Travellers Insurance & Surety Corporation vs. Hon.

Court of Appeals & Vicente Mendoza

mean that the insurer can be held solidarily liable with the insured and/or the other parties found at
fault. The liability of the insurer is based on contract; that of the insured is based on tort.

Facts:
Vicente Mendoza, Jr. as heir of his mother (Feliza Vineza de Mendoza) who was killed in a vehicular
accident, filed an action for damages against the erring taxicab driver (Rodrigo Dumlao), the owner
(Armando Abellon) of the taxicab (Lady Love Taxi with Plate No. 438-HA Pilipinas Taxi 1980) and the
alleged insurer of the vehicle which featured in the vehicular accident. The erring taxicab was allegedly
covered by a third-party liability insurance policy issued by petitioner Travellers Insurance & Surety
Corporation. Petitioner was included in the complaint as the compulsory insurer of the said taxicab
under Certificate of Cover No. 1447785-3. The trial court rendered judgment in favor of private
respondent and ordered
Rodrigo Dumlao, Armando Abellon and petitioner to pay private respondent death indemnity, moral
damages, exemplary damages, attorneys fees and other litigation expenses, jointly and severally. The
decision was affirmed by the CA and the subsequent MR was denied.
Hence this petition.

II. At the time of the vehicular incident which resulted in the death of private respondents mother, during
which time the Insurance Code had not yet been amended by Batas Pambansa (B.P.) Blg. 874, Section
384 provided as follows:
Any person having any claim upon the policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company concerned a written notice of claim setting forth
the amount of his loss, and/or the nature, extent and duration of the injuries sustained as certified by a
duly licensed physician. Notice of claim must be filed within six months from date of the accident,
otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or
injury must be brought in proper cases, with the Commission or the Courts within one year from date of
accident, otherwise the claimants right of action shall prescribe
It is significant to note that the aforecited Section 384 was amended by B.P. Blg. 874 to categorically
provide that action or suit for recovery of damage due to loss or injury must be brought in proper
cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise the
claimants right of action shall prescribe

ISSUE: Whether petitioner is liable to private respondent?

HELD: NO.
I. The right of the person injured to sue the insurer of the party at fault (insured), depends on whether
the contract of insurance is intended to benefit third persons also or on the insured. And the test
applied has been this: Where the contract provides for indemnity against liability to third persons, then
third persons to whom the insured is liable can sue the insurer. Where the contract is for indemnity
against actual loss or payment, then third persons cannot proceed against the insurer, the contract
being solely to reimburse the insured for liability actually discharged by him thru payment to third
persons, said third persons recourse being thus limited to the insured alone. The trial court did not
distinguish between the private respondents cause of action against the owner and the driver of the
Lady Love taxicab and his cause of action against petitioner. The former is based on torts and quasidelicts while the latter is based on contract. Confusing these two sources of obligations as they arise
from the same act of the taxicab fatally hitting private respondents mother, and in the face of
overwhelming evidence of the reckless imprudence of the driver of the Lady Love taxicab, the trial court
brushed aside its ignorance of the terms and conditions of the insurance contract and forthwith found all
three - the driver of the taxicab, the owner of the taxicab, and the alleged insurer of the taxicab - jointly
and severally liable for actual,
moral and exemplary damages as well as attorneys fees and litigation expenses. This is clearly a
misapplication of the law by the trial court, and respondent appellate court grievously erred in not
having reversed the trial court on this ground. "While it is true that where the insurance contract
provides for indemnity against liability to third persons, such third persons can directly sue the insurer,
however, the direct liability of the insurer under indemnity contracts against third-party liability does not

We have certainly ruled with consistency that the prescriptive period to bring suit in court under an
insurance policy, begins to run from the date of the insurers rejection of the claim filed by the insured,
the beneficiary or any person claiming under an insurance contract. This ruling is premised upon the
compliance by the persons suing under an
insurance contract, with the indispensable requirement of having filed the written claim mandated by
Section 384 of the Insurance Code before and after its amendment. Absent such written claim filed by
the person suing under an insurance contract, no cause of action accrues under such insurance
contract, considering that it is the rejection of that claim that triggers the running of the one-year
prescriptive period to bring suit in court, and there can be no opportunity for the insurer to even reject a
claim if none has been filed in the first place, as in the instant case.
WHEREFORE, the instant petition is HEREBY GRANTED.
PHIL. AMERICAN LIFE INSURANCE v. PINEDA
175 SCRA 416
PARAS; July 19, 1989
NATURE
Petition for review on certiorari the orders of CFI
Judge Pineda

FACTS
- In 1968, Private Respondent Rodolfo Dimayuga procured an ordinary life insurance policy from
the petitioner company and designated his wife and children as irrevocable beneficiaries. On
Feb. 22, 1980, Dimayuga filed with the CFI a petition to amend the designation of the
beneficiaries in his life policy from irrevocable to revocable. Petitioner filed an Urgent Motion to reset
hearing as well as its comment and/or Opposition to the respondents
petition.
- Respondent Judge denied petitioners Urgent Motion, thus allowing private respondent to adduce
evidence, the consequence of which was the issuance of the questioned Order granting the
petition. Petitioner then filed a MFR which was also denied hence this petition.
ISSUE
1. WON the designation of the irrevocable beneficiaries could be changed or amended without the
consent of all the irrevocable beneficiaries
2. WON the irrevocable beneficiaries herein, one of whom is already deceased while the others are all
minors could validly give consent to the change or amendment in the designation of the irrevocable
beneficiaries
HELD
1. NO
- Based on the provision of their contract and the law applicable, it is only with the consent of all
the beneficiaries that any change or amendment in the policy concerning the irrevocable beneficiaries
may be legally and validly effected. Both the law and the Policy do not provide for any other exception.
Reasoning
- Since the policy was procured in 1968, the applicable law in this case is the Insurance Act and
under that law, the beneficiary designated in a life insurance contract cannot be changed without
the consent of the beneficiary because he has a vested interest in the policy.

- Contracts which are the private laws of the contracting parties should be fulfilled according to
the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to
the intention of the contracting parties, for contracts are obligatory, no matter in what form they may
be, whenever the essential requisites for their validity are present.
- Finally, the fact that the contract of insurance does not contain a contingency when the change in the
designation of beneficiaries could be validly effected means that it was never within the contemplation
of
the parties.
2. NO
- The parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract,
for otherwise, the vested rights of the irrevocable beneficiaries would be rendered inconsequential.
The alleged acquiescence of the 6 children beneficiaries cannot be considered an effective ratification
to the
change of the beneficiaries from irrevocable to revocable. They were minors at the time, and could
not validly give consent. Neither could they act through their father-insured since their interests are
quite divergent from one another.Disposition questioned Orders of respondent judge are nullified and
set aside.

Rizal surety & insurance company vs CA

(TRANSWORLD KNITTING MILLS, INC.)
336 SCRA 12
PURISIMA; July 18, 2000
NATURE
Petition for Review on Certiorari under Rule 45 of the
Rules of Court
FACTS

- The Beneficiary Designation Indorsement in the policy in the name of Dimayuga states that
the designation of the beneficiaries is irrevocable: no right or privilege under the Policy may be
exercised, or agreement made with the Company to any change in or amendment to the Policy,
without the consent of the said beneficiary/beneficiaries.

- Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy No. 45727 in
favor of Transworld Knitting Mills, Inc. (Transworld).
- Pertinent portions of subject policy on the buildings insured, and location thereof, read:

"On stocks of finished and/or unfinished products, raw materials and supplies of every kind and
description, the properties of the Insureds and/or held by them in trust, on commission or on
joint account with others and/or for which they (sic) responsible in case
of loss whilst contained and/or stored during the currency of this Policy in the premises occupied
by them forming part of the buildings situate (sic) within own Compound at MAGDALO STREET,
BARRIO UGONG, PASIG, METRO MANILA, PHILIPPINES, BLOCK NO. 601 Said building of fourspan lofty one storey in height with mezzanine portions is constructed of reinforced concrete and
hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills, garment
and lingerie factory, transistor-stereo assembly plant, offices, warehouse and caretaker's
quarters. Bounds in front partly by one-storey concrete building under galvanized iron roof occupied as
canteen and guardhouse, partly by building of two and partly one storey constructed of concrete
below, timber above undergalvanized iron roof occupied as garage and quarters and partly by open
space and/or tracking/ packing, beyond which is the aforementioned Magdalo Street; on its right
and left by driveway, thence open spaces, and at the rear by open spaces.'"
- The same pieces of property insured with the petitioner were also insured with New India
Assurance Company, Ltd., (New India).
- Fire broke out in the compound of Transworld, razing the middle portion of its four-span building and
partly gutting the left and right sections thereof. A two-storey building (behind said four-span
building) where fun and amusement machines and spare parts were stored, was also destroyed by
the fire.
- Transworld filed its insurance claims with Rizal Surety & Insurance Company and New India
Assurance Company but to no avail.
- Private respondent brought against the said insurance companies an action for collection of
sum of money and damages.
- Petitioner Rizal Insurance countered that its fire insurance policy sued upon covered only the
contents of the four-span building, which was partly burned, and not the damage caused by the fire
on the two-storey annex building.
- The trial court dismissed the case as against The New India Assurance Co., Ltd. but ordered
defendant Rizal Surety And Insurance Company to pay Transwrold (sic) Knitting Mills, Inc.
- Both the petitioner, Rizal Insurance Company, and private respondent, Transworld Knitting Mills,
Inc., went to the Court of Appeals, which required New India Assurance Company to pay plaintiffappellant the amount of P1,818,604.19 while the Rizal Surety has to pay the plaintiff-appellant
P470,328.67.
- New India appealed to the Court theorizing inter alia that the private respondent could not be

