render automobile insurance practically a sham, but to a
compelled to call upon a dialectician to plead their cause or a specific situation where a person other than the insured himself,
metaphysician to secure their rights. Common sense and ordinary even upon his order or with his permission, drives the motor
understanding should be their recourse, and not metaphysics vehicle without a license or with one that has already expired. No
that fertile field of delusion propagated by language. principle of law or of public policy militates against the validity of
such a provision.
 Domingo Reyes is in possession of a driver's license issued by the
CCC Insurance Corp. V. CA (1970) Motor Vehicles Office which on its face appears to have been
regularly issued
G.R. No. L-25920 January 30, 1970 Neither Gloria Presa nor the officer-in-charge Marciano A. Monzon
was placed on the witness stand to be examined in order to
Lessons Applicable: Motor vehicle liability insurance - "Authoried determine whether said license is indeed void
Driver Clause" (Insurance) Section 24 of the Revised Motor Vehicles Law, Act 3992 of the
Laws Applicable: Philippine Legislature, as amended by Republic Acts Nos. 587,
1204 and 2863,1

FACTS: An examination or demonstration to show any applicant's ability to

Carlos F. Robes insured with the CCC Insurance Corporation his operate motor vehicles may also be required in the discretion of
Dodge Kingsway car against loss or damage through accident for the Chief, Motor Vehicles Office or his deputies.
an amount not exceeding P8,000 Section 26 of the Act prescribes further:
June 25 1961: Carlos' driver Domingo Reyes met a vehicular
collision along Rizal Avenue Extension, Potrero, Malabon, Rizal SEC. 26. Issuance of chauffeur's license; professional badge: If,
Ccc Insurance Corporation denied his claim reasoning that the after examination, or without the same, the Chief, Motor Vehicles
driver was not an "authorized driver" Office or his deputies, believe the applicant to possess the
Reyes, who cannot read and write, who has never passed any necessary qualifications and knowledge, they shall issue to such
examination for drivers, and has not applied for a license from the applicant a license to operate as chauffeur ...
duly constituted government agency entrusted with the duty of There is no proof that the owner of the automobile knew that the
licensing drivers, cannot be considered an authorized driver circumstance surrounding such issuance showed that it was
AUTHORIZED DRIVER: irregular
Any of the following: the weight of authority is in favor of a liberal interpretation of the
(a) The insured; insurance policy for the benefit of the party insured, and strictly
(b) Any person driving on the Insured's order or with his against the insurer
permission, provided that the person driving is permitted in
accordance with licensing laws or regulations to drive the motor
vehicle covered by this Policy, or has been so permitted and is not G.R. No. L-54171 October 28, 1980
disqualified by order of a court of law or by reason of any JEWEL VILLACORTA, assisted by her husband, GUERRERO
enactment or regulation from driving such Motor Vehicle. VILLACORTA, petitioner,
RTC: favored Robes and CCC was order to pay vs.
ISSUE: W/N Domingo Reyes was an authorized driver THE INSURANCE COMMISSION and EMPIRE INSURANCE
COMPANY, respondents.

HELD: YES. CA affirmed TEEHANKEE, Acting C.J.:

Court of Appeals found that the driver's license No. 271703 DP was The Court sets aside respondent Insurance Commission's dismissal
genuine of petitioner's complaint and holds that where the insured's car is
wrongfully taken without the insured's consent from the car service Respondent insurance commission, however, dismissed petitioner's
and repair shop to whom it had been entrusted for check-up and complaint for recovery of the total loss of the vehicle against
repairs (assuming that such taking was for a joy ride, in the course private respondent, sustaining respondent insurer's contention that
of which it was totally smashed in an accident), respondent insurer the accident did not fall within the provisions of the policy either for
is liable and must pay insured for the total loss of the insured the Own Damage or Theft coverage, invoking the policy provision
vehicle under the theft clause of the policy. on "Authorized Driver" clause. 1
The undisputed facts of the case as found in the appealed decision Respondent commission upheld private respondent's contention on
of April 14, 1980 of respondent insurance commission are as the "Authorized Driver" clause in this wise: "It must be observed
follows: that under the above-quoted provisions, the policy limits the use of
Complainant [petitioner] was the owner of a Colt Lancer, Model the insured vehicle to two (2) persons only, namely: the insured
1976, insured with respondent company under Private Car Policy himself or any person on his (insured's) permission. Under the
No. MBI/PC-0704 for P35,000.00 Own Damage; P30,000.00 second category, it is to be noted that the words "any person' is
Theft; and P30,000.00 Third Party Liability, effective May 16, qualified by the phrase
1977 to May 16, 1978. On May 9, 1978, the vehicle was brought to ... on the insured's order or with his permission.' It is therefore
the Sunday Machine Works, Inc., for general check-up and repairs. clear that if the person driving is other than the insured, he must
On May 11, 1978, while it was in the custody of the Sunday have been duly authorized by the insured, to drive the vehicle to
Machine Works, the car was allegedly taken by six (6) persons and make the insurance company liable for the driver's negligence.