compensated for the loss of the fun and amusement machines and spare parts stored at the
two-storey building because it (Transworld) had no insurable interest in said goods or items.
- The Court denied the appeal with finality.
- Petitioner Rizal Insurance and private respondent Transworld, interposed a Motion for
Reconsideration before the Court of Appeals, which reconsidered its decision of July 15, 1993, as
regards the imposition of interest.
- Undaunted, petitioner Rizal Surety & Insurance Company found its way to the Court.
ISSUE
WON the fire insurance policy litigated upon protected only the contents of the main building
(four-span), and did not include those stored in the two-storey annex building
HELD
NO
- Resolution of the issue posited hinges on the proper interpretation of the stipulation in subject fire
insurance policy regarding its coverage, which reads:
"xxx contained and/or stored during the currency of this Policy in the premises occupied by them
forming part of the buildings situate (sic) within own Compound xxx"
- It can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what
were stored in the four-span building. As opined by the trial court of origin, two requirements must
concur in order that the said fun and amusement machines and spare parts would be deemed
protected by the fire insurance policy under scrutiny, to wit:
"First, said properties must be contained and/or stored in the areas occupied by Transworld and
second, said areas must form part of the building described in the policy xxx"
- Said building of four-span lofty one storey in height with mezzanine portions is constructed of
reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as
hosiery mills, garment and lingerie factory, transistor-stereo assembly plant, offices, ware house and
caretaker's quarter.
- The Court is mindful of the well-entrenched doctrine that factual findings by the Court of Appeals
are conclusive on the parties and not reviewable by this Court, and the same carry even more weight

when the Court of Appeals has affirmed the findings of fact arrived at by the lower court.
- In the case under consideration, both the trial court and the Court of Appeals found that the so called
"annex " was not an annex building but an integral and inseparable part of the four-span building
described in the policy and consequently, the machines and spare parts stored therein were
covered by the fire insurance in dispute.
- Verily, the two-storey building involved, a permanent structure which adjoins and
intercommunicates with the "first right span of the lofty storey building", formed part thereof, and
meets the requisites for compensability under the fire insurance policy sued upon.
- So also, considering that the two-storey building aforementioned was already existing when
subject fire insurance policy contract was entered into, petitioner should have specifically excluded
the said two-storey building from the coverage of the fire insurance if minded to exclude the same
but if did not, and instead, went on to provide that such fire insurance policy covers the products,
raw materials and supplies stored within the premises of respondent Transworld which was an
integral part of the four-span building occupied by Transworld, knowing fully well the existence of
such building adjoining and intercommunicating with the right section of the four-span building.
- Indeed, the stipulation as to the coverage of the fire insurance policy under controversy has created
a doubt regarding the portions of the building insured thereby. Article 1377 of the New Civil Code
provides:
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity"
- Conformably, it stands to reason that the doubt should be resolved against the petitioner, Rizal
Surety Insurance Company, whose lawyer or managers drafted the fire insurance policy contract
under scrutiny. Citing the aforecited provision of law in point, the Court in Landicho vs. Government
Service Insurance System, ruled:
"This is particularly true as regards insurance policies, in respect of which it is settled that the terms
in an insurance policy, which are
ambiguous, equivocal, or uncertain x x x are to be construed strictly and most strongly against the
insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or
payment to the insured, especially where forfeiture is involved' and the reason for this is that the
'insured usually has no voice in
the selection or arrangement of the words employed and that the language of the contract is
selected with great care and deliberation by experts and legal advisers employed by, and acting
exclusively in the interest of, the insurance company.' "

- Equally relevant is the following disquisition of the Court in Fieldmen's Insurance Company, Inc.
vs. Vda. De Songco, to wit:
"'This rigid application of the rule on ambiguities has become necessary in view of current business
practices. The courts cannot ignore that nowadays monopolies, cartels and concentration of
capital, endowed with overwhelming economic power, manage to impose upon parties dealing
with them cunningly prepared 'agreements' that the weaker party may not change one whit, his
participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since
Raymond Saleilles 'contracts by adherence' (contrats [sic] d'adhesion), in
contrast to these entered into by parties bargaining on an equal footing, such contracts (of which
policies of insurance and international bills of lading are prime example) obviously call for greater
strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from
abuses and imposition, and
prevent their becoming traps for the unwary.'"
- The issue of whether or not Transworld has an insurable interest in the fun and amusement
machines and spare parts, which entitles it to be indemnified for the loss thereof, had been settled
in G.R. No. L-111118, entitled New India Assurance
Company, Ltd., vs. Court of Appeals, where the appeal of New India from the decision of the Court
of Appeals under review, was denied with finality by this Court on February 2, 1994.
- The rule on conclusiveness of judgment, which obtains under the premises, precludes the
relitigation of a particular fact or issue in another action between the same parties based on a different
claim or cause of action. "xxx the judgment in the prior action operates as estoppel only as to
those matters in issue or points controverted, upon the determination of which the finding or judgment
was rendered. In fine, the previous judgment is conclusive in the second case, only as those
matters actually and directly controverted and determined and not as to matters merely involved
therein."
Disposition Decision, and the Resolution of the CA
WERE AFFIRMED in toto. No pronouncement as to
costs.

GEAGONIA v. CA (COUNTRY BANKERS INSURANCE)

8 SCRA 343
DAVIDE; February 6 1995

FACTS
-Geagonia is the owner of Norman's Mart located in the public market of San Francisco, Agusan del
Sur. On 22 Dec 1989, he obtained from the private respondent fire insurance policy for
P100,000.00.
The period of the policy was from 22 Dec 1989 to 22 Dec 1990 and covered the ff: "Stock-in-trade
consisting principally of dry goods such as RTW's for men and women wear and other usual to
assured's
business.
-The policy contained the following condition:
"3. The insured shall give notice to the Company of any insurance or insurances already effected,
or which may subsequently be effected, covering any of the property or properties consisting of
stocks in
trade, goods in process and/or inventories only hereby insured, and unless notice be given and the
particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to
Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any
loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that
this condition shall not apply when the total insurance or insurances in force at the time of the loss or
damage is not more than P200,000.00."
-On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San
Francisco, Agusan del Sur. The petitioner's insured stocks-in-trade were completely destroyed
prompting him to file w/ the private respondent a claim under the policy. On 28 Dec 1990, the private
respondent denied the claim because it found that at the time of the loss the petitioner's stocks-in-trade
were likewise covered by two fire insurance policies for
P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC).

claims that the time he obtained the private respondent's fire insurance policy he knew that the two
policies issued by the PFIC were already in existence; however, he had no knowledge of the
provision in the private respondent's policy requiring him to inform it
of the prior policies; this requirement was not mentioned to him by the private respondent's agent;
and had it been so mentioned, he would not have withheld such information. He further asserted that
the total of the amounts claimed under the three policies was below the actual value of his stocks
at the time of loss, w/c was P1M.
- The Insurance Commission found that the petitioner did not violate Condition 3 as he had no
knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was
Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and
that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were
based on the petitioner's testimony that he came to know of the
PFIC policies only when he filed his claim with the private respondent and that Cebu Tesing Textile
obtained them and paid for their premiums w/o informing him. The Insurance Commission then
ordered the respondent company to pay complainant the sum of P100,000.00 with legal interest from
the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as attorney's fees.
-CA reversed the decision of the Insurance Commission because it found that the petitioner
knew of the existence of the two other policies issued by the PFIC
ISSUES
1. WON the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he
obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact,
violating Condition 3 of the policy
2. if he had, WON he is precluded from recovering therefrom

-The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of
the policy.

HELD
1. YES
- We agree w/ the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of
18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the
contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a
written admission made ante litem motam. It was, indeed, incredible that he did not know about
the prior policies since these policies were not new or original.

- Geagonia then filed a complaint against the private respondent w/ the Insurance Commission for
the recovery of P100,000.00 under fire insurance policy, for attorney's fees, and costs of litigation. He

2. NO
- It must, however, be underscored that unlike the "other insurance" clauses involved in General

Insurance and Surety Corp. vs. Ng Hua or in Pioneer Insurance & Surety Corp. vs. Yap, which
read:
"The insured shall give notice to the company of any insurance or insurances already effected, or
which may subsequently be effected covering any of the property hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be stated in or endorsed on this
Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under
this Policy shall be forfeited." or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co.
which provided "that any outstanding insurance upon the whole or a portion of the objects thereby
assured must be declared by the insured in writing and he
must cause the company to add or insert it in the policy, without which such policy shall be null and
void, and the insured will not be entitled to indemnity in case of loss," Condition 3 in the
private respondent's policy No. F-14622 does not absolutely declare void any violation thereof. It
expressly provides that the condition "shall not apply when the total insurance or insurances in
force at the time of the loss or damage is not more than P200,000.00."
- Interpretation: It is a cardinal rule on insurance that a policy or insurance contract is to be
interpreted liberally in favor of the insured and strictly against the company, the reason being,
undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when
he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that
any construction which would result in the forfeiture of the policy benefits for the person claiming
thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit
recovery, as, for example, by finding a waiver for such forfeiture. Stated differently, provisions,
conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be
construed most strictly against those for whose benefits they are inserted, and most favorably
toward those against whom they are
intended to operate. The reason for this is that, except for riders which may later be inserted, the
insured sees the contract already in its final form and has had no voice in the selection or arrangement
of
the words employed therein. On the other hand, the language of the contract was carefully chosen
and deliberated upon by experts and legal advisers who had acted exclusively in the interest of the
insurers
and the technical language employed therein is rarely understood by ordinary laymen.
- With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally
free from ambiguity and must be
meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to
double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00
of the total policies obtained.

- Furthermore, by stating within Condition 3 itself that such condition shall not apply if the
insurance in force at the time of loss does not exceed P200,000.00, the private respondent was
amenable
to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to
discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause
in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a
property owner obtains insurance policies from two or more insurers in a total amount that exceeds
the property's value, the insured may have an inducement to destroy the property for the purpose of
collecting the insurance. The public as well as the insurer is interested in preventing a situation in
which a fire would be profitable to the insured.Disposition Petition granted. The decision of the Court
of Appeals in CA-G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Commission
in Case No. 3340 is REINSTATED.

DEL ROSARIO V EQUITABLE INSURANCE & CASUALTY CO., INC

8 SCRA 343
PAREDES; June 29, 1963
NATURE
Appeal from judgment of CFI Rizal
FACTS
- Francisco del Rosario was insured by Equitable Insurance and Casualty Co. Inc under
Personal Accident Policy no. 7136. The Company bound itself to pay P1000 to P3000 as indemnity
for the death of the insured.
- Under the policy:
Part I. Indemnity for Death if the insured sustains any bodily injury
which is effected solely through violent, external, visible and accidental means, and which shall
result, independently of
all other causes and within sixty days from the occurrence thereof, in the Death of the Insured, the
Company shall pay the amount set opposite such injury:
Section 1. Injury sustained other than those specified below unless excepted hereinafter P1000
Section 2. Injury sustained by the wrecking or disablement of a railroad passenger car or street
railway car in or on which the Insured is traveling as a farepaying passenger P1500
Section 3. Injury sustained by the burning of a church, theatre, public library or municipal

administration building while the Insured is therein at the commencement of the fire P2000

- CFI ruled in favor of petitioner, ordering the company to pay P2000 to del Rosario.

Section 4. Injury sustained by the wrecking or disablement of a regular passenger elevator car
in which the Insured is being conveyed as a passenger (Elevator in mines exluded) P2500

ISSUE
How much should the indemnity be

Section 5. Injury sustained by a stroke of lightning or by a cyclone P3000

xxxxxxxxxxxx
Part VI. Exceptions
This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability, Hospital
fees, or Loss of time, caused to the insured:
x x x (h) By drowning except as a consequence of the wrecking or disablement in the Philippine
waters of a passenger steam or motor vessel in which the Insured is traveling as a farepaying
passenger; x x x
- A rider to the Policy contained the following;
IV. DROWNING
It is hereby declared and agreed that exemption clause Letter (h) in PART VI of the policy is
hereby waived by the company, and to form a part of the provision covered by the policy.
- Feb 24, 1957, Francisco del Rosario while on board the motor launch ISLAMA, with his beneficiary to
the policy, Remedios Jayme, were forced to jump off said launch on account of fire which broke out
on said vessel, resulting in the death by drowning of the insured and his beneficiary.
- Simeon del Rosario, the insureds father, filed a claim for payment with the company. The
company paid him P1000 pursuantto section 1 Part I of the policy.
- On the same date, Atty. Francisco wrote to the company acknowledging receipt by his client of the
P1000 but informing said company that said amount was not the correct one. He claimed that the
amount payable should be P1500 under the provision of
Section 2 Part I, based on the rule of pari materia.
- The company referred the matter to the Insurance Coomissioner, who was of the opinion that the
liability of the company was only P1000. thus the company refused to pay more that P1000. Atty.
Francisco wrote a subsequent letter to company asking for p3000, which the company refused to
pay.

HELD
- All the parties agree that indemnity has to be paid, but the conflict centers on how much it should be.
- Where there is ambiguity with respect to the terms and conditions of the policy, the same will be
resolved against the one responsible thereof. Generally, the insured has little, if any, participation in
the preparation of the policy, together with the
drafting of its terms and conditions. The interpretation of obscure stipulations in a contract should
not favor the party who caused the obscurity.
- SC agreed with the ruling of the lower court: x x x death by drowning is a ground for recovery apart
from the bodily injury because death by
bodily injury is covered by Part I of the policy while death by drowning is covered by Part VI thereof.
But while the policy mentions specific amounts that may be recovered for death for
bodily injury, yet, there is not specific amount mentioned in the policy for death thru drowning
although the latter is, under Part VI of the policy, a ground for recovery thereunder. Since the
defendant has bound itself to pay P1000 to P3000 as indemnity for the death of the insured but the
policy does not positively state any
definite amount that may be recovered in case of death by drowning, there is an ambiguity in this
respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against
the insurer so as to allow a greater indemnity. x x x plaintiff is therefore entitled to recover P3000.
Disposition Judgment appealed from is affirmed.
FIRST QUEZON CITY INSURANCE CO. v. CA (DE
DIOS MARIKINA TRANSPORT CO)
218 SCRA 526
GRINO-AQUINO; February 28, 1993
NATURE
PETITION for review of the decision of the Court of Appeals. FQCIC seeks to limit to P12000, the
amount specified in the insurance contract, its liability to indemnify the respomdemt DMTC, for
the damages suffered by a passenger, who accidentally fell off the
bug.

- A complaint for recovery of the balance of P2000 was instituted with the CFI Rizal, praying for a
further sum of P10000 as attorneys fees, expenses of litigation and costs.
FACTS

- After sending off certain seamen at the departure area of MIA, Jose V. del Rosario proceeded to
the public utility bus stop. While at the bus stop, the plaintiff saw a DMTC bus. While moving at a
crawling
pace, it was taking several passengers, all of whom managed to board the bus while it was already at
the bus stop; plaintiff was the last one to board the bus.While the plaintiff was still on the bus with his
hand
on the bus door, the slowly moving bus sped forward at a high speed, as a result of which, the plaintiff
lost balance and fell from the bus. As plaintiff clung instinctively to the handle bar, he was dragged
by
the bus along the asphalted road. The bus driver, Gil Agpalo, abruptly stopped the bus. Then fled from
the scene, leaving the bus and the injured plaintiff behind.
- The plaintiff was brought to the Manila Sanitarium and Hospital where the doctors performed 2 major
surgical operations on plaintiffs right leg.
- Plaintiff was confined at the hospital for (40) days, from June 10, 1984 to August 26, 1984.
Medical expenses totaled the amount of P69,444.41. Plaintiffs medical expenses were advanced
by his
employer Maglines but he was required to reimburse Maglines on a staggered basis by way of
salary deductions. After his release from the hospital, he returned to the hospital for further
treatment and checkup. The injuries had left plaintiff with a huge scar on his right leg. Also, the
plaintiff incurred lost earning by way of unearned salaries amounting to P7,500.00 due to said
physical injuries and the consequent hospital confinement.
- Plaintiff filed on June 26, 1985 the complaint against DMTC and its driver. Agpalo was later
dropped as a party defendant because he could not be served with summons. Upon filing its
answer, defendant DMTC filed a thirdparty complaint against
First Quezon City Insurance Co., Inc. September 17, 1985, third-party defendant filed its answer to
the third-party complaint.
- TC held DMTC complaint dismissed for lack of merit and as regards the third-party complaint First
Quezon City Insurance Co., Inc. was to indemnify third-party plaintiff DMTC in the sum of
P12,000.00
with interest. There being no satisfactory warrant the court dismissed the rest of the claims in the
complaint and third-party complaint.
- The bus company appealed to the CA, which modified the dispositive as regards the third-party
complaint, that the third-party defendant First Quezon City Insurance Co., Inc. be ordered to
indemnify third-party plaintiff DMTC the SUM of P50,000.00 with legal interest. Insurance company
filed a MFR which was denied.
Hence, this petition for review, assailing the appellate courts' interpretation of the provision of the
insurance contract on the limit of the insurer's liability.

ISSUE
WON the CA erred in the interpretation of the insurance contract on the limit of the insurers
liability
HELD
YES
- The insurance policy clearly placed the maximum limit of the petitioner's liability for damages arising
from death or bodily injury at P12,000.00 per passenger and its maximum liability per accident at
P50,000.00. Since only one passenger was injured in the accident, the insurer's liability for the
damages suffered by said passenger is pegged to the amount of P12,000.00 only.
- The limit of P50,000.00 per accident means that the insurer's maximum liability for any single
accident will not exceed P50,000.00 regardless of the number of passengers killed or injured therein.
The bus company may not recover from the insurance company more than P12,000.00 per
passenger killed or injured, or (P50,000.00) per accident even if under the judgment of the court,
the erring bus operator will have to pay more than P12,000.00 to each injured passenger. The
trial court's interpretation of the insurance contract was the correct interpretation.
Disposition petition for review is GRANTED. The decision promulgated by the CA, ordering the third
party defendent, First Quezon City Insurance Co., Inc. to indemnify theI private respondent,
(DMTC), the sum of P50,000.00 for the damages of the passenger, Jose V. Del Rosario, is hereby
modified by reducing the award to 12,000.00 only. Costs against the private respondent De Dios
Marikina

Insurance Case Digest: New Life Enterprises V. Court Of Appeals (1992)

FACTS:

May 15, 1981: Western Guaranty Corporation issued Fire Insurance Policy
to New Life Enterprises foar P350,000

renewed on May, 13, 1982

July 30,1981: Reliance Surety and Insurance Co., Inc. issued Fire

Insurance Policy to New Life Enterprises for P300,000

same insurance claims adjuster

November 12, 1981; Additional P700,000

Availmentof

February 8, 1982: Equitable Insurance

do not warrant the speculative conclusion of the trial court.

October 19, 1982 2 am: fire electrical in nature destroyed the stock in trade

Sy violated the "Other Insurance Clause"

insured

to

express any

the

terms

disagreement

vital

one

of

the
with

because

to

where
reveal

but did not, that was deception - guilty of clear fraud total absence of such notice nullifies the

RTC: favored New Life and against the three insurance companies

CA: reversed -failure to state or endorse the other insurance coverage

policy
assuming arguendo that petitioners felt the

legitimate need to be clarified as to the policy condition violated, there was a considerable

W/N

Sy

can

claim

against

the

three

insurance

companies

for

violating

lapse of time from their receipt of the insurer's clarificatory letter dated March 30, 1983, up to

the "Other Insurance Clause"

the

time

the

complaint

year prescriptive period was yet

NO.The

terms

of the contract are clear and unambiguous.

The insured is specifically required to disclose to the

insurer

any

other

insurance

and

from

its

particulars which he may have effected on the same subject matter.

the

the insured had been asked

HELD:

of

what is provided for. a clear misrepresentation and

happened with the others who were sister companies.