driven out to Montalban, Rizal. While travelling along Mabini St., Complainant admitted that she did not know the person who drove
Sitio Palyasan, Barrio Burgos, going North at Montalban, Rizal, the her vehicle at the time of the accident, much less consented to the
car figured in an accident, hitting and bumping a gravel and sand use of the same (par. 5 of the complaint). Her husband likewise
truck parked at the right side of the road going south. As a admitted that he neither knew this driver Benito Mabasa (Exhibit
consequence, the gravel and sand truck veered to the right side of '4'). With these declarations of complainant and her husband, we
the pavement going south and the car veered to the right side of hold that the person who drove the vehicle, in the person of Benito
the pavement going north. The driver, Benito Mabasa, and one of Mabasa, is not an authorized driver of the complainant. Apparently,
the passengers died and the other four sustained physical injuries. this is a violation of the 'Authorized Driver' clause of the policy.
The car, as well, suffered extensive damage. Complainant, Respondent commission likewise upheld private respondent's
thereafter, filed a claim for total loss with the respondent company assertion that the car was not stolen and therefore not covered by
but claim was denied. Hence, complainant, was compelled to the Theft clause, ruling that "The element of 'taking' in Article 308
institute the present action. of the Revised Penal Code means that the act of depriving another
The comprehensive motor car insurance policy for P35,000.00 of the possession and dominion of a movable thing is coupled ...
issued by respondent Empire Insurance Company admittedly with the intention. at the time of the 'taking', of withholding it with
undertook to indemnify the petitioner-insured against loss or the character of permanency (People vs. Galang, 7 Appt. Ct. Rep.
damage to the car (a) by accidental collision or overturning, or 13). In other words, there must have been shown a felonious
collision or overturning consequent upon mechanical breakdown or intent upon the part of the taker of the car, and the intent must be
consequent upon wear and tear; (b) by fire, external explosion, an intent permanently to deprive the insured of his car," and that
self-ignition or lightning or burglary, housebreaking or theft; and "Such was not the case in this instance. The fact that the car was
(c) by malicious act. taken by one of the residents of the Sunday Machine Works, and
the withholding of the same, for a joy ride should not be construed
to mean 'taking' under Art. 308 of the Revised Penal Code. If at all wrecks the car. There is no question of his being an "authorized
there was a 'taking', the same was merely temporary in nature. A driver" which allows recovery of the loss although his trip was for a
temporary taking is held not a taking insured against (48 A LR 2d., personal or illicit purpose without the owner's authorization.
page 15)." Secondly, and independently of the foregoing (since when a car is
The Court finds respondent commission's dismissal of the unlawfully taken, it is the theft clause, not the "authorized driver"
complaint to be contrary to the evidence and the law. clause, that applies), where a car is admittedly as in this case
First, respondent commission's ruling that the person who drove unlawfully and wrongfully taken by some people, be they
the vehicle in the person of Benito Mabasa, who, according to its employees of the car shop or not to whom it had been entrusted,
finding, was one of the residents of the Sunday Machine Works, and taken on a long trip to Montalban without the owner's consent
Inc. to whom the car had been entrusted for general check-up and or knowledge, such taking constitutes or partakes of the nature of
repairs was not an "authorized driver" of petitioner-complainant is theft as defined in Article 308 of the Revised Penal Code, viz. "Who
too restrictive and contrary to the established principle that are liable for theft. Theft is committed by any person who, with
insurance contracts, being contracts of adhesion where the only intent to gain but without violence against or intimidation of
participation of the other party is the signing of his signature or his persons nor force upon things, shall take personal property of
"adhesion" thereto, "obviously call for greater strictness and another without the latter's consent," for purposes of recovering
vigilance on the part of courts of justice with a view of protecting the loss under the policy in question.