ISSUE:

conformity

policy isimplied from his failure to

Julian Sy went to Reliance to claim but he was refused. Same thing

The

worth P1,550,000

services of the same agents and adjusters by different

companies is a common practice in the insurancebusiness and such facts

Corporation issued Fire Insurance Policy to New Life Enterprises for P200,000

the

the

was

filed in court

on

January 31, 1984. The one-

toexpire on November 29, 1983, or about eight (8) months

receipt of the clarificatory letter, but petitioners

let

the

period lapse without bringing their action in

Insurance Case Digest: Rizal Commercial Banking Corporation V. Ca (1998)

The knowledge of such insurance by the insurer's agents, even assuming the acquisition
thereof by the former, is not the "notice" that would estop the insurers from denying

FACTS:

the claim.

conclusion of

the trial court that Reliance and Equitable are "sister

RCBC Binondo Branch initially granted a credit facility of P30M to Goyu &

companies" is an unfounded conjecture drawn from the mere fact that Yap Kam

Sons, Inc. GOYUs applied again and through Binondo Branch key officer's Uys and Laos

Chuan

recommendation, RCBCs executive committee increased its credit facility to P50M to P90M

was

an agent for both companies which

also

had

the

and finally to P117M.

As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in

policies were attached in favor of Sebastian

favor of RCBC.

GOYU concluded that the endorsements favoring RCBC as defective.

GOYU obtained in its name 10 insurance policy on the mortgaged properties

from Malayan Insurance Company, Inc. (MICO). In February 1992, he was issued 8

ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the

insurance policies in favor of RCBC.

mortgagor, in case of the occurrence of loss

April 27, 1992: One of GOYUs factory buildings was burned so he claimed
against MICO for the loss who denied contending that the insurance policies were

HELD: YES.

either attached pursuant to writs of attachments/garnishments or that creditors are claiming to

have a better right

GOYU filed a complaint for specific performance and damages at the RTC

RCBC, one of GOYUs creditors, also filed with MICO its formal claim over

RTC and CA: endorsements do not bear the signature of any officer of

mortgagor and a mortgagee have separate and distinct insurable interests in

the same mortgaged property, such that each one of them may insure the same property for
his own sole benefit
although it appears that GOYU obtained the subject insurance policies

the proceeds of the insurance policies, but said claims were also denied for the same reasons

naming itself as the sole payee, the intentions of the parties as shown by their

that MICO denied GOYUs claims

contemporaneous acts, must be given due consideration in order to better serve the interest of

RTC: Confirmed GOYUs other creditors (Urban Bank, Alfredo Sebastian,

justice and equity

and Philippine Trust Company) obtained their writs of attachment covering an aggregate

8 endorsement documents were prepared by Alchester in favor of RCBC

amount of P14,938,080.23 and ordered that 10 insurance policies be deposited with the court

MICO, a sister company of RCBC

minus the said amount so MICO deposited P50,505,594.60.

GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.

Another Garnishment of P8,696,838.75 was handed down

GOYU is at the very least estopped from assailing their operative effects.

RTC: favored GOYU against MICO for the claim, RCBC for damages and to

The two courts below erred in failing to see that the promissory notes which

pay RCBC its loan

CA: Modified by increasing the damages in favor of GOYU

In G.R. No. 128834, RCBC seeks right to intervene in the action between
Alfredo C. Sebastian (the creditor) and GOYU (the debtor), where the subject insurance

they ruled should be excluded for bearing dates which are after that of the fire, are mere
renewals of previous ones

RCBC has the right to claim the insurance proceeds, in substitution of the
property lost in the fire. Having assigned its rights, GOYU lost its standing as the beneficiary of

the said insurance policies

failure to apply the Doctrine of Estoppel in

this case would result in a gross travesty of justice.

insurance company to be held liable for unreasonably delaying and

withholding payment of insurance proceeds, the delay must be wanton, oppressive, or

ISSUE: Whether or not the insurance claim is proper?

malevolent - not shown

Sebastians right as attaching creditor must yield to the preferential rights of

RCBC over the Malayan insurance policies as first mortgagee.

FIELDMENS INSURANCE CO. vs. VDA. DE SONGCO

FACTS:
Federico Songco owned a private jeepney. On September 15, 1960, he was induced by
Fieldmen's insurance agent Benjamin Sambat to apply for a Common Carrier's Liability Insurance
Policy covering his motor vehicle. He was issued a Common Carriers
Accident Insurance Policy. On the next year, he renewed the policy by paying the annual
premium. During the effectivity of the renewed policy, the insured vehicle collided with another car
while being driven by Rodolfo Songco, a duly licensed driver and son of Federico (the vehicle
owner). As a result, Federico Songco (father) and Rodolfo Songco (son) died, along with other
passengers.
A claim was filed but was denied by the insurance company on the pretext that what was insured
was a private vehicle and not a common carrier. During the trial, it was declared by a witness that when
insurance agent Benjamin Sambat was inducing Songco to insure
his vehicle, the latter butted in saying, Our vehicle is a private vehicle and not for passengers. But
the agent replied: Regardless of whether your vehicle was an owner-type or for passengers, it
could still be insured because our company is not owned by the Government. And the
Government has nothing to do
with our company.
The Court of Appeals rendered a decision in favor of the claimants. It held that where inequitable
conduct is shown by an insurance firm, it is estopped from enforcing forfeitures in its favor, in
order to forestall fraud or imposition on the insured. After Fieldmen's Insurance Co. had led the
insured Songco to believe that he could qualify under the common carrier liability insurance policy, it
could not, thereafter, be permitted to change its stand to the detriment of the heirs of the insured. The

RULING:
The fact that the insured owned a private vehicle, not a common carrier, was something which the
company knew all along. In fact, it exerted the utmost pressure on the insured, a man of scant
education, to enter into the contract of insurance. The Court of Appeals also
held that since some of the conditions contained in the policy were impossible to comply with under
the existing conditions at the time, the insurer is estopped from asserting breach of such conditions.
The Supreme Court, in affirming the decision of the Court of Appeals, took judicial notice of the fact
that nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming
economic power, manage to impose upon parties dealing with them cunningly prepared
agreements that the weaker party may not change one whit, his participation in the agreement being
reduced to the alternative of take it or leave it labelled since Raymond Saleilles as contracts by
adherence (contrats d'adhesion), in
contrast to those entered into by parties bargaining on an equal footing, such contracts (i.e. insurance
policies & international bills of lading) obviously call for greater strictness and vigilance on the part of
courts of justice with a view to protecting the weaker party from
abuses. Citing the case of Qua Chee Gan vs. Law Union & Rock
Insurance, "The contract of insurance is one of perfect good faith (uberima fides) not for the
insured alone but equally so for the insurer; in fact, it is more so for the latter, since its dominant
bargaining position carries with it stricter responsibility."
Landicho vs. GSIS
[G.R. No. L-28866 March 17, 1972]
FACTS:
On June 1, 1964, the GSIS issued in favor of Flaviano Landicho, a civil engineer of the Bureau of
Public Works, stationed at Mamburao, Mindoro Occidental, optional additional life insurance policy
No. OG-136107 in the sum of P7,900.
Before the issuance of said policy, Landicho had filed an application, by filing and signing a printed form
of the GSIS on the basis of which the policy was issued. Paragraph 7 of said application States:

7. xxx I hereby agree as follows: xxx

c. That this application serves as a letter of authority to the Collecting Officer of our Office thru
the GSIS to deduct from my salary the monthly premium in the amount of P33.36,
beginning the month of May, 1964, and every month thereafter until notice of its discontinuance
shall have beenreceived from the System; .
d. That the failure to deduct from my salary the month premiums shall not make the policy lapse,
however, the premium account shall be considered as indebtedness which, I bind myself to
pay the System; .
e. That my policy shall be made effective on the first day of the month next following the month
the first premium is paid; provided, that it is not more ninety (90) days before or
after the date of the medical examination, was conducted if
required."
While still an employee of the Bureau of Public Works, Mr. Landicho died in an airplane crash on June
29, 1966. Mrs. Landicho, in her own behalf and that of her co-plaintiffs and minor children, Rafael J.
and Maria Lourdes Eugenia, filed with the GSIS a claim for
P15,800, as the double indemnity due under policy No. OG-136107. GSIS denied the claim, upon the
ground that the policy had never been in force because, pursuant to subdivision (e) of the
above-quoted paragraph 7 of the application, the policy "shall be ... effective on the first day of the
month next following the month the first premium is paid," and no premium had ever been paid on said
policy. The Lower Court decided in favor of the petitioner. GSIS appealed to the Supreme Court.
ISSUE: WON the insurance policy in question has ever been in force, not a single premium having
been paid thereon.
RULING:
Lower Court decision is sustained.

This is particularly true as regards insurance policies, in respect of which it is settled that the " "terms in
an insurance policy, which are ambiguous, equivocal, or uncertain ... are to be construed strictly
and most strongly against the insurer, and liberally in favor of
the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially
where a forfeiture is involved" (29 Am. Jur., 181), and the reason for this rule is the "insured usually
has no voice in the selection or arrangement of the words employed
and that the language of the contract is selected with great care and deliberation by experts and
legal advisers employed by, and acting exclusively in the interest of, the insurance company." (44
C.J.S., p. 1174.)
The equitable and ethical considerations justifying the foregoing view are bolstered up by two (2)
factors, namely:
(a) The aforementioned subdivision (c) states "that this application serves as a letter of authority to
the Collecting Officer of our Office" the Bureau of Public Works "thru the GSIS to deduct from my
salary the monthly premium in the amount of P33.36." No such
deduction was made and, consequently, not even the first premium "paid" because the
collecting officer of the Bureau of Public Works was not advised by the GSIS to make it (the deduction)
pursuant to said authority. Surely, this omission of the GSIS should
not inure to its benefit.
(b) The GSIS had impliedly induced the insured to believe that Policy No. OG-136107 was in force,
he having been paid by the GSIS the dividends corresponding to said policy. Had the insured had
the slightest inkling that the latter was not, as yet, effective for non-payment of the first
premium, he would have, in all probability, caused the same to be forthwith satisfied.
WHEREFORE, the decision appealed from should be, it is hereby affirmed, with costs against the
defendant-appellant, Government Service Insurance System. It is so ordered.

(T)he language, of subdivisions (c), (d) and (e) is such as to create an ambiguity that should be
resolved against the party responsible therefor defendant GSIS, as the party who prepared and
furnished the application form and in favor of the party misled
thereby, the insured employee.

PALILEO v. COSIO
[G.R. No. L-7667 November 28, 1955]

Indeed, our Civil Code provides:

The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity.

FACTS:
On Dec. 18, 1951, Palileo obtained from Cosio a loan in
the sum of 12,000. Pursuant to their agreement,

Palileo paid to Cosio as interest on the loan a total of

P2,250 corresponding to 9 mos from Dec 18, 1951, on
the basis of P250 a month, which is more than the
maximum interest allowed by law. To secure the
payment of the aforesaid loan, defendant required
plaintiff to sign a a document known as Conditional
Sale of Residential Bldg purporting to convey to
defendant, with right to repurchase, a two-story
building of strong materials belonging to plaintiff. This
document did not express the true intention of the
parties, which was merely to place said property as
security for the payment of the loan. After the
execution of the document, defendant insured the
building against fire with the Associated Insurance &
Surety Co., Inc. for the sum of P15000, the insurance
policy having been issued in the name of defendant.
The building was partly destroyed by fire and, after
proper demand, defendant collected from the
insurance company an indemnity of P13,107. Plaintiff
demanded from defendant that she be credited with
the necessary amount to pay her obligation out of the
insurance proceeds but defendant refused to do so.
Upon these facts, the trial court held that the
defendant should credit the sum of P13,107 received
by him from the Associated Insurance & Surety Co.,
Inc. to the payment of plaintiffs obligation in the sum
of P12000, thus considering the agreement fully paid
and leaving a balance of P1107 from the insurance
collected by the defendant; and since plaintiff had paid
to defendant P2250 for 9 mos for interest which
exceeds the 12 percent per annum legal interest
(P1440 for one year), plaintiff overpaid P810,
defendant should refund plaintiff the total of P1107
plus P810 and to pay the costs.
ISSUE:
WON the trial court is justified in considering the
obligation of plaintiff fully compensated by the
insurance amount and in ordering defendant to refund
to plaintiff the sum of P1107 representing the
difference of the loan of 12K from the sum of P13107
collected by defendant from insurance notwithstanding

the fact that it was proven that the insurance was

taken for the benefit of the mortgagor?
HELD:
SC modified the judgment of the lower court as
follows: (1) the transaction had between the plaintiff
and defendant was merely an equitable mortgage
intended to secure the payment of the loan of 12K; (2)
that the proceeds of the insurance amounting to P13,
107 was properly collected by defendant who is not
required to account for it to the plaintiff; (3) that the
collection of said insurance proceeds shall not be
deemed to have compensated the obligation of the
plaintiff to the defendant, but bars the latter from
claiming its payment from the former; and (4)
defendant shall pay to the plaintiff the sum of P810
representing the overpayment made by plaintiff by
way of interest on the loan.
The rule is that where a mortgagee, independently of
the mortgagor, insures the mortgaged property in his
own name and for his own interest, he is entitled to
the insurance proceeds in case of loss, but in such
case, he is not allowed to retain his claim against the
mortgagor, but is passed by subrogation to the insurer
to the extent of the money paid. Or, stated in another
way, the mortgagee may insure his interest in the
property independently of the mortgagor. In that
event, upon the destruction of the property the
insurance money paid to the mortgagee will not inure
to the benefit of the mortgagor, and the amount due
under the mortgage debt remains unchanged. The
mortgagee, however, is not allowed to retain his claim
against the mortgagor, but it passes by subrogation to
the insurer, to the extent of the insurance money
paid.
The general rule and the weight of authority is, that
the insurer is thereupon subrogated to the rights of the
mortgagee under the mortgage. This is put upon the
analogy of the situation of the insurer to that of a
surety.
The correct solution, contrary to the trial courts ruling,
should be that the proceeds of the insurance should be
delivered to the defendant but that her claim against

the plaintiff should be considered assigned to the

insurance company who is deemed subrogated to the
rights of the defendant to the extent of the money paid
as indemnity.

THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T. EBRADO and PASCUALA
VDA. DE EBRADO
[G.R. No. L-44059 October 28, 1977]
Facts of the Case:
On September 1, 1968, Buenaventura Cristor Ebrado
was issued by The Life Assurance Co., Ltd., Policy No.
009929 on a whole-life for P5,882.00 with a, rider for
Accidental Death for the same amount Buenaventura
C. Ebrado designated Carpponia T. Ebrado as the
revocable beneficiary in his policy. He to her as his
wife.
On October 21, 1969, Buenaventura C. Ebrado died
when he was hit by a failing branch of a tree. As the
policy was in force, The Insular Life Assurance Co.,
Ltd. liable to pay the coverage in the total amount of
P11,745.73, representing the face value of the policy
in the amount of P5,882.00 plus the additional benefits
for accidental death also in the amount of P5,882.00
and the refund of P18.00 paid for the premium due
November, 1969, minus the unpaid premiums and
interest thereon due for January and February, 1969,
in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for
the proceeds of the Policy as the designated
beneficiary therein, although she admits that she and
the insured Buenaventura C. Ebrado were merely living
as husband and wife without the benefit of marriage.

Pascuala Vda. de Ebrado also filed her claim as the

widow of the deceased insured. She asserts that she is
the one entitled to the insurance proceeds, not the
common-law wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be
paid, the insurer, The Insular Life Assurance Co., Ltd.
commenced an action for Interpleader before the Court
of First Instance of Rizal on April 29, 1970.
After the issues have been joined, a pre-trial
conference was held. In the pre-trial conference the
parties submits evidence and make admissions.xxx; 8)
that the beneficiary designated by the insured in the
policy is Carponia Ebrado and the insured made
reservation to change the beneficiary but although the
insured made the option to change the beneficiary,
same was never changed up to the time of his death
and the wife did not have any opportunity to write the
company that there was reservation to change the
designation of the parties it agreed that a decision be
rendered based on and stipulation of facts as to who
among the two claimants is entitled to the policy.
On September 25, 1972, the trial court rendered
judgment declaring among others, Carponia T. Ebrado
disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing
the
payment of the insurance proceeds to the estate of the
deceased insured. The trial court held that.It is patent
from the last paragraph of Art. 739 of the Civil Code
that a criminal conviction for adultery or concubinage
is not essential in order to establish the disqualification
mentioned therein. Neither is it also necessary that a
finding of such guilt or commission of those acts be
made in a separate independent action brought for the
purpose. The guilt of the donee (beneficiary) may be
proved by preponderance of evidence in the same
proceeding (the action brought to declare the nullity of
the donation).
Since it is agreed in their stipulation during the pretrial that the deceased insured and defendant Carponia
T. Ebrado were living together as husband and wife
without being legally married and that the marriage of
the insured with the other defendant Pascuala Vda. de

Ebrado was valid and still existing at the time the

insurance in question was purchased there is no
question that defendant Carponia T. Ebrado is
disqualified from becoming the beneficiary of the policy
in question and as such she is not entitled to the
proceeds of the insurance upon the death of the
insured.
Issue of the Case:
Can a common-law wife named as beneficiary in the
life insurance policy of a legally married man claim the
proceeds thereof in case of death of the latter?
Ruling:
The SC affirmed the decision of the trial court.
under Article 2012 of the same Code, "any person who
is forbidden from receiving any donation under Article
739 cannot be named beneficiary of a fife insurance
policy by the person who cannot make a donation to
him. Common-law spouses are, definitely, barred from
receiving donations from each other. Article 739 of the
new Civil Code provides: The following donations shall
be void:
1. Those made between persons who were guilty of
adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the
same criminal offense, in consideration thereof;
3. Those made to a public officer or his wife,
descendants or ascendants by reason of his office.
In the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of
the donor or donee; and the guilt of the donee may be
proved by preponderance of evidence in the same
action.
The underscored clause neatly conveys that no
criminal conviction for the offense is a condition
precedent. In fact, it cannot even be from the
aforequoted provision that a prosecution is needed. On
the contrary, the law plainly states that the guilt of the
party may be proved "in the same acting for
declaration of nullity of donation. And, it would be
sufficient if evidence preponderates upon the guilt of
the consort for the offense indicated. The quantum of
proof in criminal cases is not demanded.

In the caw before Us, the requisite proof of commonlaw relationship between the insured and the
beneficiary has been conveniently supplied by the
stipulations between the parties in the pre-trial
conference of the case. It case agreed upon and
stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala
Ebrado with whom she has six legitimate children; that
during his lifetime, the deceased insured was living
with his common-law wife, Carponia Ebrado, with
whom he has two children. These stipulations are
nothing less than judicial admissions which, as a
consequence, no longer require proof and cannot be
contradicted. A fortiori, on the basis of these
admissions, a judgment may be validly rendered
without going through the rigors of a trial for the sole
purpose of proving the illicit liaison between the
insured and the beneficiary. In fact, in that pretrial,
the parties even agreed "that a decision be rendered
based on this agreement and stipulation of facts as to
who among the two claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower
court is hereby affirmed. Carponia T. Ebrado is hereby
declared disqualified to be the beneficiary of the late
Buenaventura C. Ebrado in his life insurance policy. As
a consequence, the proceeds of the policy are hereby
held payable to the estate of the deceased insured.
Costs against Carponia T. Ebrado.
SO ORDERED.
SOUTHERN LUZON EMPLOYEES ASSN. VS GOLPEO
Note:
A common law wife of the insured who has a legal wife
is disqualified as beneficiary. It is not required that
there be a previous conviction for adultery or
concubinage for the prohibition to apply. However, in
an earlier case (such as the present case), the
common-law wife designated prevailed over the legal
wife because the case took place while the Old Civil
Code was still applicable, under which there was no

provision similar to Art.2012.