the weaker party from abuse and imposition, and prevent their The Court rejects respondent commission's premise that there
becoming traps for the unwary. 2 must be an intent on the part of the taker of the car "permanently
The main purpose of the "authorized driver" clause, as may be to deprive the insured of his car" and that since the taking here
seen from its text, supra, is that a person other than the insured was for a "joy ride" and "merely temporary in nature," a
owner, who drives the car on the insured's order, such as his "temporary taking is held not a taking insured against."
regular driver, or with his permission, such as a friend or member The evidence does not warrant respondent commission's findings
of the family or the employees of a car service or repair shop must that it was a mere "joy ride". From the very investigator's report
be duly licensed drivers and have no disqualification to drive a cited in its comment, 3 the police found from the waist of the car
motor vehicle. driver Benito Mabasa Bartolome who smashed the car and was
A car owner who entrusts his car to an established car service and found dead right after the incident "one cal. 45 Colt. and one apple
repair shop necessarily entrusts his car key to the shop owner and type grenade," hardly the materials one would bring along on a
employees who are presumed to have the insured's permission to "joy ride". Then, again, it is equally evident that the taking proved
drive the car for legitimate purposes of checking or road-testing to be quite permanent rather than temporary, for the car was
the car. The mere happenstance that the employee(s) of the shop totally smashed in the fatal accident and was never returned in
owner diverts the use of the car to his own illicit or unauthorized serviceable and useful condition to petitioner-owner.
purpose in violation of the trust reposed in the shop by the insured Assuming, despite the totally inadequate evidence, that the taking
car owner does not mean that the "authorized driver" clause has was "temporary" and for a "joy ride", the Court sustains as the
been violated such as to bar recovery, provided that such better view that which holds that when a person, either with the
employee is duly qualified to drive under a valid driver's license. object of going to a certain place, or learning how to drive, or
The situation is no different from the regular or family driver, who enjoying a free ride, takes possession of a vehicle belonging to
instead of carrying out the owner's order to fetch the children from another, without the consent of its owner, he is guilty of theft
school takes out his girl friend instead for a joy ride and instead because by taking possession of the personal property belonging to
another and using it, his intent to gain is evident since he derives its way back to Davao City, the Chevrolet, allegedly due to some
therefrom utility, satisfaction, enjoyment and pleasure. Justice mechanical defect, accidentally bumped an electric post causing
Ramon C. Aquino cites in his work Groizard who holds that the use actual damages to the tune of 5,518.61.
of a thing constitutes gain and Cuello Calon who calls it "hurt de When defendant resisted payment, suit was brought by plaintiff to
uso. " 4 recover on the insurance indemnity. As per the terms of the
The insurer must therefore indemnify the petitioner-owner for the contract, the trial court ordered the defendant insurance company
total loss of the insured car in the sum of P35,000.00 under the to indemnify the association the amount of P5,000.00 for the
theft clause of the policy, subject to the filing of such claim for damage sustained by the vehicle. On appeal, defendant interposed
reimbursement or payment as it may have as subrogee against the the defense that Catiben had not yet been proven to be guilty of
Sunday Machine Works, Inc. theft, so recovery on the policy cannot be had.
ACCORDINGLY, the appealed decision is set aside and judgment is
hereby rendered sentencing private respondent to pay petitioner ISSUE:
the sum of P35,000.00 with legal interest from the filing of the Is a prior conviction for theft required in order to recover on a
complaint until full payment is made and to pay the costs of suit. comprehensive policy payable upon loss or damage to the vehicle?
SO ORDERED. HELD:
No. Prior conviction of Catiben is not necessary. The insurance
company is liable to pay the association.