FACTS:
Southern Luzon Employees' Association is composed of
laborers and employees of Laguna tayabas Bus Co.,
and Batangas Transportation Company, and one of its
purposes is mutual aid of its members and their
defendants in case of death.
Roman A. Concepcion was a member until his death on
December 13, 1950. In the form required by the association to be accomplished by its members,
with
reference to the death benefit, Roman A. Concepcion
listed as his beneficiaries Aquilina Maloles, Roman M.
Concepcion, Jr., Estela M. Concepcion, Rolando M.
Concepcion and Robin M. Concepcion.
After the death of Roman A. Concepcion, the
association was able to collect voluntary contributions
from its members amounting to P2,505. Three sets of
claimants presented themselves, namely, (1) Juanita
Golpeo, legal wife of Roman A. Concepcion, and her
children; (2) Aquilina Maloles, common law wife of
Roman A. Concepcion, and her children, named
beneficiaries by the deceased; and (3) Elsie Hicban,
another common law wife of Roman A. Concepcion,
and her child.
The court rendered a decision, declaring the
defendants Aquiliana Malolos and her children the sole
beneficiaries of the sum of P2,505.00 and ordering the
plaintiff to deliver said amount to them.
ISSUE:
WHETHER OR NOT THE COURT COMMITED ERROR IN
DESIGNATING A COMMON LAW WIFE OF AN INSURED
AS THE BENEFICIARY INSTEAD OF THE LEGAL WIFE.
Remember: This case took place while the Old Civil
Code was still applicable.
HELD: Judgment affirmed.
The decision is based mainly on the theory that the
contract between the plaintiff and the deceased Roman
A. Concepcion partook of the nature of an insurance
and that, therefore, the amount in question belonged
exclusively to the beneficiaries, invoking the following
pronouncements of this Court in the case of Del Val vs.
Del Val, 29 Phil., 534:

With the finding of the trial court that the proceeds

of the life-insurance policy belongs exclusively to
the defendant as his individual and separate
property, we agree. That the proceeds of an
insurance policy belong exclusively to the
beneficiary and not to the estate of the person
whose life was insured, and that such proceeds are
the separate and individual property of the
beneficiary, and not of the heirs of the person
whose life was insured, is the doctrine in America.
We believe that the same doctrine obtains in these
Islands by virtue of section 428 of the Code of
Commerce, which reads:
"The amounts which the underwriter must deliver
to the person insured, in fulfillment of the contract,
shall be the property creditors of any kind
whatsoever of the person who effected the
insurance in favor of the formers."
AS TO THE CONTENTION OF THE COUNSELS
PLAINTIFF THAT THE PROCEEDS OF THE INSURANCE
POLICY WERE DONATION OR GIFT MADE BY THE
FATHER DURING HIS LIFETIME, SUCH THAT UNDER
THE CIVIL CODE ARE NOT BETTERMENTS AND SHALL
BE CONSIDERED AS PART OF THE LEGAL PORTION.
The court disagrees with this contention. The contract
of life insurance is a special contract and the
destination of the proceeds thereof is determined by
special laws which deal exclusively with that subject.
The Civil Code has no provisions which relate directly
and specifically to life-insurance contract or to the
destination of life-insurance proceeds. That subject is
regulate exclusively by the Code of Commerce which
provides for the terms of the contract, the relations of
the parties and the destination of the proceeds of the
policy.
SOCIAL SECURITY SYSTEM vs. CANDELARIA D. DAVAC
[G.R. No. L-21642. July 30, 1966.]
Facts:

This is an appeal from the resolution of the Social

Security Commission declaring respondent Candelaria
Davac as the person entitled to receive the death
benefits payable for the death of Petronilo Davac.
The late Petronilo Davac, a former employee of Lianga
Bay Logging Co. Inc. became a member of the Social
Security System (SSS for short) on September 1,
1957. He designated respondent Candelaria Davac as
his beneficiary and indicated his relationship to her as
that of "wife". When he died, each of the respondents
(Candelaria Davac and Lourdes Tuplano) filed their
claims for death benefit with the SSS. It appears from
their respective claims and the documents submitted
in support thereof, that the deceased contracted two
marriages, the first, with claimant Lourdes Tuplano on
August 29, 1946, who bore him a child, Romeo Davac
and the second, with claimant Candelaria Davac on
January 18, 1949, with whom he had a minor
daughter, Elizabeth Davac. Due to their conflicting
claims, the processing thereof was held in abeyance,
whereupon the SSS filed this petition praying that
respondents be required to interplead and litigate
between themselves their conflicting claims over the
death benefits in question.
Issue:
Whether or not the Social Security Commission acted
correctly in declaring respondent Candelaria Davac as
the person entitled to receive the death benefits in
question.
Held: yes.
The benefit receivable under the Social Security Act is
in the nature of a special privilege or an arrangement
secured by the law, pursuant to the policy of the State
to provide social security to the workingmen. The
amounts that may thus be received cannot be
considered as property earned by the member during his lifetime, and, hence, do not form part of
the
properties of the conjugal partnership or of the estate
of the said member. They are disbursed from a public
special fund created by Congress pursuant to the
declared policy of the Republic "to develop, establish
gradually and perfect a social security system which . .

. shall provide protection against the hazards of

disability, sickness, old age and death." (Section 1,
Republic Act No. 1792.) Consequently, if there is a
named beneficiary and the designation is not invalid, it
is not the heirs of the employee who are entitled to
receive the benefits, unless they are the designated
beneficiaries themselves. It is only when there is no
designated beneficiary or when the designation is void
that the laws of succession become applicable. The
Social Security Act is not a law of succession.
RE: CLAIMS FOR BENEFITS OF THE HEIRS OF THE
LATE MARIO V. CHANLIONGCO, FIDELA B
CHANLIONGCO, MARIO B. CHANLIONGCO II, MA.
ANGELINA C. BUENAVENTURA and MARIO C.
CHANLIONGCO, JR.
Facts:
This matter refers to the claims for retirement benefits
filed by the heirs of the late ATTY. MARIO V.
CHANLIONGCO an attorney of the Court, it is in the
records that at the time of his death, Atty. Chanliongco
was more than 63 years of age, with more than 38
years of service in the government. He did not have
any pending criminal administrative or not case against
him, neither did he have any money or property
accountability. The highest salary he received was
P18,700.00 per annum.
Aside from his widow, Dra. Fidel B. Chanliongco and an
only Intimate Mario it appears that there are other
deceased to namely, Mrs. Angelina C. , Jr., both born
out of wedlock to Angelina R Crespo, and duly
recognized by the deceased. Except Mario, Jr., who is
only 17 years of age, all the claimants are of legal age.
According to law, the benefits accruing to the deceased
consist of: (1) retirement benefits; (2) money value of
terminal leave; (3) life insurance and (4) refund of
retirement premium.
From the records now before US, it appears that the
GSIS had already the release the life insurance
proceeds; and the refund of rent to the claimants.
RULING:

The record also shows that the late Atty. Chanliongco

died ab intestato and that he filed or over to state in
his application for membership with the GSIS the
beneficiary or benefits of his retirement benefits,
should he die before retirement. Hence, the retirement
benefits shall accrue to his estate and will be
distributed among his Legal heirs in with the benefits
on intestate s , as in the caw of a fife if no benefit is
named in the policy (Vda. de vs. GSIS, L-28093, Jan.
30, 1971, 37 SCRA 315, 325).
AQUINO, J., concurring:
There may be instances, like the instant case, where in
legal succession the estate is distributed according to
the rules on legitime without applying the rules on
intestate ion. The reason is that sometimes the estate
is not even sufficient to satisfy the legitimes. The
legitimes of the primary compulsory heirs, like a child
or descendant, should first be satisfied.
In this case the decedent's legal heirs are his
legitimate child, his widow and two intimate children.
His estate is partitioned among those heirs by giving
them their respective time.
The legitimate child gets one-half of the estate as his
legitime which is regarded as his share as a legal heir
Art 888, Civil Code).
The widow's legitime is one-fourth of the estate. That
represents also her share as a legal heir. The
remaining one-fourth of the estate, which is the free
portion, goes to the illegitimate children in equal
shares, as their legitime, Pursuant to the provision that
'the legitimate of the illegitimate children shall be
taken from the portion of the estate at the free
disposal of the testator, provoked that in no case shall
the total legitime of such illegitimate children exceed
that free portion, and that the legitime of the surviving
spouse must first be fully satisfied.
The rule in Santillon vs. Miranda, L-19281, June 30,
1965, 14 SCRA 563, that when the surviving spouse
concurs with only one legitimate child, the spouse is
entitled to one-half of the estate and the gets the
other half, t to article 996 of the Civil Code, does not

apply to the case because here intimate children

concur with the surviving spouse and the intimate
child.
In this case, to divide the estate between the surviving
spouse and the ligitemate child that deprive the
illegitimate children of their legitime. So, the
decendent's estate is distributed in the proportion of
1/2 for the legitimate child, 1/4 for the widow and 1/8
each for the two illegitimate children.
Also not of possible application to this case is the rule
that the legal of an acknowledge natural child is 1/2 of
the legitime of the legitimate child of that the of the
spurious child is 2/5 of that of the of the intimate child
or 4/5 of that of that of the acknowledged natural
child.
The rule be applied because the estate is not sufficient
to cover legitimes of all compulsory heirs. That is one
of the flaws of the law of succession. A situation as in
the instant case may arise where the illegitimate
children get less than their legitime. With respect to
the decendant's unpaid salary and the money value of his leave, the same are conjugal properties
because of
the rule that property "obtained by the or work, or as
salary of the spouses, or either of them", is conjugal in
character.

TRADERS INSURANCE & SURETY CO vs. JUAN

GOLANGCO Y OTRA
[Sep 21, 1954, En Banc G.R. No. L-6442]
Facts:
Tomas Lianco and the Archbishop ( no name indicated)
entered into a contract of lease on a parcel of land
owned by church . As lessee, Lianco erected a building
on the leased portion of the churchs land. Lianco later
transferred ownership of this building to Kaw Eng Si,
who later transferred the same to Golangco. This
transfers by Lianco of his right to lease and the
buildingownership were without consent of the
Archbishop. The Archbishop filed an ejectment case

against Lianco, who appears to be occupants of the

premises building with others paying rent to Golangco.
This right of Golangco to receive rent on the building
was judicially recognized in a case decided between
Lianco and some others occupying the premises
pursuant to a compromise agreement. At the moment,
the Archbishop did not exercise his option to question
Golangcos rights as lessee, as the transfer by Lianco
was without the Archbishops consent. On April 7,
1949,Golangco applied for fire insurance with Traders
Insurance and Surety Co. of which Golangco was
issued fire insurance policy stating that all insurance
covered under said policy, includes the 'rent or other
subject matter of insurance in respect of or in
connection with any building or any property contained
in any building'. On June 5, 1949, fire ravaged the
building premises pursuant of which Golangco
requested Traders Insurance to pay the insurance
amount of 10,000 including the amount of rent P1,100
monthly. Traders insurance refused to pay the
insurance as pertaining to the rent averring that
Golangco has no insurable interest therein.
Issue:
WON Golangco has insurable interest ( in the property)
on the rent of the building premises which may
lawfully/validly be subject of insurance?
Ruling:
Yes, Sec. 13 of the Insurance Code provides that
Every interest in the property, whether real or
personal, or any relation thereto, or liability in respect
thereof of such nature that a contemplated peril might
directly damnify the insured, is an insurable interest.
By virtue of the contract between Tomas B. Lianco and
the Archbishop, Lianco erected the building of which
the premises in question form part and became owner
thereof . He transferred the ownership of the premises
in question to kaw Eng Si, who in turn transferred it to
plaintiff Juan Golangco .Lianco and the actual occupant
of the premises acknowledged plaintiff's right to collect
rentals thereon in a compromise agreement which was
incorporated in a judicial judgment. Both at the time of
the issuance of the policy and at the time of the fire,

plaintiff Golangco was in legal possession of the

premises, collecting rentals from its occupant. It seems
plain that if the premises were destroyed - as they
were - by fire, Golangco would be, as he was, directly
damnified thereby; and hence he had an insurable
interest therein (section 13, Insurance Law).
It is to be noted that the policy so worded indicates
that the fire insurance policy includes 'rent or other
subject matter of insurance in respect of or in
connection with any building or any property contained
in any building'. The argument of Traders Insurance
that a policy of insurance must specify the interest of
the insured in the property insured, if he is not the
absolute owner thereof, is not meritorious because it
was the Traders, not Golangco, who prepared that
policy, and it cannot take advantage of its own acts to
plaintiff's detriment; and, in any case, this provision
was substantially complied with by Golangco when he
made a full and clear statement of his interests to
Trader's manager.
The contract between Lianco and the Archbishop only
forbade Lianco from transferring 'his rights as LESSEE
but the contracts Lianco made in favor of Kaw Eng Si
and plaintiff Golangco did not transfer such rights; and
hence no written consent thereto was necessary. At
worst, the contract would be voidable, but not a void
contract, at the option of the Archbishop; but this
would not deprive Golangco of his insurable interest
until such option were exercised; and it does not
appear that it was ever exercised.
The ejectment case filed by the Archbishop against
Lianco did not remove nor destroy plaintiff's insurable
interest: first, because plaintiff was not a party thereto
and cannot be bound thereby; and second, because
the judgment of the Municipal Court, at least as late as
February 14, 1950, had not been executed so far as
possession of the premises were concerned; so that,
as far as plaintiff Golangco was concerned, his right to
the premises and to the rentals thereon continued to
exist on June 5, 1949 when the fire took place."

Simeon Del Rosario v Equitable Insurance and Casualty Co. Inc

GR No. L-16215 June 29, 1963
FACTS: Defendant Company issued a life insurance policy on the life of Francisco Del Rosario, son of
plaintiff, binding it to pay P1, 000 to P3, 000 as indemnity for the death of the insured. Insured died by
drowning when the vessel Islama caught fire in the waters of Jolo. Plaintiff filed a claim and received
P1,000 indemnity, however, he, through his lawyer, asked for an additional P2,000 in view of the
conditions in the insurance policy that the company will be liable for the death insured by drowning, but,
said provision did not state the amount to be paid as indemnity. The company refused to pay by virtue
of a letter of opinion from the Insurance Commissioner which fixed the amount of indemnity at P1, 000.

of summons is intended to give notice to the defendant that an action has been commenced against it.
Petitioners contention that
it was not properly served with summons and that Atty. Gloria was not authorized to appear for and in
its behalf are untenable. Although petitioner questioned the propriety of the service of summons, it
however, failed to substantiate its allegation that it was not properly served with summons. Hence, the
disputable presumption that official duty has been regularly performed prevails.

ISSUE: How much should the indemnity be?

HELD: Indemnity should be P3, 000. Under the proven facts and circumstances, the findings of the
trial court, are well taken, for they are supported by generally accepted principles or rulings on
insurance, which enunciate that where there is ambiguity with respect to the terms and conditions of
the policy, the same will be
resolved against the one responsible thereof. It should be recalled, that generally, the insured, has little,
if any, participation in the preparation of the policy, together with the drafting of its terms and conditions.
The interpretation of obscure stipulations in a contract should not favor the party who caused the
obscurity (Article 1377, Civil Code), which, in the case at bar, is the insurance company.
Paramount Insurance Corporation v Hon. Maximo Japzon, et al.
GR No. L-68037 July 29, 1992
FACTS: Petitioner insurance company refuses to pay the claims for damages made by two persons
(Jose Lara and Arsenio Paed), passengers of a jeepney which collided with a Ford truck insured by
petitioner company, on the ground that the lower court has not validly acquired jurisdiction over its
person, when a certain Atty. Segundo
Gloria appeared for its behalf but was allegedly unauthorized to file an answer for it, and that petitioner
company was not validly served with summons and a copy of the complaint, nor did it actually
participate in the proceedings.
ISSUE: Whether or not jurisdiction of the person of the petitioner insurance company have been validly
acquired by the lower court.
HELD: Yes. Jurisdiction over the person of the defendant in civil cases is acquired either by his
voluntary appearance in court and his submission to its authority by service of summons. The service

Rafael (Rex) Verendia v Court of Appeals, et al.

GR No. 75605 January 22, 1993
FACTS: Verendia insured a residential building located in Antipolo, Rizal, with Fidelity and Surety
Insurance Company for P385, 000. The same building was also insured by two other companies,
namely, Country Bankers Insurance and Development Insurance for P56, 000 and P400, 000,
respectively. While the tree insurance policies
were in force, the property was completely destroyed by fire on 8 December 1980. Fidelity was
informed of the loss but refused payment, thus, prompting Verendia to file a complaint before the CFI.
Fidelity averred that the policy was avoided by reason of over-insurance and that Verendia maliciously
represented that the building was leased to Robert Garcia, when it was actually Marcelo Garcia who
was the lessee.
ISSUE: Whether or not the contract of lease submitted by Verendia to support his claim on the fire
insurance policy constitutes a false declaration which would forfeit his benefits under the policy.
HELD: Yes. Verendia concocted the lease contract to deflect responsibility for the fire towards an
alleged lessee, inflated the value of the property by the alleged monthly rental of P6, 500 when in fact,
the Provincial Assessor of Rizal had assessed the fair market value to be only P40, 300, insured the
same with two other insurance
companies for a total coverage of P900, 000, and created a dead-end for the adjuster by the
disappearance or Robert Garcia. Basically, a contract of indemnity, an insurance contract is the
law between the parties. Its terms and conditions constitute the measure of the insurers liability and
compliance therewith is a condition precedent to the insureds right to recovery from the insurer.
Having presented a false declaration, he forfeited all benefits in the policy, in the absence of proof that

Fidelity waived such provision. Moreover, Verendia reprehensibly disregarded the principle that
insurance contracts are uberrimae fidae and demand the most abundant good faith.

Development Bank of the Philippines v Court of Appeals and the Estate of the late Juan B. Dans
March 21, 1994
FACTS: In May 1987, Juan Dans, 76 years of age, together with his wife Candida, applied for a loan
of P500, 000 with the DBP. The DBP advised him to obtain a mortgage redemption insurance (MRI)
with the DBP MRI Pool. Aloan of P300, 000 was approved and released on 11 August 1987. From the
proceeds of the loan, the DBP
deducted P1, 476 as payment for the MRI premium. On 15 August 1987, Dans accomplished and
submitted the MRI Application for Insurance and the Health Statement for DBP MRI Pool. On 20
August, The MRI premium was credited by DBP to the savings account of the DBP MRI Pool. On 3
September, Dans died. On 23 September, The DBP MRI Pool notified DBP that Dans was not
eligible for MRI coverage, being over the acceptance limit of 60 years at the time of the application.
Candida, then, filed a complaint with the RTC for Collection of Sum of Money with Damages. The RTC
ruled in favor of respondent Estate but absolved the DBP MRI
Pool from liability.