The comprehensive policy issued by the insurance company

includes loss of or damage to the motor vehicle by burglary or
theft. It is settled that the act of Catiben in taking the vehicle for a
joy ride to Toril, Davao City, constitutes theft within the meaning of
the insurance policy and that recovery for damage to the car is not
Association of Baptists for World Evangelism, Inc. v. barred by the illegal use of the car by one of the station boys.
Fieldmens Insurance Co.,Inc. There need be no prior conviction for the crime of theft to make an
GR No. L-28772 September 21, 1983 insurer liable under the theft clause of the policy. Upon the facts
FACTS: stipulated by the parties it is admitted that Catiben had taken the
Plaintiff (herein Petitioner) Association of Baptists for World vehicle for a joy ride and while the same was in his possession he
Evangelism, Inc., a domestic religious corporation, insured with the bumped it against an electric post resulting in damages. The act is
Fieldmens Insurance Co., Inc under its Private Car Comprehensive theft within a policy of insurance.
Policy a Chevrolet Carry-all, up to a maximum indemnity of
5,000.00, in case of loss or damage to the vehicle. In 1961, Dr. In a civil action for recovery on an automobile insurance, the
Antonio Lim, the representative of the association, displayed the question whether a person using a certain automobile at the time
Chevrolet for sale at the Jones Monument Mobilgas Service Station of the accident stole it or not is to be determined by a fair
at Davao City, under the care of the stations operator. However, preponderance of evidence and not by the rule of criminal law
on January 1962, instead of keeping it safe, one of the boys at the requiring proof of guilt beyond reasonable doubt. Besides, there is
Jones Monument Mobilgas Service Station, Romeo Catiben, took no provision in the policy requiring prior criminal conviction for
the Chevrolet for a joy ride without the prior permission of Lim. On theft, in the absence of any provision in the policy to the contrary.
Judgment of the trial court was AFFIRMED. If it were an ordinary life insurance policy, taking into account that
the insured, Luis G. Morales, was 38 years of age and the amount
of the policy was for P50,000.00 the annual premium would have
Gallardo V. Morales (1960) been around P1,206
G.R. No. L-12189 April 29, 1960 the period for the policy was stipulated for one year, and
Lessons Applicable: Definition and Coverage of Life considerations as to age, health, occupation and other personal
Insurance (Insurance) circumstances were not taken into account in an accident insurance
Laws Applicable: Rule 39, section 12, subdivision (k) of the policy
Rules of Court (old law) Annex "1" of the opposition, shows that the Capital Insurance and
Surety Company Inc. is a non-life insurance company and that the
only authority granted to it to transact business covers fire,
FACTS: marine, surety, fidelity, accident, motor car, and miscellaneous
CFI: Hermenegilda S. Morales to pay P7,000 to a creditor Francisca insurance, except life insurance
Gallardo Accident vs Life Insurance Policy
writ of execution was issued and delivered to the Sheriff accident policy - merely insures the person from injury and or
who garnished and levied execution on the sum of P7,000 out of death resulting from murder, assault, or an attempt thereat
the P30,000 due from the Capital Insurance & Surety Co. Inc., Accident insurance
to Morales as beneficiary whose husband Luis Morales died indemnity or casualty contract
by assassination. life insurance policy - what is insured is the life of the subject for a
Morales asked the sheriff to quash and lift said garnishment or levy definite number of years
on execution invoking Rule 39, section 12, subdivision (k) of the life insurance
Rules of Court but it was denied. investment contract
All moneys, benefits, privileges, or annuities accruing or in any contract by which the insurer, for a stipulated sum, engages to pay
manner growing out of any life insurance, if the annual premiums a certain amount of money if another dies within the time limited
paid do not exceed five hundred pesos, and if they exceed that by the policy
sum a like exemption shall exist which shall bear the same contract for insurance for one year in consideration of an advanced
proportion to the moneys, benefits, privileges, and annuities so premium, with the right of assured to continue it from year to year
accruing or growing out of such insurance that said five hundred upon payment of a premium as stipulated
pesos bears to the whole annual premiums paid. includes accident insurance, since life is insured under either
Morales appealed maintaining that it was a life insurance for it contract
insured her husband for injuries and/or death as a result of murder includes all policies of insurance in which payment of insurance
or assault or attempt thereat money is contingent upon loss of life
ISSUE: W/N the insurance is a life insurance and not an accident "any life insurance"
insurance applies to ordinary life insurance contracts, as well as to those
which, although intended primarily to indemnify for risks arising
HELD: NO. order appealed from is reversed, and the garnishment from accident, likewise, insure against loss of life due, either to
in dispute hereby set aside and quashed accidental causes, or to the willful and criminal act of another,
the annual premium was for P15 which, as such, is not strictly accidental in nature
statutes of this nature seek to enable the head of the family to Held: NO. Basilio was a watchman of the Manila Auto Supply which
secure his widow and children from becoming a burden upon the was a block away from the house of Atty. Ojeda where something
community and, accordingly, should merit a liberal interpretation suspicious was happening which caused the latter to ask for help.
While at first he declined the invitation of Atty. Ojeda to go with
him to his residence to inquire into what was going on because he
Calanoc vs. CA (98 PHIL 79) was not a regular policeman, he later agreed to come along when
prompted by the traffic policeman, and upon approaching the gate
Post under case digests, Commercial Law at Wednesday, February of the residence he was shot and died. The circumstance that he
22, 2012 was a mere watchman and had no duty to heed the call of Atty.
Facts: Basilio was a watchman of the Manila Auto Supply located at Ojeda should not be taken as a capricious desire on his part to
the corner of Avenida Rizal and Zurbaran. He secured a life expose his life to danger considering the fact that the place he was
insurance policy from the Philippine American Life in duty-bound to guard was only a block away. In volunteering to
InsuranceCompany in the amount of P2,000 to which was attached extend help under the situation, he might have thought, rightly or
a supplementary contract covering death by accident. On January wrongly, that to know the truth was in the interest of his employer
25, 1951, he died of a gunshot wound on the occasion of a robbery it being a matter that affects the security of the neighborhood.
committed in the house of Atty. Ojeda at the corner of Oroquieta No doubt there was some risk coming to him in pursuing that
and Zurbaran streets. Calanoc, the widow, was paid the sum of errand, but that risk always existed it being inherent in
P2,000, face value of the policy, but when she demanded the the position he was holding. He cannot therefore be blamed solely
payment of the additional sum of P2,000 representing the value of for doing what he believed was in keeping with his duty as a
the supplemental policy, the company refused alleging, as main watchman and as a citizen. And he cannot be considered as
defense, that the deceased died because he was murdered by a making an arrest as an officer of the law, as contended, simply
person who took part in the commission of the robbery and while because he went with the traffic policeman, for certainly he did not
making an arrest as an officer of the law which contingencies were go there for that purpose nor was he asked to do so by the
expressly excluded in the contract and have the effect of policeman.
exempting the company from liability.
Much less can it be pretended that Basilio died in the course of an
It is contended in behalf of the company that Basilio was killed assault or murder considering the very nature of these crimes. In
which "making an arrest as an officer of the law" or as a result of the first place, there is no proof that the death of Basilio is the
an "assault or murder" committed in the place and therefore his result of either crime for the record is barren of
death was caused by one of the risks excluded by the any circumstance showing how the fatal shot was fired. Perhaps
supplementary contract which exempts the company from liability. this may be clarified in the criminal case now pending in court as
This contentionwas upheld by the Court of Appeals. Hence, this regards the incident but before that is done anything that might be
petition. said on the point would be a mere conjecture. Nor can it be said
that the killing was intentional for there is the possibility that the
Issue: Whether or not the death of the victim comes within the malefactor had fired the shot merely to scare away the people
purview of the exception clause of the supplementary policy and, around for his own protection and not necessarily to kill or hit the
hence, exempts the company from liability. victim. In any event, while the act may not exempt the triggerman
from liability for the damage done, the fact remains that the
happening was a pure accident on the part of the victim. The victim This clause provide for the payment of the sum upon proof "that
could have been either the policeman or Atty. Ojeda for it cannot the death of the Insured resulted directly from bodily injury
be pretended that the malefactor aimed at the deceased precisely affected through external and violent means sustained in an
because he wanted to take his life. accident . . . and independently of all other clauses." But far from
proving that the insured died from bodily injury sustained in an
accident, the agreed facts are to the effect that the insured
was murdered, thus making it indisputable that his death resulted
HERMINIA Q. KANAPI, plaintiff-appellant, from injury "intentionally inflicted by a third party"; which is one of
vs. the exceptions to the accident benefit clause, according to which
THE INSULAR LIFE ASSURANCE CO., LTD., defendant-appellee. the benefit shall not apply to death resulting from "(5) Any injury
Jose Aguirre and Alfredo Catalico for appellant. received . . . (e) that has been inflicted intentionally by a third
Araneta and Araneta for appellee. party, either with or without provocation on the part of the
REYES, J.: Insured, and whether or not the attack or the defense by the third
party was caused by a violation of the law by the Insured. . . ."