During the Japanese Occupation, the building and insured merchandise were burned. Respondent
submitted to the petitioner its
claim. The salvaged goods were sold at public auction and, after deducting their value, the total loss
suffered was fixed at P92, 650. Petitioner refused to pay on the ground that the policy in favor of the
respondent had ceased to be in force on the date the US declared war against Germany, the
respondent corporation being controlled by German subjects and the petitioner being a company
under American jurisdiction. Pursuant to an order of the Director of the Bureau of Financing, petitioner
paid to respondent the sum of P92, 650 on April 19, 1943. Petitioner then filed an action in the CFI for
the purpose of recovering the amount paid. The CFI dismissed the
petition and the CA affirmed.
ISSUE: Whether or not the insurance contract between petitioner and respondent, automatically
ceased to be in force, upon the declaration of war by the US against Germany.
HELD: Yes. The Philippine Insurance Law (Act No. 2427, as amended) in section 8, provides that
anyone except a public enemy may be insured. It stands to reason that an insurance policy ceases to
be allowable as soon as an insured becomes a public enemy.

Philippine National Bank v Court of Appeals, et al.

GR No. L-43766 February 26, 1988

ISSUE: Whether or not DBP and DBP MRI Pool are equally liable.
HELD: No. Where there was no perfected contract of insurance, DBP MRI Pool cannot be held liable on
the contract that does not exist. The liability of DBP is another matter. In dealing with Dans, DBP was
wearing two legal hats: the first as lender and the second as insurance agent. The DBP is not
authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing all
the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded
the scope of its authority when it accepted Dans application for MRI collecting the insurance
premium, and deducting its agents commission and fee service.
Filipinas Compania de Seguros v Christern, Huenfeld and Co.
GR No. L-2294 May 25, 1951
FACTS: On October 1, 1941, respondent, after payment of corresponding premium, obtained from the
petitioner, a fire policy in the sum P100, 000, covering merchandise contained in a building.

FACTS: On 10 January 1963, respondent Desiderio spouses applied for a retailers loan with the PNB,
which was approved and secured by a chattel mortgage consisting of the inventory of stocks in the
store of the spouses. In addition, the merchandise subject of the mortgage, were insured with the
Cosmopolitan Insurance Co. for P4, 000, with the PNB as beneficiary. On 1 August 1964, the spouses
paid P1,089.60 as partial payment of the loan, however, the insured building and merchandise were
totally destroyed by fire. The PNB sent several demand letters to the insurance company for the
purpose of recovering the proceeds of the insurance but to no avail.
Sometime in 1966, the said insurance company became the subject of liquidation. Seven years after
the fire, the PNB filed a complaint for collection against the spouses. The City Court dismissed the
petition and declared the amount of P1, 089.60 unrecoverable. The CFI and the CA affirmed.
ISSUE: Whether the PNB, as attorney-in-fact of the spouses, is bound to successfully collect the
insurance proceeds of the mortgaged property of the latter.
HELD: No. The PNB could have collected the insurance proceeds if only it were not negligent. It had

ample time and enough legal remedies to collect when the same became due, yet, it merely sent
demand letters to the insurance company. It did not even file a suit for the recovery of the insurance
proceeds against the insurance
company before and even during the liquidation. Realizing that it could no longer collect from the
insurance company, it directed the collection suit against the spouses whose obligation with the PNB
had long been extinguished.
El Oriente Fabrica de Tabacos, Inc. v Juan Posadas
GR No. 34774 September 21, 1931
FACTS: On 18 March 1925, plaintiff, in order to protect itself against the loss that it might suffer by
reason of the death of its manager, A. Velhagen, procured from the Manufacturers Life Insurance Co.,
an insurance policy on the life of said manager for $50, 000. The plaintiff is designated as the sole
beneficiary. The plaintiff charged as expenses of its business all the said premiums and deducted the
same from its gross incomes as reported in its annual income tax returns, which deductions were
allowed by defendant were allowed by defendant upon a showing made by the plaintiff that such
premiums were legitimate expenses. Upon the death of Velhagen in 1929,
plaintiff received the proceeds amounting P104, 957.88. Over the protest of the plaintiff, which
claimed exemption under Section 4 of the Income Tax Law, the defendant Collector of Internal
Revenue assessed and levied the sum of P3, 148.74 as income tax on the proceeds of the insurance
policy, which plaintiff paid under protest.
ISSUE: Whether the proceeds of an insurance taken by a corporation on the life of an important official
to indemnify it against loss in case of his death, are taxable as income under the Philippine Income
Tax Law.
HELD: No. It is true that the Income Tax Law, in exempting individual beneficiaries, speaks of the
proceeds of life insurance policies as income, but this is a very slight indication of legislative intention.
In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually
suffered because of the death of its manager.
Basilia Berdin Vda. De Consuegra, et al. v GSIS, et al.
GR No. L-28093 January 30, 1971
FACTS: The late Jose Consuegra, at the time of his death, was employed as a shop foreman of the
Office of the District Engineer in Surigao del Norte. In his lifetime, he contracted two marriages, the first

with respondent Rosario Diaz, and the second, which was contracted in good faith while the first
marriage was subsisting, with
petitioner, Basilia Berdin. Being a member of the GSIS when he died, the proceeds of his life
insurance policy were paid to Basilia and her children who were the beneficiaries named in the
policy. Having been in government service for more than 20 years, Consuegra was entitled to
retirement insurance benefits worth P6, 304.47.
Consuegra did not designate any beneficiary who would receive the retirement insurance benefits
due to him. Respondent Rosario then filed a claim with the GSIS asking that the retirement insurance
benefits be paid to her as the only legal heir, considering that the deceased did not designate any
beneficiary with respect to his
retirement insurance benefits. Petitioner Basilia and her children, likewise, filed a similar claim,
asserting that being the beneficiaries named in the life insurance policy, they are the only ones entitled
to receive the retirement insurance benefits due. The GSIS ruled that the legal heirs were Rosario
Diaz, who is entitled to 8/16 of the
retirement insurance; and Basilia Berdin and her seven children, who are entitled to the remaining 8/16,
each of them to receive an equal share of 1/16. Dissatisfied, Basilia filed a case before the CFI
which, however, upheld the decision of the GSIS.
ISSUE: (1) Whether or not the system of life insurance and the system of retirement insurance are
complementary to each other such that whoever is named beneficiary in the life insurance is also the
beneficiary in the retirement insurance when no such beneficiary is named in the retirement insurance.
(2) To whom should the retirement benefits of Jose Consuegra be paid, because he did not, or failed to
designate the beneficiary of his retirement insurance?
HELD: No. Subsection (b) of Section 11 of Commonwealth Act 186, as amended by Rep. Act 660,
clearly indicate that there is need for the employee to file an application for retirement
insurance benefits when he becomes a member of the GSIS, and he should state in his
application the beneficiary of his retirement
insurance. Hence, the beneficiary named in the life insurance does not automatically become the
beneficiary in the retirement insurance unless the same beneficiary in the life insurance is so
designated in the application for retirement insurance. In the case of the proceeds of a life insurance,
the same are paid to whoever is named the beneficiary in the life insurance policy. As in the case of a
life insurance provided for in the Insurance Act (Act 2427, as amended), the beneficiary in a life
insurance under the GSIS may not necessarily be an heir of the insured. The insured in a life insurance
may designate any person as beneficiary unless disqualified to be so under the provisions of the Civil
Code. And in the absence of any beneficiary named in the life insurance policy, the proceeds of the
insurance will go to the estate of the insured.
Therefore, the respondent GSIS had correctly acted when it ruled that the proceeds of the retirement
insurance of the late Jose Consuegra should be divided equally between his first living wife

Rosario Diaz, on the one hand, and his second wife Basilia Berdin and his children by her, on the other.
Hilario Gercio v Sun Life Assurance of Canada, et al.
GR No. 23703 September 28, 1925
FACTS: Hilario Gercio, the insured, is the plaintiff. The Sun Life Assurance Co. of Canada, the
insurer, and Andrea Zialcita, the beneficiary, are the defendants. The complaint is in the nature of
mandamus. Its purpose is to compel the defendant Sun Life Assurance Co. of Canada to change the
beneficiary in the policy issued by the defendant company on the life of the plaintiff Hilario Gercio, with
one Andrea Zialcita as beneficiary. The judgment of the trial court was in favor of the plaintiff without
costs, and ordered the defendant company to eliminate from the insurance policy the
name of Andrea Zialcita as beneficiary and to substitute therefor such name as the plaintiff might furnish
to the defendant for that purpose. On the date the policy was issued, Andrea Zialcita was the lawful wife
of Hilario Gercio. Towards the end of the year 1919, she was convicted of the crime of adultery. On
September 4, 1920, a
decree of divorce was issued in civil case no. 17955, which had the effect of completely
dissolving the bonds of matrimony contracted by Hilario Gercio and Andrea Zialcita. On March 4,
1922, Hilario Gercio formally notified the Sun Life Assurance Co. of Canada that he had revoked his
donation in favor of Andrea Zialcita,
and that he had designated in her stead his present wife, Adela Garcia de Gercio, as the beneficiary of
the policy. Gercio requested the insurance company to eliminate Andrea Zialcita as beneficiary. This,
the insurance company has refused and still refuses to do.
ISSUE:
Whether the insured the husband has the power to change the beneficiary the former
wife and to name instead his actual wife, where the insured and the beneficiary have been divorced
and where the policy of insurance does not expressly reserve to the insured the right to change the
beneficiary.
HELD: No. The wife has an insurable interest in the life of her husband. The beneficiary has an
absolute vested interest in the policy from the date of its issuance and delivery. So when a policy of life
insurance is taken out by the husband in which the wife is named as beneficiary, she has a subsisting
interest in the policy. If the
husband wishes to retain to himself the control and ownership of the policy he may so provide in the
policy. But if the policy contains no provision authorizing a change of beneficiary without the
beneficiary's consent, the insured cannot make such change.
Accordingly, it is held that a life insurance policy of a husband made payable to the wife as beneficiary,

is the separate property of the beneficiary and beyond the control of the husband. Also, there is no
provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the
husband to be changed after a divorce. It must follow, therefore, in the absence of a statute to the
contrary, that if a policy is taken out upon a husband's life the wife is named as beneficiary therein, a
subsequent divorce does not destroy her rights under the policy.