This is an action on a life insurance policy. There is nothing to the suggestion that the case comes under
On August 1, 1848, the defendant insurance company issued a exception 5 (d) or that portion of it which excepts from the benefit
policy on the life of plaintiff's husband, Henry G. Kanapi, whereby any injury received "in any assault provoked by the Insured", it
defendant undertook to pay to plaintiff as beneficiary, upon the being argued that by express mention of provoked assault an
death of the insured, the sum of P5,000 if the death be due to unprovoked one is inferentially excluded. The inference is not
natural causes and an additional P5,000 if the death be due to admissible because where the injury is inflicted without provocation
accidental means, payment of this additional sum being provided the case comes within the terms of exception 5 (e), which, is,
for in the "Accidental Death Benefit Policy Clause" appended to and therefore, the one that should be applied.
forming part of the policy but expressly made subject to the We find the decision appealed from to be in accordance with law
exception that the clause would not apply where death resulted and the facts. It is, therefore, affirmed, with costs.
from injury "intentionally inflicted by a third party." During the life
of the policy, the insured died from a bullet wound inflicted, G.R. No. L-25579 March 29, 1972
without provocation, by one Conrado Quemosing, who, as author EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T.
of the killing, was found guilty of murder and sentenced to prison. BIAGTAN, GIL T. BIAGTAN and GRACIA T.
Upon receiving proof of the insured's death, defendant paid plaintiff BIAGTAN, plaintiffs-appellees,
P5,000, but refused to pay the additional P5,000 claimed upon the vs.
accidental death benefit clause on the ground that, as the injured THE INSULAR LIFE ASSURANCE COMPANY, LTD., defendant-
died from an injury intentionally inflicted by a third party, the appellant.
clause did not apply. The present action is for the recovery of the Tanopo, Millora, Serafica, and Saez for plaintiff-appellees.
additional sum. Araneta, Mendoza and Papa for defendant-appellant.
Upholding defendant's stand, the lower court dismissed the action,
whereupon plaintiff appealed to this Court, and the question for us MAKALINTAL, J.:p
to determine is whether plaintiff is entitled to the additional P5,000 This is an appeal from the decision of the Court of First Instance of
claimed under the accident benefit clause of the policy. Pangasinan in its Civil Case No. D-1700.
The facts are stipulated. Juan S. Biagtan was insured with non-mortal were inflicted intentionally. The court, in ruling
defendant InsularLife Assurance Company under Policy No. 398075 negatively on the issue, stated that since the parties presented no
for the sum of P5,000.00 and, under a supplementary contract evidence and submitted the case upon stipulation, there was no
denominated "Accidental Death Benefit Clause, for an additional "proof that the act of receiving thrust (sic) from the sharp-pointed
sum of P5,000.00 if "the death of the Insured resulted directly instrument of the robbers was intended to inflict injuries upon the
from bodily injury effected solely through external and violent person of the insured or any other person or merely to scare away
means sustained in an accident ... and independently of all other any person so as to ward off any resistance or obstacle that might
causes." The clause, however,expressly provided that it would not be offered in the pursuit of their main objective which was
apply where death resulted from an injury"intentionally inflicted by robbery."
another party." The trial court committed a plain error in drawing the conclusion it
On the night of May 20, 1964, or during the first hours of the did from the admitted facts. Nine wounds were inflicted upon the
following day a band of robbers entered the house of the insured deceased, all by means of thrusts with sharp-pointed instruments
Juan S. Biagtan. What happened then is related in the decision of wielded by the robbers. This is a physical fact as to which there is
the trial court as follows: no dispute. So is the fact that five of those wounds caused the
...; that on the night of May 20, 1964 or the first hours of May 21, death of the insured. Whether the robbers had the intent to kill or
1964, while the said life policy and supplementary contract were in merely to scare the victim or to ward off any defense he might
full force and effect, the house of insured Juan S. Biagtan was offer, it cannot be denied that the act itself of inflicting the injuries
robbed by a band of robbers who were charged in and convicted by was intentional. It should be noted that the exception in the
the Court of First Instance of Pangasinan for robbery with accidental benefit clause invoked by the appellant does not speak
homicide; that in committing the robbery, the robbers, on reaching of the purpose whether homicidal or not of a third party in
the staircase landing on the second floor, rushed towards the door causing the injuries, but only of the fact that such injuries have
of the second floor room, where they suddenly met a person near been "intentionally" inflicted this obviously to distinguish them
the door of oneof the rooms who turned out to be the insured Juan from injuries which, although received at the hands of a third
S. Biagtan who received thrusts from their sharp-pointed party, are purely accidental. This construction is the basic idea
instruments, causing wounds on the body of said Juan S. Biagtan expressed in the coverage of the clause itself, namely, that "the
resulting in his death at about 7 a.m. on the same day, May 21, death of the insured resulted directly from bodily injury effected
1964; solely through external and violent means sustained in
Plaintiffs, as beneficiaries of the insured, filed a claim under the an accident ... and independently of all other causes." A gun which
policy. The insurance company paid the basic amount of P5,000.00 discharges while being cleaned and kills a bystander; a hunter who
but refused to pay the additional sum of P5,000.00 under the shoots at his prey and hits a person instead; an athlete in a
accidental death benefit clause, on the ground that the insured's competitive game involving physical effort who collides with an
death resulted from injuries intentionally inflicted by third parties opponent and fatally injures him as a result: these are instances
and therefore was not covered. Plaintiffs filed suit to recover, and where the infliction of the injury is unintentional and therefore
after due hearing the court a quo rendered judgment in their favor. would be within the coverage of an accidental death benefit clause
Hence the present appeal by the insurer. such as thatin question in this case. But where a gang of robbers
The only issue here is whether under the facts are stipulated and enter a house and coming face to face with the owner, even if
found by the trial court the wounds received by the insured at the unexpectedly, stab him repeatedly, it is contrary to all reason and
hands of the robbers nine in all, five of them mortal and four logic to say that his injuries are not intentionally inflicted,
regardless of whether they prove fatal or not. As it was, in the interposed to the action to recover indemnity, namely: (1) that the
present case they did prove fatal, and the robbers have been insured having been killed by intentional means, his death was not
accused and convicted of the crime of robbery with homicide. accidental, and (2) that the proviso in the policy expressly
The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon exempted the insurer from liability in case the insured died from
by the trial court in support of its decision. The facts in that case, injuries intentionally inflicted by another person. In rendering
however, are different from those obtaining here. The insured judgment for the insurance company the Court held that while the
there was a watchman in a certain company, who happened to be assassination of the insured was as to him an unforeseen event
invited by a policeman to come along as the latter was on his way and therefore accidental, "the clause of the proviso that excludes
to investigate a reported robbery going on in a private house. As the (insurer's) liability, in case death or injury is intentionally
the two of them, together with the owner of the house, approached inflicted by another person, applies to this case."
and stood in front of the main gate, a shot was fired and it turned In Butero v. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St. Rep.
out afterwards that the watchman was hit in the abdomen, the 61, 71 S.W. 811, the insured was shot three times by a person
wound causing his death. Under those circumstances this Court unknown late on a dark and stormy night, while working in the coal
held that it could not be said that the killing was intentional for shed of a railroad company. The policy did not cover death
there was the possibility that the malefactor had fired the shot to resulting from "intentional injuries inflicted by the insured or any
scare people around for his own protection and not necessarrily to other person." The inquiry was as to the question whether the
kill or hit the victim. A similar possibility is clearly ruled out by the shooting that caused the insured's death was accidental or
facts in the case now before Us. For while a single shot fired from a intentional; and the Court found that under the facts, showing that
distance, and by a person who was not even seen aiming at the the murderer knew his victim and that he fired with intent to kill,
victim, could indeed have been fired without intent to kill or injure, there could be no recovery under the policy which excepted death
nine wounds inflicted with bladed weapons at close range cannot from intentional injuries inflicted by any person.
conceivably be considered as innocent insofar as such intent is WHEREFORE, the decision appealed from is reversed and the
concerned. The manner of execution of the crime permits no other complaint dismissed, without pronouncement as to costs.
conclusion.
Court decisions in the American jurisdiction, where similar
provisions in accidental death benefit clauses in insurance policies
have been construed, may shed light on the issue before Us. Thus, Pineda V. CA (1993)
it has been held that "intentional" as used in an accident policy
excepting intentional injuries inflicted by the insured or any other Commissioner of Internal Revenue vs Lincoln Philippine Life
person, etc., implies the exercise of the reasoning faculties, Insurance Company, Inc.
consciousness and volition. 1 Where a provision of the policy
excludes intentional injury, it is the intention of the person Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now
inflicting the injury that is controlling. 2 If the injuries suffered by called Jardine-CMA Life Insurance Company, Inc.) used to issue
the insured clearly resulted from the intentional act of a third policies called Junior Estate Builder Policy. A clause therein
person the insurer is relieved from liability as stipulated. 3 provides for an automatic increase in the amount of life insurance
In the case of Hutchcraft's Ex'r v. Travelers' Ins. Co., 87 Ky. 300, 8 coverage upon attainment of a certain age by the insured without
S.W. 570, 12 Am. St. Rep. 484, the insured was waylaid and the need of issuing a new policy. The clause was to take effect in
assassinated for the purpose of robbery. Two (2) defenses were
the year 1984. Documentary stamp taxes due on the policy were While tax avoidance schemes and arrangements are not prohibited,
paid by Lincoln Philippine only on the initial sum assured. tax laws cannot be circumvented in order to evade the payment of
When the clause became effective in 1984, the Commissioner of just taxes. In the case at bar, to claim that the increase in the
Internal Revenue assessed anadditional tax on the increased amount insured (by virtue of the automatic increase clause
amount of the coverage of the said policies. Said tax was to cover incorporated into the policy at the time of issuance) should not be
the deficiency documentary stamps tax for said year. The Court of included in the computation of the documentary stamp taxes due
Appeals ruled that there is only one policy and the automatic on the policy would be a clear evasion of the law requiring that the
increase is not a separate policy; that said increase of coverage is tax be computed on the basis of the amount insured by the policy.
not covered by another documentary stamp tax.
ISSUE: Whether or not there is only one policy.
HELD: Yes. Section 49, Title VI of the Insurance Code defines an
insurance policy as the written instrument in which a contract of
insurance is set forth. Section 50 of the same Code provides that
the policy, which is required to be in printed form, may contain any
word, phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance. It is thus
clear that any rider, clause, warranty or endorsement pasted or
attached to the policy is considered part of such policy or contract
of insurance.
The subject insurance policy at the time it was issued contained an
automatic increase clause. Although the clause was to take effect
only in 1984, it was written into the policy at the time of its
issuance. The distinctive feature of the junior estate builder
policy called the automatic increase clause already formed part
and parcel of the insurance contract, hence, there was no need for
an execution of a separate agreement for the increase in the
coverage that took effect in 1984 when the assured reached a
certain age.
The said increase however is imposable with documentary stamp
taxes. The original documentary stamps tax paid by Lincoln
Philippine covers the original amount of the policies without the
projected increase. The said increase was already definite at the
time of the issuance of the policy. Thus, the amount insured by the
policy at the time of its issuance necessarily included
the additional sum covered by the automatic increase clause
because it was already determinable at the time the transaction
was entered into and formed part of the policy.